UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-3850
Exact name of registrant as specified in charter: Delaware Group Tax-Free Fund
Address of principal executive offices:
2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service:
Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: August 31
Date of reporting period: February 29, 2004
Item 1. Reports to Stockholders
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
Semiannual Report FEBRUARY 29, 2004
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DELAWARE TAX-FREE USA FUND
DELAWARE TAX-FREE INSURED FUND
DELAWARE TAX-FREE USA INTERMEDIATE FUND
[LOGO]
POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
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FINANCIAL STATEMENTS:
Statements of Net Assets 1
Statement of Assets and Liabilities 11
Statements of Operations 12
Statements of Changes in Net Assets 13
Financial Highlights 15
Notes to Financial Statements 24
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Funds are not FDIC insured and are not guaranteed. It is possible to lose
the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a
series of Delaware Management Business Trust, which is a registered
investment advisor.
(C) 2004 Delaware Distributors, L.P.
Statements Delaware Tax-Free USA Fund
OF NET ASSETS February 29, 2004 (Unaudited)
Principal Market
Amount Value
Municipal Bonds - 96.37%
Airline Revenue Bonds - 2.67%
Kenton County, Kentucky Airport
Board Revenue (Delta Airlines, Inc.)
Series A 7.50% 2/1/12 (AMT) $ 5,000,000 $ 4,983,700
Minneapolis/St. Paul, Minnesota
Metropolitan Airports Commission
Special Facilities Revenue
(Northwest Airlines, Inc.)
Series A 7.00% 4/1/25 (AMT) 1,300,000 1,255,514
New Jersey Economic Development
Authority Special Facility Revenue
(Continental Airlines, Inc. Project)
6.25% 9/15/29 (AMT) 6,000,000 5,170,200
Tulsa, Oklahoma Municipal Airport Trust
Revenue (American Airlines Corp.)
7.35% 12/1/11 2,250,000 2,104,830
-----------
13,514,244
-----------
Airport Revenue Bonds - 1.60%
Capital Trust Agency Florida Revenue
(Orlando/Cargo Project)
6.75% 1/1/32 (AMT) 2,000,000 1,924,660
Grapevine, Texas Industrial Development
Corporate Revenue (Air Cargo)
6.50% 1/1/24 (AMT) 920,000 955,724
Houston, Texas Industrial Development
Corporate Revenue (Air Cargo)
6.375% 1/1/23 (AMT) 2,000,000 2,057,600
Metropolitan Washington D.C. Airport
Authority System Series A
5.25% 10/1/32 (FGIC) (AMT) 3,000,000 3,153,960
-----------
8,091,944
-----------
City General Obligation Bonds - 3.45%
New York City, New York
Series H 6.125% 8/1/25 4,960,000 5,565,914
Series I 5.125% 3/1/23 5,875,000 6,173,391
Series J 5.25% 6/1/28 5,400,000 5,715,360
-----------
17,454,665
-----------
Continuing Care/Retirement Revenue Bonds - 1.36%
Cass County, North Dakota Health
Facilities Revenue (Catholic Health-Villa
Nazareth Project) 6.25% 11/15/14 1,000,000 1,013,820
+Delaware County, Pennsylvania Authority
Revenue (Main Line & Haverford
Nursing and Rehabilitation Center)
9.00% 8/1/22 1,860,000 1,133,205
Gainesville & Hall County, Georgia
Development Authority Revenue
(Lanier Village Estates) Series C
7.25% 11/15/29 1,000,000 1,078,670
Lucas County, Ohio Health Care
Facility Revenue
(Sunset Retirement Communities)
Series A 6.625% 8/15/30 2,000,000 2,115,540
Waukesha, Wisconsin Housing Authority
(Westgrove Woods) Series A
6.00% 12/1/31 (GNMA) (AMT) 1,500,000 1,561,425
-----------
6,902,660
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Corporate-Backed Revenue Bonds - 6.13%
Alliance, Texas Airport Authority
Special Facilities Revenue
(Federal Express Corp. Project)
6.375% 4/1/21 (AMT) $ 2,000,000 $ 2,141,300
Ashland, Kentucky Sewer & Solid
Waste Revenue (Ashland, Inc.)
7.125% 2/1/22 (AMT) 5,000,000 5,236,400
+Columbus, Kansas Industrial Revenue
(ACE Electrical Acquisition)
7.00% 8/1/17 (AMT) 800,000 439,888
Indianapolis, Indiana Airport Authority
Revenue (Federal Express Corp. Project)
7.10% 1/15/17 (AMT) 7,800,000 8,131,188
Pennsylvania Economic Development
Financing Authority Wastewater
Treatment Revenue
(Sun Co., Inc. -R & M Project) Series A
7.60% 12/1/24 (AMT) 5,000,000 5,300,650
Phenix County, Alabama Industrial
Development Board Environmental
Improvement Revenue
(Mead Westvaco Corp.) Series A
6.35% 5/15/35 (AMT) 3,000,000 3,178,650
Puerto Rico Industrial, Medical &
Environmental Pollution Control
Facilities Financing Authority Revenue
(PepsiCo, Inc. Project) 6.25% 11/15/13 1,250,000 1,310,625
Richmond County, Georgia Development
Authority Environmental Improvement
Revenue (International Paper Co.)
Series B 5.95% 11/15/25 (AMT) 5,000,000 5,274,050
-----------
31,012,751
-----------
Dedicated Tax & Fees Revenue Bonds - 4.91%
Bi-State Development Agency Missouri,
Illinois Metropolitan District
(Metrolink Cross County Project)
Series B 5.00% 10/1/32 (FSA) 2,000,000 2,105,500
Jacksonville, Florida Sales Tax Revenue
5.00% 10/1/30 (MBIA) 9,500,000 10,021,740
New York City, New York Transitional
Finance Authority Series D
5.00% 2/1/31 5,000,000 5,228,750
Southeast Wisconsin Professional
Baseball Park District Sales Tax Revenue
Series A 5.50% 12/15/26 (MBIA) 5,500,000 6,430,545
Truth or Consequences, New Mexico Gross
Receipts Tax Revenue 6.30% 7/1/16 1,000,000 1,048,980
-----------
24,835,515
-----------
Escrowed to Maturity Bonds - 5.53%
Louisiana Public Facilities Authority
Hospital Revenue
(Southern Baptist Hospital, Inc.)
8.00% 5/15/12 6,695,000 8,301,465
Oklahoma State Turnpike Authority
Revenue (First Senior)
6.00% 1/1/22 13,535,000 16,717,349
Virgin Islands Public Finance Authority
Revenue Series A 7.30% 10/1/18 2,200,000 2,968,790
-----------
27,987,604
-----------
1
Statements Delaware Tax-Free USA Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Higher Education Revenue Bonds - 11.09%
California Educational Facilities
Authority Revenue
(University of South California)
Series A 5.00% 10/1/33 $ 8,000,000 $ 8,402,160
Colorado State University Systems
Series B 5.00% 3/1/35 (AMBAC) 250,000 261,513
Illinois Educational Facilities Authority
Student Housing Revenue
(Educational Advancement Fund-
University Center Project) 6.25% 5/1/30 5,000,000 5,192,100
Maryland State Economic Development
Corporation, Student Housing Revenue
(University of Maryland College
Park Project) 5.625% 6/1/35 1,125,000 1,152,956
Massachusetts State Health & Educational
Facilities Authority Revenue
(Nichols College) Series C
6.00% 10/1/17 1,000,000 1,036,600
6.125% 10/1/29 1,400,000 1,404,116
Middlesex County, New Jersey
Improvement Authority Revenue
(Street Student Housing Project)
Series A 5.00% 8/15/35 4,500,000 4,532,400
New Hampshire Higher Educational &
Health Facilities Authority Revenue
(New Hampton School Issue)
5.375% 10/1/28 3,070,000 2,911,527
New Jersey State Educational Facilities
Revenue (Kean University) Series D
5.00% 7/1/28 (FGIC) 3,250,000 3,432,325
++New York State Dormitory Authority
Revenues (Drivers-107) Inverse Floater
12.576% 5/15/15 (MBIA) 10,500,000 15,156,749
Ohio State Higher Educational Facilities
Revenue (Oberlin College Project)
5.00% 10/1/33 2,000,000 2,093,820
Payne County, Oklahoma Economic
Development Authority Student
Housing Revenue (Collegiate Housing
Foundation-Oklahoma State University)
Series A 6.375% 6/1/30 4,000,000 4,928,760
South Carolina Educational Facilities
Authority for Non-Profit Institutions
(Southern Wesleyan University)
5.00% 3/1/25 1,200,000 1,156,164
University of California Revenues
Series A 5.00% 5/15/33 (AMBAC) 3,250,000 3,415,100
Vermont University & State Agriculture
College 5.125% 10/1/37 (AMBAC) 1,000,000 1,050,430
-----------
56,126,720
-----------
Hospital Revenue Bonds - 9.63%
Cando, North Dakota Nursing Facility
Revenue (Towner County Medical
Center Project) 7.125% 8/1/22 1,000,000 1,018,760
Chatham County, Georgia Hospital
Authority Revenue
(Memorial Health Medical Center)
Series A 6.125% 1/1/24 1,000,000 1,089,800
Principal Market
Amount Value
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Cuyahoga County, Ohio Revenue
(Cleveland Clinic Health Systems)
Series A 5.50%1/1/29 $ 7,500,000 $ 7,893,974
Henrico County, Virginia Economic
Development Authority Revenue
(Bon Secours Health System, Inc.)
Series A 5.60% 11/15/30 2,000,000 2,090,260
Illinois Health Facilities Authority Revenue
(Elmhurst Memorial Healthcare)
5.625% 1/1/28 2,000,000 2,100,720
Louisiana Public Facilities
Authority Revenue
(Ochsner Clinic Foundation Project)
Series B 5.50% 5/15/32 1,750,000 1,817,113
Maryland State Health & Higher
Educational Facilities Authority Revenue
(Sheppard Pratt) Series A
5.25% 7/1/35 2,150,000 2,228,583
Michigan State Hospital Finance
Authority Revenue
(Ascension Health Credit Group)
Series B 5.25% 11/15/26 3,500,000 3,649,905
(Oakwood Obligation Group)
Series A 5.75% 4/1/32 2,500,000 2,643,975
(Trinity Health Credit) Series C
5.375% 12/1/30 6,000,000 6,294,240
New Jersey Health Care Facilities
Financing Authority Revenue
(Capital Health System Obligation Group)
Series A 5.375% 7/1/33 1,000,000 1,013,120
Prince William County, Virginia Industrial
Development Authority Hospital
Revenue (Potomac Hospital Project)
5.35% 10/1/36 1,750,000 1,815,485
South Carolina Jobs Economic Development
Authority Revenue
(Bon Secours Health System, Inc.)
Series A 5.625% 11/15/30 5,000,000 5,103,050
South Miami, Florida Health Facilities
Authority Hospital Revenue
(Baptist Health South Florida Group)
5.25% 11/15/33 4,000,000 4,122,000
St. Louis Park, Minnesota Health Care
Facilities Revenue
(Park Nicollet Health Services)
Series B 5.25% 7/1/30 2,500,000 2,579,400
Tangipahoa Parish, Louisiana Hospital
Service District #1 Hospital Revenue
(North Oaks Medical Center Project)
Series A 5.00% 2/1/30 3,250,000 3,278,503
-----------
48,738,888
-----------
Investor Owned Utilities Revenue Bonds - 14.01%
Brazos, Texas River Authority Pollution
Revenue (TXU Energy Co. Project)
Series B 6.30% 7/1/32 (AMT) 3,500,000 3,667,685
Claiborne County, Mississippi Pollution
Control Revenue
(System Energy Resources, Inc. Project)
7.30% 5/1/25 3,000,000 3,012,150
2
Statements Delaware Tax-Free USA Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Investor Owned Utilities Revenue Bonds (continued)
Clark County, Nevada Industrial
Development Revenue
(Nevada Power Co. Project)
Series C 7.20% 10/1/22 $ 8,000,000 $ 8,178,400
Luzerne County, Pennsylvania Industrial
Development Authority
(Pennsylvania Gas & Water Co. Project)
Series A 7.00% 12/1/17 (AMBAC) (AMT) 4,000,000 4,249,000
Midland County, Michigan Economic
Development Subordinate Limited
Obligation (Midland Congeneration)
Series A 6.875% 7/23/09 (AMT) 3,050,000 3,195,577
Mississippi Business Finance Corporation
Pollution Control Revenue
(System Energy Resources, Inc. Project)
5.90% 5/1/22 3,000,000 3,024,360
Petersburg, Indiana Pollution
Control Revenue
(Indianapolis Power & Light Co. Project)
6.375% 11/1/29 (AMT) 4,250,000 4,522,255
6.625% 12/1/24 4,500,000 4,638,465
Port Morrow, Oregon Pollution
Control Revenue
(Portland General Electric Co.)
Series A 5.20% 5/1/33 2,000,000 2,107,780
Sabine River Authority, Texas Pollution
Control Revenue
(Southwestern Electric Power Co.)
6.10% 4/1/18 (MBIA) 4,000,000 4,396,360
Suffolk County, New York Industrial
Agency Development Revenue
(Keyspan-Port Jefferson Project)
5.25% 6/1/27 (AMT) 3,500,000 3,579,835
Sweetwater County, Wyoming Pollution
Control Revenue
(Idaho Power Co. Project)
Series A 6.05% 7/15/26 5,000,000 5,194,700
West Feliciana Parish, Louisiana Pollution
Control Revenue
(Gulf States Utilities Co. Project)
Series A 7.50% 5/1/15 20,700,000 21,083,984
-----------
70,850,551
-----------
Miscellaneous Revenue Bonds - 0.64%
Director State, Nevada Department of
Business & Industry
(Las Vegas Monorail Project) 2nd Tier
7.375% 1/1/40 1,000,000 985,600
Wisconsin Center District Tax Revenue
(Junior Dedicated) 5.25% 12/15/23 (FSA) 2,000,000 2,267,260
-----------
3,252,860
-----------
Multi Family Housing Revenue Bonds - 0.93%
Carlsbad, New Mexico Housing
Corporation Multifamily Revenue
(Colonial Hillcrest) 7.375% 8/15/27 1,000,000 951,430
Milwaukee, Wisconsin Redevelopment
Authority Multifamily Revenue
(City Hall Square)
6.30% 8/1/38 (FHA) (AMT) 1,455,000 1,538,459
Principal Market
Amount Value
Municipal Bonds (continued)
Multi Family Housing Revenue Bonds (continued)
North Dakota State Housing Finance
Agency Multifamily Revenue
Series A 6.15% 12/1/17 (FNMA) $ 1,300,000 $ 1,362,686
Southeastern New Mexico Affordable
Housing Corporation Multifamily
Revenue (Casa Hermosa Apartments)
7.25% 12/1/27 1,000,000 854,290
-----------
4,706,865
-----------
Municipal Lease Revenue Bonds - 5.30%
Alexandria, Virginia Industrial Development
Authority Revenue
(Institute for Defense Analyses)
Series A 5.90% 10/1/30 (AMBAC) 5,000,000 5,830,750
Cudahy, Wisconsin Community Development
Authority Lease Revenue 6.00% 6/1/11 1,000,000 1,095,120
Golden State, California Tobacco
Securitization Corporation
Settlement Revenue
Series B 5.50% 6/1/43 7,500,000 7,645,950
Series B 5.625% 6/1/38 7,500,000 7,728,450
Idaho State Building Authority Revenue
Series A 5.00% 9/1/43 (XLCA) 1,000,000 1,039,860
Linn County, Kansas Certificates
of Participation 7.25% 3/1/13 (AMT) 350,000 340,886
St. Paul, Minnesota Port Authority Lease
Revenue (Robert Street Office Building)
4.75% 12/1/23 3,000,000 3,107,730
-----------
26,788,746
-----------
*Pre-Refunded Bonds - 5.37%
Iowa Finance Authority Revenue
(State Revolving Fund)
Combined Series 6.25% 5/1/24-04 1,750,000 1,784,020
Michigan State Hospital Finance
Authority Revenue
(Genesys Health Systems) Series A
7.50% 10/1/27-05 8,130,000 8,949,341
8.125% 10/1/21-05 4,000,000 4,520,080
Mississippi Development Bank Special
Obligation
(Madison County Hospital Project)
6.30% 7/1/22-09 2,070,000 2,516,623
New York City, New York Series H
6.125% 8/1/25-07 40,000 46,374
North Dakota State Building Authority
Lease Revenue Series A
6.10% 12/1/16-04 (FSA) 1,480,000 1,537,676
Puerto Rico Industrial, Tourist,
Educational, Medical & Environmental
Control Facilities
(Polytechnic University Project)
Series A 6.50% 8/1/24-04 1,910,000 1,992,990
Puerto Rico Municipal Finance Agency
Series A 6.00% 7/1/14-04 (FSA) 3,500,000 3,613,610
Southeast Wisconsin Professional Baseball
Park District Sales Tax Revenue
5.80% 12/15/26-07 (MBIA) 1,000,000 1,134,770
Wisconsin Housing Finance Authority
Revenue 6.10% 6/1/21-17 (FHA) 890,000 1,058,815
-----------
27,154,299
-----------
3
Statements Delaware Tax-Free USA Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Public Utility District Revenue Bonds - 3.13%
Chelan County, Washington Public
Utilities District #001
Consolidated Revenue
(Chelan Hydro System) Series A
5.45% 7/1/37 (AMBAC) (AMT) $ 5,000,000 $ 5,340,350
Richmond, Virginia Public Utilities
Revenue 5.00% 1/15/27 (FSA) 10,000,000 10,479,700
-----------
15,820,050
-----------
Recreational Area Revenue Bonds - 0.97%
New York, New York City Trust Cultural
Restoration Revenue
(Wildlife Conservation Society)
5.00% 2/1/34 (FGIC) 3,500,000 3,700,235
Santa Fe, New Mexico Municipal
Recreation Complex Net Revenue
5.625% 12/1/23 1,190,000 1,187,073
-----------
4,887,308
-----------
School District General Obligation Bonds - 0.50%
Lewisville, Texas Independent School
District Permanent School Fund
6.15% 8/15/21 2,160,000 2,513,570
-----------
2,513,570
-----------
Single Family Housing Revenue Bonds - 0.61%
New Mexico Mortgage Finance Authority
Series B Class III 6.75% 7/1/25
(FNMA) (GNMA) 500,000 508,925
Series E 6.95% 1/1/26 (FNMA) (GNMA) 460,000 478,814
Series F 6.85% 1/1/21 (FNMA) (GNMA) 180,000 183,245
North Dakota State Housing
Finance Agency Revenue
Series A 6.30% 7/1/16 (AMT) 750,000 790,598
Series B 6.25% 1/1/17 (AMT) 660,000 680,064
Santa Fe, New Mexico Single Family
Mortgage Revenue
6.20% 11/1/16 (FNMA) (GNMA) (AMT) 295,000 297,248
Utah State Housing Finance Agency Single
Family Mortgage
Series A 7.20% 1/1/27 (FHA) (VA) (AMT) 150,000 155,331
-----------
3,094,225
-----------
State General Obligation Bonds - 1.03%
California State 5.00% 2/1/31 (MBIA) 5,000,000 5,225,000
-----------
5,225,000
-----------
Territorial General Obligation Bonds - 4.04%
Puerto Rico Commonwealth
Public Improvement
5.375% 7/1/21 (MBIA) 50,000 56,860
Series A 5.125% 7/1/31 10,375,000 10,799,130
Series A 5.50% 7/1/19 (MBIA) 8,000,000 9,564,720
-----------
20,420,710
-----------
Territorial Revenue Bonds - 4.65%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series G 5.00% 7/1/42 10,000,000 10,350,400
Puerto Rico Commonwealth Industrial
Development Company General Purpose
Revenues Series B 5.375% 7/1/16 1,000,000 1,109,380
Principal Market
Amount Value
Municipal Bonds (continued)
Territorial Revenue Bonds (continued)
Puerto Rico Electric Power
Authority Revenue
Series II 5.25% 7/1/31 $ 6,000,000 $ 6,375,120
Series U 6.00% 7/1/14 2,550,000 2,638,103
Puerto Rico Housing, Bank & Finance
Agency Single Family Mortgage
Revenue 6.25% 4/1/29
(FHLMC) (FNMA) (GNMA) (AMT) 1,240,000 1,286,438
Puerto Rico Industrial, Tourist, Educational,
Medical & Environmental Control
Facilities (Hospital Auxilio Mutuo
Obligated Group) Series A
6.25% 7/1/24 (MBIA) 1,200,000 1,267,836
Virgin Islands Water & Power Authority
Water System Revenue 5.50% 7/1/17 510,000 522,148
------------
23,549,425
------------
Turnpike/Toll Road Revenue Bonds - 4.63%
New Jersey State Highway Authority
Garden State Parkway General Revenue
(Senior Parkway)
5.50% 1/1/14 (FGIC) 5,000,000 5,911,050
5.50% 1/1/15 (FGIC) 7,310,000 8,666,736
Ohio State Turnpike Commission
Revenue Series A
5.50% 2/15/24 (FGIC) 5,000,000 5,809,600
5.50% 2/15/26 (FGIC) 2,590,000 3,022,763
------------
23,410,149
------------
Water & Sewer Revenue Bonds - 4.19%
New York City, New York Municipal
Water Finance Authority Water &
Sewer System Revenue Series A
5.00% 6/15/35 5,000,000 5,227,800
5.125% 6/15/34 12,000,000 12,608,040
West Virginia State Water Development
Authority Revenue (Loan Program III)
Series A 6.375% 7/1/39 (AMBAC) (AMT) 2,890,000 3,375,780
------------
21,211,620
------------
Total Municipal Bonds (cost $449,940,912) 487,550,369
------------
**Variable Rate Demand Notes - 2.98%
Airline Revenue Bonds - 0.44%
Clayton County, Georgia Development
Authority Special Facilities Revenue
(Delta Air Lines Project) Series A
0.97% 6/1/29 2,250,000 2,250,000
------------
2,250,000
------------
City General Obligation Bonds - 0.52%
Lancaster County, Pennsylvania Series B
0.95% 11/1/16 (FSA) 2,650,000 2,650,000
------------
2,650,000
------------
Continuing Care/Retirement Revenue Bonds - 0.59%
North Carolina Medical Care Common
Health Care Facilities Revenue
(Carol Woods Project) 1.05% 4/1/31
(RADIAN) 2,960,000 2,960,000
------------
2,960,000
------------
4
Statements Delaware Tax-Free USA Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
**Variable Rate Demand Notes (continued)
Higher Education Revenue Bonds - 0.34%
Idaho State University Foundation
Income Revenue
(L.E. & Thelma Stephens Project)
0.95% 5/1/21 (LOC Wells Fargo Bank) $ 500,000 $ 500,000
Maryland State Economic Development
Corporate Revenue
(CHF College Park LLC) Series A
0.95% 6/1/32 (LOC Wachovia Bank) 1,200,000 1,200,000
------------
1,700,000
------------
Hospital Revenue Bonds - 1.09%
Loudoun County, Virginia Industrial
Development Authority Revenue
(Howard Hughes Medical Institution)
Series E 0.97% 2/15/38 3,000,000 3,000,000
New Castle, Pennsylvania Area Hospital
Authority Revenue
(Jameson Memorial Hospital)
0.90% 7/1/26 500,000 500,000
Vermont Educational & Health Buildings
Financing Agency Revenue
(Rutland Regional Medical Center)
Series A 1.04% 4/1/32 (RADIAN) 2,000,000 2,000,000
------------
5,500,000
------------
Total Variable Rate Demand Notes
(Cost $15,060,000) 15,060,000
------------
Total Market Value of Securities - 99.35%
(cost $465,000,912) 502,610,369
Receivables and Other Assets
Net of Liabilities - 0.65% 3,299,978
------------
Net Assets Applicable to 43,214,497 Shares
Outstanding - 100.00% $505,910,347
============
Net Asset Value - Delaware Tax-Free USA Fund Class A
($471,418,174 / 40,268,193 Shares) $11.71
------
Net Asset Value - Delaware Tax-Free USA Fund Class B
($28,241,164 / 2,412,352 Shares) $11.71
------
Net Asset Value - Delaware Tax-Free USA Fund Class C
($6,251,009 / 533,952 Shares) $11.71
------
Components of Net Assets at February 29, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $479,017,583
Distributions in excess of net investment income (12,071)
Accumulated net realized loss on investments (10,704,622)
Net unrealized appreciation of investments 37,609,457
------------
Total net assets $505,910,347
============
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**The interest rate shown is the rate as of February 29, 2004.
+Non-income producing security. Security is currently in default.
++An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of February 29, 2004.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FHLMC - Insured by the Federal Home Loan Mortgage Corporation
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - by Radian Asset Assurance
VA - Insured by the Veterans Administration
XLCA - Insured by XL Capital Assurance
Net Asset Value and Offering Price per Share -
Delaware Tax-Free USA Fund
Net asset value Class A (A) $11.71
Sales charge (4.50% of offering price, or 4.70% of
amount invested per share) (B) 0.55
------
Offering price $12.26
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
5
Statements Delaware Tax-Free Insured Fund
OF NET ASSETS (CONTINUED) February 29, 2004 (Unaudited)
Principal Market
Amount Value
Municipal Bonds - 101.88%
Airline Revenue Bonds - 1.30%
New Jersey Economic Development
Authority Special Facility Revenue
(Continental Airlines, Inc. Project)
6.25% 9/15/29 (AMT) $1,000,000 $ 861,700
----------
861,700
----------
Airport Revenue Bonds - 4.01%
Dallas-Fort Worth, Texas International
Airport Revenue Series A
5.50% 11/1/31 (FGIC) (AMT) 1,500,000 1,607,940
Metropolitan Washington DC Airport
Authority System Series A
5.25% 10/1/32 (FGIC) (AMT) 1,000,000 1,051,320
----------
2,659,260
----------
City General Obligation Bonds - 7.80%
Melrose Park, Illinois Tax Increment
Series B 6.00% 12/15/19 (FSA) 1,250,000 1,488,550
Powell, Ohio 5.50% 12/1/32 (FGIC) 2,000,000 2,198,960
Vancouver, Washington Limited Tax
5.50% 12/1/25 (AMBAC) 1,250,000 1,478,313
----------
5,165,823
----------
Dedicated Tax & Fees Revenue Bonds - 3.42%
Jacksonville, Florida Sales Tax Revenue
5.00% 10/1/30 (MBIA) 1,000,000 1,054,920
Tampa, Florida Sports Authority Revenue
(Tampa Bay Arena Project) Sales Tax
5.75% 10/1/20 (MBIA) 1,000,000 1,208,660
----------
2,263,580
----------
Higher Education Revenue Bonds - 8.14%
Amherst, New York Industrial Agency
Civic Facilities Revenue
(UBF Faculty Student Housing) Series A
5.75% 8/1/30 (AMBAC) 1,300,000 1,487,499
Illinois Educational Facilities Authority
Student Housing Revenue
(Educational Advancement Funding -
University Center Project) 6.25% 5/1/34 1,000,000 1,030,150
Massachusetts State Development
Finance Agency Revenue
(Massachusetts College of Pharmacy)
Series C 5.75% 7/1/33 500,000 507,475
Massachusetts State Industrial Finance
Agency Revenue Higher Education
(Clark University Project) 6.10% 7/1/16 1,250,000 1,339,213
Pennsylvania State Higher Educational
Facilities Authority Revenue
(Widener University) 5.375% 7/15/29 1,000,000 1,026,620
----------
5,390,957
----------
Hospital Revenue Bonds - 7.04%
Knox County, Tennessee Health,
Educational & Housing Facilities
Board Hospital Revenue
(East Tennessee Hospital Project)
Series B 5.75% 7/1/33 1,000,000 1,037,600
New Jersey Health Care Facilities
Financing Authority Revenue
(Capital Health System Obligation Group)
Series A 5.00% 7/1/26 1,250,000 1,242,425
Principal Market
Amount Value
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Prince William County, Virginia Industrial
Development Authority Hospital
Revenue (Potomac Hospital Project)
5.20% 10/1/30 $1,000,000 $1,026,690
Tangipahoa Parish, Louisiana Hospital
Service District #1 Hospital Revenue
(North Oaks Medical Center Project)
Series A 5.00% 2/1/25 1,330,000 1,355,204
----------
4,661,919
----------
Investor Owned Utilities Revenue Bonds - 14.64%
Luzerne County, Pennsylvania Industrial
Development Authority
(Pennsylvania Gas & Water Co. Project)
Series A 7.00% 12/1/17 (AMBAC) (AMT) 1,000,000 1,062,250
Mason County, West Virginia Pollution
Control Revenue
(Appalachian Power Co. Project)
Series K 6.05% 12/1/24 (AMBAC) 3,000,000 3,520,530
Petersburg, Indiana Pollution
Control Revenue
(Indianapolis Power & Light Co. Project)
6.375% 11/1/29 (AMT) 750,000 798,045
Salem County, New Jersey Industrial
Pollution Control Financing
Authority Revenue
(Public Service Electric & Gas Co.)
Series D 6.55% 10/1/29 (MBIA) 3,600,000 3,780,143
South Carolina Jobs Economic Development
Authority Industrial Revenue
(South Carolina Electric & Co. Project)
Series B 5.45% 11/1/32 (AMBAC) (AMT) 500,000 536,715
----------
9,697,683
----------
Multi Family Housing Revenue Bonds - 9.47%
Franklin County, Ohio Multi Family Revenue
(Alger Green) Series A
5.80% 5/20/44 (GNMA) (AMT) 1,150,000 1,228,867
Illinois Development Finance Authority
Revenue (Section 8) Series A
5.80% 7/1/28 (FHA) (MBIA) 2,790,000 2,939,627
Illinois Housing Development Authority
Multi Family Revenue
(Crystal Lake Preservation) Series A -1
5.80% 12/20/41 (GNMA) 2,000,000 2,104,940
----------
6,273,434
----------
Municipal Lease Revenue Bonds - 4.46%
Alexandria, Virginia Industrial Development
Authority Revenue
(Institute for Defense Analyses)
Series A 5.90% 10/1/30 (AMBAC) 1,000,000 1,166,150
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series B 5.50% 6/1/43 1,000,000 1,019,460
Loudoun County, Virginia Industrial
Development Authority Public Safety
Facility Lease Revenue Series A
5.25% 12/15/23 (FSA) 700,000 767,347
----------
2,952,957
----------
6
Statements Delaware Tax-Free Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Political Subdivision General Obligation Bonds - 0.92%
State Clair County, Michigan
5.00% 4/1/21 (AMBAC) $ 565,000 $ 610,307
-----------
610,307
-----------
*Pre-Refunded Bonds - 14.95%
Michigan State Hospital Finance Authority
Revenue (Genesys Health Systems)
Series A 7.50% 10/1/27-05 1,500,000 1,651,170
Regional Transportation Authority
Illinois Revenue Series D
6.75% 6/1/25-04 (FGIC) 7,970,000 8,250,065
-----------
9,901,235
-----------
Public Utility District Revenue Bonds - 5.16%
Austin, Texas Revenue Subordinate Lien
5.25% 5/15/20 (MBIA) 3,000,000 3,418,980
-----------
3,418,980
-----------
Recreational Area Revenue Bonds - 1.45%
Hoffman Estates, Illinois Park District Debt
Certificates 4.50% 12/1/23 1,000,000 962,530
-----------
962,530
-----------
School District General Obligation Bonds - 4.48%
Brookville, Ohio Local School District
5.00% 12/1/26 (FSA) 500,000 530,290
Jackson, Ohio Local School District
(Stark & Summit Counties) School
Facilities 5.625% 12/1/25 (FSA) 1,000,000 1,117,640
Pomona, California United School District
Series A 6.55% 8/1/29 (MBIA) 1,000,000 1,320,530
-----------
2,968,460
-----------
Single Family Housing Revenue Bonds - 1.36%
New Mexico Mortgage Finance Authority
Single Family Mortgage Program Series C
6.20% 7/1/26 (FNMA) (GNMA) 870,000 903,939
-----------
903,939
-----------
Territorial General Obligation Bonds - 1.81%
Puerto Rico Commonwealth Public
Improvement Series A
5.50% 7/1/19 (MBIA) 1,000,000 1,195,590
-----------
1,195,590
-----------
Territorial Revenue Bonds - 7.68%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Series E
5.50% 7/1/17 (FSA) 1,250,000 1,499,113
5.50% 7/1/19 (FSA) 3,000,000 3,586,770
-----------
5,085,883
-----------
Turnpike/Toll Road Revenue Bonds - 3.79%
Harris County, Texas Toll Road Subordinate
Lien 5.00% 8/15/25 (FGIC) 1,250,000 1,321,488
New Jersey State Highway Authority Garden
State Parkway General Revenue
5.50% 1/1/16 (FGIC) 1,000,000 1,187,700
-----------
2,509,188
-----------
Total Municipal Bonds (cost $62,192,969) 67,483,425
-----------
Total Market Value of Securities - 101.88%
(cost $62,192,969) $67,483,425
Liabilities Net of Receivables and
Other Assets - (1.88%) (1,246,663)
-----------
Net Assets Applicable to 5,851,274 Shares
Outstanding - 100.00% $66,236,762
===========
Net Asset Value - Delaware Tax-Free Insured Fund
Class A ($57,421,351 / 5,072,547 Shares) $11.32
------
Net Asset Value - Delaware Tax-Free Insured Fund
Class B ($6,964,536 / 615,226 Shares) $11.32
------
Net Asset Value - Delaware Tax-Free Insured Fund
Class C ($1,850,875 / 163,501 Shares) $11.32
------
Components of Net Assets at February 29, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $61,085,630
Distributions in excess of net investment income (1,520)
Accumulated net realized loss on investments (137,804)
Net unrealized appreciation of investments 5,290,456
-----------
Total net assets $66,236,762
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Insured Fund
Net asset value Class A (A) $11.32
Sales charge (4.50% offering price, or 4.68% of
amount invested per share) (B) 0.53
------
Offering price $11.85
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
7
Statements Delaware Tax-Free USA Intermediate Fund
OF NET ASSETS (CONTINUED) February 29, 2004 (Unaudited)
Principal Market
Amount Value
Municipal Bonds - 93.86%
Airport Revenue Bonds - 2.28%
Chicago, Illinois O' Hare International
Airport Revenue General-Airport-Third
Lein Series A-2
5.75% 1/1/20 (FSA) (AMT) $1,000,000 $1,126,870
Metropolitan, Washington D.C. Airport
Authority Systems Series A
5.50% 10/1/19-00 (FGIC) (AMT) 1,000,000 1,109,500
----------
2,236,370
----------
City General Obligation Bonds - 3.94%
New York City, New York
Series G 5.25% 8/1/15 1,000,000 1,115,890
Series J 5.50% 6/1/23 1,000,000 1,096,010
Powell, Ohio 5.50% 12/1/25 (FGIC) 1,500,000 1,658,385
----------
3,870,285
----------
Convention Center/Auditorium/Hotel Revenue Bonds - 1.05%
Suffolk, Virginia Industrial
Development Authority
(Hotel & Conference Center Project)
5.00% 10/1/23 (ACA) 1,000,000 1,027,970
----------
1,027,970
----------
Corporate-Backed Revenue Bonds - 8.21%
Alliance, Texas Airport Authority
Special Facilities Revenue
(Federal Express Corp. Project)
6.375% 4/1/21 (AMT) 1,000,000 1,070,650
Cartersville, Georgia Development Authority
Waste & Wastewater Facilities Revenue
(Anheuser Busch Project)
5.10% 2/1/12 (AMT) 450,000 499,163
Michigan State Strategic Funding Limited
Obligation Revenue
(Detroit Edison Co. Project) Series A
5.50% 6/1/30 (XLCA) (AMT) 1,000,000 1,083,890
Ohio State Air Quality Development
Authority Revenue Environmental
Improvement (USX Project)
5.00% 11/1/15 1,000,000 1,094,420
Pennsylvania Economic Development
Financing Authority Wastewater
Treatment Revenue
(Sun Co. Inc. -R & M Project)
Series A 7.60% 12/1/24 (AMT) 1,000,000 1,060,130
Prattville, Alabama Industrial Development
Board Environmental Improvement
Revenue (International Paper Co. Project)
Series A 6.70% 3/1/24 (AMT) 1,500,000 1,637,235
Sugar Creek, Missouri Industrial
Development Revenue
(Lafarge North America) Series A
5.65% 6/1/37 (AMT) 500,000 509,625
Toledo, Lucas County, Ohio Port Authority
Development Revenue (Northwest Ohio
Bond Fund - Alex Products Inc.)
Series B 6.125% 11/15/09
(LOC Fifth Third Bank) (AMT) 1,000,000 1,109,990
----------
8,065,103
----------
Principal Market
Amount Value
Municipal Bonds (continued)
Dedicated Tax & Fees Revenue Bonds - 4.48%
Casa Grande, Arizona Excise Tax Revenue
5.00% 4/1/22 (AMBAC) $1,600,000 $1,720,048
Ernest N. Morial - New Orleans, Louisiana
Exhibit Hall Authority Special Tax
Senior Subordinate Series A
5.25% 7/15/28 (AMBAC) 1,000,000 1,075,230
New York City Transitional Finance Authority
Future Tax Secured Series D
5.00% 2/1/27 1,535,000 1,608,695
----------
4,403,973
----------
Escrowed to Maturity Bonds - 0.34%
Metropolitan Pier & Exposition Authority
Illinois Hospitality Facilities
(McCormick Place Convention Center)
5.75% 7/1/06 315,000 333,040
----------
333,040
----------
Higher Education Revenue Bonds - 16.78%
Forest Grove, Oregon Revenue Campus
(Pacific University)
6.30% 5/1/25 (RADIAN) 1,000,000 1,148,540
Illinois Educational Facilities Authority
Student Housing Revenue
(Educational Advancement -
University Center Project) 6.00% 5/1/22 750,000 770,963
Lynchburg, Virginia Industrial Development
Authority Educational Facilities Revenue
(Lynchburg College) 5.25% 9/1/33 1,000,000 1,030,570
Massachusetts State Health & Educational
Facilities Authority Revenue
(Nichols College) Series C
6.125% 10/1/29 1,000,000 1,002,940
Michigan Higher Education Facilities
Authority Revenue
(Kalamazoo College Project)
5.50% 12/1/19 500,000 551,245
Michigan Technology University Series A
5.00% 10/1/22 (MBIA) 1,115,000 1,192,526
Middlesex County, New Jersey Improvement
Authority Revenue
(Street Student Housing Project)
Series A 5.00% 8/15/35 1,000,000 1,007,200
New Jersey State Educational Facilities
Authority Revenue
(Georgian Court College Project)
Series C 6.50% 7/1/33 500,000 559,965
New York State Dormitory Authority Revenues
(Brooklyn Law School)
Series A 5.50% 7/1/18 (RADIAN) 1,000,000 1,122,160
(Long Island University)
Series B 5.50% 9/1/20 (RADIAN) 1,000,000 1,103,950
Ohio State Higher Educational Facility
Revenue (John Carroll University)
5.50% 11/15/18 335,000 380,161
(Kenyon College Project) 4.70% 7/1/37 1,000,000 1,066,130
Ohio State University General Receipts
Series B 5.25% 6/1/21 1,000,000 1,097,920
8
Statements Delaware Tax-Free USA Intermediate Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Higher Education Revenue Bonds (continued)
Pennsylvania State Higher Educational
Facilities Authority College & University
Revenue (Geneva College Project)
6.125% 4/1/22 $ 1,000,000 $ 1,048,640
Pennsylvania State Higher Educational
Facilities Authority Revenue
(Dickenson College) Series AA1
5.00% 11/1/26 (RADIAN) 500,000 513,285
South Carolina Educational Facilities
Authority for Private Nonprofit Institutions
(Southern Wesleyan University)
5.00% 3/1/20 1,475,000 1,474,985
University of California Revenue Series A
5.125% 5/15/20 (AMBAC) 250,000 273,605
University of Oklahoma Research Facilities
5.00% 3/1/23 (AMBAC) 1,065,000 1,137,015
-----------
16,481,800
-----------
Hospital Revenue Bonds - 12.31%
Carrington, North Dakota Health Facilities
Revenue (Carrington Health Center Project)
6.25% 11/15/15 500,000 505,985
Chatham County, Georgia Hospital Authority
Revenue (Memorial Health Medical Center)
Series A 6.125% 1/1/24 1,000,000 1,089,800
Cuyahoga County, Ohio Revenue
(Cleveland Clinic Health System)
Series A 6.00% 1/1/21 1,000,000 1,111,320
Lancaster County, Pennsylvania Hospital
Authority Revenue
(Lancaster General Hospital Project)
5.75% 3/15/21 1,000,000 1,078,020
Lebanon County, Pennsylvania Health
Facilities Authority Revenue
(Good Samaritan Hospital Project)
4.50% 11/15/18 500,000 489,170
Maryland State Health & Higher Education
Facilities Authority Revenue
(Union Hospital of Cecil County)
5.625% 7/1/32 500,000 525,420
Michigan State Hospital Finance Authority
Revenue (Trinity Health Credit)
Series C 5.375% 12/1/23 500,000 529,310
Minneapolis Health Care System Revenue
(Allina Health Systems)
Series A 5.75% 11/15/32 500,000 533,655
New Hampshire Health & Education Facilities
Authority Revenue (Elliot Hospital)
Series B 5.60% 10/1/22 1,000,000 1,031,010
New Jersey Health Care Facilities Financing
Authority Revenue Health Systems
(Catholic Health East Project)
Series A 5.375% 11/15/33 845,000 871,018
North Texas Health Facilities Development
Corporation Hospital Revenue
(United Regional Health Care
System, Inc. Project) 6.00% 9/1/23 1,000,000 1,063,670
Prince William County, Virginia Industrial
Development Authority Hospital Revenue
(Potomac Hospital Project)
5.20% 10/1/30 545,000 559,546
Principal Market
Amount Value
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Southcentral, Pennsylvania General
Authority Revenue
(Wellspan Health Obligated Project)
5.625% 5/15/26 $ 1,000,000 $ 1,058,530
Terrebonne Parish, Louisiana Hospital
Service District #1 Hospital Revenue
(Terrebonne General Medical Center Project)
5.50% 4/1/33 (AMBAC) 1,500,000 1,641,465
-----------
12,087,919
-----------
Investor Owned Utilities Revenue Bonds - 8.58%
Cambria County, Pennsylvania Industrial
Development Authority Pollution
Control Revenue
(Pennsylvania Electric Co. Project)
Series A 5.80% 11/1/20 (MBIA) 500,000 541,865
Connecticut State Development Authority
Pollution Control Revenue
(Connecticut Light & Power Co.)
3.35% 5/1/31 (AMBAC) (AMT) 1,300,000 1,340,521
Forsyth, Montana Pollution Control Revenue
(Portland General) Series A
5.20% 5/1/33 1,005,000 1,055,712
Maricopa County, Arizona Pollution Control
Corporation Pollution Control Revenue
(El Paso Electric Co. Project)
A 6.375% 8/1/15 750,000 788,333
Montgomery County, Pennsylvania Industrial
Development Authority Pollution
Control Revenue (PECO Energy Co.)
Series A 5.20% 10/1/30 1,000,000 1,018,780
Sabine River Authority, Texas Pollution
Control Revenue (TXU Electric Co. Project)
Series A 5.50% 5/1/22 1,000,000 1,093,220
Saint Charles Parish, Louisiana Pollution
Control Revenue (Entergy Louisiana Inc.)
Series A 4.90% 6/1/30 1,000,000 1,028,290
South Carolina Jobs Economic Development
Authority Industrial Revenue
(South Carolina Electric and
Gas Co. Project) Series B
5.45% 11/1/32 (AMBAC) (AMT) 500,000 536,715
West Feliciana Parish, Louisiana
Pollution Control Revenue
(Gulf States Utilities Co. Project)
Series A 7.50% 5/1/15 1,000,000 1,018,550
-----------
8,421,986
-----------
Miscellaneous Revenue Bonds - 3.05%
Florida Municipal Loan Council Revenue
Series B 5.00% 12/1/23 (MBIA) 750,000 799,140
New York State Municipal Bond Bank
Agency Special School Purpose Revenue
Series C 5.25% 6/1/22 1,000,000 1,075,440
Oregon State Department Administrative
Services Lottery Revenue Series A
5.00% 4/1/18 (FSA) 1,000,000 1,117,130
-----------
2,991,710
-----------
9
Statements Delaware Tax-Free USA Intermediate Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Municipal Lease Revenue Bonds - 7.12%
Albany, New York Industrial Development
Agency Civic Facility Revenue
(Charitable Leadership Project)
Series A 5.75% 7/1/26 $ 500,000 $ 515,815
Golden State, California Tobacco
Securitization Settlement Revenue
Series B 5.75% 6/1/23 1,000,000 1,068,070
Middle River, Virginia Regional
Jail Authority Facility Revenue
5.00% 5/15/20 (MBIA) 1,285,000 1,400,753
Missouri State Development Finance Board
Infrastructure Facilities Revenue
(Hartman Heritage Center Phase II)
5.00% 4/1/21 (AMBAC) 1,335,000 1,420,320
Nelson County, Virginia Industrial
Development Authority Lease Revenue
5.00% 8/15/22 (AMBAC) 1,425,000 1,527,600
North Carolina Infrastructure Finance
Corporation Certificates of Participation
(North Carolina Correctional
Facilities Project) Series A 5.00% 2/1/23 1,000,000 1,064,790
----------
6,997,348
----------
Political Subdivision General Obligation Bonds - 3.37%
Lansing, Michigan Community College
5.00% 5/1/21 (MBIA) 1,325,000 1,423,235
Lunenburg County, Virginia Series B
5.25% 2/1/29 (MBIA) 715,000 772,701
Middlesex County, New Jersey Improvement
Authority Revenue
(County Guaranteed Open Space Trust)
5.25% 9/15/20 1,000,000 1,117,330
----------
3,313,266
----------
Ports & Harbors Revenue Bonds - 0.57%
Virginia Port Authority Commonwealth
Port Fund Revenue Resolution
5.00% 7/1/12 (AMT) 500,000 558,830
----------
558,830
----------
*Pre-Refunded Bonds - 3.42%
Arizona State Transportation Board
Highway Revenue 6.25% 7/1/16-09 1,850,000 2,223,182
Pennsylvania State Higher Educational
Facilities Authority College
& University Revenue
(Ursinus College Project)
5.90% 1/1/27-07 1,000,000 1,138,650
----------
3,361,832
----------
Public Power Revenue Bonds - 5.01%
Long Island Power Authority New York
Electric System Revenue Series C
5.00% 9/1/23 500,000 519,365
Metropolitan Government Nashville &
Davidson County, Tennessee Electric
Revenue Series B 5.50% 5/15/14 1,000,000 1,187,050
Nebraska Public Power District Revenue
Series A 5.00% 1/1/20 (AMBAC) 1,000,000 1,082,550
Principal Market
Amount Value
Municipal Bonds (continued)
Public Power Revenue Bonds (continued)
South Carolina State Public Service
Authority Revenue Series A
5.125% 1/1/21 (FSA) $ 1,000,000 $ 1,088,290
Texas Municipal Power Agency Revenue
4.125% 9/1/12 (MBIA) 1,000,000 1,038,650
-----------
4,915,905
-----------
Recreational Area Revenue Bonds - 1.11%
Hampton, Virginia Convention Center
Revenue 5.25% 1/15/23 (AMBAC) 1,000,000 1,085,240
-----------
1,085,240
-----------
School District General Obligation Bonds - 3.47%
Brookville, Ohio Local School District
5.00% 12/1/26 (FSA) 1,000,000 1,060,580
Licking County, Ohio Joint Vocational
School District 5.00% 12/1/19 (MBIA) 1,000,000 1,088,270
Salem-Keizer, Oregon School District #24J
5.00% 6/15/19 (FSA) 1,145,000 1,255,515
-----------
3,404,365
-----------
State General Obligation Bonds - 1.97%
California State 5.25% 11/1/17 1,000,000 1,082,320
Florida State Board Education Capital Outlay
(Public Education) Series B
5.00% 6/1/10 750,000 854,475
-----------
1,936,795
-----------
Territorial Revenue Bonds - 2.17%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series B 6.00% 7/1/26 1,000,000 1,066,110
University of Puerto Rico Revenue Series M
5.50% 6/1/15 (MBIA) 1,000,000 1,066,040
-----------
2,132,150
-----------
Turnpike/Toll Road Revenue Bonds - 2.20%
Dunes, Florida Community Development
District Revenue -
Intracoastal Waterway Bridge
(ITT Industries Corp.) 5.50% 10/1/07 825,000 844,058
Harris County, Texas Toll Road Subordinate
Lien 5.00% 8/15/25 (FGIC) 1,250,000 1,321,487
-----------
2,165,545
-----------
Water & Sewer Revenue Bonds - 2.43%
Ohio State Water Development Authority
Revenue (Fresh Water) Series B
5.50% 12/1/19 (FSA) 1,000,000 1,192,890
Virginia State Resource Authority Clean
Water Revenue (State Revolving Fund)
6.00% 10/1/16 1,000,000 1,190,910
-----------
2,383,800
-----------
Total Municipal Bonds (cost $87,352,495) 92,175,232
-----------
10
Statements Delaware Tax-Free USA Intermediate Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
**Variable Rate Demand Notes- 6.24%
Continuing Care/Retirement Revenue Bonds - 2.44%
Philadelphia, Pennsylvania Authority for
Industrial Development Revenues
(Newcourtland Elder Services Project)
1.00% 3/1/27 (LOC PNC Bank) $ 2,400,000 $ 2,400,000
------------
2,400,000
------------
Hospital Revenue Bonds - 1.27%
Idaho Health Facilities Authority Revenue
(Pooled Financing Program)
0.95% 10/1/10 (LOC Bank of Idaho) 1,250,000 1,250,000
------------
1,250,000
------------
Miscellaneous Revenue Bonds - 2.53%
Chester County, Pennsylvania Industrial
Development Authority Revenue
(Archdiocese Philadelphia) 1.00% 7/1/31
(LOC Wachovia Bank) 2,480,000 2,480,000
------------
2,480,000
------------
Total Variable Rate Demand Notes
(cost $6,130,000) 6,130,000
------------
Total Market Value of Securities - 100.10%
(cost $93,482,495) 98,305,232
Liabilities Net of Receivables and
Other Assets - (0.10%) (94,439)
------------
Net Assets Applicable to 8,519,642 Shares
Outstanding - 100.00% $ 98,210,793
============
Net Asset Value - Delaware Tax-Free
USA Intermediate Fund Class A
($75,206,939 / 6,524,087 Shares) $11.53
------
Net Asset Value - Delaware Tax-Free
USA Intermediate Fund Class B
($4,435,119 / 384,750 Shares) $11.53
------
Net Asset Value - Delaware Tax-Free
USA Intermediate Fund Class C
($18,568,735 / 1,610,805 Shares) $11.53
------
Components of Net Assets at February 29, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $93,920,983
Accumulated net realized loss on investments (532,927)
Net unrealized appreciation of investments 4,822,737
-----------
Total net assets $98,210,793
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**The interest rate shown is the rate as of February 29, 2004.
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
XLCA - Insured by XL Capital Assurance
Net Asset Value and Offering Price per Share -
Delaware Tax-Free USA Intermediate Fund
Net asset value Class A (A) $11.53
Sales charge (2.75% of offering price, or 2.86% of
amount invested per share) (B) 0.33
------
Offering price $11.86
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
11
Statements Six Months Ended February 29, 2004 (Unaudited)
OF OPERATIONS
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free USA
USA Fund Insured Fund Intermediate Fund
Investment Income:
Interest $13,905,170 $1,742,183 $1,813,901
----------- ---------- ----------
Expenses:
Management fees 1,374,520 166,264 202,976
Distribution expenses-- Class A 511,575 63,651 94,118
Distribution expenses-- Class B 147,631 35,143 21,457
Distribution expenses-- Class C 28,786 8,479 67,301
Dividend disbursing and transfer agent fees and expenses 197,475 22,655 62,438
Accounting and administration expenses 98,060 13,040 15,612
Legal and professional fees 47,971 7,134 6,527
Registration fees 36,087 24,686 26,833
Reports and statements to shareholders 30,476 8,000 5,100
Custodian fees 18,111 2,906 2,691
Trustees' fees 8,500 2,707 2,174
Other 23,157 3,758 2,781
----------- ---------- ----------
2,522,349 358,423 510,008
Less expenses absorbed or waived (192,465) -- (60,755)
Less waived distribution expenses-- Class A -- -- (47,059)
Less expenses paid indirectly (15,916) (2,605) (3,106)
----------- ---------- ----------
Total expenses 2,313,968 355,818 399,088
----------- ---------- ----------
Net Investment Income 11,591,202 1,386,365 1,414,813
----------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 498,818 535,198 52,960
Net change in unrealized appreciation/depreciation of investments 22,928,742 2,115,582 3,667,818
----------- ---------- ----------
Net Realized and Unrealized Gain on Investments 23,427,560 2,650,780 3,720,778
----------- ---------- ----------
Net Increase in Net Assets Resulting from Operations $35,018,762 $4,037,145 $5,135,591
=========== ========== ==========
See accompanying notes
12
Statements Delaware National Tax-Free Funds
OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
2/29/04 8/31/03 2/29/04 8/31/03
(Unaudited) (Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 11,591,202 $ 24,470,688 $ 1,386,365 $ 2,895,295
Net realized gain on investments 498,818 7,454,521 535,198 304,202
Net change in unrealized appreciation/depreciation
of investments 22,928,742 (12,187,465) 2,115,582 (1,233,636)
------------ ------------ ----------- -----------
Net increase in net assets resulting from operations 35,018,762 19,737,744 4,037,145 1,965,861
------------ ------------ ----------- -----------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (10,901,533) (22,879,537) (1,234,310) (2,586,809)
Class B (577,226) (1,369,010) (122,488) (260,356)
Class C (112,443) (227,290) (29,567) (48,130)
------------ ------------ ----------- -----------
(11,591,202) (24,475,837) (1,386,365) (2,895,295)
------------ ------------ ----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
Class A 9,182,444 25,026,196 1,386,604 8,186,170
Class B 670,183 1,727,675 530,645 1,748,052
Class C 962,983 865,681 369,504 506,312
Net asset value of shares issued upon reinvestment
of dividends and distributions:
Class A 5,991,907 12,394,890 705,595 1,477,059
Class B 319,932 725,739 72,163 162,588
Class C 89,951 177,751 15,016 23,909
------------ ------------ ----------- -----------
17,217,400 40,917,932 3,079,527 12,104,090
------------ ------------ ----------- -----------
Cost of shares repurchased:
Class A (26,431,061) (67,824,944) (4,598,546) (11,615,063)
Class B (5,203,222) (8,584,064) (1,539,414) (1,848,762)
Class C (577,698) (1,452,089) (48,036) (546,998)
------------ ------------ ----------- -----------
(32,211,981) (77,861,097) (6,185,996) (14,010,823)
------------ ------------ ----------- -----------
Decrease in net assets derived from capital share
transactions (14,994,581) (36,943,165) (3,106,469) (1,906,733)
------------ ------------ ----------- -----------
Net Increase (Decrease) in Net Assets 8,432,979 (41,681,258) (455,689) (2,836,167)
Net Assets:
Beginning of period 497,477,368 539,158,626 66,692,451 69,528,618
------------ ------------ ----------- -----------
End of period (including distributions in excess
of net investment income of ($12,071) and
($12,071) for Delaware Tax-Free USA Fund and
($1,520) and ($1,520) for Delaware Tax-Free
Insured Fund) $505,910,347 $497,477,368 $66,236,762 $66,692,451
============ ============ =========== ===========
See accompanying notes
13
Statements Delaware National Tax-Free Funds
OF CHANGES IN NET ASSETS (CONTINUED)
Delaware Tax-Free
USA Intermediate Fund
Six Months Year
Ended Ended
2/29/04 8/31/03
(Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 1,414,813 $ 1,706,249
Net realized gain (loss) on investments 52,960 (54,314)
Net change in unrealized appreciation/depreciation of
investments 3,667,818 (476,271)
----------- -----------
Net increase in net assets resulting from operations 5,135,591 1,175,664
----------- -----------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (1,161,756) (1,341,628)
Class B (61,240) (128,415)
Class C (191,817) (236,206)
----------- -----------
(1,414,813) (1,706,249)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
Class A 27,862,408 35,622,367
Class B 418,986 2,234,615
Class C 8,140,025 6,248,865
Net asset value of shares issued upon reinvestment
of dividends and distributions:
Class A 811,469 886,165
Class B 38,120 76,567
Class C 109,661 130,199
----------- -----------
37,380,669 45,198,778
----------- -----------
Cost of shares repurchased:
Class A (7,840,158) (10,697,739)
Class B (760,611) (1,165,571)
Class C (849,286) (2,995,414)
----------- -----------
(9,450,055) (14,858,724)
----------- -----------
Increase (decrease) in net assets derived from capital
share transactions 27,930,614 30,340,054
----------- -----------
Net Increase (Decrease) in Net Assets 31,651,392 29,809,469
Net Assets:
Beginning of period 66,559,401 36,749,932
----------- -----------
End of period (including undistributed (distributions
in excess of) net investment income of $0 and $0
for Delaware Tax-Free USA Intermediate Fund and
($4,104) and ($4,104) for Delaware National High-Yield
Municipal Bond Fund) $98,210,793 $66,559,401
=========== ===========
See accompanying notes
14
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free USA Fund Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(3) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.170 $11.280 $11.320 $10.830 $10.890 $11.830
Income (loss) from investment operations:
Net investment income 0.268 0.537 0.566 0.582 0.587 0.593
Net realized and unrealized gain (loss) on investments 0.540 (0.110) (0.040) 0.490 (0.060) (0.916)
------- ------- ------- ------- ------- -------
Total from investment operations 0.808 0.427 0.526 1.072 0.527 (0.323)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.268) (0.537) (0.566) (0.582) (0.587) (0.593)
Net realized gain on investments -- -- -- -- -- (0.024)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.268) (0.537) (0.566) (0.582) (0.587) (0.617)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.710 $11.170 $11.280 $11.320 $10.830 $10.890
======= ======= ======= ======= ======= =======
Total return(1) 7.30% 3.84% 4.85% 10.19% 5.11% (2.90%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $471,418 $460,917 $495,731 $495,597 $421,136 $485,240
Ratio of expenses to average net assets 0.87% 0.87% 0.87% 0.88% 0.97% 1.00%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.95% 0.97% 0.98% 0.89% 0.97% 1.00%
Ratio of net investment income to average net assets 4.69% 4.74% 5.08% 5.29% 5.54% 5.13%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.61% 4.64% 4.97% 5.28% 5.54% 5.13%
Portfolio turnover 39% 96% 99% 103% 76% 59%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was a decrease in net
investment income per share of $0.001, an increase in net realized and
unrealized gain (loss) per share of $0.001, and a decrease in the ratio of
net investment income to average net assets of 0.01%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(3) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
15
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free USA Fund Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(3) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.170 $11.280 $11.320 $10.830 $10.890 $11.830
Income (loss) from investment operations:
Net investment income 0.223 0.449 0.479 0.494 0.502 0.500
Net realized and unrealized gain (loss) on investments 0.540 (0.110) (0.040) 0.490 (0.060) (0.916)
------- ------- ------- ------- ------- -------
Total from investment operations 0.763 0.339 0.439 0.984 0.442 (0.416)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.223) (0.449) (0.479) (0.494) (0.502) (0.500)
Net realized gain on investments -- -- -- -- -- (0.024)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.223) (0.449) (0.479) (0.494) (0.502) (0.524)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.710 $11.170 $11.280 $11.320 $10.830 $10.890
======= ======= ======= ======= ======= =======
Total return(1) 6.88% 3.03% 4.04% 9.32% 4.27% (3.67%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $28,241 $31,052 $37,448 $39,317 $26,059 $34,249
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.68% 1.77% 1.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.73% 1.75% 1.76% 1.69% 1.77% 1.80%
Ratio of net investment income to average net assets 3.91% 3.96% 4.30% 4.49% 4.74% 4.33%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.83% 3.86% 4.19% 4.48% 4.74% 4.33%
Portfolio turnover 39% 96% 99% 103% 76% 59%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was a decrease in net
investment income per share of $0.001, an increase in net realized and
unrealized gain (loss) per share of $0.001, and a decrease in the ratio of
net investment income to average net assets of 0.01%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(3) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
16
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free USA Fund Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(3) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.170 $11.280 $11.320 $10.830 $10.890 $11.830
Income (loss) from investment operations:
Net investment income 0.223 0.449 0.479 0.494 0.502 0.500
Net realized and unrealized gain (loss) on investments 0.540 (0.110) (0.040) 0.490 (0.060) (0.916)
------- ------- ------- ------- ------- -------
Total from investment operations 0.763 0.339 0.439 0.984 0.442 (0.416)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.223) (0.449) (0.479) (0.494) (0.502) (0.500)
Net realized gain on investments -- -- -- -- -- (0.024)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.223) (0.449) (0.479) (0.494) (0.502) (0.524)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.710 $11.170 $11.280 $11.320 $10.830 $10.890
======= ======= ======= ======= ======= =======
Total return(1) 6.88% 3.03% 4.04% 9.32% 4.27% (3.67%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $6,251 $5,508 $5,979 $6,457 $1,851 $3,415
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.68% 1.77% 1.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.73% 1.75% 1.76% 1.69% 1.77% 1.80%
Ratio of net investment income to average net assets 3.91% 3.96% 4.30% 4.49% 4.74% 4.33%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.83% 3.86% 4.19% 4.48% 4.74% 4.33%
Portfolio turnover 39% 96% 99% 103% 76% 59%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was a decrease in net
investment income per share of $0.001, an increase in net realized and
unrealized gain (loss) per share of $0.001, and a decrease in the ratio of
net investment income to average net assets of 0.01%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(3) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
17
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Insured Fund Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(2) 8/31/03 8/31/02 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $10.880 $11.020 $10.950 $10.390 $10.360 $11.150
Income (loss) from investment operations:
Net investment income 0.236 0.473 0.487 0.483 0.513 0.510
Net realized and unrealized gain (loss) on investments 0.440 (0.140) 0.070 0.560 0.030 (0.667)
------- ------- ------- ------- ------- -------
Total from investment operations 0.676 0.333 0.557 1.043 0.543 (0.157)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.236) (0.473) (0.487) (0.483) (0.513) (0.510)
Net realized gain on investments -- -- -- -- -- (0.123)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.236) (0.473) (0.487) (0.483) (0.513) (0.633)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.320 $10.880 $11.020 $10.950 $10.390 $10.360
======= ======= ======= ======= ======= =======
Total return(1) 6.27% 3.02% 5.27% 10.30% 5.50% (1.48%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $57,421 $57,630 $60,365 $62,397 $61,722 $68,422
Ratio of expenses to average net assets 0.97% 0.92% 0.92% 1.02% 0.95% 0.97%
Ratio of net investment income to average net assets 4.27% 4.25% 4.51% 4.58% 5.07% 4.74%
Portfolio turnover 74% 109% 136% 113% 117% 48%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
18
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Insured Fund Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(2) 8/31/03 8/31/02 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $10.880 $11.020 $10.950 $10.390 $10.360 $11.150
Income (loss) from investment operations:
Net investment income 0.193 0.386 0.403 0.399 0.432 0.430
Net realized and unrealized gain (loss) on investments 0.440 (0.140) 0.070 0.560 0.030 (0.667)
------- ------- ------- ------- ------- -------
Total from investment operations 0.633 0.246 0.473 0.959 0.462 (0.237)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.193) (0.386) (0.403) (0.399) (0.432) (0.430)
Net realized gain on investments -- -- -- -- -- (0.123)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.193) (0.386) (0.403) (0.399) (0.432) (0.553)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.320 $10.880 $11.020 $10.950 $10.390 $10.360
======= ======= ======= ======= ======= =======
Total return(1) 5.86% 2.22% 4.46% 9.43% 4.66% (2.27%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $6,965 $7,614 $7,677 $7,506 $4,990 $5,022
Ratio of expenses to average net assets 1.75% 1.70% 1.70% 1.82% 1.75% 1.77%
Ratio of net investment income to average net assets 3.49% 3.47% 3.73% 3.78% 4.27% 3.94%
Portfolio turnover 74% 109% 136% 113% 117% 48%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
19
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Insured Fund Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(2) 8/31/03 8/31/02 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $10.880 $11.020 $10.950 $10.390 $10.360 $11.150
Income (loss) from investment operations:
Net investment income 0.193 0.386 0.403 0.399 0.432 0.430
Net realized and unrealized gain (loss) on investments 0.440 (0.140) 0.070 0.560 0.030 (0.667)
------- ------- ------- ------- ------- -------
Total from investment operations 0.633 0.246 0.473 0.959 0.462 (0.237)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.193) (0.386) (0.403) (0.399) (0.432) (0.430)
Net realized gain on investments -- -- -- -- -- (0.123)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.193) (0.386) (0.403) (0.399) (0.432) (0.553)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.320 $10.880 $11.020 $10.950 $10.390 $10.360
======= ======= ======= ======= ======= =======
Total return(1) 5.86% 2.22% 4.46% 9.42% 4.66% (2.27%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $1,851 $1,448 $1,488 $1,588 $813 $1,502
Ratio of expenses to average net assets 1.75% 1.70% 1.70% 1.82% 1.75% 1.77%
Ratio of net investment income to average net assets 3.49% 3.47% 3.73% 3.78% 4.27% 3.94%
Portfolio turnover 74% 109% 136% 113% 117% 48%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
20
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free USA Intermediate Fund Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(2) 8/31/03 8/31/02 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.010 $11.020 $10.890 $10.360 $10.270 $10.710
Income (loss) from investment operations:
Net investment income 0.208 0.435 0.462 0.480 0.474 0.478
Net realized and unrealized gain (loss) on investments 0.520 (0.010) 0.130 0.530 0.090 (0.440)
------- ------- ------- ------- ------- -------
Total from investment operations 0.728 0.425 0.592 1.010 0.564 0.038
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.208) (0.435) (0.462) (0.480) (0.474) (0.478)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.208) (0.435) (0.462) (0.480) (0.474) (0.478)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.530 $11.010 $11.020 $10.890 $10.360 $10.270
======= ======= ======= ======= ======= =======
Total return(1) 6.66% 3.89% 5.63% 10.01% 5.69% 0.29%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $75,207 $51,479 $26,075 $19,471 $20,646 $25,186
Ratio of expenses to average net assets 0.80% 0.80% 0.80% 0.80% 0.80% 0.79%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.10% 1.15% 0.94% 1.06% 0.95% 0.96%
Ratio of net investment income to average net assets 3.67% 3.85% 4.28% 4.55% 4.65% 4.47%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.37% 3.50% 4.14% 4.29% 4.50% 4.25%
Portfolio turnover 24% 130% 195% 231% 199% 109%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager and
distributor, as applicable. Performance would have been lower had the
expense limitation not been in effect.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
21
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free USA Intermediate Fund Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(2) 8/31/03 8/31/02 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.010 $11.020 $10.890 $10.360 $10.270 $10.710
Income (loss) from investment operations:
Net investment income 0.160 0.340 0.371 0.391 0.388 0.387
Net realized and unrealized gain (loss) on investments 0.520 (0.010) 0.130 0.530 0.090 (0.440)
------- ------- ------- ------- ------- -------
Total from investment operations 0.680 0.330 0.501 0.921 0.478 (0.053)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.160) (0.340) (0.371) (0.391) (0.388) (0.387)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.160) (0.340) (0.371) (0.391) (0.388) (0.387)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.530 $11.010 $11.020 $10.890 $10.360 $10.270
======= ======= ======= ======= ======= =======
Total return(1) 6.21% 3.02% 4.74% 9.08% 4.80% (0.56%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,435 $4,538 $3,384 $2,366 $1,751 $2,195
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.65% 1.65% 1.64%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.80% 1.87% 1.79% 1.91% 1.80% 1.81%
Ratio of net investment income to average net assets 2.82% 3.00% 3.43% 3.70% 3.80% 3.62%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 2.67% 2.78% 3.29% 3.44% 3.65% 3.40%
Portfolio turnover 24% 130% 195% 231% 199% 109%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
22
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free USA Intermediate Fund Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
2/29/04(2) 8/31/03 8/31/02 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.010 $11.020 $10.890 $10.360 $10.270 $10.710
Income (loss) from investment operations:
Net investment income 0.160 0.340 0.371 0.391 0.388 0.387
Net realized and unrealized gain (loss) on investments 0.520 (0.010) 0.130 0.530 0.090 (0.440)
------- ------- ------- ------- ------- -------
Total from investment operations 0.680 0.330 0.501 0.921 0.478 (0.053)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.160) (0.340) (0.371) (0.391) (0.388) (0.387)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.160) (0.340) (0.371) (0.391) (0.388) (0.387)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.530 $11.010 $11.020 $10.890 $10.360 $10.270
======= ======= ======= ======= ======= =======
Total return(1) 6.21% 3.02% 4.74% 9.08% 4.80% (0.56%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $18,569 $10,542 $7,291 $3,602 $2,441 $3,310
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.65% 1.65% 1.64%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.80% 1.87% 1.79% 1.91% 1.80% 1.81%
Ratio of net investment income to average net assets 2.82% 3.00% 3.43% 3.70% 3.80% 3.62%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 2.67% 2.78% 3.29% 3.44% 3.65% 3.40%
Portfolio turnover 24% 130% 195% 231% 199% 109%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
See accompanying notes
23
Notes Delaware National Tax-Free Funds
TO FINANCIAL STATEMENTS February 29, 2004 (Unaudited)
Delaware Group Tax-Free Fund (the "Trust") is organized as a Delaware statutory
trust and offers three series: Delaware Tax-Free USA Fund, Delaware Tax-Free
Insured Fund, and Delaware Tax-Free USA Intermediate Fund. Voyageur Mutual Funds
is organized as a Delaware business trust and offers six series: Delaware
Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free
Idaho Fund, Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National
High-Yield Municipal Bond Fund, and Delaware Tax-Free New York Fund. These
financial statements and the related notes pertain to Delaware Tax-Free USA
Fund, Delaware Tax-Free Insured Fund, Delaware Tax-Free USA Intermediate Fund
and Delaware National High-Yield Municipal Bond Fund (each referred to as a
"Fund" or, collectively, as the "Funds"). The above Trusts are open-end
investment companies. The Funds are considered non-diversified under the
Investment Company Act of 1940, as amended. The Funds offer Class A, Class B,
and Class C shares. Class A shares are sold with a front-end sales charge of up
to 4.50% for Delaware Tax-Free USA Fund, Delaware Tax-Free Insured Fund and
Delaware National High-Yield Municipal Bond Fund, and up to 2.75% for Delaware
Tax-Free USA Intermediate Fund. Class B shares of the Delaware Tax-Free USA
Fund, Delaware Tax-Free Insured Fund, and Delaware National High-Yield Municipal
Bond Fund, are sold with a contingent deferred sales charge that declines from
4% to zero depending upon the period of time the shares are held. Class B shares
will automatically convert to Class A shares on a quarterly basis approximately
eight years after purchase. Class B shares of Delaware Tax-Free USA Intermediate
Fund are sold with a contingent deferred sales charge that declines from 2% to
zero depending upon the time the shares are held. Class B shares of Delaware
Tax-Free USA Intermediate Fund will automatically convert to Class A shares on a
quarterly basis approximately five years after purchase. Class C shares are sold
with a contingent deferred sales charge of 1%, if redeemed during the first
twelve months.
The investment objective of Delaware Tax-Free USA Fund, Delaware Tax-Free
Insured Fund and Delaware Tax-Free USA Intermediate Fund is to seek as high a
level of current interest income exempt from federal income tax as is available
from municipal obligations as is consistent with prudent investment management
and preservation of capital.
The investment objective of Delaware National High-Yield Municipal Bond Fund is
to seek a high level of current income exempt from federal income tax primarily
through investment in medium- and lower-grade municipal obligations.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities 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 under the direction of each Fund's Board of
Trustees.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes 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.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. 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.
Management fees and other expenses are paid monthly. 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. Discounts and premiums are amortized to interest
income over the lives of the respective securities. Each Fund declares dividends
daily from net investment income and pays such dividends monthly and declares
and pays distributions from net realized gain on investments, if any, annually.
Certain expenses of the Funds are paid through commission arrangements with
brokers. In addition, the Funds may receive earnings credits from their
custodian when positive cash balances are maintained, which are used to offset
custody fees. The expenses paid under the above arrangements are included in
their respective expense captions on the Statements of Operations with the
corresponding expense offset shown as "expenses paid indirectly." The amount of
these expenses for the six months ended February 29, 2004 were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
Commission reimbursements $6,005 $ 799 $ 975
Earnings credits 9,911 1,806 2,131
24
Notes Delaware National Tax-Free Funds
TO FINANCIAL STATEMENTS (CONTINUED)
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee based on
each Fund's average daily net assets as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
On the first $500 million 0.550% 0.500% 0.500%
On the next $500 million 0.500% 0.475% 0.475%
On the next $1.5 billion 0.450% 0.450% 0.450%
In excess of $2.5 billion 0.425% 0.425% 0.425%
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed specified percentages of average daily net assets through October 31,
2004 as shown below.
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
The operating expense limitation
as a percentage of average daily
net assets (per annum) 0.65% 0.75% 0.65%
Delaware Service Company, Inc.
(DSC), an affiliate of DMC, provides accounting, administration, dividend
disbursing and transfer agent services. Each Fund pays DSC a monthly fee based
on average net assets subject to certain minimums for accounting and
administration services.
Each Fund pays DSC a monthly fee based on the number of shareholder accounts for
dividend disbursing and transfer agent services. Pursuant to a distribution
agreement and distribution plan, the Funds pay Delaware Distributors, L.P.
(DDLP), the distributor and an affiliate of DMC, an annual distribution and
service fee not to exceed 0.30% of the average daily net assets of the Class A
shares for Delaware Tax-Free USA Fund, Delaware Tax-Free Insured Fund, and
Delaware Tax-Free USA Intermediate Fund, 0.25% of the average daily net assets
of the Class A shares for the Delaware National High-Yield Municipal Bond Fund,
and 1.00% of the average daily net assets of the Class B and C shares for all
Funds. DDLP has contracted to waive distribution fees through August 31, 2004 in
order to prevent distribution fees of Class A from exceeding 0.15% of the
average daily net assets for the Delaware Tax-Free USA Intermediate Fund.
At February 29, 2004, the Funds had liabilities payable to affiliates as
follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
Investment management fee
payable to DMC $37,461 $26,041 $26,277
Dividend disbursing, transfer agent
fees, accounting and other
expenses payable to DSC 9,455 730 14,452
Other expenses payable to
DMC and affiliates* 7,710 3,614 12,189
*DMC, as part of its administrative services, pays operating expenses on behalf
of the Funds and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, professional fees, registration fees
and trustees' fees.
Certain internal legal expenses are allocated to the Funds. For the six months
ended February 29, 2004, Delaware Tax-Free USA Fund, Delaware Tax-Free USA
Insured Fund, Delaware Tax-Free USA Intermediate Fund, and Delaware National
High-Yield Municipal Bond Fund had costs of $24,093, $3,238, $3,009, and $4,113,
respectively.
For the six months ended February 29, 2004, DDLP earned commissions on sales of
Class A shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
$15,620 $4,219 $14,641
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the
Trusts. These officers and trustees are paid no compensation by the Funds.
25
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
Delaware National Tax-Free Funds
3. Investments
For the six months ended February 29, 2004, the Funds made purchases and sales
of investment securities as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
Purchases other than U.S. government
securities and short-term investments $95,893,616 $24,974,909 $42,800,417
Sales other than U.S. government
securities and short-term investments 112,613,213 24,581,417 9,691,928
At February 29, 2004, the cost of investments for federal income tax purposes
has been estimated since the final tax characteristics cannot be determined
until fiscal year end. At February 29, 2004, the cost of investments and
unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
Cost of investments $465,049,040 $62,192,969 $93,482,495
------------ ----------- -----------
Aggregate unrealized appreciation $ 39,247,774 $ 5,307,779 $ 4,822,737
Aggregate unrealized depreciation (1,686,445) (17,323) (--)
------------ ----------- -----------
Net unrealized appreciation (depreciation) $ 37,561,329 $ 5,290,456 $ 4,822,737
============ =========== ===========
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the period ended February 29, 2004 and the year ended
August 31, 2003 was as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
Six months ended 2/29/04
- ------------------------
Tax-exempt income $11,591,202 $1,386,365 $1,414,813
Year ended 8/31/03
- ------------------
Tax-exempt income $24,475,837 $2,895,295 $1,706,249
*Tax information
for the six months ended February 29, 2004 is an estimate and the tax character
of dividends and distributions may be redesignated at fiscal year end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of February 29, 2004, the
estimated components of net assets on a tax basis were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund USA Intermediate Fund
----------------- ----------------- ---------------------
Shares of beneficial interest $479,017,583 $61,085,630 $93,920,983
Undistributed tax-exempt income (12,071) (1,520) --
Net realized capital gains (losses)
on investments 444,062 363,204 52,960
Capital loss carryforwards (11,100,556) (501,008) (585,887)
Unrealized appreciation of investments 37,561,329 5,290,456 4,822,737
------------ ----------- -----------
Net assets $505,910,347 $66,236,762 $98,210,793
============ =========== ===========
For federal income tax purposes, each Fund had accumulated capital losses as of
August 31, 2003, which may be carried forward and applied against future capital
gains. Such capital loss carryforwards amounts will expire as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Year of Expiration USA Fund Insured Fund USA Intermediate Fund
- ------------------ ----------------- ----------------- ---------------------
2008 $11,100,238 $501,008 $295,023
2009 318 -- --
2010 -- -- --
2011 -- -- 290,864
----------- -------- --------
Total $11,100,556 $501,008 $585,887
=========== ======== ========
26
Notes Delaware National Tax-Free Funds
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund
----------------- -----------------
Six Months Year Six Months Year
Ended Ended Ended Ended
2/29/04 8/31/03 2/29/04 8/31/03
Shares sold:
Class A 801,171 2,205,659 125,013 730,539
Class B 58,810 151,949 47,639 154,828
Class C 84,010 76,265 33,359 45,229
Shares issued upon reinvestment
of dividends and distributions:
Class A 520,900 1,096,565 63,317 133,254
Class B 27,819 64,211 6,476 14,671
Class C 7,817 15,731 1,346 2,159
---------- ---------- -------- ----------
1,500,527 3,610,380 277,150 1,080,680
---------- ---------- -------- ----------
Shares repurchased:
Class A (2,309,971) (5,987,662) (413,815) (1,041,433)
Class B (453,755) (756,095) (138,885) (165,843)
Class C (50,876) (128,993) (4,358) (49,165)
---------- ---------- -------- ----------
(2,814,602) (6,872,750) (557,058) (1,256,441)
---------- ---------- -------- ----------
Net decrease (1,314,075) (3,262,370) (279,908) (175,761)
========== ========== ======== ==========
Delaware Tax-Free
USA Intermediate Fund
---------------------
Six Months Year
Ended Ended
2/29/04 8/31/03
Shares sold:
Class A 2,469,788 3,185,915
Class B 37,254 202,146
Class C 718,390 555,499
Shares issued upon reinvestment
of dividends and distributions:
Class A 71,629 79,702
Class B 3,368 6,901
Class C 9,683 11,740
--------- ----------
3,310,112 4,041,903
--------- ----------
Shares repurchased:
Class A (693,011) (956,446)
Class B (68,034) (104,005)
Class C (74,817) (271,408)
--------- ----------
(835,862) (1,331,859)
--------- ----------
Net increase (decrease) 2,474,250 2,710,044
========= ==========
For the six months ended February 29, 2004 and the year ended August 31, 2003,
the following shares were converted from Class B to Class A shares. The
respective amounts are included in Class B redemptions and Class A subscriptions
in the tables above and the Statements of Changes in Net Assets as follows:
Six Months Ended Year Ended
2/29/04 8/31/03
-------------------------------- ---------------------------------
Class B Class A Class B Class A
shares shares Amount shares shares Amount
------- ------- ------ ------- ------- ------
Delaware Tax-Free USA Fund 230,639 230,639 $2,634,683 271,987 271,987 $3,117,043
Delaware Tax-Free Insured Fund 29,111 29,111 324,259 29,043 29,043 327,187
Delaware Tax-Free USA Intermediate Fund 13,985 13,985 156,073 30,412 30,412 341,657
27
Notes Delaware National Tax-Free Funds
TO FINANCIAL STATEMENTS (CONTINUED)
6. Line of Credit
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $177,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of February 29, 2004 or at any time during
the period.
7. Credit and Market Risk
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, regional or local economic conditions, and differing levels
of supply and demand for municipal bonds. Many municipalities insure repayment
for their obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that market 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.
Delaware National High-Yield Municipal Bond Fund invests in high-yield fixed
income securities, which carry ratings of BB or lower by Standard and Poor's
Rating Group and/or Ba or lower by Moody's Investors Services, Inc. Investments
in these higher yielding securities are generally accompanied by a greater
degree of credit risk than higher rated securities. Additionally, lower rated
securities may be more susceptible to adverse economic and competitive industry
conditions than investment grade securities.
28
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual report is for the information of Delaware Tax-Free USA Fund,
Delaware Tax-Free Insured Fund, Delaware Tax-Free USA Intermediate Fund, and
Delaware National High-Yield Municipal Bond Fund shareholders, but it may be
used with prospective investors when preceded or accompanied by a current
prospectus for Delaware Tax-Free USA Fund, Delaware Tax-Free Insured Fund,
Delaware Tax-Free USA Intermediate Fund, and Delaware National High-Yield
Municipal Bond Fund and the Delaware Investments Performance Update for the most
recently completed calendar quarter. The prospectus sets forth details about
charges, expenses, investment objectives, and operating policies of each Fund.
You should read the prospectus carefully before you invest. The figures in this
report represent past results which are not a guarantee of future results. The
return and principal value of an investment in each Fund will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information
Jude T. Driscoll* Joseph H. Hastings Investment Manager
Chairman Executive Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA International Affiliate
Walter P. Babich Delaware International Advisers Ltd.
Board Chairman Richelle S. Maestro London, England
Citadel Construction Corporation Senior Vice President,
King of Prussia, PA Chief Legal Officer and Secretary National Distributor
Delaware Investments Family of Funds Delaware Distributors, L.P.
John H. Durham Philadelphia, PA Philadelphia, PA
Private Investor
Gwynedd Valley, PA Michael P. Bishof Shareholder Servicing, Dividend
Senior Vice President and Treasurer Disbursing and Transfer Agent
John A. Fry* Delaware Investments Family of Funds Delaware Service Company, Inc.
President Philadelphia, PA 2005 Market Street
Franklin & Marshall College Philadelphia, PA 19103-7094
Lancaster, PA
For Shareholders
Anthony D. Knerr 800 523-1918
Managing Director
Anthony Knerr & Associates For Securities Dealers and Financial
New York, NY Institutions Representatives Only
800 362-7500
Ann R. Leven
Former Treasurer/Chief Fiscal Officer Web site
National Gallery of Art www.delawareinvestments.com
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Janet L. Yeomans
Vice President/Mergers & Acquisitions
3M Corporation
St. Paul, MN
*Mr. Driscoll and Mr. Fry are not trustees of the
Delaware National High-Yield Municipal Bond Fund.
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at
http://www.delawareinvestments.com; and (iii) on the Commission's website at
http://www.sec.gov.; and beginning no later than August 31, 2004, information
(if any) regarding how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
- --------------------------------------------------------------------------------
(8622) Printed in the USA
SA-011 [2/04] IVES 4/04 J9624
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 10. Controls and Procedures
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal control
over financial reporting that occurred during the registrant's last fiscal
half-year that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 11. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are
attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1
under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf, by the undersigned, thereunto duly authorized.
Name of Registrant: Delaware Group Tax-Free Fund
JUDE T. DRISCOLL
- ----------------------------
By: Jude T. Driscoll
---------------------
Title: Chairman
Date: 4/30/04
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
JUDE T. DRISCOLL
- ----------------------------
By: Jude T. Driscoll
---------------------
Title: Chairman
Date: 4/30/04
-----------
JOSEPH H. HASTINGS
- ---------------------------
By: Joseph H. Hastings
--------------------
Title: Chief Financial Officer
Date: 4/30/04
-----------