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: November 30
Date of reporting period: February 28, 2005
Delaware
Investments(R)
-----------------------------------
A member of Lincoln Financial Group
FIXED INCOME
SEMIANNUAL REPORT FEBRUARY 28, 2005
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE USA FUND
DELAWARE TAX-FREE INSURED FUND
DELAWARE TAX-FREE USA INTERMEDIATE FUND
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
[LOGO]
POWERED BY RESEARCH.(SM)
TABLE
OF CONTENTS
- -----------------------------------------------------
DISCLOSURE OF FUND EXPENSES 1
- -----------------------------------------------------
SECTOR ALLOCATION 3
- -----------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 5
Statement of Assets and Liabilities 19
Statements of Operations 20
Statements of Changes in Net Assets 21
Financial Highlights 23
Notes to Financial Statements 35
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) 2005 Delaware Distributors, L.P.
DISCLOSURE For the Period September 1, 2004 to February 28, 2005
OF FUND EXPENSES
As a shareholder of a fund, you incur two types of costs:
(1) transaction costs, including sales charges (loads) on purchase payments,
reinvested dividends, or other distributions; redemption fees; and exchange
fees; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other fund expenses. The following examples are
intended to help you understand your ongoing costs (in dollars) of investing in
a fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The Examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2004 to February 28,
2005.
ACTUAL EXPENSES
The first section of the tables shown, "Actual Fund Return," provides
information about actual account values and actual expenses. You may use the
information in this section of the table, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number in the first section under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the tables shown, "Hypothetical 5% Return," provides
information about hypothetical account values and hypothetical expenses based on
the Fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the second
section of the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher. The Fund's actual expenses shown in the table reflect fee waivers in
effect. The expenses shown in the table assume reinvestment of all dividends and
distributions. In each case, "Expenses Paid During Period" are equal to the
Fund's annualized expense ratio, multiplied by the average account value over
the period, multiplied by 181/365 (to reflect the one-half year period).
DELAWARE TAX-FREE USA FUND
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/04 to
9/1/04 2/28/05 Ratio 2/28/05
- --------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,036.00 0.86% $4.34
Class B 1,000.00 1,032.10 1.63% 8.21
Class C 1,000.00 1,032.10 1.63% 8.21
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.53 0.86% $4.31
Class B 1,000.00 1,016.71 1.63% 8.15
Class C 1,000.00 1,016.71 1.63% 8.15
- --------------------------------------------------------------------------------------------------------------
DELAWARE TAX-FREE INSURED FUND
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/04 to
9/1/04 2/28/05 Ratio 2/28/05
- --------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,027.90 0.88% $4.42
Class B 1,000.00 1,024.00 1.65% 8.28
Class C 1,000.00 1,024.00 1.65% 8.28
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.43 0.88% $4.41
Class B 1,000.00 1,016.61 1.65% 8.25
Class C 1,000.00 1,016.61 1.65% 8.25
- --------------------------------------------------------------------------------------------------------------
1
DISCLOSURE For the Period September 1, 2004 to February 28, 2005
OF FUND EXPENSES (CONTINUED)
DELAWARE TAX-FREE USA INTERMEDIATE FUND
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/04 to
9/1/04 2/28/05 Ratio 2/28/05
- --------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,025.10 0.78% $3.92
Class B 1,000.00 1,021.70 1.63% 8.17
Class C 1,000.00 1,020.80 1.63% 8.17
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.93 0.78% $3.91
Class B 1,000.00 1,016.71 1.63% 8.15
Class C 1,000.00 1,016.71 1.63% 8.15
- --------------------------------------------------------------------------------------------------------------
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/04 to
9/1/04 2/28/05 Ratio 2/28/05
- --------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,044.70 0.93% $4.71
Class B 1,000.00 1,040.70 1.68% 8.50
Class C 1,000.00 1,040.70 1.68% 8.50
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.18 0.93% $4.66
Class B 1,000.00 1,016.46 1.68% 8.40
Class C 1,000.00 1,016.46 1.68% 8.40
- --------------------------------------------------------------------------------------------------------------
2
SECTOR ALLOCATION As of February 28, 2005
The SEC adopted a requirement that all funds present their categories of
portfolio holdings in a table, chart, or graph format in their annual and
semiannual shareholder reports, whether or not a schedule of investments is
utilized. The following charts list each Fund's categories of portfolio holdings
as a percentage of total net assets and is provided in compliance with such
requirement.
DELAWARE TAX-FREE USA FUND DELAWARE TAX-FREE INSURED FUND
PERCENTAGE PERCENTAGE
SECTOR OF NET ASSETS SECTOR OF NET ASSETS
- --------------------------------------------------------------- ---------------------------------------------------------------
MUNICIPAL BONDS 97.30% MUNICIPAL BONDS 95.69%
- --------------------------------------------------------------- ---------------------------------------------------------------
Airline Revenue Bonds 1.30% Airport Revenue Bonds 2.56%
Airport Revenue Bonds 1.57% City General Obligation Bonds 5.83%
City General Obligation Bonds 3.60% Continuing Care/Retirement Revenue Bonds 2.12%
Continuing Care/Retirement Revenue Bonds 1.63% Corporate Backed Revenue Bonds 1.28%
Corporate-Backed Revenue Bonds 4.43% Dedicated Tax & Fees Revenue Bonds 5.35%
Dedicated Tax & Fees Revenue Bonds 5.12% Escrowed to Maturity Bonds 1.87%
Escrowed to Maturity Bonds 8.58% Higher Education Revenue Bonds 11.34%
Higher Education Revenue Bonds 11.20% Hospital Revenue Bonds 3.41%
Hospital Revenue Bonds 10.73% Investor Owned Utilities Revenue Bonds 7.63%
Investor Owned Utilities Revenue Bonds 14.01% Multifamily Housing Revenue Bonds 10.03%
Miscellaneous Revenue Bonds 0.48% Municipal Lease Revenue Bonds 6.47%
Multifamily Housing Revenue Bonds 0.92% Political Subdivision General Obligation Bonds 0.97%
Municipal Lease Revenue Bonds 7.04% Pre-Refunded Bonds 4.76%
Pre-Refunded Bonds 5.63% Public Utility District Revenue Bonds 5.45%
Public Utility District Revenue Bonds 3.29% School District General Obligation Bonds 5.94%
School District General Obligation Bonds 0.51% Single Family Housing Revenue Bonds 1.17%
Single Family Housing Revenue Bonds 0.42% Territorial General Obligation Bonds 1.89%
Territorial General Obligation Bonds 1.97% Territorial Revenue Bonds 9.80%
Territorial Revenue Bonds 7.82% Turnpike/Toll Road Revenue Bonds 0.84%
Turnpike/Toll Road Revenue Bonds 2.95% Water & Sewer Revenue Bonds 6.98%
---------------------------------------------------------------
Water & Sewer Revenue Bonds 4.10% VARIABLE RATE DEMAND NOTES 3.23%
- --------------------------------------------------------------- ---------------------------------------------------------------
VARIABLE RATE DEMAND NOTES 2.66% TOTAL MARKET VALUE OF SECURITIES 98.92%
- --------------------------------------------------------------- ---------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 99.96% RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.08%
- --------------------------------------------------------------- ---------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.04% TOTAL NET ASSETS 100.00%
- --------------------------------------------------------------- ---------------------------------------------------------------
TOTAL NET ASSETS 100.00%
- ---------------------------------------------------------------
3
SECTOR ALLOCATION As of February 28, 2005
The SEC adopted a requirement that all funds present their categories of
portfolio holdings in a table, chart, or graph format in their annual and
semiannual shareholder reports, whether or not a schedule of investments is
utilized. The following charts list each Fund's categories of portfolio holdings
as a percentage of total net assets and is provided in compliance with such
requirement.
DELAWARE TAX-FREE INTERMEDIATE FUND DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
PERCENTAGE PERCENTAGE
SECTOR OF NET ASSETS SECTOR OF NET ASSETS
- --------------------------------------------------------------- ---------------------------------------------------------------
MUNICIPAL BONDS 91.90% MUNICIPAL BONDS 97.44%
- --------------------------------------------------------------- ---------------------------------------------------------------
Airport Revenue Bonds 1.88% Airline Revenue Bonds 1.59%
City General Obligation Bonds 4.39% Airport Revenue Bonds 4.40%
Corporate-Backed Revenue Bonds 7.53% Continuing Care/Retirement Revenue Bonds 11.04%
Dedicated Tax & Fees Revenue Bonds 5.60% Corporate-Backed Revenue Bonds 10.50%
Escrowed to Maturity Bonds 0.19% Dedicated Tax & Fees Revenue Bonds 5.01%
Higher Education Revenue Bonds 15.85% Escrowed to Maturity Bonds 0.50%
Hospital Revenue Bonds 12.15% Higher Education Revenue Bonds 18.43%
Investor Owned Utilities Revenue Bonds 6.88% Hospital Revenue Bonds 16.28%
Miscellaneous Revenue Bonds 1.84% Investor Owned Utilities Revenue Bonds 11.64%
Municipal Lease Revenue Bonds 2.52% Miscellaneous Revenue Bonds 1.07%
Political Subdivision General Obligation Bonds 2.79% Multifamily Housing Revenue Bonds 1.22%
Ports & Harbors Revenue Bonds 0.46% Municipal Lease Revenue Bonds 5.18%
Pre-Refunded Bonds 3.59% Political Subdivision General Obligation Bonds 0.50%
Public Power Revenue Bonds 2.54% Pre-Refunded Bonds 5.39%
Recreational Area Revenue Bonds 0.92% School District General Obligation Bonds 1.26%
School District General Obligation Bonds 5.61% Tax Increment/Special Assessment Bonds 3.43%
---------------------------------------------------------------
School District Revenue Bonds 0.95% TOTAL MARKET VALUE OF SECURITIES 97.44%
---------------------------------------------------------------
State General Obligation Bonds 2.58% RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.56%
---------------------------------------------------------------
Tax Increment/Special Assessment Bonds 1.59% TOTAL NET ASSETS 100.00%
---------------------------------------------------------------
Territorial General Obligation Bonds 1.86%
Territorial Revenue Bonds 4.25%
Transportation Revenue Bonds 0.94%
Turnpike/Toll Road Revenue Bonds 1.16%
Water & Sewer Revenue Bonds 3.83%
- ---------------------------------------------------------------
VARIABLE RATE DEMAND NOTES 6.44%
- ---------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 98.34%
- ---------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.66%
- ---------------------------------------------------------------
TOTAL NET ASSETS 100.00%
- ---------------------------------------------------------------
4
STATEMENTS DELAWARE TAX-FREE USA FUND
OF NET ASSETS February 28, 2005 (Unaudited)
Principal Market
Amount Value
MUNICIPAL BONDS - 97.30%
Airline Revenue Bonds - 1.30%
Minneapolis/St. Paul, Minnesota
Metropolitan Airports Commission
Special Facilities Revenue
(Northwest Airlines, Inc. Project)
Series A 7.00% 4/1/25 (AMT) $ 1,300,000 $ 1,184,326
New Jersey Economic Development
Authority Special Facility Revenue
(Continental Airlines, Inc. Project)
6.25% 9/15/29 (AMT) 3,500,000 2,786,315
Tulsa, Oklahoma Municipal Airport Trust
Revenue (American Airlines Corp.)
7.35% 12/1/11 2,250,000 2,228,828
-----------
6,199,469
-----------
Airport Revenue Bonds - 1.57%
Capital Trust Agency Florida Revenue
(Fort Lauderdale/Cargo Project)
5.75% 1/1/32 (AMT) 2,500,000 2,489,625
(Orlando/Cargo Project)
6.75% 1/1/32 (AMT) 2,000,000 1,976,080
Grapevine, Texas Industrial Development
Corporate Revenue (Air Cargo)
6.50% 1/1/24 (AMT) 920,000 956,211
Houston, Texas Industrial Development
Corporate Revenue (Air Cargo)
6.375% 1/1/23 (AMT) 2,000,000 2,063,180
-----------
7,485,096
-----------
City General Obligation Bonds - 3.60%
New York City, New York
Series H 6.125% 8/1/25 4,860,000 5,235,775
Series I 5.125% 3/1/23 5,875,000 6,165,930
Series J 5.25% 6/1/28 5,400,000 5,739,552
-----------
17,141,257
-----------
Continuing Care/Retirement Revenue Bonds - 1.63%
Colorado Health Facilities Authority Revenue
(Evangelical Lutheran) 5.25% 6/1/34 3,000,000 3,084,600
++Delaware County, Pennsylvania Authority
Revenue (Main Line & Haverford
Nursing and Rehabilitation Center)
9.00% 8/1/22 1,860,000 1,481,174
Gainesville & Hall County, Georgia
Development Authority Revenue
(Lanier Village Estates Project)
Series C 7.25% 11/15/29 1,000,000 1,108,260
Lucas County, Ohio Health Care Facility
Revenue (Sunset Retirement
Communities) Series A 6.625% 8/15/30 2,000,000 2,109,740
-----------
7,783,774
-----------
Corporate-Backed Revenue Bonds - 4.43%
Alliance, Texas Airport Authority Special
Facilities Revenue (Federal Express
Corp. Project) 6.375% 4/1/21 (AMT) 2,000,000 2,110,620
Ashland, Kentucky Sewer & Solid Waste
Revenue (Ashland, Inc. Project)
7.125% 2/1/22 (AMT) 5,000,000 5,130,300
Cloquet, Minnesota Pollution Control
Revenue (Potlatch Corp. Project)
5.90% 10/1/26 1,695,000 1,709,865
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Corporate-Backed Revenue Bonds (continued)
++Columbus, Kansas Industrial Revenue
(ACE Electrical Acquisition)
7.00% 8/1/17 (AMT) $ 800,000 $ 262,000
Indianapolis, Indiana Airport Authority
Revenue (Federal Express Corp. Project)
5.10% 1/15/17 (AMT) 2,000,000 2,115,060
Phenix County, Alabama Industrial
Development Board Environmental
Improvement Revenue (Mead
Westvaco Corporation Project)
Series A 6.35% 5/15/35 (AMT) 3,000,000 3,225,570
Puerto Rico Industrial, Medical &
Environmental Pollution Control
Facilities Financing Authority Revenue
(PepsiCo Inc. Project) 6.25% 11/15/13 1,250,000 1,308,750
Richmond County, Georgia Development
Authority Environmental Improvement
Revenue (International Paper Co.)
Series B 5.95% 11/15/25 (AMT) 5,000,000 5,224,350
-----------
21,086,515
-----------
Dedicated Tax & Fees Revenue Bonds - 5.12%
Bi-State Development Agency Missouri,
Illinois Metropolitan District
(Metrolink Cross County Project)
Series B 5.00% 10/1/32 (FSA) 2,000,000 2,079,920
New Jersey Economic Development
Authority (Cigarette Tax)
5.75% 6/15/34 2,000,000 2,121,740
New York City, New York Transitional
Finance Authority Series D
5.00% 2/1/31 5,000,000 5,159,900
New York State Sales Tax Asset
Receivables 5.25% 10/15/27 (AMBAC) 7,000,000 7,579,810
Southeast Wisconsin Professional
Baseball Park District Sales Tax
Revenue Series A
5.50% 12/15/26 (MBIA) 5,500,000 6,440,225
Truth or Consequences, New Mexico
Gross Receipts Tax Revenue
6.30% 7/1/16 1,000,000 1,028,570
-----------
24,410,165
-----------
Escrowed to Maturity Bonds - 8.58%
Louisiana Public Facilities Authority
Hospital Revenue (Southern Baptist
Hospital, Inc.) 8.00% 5/15/12 6,135,000 7,215,926
New Jersey State Highway Authority
Garden State Parkway General
Revenue (Senior Parkway) 5,000,000 5,719,800
5.50% 1/1/14 (FGIC)
5.50% 1/1/15 (FGIC) 7,310,000 8,402,991
Oklahoma State Turnpike Authority
Revenue (First Senior) 6.00% 1/1/22 13,535,000 16,668,082
Virgin Islands Public Finance Authority
Revenue Series A 7.30% 10/1/18 2,200,000 2,867,216
-----------
40,874,015
-----------
Higher Education Revenue Bonds - 11.20%
California Educational Facilities Authority
Revenue (University of South California)
Series A 5.00% 10/1/33 8,000,000 8,304,160
5
STATEMENTS DELAWARE TAX-FREE USA FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Higher Education Revenue Bonds (continued)
Illinois Educational Facilities Authority
Student Housing Revenue (Educational
Advancement Fund-University Center
Project) 6.25% 5/1/30 $ 5,000,000 $ 5,319,900
Maryland State Economic Development
Corporation, Student Housing Revenue
(University of Maryland College Park
Project) 5.625% 6/1/35 1,125,000 1,165,759
Massachusetts State Health & Educational
Facilities Authority Revenue
(Nichols College) Series C
6.00% 10/1/17 1,000,000 1,048,370
6.125% 10/1/29 1,400,000 1,431,836
Milledgeville-Baldwin County, Georgia
Development Authority Revenue
(Georgia College & State University
Foundation) 6.00% 9/1/33 1,000,000 1,075,690
New Hampshire Higher Educational &
Health Facilities Authority Revenue
(New Hampton School Issue)
5.375% 10/1/28 3,070,000 2,907,014
New Jersey State Educational Facilities
Authority Revenue (Stevens Institute of
Technology) Series B 5.25% 7/1/24 2,085,000 2,176,386
&New York State Dormitory Authority
Revenues (Drivers-107) Inverse Floater
6.746% 5/15/15 (MBIA) 20,000,000 23,679,199
University of Arkansas Various Facility
Revenue Constructions (University of
Arkansas Medical Sciences Campus)
Series B 5.00% 11/1/34 (MBIA) 1,500,000 1,562,400
University of California Revenues
Series A 5.00% 5/15/33 (AMBAC) 3,500,000 3,629,780
Vermont University & State Agriculture
College 5.125% 10/1/37 (AMBAC) 1,000,000 1,043,370
-----------
53,343,864
-----------
Hospital Revenue Bonds - 10.73%
Akron Bath Copley, Ohio Joint Township
Hospital District Revenue
(Summa Health System)
Series A 5.25% 11/15/31 (RADIAN) 3,000,000 3,146,370
Cando, North Dakota Nursing Facility
Revenue (Towner County Medical
Center Project) 7.125% 8/1/22 1,000,000 1,011,730
Chatham County, Georgia Hospital
Authority Revenue (Memorial Health
Medical Center) Series A 6.125% 1/1/24 1,000,000 1,091,920
Cuyahoga County, Ohio Revenue
(Cleveland Clinic Health Systems)
Series A 5.50% 1/1/29 7,500,000 7,992,149
Dormitory Authority of the State of
New York Catholic Health Services of
Long Island (St Francis Hospital Project)
Series 2004 5.10% 7/1/34 2,500,000 2,567,125
Duluth, Minnesota Economic Development
Authority Health Care Facilities Revenue
Benedictine Health System
(St. Mary's Hospital) 5.25% 2/15/33 5,825,000 5,986,236
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Hospital Revenue Bonds (continued)
Florence County, South Carolina
Hospital Revenue (McLeod Regional
Medical Center Project)
Series A 5.25% 11/1/27 (FSA) $ 2,355,000 $ 2,528,870
Illinois Health Facilities Authority Revenue
(Elmhurst Memorial Healthcare Project)
5.625% 1/1/28 2,000,000 2,090,020
Louisiana Public Facilities Authority
Revenue (Ochsner Clinic Foundation
Project) Series B 5.50% 5/15/32 1,500,000 1,558,185
Michigan State Hospital Finance
Authority Revenue
(Ascension Health Credit Group)
Series B 5.25% 11/15/26 3,500,000 3,680,810
(Oakwood Obligation Group)
Series A 5.75% 4/1/32 2,500,000 2,642,650
(Trinity Health Credit)
Series C 5.375% 12/1/30 6,000,000 6,298,080
Multnomah County, Oregon Hospital
Facilities Authority Revenue (Providence
Health System) 5.25% 10/1/22 3,000,000 3,241,560
North Carolina Medical Care Commission
Hospital Revenue (Northeast Medical
Center Project) 5.125% 11/1/34 1,250,000 1,296,750
Prince William County, Virginia Industrial
Development Authority Hospital
Revenue (Potomac Hospital Project)
5.35% 10/1/36 1,750,000 1,840,248
South Miami, Florida Health Facilities
Authority Hospital Revenue
(Baptist Health South Florida Group)
5.25% 11/15/33 4,000,000 4,153,400
-----------
51,126,103
-----------
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 3,775,485
Clark County, Nevada Industrial
Development Revenue (Nevada Power
Co. Project) Series C 7.20% 10/1/22 8,000,000 8,120,000
Midland County, Michigan Economic
Development Subordinate Limited
Obligation (Midland Congeneration
Project) Series A 6.875% 7/23/09 (AMT) 3,050,000 3,158,184
Mississippi Business Finance Corporation
Pollution Control Revenue
(System Energy Resources, Inc. Project)
5.90% 5/1/22 3,000,000 3,036,540
Pennsylvania Economic Development
Financing 6.75% 12/1/36 (AMT) 3,250,000 3,477,403
Petersburg, Indiana Pollution Control
Revenue (Indianapolis Power &
Light Co. Project)
6.375% 11/2/29 (AMT) 4,250,000 4,482,008
6.625% 12/1/24 4,500,000 4,600,800
Port Morrow, Oregon Pollution Control
Revenue (Portland General Electric Co.)
Series A 5.20% 5/1/33 2,000,000 2,113,300
6
STATEMENTS DELAWARE TAX-FREE USA FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Investor Owned Utilities Revenue Bonds (continued)
Sabine River Authority, Texas Pollution
Control Revenue (Southwestern Electric
Power Co.) 6.10% 4/1/18 (MBIA) $ 4,000,000 $ 4,213,120
Suffolk County, New York Industrial Agency
Development Revenue (Keyspan-Port
Jefferson Project) 5.25% 6/1/27 (AMT) 3,500,000 3,630,480
Sweetwater County, Wyoming Pollution
Control Revenue (Idaho Power Co.
Project) Series A 6.05% 7/15/26 5,000,000 5,246,700
West Feliciana Parish, Louisiana Pollution
Control Revenue (Gulf States Utilities
Co. Project) Series A 7.50% 5/1/15 20,700,000 20,894,786
-----------
66,748,806
-----------
Miscellaneous Revenue Bonds - 0.48%
Wisconsin Center District Tax Revenue
(Junior Dedicated) 5.25% 12/15/23 (FSA) 2,000,000 2,263,960
-----------
2,263,960
-----------
Multifamily Housing Revenue Bonds - 0.92%
Milwaukee, Wisconsin Redevelopment
Authority Multifamily Revenue (City Hall
Square) 6.30% 8/1/38 (FHA) (AMT) 1,455,000 1,515,077
North Dakota State Housing Finance
Agency Multifamily Revenue Series A
6.15% 12/1/17 (FNMA) 1,300,000 1,342,432
Waukesha, Wisconsin Housing Authority
(Westgrove Woods) Series A
6.00% 12/1/31 (GNMA) (AMT) 1,500,000 1,538,550
-----------
4,396,059
-----------
Municipal Lease Revenue Bonds - 7.04%
Alexandria, Virginia Industrial
Development Authority Revenue
(Institute for Defense Analyses)
Series A 5.90% 10/1/30 (AMBAC) 5,000,000 5,645,100
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series B
5.50% 6/1/43 7,500,000 8,014,649
5.625% 6/1/38 7,500,000 8,148,825
Idaho State Building Authority Revenue
Series A 5.00% 9/1/43 (XLCA) 1,000,000 1,030,930
Linn County, Kansas Certificates of
Participation 7.25% 3/1/13 (AMT) 350,000 332,518
Missouri State Development Finance
Board Infrastructure Facilities Revenue
(Branson Landing Project) Series A
5.25% 12/1/19 1,000,000 1,049,250
5.50% 12/1/24 980,000 1,030,715
5.625% 12/1/28 2,930,000 3,093,260
Philadelphia, Pennsylvania Redevelopment
Authority Revenue 5.00% 4/15/30 (FGIC) 5,000,000 5,207,550
-----------
33,552,797
-----------
*Pre-Refunded Bonds - 5.63%
Cudahy, Wisconsin Community
Development Authority Lease Revenue
6.00% 6/1/11-06 1,000,000 1,043,240
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
*Pre-Refunded Bonds (continued)
Michigan State Hospital Finance Authority
Revenue (Genesys Health Systems)
Series A 7.50% 10/1/27-05 $ 8,130,000 $ 8,377,964
8.125% 10/1/21-05 4,000,000 4,215,000
Mississippi Development Bank Special
Obligation (Madison County Hospital
Project) 6.30% 7/1/22-09 2,070,000 2,376,464
New York City, New York
Series H 6.125% 8/1/25-07 140,000 152,935
Payne County, Oklahoma Economic
Development Authority Student
Housing Revenue (Collegiate Housing
Foundation-Oklahoma State University)
Series A 6.375% 6/1/30-11 4,000,000 4,665,760
Puerto Rico Commonwealth
5.375% 7/1/21-07 (MBIA) 50,000 53,902
Puerto Rico Commonwealth Public
Improvement Series A 5.125% 7/1/31-11 3,495,000 3,870,852
Southeast Wisconsin Professional
Baseball Park District Sales Tax Revenue
5.80% 12/15/26-07 (MBIA) 1,000,000 1,073,100
Wisconsin Housing Finance Authority
Revenue 6.10% 6/1/21-17 (FHA) 865,000 980,590
-----------
26,809,807
-----------
Public Utility District Revenue Bonds - 3.29%
Chelan County, Washington Public Utilities
District #001 Consolidated Revenue
(Chelan Hydro System) Series A
5.45% 7/1/37 (AMBAC) (AMT) 5,000,000 5,271,800
Richmond, Virginia Public Utilities Revenue
5.00% 1/15/27 (FSA) 10,000,000 10,391,500
-----------
15,663,300
-----------
School District General Obligation Bonds - 0.51%
Lewisville, Texas Independent School
District Permanent School Fund
6.15% 8/15/21 2,160,000 2,422,116
-----------
2,422,116
-----------
Single Family Housing Revenue Bonds - 0.42%
New Mexico Mortgage Finance Authority
Series B Class III 6.75% 7/1/25
(GNMA) (FNMA) 345,000 350,244
Series E 6.95% 1/1/26 (GNMA) (FNMA) 335,000 346,169
North Dakota State Housing Finance
Agency Revenue
Series A 6.30% 7/1/16 (AMT) 540,000 560,746
Series B 6.25% 1/1/17 (AMT) 405,000 408,552
Santa Fe, New Mexico Single Family
Mortgage Revenue 6.20% 11/1/16
(GNMA) (FNMA) (AMT) 255,000 255,263
Utah State Housing Finance Agency
Single Family Mortgage Series A
7.20% 1/1/27 (FHA) (VA) (AMT) 60,000 61,282
-----------
1,982,256
-----------
Territorial General Obligation Bonds - 1.97%
Puerto Rico Commonwealth Public
Improvement Series A
5.50% 7/1/19 (MBIA) 8,000,000 9,380,960
-----------
9,380,960
-----------
7
STATEMENTS DELAWARE TAX-FREE USA FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Territorial Revenue Bonds - 7.82%
Puerto Rico Commonwealth Highway &
Transportation Authority Transportation
Revenue Series G 5.00% 7/1/42 $ 6,750,000 $ 6,901,065
Puerto Rico Commonwealth Industrial
Development Company General Purpose
Revenues Series B 5.375% 7/1/16 1,000,000 1,069,450
Puerto Rico Commonwealth Public
Improvement Series A 5.125% 7/1/31 6,880,000 7,129,882
Puerto Rico Electric Power Authority
Revenue Series II 5.25% 7/1/31 6,000,000 6,369,720
Puerto Rico Housing, Bank & Finance
Agency Single Family Mortgage
Revenue 6.25% 4/1/29
(GNMA) (FNMA) (FHLMC) (AMT) 1,240,000 1,266,747
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 1,231,872
Puerto Rico Public Buildings Authority
Revenue (Government Facilities)
Series I 5.25% 7/1/33 12,000,000 12,745,320
Virgin Islands Water & Power Authority
Water System Revenue 5.50% 7/1/17 510,000 522,867
------------
37,236,923
------------
Turnpike/Toll Road Revenue Bonds - 2.95%
Ohio State Turnpike Commission Revenue
Series A
5.50% 2/15/24 (FGIC) 5,000,000 5,804,500
5.50% 2/15/26 (FGIC) 2,590,000 3,026,363
Pennsylvania State Turnpike Commission
Revenue Series A 5.00% 12/1/34
(AMBAC) 5,000,000 5,225,500
------------
14,056,363
------------
Water & Sewer Revenue Bonds - 4.10%
Augusta, Georgia Water & Sewer Revenue
5.25% 10/1/34 (FSA) 3,375,000 3,634,335
New York City, New York Municipal Water
Finance Authority Water & Sewer System
Revenue Series A 5.125% 6/15/34 12,125,000 12,587,326
West Virginia State Water Development
Authority Revenue (Loan Program III)
Series A 6.375% 7/1/39 (AMBAC) (AMT) 2,890,000 3,284,427
------------
19,506,088
------------
TOTAL MUNICIPAL BONDS (cost $430,775,733) 463,469,693
------------
oVARIABLE RATE DEMAND NOTES - 2.66%
Chester County, Pennsylvania Industrial
Development Authority Revenue
(Archdiocese of Philadelphia)
1.80% 7/1/31 9,000,000 9,000,000
Philadelphia, Pennsylvania Authority for
Industrial Development Revenue
(Newcourtland Elder Services Project)
1.80% 3/1/27 3,655,000 3,655,000
------------
TOTAL VARIABLE RATE DEMAND NOTES
(cost $12,655,000) 12,655,000
------------
TOTAL MARKET VALUE OF SECURITIES - 99.96%
(cost $443,430,733) $476,124,693
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.04% 177,134
------------
NET ASSETS APPLICABLE TO 41,038,435
SHARES OUTSTANDING - 100.00% $476,301,827
============
Net Asset Value - Delaware Tax-Free USA Fund Class A
($451,337,110 / 38,887,410 Shares) $11.61
------
Net Asset Value - Delaware Tax-Free USA Fund Class B
($18,909,182 / 1,629,283 Shares) $11.61
------
Net Asset Value - Delaware Tax-Free USA Fund Class C
($6,055,535 / 521,742 Shares) $11.61
------
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005:
Shares of beneficial interest
(unlimited authorization - no par) $454,005,523
Distributions in excess of net investment income (12,071)
Accumulated net realized loss on investments (10,385,585)
Net unrealized appreciation of investments 32,693,960
------------
Total net assets $476,301,827
============
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
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
VA - Insured by the Veterans Administration
XLCA - Insured by XL Capital Assurance
*Pre-Refunded Bonds are municipals that are generally backed or secured by
U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed
by the year in which the bond is pre-refunded.
oVariable Rate Notes. The interest rate shown is the rate as of February 28,
2005.
&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 28, 2005.
++Non-income producing security. Security is currently in default.
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE USA FUND
Net asset value Class A (A) $11.61
Sales charge (4.50% of offering price) (B) 0.55
------
Offering price $12.16
======
(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
8
STATEMENTS DELAWARE TAX-FREE INSURED FUND
OF NET ASSETS (CONTINUED) February 28, 2005 (Unaudited)
Principal Market
Amount Value
MUNICIPAL BONDS - 95.69%
Airport Revenue Bonds - 2.56%
Dallas-Fort Worth, Texas International
Airport Revenue Series A 5.50% 11/1/31
(FGIC) (AMT) $1,500,000 $1,583,340
----------
1,583,340
----------
City General Obligation Bonds - 5.83%
Melrose Park, Illinois Tax Increment
Series B 6.00% 12/15/19 (FSA) 1,250,000 1,427,038
Powell, Ohio 5.50% 12/1/32 (FGIC) 2,000,000 2,186,840
----------
3,613,878
----------
Continuing Care/Retirement Revenue Bonds - 2.12%
Colorado Health Facilities Authority Revenue
(Evangelical Lutheran)
Series A 5.25% 6/1/34 1,275,000 1,310,955
----------
1,310,955
----------
Corporate Backed Revenue Bonds - 1.28%
Indianapolis, Indiana Airport Authority
Revenue (Federal Express Corp. Project)
5.10% 1/15/17 (AMT) 750,000 793,148
----------
793,148
----------
Dedicated Tax & Fees Revenue Bonds - 5.35%
New Jersey Economic Development
Authority (Cigarette Tax) 5.50% 6/15/31 1,000,000 1,037,870
New York State Sales Tax Asset
Receivables 5.25% 10/15/27 (AMBAC) 1,000,000 1,082,830
Tampa, Florida Sports Authority Revenue
(Tampa Bay Arena Project) Sales Tax
5.75% 10/1/20 (MBIA) 1,000,000 1,191,860
----------
3,312,560
----------
Escrowed to Maturity Bonds - 1.87%
New Jersey State Highway Authority Garden
State Parkway General Revenue
5.50% 1/1/16 (FGIC) 1,000,000 1,156,120
----------
1,156,120
----------
Higher Education Revenue Bonds - 11.34%
Amherst, New York Industrial Agency
Civic Facilities Revenue
(UBF Faculty Student Housing)
Series A 5.75% 8/1/30 (AMBAC) 1,300,000 1,468,336
Illinois Educational Facilities Authority
Student Housing Revenue (Educational
Advancement Funding - University
Center Project) 6.25% 5/1/34 1,000,000 1,032,090
Massachusetts State Development
Finance Agency Revenue
(Massachusetts College of Pharmacy
Project) Series C 5.75% 7/1/33 500,000 525,015
Massachusetts State Industrial Finance
Agency Revenue Higher Education
(Clark University Project) 6.10% 7/1/16 1,250,000 1,308,600
New York State Dormitory Authority
Revenue (Fashion Institute Student
Housing Corp.) 5.00% 7/1/13 (FGIC) 1,000,000 1,101,950
Pennsylvania State Higher Educational
Facilities Authority Revenue
(Widener University) 5.375% 7/15/29 1,000,000 1,046,610
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Higher Education Revenue Bonds (continued)
University of Central Florida Athletics
Association Certificates of Participation
Series A 5.25% 10/1/34 (FGIC) $ 500,000 $ 535,165
----------
7,017,766
----------
Hospital Revenue Bonds - 3.41%
Florence County, South Carolina Hospital
Revenue (McLeod Regional Medical
Center Project) Series A
5.25% 11/1/27 (FSA) 1,000,000 1,073,830
Knox County, Tennessee Health
Educational & Housing Facilities Board
Hospital Revenue (East Tennessee
Hospital Project) Series B 5.75% 7/1/33 1,000,000 1,041,230
----------
2,115,060
----------
Investor Owned Utilities Revenue Bonds - 7.63%
Mason County, West Virginia Pollution
Control Revenue (Appalachian
Power Co. Project) Series K
6.05% 12/1/24 (AMBAC) 3,000,000 3,404,490
Petersburg, Indiana Pollution Control
Revenue (Indianapolis Power &
Light Co. Project) 6.375% 11/1/29 (AMT) 750,000 790,943
South Carolina Jobs Economic
Development Authority Industrial
Revenue (South Carolina Electric &
Gas Co. Project) Series B
5.45% 11/1/32 (AMBAC) (AMT) 500,000 531,140
----------
4,726,573
----------
Multifamily Housing Revenue Bonds - 10.03%
Franklin County, Ohio Multi Family Revenue
(Alger Green) Series A 5.80% 5/20/44
(GNMA) (AMT) 1,150,000 1,203,222
Illinois Development Finance Authority
Revenue (Section 8) Series A
5.80% 7/1/28 (MBIA) (FHA) 2,790,000 2,895,545
Illinois Housing Development Authority
Multi Family Revenue (Crystal Lake
Preservation) Series A-1
5.80% 12/20/41 (GNMA) 2,000,000 2,105,820
----------
6,204,587
----------
Municipal Lease Revenue Bonds - 6.47%
Alexandria, Virginia Industrial
Development Authority Revenue
(Institute for Defense Analyses)
Series A 5.90% 10/1/30 (AMBAC) 1,000,000 1,129,020
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series B 5.50% 6/1/43 1,000,000 1,068,620
Loudoun County, Virginia Industrial
Development Authority Public Safety
Facility Lease Revenue Series A
5.25% 12/15/23 (FSA) 700,000 760,256
Missouri State Development Finance
Board Infrastructure Facilities Revenue
(Branson Landing Project) Series A
5.50% 12/1/24 1,000,000 1,051,750
----------
4,009,646
----------
9
STATEMENTS DELAWARE TAX-FREE INSURED FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Political Subdivision General Obligation Bonds - 0.97%
St. Clair County, Michigan
5.00% 4/1/21 (AMBAC) $ 565,000 $ 602,143
----------
602,143
----------
*Pre-Refunded Bonds - 4.76%
Michigan State Hospital Finance Authority
Revenue (Genesys Health Systems)
Series A 7.50% 10/1/27-05 1,500,000 1,545,750
Vancouver, Washington Limited Tax
5.50% 12/1/25-10 (AMBAC) 1,250,000 1,403,675
----------
2,949,425
----------
Public Utility District Revenue Bonds - 5.45%
Austin, Texas Revenue Subordinate Lien
5.25% 5/15/20 (MBIA) 3,000,000 3,378,360
----------
3,378,360
----------
School District General Obligation Bonds - 5.94%
Jackson, Ohio Local School District
(Stark & Summit Counties) School
Facilities Construction & Improvement
5.625% 12/1/25 (FSA) 1,000,000 1,104,950
Kenowa Hills, Michigan Public Schools
Refunding 5.00% 5/1/25 (FGIC) 490,000 518,621
Pomona, California United School District
Series A 6.55% 8/1/29 (MBIA) 1,000,000 1,309,910
South Redford, Michigan School District
5.00% 5/1/21 (FGIC) 700,000 748,419
----------
3,681,900
----------
Single Family Housing Revenue Bonds - 1.17%
New Mexico Mortgage Finance Authority
Single Family Mortgage Program
Series C 6.20% 7/1/26 (GNMA) (FNMA) 710,000 727,317
----------
727,317
----------
Territorial General Obligation Bonds - 1.89%
Puerto Rico Commonwealth
Public Improvement Series A
5.50% 7/1/19 (MBIA) 1,000,000 1,172,620
----------
1,172,620
----------
Territorial Revenue Bonds - 9.80%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Series E
5.50% 7/1/17 (FSA) 1,250,000 1,455,725
5.50% 7/1/19 (FSA) 3,000,000 3,517,860
Puerto Rico Public Buildings Authority
Revenue (Government Facilities)
Series J 5.00% 7/1/36 (AMBAC) 1,000,000 1,091,260
----------
6,064,845
----------
Turnpike/Toll Road Revenue Bonds - 0.84%
Pennsylvania State Turnpike Commission
Revenue Series A 5.00% 12/1/34 (AMBAC) 500,000 522,550
----------
522,550
----------
Water & Sewer Revenue Bonds - 6.98%
Atlanta, Georgia Water & Waste Water
Revenue 5.00% 11/1/18 (FSA) 1,000,000 1,081,610
Augusta, Georgia Water & Sewer Revenue
5.25% 10/1/34 (FSA) 1,000,000 1,076,840
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Water & Sewer Revenue Bonds (continued)
Fulton County, Georgia Water & Sewer
Revenue 5.25% 1/1/35 (FGIC) $ 1,000,000 $ 1,069,580
Green Bay, Wisconsin Water Systems
Revenue Refunding and Improvements
Bonds 5.25% 11/1/22 (FSA) 1,000,000 1,093,950
-----------
4,321,980
-----------
TOTAL MUNICIPAL BONDS (cost $55,079,092) 59,264,773
-----------
OVARIABLE RATE DEMAND NOTES - 3.23%
Michigan State South Central Power
1.87% 10/1/11 (AMBAC) 1,500,000 1,500,000
Minneapolis, Minnesota Library
1.72% 12/1/32 (SPA, Dexia Credit Local) 500,000 500,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES
(cost $2,000,000) 2,000,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 98.92%
(cost $57,079,092) 61,264,773
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.08% 670,800
-----------
NET ASSETS APPLICABLE TO 5,541,627
SHARES OUTSTANDING - 100.00% $61,935,573
===========
Net Asset Value - Delaware Tax-Free Insured Fund
Class A ($53,526,889 / 4,789,271 Shares) $11.18
------
Net Asset Value - Delaware Tax-Free Insured Fund
Class B ($6,265,097 / 560,564 Shares) $11.18
------
Net Asset Value - Delaware Tax-Free Insured Fund
Class C ($2,143,587 / 191,792 Shares) $11.18
------
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005:
Shares of beneficial interest
(unlimited authorization - no par) $57,659,171
Distributions in excess of net investment income (1,790)
Accumulated net realized gain on investments 92,511
Net unrealized appreciation of investments 4,185,681
-----------
Total net assets $61,935,573
===========
*Pre-Refunded Bonds are municipals that are generally backed or secured by
U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by
the year in which the bond is pre-refunded.
oVariable Rate Notes. The interest rate shown is the rate as of February 28,
2005.
10
STATEMENTS DELAWARE TAX-FREE INSURED FUND
OF NET ASSETS (CONTINUED)
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Indemnity 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
SPA - Stand-by Purchase Agreement
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE INSURED FUND
Net asset value Class A (A) $11.18
Sales charge (4.50% offering price) (B) 0.53
------
Offering price $11.71
======
(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 DELAWARE TAX-FREE USA INTERMEDIATE FUND
OF NET ASSETS (CONTINUED) February 28, 2005 (Unaudited)
Principal Market
Amount Value
MUNICIPAL BONDS - 91.90%
Airport Revenue Bonds - 1.88%
Chicago, Illinois O' Hare International
Airport Revenue General-Airport-Third
Lein Series A-2 5.75% 1/1/20
(FSA) (AMT) $1,000,000 $1,114,610
Metropolitan, Washington D.C. Airport
Authority Systems Series A
5.50% 10/1/19 (FGIC) (AMT) 1,000,000 1,093,290
----------
2,207,900
----------
City General Obligation Bonds - 4.39%
Cleveland, Ohio 5.25% 12/1/23 (AMBAC) 1,185,000 1,296,106
New York City, New York
Series G 5.25% 8/1/15 1,000,000 1,088,710
Series J 5.50% 6/1/23 1,000,000 1,084,920
Powell, Ohio 5.50% 12/1/25 (FGIC) 1,500,000 1,671,990
----------
5,141,726
----------
Corporate-Backed Revenue Bonds - 7.53%
Alliance, Texas Airport Authority Special
Facilities Revenue (Federal Express Corp.
Project) 6.375% 4/1/21 (AMT) 1,000,000 1,055,310
Cartersville, Georgia Development
Authority Waste & Wastewater Facilities
Revenue (Anheuser Busch Project)
5.10% 2/1/12 (AMT) 450,000 484,349
Dutchess County, New York Industrial
Development Agency Amount
5.45% 12/1/29 (AMT) 1,500,000 1,634,309
Indianapolis, Indiana Airport Authority
Revenue (Federal Express Corp. Project)
5.10% 1/15/17 (AMT) 750,000 793,148
Michigan State Strategic Funding Limited
Obligation Revenue (Detroit Edison Co.
Project) Series A 5.50% 6/1/30
(XLCA) (AMT) 1,000,000 1,072,030
Ohio State Air Quality Development
Authority Revenue Environmental
Improvement (USX Project)
5.00% 11/1/15 1,000,000 1,087,000
Prattville, Alabama Industrial Development
Board Environmental Improvement
Revenue (International Paper Co.
Project) Series A 6.70% 3/1/24 (AMT) 1,000,000 1,097,890
Sugar Creek, Missouri Industrial
Development Revenue (Lafarge North
America) Series A 5.65% 6/1/37 (AMT) 500,000 514,840
Toledo, Lucas County, Ohio Port Authority
Development Revenue (Northwest Ohio
Bond Fund - Alex Products Inc.)
Series B 6.125% 11/15/09 (AMT) 1,000,000 1,084,450
----------
8,823,326
----------
Dedicated Tax & Fees Revenue Bonds - 5.60%
Casa Grande, Arizona Excise Tax Revenue
5.00% 4/1/22 (AMBAC) 1,600,000 1,706,432
New Jersey Economic Development
Authority (Cigarette Tax) 5.50% 6/15/31 1,000,000 1,037,870
New York City Transitional Finance
Authority Revenue Refunding - Future
Tax Secured Series A 5.50% 11/1/26 1,000,000 1,111,290
New York State Sales Tax Asset Receivables
5.25% 10/15/27 (AMBAC) 1,000,000 1,082,830
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Dedicated Tax & Fees Revenue Bonds (continued)
Wyoming State Loan & Investment
Facilities Revenue 5.00% 10/1/24 $1,550,000 $1,628,880
----------
6,567,302
----------
Escrowed to Maturity Bonds - 0.19%
Metropolitan Pier & Exposition Authority
Illinois Hospitality Facilities (McCormick
Place Convention Center) 5.75% 7/1/06 215,000 220,216
----------
220,216
----------
Higher Education Revenue Bonds - 15.85%
Allegheny County, Pennsylvania Higher
Education Building Authority University
Revenue (Duquesne University)
Series A 5.00% 3/1/16 (FGIC) 1,000,000 1,085,650
Forest Grove, Oregon Revenue Campus
(Pacific University) 6.30% 5/1/25
(RADIAN) 1,000,000 1,117,630
Fulton County, Georgia Development
Authority Revenue (Molecular Science
Building Project) 5.25% 5/1/21 (MBIA) 1,000,000 1,093,950
Illinois Educational Facilities Authority
Student Housing Revenue (Educational
Advancement-University Center Project)
6.00% 5/1/22 750,000 799,500
Indiana State Educational Facilities
Authority Revenue 5.00% 10/1/34 500,000 502,590
Massachusetts State Health & Educational
Facilities Authority Revenue (Nichols
College Issue) Series C 6.125% 10/1/29 1,000,000 1,022,740
Michigan Higher Education Facilities
Authority Revenue (Kalamazoo College
Project) 5.50% 12/1/19 500,000 544,695
New Jersey State Educational Facilities
Authority Revenue (Georgian Court
College Project) Series C 6.50% 7/1/33 500,000 564,605
New York State Dormitory Authority Revenue
(Brooklyn Law School)
Series A 5.50% 7/1/18 (RADIAN) 1,000,000 1,103,580
(Fashion Institute Student Housing
Corp.)5.00% 7/1/13 (FGIC) 1,000,000 1,101,950
(Long Island University)
Series B 5.50% 9/1/20 (RADIAN) 1,000,000 1,089,210
Ohio State Higher Educational
Facility Revenue
(John Carroll University) 5.50% 11/15/18 335,000 373,207
(Kenyon College Project) 4.70% 7/1/37 1,000,000 1,046,650
Ohio State University General Receipts
Series B 5.25% 6/1/21 1,000,000 1,092,040
Pennsylvania State Higher Educational
Facilities Authority College & University
Revenue (Geneva College Project)
6.125% 4/1/22 1,000,000 1,067,350
Pennsylvania State Higher Educational
Facilities Authority Revenue
(Widener University)
5.00% 7/15/26 550,000 562,271
5.00% 7/15/31 750,000 760,575
Pennsylvania State University
5.00% 9/1/29 1,000,000 1,047,040
12
STATEMENTS DELAWARE TAX-FREE USA INTERMEDIATE FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Higher Education Revenue Bonds (continued)
South Carolina Educational Facilities
Authority for Private Nonprofit
Institutions (Southern Wesleyan
University) 5.00% 3/1/20 $ 1,200,000 $ 1,218,251
University of California Revenue
Series A 5.125% 5/15/20 (AMBAC) 250,000 270,583
University of Oklahoma Research Facilities
5.00% 3/1/23 (AMBAC) 1,065,000 1,129,048
-----------
18,593,115
-----------
Hospital Revenue Bonds - 12.15%
Chatham County, Georgia Hospital
Authority Revenue (Memorial Health
Medical Center) Series A 6.125% 1/1/24 1,000,000 1,091,920
Cuyahoga County, Ohio Revenue
(Cleveland Clinic Health System)
Series A 6.00% 1/1/21 1,000,000 1,124,380
Duluth, Minnesota Economic Development
Authority Health Care Facilities Revenue
Benedictine Health System
(St. Mary's Hospital) 5.50% 2/15/23 1,000,000 1,054,510
Florence County, South Carolina Hospital
Revenue (McLeod Regional Medical
Center Project) Series A
5.25% 11/1/27 (FSA) 1,000,000 1,073,830
Indiana Health Facility Financing
Authority Hospital Revenue
(Deaconess Hospital Obligation)
Series A 5.375% 3/1/29 (AMBAC) 700,000 753,543
Lancaster County, Pennsylvania Hospital
Authority Revenue (Lancaster General
Hospital Project) 5.75% 3/15/21 1,000,000 1,085,270
Maryland State Health & Higher Education
Facilities Authority Revenue (Union
Hospital of Cecil County) 5.625% 7/1/32 500,000 530,155
Michigan State Hospital Finance Authority
Revenue (Trinity Health Credit)
Series C 5.375% 12/1/23 500,000 528,850
Minneapolis, Minnesota Health Care
System Revenue (Allina Health Systems)
Series A 5.75% 11/15/32 500,000 531,140
Multnomah County, Oregon Hospital
Facilities Authority Revenue (Providence
Health System) 5.25% 10/1/22 1,000,000 1,080,520
New Hampshire Health & Education
Facilities Authority Revenue (Elliot
Hospital) Series B 5.60% 10/1/22 1,000,000 1,044,350
North Texas Health Facilities Development
Corporation Hospital Revenue
(United Regional Health Care
System, Inc. Project) 6.00% 9/1/23 1,000,000 1,076,360
Prince William County, Virginia Industrial
Development Authority Hospital
Revenue (Potomac Hospital Project)
5.20% 10/1/30 545,000 566,495
Southcentral, Pennsylvania General
Authority Revenue (Wellspan Health
Obligated Project) 5.625% 5/15/26 1,000,000 1,070,430
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Hospital Revenue Bonds (continued)
Terrebonne Parish, Louisiana Hospital
Service District #1 Hospital Revenue
(Terrebonne General Medical Center
Project) 5.50% 4/1/33 (AMBAC) $ 1,500,000 $ 1,626,059
-----------
14,237,812
-----------
Investor Owned Utilities Revenue Bonds - 6.88%
Cambria County, Pennsylvania Industrial
Development Authority Pollution
Control Revenue (Pennsylvania Electric
Co. Project) Series A
5.80% 11/1/20 (MBIA) 500,000 519,995
Connecticut State Development Authority
Pollution Control Revenue
(Connecticut Light & Power Co.)
3.35% 5/1/31 (AMBAC) (AMT) 1,300,000 1,295,177
Forsyth, Montana Pollution Control
Revenue (Portland General Project)
Series A 5.20% 5/1/33 1,005,000 1,061,933
Maricopa County, Arizona Pollution Control
Corporation Revenue (El Paso Electric
Co. Project) Series A 6.375% 8/1/15 750,000 760,770
Pennsylvania Economic Development
Financing 6.75% 12/1/36 (AMT) 750,000 802,478
Sabine River Authority, Texas Pollution
Control Revenue (TXU Electric Co.
Project) Series A 5.50% 5/1/22 1,000,000 1,082,790
Saint Charles Parish, Louisiana Pollution
Control Revenue (Entergy Louisiana, Inc.)
Series A 4.90% 6/1/30 1,000,000 1,005,350
South Carolina Jobs Economic
Development Authority Industrial
Revenue (South Carolina Electric &
Gas Co. Project) Series B
5.45% 11/1/32 (AMBAC) (AMT) 500,000 531,140
West Feliciana Parish, Louisiana Pollution
Control Revenue (Gulf States Utilities Co.
Project) Series A 7.50% 5/1/15 1,000,000 1,009,410
-----------
8,069,043
-----------
Miscellaneous Revenue Bonds - 1.84%
New York State Municipal Bond Bank
Agency Special School Purpose
Revenue Series C 5.25% 6/1/22 1,000,000 1,074,010
Oregon State Department Administrative
Services Lottery Revenue Refunding
Series A 5.00% 4/1/18 (FSA) 1,000,000 1,081,500
-----------
2,155,510
-----------
Municipal Lease Revenue Bonds - 2.52%
Albany, New York Industrial Development
Agency Civic Facility Revenue
(Charitable Leadership Project)
Series A 5.75% 7/1/26 500,000 514,800
Golden State, California Tobacco
Securitization Settlement Revenue
Series B 5.75% 6/1/23 1,000,000 1,065,640
Middle River, Virginia Regional Jail
Authority Facility Revenue
5.00% 5/15/20 (MBIA) 1,285,000 1,374,552
-----------
2,954,992
-----------
13
STATEMENTS DELAWARE TAX-FREE USA INTERMEDIATE FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Political Subdivision General Obligation Bonds - 2.79%
Lansing, Michigan Community College
5.00% 5/1/21 (MBIA) $1,325,000 $1,410,171
Lunenburg County, Virginia
Series B 5.25% 2/1/29 (MBIA) 715,000 763,677
Middlesex County, New Jersey Improvement
Authority Revenue (County Guaranteed
Open Space Trust) 5.25% 9/15/20 1,000,000 1,101,200
----------
3,275,048
----------
Ports & Harbors Revenue Bonds - 0.46%
Virginia Port Authority Commonwealth Port
Fund Revenue Resolution
5.00% 7/1/12 (AMT) 500,000 543,610
----------
543,610
----------
*Pre-Refunded Bonds - 3.59%
Arizona State Transportation Board
Highway Revenue 6.25% 7/1/16-09 1,850,000 2,101,434
Pennsylvania State Higher Educational
Facilities Authority College & University
Revenue (Ursinus College Project)
5.90% 1/1/27-07 1,000,000 1,078,090
Puerto Rico Commonwealth Highway &
Transportation Authority Transportation
Revenue Series B 6.00% 7/1/26-05 1,000,000 1,023,140
----------
4,202,664
----------
Public Power Revenue Bonds - 2.54%
Metropolitan Government Nashville &
Davidson County, Tennessee Electric
Revenue Series B 5.50% 5/15/14 1,000,000 1,141,910
South Carolina State Public Service
Authority Revenue Series A
5.125% 1/1/21 (FSA) 1,000,000 1,076,200
Texas Municipal Power Agency Revenue
4.00% 9/1/11 (AMBAC) 750,000 756,555
----------
2,974,665
----------
Recreational Area Revenue Bonds - 0.92%
Hampton, Virginia Convention Center
Revenue 5.25% 1/15/23 (AMBAC) 1,000,000 1,073,600
----------
1,073,600
----------
School District General Obligation Bonds - 5.61%
Bannock County, Idaho School District #025
(Pocatello Idaho School Board Guaranty
Program) 5.00% 8/15/16 1,100,000 1,204,544
Kenowa Hills, Michigan Public Schools
Refunding 5.00% 5/1/25 (FGIC) 1,000,000 1,058,410
Licking County, Ohio Joint Vocational
School District 5.00% 12/1/19 (MBIA) 1,000,000 1,074,150
Otsego, Michigan Public Schools District
5.00% 5/1/21 (FSA) 1,185,000 1,263,471
Salem-Keizer, Oregon School District #24J
Refunding 5.00% 6/15/19 (FSA) 1,145,000 1,231,722
South Redford, Michigan School District
5.00% 5/1/21 (FGIC) 700,000 748,419
----------
6,580,716
----------
Principal Market
Amount Value
MUNICIPAL Bonds (continued)
School District Revenue Bonds - 0.95%
Anderson School Building
5.50% 7/15/25 (FSA) $1,000,000 $1,109,300
----------
1,109,300
----------
State General Obligation Bonds - 2.58%
California State 5.25% 11/1/17 1,000,000 1,091,570
California State Economic Recovery
Series A 5.25% 7/1/14 1,000,000 1,118,500
Florida State Board Education Capital
Outlay (Public Education) Series B
5.00% 6/1/10 750,000 817,290
----------
3,027,360
----------
Tax Increment/Special Assessment Bonds - 1.59%
Allegheny County, Pennsylvania
Redevelopment Authority 5.10% 7/1/14 250,000 261,613
Portland, Oregon Urban Renewal &
Redevelopment Interstate Corridor
Series A 5.25% 6/15/20 (FGIC) 1,000,000 1,105,930
St. Joseph, Missouri Industrial
Development Authority Tax Increment
Revenue (Shoppes At North Village
Project) 5.10% 11/1/19 500,000 492,105
----------
1,859,648
----------
Territorial General Obligation Bonds - 1.86%
Puerto Rico Commonwealth 5.00% 7/1/30 1,000,000 1,067,290
oPuerto Rico Public Finance Corporation
Commonwealth Appropriation Series A
(LOC, Puerto Rico Government Bank)
5.75% 8/1/27 1,000,000 1,112,250
----------
2,179,540
----------
Territorial Revenue Bonds - 4.25%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series J 5.50% 7/1/21 1,000,000 1,106,050
Puerto Rico Electric Power Authority Power
Revenue Series OO 5.00% 7/1/13 (CIFG) 1,000,000 1,102,710
Puerto Rico Public Buildings Authority
Revenue (Government Facilities)
Series J 5.00% 7/1/28 1,000,000 1,067,290
Puerto Rico Public Finance Corporate
5.25% 8/1/29 (MBIA) 620,000 685,193
University of Puerto Rico Revenue
Series M 5.50% 6/1/15 (MBIA) 1,000,000 1,021,930
----------
4,983,173
----------
Transportation Revenue Bonds - 0.94%
Colorado Department Transportation
Revenue (Anticipation Notes) Series B
5.00% 12/15/14 (FGIC) 1,000,000 1,106,570
----------
1,106,570
----------
Turnpike/Toll Road Revenue Bonds - 1.16%
Pennsylvania State Turnpike
Commission Revenue Series A
5.25% 12/1/20 (AMBAC) 1,230,000 1,356,788
----------
1,356,788
----------
Water & Sewer Revenue Bonds - 3.83%
Atlanta, Georgia Water & Waste Water
Revenue 5.00% 11/1/18 (FSA) 1,000,000 1,081,610
14
STATEMENTS DELAWARE TAX-FREE USA INTERMEDIATE FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Water & Sewer Revenue Bonds (continued)
Green Bay, Wisconsin Water Systems
Revenue Refunding & Improvements
Bonds 5.25% 11/1/22 (FSA) $ 1,000,000 $ 1,093,950
Ohio State Water Development Authority
Revenue (Fresh Water) Series B
5.50% 12/1/19 (FSA) 1,000,000 1,167,750
Virginia State Resource Authority Clean
Water Revenue (State Revolving Fund)
6.00% 10/1/16 1,000,000 1,141,460
------------
4,484,770
------------
TOTAL MUNICIPAL BONDS (cost $103,593,755) 107,728,394
------------
oVARIABLE RATE DEMAND NOTES - 6.44%
Chester County, Pennsylvania Industrial
Development Authority Revenue
(Archdiocese of Philadelphia)
1.80% 7/1/31 3,000,000 3,000,000
Philadelphia, Pennsylvania Authority for
Industrial Development Revenue
(Newcourtland Elder Services Project)
1.80% 3/1/27 3,500,000 3,500,000
Portland, Oregon Multifamily Housing
Revenue (South Park Block Project)
1.85% 12/1/11 1,050,000 1,050,000
------------
TOTAL VARIABLE RATE DEMAND NOTES
(cost $7,550,000) 7,550,000
------------
TOTAL MARKET VALUE OF SECURITIES - 98.34%
(cost $111,143,755) 115,278,394
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.66% 1,943,527
------------
NET ASSETS APPLICABLE TO 10,217,733
SHARES OUTSTANDING - 100.00% $117,221,921
============
Net Asset Value - Delaware Tax-Free USA Intermediate Fund
Class A ($92,893,903 / 8,097,044 Shares) $11.47
------
Net Asset Value - Delaware Tax-Free USA Intermediate Fund
Class B ($3,666,645 / 319,646 Shares) $11.47
------
Net Asset Value - Delaware Tax-Free USA Intermediate Fund
Class C ($20,661,373 / 1,801,043 Shares) $11.47
------
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005:
Shares of beneficial interest
(unlimited authorization - no par) $113,594,138
Accumulated net realized loss on investments (506,856)
Net unrealized appreciation of investments 4,134,639
-------------
Total net assets $117,221,921
============
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
CIFG - Insured by CDC IXIS Financial Guaranty
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
*Pre-Refunded Bonds are municipals that are generally backed or secured by
U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by
the year in which the bond is pre-refunded.
oVariable Rate Notes. The interest rate shown is the rate as of February 28,
2005.
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE USA INTERMEDIATE FUND
Net asset value Class A (A) $11.47
Sales charge (2.75% of offering price) (B) 0.32
------
Offering price $11.79
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
15
STATEMENTS DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
OF NET ASSETS (CONTINUED) February 28, 2005 (Unaudited)
Principal Market
Amount Value
MUNICIPAL BONDS - 97.44%
Airline Revenue Bonds - 1.59%
Minneapolis/St. Paul, Minnesota Metropolitan
Airports Commission Special Facilities
Revenue (Northwest Airlines, Inc. Project)
Series A 7.00% 4/1/25 (AMT) $ 500,000 $ 455,510
New Jersey Economic Development
Authority Special Facilities Revenue
(Continental Airlines, Inc. Project)
6.25% 9/15/19 (AMT) 1,000,000 840,950
----------
1,296,460
----------
Airport Revenue Bonds - 4.40%
City of Augusta, Georgia
Series C 5.45% 1/1/31 (AMT) 1,000,000 1,005,670
New York City, New York Industrial
Development (JFK Airis Project)
5.50% 7/1/28 (AMT) 905,000 911,760
Oklahoma City, Oklahoma Industrial &
Cultural Facilities Subordinated (Air
Cargo Project) 6.75% 1/1/23 (AMT) 1,160,000 1,146,602
Onondaga County, New York Industrial
Development Authority Revenue
Subordinated (Air Cargo Project)
7.25% 1/1/32 (AMT) 500,000 514,505
----------
3,578,537
----------
Continuing Care/Retirement Revenue Bonds - 11.04%
Bexar County, Texas Health Facilities
Development Corporation
(Army Retirement Residence Project)
6.30% 7/1/32 1,000,000 1,062,750
Buhl, Minnesota Nursing Home Revenue
(Forest Health Services Project)
Series A 6.75% 8/1/33 600,000 613,320
Colorado Health Facilities Authority
Revenue (Evangelical Lutheran)
5.25% 6/1/34 750,000 771,150
Gainesville & Hall County, Georgia
Development Authority Revenue
(Lanier Village Estates Project)
Series C 7.25% 11/15/29 1,000,000 1,108,260
Marion County, Missouri Nursing Home
District Revenue 7.00% 8/1/13 1,050,000 1,051,722
Montgomery County, Pennsylvania Higher
Education & Health Authority Revenue
(Foulkeways at Gwynedd Project)
6.75% 11/15/30 1,000,000 1,056,620
Philadelphia, Pennsylvania Hospitals &
Higher Education Facilities Authority
Revenue (The Philadelphia Protestant
Home Project) Series A 6.50% 7/1/27 1,100,000 1,105,214
Rochester, Minnesota Multifamily Revenue
(Wedum Shorewood Campus Project)
6.60% 6/1/36 985,000 987,266
Vermont Education & Health Building
Financing Agency Revenue Health Care Facility
(Copley Manor Project) 6.15% 4/1/19 1,730,000 1,224,321
----------
8,980,623
----------
Corporate-Backed Revenue Bonds - 10.50%
Alliance, Texas Airport Authority
Special Facilities Revenue (Federal Express Corp.
Project) 6.375% 4/1/21 (AMT) 2,000,000 2,110,619
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Corporate-Backed Revenue Bonds (continued)
Ashland, Kentucky Sewer & Solid Waste
Revenue (Ashland, Inc. Project)
7.125% 2/1/22 (AMT) $ 700,000 $ 718,242
++California Pollution Control Financing
Authority Pollution Control Revenue
(Laidlaw Environmental, Inc. Project)
Series A 6.70% 7/1/07 (AMT) 1,000,000 2,500
Cloquet, Minnesota Pollution Control
Revenue (Potlatch Corp. Project)
5.90% 10/1/26 750,000 756,578
De Soto Parish, Louisiana Environmental
Improvement Revenue (International
Paper Company Project)
Series A 6.35% 2/1/25 (AMT) 1,650,000 1,773,932
Gulf Coast, Texas Waste Disposal Authority
Revenue (Valero Energy Project)
6.65% 4/1/32 (AMT) 1,000,000 1,087,590
Phoenix County, Alabama Industrial
Development Board Environmental
Improvement Revenue (Mead Westvaco
Corporation Project) Series A
6.35% 5/15/35 (AMT) 500,000 537,595
Sugar Creek, Missouri Industrial
Development Revenue (Lafarge North
America) Series A 5.65% 6/1/37 (AMT) 500,000 514,840
Toledo Lucas County, Ohio Port
Development Revenue Authority
(Toledo Express Airport Project)
6.375% 11/15/32 (AMT) 1,000,000 1,042,140
----------
8,544,036
----------
Dedicated Tax & Fees Revenue Bonds - 5.01%
Chicago, Illinois Tax Increment Subordinate
(Central Loop Redevelopment Project)
Series A 6.50% 12/1/08 1,000,000 1,072,111
Las Vegas, Nevada Local Improvement
Special District #808 (Summerlin Area
Project) 6.75% 6/1/21 990,000 1,022,541
New Jersey Economic Development
Authority (Cigarette Tax) 5.75% 6/15/34 1,000,000 1,060,870
New York State Sales Tax Asset Receivables
Series A 5.25% 10/15/27 (AMBAC) 500,000 541,415
Prescott Valley, Arizona Improvement
District Special Assessment
7.90% 1/1/12 365,000 378,220
----------
4,075,157
----------
Escrowed to Maturity Bonds - 0.50%
Illinois State Development Finance
Authority (Harrisburg Medical Center
Project) 7.00% 3/1/06 400,000 405,880
----------
405,880
----------
Higher Education Revenue Bonds - 18.43%
Berks County, Pennsylvania Municipal
Authority College (Albright College
Project) 5.375% 10/1/28 700,000 717,626
Illinois Educational Facilities Authority
Student Housing Revenue (Educational
Advancement Fund-University Center
Project) 6.25% 5/1/30 2,000,000 2,127,959
16
STATEMENTS DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Higher Education Revenue Bonds (continued)
Maine Finance Authority Education
Revenue (Waynflete School Project)
6.40% 8/1/19 $ 1,000,000 $ 1,075,510
Maryland State Economic Development
Corporation, Student Housing Revenue
(University of Maryland College Park
Project) 5.625% 6/1/35 1,000,000 1,036,230
Massachusetts State Development
Finance Agency Revenue
(Massachusetts College of Pharmacy
Project) Series C 5.75% 7/1/33 1,000,000 1,050,030
Massachusetts State Health &
Educational Facilities Authority
Revenue (Nichols College Issue)
Series C 6.125% 10/1/29 2,000,000 2,045,479
Milledgeville-Baldwin County, Georgia
Development Authority Revenue
(Georgia College & State University
Foundation) 6.00% 9/1/33 1,000,000 1,075,690
Minnesota State Higher Education
Facilities Authority Revenue
(College of Art & Design Project)
Series 5-D 6.75% 5/1/26 500,000 544,765
New Hampshire Higher Education &
Health Facilities Authority (Brewster
Academy Project) 6.75% 6/1/25 1,000,000 1,006,080
New Jersey State Educational Facilities
Authority (Fairleigh Dickinson Project)
5.50% 7/1/23 750,000 785,363
New Mexico Educational Assistance
Foundation Student Loan Revenue
1st Subordinate Series A-2
6.65% 11/1/25 (AMT) 985,000 995,431
Pennsylvania State Higher Education
Facilities Authority Revenue (Widener
University) 5.00% 7/15/39 1,000,000 1,012,310
Scranton-Lackawanna, Pennsylvania
Health & Welfare Authority First
Mortgage Revenue (Lackawanna Junior
College Project) 5.75% 11/1/20 1,510,000 1,523,515
-----------
14,995,988
-----------
Hospital Revenue Bonds - 16.28%
Coffee County, Georgia Hospital Authority
Revenue (Coffee Regional Medical
Center Project) 5.00% 12/1/26 1,000,000 1,005,330
Illinois Health Facilities Authority Revenue
(Elmhurst Memorial Healthcare Project)
5.625% 1/1/28 1,000,000 1,045,010
(Midwest Physician Group Limited
Project) 5.50% 11/15/19 35,000 31,419
Knox County, Tennessee Health Educational
& Housing Facilities Board Hospital
Revenue (East Tennessee Hospital
Project) Series B 5.75% 7/1/33 1,300,000 1,353,598
Louisiana Public Facilities Authority
Revenue (Ochsner Clinic Foundation
Project) Series B 5.50% 5/15/32 1,000,000 1,038,790
Massachusetts State Health & Educational
Facilities Authority Revenue (Jordan
Hospital Project) Series E 6.75% 10/1/33 1,000,000 1,065,240
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Hospital Revenue Bonds (continued)
Montgomery County, Pennsylvania Higher
Education & Health Authority Revenue
(Catholic Health East)
Series C 5.375% 11/15/34 $ 1,000,000 $ 1,039,110
Prince William County, Virginia Industrial
Development Authority Hospital
Revenue (Potomac Hospital Project)
5.20% 10/1/30 1,000,000 1,039,440
Richland County, Ohio Hospital Facilities
Revenue (Medcentral Health System
Project) Series B 6.375% 11/15/30 1,500,000 1,614,599
Shakopee, Minnesota Health Care
Facilities Revenue (St. Francis Regional
Medical Center) 5.25% 9/1/34 750,000 767,468
South Dakota Health & Education Facilities
Authority Revenue (Huron Regional
Medical Center Project) 7.00% 4/1/10 1,000,000 1,023,340
St. Joseph County, Indiana Industrial
Economic Development (Madison
Center Project) 5.50% 2/15/21 1,150,000 1,161,167
Yavapai County, Arizona Industrial
Development Authority Hospital
Revenue (Yavapai Medical Center
Project) Series A 6.00% 8/1/33 1,000,000 1,061,320
-----------
13,245,831
-----------
Investor Owned Utilities Revenue Bonds - 11.64%
Brazos River Authority Texas Pollution
Revenue (TXU Energy Co. Project)
Series B 6.30% 7/1/32 (AMT) 1,000,000 1,078,710
oForsyth, Montana Pollution Control
Revenue (Portland General Project)
Series A 5.20% 5/1/33 1,000,000 1,056,650
oMaricopa County, Arizona Pollution
Control Corporation Revenue
(El Paso Electric Co. Project)
Series A 6.375% 8/1/15 1,250,000 1,267,950
Midland County, Michigan Economic
Development Subordinate Limited
Obligation (Midland Congeneration
Project) Series A 6.875% 7/23/09 (AMT) 1,950,000 2,019,167
Mississippi Business Finance Corporation
Pollution Control Revenue (System
Energy Resources, Inc. Project)
5.90% 5/1/22 900,000 910,962
oPennsylvania Economic Development
Financing (Reliant Energy) Series B
6.75% 12/1/36 (AMT) 1,000,000 1,069,970
Petersburg, Indiana Pollution Control
Revenue (Indianapolis Power & Light
Co. Project) 6.375% 11/1/29 (AMT) 1,000,000 1,054,590
West Feliciana Parish, Louisiana Pollution
Control Revenue (Gulf States Utilities Co.
Project) Series A 7.50% 5/1/15 1,000,000 1,009,410
-----------
9,467,409
-----------
Miscellaneous Revenue Bonds - 1.07%
Lowry, Colorado Economic Redevelopment
Authority Revenue Series A
(Private Placement) 7.30% 12/1/10 500,000 520,535
17
STATEMENTS DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Miscellaneous Revenue Bonds (continued)
Westminster, Colorado Shaw Heights
Special Improvement District
Series A 7.50% 12/1/07 $ 350,000 $ 353,644
----------
874,179
----------
Multifamily Housing Revenue Bonds - 1.22%
District Columbia Housing Finance Agency
(Henson Ridge) Series E 5.10% 6/1/37
(FHA) (AMT) 1,000,000 989,140
----------
989,140
----------
Municipal Lease Revenue Bonds - 5.18%
Dauphin County, Pennsylvania General
Authority (Riverfront Office & Parking
Project) Series A 5.75% 1/1/10 1,875,000 1,851,900
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series B 5.50% 6/1/43 1,500,000 1,602,930
Missouri State Development Finance Board
Infrastructure Facilities Revenue (Branson
Landing Project) Series A 5.50% 12/1/24 720,000 757,260
----------
4,212,090
----------
Political Subdivision General Obligation Bonds - 0.50%
Illinois State Development Finance
Authority East St. Louis Debt Restructure
Revenue 7.375% 11/15/11 400,000 409,768
---------
409,768
---------
*Pre-Refunded Bonds - 5.39%
Illinois State Development Finance Authority
(Harrisburg Medical Center Project)
7.20% 3/1/07-06
7.02% 3/1/08-06 800,000 811,904
Mississippi Development Bank Special
Obligation (Madison County Hospital
Project) 6.40% 7/1/29-09 1,585,000 1,826,063
Savannah, Georgia Economic Development
Authority Revenue (College of Art &
Design Project) 6.50% 10/1/13-09 1,000,000 1,150,400
Volusia County, Florida Industrial
Development Authority Mortgage
Revenue (Bishops Glen Retirement
Health Facilities Project)
7.50% 11/1/16-06 555,000 601,725
---------
4,390,092
---------
School District General Obligation Bonds - 1.26%
Laredo, Texas Independent School District
Series B 5.00% 8/1/29 (AMBAC) 1,000,000 1,023,390
---------
1,023,390
---------
Tax Increment/Special Assessment Bonds - 3.43%
Chicago, Illinois Tax Increment Allocation
(Chatham Ridge Project) 5.95% 12/15/12 750,000 764,903
Midtown Miami, Florida Community
Development District Special
6.50% 5/1/37 1,000,000 1,042,300
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Tax Increment/Special Assessment Bonds (continued)
St. Joseph, Missouri Industrial
Development Authority
(Shoppes at North Village Project)
Series A 5.375% 11/1/24 $ 1,000,000 $ 984,410
-----------
2,791,613
-----------
TOTAL MUNICIPAL BONDS (cost $76,935,264) 79,280,193
-----------
TOTAL MARKET VALUE OF SECURITIES - 97.44%
(cost $76,935,264) 79,280,193
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 2.56% 2,083,360
-----------
NET ASSETS APPLICABLE TO 7,973,438
SHARES OUTSTANDING - 100.00% $81,363,553
===========
Net Asset Value - Delaware National High-Yield Municipal
Bond Fund Class A ($62,237,965 / 6,102,955 Shares) $10.20
------
Net Asset Value - Delaware National High-Yield Municipal
Bond Fund Class B ($14,061,952 / 1,375,744 Shares) $10.22
------
Net Asset Value - Delaware National High-Yield Municipal
Bond Fund Class C ($5,063,636 / 494,739 Shares) $10.23
-------
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005:
Shares of beneficial interest
(unlimited authorization - no par) $84,773,153
Distributions in excess of net investment income (4,104)
Accumulated net realized loss on investments (5,750,425)
Net unrealized appreciation of investments 2,344,929
-----------
Total net assets $81,363,553
===========
SUMMARY OF ABBREVIATIONS:
AMT - Subject to Alternative Minimum Tax
AMBAC - Insured by the AMBAC Assurance Company
FHA - Insured by the Federal Housing Administration
++Non-income producing security for the period ended February 28, 2005. Security
is currently in default.
*Pre-Refunded Bonds are municipals that are generally backed or secured by
U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed
by the year in which the bond is pre-refunded.
oVariable Rate Notes. The interest rate shown is the rate as of February 28,
2005.
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
Net asset value Class A (A) $10.20
Sales charge (4.50%) (B) 0.48
------
Offering price $10.68
======
(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
18
STATEMENT DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
OF ASSETS AND LIABILITIES February 28, 2005 (Unaudited)
ASSETS:
Investments at market $79,280,193
Cash 2,727,072
Receivables for securities sold 1,036,940
Subscriptions receivable 289,181
Interest receivable 1,205,988
-----------
Total assets 84,539,374
-----------
LIABILITIES:
Payable for securities purchased 3,014,294
Liquidations payable 15,795
Distributions payable 58,491
Management fees payable 23,914
Other accrued expenses 63,327
-----------
Total liabilities 3,175,821
-----------
TOTAL NET ASSETS $81,363,553
-----------
INVESTMENTS AT COST $76,935,264
-----------
See accompanying notes
19
STATEMENTS DELAWARE NATIONAL TAX-FREE FUNDS
OF OPERATIONS Six Months Ended February 28, 2005 (Unaudited)
Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free USA National High-Yield
USA Fund Insured Fund Intermediate Fund Municipal Bond Fund
INVESTMENT INCOME:
Interest $12,832,403 $1,483,614 $2,329,672 $2,289,148
----------- ---------- ---------- ----------
EXPENSES:
Management fees 1,304,838 154,604 267,309 210,364
Distribution expenses - Class A 512,535 61,326 125,196 71,784
Distribution expenses - Class B 100,591 32,368 18,439 71,307
Distribution expenses - Class C 28,856 10,519 97,844 24,303
Dividend disbursing and transfer agent fees
and expenses 154,713 17,998 85,875 27,366
Reports and statements to shareholders 94,824 10,226 18,885 10,673
Accounting and administration expenses 78,920 10,313 17,763 12,719
Legal and professional fees 46,577 6,237 10,973 13,949
Registration fees 25,161 15,990 22,534 10,071
Custodian fees 15,333 2,064 3,758 2,407
Trustees' fees 12,752 1,665 2,845 2,012
Pricing fees 2,216 823 1,725 2,512
Other 7,035 891 1,233 21
----------- ---------- ---------- ----------
2,384,351 325,024 674,379 459,488
Less expenses absorbed or waived (232,278) (18,977) (100,644) (29,031)
Less waived distribution expenses -- Class A -- -- (62,598) --
Less expense paid indirectly (12,040) (1,585) (2,745) (1,518)
----------- ---------- ---------- ----------
Total expenses 2,140,033 304,462 508,392 428,939
----------- ---------- ---------- ----------
NET INVESTMENT INCOME 10,692,370 1,179,152 1,821,280 1,860,209
----------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 433,855 220,621 69,991 124,761
Net change in unrealized appreciation/depreciation
of investments 5,732,562 247,172 717,735 1,313,414
----------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 6,166,417 467,793 787,726 1,438,175
----------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $16,858,787 $1,646,945 $2,609,006 $3,298,384
=========== ========== ========== ==========
See accompanying notes
20
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
2/28/05 8/31/04 2/28/05 8/31/04
(Unaudited) (Unaudited)
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 10,692,370 $ 23,010,855 $ 1,179,152 $ 2,702,112
Net realized gain on investments 433,855 375,000 220,621 668,371
Net change in unrealized appreciation/depreciation
of investments 5,732,562 12,280,683 247,172 763,635
------------ ------------ ----------- -----------
Net increase in net assets resulting from operations 16,858,787 35,666,538 1,646,945 4,134,118
------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (10,195,852) (21,714,746) (1,044,887) (2,399,145)
Class B (378,941) (1,066,585) (101,361) (240,793)
Class C (108,577) (229,524) (32,904) (62,174)
Net realized gain on investments:
Class A -- -- (105,930) --
Class B -- -- (13,185) --
Class C -- -- (4,364) --
------------ ------------ ----------- -----------
(10,683,370) (23,010,855) (1,302,631) (2,702,112)
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 8,749,668 28,738,384 1,542,516 2,654,253
Class B 278,594 1,047,025 56,095 966,911
Class C 594,795 1,144,768 253,095 563,665
Net asset value of shares issued upon reinvestment of
dividends and distributions:
Class A 5,417,303 11,673,132 648,704 1,325,637
Class B 211,793 585,568 66,607 139,876
Class C 87,735 183,313 18,689 31,760
------------ ------------ ----------- -----------
15,339,888 43,372,190 2,585,706 5,682,102
------------ ------------ ----------- -----------
Cost of shares repurchased:
Class A (24,858,399) (56,907,009) (3,346,920) (8,473,975)
Class B (4,240,661) (11,044,588) (621,792) (2,141,982)
Class C (486,673) (1,181,389) (141,127) (75,210)
------------ ------------ ----------- -----------
(29,585,733) (69,132,986) (4,109,839) (10,691,167)
------------ ------------ ----------- -----------
Decrease in net assets derived from capital share
transactions (14,245,845) (25,760,796) (1,524,133) (5,009,065)
------------ ------------ ----------- -----------
NET DECREASE IN NET ASSETS (8,070,428) (13,105,113) (1,179,819) (3,577,059)
NET ASSETS:
Beginning of period 484,372,255 497,477,368 63,115,392 66,692,451
------------ ------------ ----------- -----------
End of period(1) $476,301,827 $484,372,255 $61,935,573 $63,115,392
============ ============ ============ ===========
(1)Distributions in excess of net investment income $ (12,071) $ (12,071) $ (1,790) $ (1,790)
============ ============ ============ ===========
See accompanying notes
21
STATEMENTS DELAWARE NATIONAL TAX-FREE FUNDS
OF CHANGES IN NET ASSETS (CONTINUED)
Delaware Tax-Free Delaware National High-Yield
USA Intermediate Fund Municipal Bond Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
2/28/05 8/31/04 2/28/05 8/31/04
(Unaudited) (Unaudited)
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,821,280 $ 3,191,082 $ 1,860,209 $ 3,873,703
Net realized gain on investments 69,991 9,040 124,761 156,218
Net change in unrealized appreciation/depreciation
of investments 717,735 2,261,985 1,313,414 2,120,542
------------ ------------ ----------- -----------
Net increase in net assets resulting from operations 2,609,006 5,462,107 3,298,384 6,150,463
------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (1,501,693) (2,607,537) (1,447,700) (2,992,760)
Class B (50,679) (117,263) (305,441) (668,880)
Class C (268,908) (466,282) (103,890) (206,085)
------------ ------------ ----------- -----------
(1,821,280) (3,191,082) (1,857,031) (3,867,725)
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 22,826,758 48,901,601 6,833,848 7,733,793
Class B 207,977 806,273 263,795 690,784
Class C 2,833,061 10,526,986 809,454 687,623
Net asset value of shares issued upon reinvestment of
dividends and distributions:
Class A 1,089,500 1,857,428 824,427 1,525,650
Class B 36,532 73,821 142,537 312,081
Class C 124,996 228,547 69,662 137,511
------------ ------------ ----------- -----------
27,118,824 62,394,656 8,943,723 11,087,442
------------ ------------ ----------- -----------
Cost of shares repurchased:
Class A (9,089,919) (26,542,632) (3,191,744) (14,093,525)
Class B (349,174) (1,814,125) (1,152,581) (3,404,857)
Class C (1,637,374) (2,476,487) (707,544) (1,487,741)
------------ ------------ ----------- -----------
(11,076,467) (30,833,244) (5,051,869) (18,986,123)
------------ ------------ ----------- -----------
Increase (decrease) in net assets derived from capital share
transactions 16,042,3573 1,561,412 3,891,854 (7,898,681)
------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 16,830,083 33,832,437 5,333,207 (5,615,943)
NET ASSETS:
Beginning of period 100,391,838 66,559,401 76,030,346 81,646,289
------------ ------------ ----------- -----------
End of period(1) $117,221,921 $100,391,838 $81,363,553 $76,030,346
============ ============ =========== ===========
(1)Distributions in excess of net investment income $ -- $ -- $ (4,104) $ (4,104)
============ ============ =========== ===========
See accompanying notes
22
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.460 $11.170 $11.280 $11.320 $10.830 $10.890
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.260 0.538 0.537 0.566 0.582 0.587
Net realized and unrealized gain (loss) on investments 0.150 0.290 (0.110) (0.040) 0.490 (0.060)
------- ------- ------- ------- ------- -------
Total from investment operations 0.410 0.828 0.427 0.526 1.072 0.527
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.260) (0.538) (0.537) (0.566) (0.582) (0.587)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.260) (0.538) (0.537) (0.566) (0.582) (0.587)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.610 $11.460 $11.170 $11.280 $11.320 $10.830
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 3.60% 7.54% 3.84% 4.85% 10.19% 5.11%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $451,337 $456,192 $460,917 $495,731 $495,597 $421,136
Ratio of expenses to average net assets 0.86% 0.87% 0.87% 0.87% 0.88% 0.97%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 0.96% 0.93% 0.97% 0.98% 0.89% 0.97%
Ratio of net investment income to average net assets 4.54% 4.72% 4.74% 5.08% 5.29% 5.54%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 4.44% 4.66% 4.64% 4.97% 5.28% 5.54%
Portfolio turnover 19% 32% 96% 99% 103% 76%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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) 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.
See accompanying notes
23
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.460 $11.170 $11.280 $11.320 $10.830 $10.890
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.216 0.449 0.449 0.479 0.494 0.502
Net realized and unrealized gain (loss) on investments 0.150 0.290 (0.110) (0.040) 0.490 (0.060)
------- ------- ------- ------- ------- -------
Total from investment operations 0.366 0.739 0.339 0.439 0.984 0.442
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.216) (0.449) (0.449) (0.479) (0.494) (0.502)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.216) (0.449) (0.449) (0.479) (0.494) (0.502)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.610 $11.460 $11.170 $11.280 $11.320 $10.830
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 3.21% 6.71% 3.03% 4.04% 9.32% 4.27%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $18,909 $22,396 $31,052 $37,448 $39,317 $26,059
Ratio of expenses to average net assets 1.63% 1.65% 1.65% 1.65% 1.68% 1.77%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.73% 1.71% 1.75% 1.76% 1.69% 1.77%
Ratio of net investment income to average net assets 3.77% 3.94% 3.96% 4.30% 4.49% 4.74%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.67% 3.88% 3.86% 4.19% 4.48% 4.74%
Portfolio turnover 19% 32% 96% 99% 103% 76%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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) 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.
See accompanying notes
24
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.460 $11.170 $11.280 $11.320 $10.830 $10.890
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.216 0.449 0.449 0.479 0.494 0.502
Net realized and unrealized gain (loss) on investments 0.150 0.290 (0.110) (0.040) 0.490 (0.060)
------- ------- ------- ------- ------- -------
Total from investment operations 0.366 0.739 0.339 0.439 0.984 0.442
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.216) (0.449) (0.449) (0.479) (0.494) (0.502)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.216) (0.449) (0.449) (0.479) (0.494) (0.502)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.610 $11.460 $11.170 $11.280 $11.320 $10.830
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 3.21% 6.71% 3.03% 4.04% 9.32% 4.27%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $6,056 $5,784 $5,508 $5,979 $6,457 $1,851
Ratio of expenses to average net assets 1.63% 1.65% 1.65% 1.65% 1.68% 1.77%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.73% 1.71% 1.75% 1.76% 1.69% 1.77%
Ratio of net investment income to average net assets 3.77% 3.94% 3.96% 4.30% 4.49% 4.74%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.67% 3.88% 3.86% 4.19% 4.48% 4.74%
Portfolio turnover 19% 32% 96% 99% 103% 76%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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) 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.
See accompanying notes
25
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.110 $10.880 $11.020 $10.950 $10.390 $10.360
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.216 0.471 0.473 0.487 0.483 0.513
Net realized and unrealized gain (loss) on investments 0.092 0.230 (0.140) 0.070 0.560 0.030
------- ------- ------- ------- ------- -------
Total from investment operations 0.308 0.701 0.333 0.557 1.043 0.543
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.216) (0.471) (0.473) (0.487) (0.483) (0.513)
Net realized gain on investments (0.022) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.238) (0.471) (0.473) (0.487) (0.483) (0.513)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.180 $11.110 $10.880 $11.020 $10.950 $10.390
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.79% 6.55% 3.02% 5.27% 10.30% 5.50%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $53,527 $54,384 $57,630 $60,365 $62,397 $61,722
Ratio of expenses to average net assets 0.88% 0.93% 0.92% 0.92% 1.02% 0.95%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 0.94% 0.93% 0.92% 0.92% 1.02% 0.95%
Ratio of net investment income to average net assets 3.91% 4.26% 4.25% 4.51% 4.58% 5.07%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.85% 4.26% 4.25% 4.51% 4.58% 5.07%
Portfolio turnover 24% 54% 109% 136% 113% 117%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of 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.
See accompanying notes
26
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.110 $10.880 $11.020 $10.950 $10.390 $10.360
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.173 0.385 0.386 0.403 0.399 0.432
Net realized and unrealized gain (loss) on investments 0.092 0.230 (0.140) 0.070 0.560 0.030
------- ------- ------- ------- ------- -------
Total from investment operations 0.265 0.615 0.246 0.473 0.959 0.462
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.173) (0.385) (0.386) (0.403) (0.399) (0.432)
Net realized gain on investments (0.022) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.195) (0.385) (0.386) (0.403) (0.399) (0.432)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.180 $11.110 $10.880 $11.020 $10.950 $10.390
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.40% 5.72% 2.22% 4.46% 9.43% 4.66%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $6,265 $6,728 $7,614 $7,677 $7,506 $4,990
Ratio of expenses to average net assets 1.65% 1.71% 1.70% 1.70% 1.82% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.71% 1.71% 1.70% 1.70% 1.82% 1.75%
Ratio of net investment income to average net assets 3.14% 3.48% 3.47% 3.73% 3.78% 4.27%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.08% 3.48% 3.47% 3.73% 3.78% 4.27%
Portfolio turnover 24% 54% 109% 136% 113% 117%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of 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.
See accompanying notes
27
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.110 $10.880 $11.020 $10.950 $10.390 $10.360
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.173 0.385 0.386 0.403 0.399 0.432
Net realized and unrealized gain (loss) on investments 0.092 0.230 (0.140) 0.070 0.560 0.030
------- ------- ------- ------- ------- -------
Total from investment operations 0.265 0.615 0.246 0.473 0.959 0.462
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.173) (0.385) (0.386) (0.403) (0.399) (0.432)
Net realized gain on investments (0.022) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.195) (0.385) (0.386) (0.403) (0.399) (0.432)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.180 $11.110 $10.880 $11.020 $10.950 $10.390
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.40% 5.72% 2.22% 4.46% 9.42% 4.66%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $2,144 $2,003 $1,448 $1,488 $1,588 $813
Ratio of expenses to average net assets 1.65% 1.71% 1.70% 1.70% 1.82% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.71% 1.71% 1.70% 1.70% 1.82% 1.75%
Ratio of net investment income to average net assets 3.14% 3.48% 3.47% 3.73% 3.78% 4.27%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.08% 3.48% 3.47% 3.73% 3.78% 4.27%
Portfolio turnover 24% 54% 109% 136% 113% 117%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of 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.
See accompanying notes
28
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.390 $11.010 $11.020 $10.890 $10.360 $10.270
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.204 0.419 0.435 0.462 0.480 0.474
Net realized and unrealized gain (loss) on investments 0.080 0.380 (0.010) 0.130 0.530 0.090
------- ------- ------- ------- ------- -------
Total from investment operations 0.284 0.799 0.425 0.592 1.010 0.564
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.204) (0.419) (0.435) (0.462) (0.480) (0.474)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.204) (0.419) (0.435) (0.462) (0.480) (0.474)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.470 $11.390 $11.010 $11.020 $10.890 $10.360
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.51% 7.36% 3.89% 5.63% 10.01% 5.69%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $92,894 $77,448 $51,479 $26,075 $19,471 $20,646
Ratio of expenses to average net assets(3) 0.78% 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.11% 1.09% 1.15% 0.94% 1.06% 0.95%
Ratio of net investment income to average net assets 3.58% 3.70% 3.85% 4.28% 4.55% 4.65%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.25% 3.41% 3.50% 4.14% 4.29% 4.50%
Portfolio turnover 20% 27% 130% 195% 231% 199%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of 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. Performance would have been lower had the expense limitation
not been in effect.
(3) Ratio for the year ended August 31, 2004, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 0.82%.
See accompanying notes
29
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.380 $11.010 $11.020 $10.890 $10.360 $10.270
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.156 0.323 0.340 0.371 0.391 0.388
Net realized and unrealized gain (loss) on investments 0.090 0.370 (0.010) 0.130 0.530 0.090
------- ------- ------- ------- ------- -------
Total from investment operations 0.246 0.693 0.330 0.501 0.921 0.478
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.156) (0.323) (0.340) (0.371) (0.391) (0.388)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.156) (0.323) (0.340) (0.371) (0.391) (0.388)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.470 $11.380 $11.010 $11.020 $10.890 $10.360
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.17% 6.36% 3.02% 4.74% 9.08% 4.80%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $3,667 $3,743 $4,538 $3,384 $2,366 $1,751
Ratio of expenses to average net assets(3) 1.63% 1.65% 1.65% 1.65% 1.65% 1.65%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.81% 1.79% 1.87% 1.79% 1.91% 1.80%
Ratio of net investment income to average net assets 2.73% 2.85% 3.00% 3.43% 3.70% 3.80%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 2.55% 2.71% 2.78% 3.29% 3.44% 3.65%
Portfolio turnover 20% 27% 130% 195% 231% 199%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of 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.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2004, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 1.67%.
See accompanying notes
30
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
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.390 $11.010 $11.020 $10.890 $10.360 $10.270
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.156 0.323 0.340 0.371 0.391 0.388
Net realized and unrealized gain (loss) on investments 0.080 0.380 (0.010) 0.130 0.530 0.090
------- ------- ------- ------- ------- -------
Total from investment operations 0.236 0.703 0.330 0.501 0.921 0.478
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.156) (0.323) (0.340) (0.371) (0.391) (0.388)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.156) (0.323) (0.340) (0.371) (0.391) (0.388)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.470 $11.390 $11.010 $11.020 $10.890 $10.360
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.08% 6.45% 3.02% 4.74% 9.08% 4.80%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $20,661 $19,201 $10,542 $7,291 $3,602 $2,441
Ratio of expenses to average net assets(3) 1.63% 1.65% 1.65% 1.65% 1.65% 1.65%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.81% 1.79% 1.87% 1.79% 1.91% 1.80%
Ratio of net investment income to average net assets 2.73% 2.85% 3.00% 3.43% 3.70% 3.80%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 2.55% 2.71% 2.78% 3.29% 3.44% 3.65%
Portfolio turnover 20% 27% 130% 195% 231% 199%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of 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.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2004, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 1.67%.
See accompanying notes
31
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $10.010 $ 9.730 $9.950 $10.240 $ 9.950 $10.340
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.253 0.496 0.522 0.542 0.556 0.564
Net realized and unrealized gain (loss) on investments 0.190 0.280 (0.219) (0.290) 0.293 (0.393)
------- ------- ------ ------- ------- -------
Total from investment operations 0.443 0.776 0.303 0.252 0.849 0.171
------- ------- ------ ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.253) (0.496) (0.523) (0.542) (0.559) (0.561)
------- ------- ------ ------- ------- -------
Total dividends and distributions (0.253) (0.496) (0.523) (0.542) (0.559) (0.561)
------- ------- ------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.200 $10.010 $9.730 $ 9.950 $10.240 $ 9.950
======= ======= ====== ======= ======= =======
TOTAL RETURN(3) 4.47% 8.13% 3.13% 2.59% 8.81% 1.85%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $62,238 $56,698 $59,829 $64,259 $76,018 $78,207
Ratio of expenses to average net assets 0.93% 1.00% 0.99% 0.96% 0.97% 1.00%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.01% 1.02% 1.05% 1.04% 0.97% 1.21%
Ratio of net investment income to average net assets 5.04% 5.00% 5.30% 5.42% 5.55% 5.71%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 4.96% 4.98% 5.24% 5.34% 5.55% 5.50%
Portfolio turnover 22% 46% 64% 53% 49% 61%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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 an increase in net
investment income per share of less than $0.001, a decrease in net realized
and unrealized gain (loss) per share of less than $0.001, and an increase in
the ratio of net investment income to average net assets of less than 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) 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.
See accompanying notes
32
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $10.030 $ 9.760 $9.980 $10.260 $ 9.980 $10.360
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.216 0.421 0.448 0.467 0.480 0.491
Net realized and unrealized gain (loss) on investments 0.190 0.270 (0.219) (0.281) 0.284 (0.384)
------- ------- ------ ------- ------- -------
Total from investment operations 0.406 0.691 0.229 0.186 0.764 0.107
------- ------- ------ ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.216) (0.421) (0.449) (0.466) (0.484) (0.487)
------- ------- ------ ------- ------- -------
Total dividends and distributions (0.216) (0.421) (0.449) (0.466) (0.484) (0.487)
------- ------- ------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.220 $10.030 $9.760 $ 9.980 $10.260 $ 9.980
======= ======= ====== ======= ======= =======
TOTAL RETURN(3) 4.07% 7.20% 2.36% 1.91% 7.88% 1.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $14,062 $14,534 $16,499 $20,021 $20,277 $18,374
Ratio of expenses to average net assets 1.68% 1.75% 1.74% 1.71% 1.72% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.76% 1.77% 1.80% 1.79% 1.72% 1.96%
Ratio of net investment income to average net assets 4.29% 4.25% 4.55% 4.67% 4.80% 4.96%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 4.21% 4.23% 4.49% 4.59% 4.80% 4.75%
Portfolio turnover 22% 46% 64% 53% 49% 61%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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 an increase in net
investment income per share of less than $0.001, a decrease in net realized
and unrealized gain (loss) per share of less than $0.001, and an increase in
the ratio of net investment income to average net assets of less than 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) 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.
See accompanying notes
33
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $10.040 $ 9.770 $9.990 $10.270 $ 9.990 $10.370
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.216 0.421 0.448 0.467 0.480 0.492
Net realized and unrealized gain (loss) on investments 0.190 0.270 (0.219) (0.281) 0.284 (0.386)
------- ------- ------ ------- ------- -------
Total from investment operations 0.406 0.691 0.229 0.186 0.764 0.106
------- ------- ------ ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.216) (0.421) (0.449) (0.466) (0.484) (0.486)
------- ------- ------ ------- ------- -------
Total dividends and distributions (0.216) (0.421) (0.449) (0.466) (0.484) (0.486)
------- ------- ------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.230 $10.040 $9.770 $ 9.990 $10.270 $ 9.990
======= ======= ====== ======= ======= =======
TOTAL RETURN(3) 4.07% 7.19% 2.35% 1.92% 7.98% 1.08%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $5,064 $4,798 $5,318 $6,405 $7,187 $8,770
Ratio of expenses to average net assets 1.68% 1.75% 1.74% 1.71% 1.72% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.76% 1.77% 1.80% 1.79% 1.72% 1.96%
Ratio of net investment income to average net assets 4.29% 4.25% 4.55% 4.67% 4.80% 4.96%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 4.21% 4.23% 4.49% 4.59% 4.80% 4.75%
Portfolio turnover 22% 46% 64% 53% 49% 61%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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 an increase in net
investment income per share of less than $0.001, a decrease in net realized
and unrealized gain (loss) per share of less than $0.001, and an increase in
the ratio of net investment income to average net assets of less than 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) 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.
See accompanying notes
34
NOTES DELAWARE NATIONAL TAX-FREE FUNDS
TO FINANCIAL STATEMENTS February 28, 2005 (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
(the "Trust") is organized as a Delaware statutory 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 and 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 and 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 U.S. generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. 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. In determining whether market quotations are readily available or fair
valuation will be used, various factors will be taken into consideration, such
as market closures, or with respect to foreign securities, aftermarket trading
or significant events after local market trading (e.g., government actions or
pronouncements, trading volume or volatility on markets, exchanges among
dealers, or news events).
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
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and some 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.
The Funds receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in custodian fees on the Statements of
Operations with the corresponding expense offset shown as "expense paid
indirectly." The amount of this expense for the six months ended February 28,
2005 were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
Earnings credits $12,040 $1,585 $2,745 $1,518
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 Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
On the first $500 million 0.550% 0.500% 0.500% 0.550%
On the next $500 million 0.500% 0.475% 0.475% 0.500%
On the next $1.5 billion 0.450% 0.450% 0.450% 0.450%
In excess of $2.5 billion 0.425% 0.425% 0.425% 0.425%
35
NOTES DELAWARE NATIONAL TAX-FREE FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
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 as shown below.
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
The operating expense limitation
as a percentage of average
daily net assets (per annum) 0.65% 0.75% 0.65% 0.75%
Expiration date 10/31/04 10/31/04 10/31/04 10/31/04
Effective November 1, 2004, the
operating expense limitation
as a percentage of average daily
net assets (per annum) 0.62% 0.67% 0.60% 0.65%
Expiration date 12/29/05 12/29/05 12/29/05 12/29/05
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 and
service fees through December 29, 2005 in order to prevent distribution and
service fees of Class A from exceeding 0.25% of the average daily net assets for
the Delaware Tax-Free USA Fund and Delaware Tax-Free Insured Fund and 0.15% of
the average daily net assets for the Delaware Tax-Free USA Intermediate Fund.
At February 28, 2005, the Funds had liabilities payable to affiliates as
follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
Investment management fee
payable to DMC $130,576 $15,668 $5,937 $23,914
Dividend disbursing, transfer
agent, accounting and
administration fees and
other expenses payable to DSC 38,127 4,681 18,095 6,735
Other expenses payable to DMC
and affiliates* 124,732 21,143 36,542 30,951
*DMC, as part of its administrative services, pays operating expenses on behalf
of each Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax
services, registration fees and trustees' fees.
As provided in the investment management agreement, each Fund bears the cost of
certain legal services expenses, including internal legal services provided to
each Fund by DMC employees. For the six months ended February 28, 2005, each
Fund was charged internal legal services provided by DMC as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
$12,730 $1,723 $3,002 $2,136
For the six months ended February 28, 2005, DDLP earned commissions on sales of
Class A shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
$17,561 $1,820 $11,066 $4,930
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust.
These officers and trustees are paid no compensation by the Funds.
36
NOTES DELAWARE NATIONAL TAX-FREE FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
For the six months ended February 28, 2005, the Funds made purchases and sales
of investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
Purchases $43,473,923 $7,009,074 $27,262,033 $12,227,920
Sales 56,557,207 7,856,230 9,913,244 8,311,765
At February 28, 2005, 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 28, 2005, the cost of investments and
unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
Cost of investments $443,437,194 $57,079,092 $111,143,755 $76,967,253
------------ ----------- ------------ -----------
Aggregate unrealized appreciation $ 33,935,273 $ 4,189,445 $ 4,236,794 $ 3,811,618
Aggregate unrealized depreciation (1,247,774) (3,764) (102,155) (1,498,678)
------------ ----------- ------------ -----------
Net unrealized appreciation $ 32,687,499 $ 4,185,681 $ 4,134,639 $ 2,312,940
============ =========== ============ ===========
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 U.S. generally
accepted accounting principles. Additionally, gains (losses) on net short-term
gains on sales of investment securities are treated as ordinary income for
federal income tax purposes. The tax character of dividends and distributions
paid during the six months ended February 28, 2005 and the year ended August 31,
2004 was as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
SIX MONTHS ENDED 2/28/05*
- -------------------------
Tax-exempt income $10,683,370 $1,179,152 $1,821,280 $1,857,031
Ordinary Income -- 33,676 -- --
Long-term capital gain -- 89,803 -- --
----------- ---------- ---------- ----------
Total $10,683,370 $1,302,631 $1,821,280 $1,857,031
=========== ========== ========== ==========
YEAR ENDED 8/31/04
- ------------------
Tax-exempt income $23,010,855 $2,702,112 $3,191,082 $3,867,725
----------- ---------- ---------- ----------
Total $23,010,855 $2,702,112 $3,191,082 $3,867,725
=========== ========== ========== ==========
*Tax information for the six months ended February 28, 2005 is an estimate and
the tax character of dividends and distributions may be redesignated at the
fiscal year end.
The components of net assets are estimated since the final tax characteristics
cannot be determined until fiscal year end. As of February 28, 2005, the
estimated components of net assets on a tax basis were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
Shares of beneficial interest $454,005,523 $ 57,659,171 $113,594,138 $84,773,153
Distributions in excess of
tax-exempt income (12,071) (1,790) -- (4,104)
Undistributed ordinary income -- 24,518 -- --
Undistributed long-term capital
gain -- 67,993 -- --
Capital loss carryforwards (10,379,124) -- (506,856) (5,718,436)
Unrealized appreciation of
investments 32,687,499 4,185,681 4,134,639 2,312,940
------------ ----------- ------------ -----------
Net assets $476,301,827 $61,935,573 $117,221,921 $81,363,553
============ =========== ============ ===========
37
NOTES DELAWARE NATIONAL TAX-FREE FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
4. DIVIDEND AND DISTRIBUTION INFORMATION (CONTINUED)
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. For the six months ended
February 28, 2005, each Fund recorded an estimate of these differences since the
final tax characteristics cannot be determined until fiscal year end.
Reclassifications are primarily due to tax treatment of market discounts and
premiums on certain debt instruments. Results of operations and net assets were
not affected by these reclassifications.
Delaware Tax-Free Delaware National High-Yield
USA Fund Municipal Bond Fund
----------------- ----------------------------
Undistributed net investment
income $(9,000) $(3,178)
Accumulated realized gain (loss) 9,000 3,178
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Capital loss carryforwards for
each Fund remaining at February 28, 2005 will expire as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
Year of Expiration USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
- ------------------ ----------------- ----------------- --------------------- ----------------------------
2008 $10,791,021 $4,631 $295,023 $ 782,666
2009 318 -- -- 3,025,716
2010 -- -- -- 70,671
2011 -- -- 290,864 997,721
2012 -- -- 5,791 980,742
----------- ------ -------- ----------
Total $10,791,339 $4,631 $591,678 $5,857,516
=========== ====== ======== ==========
For the six months ended February 28, 2005, each Fund had capital gains, which
may be offset by the capital loss carryforwards.
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund Insured Fund USA Intermediate Fund Municipal Bond Fund
----------------- ----------------- --------------------- ----------------------------
$412,215 $72,624 $84,822 $139,080
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
2/28/05 8/31/04 2/28/05 8/31/04
Shares sold:
Class A 757,881 2,542,308 137,169 240,752
Class B 23,976 91,678 5,023 86,796
Class C 51,251 100,047 22,499 51,075
Shares issued upon reinvestment
of dividends and distributions:
Class A 468,106 1,022,075 58,012 119,786
Class B 18,304 51,247 5,957 12,642
Class C 7,581 16,055 1,672 2,871
---------- ---------- -------- --------
1,327,099 3,823,410 230,332 513,922
---------- ---------- -------- --------
Shares repurchased:
Class A (2,154,040) (5,005,013) (299,245) (765,235)
Class B (367,790) (967,610) (55,800) (194,050)
Class C (41,932) (104,261) (12,635) (6,844)
---------- ---------- -------- --------
(2,563,762) (6,076,884) (367,680) (966,129)
---------- ---------- -------- --------
Net decrease (1,236,663) (2,253,474) (137,348) (452,207)
========== ========== ======== ========
38
NOTES DELAWARE NATIONAL TAX-FREE FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES (CONTINUED)
Delaware Tax-Free Delaware National High-Yield
USA Intermediate Fund Municipal Bond Fund
--------------------- ----------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
2/28/05 8/31/04 2/28/05 8/31/04
Shares sold:
Class A 1,992,263 4,337,621 671,388 779,157
Class B 18,135 71,772 25,988 69,306
Class C 246,563 929,113 79,562 68,954
Shares issued upon reinvestment of
dividends and distributions:
Class A 94,941 164,775 81,322 153,547
Class B 3,184 6,543 14,027 31,343
Class C 10,893 20,268 6,844 13,793
--------- ---------- -------- ----------
2,365,979 5,530,092 879,131 1,116,100
--------- ---------- -------- ----------
Shares repurchased:
Class A (792,622) (2,375,615) (315,729) (1,412,735)
Class B (30,457) (161,693) (113,409) (342,565)
Class C (142,855) (220,488) (69,443) (149,447)
--------- ---------- -------- ----------
(965,934) (2,757,796) (498,581) (1,904,747)
--------- ---------- -------- ----------
Net increase (decrease) 1,400,045 2,772,296 380,550 (788,647)
========= ========== ======== ==========
For the six months ended February 28, 2005 and the year ended August 31, 2004,
the following shares and values 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 on the prior page and above and the Statements of
Changes in Net Assets.
Six Months Ended Year Ended
2/28/05 8/31/04
-------------------------------- --------------------------------
Class B Class A Class B Class A
shares shares Value shares shares Value
------ ------ ----- ------ ------ -----
Delaware Tax-Free USA Fund 212,516 212,424 $2,448,192 407,411 407,411 $4,651,731
Delaware Tax-Free Insured Fund 4,216 4,216 47,049 42,758 42,758 472,881
Delaware Tax-Free USA Intermediate Fund 3,365 3,365 38,464 20,911 20,911 235,413
Delaware National High-Yield Municipal Bond Fund 10,780 10,802 108,803 972 975 9,691
6. PROXY RESULTS
The shareholders of Delaware Group Tax-Free Funds and Voyageur Mutual Funds
(each, the "Trust") voted on the following proposals at the special meeting of
shareholders on March 23, 2005 or as adjourned. The description of each proposal
and number of shares voted are as follows:
1. To elect a Board of Trustees for each of the Trusts.
Delaware Group Tax-Free Funds Voyageur Mutual Funds
--------------------------------------- --------------------------------------
Shares Voted Shares Voted
Shares Voted For Withheld Authority Shares Voted For Withheld Authority
- ----------------------------------------------------------------------------------------------------------------
Thomas L. Bennett 37,979,036.513 1,048,233.841 20,895,278.6563 60,093.724
- ----------------------------------------------------------------------------------------------------------------
Jude T. Driscoll 38,000,153.644 1,027,116.713 20,914,639.6563 40,732.724
- ----------------------------------------------------------------------------------------------------------------
John A. Fry 38,003.289.743 1,023,980.614 20,894,793.6563 60,578.724
- ----------------------------------------------------------------------------------------------------------------
Anthony D. Knerr 37,979,818.032 1,037,452.325 20,894,488.6563 60,883.724
- ----------------------------------------------------------------------------------------------------------------
Lucinda S. Landreth 37,961,415.917 1,065,854.440 20,879,031.6563 76,340.724
- ----------------------------------------------------------------------------------------------------------------
Ann R. Leven 37,961,430.648 1,065,839.709 20,857,874.6563 97,497.724
- ----------------------------------------------------------------------------------------------------------------
Thomas F. Madison 37,996,204.955 1,031,065.402 20,905,985,6563 49,386.724
- ----------------------------------------------------------------------------------------------------------------
Janet L. Yeomans 37,983,172.594 1,044,097.763 20,859,670.6563 95,701.724
- ----------------------------------------------------------------------------------------------------------------
J. Richard Zecher 37,951,191.521 1,076,078.836 20,914,639.6563 40,732.724
- ----------------------------------------------------------------------------------------------------------------
39
NOTES DELAWARE NATIONAL TAX-FREE FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
6. PROXY RESULTS (CONTINUED)
2. To approve the use of a "manager of managers" structure whereby the
investment manager of the funds of each Trust will be able to hire and replace
subadvisers without shareholder approval.
FOR AGAINST ABSTAIN
--- ------- -------
Delaware Tax-Free Insured Fund 2,901,910.367 203,102.434 188,821.454
Delaware Tax-Free USA Fund 22,052,517.324 1,738,327.316 1,287,024.842
Delaware Tax-Free USA Intermediate Fund 3,874,386.962 210,011.168 129,857.255
Delaware National High-Yield Municipal Bond Fund 3,832,827.883 181,124.111 106,194.831
7. LINE OF CREDIT
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $183,100,000 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 28, 2005 or at any time during
the period.
8. 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 & Poor's
Ratings Group and/or Ba or lower by Moody's Investors Service, 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.
The Funds may invest in inverse floating rate securities ("inverse floaters"), a
type of derivative tax-exempt obligation with floating or variable interest
rates that move in the opposite direction of short-term interest rates, usually
at an accelerated speed. Consequently, the market values of inverse floaters
will generally be more volatile than other tax-exempt investments. Such
securities are denoted on the Statements of Net Assets.
9. CONTRACTUAL OBLIGATIONS
The Funds enter into contracts in the normal course of business that contain a
variety of indemnifications. The Funds' maximum exposure under these
arrangements is unknown. However, the Funds have not had prior claims or losses
pursuant to these contracts. Management has reviewed each Fund's existing
contracts and expects the risk of loss to be remote.
40
Delaware
Investments(R)
- -----------------------------------
A member of Lincoln Financial Group
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 that 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 MICHAEL P. BISHOF INVESTMENT MANAGER
Chairman Senior 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 NATIONAL DISTRIBUTOR
THOMAS L. BENNETT Delaware Distributors, L.P.
Private Investor RICHELLE S. MAESTRO Philadelphia, PA
Rosemont, PA Executive Vice President,
Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND
JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT
President Philadelphia, PA Delaware Service Company, Inc.
Franklin & Marshall College 2005 Market Street
Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094
Senior Vice President and Treasurer
ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS
Managing Director Philadelphia, PA 800 523-1918
Anthony Knerr & Associates
New York, NY FOR SECURITIES DEALERS AND FINANCIAL
INSTITUTIONS REPRESENTATIVES ONLY
LUCINDA S. LANDRETH 800 362-7500
Former Chief Investment Officer
Assurant, Inc. WEB SITE
Philadelphia, PA www.delawareinvestments.com
ANN R. LEVEN
Former Treasurer/Chief Fiscal Officer
National Gallery of Art
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
J. RICHARD ZECHER
Founder
Investor Analytics
Scottsdale, AZ
- --------------------------------------------------------------------------------
Each Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and
procedures that each 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 each Fund's Web site at
http://www.delawareinvestments.com; and (iii) on the Commission's Web site at
http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the
Commission's Public Reference Room in Washington, DC; information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Information (if any) regarding how each Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through each Fund's Web site at
http://www.delawareinvestments.com; and (ii) on the Commission's Web site at
http://www.sec.gov.
- --------------------------------------------------------------------------------
(9274) Printed in the USA
SA-011 [2/05] IVES 4/05 J10084
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. Schedule of Investments
Included as part of report to shareholders filed under Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. 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 second fiscal quarter of the
period covered by the report to stockholders included herein (i.e., the
registrant's second fiscal quarter) that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
Item 12. 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: 4/28/05
------------------------
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: 4/28/05
------------------------
MICHAEL P. BISHOF
- -------------------------------
By: Michael P. Bishof
------------------------
Title: Chief Financial Officer
Date: 4/28/05
------------------------