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:
David F. Connor, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: August 31
Date of reporting period: February 28, 2006
The Registrant's shareholder reports are combined with the shareholder reports
of other investment company registrants. This Form N-CSR pertains to the
Delaware Tax-Free USA Fund, Delaware Tax-Free USA Intermediate Fund and Delaware
Tax-Free Insured Fund of the Registrant and the Delaware National High-Yield
Municipal Bond Fund, a series of Voyageur Mutual Funds, information on which is
included in the following shareholder report.
1
Item 1.
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[DELAWARE INVESTMENTS(R) LOGO]
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[GRAPHIC]
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FIXED INCOME APRIL 28, 2006
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DELAWARE TAX-FREE USA FUND
DELAWARE TAX-FREE
INSURED FUND*
DELAWARE TAX-FREE USA
INTERMEDIATE FUND
DELAWARE NATIONAL
HIGH-YIELD MUNICIPAL
BOND FUND
*Closed to new investors
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Get shareholder reports
and prospectuses online
instead of in the mail. Visit
www.delawareinvestments.com/edelivery.
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This brochure accompanies a semiannual report for
the information of Delaware National Tax-Free
Funds shareholders, but it may be used with
prospective investors when preceded or accompanied
by a current prospectus for Delaware National
Tax-Free Funds. You should consider the investment
objectives, risks, charges, and expenses of the
investment carefully before investing. The
Delaware National Tax-Free Funds prospectus
contains this and other important information
about the Funds. Prospectuses for all funds in the
Delaware Investments(R) Family of Funds are
available from your financial advisor, online at
www.delawareinvestments.com, or by phone at 800
523-1918. Please read the prospectus carefully
before you invest or send money. The figures in
the semiannual report for Delaware National
Tax-Free Funds represent past results, which are
not a guarantee of future results. The return and
principal value of an investment in the Funds will
fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
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[GRAPHIC]
DELAWARE INVESTMENTS(R)
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POWERED BY RESEARCH(R) EXPERIENCE DELAWARE INVESTMENTS
OUR MISSION:
Delaware Investments is committed to the pursuit
of consistently superior asset management and
unparalleled client service. We strongly believe
in our investment process, the consistent results
we seek to deliver, and the value we can add for
our clients.
OUR HISTORY:
Delaware Investments traces its roots to an
investment advisory firm founded in 1929. We
quickly learned how important consistent
performance was to our clients, particularly in
tough times, and continued to apply those lessons
when we launched our first mutual fund in 1938.
Delaware has managed money through 75 years of
market cycles, and our dedication to consistent
performance over the long term endures to this
day.
OUR PRINCIPLES:
CLIENTS FIRST
We believe that placing clients' interests ahead
of our own is always the right thing to do. We
offer a focused lineup of products that is aligned
with our core asset management competencies rather
than with popular trends. Some of the largest
pension plans, endowments, and foundations have
entrusted their investments to Delaware
Investments. Our institutional heritage and
expertise serve us well when crafting mutual funds
and managed account portfolios for individual
investors.
PASSION FOR PERFORMANCE
Our results-oriented culture puts investors first
and begins with our passion for performance. We
seek to deliver consistently superior returns over
the long term, and to do it in every asset class.
This means we look at three-year and five-year
track records as starting points in seeking to
deliver long-term outperformance.
PEOPLE WE'RE PROUD OF
We recognize that smart, accomplished people are a
competitive advantage. Our research analysts add
value to our investors' portfolios, just as our
award-winning operations team adds value for
shareholders. At Delaware Investments, we are more
than just committed -- we are passionate about our
mission. That culture of passion flows through
everything we do.
POWERED BY RESEARCH
Whether it's credit research on a corporate bond
or a company visit for a small-cap consumer growth
name, our deep teams of sector experts eat, sleep,
and breathe fundamental research. We believe that
fundamental research is the key to achieving
consistently superior returns over the long term.
STRENGTH IN PARTNERSHIP
Delaware Investments is the financial engine of
the Lincoln Financial Group(R) family. Like our
parent company, we understand the power of
partnerships in a knowledge-based industry. We
collaborate with a wide variety of financial
services organizations to provide the very best in
investment products and services.
(C)2006 Delaware Distributors, L.P.
Delaware Investments is the marketing name for
Delaware Management Holdings, Inc. and its
subsidiaries.
Lincoln Financial Group is the marketing name for
Lincoln National Corporation and its affiliates.
THIS PAGE IS NOT PART OF THE ANNUAL REPORT.
ii
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DEAR SHAREHOLDER: March 7, 2006
In the six months ended February 28, 2006, investors received mixed signals
about the direction of the U.S. economy, which for much of the period was
absorbing the effects of hurricanes Rita and Katrina. The new U.S. Federal
Reserve Chairman, Ben Bernanke, stepped in during a time of continuing
deliberations by the fed's Open Market Committee about monetary policy, as it
determines whether further increases in interest rates will be necessary to curb
inflation. On a positive note, investors have generally remained optimistic
despite the circumspect interest rate hikes. The outlook on Wall Street has
remained cautiously optimistic, while at the same time there has been a
continued interest in bond funds, as many investors seek to diversify.
Investors made municipal bonds -- with their tax-advantaged status -- a $1.9
trillion market in 2005 (source: Bloomberg). Generally speaking, municipal bonds
and other fixed income securities held up better than might be expected in a
challenging interest rate environment, although the Lehman Brothers Municipal
Bond Index returned 0.99% for the six months ended February 28, 2006 (source:
Lipper).
Also of note during the period, the U.S. Treasury on February 9, 2006 conducted
its first auction of 30-year bonds in four years. This sale of $14 billion in
30-year bonds is likely to affect longer-term municipal bond yields over time,
although the net long-term effect was still unclear by fiscal period end.
As you look ahead to the rest of 2006, I encourage you to work with your
financial advisor to consider building a portfolio that's diversified across the
major investment asset classes -- stocks, bonds, and short-term reserves --
keeping the allocations appropriate for your personal circumstances and risk
tolerance. It is our belief at Delaware Investments that a long-term perspective
is always healthy, and we remind you that municipal bonds are typically held
over the long term for their tax-free income. Like other fixed income
securities, municipal bonds can also serve to balance investments in stocks,
which are historically more volatile.
If you are interested in acquiring more information about creating a
well-diversified investment plan, speak with your advisor.
Thank you as always for entrusting your hard-earned dollars to Delaware
Investments.
Sincerely,
/s/ Jude T. Driscoll
Jude T. Driscoll
Chairman
Delaware Investments(R) Family of Funds
THIS PAGE IS NOT PART OF THE ANNUAL REPORT.
iii
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DELAWARE INVESTMENTS(R)
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FAMILY OF FUNDS
COMPLETE INFORMATION ON ANY FUND OFFERED BY DELAWARE INVESTMENTS CAN BE FOUND IN
EACH FUND'S CURRENT PROSPECTUS. PROSPECTUSES FOR ALL FUNDS IN THE DELAWARE
INVESTMENTS(R) FAMILY OF FUNDS ARE AVAILABLE FROM YOUR FINANCIAL ADVISOR, ONLINE
AT WWW.DELAWAREINVESTMENTS.COM, OR BY PHONE AT 800 523-1918. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
GROWTH-EQUITY GROUP
Delaware American Services Fund
Delaware Growth Opportunities Fund
Delaware Large Cap Growth Fund (Formerly Delaware Diversified Growth Fund)
Delaware Select Growth Fund
Delaware Small Cap Growth Fund
Delaware Trend Fund
Delaware U.S. Growth Fund
VALUE-EQUITY GROUP
Delaware Balanced Fund
Delaware Dividend Income Fund
Delaware Large Cap Value Fund
Delaware REIT Fund
Delaware Small Cap Value Fund*
Delaware Value Fund
CORE-EQUITY GROUP
Delaware Foundation Funds
Delaware Aggressive Allocation Portfolio (Formerly Delaware Growth Allocation
Portfolio)
Delaware Moderate Allocation Portfolio (Formerly Delaware Balanced Allocation
Portfolio)
Delaware Conservative Allocation Portfolio (Formerly Delaware Income
Allocation Portfolio)
Delaware Small Cap Core Fund (Formerly Delaware Small Cap Contrarian Fund)
INTERNATIONAL GROUP
Delaware Emerging Markets Fund*
Delaware Global Value Fund (Formerly Delaware International Small Cap Value
Fund)
Delaware International Value Equity Fund
FIXED INCOME GROUP
Corporate and Government
Delaware American Government Bond Fund
Delaware Corporate Bond Fund
Delaware Delchester Fund
Delaware Diversified Income Fund
Delaware Extended Duration Bond Fund
Delaware High-Yield Opportunities Fund
Delaware Inflation Protected Bond Fund
Delaware Limited-Term Government Fund
Money Market
Delaware Cash Reserve Fund
Delaware Tax-Free Money Fund
Municipal (National Tax-Exempt)
Delaware National High-Yield Municipal Bond Fund
Delaware Tax-Free Insured Fund*
Delaware Tax-Free USA Fund
Delaware Tax-Free USA Intermediate Fund
Municipal (State-Specific Tax-Exempt)
Delaware Tax-Free Arizona Insured Fund
Delaware Tax-Free California Fund
Delaware Tax-Free Colorado Fund
Delaware Tax-Free Florida Insured Fund
Delaware Tax-Free Idaho Fund
Delaware Minnesota High-Yield Municipal Bond Fund
Delaware Tax-Free Minnesota Fund
Delaware Tax-Free Minnesota Insured Fund
Delaware Tax-Free Minnesota Intermediate Fund
Delaware Tax-Free Missouri Insured Fund*
Delaware Tax-Free New York Fund
Delaware Tax-Free Oregon Insured Fund*
Delaware Tax-Free Pennsylvania Fund
GROWING STRONG TOGETHER
Lincoln Financial Group, through its affiliates, is a proven industry leader in
identifying and delivering sophisticated financial planning and product
solutions for the creation, protection, and enjoyment of wealth.
Delaware Investments is an asset management company committed to fundamental,
style-specific investment research across multiple asset classes.
ROOTED IN HISTORY
o The strength of both organizations today is a result of 100 years of
Lincoln history, 75+ years of Delaware Investments(R) history, and the
past 10 years together.
o Delaware Investments is recognized as an integral part of the ability of
Lincoln Financial Group to offer a broad variety of high-quality financial
solutions to investors.
o Together, they provide investors with the resources of a larger financial
services organization and the expertise, insight, and discipline of a
highly-respected investment management firm.
* Closed to new investors
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Simplify your life.
MANAGE YOUR INVESTMENTS ONLINE!
[E:DELIVERY LOGO]
Get Account Access, the Delaware Investments(R) secure Web site that allows you
to conduct your business online. Gain 24-hour access to your account and one of
the highest levels of Web security available. You also get:
o Hassle-Free Investing -- Make online purchases and redemptions at any
time.
o Simplified Tax Processing -- Automatically retrieve your Delaware
Investments(R) accounts' 1099 information and import it directly into your
1040 tax return. Available only with Turbo Tax(R) OnlineSM and Desktop
software -- www.turbotax.com.
o Less Mail Clutter -- Get instant access to your fund materials online with
Delaware eDelivery.
Register for Account Access today! Visit www.delawareinvestments.com, select
Individual Investors, and click Account Access.
Please call our Shareholder Service Center at 800 523-1918 Monday through Friday
from 8:00 a.m. to 7:00 p.m., Eastern Time, to assist with any questions.
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THIS PAGE IS NOT PART OF THE ANNUAL REPORT.
iv
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[DELAWERE INVESTMENTS(R) LOGO]
FIXED INCOME
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Semiannual Report FEBRUARY 28, 2006
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DELAWARE TAX-FREE USA FUND
DELAWARE TAX-FREE INSURED FUND
(Closed to new investors)
DELAWARE TAX-FREE USA INTERMEDIATE FUND
DELAWARE NATIONAL HIGH-YIELD
MUNICIPAL BOND FUND
[POWERED BY RESEARCH(R) LOGO]
Table
OF CONTENTS
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DISCLOSURE OF FUND EXPENSES 1
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SECTOR ALLOCATION 3
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FINANCIAL STATEMENTS:
Statements of Net Assets 5
Statements of Assets and Liabilities 23
Statements of Operations 24
Statements of Changes in Net Assets 25
Financial Highlights 27
Notes to Financial Statements 39
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OTHER FUND INFORMATION 44
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ABOUT THE ORGANIZATION 45
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Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C)2006 Delaware Distributors, L.P.
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Disclosure For the Period September 1, 2005 to February 28, 2006
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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, 2005 to February 28,
2006.
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 Funds' actual expense ratios and an assumed rate of return of 5% per year
before expenses, which is not the Funds' 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 a 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 tables 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 each 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. Each Fund's actual expenses shown in the tables reflect fee waivers in
effect. The expenses shown in each 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 9/1/05 to
9/1/05 2/28/06 Ratio 2/28/06
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Actual Fund Return
Class A $ 1,000.00 $ 1,003.80 0.85% $ 4.22
Class B 1,000.00 1,000.00 1.62% 8.03
Class C 1,000.00 1,000.00 1.62% 8.03
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Hypothetical 5% Return (5% return before expenses)
Class A $ 1,000.00 $ 1,020.58 0.85% $ 4.26
Class B 1,000.00 1,016.76 1.62% 8.10
Class C 1,000.00 1,016.76 1.62% 8.10
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Delaware Tax-Free Insured Fund (Closed to new investors)
Expense Analysis of an Investment of $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/05 to
9/1/05 2/28/06 Ratio 2/28/06
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Actual Fund Return
Class A $ 1,000.00 $ 1,004.40 0.90% $ 4.47
Class B 1,000.00 1,000.60 1.67% 8.28
Class C 1,000.00 1,001.50 1.67% 8.29
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Hypothetical 5% Return (5% return before expenses)
Class A $ 1,000.00 $ 1,020.33 0.90% $ 4.51
Class B 1,000.00 1,016.51 1.67% 8.35
Class C 1,000.00 1,016.51 1.67% 8.35
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1
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Disclosure For the Period September 1, 2005 to February 28, 2006
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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 9/1/05 to
9/1/05 2/28/06 Ratio 2/28/06
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Actual Fund Return
Class A $ 1,000.00 $ 1,007.30 0.75% $ 3.73
Class B 1,000.00 1,002.20 1.60% 7.94
Class C 1,000.00 1,003.10 1.60% 7.95
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Hypothetical 5% Return (5% return before expenses)
Class A $ 1,000.00 $ 1,021.08 0.75% $ 3.76
Class B 1,000.00 1,016.86 1.60% 8.00
Class C 1,000.00 1,016.86 1.60% 8.00
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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 9/1/05 to
9/1/05 2/28/06 Ratio 2/28/06
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Actual Fund Return
Class A $ 1,000.00 $ 1,001.60 0.90% $ 4.49
Class B 1,000.00 1,008.80 1.65% 8.22
Class C 1,000.00 1,007.80 1.65% 8.21
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Hypothetical 5% Return (5% return before expenses)
Class A $ 1,000.00 $ 1,020.33 0.90% $ 4.51
Class B 1,000.00 1,016.61 1.65% 8.25
Class C 1,000.00 1,016.61 1.65% 8.25
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2
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Sector Allocation As of February 28, 2006
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Sector designations may be different than the sector designations presented in
other Fund materials.
DELAWARE TAX-FREE USA FUND
Percentage
Sector of Net Assets
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Municipal Bonds 94.25%
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Airline Revenue Bonds 0.17%
Airport Revenue Bonds 1.60%
City General Obligation Bonds 2.95%
Combined Utilities Revenue Bonds 2.60%
Continuing Care/Retirement Revenue Bonds 2.36%
Convention Center/Hotel Revenue Bonds 0.60%
Corporate Revenue Bonds 4.59%
Dedicated Tax & Fee Revenue Bonds 8.20%
Electric & Gas Revenue Bonds 7.82%
Escrowed to Maturity Bonds 7.85%
Higher Education Revenue Bonds 4.95%
Hospital Revenue Bonds 12.60%
Investor Owned Utilities Revenue Bonds 7.60%
Multifamily Housing Revenue Bonds 0.87%
Municipal Lease Revenue Bonds 4.87%
Pre-Refunded Bonds 8.07%
School District General Obligation Bonds 2.46%
Single Family Housing Revenue Bonds 0.38%
State General Obligation Bonds 5.63%
Tax Increment/Special Assessment Bonds 0.22%
Territorial General Obligation Bonds 3.24%
Transit Authority Revenue Bonds 0.63%
Water & Sewer Revenue Bonds 3.99%
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Variable Rate Demand Notes 5.69%
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Total Market Value of Securities 99.94%
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Receivables and Other Assets Net of Liabilities 0.06%
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Total Net Assets 100.00%
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DELAWARE TAX-FREE INSURED FUND
(Closed to new investors)
Percentage
Sector of Net Assets
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Municipal Bonds 94.16%
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Airport Revenue Bonds 2.71%
City General Obligation Bonds 6.09%
Continuing Care/Retirement Revenue Bonds 2.25%
Corporate Revenue Bonds 1.35%
Dedicated Tax & Fees Revenue Bonds 5.68%
Electric & Gas Revenue Bonds 10.13%
Escrowed to Maturity Bonds 1.94%
Higher Education Revenue Bonds 12.48%
Hospital Revenue Bonds 3.65%
Investor Owned Utilities Revenue Bonds 2.28%
Multifamily Housing Revenue Bonds 10.62%
Municipal Lease Revenue Bonds 6.75%
Political Subdivision General Obligation Bonds 1.03%
Pre-Refunded Bonds 10.19%
School District General Obligation Bonds 1.28%
State General Obligation Bonds 1.79%
Territorial General Obligation Bonds 1.98%
Turnpike Revenue Bonds 0.90%
Water & Sewer Revenue Bonds 11.06%
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Variable Rate Demand Notes 5.13%
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Total Market Value of Securities 99.29%
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Receivables and Other Assets Net of Liabilities 0.71%
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Total Net Assets 100.00%
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3
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Sector Allocation As of February 28, 2006
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Sector designations may be different than the sector designations presented in
other Fund materials.
DELAWARE TAX-FREE USA INTERMEDIATE FUND
Percentage
Sector of Net Assets
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Municipal Bonds 90.00%
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Airport Revenue Bonds 2.30%
City General Obligation Bonds 3.89%
Combined Utilities 0.87%
Continuing Care/Retirement Revenue Bonds 0.54%
Convention Center/Hotel Revenue Bonds 1.77%
Corporate Revenue Bonds 4.58%
Dedicated Tax & Fees Revenue Bonds 7.36%
Electric & Gas Revenue Bonds 7.25%
Escrowed to Maturity Bonds 0.17%
Higher Education Revenue Bonds 9.68%
Hospital Revenue Bonds 10.54%
Investor Owned Utilities Revenue Bonds 2.33%
Municipal Lease Revenue Bonds 4.96%
Political Subdivision General Obligation Bonds 2.72%
Ports & Harbors Revenue Bonds 0.29%
Pre-Refunded Bonds 7.82%
Resource Recovery 0.80%
School District General Obligation Bonds 5.68%
State General Obligation Bonds 6.54%
Tax Increment/Special Assessment Bonds 2.75%
Territorial General Obligation Bonds 1.80%
Transportation Revenue Bonds 1.16%
Turnpike/Toll Road Revenue Bonds 1.58%
Water & Sewer Revenue Bonds 2.62%
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Variable Rate Demand Notes 6.90%
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Total Market Value of Securities 96.90%
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Receivables and Other Assets Net of Liabilities 3.10%
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Total Net Assets 100.00%
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DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
Percentage
Sector of Net Assets
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Municipal Bonds 96.18%
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Airline Revenue Bonds 0.40%
Airport Revenue Bonds 3.13%
Continuing Care/Retirement Revenue Bonds 16.31%
Convention Center/Hotel Revenue Bonds 2.88%
Corporate Revenue Bonds 11.64%
Dedicated Tax & Fees Revenue Bonds 4.07%
Escrowed to Maturity Bonds 0.47%
Higher Education Revenue Bonds 14.24%
Hospital Revenue Bonds 19.74%
Investor Owned Utilities Revenue Bonds 4.82%
Municipal Lease Revenue Bonds 4.38%
Pre-Refunded Bonds 8.18%
Tax Increment/Special Assessment Bonds 5.92%
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Total Market Value of Securities 96.18%
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Receivables and Other Assets Net of Liabilities 3.82%
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Total Net Assets 100.00%
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4
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Delaware Tax-Free USA Fund
Statements February 28, 2006 (Unaudited)
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OF NET ASSETS
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 94.25%
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Airline Revenue Bonds - 0.17%
++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 $ 881,595
-----------
881,595
-----------
Airport Revenue Bonds - 1.60%
Capital Trust Agency Florida Revenue
(Fort Lauderdale/
Cargo Acquisition Project)
5.75% 1/1/32 (AMT) 2,500,000 2,539,600
(Orlando/Cargo Acquisition Project)
6.75% 1/1/32 (AMT) 2,395,000 2,478,107
Grapevine, Texas Industrial Development
Corporate Revenue (Air Cargo)
6.50% 1/1/24 (AMT) 920,000 967,242
Houston, Texas Industrial Development
Corporate Revenue (Air Cargo)
6.375% 1/1/23 (AMT) 2,000,000 2,107,800
-----------
8,092,749
-----------
City General Obligation Bonds - 2.95%
New York City, New York
Series H 6.125% 8/1/25 315,000 328,869
Series I
5.00% 8/1/21 2,500,000 2,639,700
5.125% 3/1/23 5,875,000 6,203,765
Series J 5.25% 6/1/28 5,400,000 5,746,032
-----------
14,918,366
-----------
Combined Utilities Revenue Bonds - 2.60%
Orlando, Florida Utilities Commission
Water & Electric Revenue
5.25% 10/1/20 2,500,000 2,704,525
Richmond, Virginia Public Utilities Revenue
5.00% 1/15/27 (FSA) 10,000,000 10,420,500
-----------
13,125,025
-----------
Continuing Care/Retirement Revenue Bonds - 2.36%
Colorado Health Facilities
Authority Revenue
(Evangelical Lutheran)
Series A 5.25% 6/1/34 3,000,000 3,095,670
Delaware County, Pennsylvania Industrial
Development Authority Revenue
Care Institute
(Main Line Care Institute Project)
9.00% 8/1/31 1,777,611 1,476,537
Gainesville & Hall County,
Georgia Development Authority Revenue
(Lanier Village Estates Project)
Series C 7.25% 11/15/29 1,000,000 1,101,440
Lucas County, Ohio Health Care
Facility Revenue
(Sunset Retirement Communities)
Series A 6.625% 8/15/30 2,000,000 2,150,400
North Carolina Medical Care Commission
Health Care Facilities Revenue
(Pennybyrn at Mayfield)
Series A 6.125% 10/1/35 4,000,000 4,100,280
-----------
11,924,327
-----------
Principal Market
Amount Value
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Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Convention Center/Hotel Revenue Bonds - 0.60%
Middlesex County, New Jersey Improvement
Authority Senior Revenue
(Heldrich Center Hotel/Conference Project)
Series A
5.00% 1/1/32 $ 1,500,000 $ 1,500,435
5.125% 1/1/37 1,500,000 1,517,970
-----------
3,018,405
-----------
Corporate Revenue Bonds - 4.59%
Alliance, Texas Airport Authority
Special Facilities Revenue
(Federal Express Corp. Project)
6.375% 4/1/21 (AMT) 2,000,000 2,049,300
Cloquet, Minnesota Pollution
Control Revenue
(Potlatch Corp. Project) 5.90% 10/1/26 1,695,000 1,717,188
@Columbus, Kansas Industrial Revenue
(ACE Electrical Acquisition)
7.00% 8/1/17 (AMT) 800,000 328,000
Indianapolis, Indiana Airport
Authority Revenue
(Federal Express Corp. Project)
5.10% 1/15/17 (AMT) 2,000,000 2,104,880
Indianapolis, Indiana Airport Authority
Special Facilities Series 1998
(Federal Express Corp. Project)
Series 98 5.50% 5/1/29 (AMT) 2,000,000 2,054,620
Phenix City, Alabama Industrial
Development Board Environmental
Improvement Revenue
(Mead Westvaco Corp. Project)
Series A 6.35% 5/15/35 (AMT) 3,000,000 3,231,510
Puerto Rico Industrial, Medical &
Environmental Pollution Control
Facilities Financing Authority Revenue
(PepsiCo Inc. Project) 6.25% 11/15/13 1,250,000 1,309,938
Richmond County, Georgia Development
Authority Environmental Improvement
Revenue (International Paper Co. Project)
Series B 5.95% 11/15/25 (AMT) 5,000,000 5,219,849
Sweetwater County, Wyoming Solid Waste
Disposal Revenue (FMC Corp. Project)
5.60% 12/1/35 (AMT) 5,000,000 5,168,500
-----------
23,183,785
-----------
Dedicated Tax & Fee Revenue Bonds - 8.20%
Massachusetts School Building Authority
Dedicated Sales Tax Revenue Series A
5.00% 8/15/30 (FSA) 10,000,000 10,607,300
New Jersey Economic Development
Authority (Cigarette Tax)
5.75% 6/15/34 2,000,000 2,127,920
New York City, New York Transitional
Finance Authority Series D
5.00% 2/1/31 5,000,000 5,221,250
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series G 5.00% 7/1/42 6,750,000 6,907,748
Series K 5.00% 7/1/35 2,500,000 2,582,775
5
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Dedicated Tax & Fee Revenue Bonds (continued)
Puerto Rico Commonwealth Infrastructure
Financing Authority Tax Revenue
Series B 5.00% 7/1/41 $ 8,000,000 $ 8,228,080
Truth or Consequences, New Mexico
Gross Receipts Tax Revenue
6.30% 7/1/16 1,000,000 1,007,820
Westminster, Colorado Sales &
Use Tax Revenue
(Sales Tax Revenue Project)
Series A 5.60% 12/1/16 4,500,000 4,739,850
-----------
41,422,743
-----------
Electric & Gas Revenue Bonds - 7.82%
Chelan County, Washington Public
Utilities District #001 Consolidated
Revenue (Chelan Hydro System)
Series A 5.45% 7/1/37 (AMBAC) (AMT) 5,000,000 5,349,950
Lower Colorado River Authority Texas
Revenue Refunding Series A
5.875% 5/15/17 (AMBAC) 4,000,000 4,307,640
Puerto Rico Electric Power Authority
Power Revenue Series II 5.25% 7/1/31 6,000,000 6,347,520
Sabine, Texas River Authority Pollution
Control Revenue
(Southwestern Electric Power Co.)
6.10% 4/1/18 (MBIA) 4,000,000 4,089,080
Salt River Project Arizona Agriculture
Improvement & Power District Electric
(Revsalt River Project) Series A
5.00% 1/1/35 10,000,000 10,585,199
San Francisco, California City and
County Public Utilities Commission
Series A 4.75% 11/1/36 (FSA) 5,000,000 5,120,500
Suffolk County, New York Industrial
Development Agency Revenue
(Keyspan-Port Jefferson Energy Center)
5.25% 6/1/27 (AMT) 3,500,000 3,655,260
-----------
39,455,149
-----------
Escrowed to Maturity Bonds - 7.85%
Louisiana Public Facilities Authority
Hospital Revenue
(Southern Baptist Hospital, Inc.)
8.00% 5/15/12 5,555,000 6,288,149
New Jersey State Highway Authority
Garden State Parkway General Revenue
(Senior Parkway)
5.50% 1/1/14 (FGIC) 5,000,000 5,605,700
5.50% 1/1/15 (FGIC) 7,310,000 8,250,066
Oklahoma State Turnpike Authority Revenue
(First Senior) 6.00% 1/1/22 13,535,000 16,697,047
Virgin Islands Public Finance Authority
Revenue Series A 7.30% 10/1/18 2,200,000 2,772,264
-----------
39,613,226
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Higher Education Revenue Bonds - 4.95%
Chattanooga, Tennessee Health
Educational & Housing Facilities
Board Revenue
Series A 5.125% 10/1/35 $ 3,500,000 $ 3,518,270
Illinois Educational Facilities Authority
Student Housing Revenue
(Educational Advancement Fund-
University Center Project)
6.25% 5/1/30 5,000,000 5,469,450
Maryland State Economic Development
Corporation, Student Housing Revenue
(University of Maryland College
Park Project) 5.625% 6/1/35 1,125,000 1,181,925
Massachusetts State Health & Educational
Facilities Authority Revenue
(Harvard University)
Series A 5.00% 7/15/36 5,005,000 5,310,605
(Nichols College Project) Series C
6.00% 10/1/17 950,000 1,006,573
6.125% 10/1/29 1,000,000 1,059,540
Milledgeville-Baldwin County,
Georgia Development Authority Revenue
(Georgia College & State University
Foundation Project) 6.00% 9/1/33 1,000,000 1,091,160
New Hampshire Higher Educational &
Health Facilities Authority Revenue
(New Hampton School Issue)
5.375% 10/1/28 3,070,000 3,090,907
New Jersey State Educational Facilities
Authority Revenue
(Stevens Institute of Technology)
Series B 5.25% 7/1/24 2,085,000 2,197,819
Vermont University & State
Agriculture College
5.125% 10/1/37 (AMBAC) 1,000,000 1,049,100
-----------
24,975,349
-----------
Hospital Revenue Bonds - 12.60%
Akron Bath Copley, Ohio Joint Township
Hospital District Revenue
(Summa Health System)
Series A 5.25% 11/15/31 (RADIAN) 3,000,000 3,153,870
Cando, North Dakota Nursing
Facility Revenue
(Towner County Medical Center Project)
7.125% 8/1/22 1,000,000 1,005,380
Chatham County, Georgia Hospital
Authority Revenue
(Memorial Health Medical Center)
Series A 6.125% 1/1/24 1,000,000 1,098,440
Cuyahoga County, Ohio Revenue
(Cleveland Clinic Health System)
Series A 5.50% 1/1/29 7,500,000 7,988,174
Duluth, Minnesota Economic Development
Authority Health Care Facilities Revenue
(Benedictine Health System-
St. Mary's Hospital) 5.25% 2/15/33 5,000,000 5,165,750
6
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
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 $ 2,529,529
Henrico County, Virginia Economic
Development Authority Revenue
(Bon Secours Health System, Inc.)
Series A 5.60% 11/15/30 3,140,000 3,310,659
Illinois Health Facilities Authority Revenue
(Elmhurst Memorial Healthcare Project)
5.625% 1/1/28 2,000,000 2,113,620
Johnson City, Tennessee Health and
Educational Facilities Board
Hospital Revenue First Meeting
(Mountain States Health)
Series A 5.50% 7/1/36 3,000,000 3,156,900
Louisiana Public Facilities
Authority Revenue
(Ochsner Clinic Foundation Project)
Series B 5.50% 5/15/32 1,500,000 1,522,605
Maryland State Health & Higher Education
Facilities Authority Revenue
(Union Hospital of Cecil County Issue)
5.00% 7/1/40 2,345,000 2,411,856
Michigan State Hospital Finance
Authority Revenue
(Ascension Health Credit Group)
Series B 5.25% 11/15/26 3,500,000 3,693,760
(Oakwood Obligation Group)
Series A 5.75% 4/1/32 2,500,000 2,674,525
(Trinity Health Credit)
Series C 5.375% 12/1/30 6,000,000 6,363,540
Multnomah County, Oregon Hospital
Facilities Authority Revenue
(Providence Health System)
5.25% 10/1/22 3,000,000 3,234,090
New York State Dormitory Authority
(Catholic Health Services of Long Island -
St. Francis Hospital Project)
5.10% 7/1/34 2,500,000 2,549,350
North Carolina Medical Care Commission
Hospital Revenue
(Northeast Medical Center Project)
5.125% 11/1/34 1,250,000 1,300,238
Orange County, Florida Health Facilities
Authority Revenue Hospital
(Orlando Regional Healthcare)
Series B 5.125% 11/15/39 3,000,000 3,115,350
Prince William County, Virginia Industrial
Development Authority Hospital Revenue
(Potomac Hospital Corp.)
5.35% 10/1/36 1,750,000 1,848,420
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
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 $ 1,201,896
South Miami, Florida Health Facilities
Authority Hospital Revenue
(Baptist Health South Florida Group)
5.25% 11/15/33 4,000,000 4,170,600
-----------
63,608,552
-----------
Investor Owned Utilities Revenue Bonds - 7.60%
Brazos, Texas River Authority Pollution
Control Revenue
(Texas Utilities) 5.40% 5/1/29 (AMT) 3,000,000 3,024,510
(TXU Energy Co. Project)
Series B 6.30% 7/1/32 (AMT) 3,500,000 3,741,220
Clark County, Nevada Industrial
Development Revenue
(Nevada Power Co. Project)
Series C 7.20% 10/1/22 8,000,000 8,023,120
Connecticut State Development Authority
Pollution Control Revenue
Series A 5.85% 9/1/28 4,000,000 4,242,280
Mississippi Business Finance Corporation
Pollution Control Revenue
(System Energy Resources, Inc. Project)
5.90% 5/1/22 3,000,000 3,040,080
Petersburg, Indiana Pollution
Control Revenue
(Indianapolis Power & Light Co. Project)
6.375% 11/1/29 (AMT) 4,250,000 4,531,520
6.625% 12/1/24 4,500,000 4,552,290
Port Morrow, Oregon Pollution
Control Revenue
(Portland General Electric Co.)
Series A 5.20% 5/1/33 2,000,000 2,062,520
Sweetwater County, Wyoming Pollution
Control Revenue
(Idaho Power Co. Project)
Series A 6.05% 7/15/26 5,000,000 5,139,400
-----------
38,356,940
-----------
Multifamily Housing Revenue Bonds - 0.87%
Milwaukee, Wisconsin Redevelopment
Authority Multifamily Revenue
(City Hall Square)
6.30% 8/1/38 (FHA) (AMT) 1,455,000 1,522,308
North Dakota State Housing Finance
Agency Multifamily Revenue
Series A 6.15% 12/1/17 (FNMA) 1,300,000 1,327,638
Waukesha, Wisconsin Housing Authority
(Westgrove Woods)
Series A 6.00% 12/1/31 (GNMA) (AMT) 1,500,000 1,536,315
-----------
4,386,261
-----------
7
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Municipal Lease Revenue Bonds - 4.87%
Battery Park City, New York
Authority Revenue Series A
5.25% 11/1/22 $ 2,250,000 $ 2,446,110
California State Public Works Board
(Department of General
Services-Butterfield)
Series A 5.25% 6/1/30 2,750,000 2,929,218
@Linn County, Kansas Certificates
of Participation 7.25% 3/1/13 (AMT) 350,000 184,625
Missouri State Development Finance
Board Infrastructure Facilities Revenue
(Branson Landing Project)
Series A 5.25% 12/1/19 1,000,000 1,047,110
5.50% 12/1/24 980,000 1,042,103
5.625% 12/1/28 2,930,000 3,132,111
Puerto Rico Commonwealth Industrial
Development Company General
Purpose Revenues Series B
5.375% 7/1/16 1,000,000 1,040,380
Puerto Rico Public Buildings
Authority Revenue
(Government Facilities)
Series I 5.25% 7/1/33 12,000,000 12,774,000
-----------
24,595,657
-----------
- -/-Pre-Refunded Bonds - 8.07%
Alexandria, Virginia Industrial
Development Authority Revenue
(Institute for Defense Analyses)
Series A 5.90% 10/1/30-10 (AMBAC) 5,000,000 5,548,500
Cudahy, Wisconsin Community
Development Authority Lease Revenue
6.00% 6/1/11-06 1,000,000 1,006,790
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series B
5.50% 6/1/43-13 7,500,000 8,320,800
5.625% 6/1/38-13 7,500,000 8,379,825
Mississippi Development Bank
Special Obligation
(Madison County Hospital Project)
6.30% 7/1/22-09 2,070,000 2,278,697
New York City, New York Series H
6.125% 8/1/25-07 4,685,000 4,908,756
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 4,512,480
Puerto Rico Commonwealth
Public Improvement Series A
5.125% 7/1/31-11 3,495,000 3,764,954
5.375% 7/1/21-07 (MBIA) 50,000 52,063
Southeast Wisconsin Professional
Baseball Park District Sales Tax Revenue
5.80% 12/15/26-07 (MBIA) 1,000,000 1,034,070
Wisconsin Housing & Economic
Developing Authority Revenue
6.10% 6/1/21-17 (FHA) 835,000 928,186
-----------
40,735,121
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
School District General Obligation Bonds - 2.46%
Boerne, Texas Independent
School District Building
5.25% 2/1/27 $ 4,000,000 $ 4,279,240
5.25% 2/1/29 2,960,000 3,162,938
Dover, Pennsylvania Area School District
5.375% 4/1/20 (FGIC) 2,435,000 2,659,507
Lewisville, Texas Independent School
District Permanent School Fund
6.15% 8/15/21
2,160,000 2,336,364
-----------
12,438,049
-----------
Single Family Housing Revenue Bonds - 0.38%
New Mexico Mortgage Finance Authority
Series B Class III 6.75% 7/1/25
(GNMA) (FNMA) 255,000 257,833
Series E 6.95% 1/1/26 (GNMA) (FNMA) 225,000 230,225
Puerto Rico Housing, Bank & Finance
Agency Single Family Mortgage Revenue
6.25% 4/1/29 (GNMA) (FNMA)
(FHLMC) (AMT) 1,240,000 1,256,045
Santa Fe, New Mexico Single Family
Mortgage Revenue Series B-1
6.20% 11/1/16 (GNMA) (FNMA) (AMT) 175,000 175,693
-----------
1,919,796
-----------
State General Obligation Bonds - 5.63%
California State
5.00% 2/1/26 (AMBAC) 4,570,000 4,770,852
5.25% 2/1/30 (MBIA) 3,500,000 3,741,220
Commonwealth of Pennsylvania First Series
5.00% 7/1/13 3,000,000 3,247,590
Maryland State and Local Facilities Land
Capital Improvement First Series A
5.25% 3/1/13 10,000,000 11,017,200
Series A 5.50% 8/1/14 5,000,000 5,648,150
-----------
28,425,012
-----------
Tax Increment/Special Assessment Bonds - 0.22%
Midtown Miami, Florida Community
Development District Special
Assessment Revenue
(Infrastructure Project) Series B
6.50% 5/1/37 1,000,000 1,087,320
-----------
1,087,320
-----------
Territorial General Obligation Bonds - 3.24%
Puerto Rico Commonwealth Public
Improvement Series A
5.125% 7/1/31 6,880,000 7,078,419
5.50% 7/1/19 (MBIA) 8,000,000 9,271,360
-----------
16,349,779
-----------
Transit Authority Revenue Bonds - 0.63%
Metropolitan New York Transportation
Authority Revenue Refunding
Series A 5.00% 11/15/30 (FSA) 3,000,000 3,170,220
-----------
3,170,220
-----------
8
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Water & Sewer Revenue Bonds - 3.99%
Augusta, Georgia Water & Sewer Revenue
5.25% 10/1/34 (FSA) $ 3,375,000 $ 3,647,194
New York City, New York Municipal
Water Finance Authority Water &
Sewer System Revenue Series A
5.125% 6/15/34 12,125,000 12,763,865
Virgin Islands Water & Power Authority
Water System Revenue 5.50% 7/1/17 510,000 528,758
West Virginia State Water Development
Authority Revenue (Loan Program III)
Series A 6.375% 7/1/39 (AMBAC) (AMT) 2,890,000 3,190,705
-------------
20,130,522
-------------
Total Municipal Bonds
(cost $449,558,411) 475,813,948
=============
- --------------------------------------------------------------------------------
oVariable Rate Demand Notes - 5.69%
- --------------------------------------------------------------------------------
Allentown, Pennsylvania Commercial &
Industrial Development
(Diocese of Allentown)
2.93% 12/1/29 8,680,000 8,680,000
Chester County, Pennsylvania Industrial
Development Authority Revenue
(Archdiocese of Philadelphia)
2.93% 7/1/31 11,300,000 11,300,000
Idaho Housing & Finance Association
Class I 3.25% 1/1/37 (AMT) 1,000,000 1,000,000
Minneapolis, Minnesota Guthrie
Parking Ramp 3.05% 12/1/33 (SPA) 1,000,000 1,000,000
New York City, New York Municipal Water
Finance Authority Water & Sewer
System Revenue Series 93-C
2.92% 6/15/22 (FGIC) 4,500,000 4,500,000
Philadelphia, Pennsylvania Authority for
Industrial Development Revenue
(Newcourtland Elder Services Project)
2.93% 3/1/27 (LOC PNC Bank) 2,260,000 2,260,000
-------------
Total Variable Rate Demand Notes
(cost $28,740,000) 28,740,000
=============
Total Market Value of Securities - 99.94%
(cost $478,298,411) 504,553,948
Receivables and Other Assets
Net of Liabilities - 0.06% 302,040
-------------
Net Assets Applicable to 43,634,002 Shares
Outstanding - 100.00% $ 504,855,988
=============
Net Asset Value - Delaware Tax-Free USA Fund
Class A ($483,467,207 / 41,785,359 Shares) $ 11.57
-------------
Net Asset Value - Delaware Tax-Free USA Fund
Class B ($14,491,039 / 1,252,511 Shares) $ 11.57
-------------
Net Asset Value - Delaware Tax-Free USA Fund
Class C ($6,897,742 / 596,132 Shares) $ 11.57
-------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at February 28, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $ 483,617,831
Distributions in excess of net investment income (12,181)
Accumulated net realized loss on investments (5,005,199)
Net unrealized appreciation of investments 26,255,537
-------------
Total net assets $ 504,855,988
=============
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 Authority
FHLMC - Insured by the Federal Home Loan Mortgage Corporation
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
SPA - Stand-by Purchase Agreement
- -/-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. See Note 7 in "Notes to
Financial Statements."
++Non-income producing security. Security is currently in default.
oVariable rate securities. The interest rate shown is the rate as of February
28, 2006.
@Illiquid security. At February 28, 2006, the aggregate amount of illiquid
securities equals $512,625, which represented 0.10% of the Fund's net assets.
See Note 7 in "Notes to Financial Statements."
Net Asset Value and Offering Price per Share -
Delaware Tax-Free USA Fund
Net asset value Class A (A) $ 11.57
Sales charge (4.50% of offering price) (B) 0.55
-------
Offering price $ 12.12
=======
(A) Net asset value per share, as illustrated, is the 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
9
- --------------------------------------------------------------------------------
Delaware Tax-Free Insured Fund
Statements February 28, 2006 (Unaudited)
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 94.16%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 2.71%
Dallas-Fort Worth, Texas International
Airport Revenue Series A
5.50% 11/1/31 (FGIC) (AMT) $ 1,500,000 $ 1,581,585
-------------
1,581,585
-------------
City General Obligation Bonds - 6.09%
Melrose Park, Illinois Tax Increment
Series B 6.00% 12/15/19 (FSA) 1,250,000 1,376,738
Powell, Ohio 5.50% 12/1/32 (FGIC) 2,000,000 2,182,420
-------------
3,559,158
-------------
Continuing Care/Retirement Revenue Bonds - 2.25%
Colorado Health Facilities Authority Revenue
(Evangelical Lutheran) Series A
5.25% 6/1/34 1,275,000 1,315,660
-------------
1,315,660
-------------
Corporate Revenue Bonds - 1.35%
Indianapolis, Indiana Airport
Authority Revenue
(Federal Express Corp. Project)
5.10% 1/15/17 (AMT) 750,000 789,330
-------------
789,330
-------------
Dedicated Tax & Fees Revenue Bonds - 5.68%
New Jersey Economic Development Authority
(Cigarette Tax) 5.50% 6/15/31 1,000,000 1,042,850
New York State Sales Tax Asset Receivables
Series A 5.25% 10/15/27 (AMBAC) 1,000,000 1,087,000
Tampa, Florida Sports Authority
Revenue Sales Tax
(Tampa Bay Arena Project)
5.75% 10/1/20 (MBIA) 1,000,000 1,190,150
-------------
3,320,000
-------------
Electric & Gas Revenue Bonds - 10.13%
Lower Colorado River Authority
Texas Revenue Refunding
Series A 5.875% 5/15/17 (AMBAC) 1,500,000 1,615,365
Mason County, West Virginia
Pollution Control Revenue
(Appalachian Power Co. Project)
Series K 6.05% 12/1/24 (AMBAC) 3,000,000 3,284,460
San Francisco, California City and
County Public Utilities Commission
Series A 4.75% 11/1/36 (FSA) 1,000,000 1,024,100
-------------
5,923,925
-------------
Escrowed to Maturity - 1.94%
New Jersey State Highway Authority
Garden State Parkway General Revenue
(Senior Parkway) 5.50% 1/1/16 (FGIC) 1,000,000 1,137,130
-------------
1,137,130
-------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Higher Education Revenue Bonds - 12.48%
Amherst, New York Industrial Development
Agency Civic Facilities Revenue
(UBF Faculty Student Housing)
Series A 5.75% 8/1/30 (AMBAC) $ 1,300,000 $ 1,432,898
Illinois Educational Facilities Authority
Student Housing Revenue
(Educational Advancement Fund -
University Center Project)
6.25% 5/1/34 500,000 512,765
Massachusetts State Development
Finance Agency Revenue
(Massachusetts College of
Pharmacy Project) Series C
5.75% 7/1/33 500,000 533,010
New York State Dormitory
Authority Revenue
(Fashion Institute Student
Housing Corp.) 5.00% 7/1/13 (FGIC) 1,000,000 1,081,860
Oregon State Facilities Authority Revenue
(College Independent Student
Housing Project) Series A
5.25% 7/1/30 (XLCA) 1,000,000 1,076,780
Pennsylvania State Higher Educational
Facilities Authority Revenue
(Widener University)
5.375% 7/15/29 1,000,000 1,057,920
University of Massachusetts
Building Authority Revenue
(Refunding-Senior) Series 2
5.00% 11/1/25 (AMBAC) 1,000,000 1,067,520
University of Central Florida Athletics
Association Certificates of Participation
Series A 5.25% 10/1/34 (FGIC) 500,000 535,915
-------------
7,298,668
-------------
Hospital Revenue Bonds - 3.65%
Florence County, South Carolina
Hospital Revenue
(McLeod Regional Medical Center Project)
Series A 5.25% 11/1/27 (FSA) 1,000,000 1,074,110
Knox County, Tennessee Health
Educational & Housing Facilities
Board Hospital Revenue
(East Tennessee Hospital Project)
Series B 5.75% 7/1/33 1,000,000 1,061,620
-------------
2,135,730
-------------
Investor Owned Utilities Revenue Bonds - 2.28%
Petersburg, Indiana Pollution
Control Revenue
(Indianapolis Power & Light Co. Project)
6.375% 11/1/29 (AMT) 750,000 799,680
South Carolina Jobs Economic
Development Authority Industrial
Revenue (South Carolina Electric &
Gas Co. Project) Series B
5.45% 11/1/32 (AMBAC) (AMT) 500,000 531,120
-------------
1,330,800
-------------
10
- --------------------------------------------------------------------------------
Delaware Tax-Free Insured Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multifamily Housing Revenue Bonds - 10.62%
Franklin County, Ohio Multi Family Revenue
(Alger Green) Series A
5.80% 5/20/44 (GNMA) (AMT) $ 1,150,000 $ 1,207,144
Illinois Development Finance
Authority Revenue (Section 8)
Series A 5.80% 7/1/28 (FHA) (MBIA) 2,790,000 2,883,465
Illinois Housing Development Authority
Multi Family Revenue
(Crystal Lake Preservation) Series A-1
5.80% 12/20/41 (GNMA) 2,000,000 2,118,500
-------------
6,209,109
-------------
Municipal Lease Revenue Bonds - 6.75%
Golden State, California Tobacco
Securitization Corporation
Settlement Revenue Series A
5.00% 6/1/21 (AMBAC) 1,000,000 1,052,020
Loudoun County, Virginia Industrial
Development Authority Public
Safety Facility Lease Revenue Series A
5.25% 12/15/23 (FSA) 700,000 762,510
Missouri State Development Finance
Board Infrastructure Facilities Revenue
(Branson Landing Project) Series A
5.50% 12/1/24 1,000,000 1,063,370
Puerto Rico Public Buildings
Authority Revenue
(Government Facilities) Series J
5.00% 7/1/36 (AMBAC) 1,000,000 1,070,210
-------------
3,948,110
-------------
Political Subdivision General Obligation Bonds - 1.03%
St. Clair County, Michigan
5.00% 4/1/21 (AMBAC) 565,000 601,499
-------------
601,499
-------------
- -/-Pre-Refunded Bonds - 10.19%
Alexandria, Virginia Industrial
Development Authority Revenue
(Institute for Defense Analyses) Series A
5.90% 10/1/30-10 (AMBAC) 1,000,000 1,109,700
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series B 5.50% 6/1/43-13 1,000,000 1,109,440
Jackson, Ohio Local School District
(Stark & Summit Counties)
School Facilities Construction &
Improvement 5.625% 12/1/25-10 (FSA) 1,000,000 1,093,170
Massachusetts State Industrial Finance
Agency Revenue Higher Education
(Clark University Project)
6.10% 7/1/16-06 1,250,000 1,286,150
Vancouver, Washington Limited Tax
5.50% 12/1/25-10 (AMBAC) 1,250,000 1,356,813
-------------
5,955,273
-------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
School District General Obligation Bonds - 1.28%
South Redford, Michigan School District
5.00% 5/1/21 (FGIC) $ 700,000 $ 747,936
-------------
747,936
-------------
State General Obligation Bonds - 1.79%
California State 5.00% 2/1/26 (AMBAC) 1,000,000 1,043,950
-------------
1,043,950
-------------
Territorial General Obligation Bonds - 1.98%
Puerto Rico Commonwealth Public
Improvement Series A
5.50% 7/1/19 (MBIA) 1,000,000 1,158,920
-------------
1,158,920
-------------
Turnpike Revenue Bonds - 0.90%
Pennsylvania State Turnpike
Commission Revenue Series A
5.00% 12/1/34 (AMBAC) 500,000 526,595
-------------
526,595
-------------
Water & Sewer Revenue Bonds - 11.06%
Atlanta, Georgia Water &
Waste Water Revenue
5.00% 11/1/18 (FSA) 1,000,000 1,073,020
Augusta, Georgia Water &
Sewer Revenue 5.25% 10/1/34 (FSA) 1,000,000 1,080,650
Clovis, California Public Financing
Authority Wastewater Revenue
5.25% 8/1/30 (MBIA) 1,000,000 1,078,980
Fulton County, Georgia Water &
Sewer Revenue 5.25% 1/1/35 (FGIC) 1,000,000 1,074,660
Green Bay, Wisconsin Water Systems
Revenue Refunding and Improvements
Bonds 5.25% 11/1/22 (FSA) 1,000,000 1,095,179
New York City, New York Municipal
Water Finance Authority Water & Sewer
System Revenue Series B
5.00% 6/15/23 (FSA) 1,000,000 1,063,780
-------------
6,466,269
-------------
Total Municipal Bonds (cost $52,152,610) 55,049,647
=============
- --------------------------------------------------------------------------------
oVariable Rate Demand Notes - 5.13%
- --------------------------------------------------------------------------------
Alexandria, Virginia Industrial Development
Authority 3.12% 10/1/35 (SPA) (AMBAC) 2,000,000 2,000,000
California State Department of Water
Resources Power Supply Subordinate
Series G-10 3.22% 5/1/18 (FGIC) 1,000,000 1,000,000
-------------
Total Variable Rate Demand Notes
(cost $3,000,000) 3,000,000
=============
11
- --------------------------------------------------------------------------------
Delaware Tax-Free Insured Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Market Value of Securities - 99.29%
(cost $55,152,609) $ 58,049,647
Receivables and Other Assets
Net of Liabilities - 0.71% 417,860
-------------
Net Assets Applicable to 5,342,758 Shares
Outstanding - 100.00% $ 58,467,507
=============
Net Asset Value - Delaware Tax-Free Insured Fund
Class A ($49,914,609 / 4,561,261 Shares) $ 10.94
-------------
Net Asset Value - Delaware Tax-Free Insured Fund
Class B ($5,870,789 / 536,470 Shares) $ 10.94
-------------
Net Asset Value - Delaware Tax-Free Insured Fund
Class C ($2,682,109 / 245,027 Shares) $ 10.95
-------------
Components of Net Assets at February 28, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $ 55,452,807
Distributions in excess of net investment income (1,778)
Accumulated net realized gain on investments 119,440
Net unrealized appreciation of investments 2,897,038
-------------
Total net assets $ 58,467,507
=============
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
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
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. See Note 7 in
"Notes to Financial Statements."
o Variable rate securities. The interest rate shown is the rate as of
February 28, 2006.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Insured Fund
Net asset value Class A (A) $ 10.94
Sales charge (4.50% of offering price) (B) 0.52
-------------
Offering price $ 11.46
=============
(A) Net asset value per share, as illustrated, is the 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
12
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund
Statements February 28, 2006 (Unaudited)
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 90.00%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 2.30%
Chicago, Illinois O'Hare International
Airport Revenue General-Airport-Third
Lien Series A-2 5.75% 1/1/20
(FSA) (AMT) $ 1,000,000 $ 1,109,280
Dallas-Fort Worth, Texas International
Airport Revenue Series A
5.00% 11/1/15 (XLCA) (AMT) 2,000,000 2,069,140
Metropolitan, Washington D.C. Airport
Authority Systems Series A
5.50% 10/1/19 (FGIC) (AMT) 1,000,000 1,088,120
------------
4,266,540
------------
City General Obligation Bonds - 3.89%
Chicago, Illinois Board of Education
(Chicago School of Reform) Series A
5.25% 12/1/30 (AMBAC) 1,000,000 1,044,320
Cleveland, Ohio 5.25% 12/1/23 (AMBAC) 1,185,000 1,301,083
New York City, New York
Series G 5.25% 8/1/15 1,000,000 1,091,390
Series I 5.00% 8/1/21 1,000,000 1,055,880
Series J 5.50% 6/1/23 1,000,000 1,087,380
Powell, Ohio 5.50% 12/1/25 (FGIC) 1,500,000 1,636,815
------------
7,216,868
------------
Combined Utilities - 0.87%
Orlando, Florida Utilities Commission
Water & Electric Revenue
5.25% 10/1/20 1,500,000 1,622,715
------------
1,622,715
------------
Continuing Care/Retirement Revenue Bonds - 0.54%
Apple Valley, Minnesota Economic
Development Authority
Health Care Revenue
(Evercare Senior Living LLC Project)
Series A 6.00% 12/1/25 1,000,000 1,001,380
------------
1,001,380
------------
Convention Center/Hotel Revenue Bonds - 1.77%
Baltimore, Maryland Convention Center
Hotel Revenue Subordinate Series B
5.00% 9/1/16 1,200,000 1,208,880
Hampton, Virginia Convention Center
Revenue 5.25% 1/15/23 (AMBAC) 1,000,000 1,076,050
Middlesex County, New Jersey Improvement
Authority Senior Revenue
(Heldrich Center Hotel) Series A
5.00% 1/1/32 1,000,000 1,000,290
------------
3,285,220
------------
Corporate Revenue Bonds - 4.58%
Alliance, Texas Airport Authority
Special Facilities Revenue
(Federal Express Corp. Project)
6.375% 4/1/21 (AMT) 1,000,000 1,024,650
Cartersville, Georgia Development
Authority Waste & Wastewater
Facilities Revenue
(Anheuser Busch Project)
5.10% 2/1/12 (AMT) 450,000 476,406
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Corporate Revenue Bonds (continued)
Dutchess County, New York Industrial
Development Agency Revenue
(IBM Project) 5.45% 12/1/29 (AMT) $ 1,500,000 $ 1,582,980
Indianapolis, Indiana Airport
Authority Revenue
(Federal Express Corp. Project)
5.10% 1/15/17 (AMT) 750,000 789,330
Michigan State Strategic Funding
Limited Obligation Revenue
(Detroit Edison Co. Project) Series A
5.50% 6/1/30 (XLCA) (AMT) 1,000,000 1,075,990
Ohio State Air Quality Development
Authority Revenue Environmental
Improvement (USX Project)
5.00% 11/1/15 1,000,000 1,053,090
Prattville, Alabama Industrial
Development Board Environmental
Improvement Revenue
(International Paper Co. Project)
Series A 6.70% 3/1/24 (AMT) 1,000,000 1,071,330
Sugar Creek, Missouri Industrial
Development Revenue
(Lafarge North America Project)
Series A 5.65% 6/1/37 (AMT) 500,000 519,840
Toledo, Lucas County, Ohio Port
Authority Development Revenue
(Northwest Ohio Bond Fund -
Alex Products, Inc.) Series B
6.125% 11/15/09 (AMT) 860,000 902,888
------------
8,496,504
------------
Dedicated Tax & Fees Revenue Bonds - 7.36%
Casa Grande, Arizona Excise Tax Revenue
5.00% 4/1/22 (AMBAC) 1,600,000 1,703,360
Massachusetts School Building Authority
Dedicated Sales Tax Revenue Series A
5.00% 8/15/30 (FSA) 1,750,000 1,856,277
New Jersey Economic Development
Authority (Cigarette Tax) 5.50% 6/15/31 1,000,000 1,042,850
New York City, New York Transitional
Finance Authority Revenue Refunding -
Future Tax Secured Series A
5.50% 11/1/26 1,000,000 1,088,970
New York State Sales Tax Asset Receivables
Series A 5.25% 10/15/27 (AMBAC) 1,000,000 1,087,000
Oregon State Department of Administrative
Services Lottery Revenue Refunding
Series A 5.00% 4/1/18 (FSA) 1,000,000 1,074,590
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series K 5.00% 7/1/30 1,000,000 1,036,190
Westminster, Colorado Sales &
Use Tax Revenue (Sales Tax Revenue)
Series A 5.60% 12/1/16 1,500,000 1,579,950
Wyandotte County, Kansas City Kansas
Unified Government Special Obligation
Revenue Refunding-Sales Tax-2nd
Lien-Area B 5.00% 12/1/20 1,500,000 1,554,405
Wyoming State Loan & Investment
Facilities Revenue 5.00% 10/1/24 1,550,000 1,642,613
------------
13,666,205
------------
13
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Electric & Gas Revenue Bonds - 7.25%
Connecticut State Development Authority
Pollution Control Revenue
(Connecticut Light & Power Co.)
3.35% 5/1/31 (AMBAC) (AMT) $ 1,300,000 $ 1,279,356
Farmington, New Mexico Pollution
Control Revenue
(El Paso Electric Co. Project)
Series A 4.00% 6/1/32 (FGIC) 1,000,000 1,000,290
Lower Colorado River Authority Texas
Revenue Refunding Series A
5.875% 5/15/17 (AMBAC) 3,000,000 3,230,730
Metropolitan Government Nashville &
Davidson County, Tennessee Electric
Revenue Series B 5.50% 5/15/14 1,000,000 1,117,430
Oliver County, North Dakota
Pollution Control Revenue
(Square Butte Electric Coop)
Series A 5.30% 1/1/27 (AMBAC) 1,500,000 1,583,610
Puerto Rico Electric Power
Authority Power Revenue
Series OO 5.00% 7/1/13 (CIFG) 1,000,000 1,083,200
San Francisco, California City and
County Public Utilities Commission
Series A 4.75% 11/1/36 (FSA) 1,750,000 1,792,175
South Carolina Jobs Economic
Development Authority Industrial Revenue
(South Carolina Electric & Gas Co. Project)
Series B 5.45% 11/1/32 (AMBAC) (AMT) 500,000 531,120
South Carolina State Public Service
Authority Revenue Refunding
Series A 5.125% 1/1/21 (FSA) 1,000,000 1,076,710
Texas Municipal Power Agency Revenue
4.00% 9/1/11 (AMBAC) 750,000 753,623
------------
13,448,244
------------
Escrowed to Maturity Bonds - 0.17%
Metropolitan Pier & Exposition Authority
Illinois Hospitality Facilities
(McCormick Place Convention Center)
5.75% 7/1/06 110,000 110,913
Southcentral, Pennsylvania General
Authority Revenue Refunding
(Wellspan Health Obligated Project)
5.625% 5/15/26 180,000 197,348
------------
308,261
------------
Higher Education Revenue Bonds - 9.68%
Allegheny County, Pennsylvania Higher
Education Building Authority
University Revenue (Duquesne University)
Series A 5.00% 3/1/16 (FGIC) 1,000,000 1,077,180
Chattanooga, Tennessee Health
Educational & Housing Facilities
Board Revenue (CDFI Phase I, LLC Project)
Series B 5.50% 10/1/20 1,280,000 1,297,267
Fulton County, Georgia Development
Authority Revenue
(Molecular Science Building Project)
5.25% 5/1/21 (MBIA) 1,000,000 1,094,910
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Higher Education Revenue Bonds (continued)
Illinois Educational Facilities Authority
Student Housing Revenue
(Educational Advancement-
University Center Project)
6.00% 5/1/22 $ 750,000 $ 814,230
Massachusetts State Health & Educational
Facilities Authority Revenue
(Nichols College Project) Series C
6.125% 10/1/29 1,000,000 1,059,540
Michigan Higher Education
Facilities Authority Revenue
(Kalamazoo College Project)
5.50% 12/1/19 500,000 536,955
New Jersey State Educational
Facilities Authority Revenue
(Georgian Court College Project)
Series C 6.50% 7/1/33 500,000 563,060
New York State Dormitory Authority Revenue
(Brooklyn Law School)
Series A 5.50% 7/1/18 (RADIAN) 1,000,000 1,090,240
(Fashion Institute Student Housing Corp.)
5.00% 7/1/13 (FGIC) 1,000,000 1,081,860
(Long Island University) Series B
5.50% 9/1/20 (RADIAN) 1,000,000 1,080,300
Ohio State Higher Educational
Facility Revenue
(John Carroll University) 5.50% 11/15/18 335,000 367,140
(Kenyon College Project) 4.70% 7/1/37 1,000,000 1,035,400
Ohio State University General Receipts
Series B 5.25% 6/1/21 1,000,000 1,084,100
Oregon State Facilities Authority Revenue
(College Independent Student
Housing Project) Series A
5.25% 7/1/30 (XLCA) 1,000,000 1,076,780
Pennsylvania State Higher Educational
Facilities Authority College &
University Revenue
(Geneva College Project) 6.125% 4/1/22 1,000,000 1,068,400
South Carolina Educational Facilities
Authority for Private Nonprofit Institutions
(Southern Wesleyan University)
5.00% 3/1/20 1,200,000 1,215,636
University of California Revenue
Series A 5.125% 5/15/20 (AMBAC) 250,000 270,305
University of Oklahoma Research Facilities
5.00% 3/1/23 (AMBAC) 1,065,000 1,123,863
University of Puerto Rico Revenue
Series M 5.50% 6/1/15 (MBIA) 1,000,000 1,016,730
------------
17,953,896
------------
14
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds - 10.54%
Chatham County, Georgia Hospital
Authority Revenue
(Memorial Health Medical Center)
Series A 6.125% 1/1/24 $ 1,000,000 $ 1,098,440
Cuyahoga County, Ohio Revenue
(Cleveland Clinic Health System)
Series A 6.00% 1/1/21 1,000,000 1,118,670
Duluth, Minnesota Economic
Development Authority Health
Care Facilities Revenue
(Benedictine Health System
St. Mary's Hospital) 5.50% 2/15/23 1,000,000 1,065,950
Florence County, South Carolina
Hospital Revenue (McLeod Regional
Medical Center Project) Series A
5.25% 11/1/27 (FSA) 1,000,000 1,074,110
Florida Health Highlands County,
Facilities Authority Revenue
(Adventist Health) Series I
5.00% 11/15/29 2,000,000 2,069,499
Indiana Health Facility Financing
Authority Hospital Revenue
(Deaconess Hospital Obligation)
Series A 5.375% 3/1/29 (AMBAC) 700,000 752,983
Lancaster County, Pennsylvania Hospital
Authority Revenue (Lancaster General
Hospital Project) 5.75% 3/15/21 1,000,000 1,086,210
Maple Grove, Minnesota Health
Care Facilities Revenue
(North Memorial Health Care)
5.00% 9/1/29 1,000,000 1,035,590
Maryland State Health & Higher
Education Facilities Authority Revenue
(Union Hospital of Cecil County Issue)
5.625% 7/1/32 500,000 533,400
Michigan State Hospital Finance
Authority Revenue
(Trinity Health Credit) Series C
5.375% 12/1/23 500,000 531,050
Minneapolis, Minnesota Health Care
System Revenue (Allina Health Systems)
Series A 5.75% 11/15/32 500,000 537,180
Multnomah County, Oregon Hospital
Facilities Authority Revenue
(Providence Health System)
5.25% 10/1/22 1,000,000 1,078,030
New Hampshire Health & Education
Facilities Authority Revenue
(Elliot Hospital) Series B
5.60% 10/1/22 1,000,000 1,065,600
North Texas Health Facilities Development
Corporation Hospital Revenue
(United Regional Health Care
System, Inc. Project) 6.00% 9/1/23 1,000,000 1,091,680
Orange County, Florida Health
Facilities Authority Revenue
(Orlando Regional Healthcare)
Series B 4.75% 11/15/36 1,400,000 1,394,064
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
St. Mary Hospital Authority Pennsylvania
Health System Revenue
(Catholic Health East) Series A
5.25% 11/15/16 $ 1,200,000 $ 1,290,084
St. Paul, Minnesota Housing &
Redevelopment Authority
Hospital Revenue
(Healtheast Project) 6.00% 11/15/25 1,000,000 1,090,180
Terrebonne Parish, Louisiana Hospital
Service District #1 Hospital Revenue
(Terrebonne General Medical
Center Project) 5.50% 4/1/33 (AMBAC) 1,500,000 1,643,160
------------
19,555,880
------------
Investor Owned Utilities Revenue Bonds - 2.33%
Brazos, Texas River Authority
Pollution Control Revenue
(Texas Utilities) 5.40% 5/1/29 (AMT) 1,000,000 1,008,170
Connecticut State Development Authority
Pollution Control Revenue Series A
5.85% 9/1/28 1,145,000 1,214,353
Forsyth, Montana Pollution Control Revenue
(Portland General Project) Series A
5.20% 5/1/33 1,005,000 1,036,416
Sabine River Authority, Texas Pollution
Control Revenue (TXU Electric Co. Project)
Series A 5.50% 5/1/22 1,000,000 1,067,840
------------
4,326,779
------------
Municipal Lease Revenue Bonds - 4.96%
Albany, New York Industrial Development
Agency Civic Facility Revenue
(Charitable Leadership Project)
Series A 5.75% 7/1/26 500,000 521,210
California State Public Works Board Lease
Revenue Department General Services
(Butterfield Street) Series A
5.25% 6/1/25 1,000,000 1,075,420
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series 2005 A
5.00% 6/1/21 (AMBAC) 1,000,000 1,052,020
Michigan State Building Authority
Revenue Series I 5.50% 10/15/18 2,175,000 2,362,464
Middle River, Virginia Regional Jail
Authority Facility Revenue
5.00% 5/15/20 (MBIA) 1,285,000 1,379,550
New York State Municipal Bond Bank
Agency Special School Purpose Revenue
Series C 5.25% 6/1/22 1,000,000 1,083,780
Puerto Rico Public Buildings
Authority Revenue
(Government Facilities)
Series J 5.00% 7/1/28 1,000,000 1,051,180
Puerto Rico Public Finance Corporate
Series A 5.25% 8/1/29 (MBIA) 620,000 670,282
------------
9,195,906
------------
15
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Political Subdivision General Obligation Bonds - 2.72%
Baldwin County, Alabama Series A
5.00% 1/1/25 (XLCA) $ 1,195,000 $ 1,265,911
Lansing, Michigan Community College
(College and Building Site)
5.00% 5/1/21 (MBIA) 1,325,000 1,402,208
Lunenburg County, Virginia Series B
5.25% 2/1/29 (MBIA) 715,000 778,077
Middlesex County, New Jersey
Improvement Authority Revenue
(County Guaranteed Open Space Trust)
5.25% 9/15/20 1,000,000 1,090,580
Texas Water Development Board Revenue
(State Revolving Federal-Senior Lien)
Series B 5.25% 7/15/17 500,000 507,480
------------
5,044,256
------------
Ports & Harbors Revenue Bonds - 0.29%
Virginia Port Authority Commonwealth
Port Fund Revenue Resolution
5.00% 7/1/12 (AMT) 500,000 532,780
------------
532,780
------------
- -/- Pre-Refunded Bonds - 7.82%
Anderson, Indiana Independent School
Building First Mortgage
5.50% 7/15/25-14 (FSA) 1,000,000 1,122,750
Arizona State Transportation Board
Highway Revenue 6.25% 7/1/16-09 1,850,000 2,011,764
Cook County, Illinois Series A
5.375% 11/15/21-11 (FGIC) 2,160,000 2,344,940
Forest Grove, Oregon Revenue Campus
(Pacific University) 6.30% 5/1/25-10
(RADIAN) 1,000,000 1,107,090
Golden State, California Tobacco
Securitization Settlement Revenue
Series B 5.75% 6/1/23-08 1,000,000 1,050,280
Oro Valley, Arizona Common Trust Funds
Partnership Certificates of
Participation
5.75% 7/1/17-06 (MBIA) 1,000,000 1,018,150
Pennsylvania State Higher Educational
Facilities Authority College &
University Revenue
(Ursinus College Project)
5.90% 1/1/27-07 1,000,000 1,040,090
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series D 5.75% 7/1/41-12 1,500,000 1,677,270
Series J 5.50% 7/1/21-14 1,000,000 1,119,370
Southcentral, Pennsylvania
General Authority Revenue
(Welllspan Health Obligated Project)
5.625% 5/15/26-11 820,000 903,820
Virginia State Resource Authority
Clean Water Revenue
(State Revolving Fund)
6.00% 10/1/16-10 1,000,000 1,106,270
------------
14,501,794
------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Resource Recovery Bonds - 0.80%
Pennsylvania Economic Development
Financing Authority Resource
Recovery Revenue
(Subordinate Colver Project)
Series G 5.125% 12/1/15 1,500,000 1,494,645
------------
1,494,645
------------
School District General Obligation Bonds - 5.68%
Belton, Missouri School District #124
Series B 5.25% 3/1/23 1,000,000 1,093,370
Boerne, Texas Independent
School District Building
5.25% 2/1/26 4,495,000 4,808,796
5.25% 2/1/29 1,500,000 1,602,840
Licking County, Ohio Joint Vocational
School District School Facilities
Construction and Improvement
5.00% 12/1/19 (MBIA) 1,000,000 1,068,110
Salem-Keizer, Oregon School District #24J
Refunding 5.00% 6/15/19 (FSA) 1,145,000 1,226,352
South Redford, Michigan School District
5.00% 5/1/21 (FGIC) 700,000 747,936
------------
10,547,404
------------
State General Obligation Bonds - 6.54%
California State
5.00% 2/1/26 (AMBAC) 1,500,000 1,565,925
5.25% 11/1/17 1,000,000 1,086,880
5.25% 2/1/30 (MBIA) 1,500,000 1,603,380
California State Economic Recovery
Series A 5.25% 7/1/14 1,000,000 1,106,170
Florida State Board Education
Capital Outlay (Public Education)
Series B 5.00% 6/1/10 750,000 793,350
Maryland State and Local Facilities Land
Capital Improvement First Series A
5.25% 3/1/13 2,500,000 2,754,300
Minnesota State Refunding Various
Purposes 5.00% 6/1/13 1,000,000 1,033,080
Puerto Rico Public Buildings Authority
Revenue Government Facility
Series I 5.50% 7/1/23 2,000,000 2,193,060
------------
12,136,145
------------
Tax Increment/Special Assessment Bonds - 2.75%
Allegheny County, Pennsylvania
Redevelopment Authority Revenue
(Pittsburgh Mills Project) 5.10% 7/1/14 265,000 276,223
Paseo, Florida Community Development
District Capital Improvement Revenue
Series B 4.875% 5/1/10 1,000,000 1,005,560
Portland, Oregon Urban Renewal &
Redevelopment Interstate Corridor
Series A 5.25% 6/15/20 (FGIC) 1,000,000 1,102,320
16
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Tax Increment/Special Assessment Bonds (continued)
Richmond Heights, Missouri Tax
Increment & Transaction Sales Tax
Revenue Refunding & Improvement
(Francis Place Redevelopment Project)
5.625% 11/1/25 $ 1,200,000 $ 1,217,376
St. Joseph, Missouri Industrial
Development Authority Tax
Increment Revenue
(Shoppes at North Village Project)
Series A 5.10% 11/1/19 500,000 496,320
Series B 5.375% 11/1/23 1,000,000 1,003,360
------------
5,101,159
------------
Territorial General Obligation Bonds - 1.80%
Puerto Rico Commonwealth Improvement
Series A 5.25% 7/1/23 1,125,000 1,204,886
Puerto Rico Commonwealth Series A
5.00% 7/1/30 1,000,000 1,051,180
Puerto Rico Public Finance Corporation
Commonwealth Appropriation Series A
(LOC - Puerto Rico Government Bank)
5.75% 8/1/27 1,000,000 1,087,510
------------
3,343,576
------------
Transportation Revenue Bonds - 1.16%
Colorado Department Transportation Revenue
(Anticipation Notes) Series B
5.00% 12/15/14 (FGIC) 1,000,000 1,089,510
Metropolitan Transportation Authority
Revenue Refunding Series A
5.00% 11/15/30 (FSA) 1,000,000 1,056,740
------------
2,146,250
------------
Turnpike/Toll Road Revenue Bonds - 1.58%
Harris County, Texas Refunding
(Senior Lien-Toll Road) Series A
5.25% 8/15/35 (FSA) 1,500,000 1,581,645
Pennsylvania State Turnpike
Commission Revenue Series A
5.25% 12/1/20 (AMBAC) 1,230,000 1,353,369
------------
2,935,014
------------
Water & Sewer Revenue Bonds - 2.62%
Atlanta, Georgia Water &
Waste Water Revenue
5.00% 11/1/18 (FSA) 1,000,000 1,073,020
Clovis, California Public Financing
Authority Wastewater Revenue
5.25% 8/1/30 (MBIA) 1,000,000 1,078,980
Fulton County, Georgia Water &
Sewer Revenue 5.25% 1/1/35 (FGIC) 1,500,000 1,611,990
Green Bay, Wisconsin Water Systems Revenue
Refunding and Improvements Bonds
5.25% 11/1/22 (FSA) 1,000,000 1,095,180
------------
4,859,170
------------
Total Municipal Bonds (cost $162,617,788) 166,986,591
------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
oVariable Rate Demand Notes - 6.90%
- --------------------------------------------------------------------------------
Alexandria, Virginia Industrial Development
Authority 3.12% 10/1/35 (AMBAC) $ 1,000,000 $ 1,000,000
California State Department of Water
Resources Power Supply Subordinate
Series G-10 3.22% 5/1/18 (FGIC) 2,000,000 2,000,000
Chester County, Pennsylvania Industrial
Development Authority Revenue
(Archdiocese of Philadelphia)
2.93% 7/1/31 1,000,000 1,000,000
East Bay, California Municipal Utilities
Distributed Water System Revenue
Series B-2 3.12% 6/1/38 (XLCA) 1,300,000 1,300,000
Minneapolis, Minnesota Guthrie
Parking Ramp 3.05% 12/1/33 (SPA) 1,000,000 1,000,000
New Jersey Health Care Facilities
Financing Authority Revenue
(Computer Program)
Series A1 3.18% 7/1/30 3,000,000 3,000,000
Philadelphia, Pennsylvania Authority for
Industrial Development Revenue
(Newcourtland Elder Services Project)
(LOC PNC Bank) 2.93% 3/1/27 3,500,000 3,500,000
------------
Total Variable Rate Demand Notes
(cost $12,800,000) 12,800,000
------------
Total Market Value of Securities - 96.90%
(cost $175,417,788) 179,786,591
Receivables and Other Assets
Net of Liabilities - 3.10% 5,750,259
------------
Net Assets Applicable to 16,149,935 Shares
Outstanding - 100.00% $185,536,850
============
Net Asset Value - Delaware Tax-Free USA Intermediate Fund
Class A ($155,285,659 / 13,516,334 Shares) $ 11.49
------------
Net Asset Value - Delaware Tax-Free USA Intermediate Fund
Class B ($2,624,601/ 228,541 Shares) $ 11.48
------------
Net Asset Value - Delaware Tax-Free USA Intermediate Fund
Class C ($27,626,590 / 2,405,060 Shares) $ 11.49
------------
17
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at February 28, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $ 181,640,252
Accumulated net realized loss on investments (472,205)
Net unrealized appreciation of investments 4,368,803
-------------
Total net assets $ 185,536,850
=============
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
CDFI - Community Development Financial Institutions
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
SPA - Stand-by Purchase Agreement
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. See Note 7 in
"Notes to Financial Statements."
o Variable rate securities. The interest rate shown is the rate as of
February 28, 2006.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Asset Value and Offering Price per Share -
Delaware Tax-Free USA Intermediate Fund
Net asset value Class A (A) $ 11.49
Sales charge (2.75% of offering price) (B) 0.32
-------------
Offering price $ 11.81
=============
(A) Net asset value per share, as illustrated, is the 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
- --------------------------------------------------------------------------------
Delaware National High-Yield Municipal Bond Fund
Statements February 28, 2006 (Unaudited)
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 96.18%
- --------------------------------------------------------------------------------
Airline Revenue Bonds - 0.40%
++Minneapolis/St. Paul, Minnesota
Metropolitan Airports Commission
Special Facilities Revenue
(Northwest Airlines, Inc. Project)
Series A 7.00% 4/1/25 (AMT) $ 500,000 $ 339,075
-----------
339,075
-----------
Airport Revenue Bonds - 3.13%
New York City, New York Industrial
Development (JFK I LLC Project)
Series A 5.50% 7/1/28 (AMT) 905,000 911,788
Oklahoma City, Oklahoma Industrial &
Cultural Facilities Subordinated
(Air Cargo Project) 6.75% 1/1/23 (AMT) 1,160,000 1,205,193
Onondaga County, New York Industrial
Development Authority Revenue
Subordinated (Air Cargo Project)
7.25% 1/1/32 (AMT) 500,000 530,860
-----------
2,647,841
-----------
Continuing Care/Retirement Revenue Bonds - 16.31%
Apple Valley, Minnesota Economic
Development Authority Health
Care Revenue
(Augustana Home St. Paul Project)
Series A 6.00% 1/1/40 1,000,000 1,012,580
(Evercare Senior Living LLC Project)
Series A 6.125% 6/1/35 1,000,000 995,170
Bexar County, Texas Health Facilities
Development Corporation
(Army Retirement Residence Project)
6.30% 7/1/32 1,000,000 1,075,950
Buhl, Minnesota Nursing Home Revenue
(Forest Health Services Project)
Series A 6.75% 8/1/33 600,000 625,608
Colorado Health Facilities Authority Revenue
(Evangelical Lutheran) 5.00% 6/1/35 1,000,000 1,017,440
(Evangelical Lutheran) Series A
5.25% 6/1/34 750,000 773,918
Gainesville & Hall County, Georgia
Development Authority Revenue
(Lanier Village Estates Project)
Series C 7.25% 11/15/29 1,000,000 1,101,440
Lebanon County, Pennsylvania Health
Facilities Authority Center Revenue
(Pleasant View Retirement) Series A
5.30% 12/15/26 1,000,000 1,007,680
Montgomery County, Pennsylvania Higher
Education & Health Authority Revenue
(Foulkeways at Gwynedd Project)
6.75% 11/15/30 1,000,000 1,057,990
North Carolina Medical Care Commission
Health Care Facilities Revenue
(Pennybryn at Mayfield Project)
Series A 6.125% 10/1/35 1,000,000 1,025,070
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Continuing Care/Retirement Revenue Bonds (continued)
Philadelphia, Pennsylvania Hospitals &
Higher Education Facilities
Authority Revenue
(The Philadelphia Protestant Home Project)
Series A 6.50% 7/1/27 $ 1,100,000 $ 1,110,119
Rochester, Minnesota Multifamily Revenue
(Wedum Shorewood Campus Project)
6.60% 6/1/36 985,000 1,018,047
Vermont Educational & Health Building
Financing Agency Revenue
Health Care Facility
(Copley Manor Project) 6.50% 4/1/33 1,310,000 985,762
Winchester, Virginia Industrial Development
Authority Residential Care Facility
Revenue (Westminster-Canterbury)
Series A 5.30% 1/1/35 1,000,000 1,010,470
-----------
13,817,244
-----------
Convention Center/Hotel Revenue Bonds - 2.88%
Baltimore, Maryland Convention
Center Hotel Revenue Subordinated
Series B 5.875% 9/1/39 1,000,000 1,053,620
Middlesex County, New Jersey Improvement
Authority Senior Revenue
(Heldrich Center Hotel/Conference Project)
Series A
5.00% 1/1/32 500,000 500,145
5.125% 1/1/37 870,000 880,423
-----------
2,434,188
-----------
Corporate Revenue Bonds - 11.64%
Allegheny County, Pennsylvania Industrial
Development Authority Revenue
(Environmental Improvement)
5.50% 11/1/16 1,000,000 1,038,630
Alliance, Texas Airport Authority
Special Facilities Revenue
(Federal Express Corp. Project)
6.375% 4/1/21 (AMT) 2,000,000 2,049,299
Cloquet, Minnesota Pollution Control Revenue
(Potlatch Corp. Project) 5.90% 10/1/26 750,000 759,818
De Soto Parish, Louisiana Environmental
Improvement Revenue
(International Paper Co. Project)
Series A 6.35% 2/1/25 (AMT) 1,650,000 1,760,600
Gulf Coast, Texas Waste Disposal
Authority Revenue
(Valero Energy Corp. Project)
6.65% 4/1/32 (AMT) 1,000,000 1,082,300
Phenix City, Alabama Industrial
Development Board Environmental
Improvement Revenue
(Mead Westvaco Corp. Project)
Series A 6.35% 5/15/35 (AMT) 500,000 538,585
Sugar Creek, Missouri Industrial
Development Revenue
(Lafarge North America Project)
Series A 5.65% 6/1/37 (AMT) 500,000 519,840
19
- --------------------------------------------------------------------------------
Delaware National High-Yield Municipal Bond Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Corporate Revenue Bonds (continued)
Sweetwater County, Wyoming Solid
Waste Disposal Revenue
(FMC Corp. Project)
5.60% 12/1/35 (AMT) $ 1,000,000 $ 1,033,700
Toledo, Lucas County, Ohio Port
Development Revenue Authority
(Toledo Express Airport Project)
6.375% 11/15/32 Series C (AMT) 1,000,000 1,073,530
-----------
9,856,302
-----------
Dedicated Tax & Fees Revenue Bonds - 4.07%
Chicago, Illinois Tax Increment Subordinate
(Central Loop Redevelopment Project)
Series A 6.50% 12/1/08 1,000,000 1,061,000
Las Vegas, Nevada Local Improvement
Special District #808
(Summerlin Area Project)
6.75% 6/1/21 990,000 1,026,155
New Jersey Economic Development Authority
(Cigarette Tax) 5.75% 6/15/34 1,000,000 1,063,960
Prescott Valley, Arizona Improvement
District Special Assessment
(Sewer Collection System Roadway Repair)
7.90% 1/1/12 290,000 299,271
-----------
3,450,386
-----------
Escrowed to Maturity Bonds - 0.47%
Illinois State Development Finance Authority
(Harrisburg Medical Center Project)
7.00% 3/1/06 400,000 400,120
-----------
400,120
-----------
Higher Education Revenue Bonds - 14.24%
Berks County, Pennsylvania Municipal
Authority College
(Albright College Project)
5.375% 10/1/28 700,000 726,537
Chattanooga, Tennessee Health
Educational & Housing Facilities
Board Revenue (CDFI Phase I, LLC Project)
Subordinate Series B 6.00% 10/1/35 1,000,000 1,032,680
Illinois Educational Facilities Authority
Student Housing Revenue
(Educational Advancement Fund-
University Center Project) 6.25% 5/1/30 1,000,000 1,093,890
Maine Finance Authority Education Revenue
(Waynflete School Project)
6.40% 8/1/19 1,000,000 1,068,390
Maryland State Economic Development
Corporation, Student Housing Revenue
(University of Maryland
College Park Project)
5.625% 6/1/35 1,000,000 1,050,600
Massachusetts State Development
Finance Agency Revenue
(Massachusetts College of
Pharmacy Project)
Series C 5.75% 7/1/33 1,000,000 1,066,020
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Higher Education Revenue Bonds (continued)
Massachusetts State Health & Educational
Facilities Authority Revenue
(Nichols College Project) Series C
6.125% 10/1/29 $ 1,000,000 $ 1,059,540
Milledgeville-Baldwin County,
Georgia Development Authority Revenue
(Georgia College & State University
Foundation Project) 6.00% 9/1/33 1,000,000 1,091,160
Minnesota State Higher Education
Facilities Authority Revenue
(College of Art & Design Project)
Series 5-D 6.75% 5/1/26 500,000 541,990
New Jersey State Educational
Facilities Authority
(Fairleigh Dickinson Project)
Series C 5.50% 7/1/23 750,000 798,150
New Mexico Educational Assistance
Foundation Student Loan
Revenue 1st Subordinate
Series A-2 6.65% 11/1/25 (AMT) 985,000 998,967
Scranton-Lackawanna, Pennsylvania
Health & Welfare Authority
First Mortgage Revenue
(Lackawanna Junior College Project)
5.75% 11/1/20 1,510,000 1,535,459
-----------
12,063,383
-----------
Hospital Revenue Bonds - 19.74%
California Statewide Community
Development Authority Revenue
Health Facilities (Adventist Health)
Series A 5.00% 3/1/35 1,500,000 1,534,395
Coffee County, Georgia Hospital
Authority Revenue
(Coffee Regional Medical Center Project)
5.00% 12/1/26 500,000 503,665
Henrico County, Virginia Economic
Development Authority Revenue
(Bon Secours Health System Inc.)
Series A 5.60% 11/15/30 1,000,000 1,054,350
Illinois Health Facilities Authority Revenue
(Elmhurst Memorial Healthcare Project)
5.625% 1/1/28 1,000,000 1,056,810
(Midwest Physician Group
Limited Project) 5.50% 11/15/19 35,000 32,737
Knox County, Tennessee Health
Educational & Housing Facilities
Board Hospital Revenue
(East Tennessee Hospital Project)
Series B 5.75% 7/1/33 1,300,000 1,380,106
Louisiana Public Facilities Authority Revenue
(Ochsner Clinic Foundation Project)
Series B 5.50% 5/15/32 1,000,000 1,015,070
Massachusetts State Health & Educational
Facilities Authority Revenue
(Jordan Hospital Project) Series E
6.75% 10/1/33 1,000,000 1,099,760
20
- --------------------------------------------------------------------------------
Delaware National High-Yield Municipal Bond Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
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 $ 1,054,390
Orange County, Florida Health
Facilities Authority Revenue
(Orlando Regional Healthcare)
Series B 4.75% 11/15/36 1,395,000 1,389,085
Richland County, Ohio Hospital
Facilities Revenue
(Medcentral Health System Project)
Series B 6.375% 11/15/30 1,500,000 1,631,969
Shakopee, Minnesota Health Care
Facilities Revenue
(St. Francis Regional Medical Center)
5.25% 9/1/34 750,000 773,978
South Dakota Health & Education
Facilities Authority Revenue
(Huron Regional Medical Center Project)
7.00% 4/1/10 860,000 862,503
St. Joseph County, Indiana Industrial
Economic Development
(Madison Center Project)
5.50% 2/15/21 1,150,000 1,172,448
St. Paul, Minnesota Housing &
Redevelopment Authority
Hospital Revenue
(Healtheast Project)
6.00% 11/15/35 1,000,000 1,083,810
Yavapai County, Arizona Industrial
Development Authority Hospital Revenue
(Yavapai Medical Center Project)
Series A 6.00% 8/1/33 1,000,000 1,077,730
-----------
16,722,806
-----------
Investor Owned Utilities Revenue Bonds - 4.82%
Brazos, Texas River Authority
Pollution Control Revenue
(TXU Energy Co. Project)
Series B 6.30% 7/1/32 (AMT) 1,000,000 1,068,920
Forsyth, Montana Pollution Control Revenue
(Portland General Project)
Series A 5.20% 5/1/33 1,000,000 1,031,260
Mississippi Business Finance Corporation
Pollution Control Revenue
(System Energy Resources, Inc. Project)
5.90% 5/1/22 900,000 912,024
Petersburg, Indiana Pollution Control Revenue
(Indianapolis Power & Light Co. Project)
6.375% 11/1/29 (AMT) 1,000,000 1,066,240
-----------
4,078,444
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Municipal Lease Revenue Bonds - 4.38%
Dauphin County, Pennsylvania
General Authority
(Riverfront Office & Parking Project)
Series A 5.75% 1/1/10 $ 1,875,000 $ 1,868,775
Missouri State Development Finance Board
Infrastructure Facilities Revenue
(Branson Landing Project) Series A
5.50% 12/1/24 720,000 765,626
New York City, New York Industrial
Development Agency Revenue
(Terminal One Group Association)
5.50% 1/1/24 (AMT) 1,000,000 1,075,040
-----------
3,709,441
-----------
- -/-Pre-Refunded Bonds - 8.18%
Golden State, California Tobacco
Securitization Corporation Settlement
Revenue Series B 5.50% 6/1/43-13 1,500,000 1,664,160
Illinois State Development Finance Authority
(Harrisburg Medical Center Project)
7.20% 3/1/07-06
7.20% 3/1/08-06 800,000 800,000
Mississippi Development Bank
Special Obligation
(Madison County Hospital Project)
6.40% 7/1/29-09 1,585,000 1,749,745
New Hampshire Higher Education &
Health Facilities Authority
(Brewster Academy Project)
6.75% 6/1/25-06 1,000,000 1,027,460
Savannah, Georgia Economic
Development Authority Revenue
(College of Art & Design Project)
6.50% 10/1/13-09 1,000,000 1,108,170
Volusia County, Florida Industrial
Development Authority
Mortgage Revenue (Bishops Glen
Retirement Health Facilities Project)
7.50% 11/1/16-06 555,000 579,609
-----------
6,929,144
-----------
Tax Increment/Special Assessment Bonds - 5.92%
Chicago, Illinois Tax Increment Allocation
(Chatham Ridge Redevelopment Project)
5.95% 12/15/12 750,000 795,668
Lowry, Colorado Economic Redevelopment
Authority Revenue Series A
(Private Placement) 7.30% 12/1/10 390,000 406,887
Midtown Miami, Florida Community
Development District Special
Assessment Revenue
(Infrastructure Project)
Series B 6.50% 5/1/37 1,000,000 1,087,320
21
- --------------------------------------------------------------------------------
Delaware National High-Yield Municipal Bond Fund
Statements
- --------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Tax Increment/Special Assessment Bonds (continued)
Richmond Heights, Missouri Tax
Increment & Transaction Sales
Tax Revenue Refunding & Improvement
(Francis Place Redevelopment Project)
5.625% 11/1/25 $ 1,200,000 $ 1,217,376
St. Joseph, Missouri Industrial
Development Authority Tax
Increment Revenue
(Shoppes at North Village Project)
Series A 5.375% 11/1/24 1,000,000 1,005,430
Series A 5.50% 11/1/27 500,000 503,900
-----------
5,016,581
-----------
Total Municipal Bonds (cost $77,752,628) 81,464,955
===========
Total Market Value of Securities - 96.18%
(cost $77,752,628) 81,464,955
Receivables and Other Assets
Net of Liabilities - 3.82% 3,237,201
-----------
Net Assets Applicable to 8,249,600 Shares
Outstanding - 100.00% $84,702,156
===========
Net Asset Value - Delaware National High-Yield
Municipal Bond Fund
Class A ($67,389,746 / 6,567,201 Shares) $ 10.26
-----------
Net Asset Value - Delaware National High-Yield
Municipal Bond Fund
Class B ($11,764,922 / 1,143,822 Shares) $ 10.29
-----------
Net Asset Value - Delaware National High-Yield
Municipal Bond Fund
Class C ($5,547,488 / 538,577 Shares) $ 10.30
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at February 28, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $87,593,294
Distributions in excess of net investment income (4,104)
Accumulated net realized loss on investments (6,599,361)
Net unrealized appreciation of investments 3,712,327
-----------
Total net assets $84,702,156
===========
AMT - Subject to Alternative Minimum Tax
CDFI - Community Development Financial Institutions
- -/- 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. See Note 7 in
"Notes to Financial Statements".
++ Non-income producing security. Security is currently in default.
Net Asset Value and Offering Price per Share -
Delaware National High-Yield Municipal Bond Fund
Net asset value Class A (A) $ 10.26
Sales charge (4.50% of offering price) (B) 0.48
-----------
Offering price $10.74
===========
(A) Net asset value per share, as illustrated, is the 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
22
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Statements February 28, 2006 (Unaudited)
- --------------------------------------------------------------------------------
OF ASSETS AND LIABILITIES
Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free USA National High-Yield
USA Fund Insured Fund Intermediate Fund Municipal Bond Fund
Assets:
Investments at market $ 504,553,948 $ 58,049,647 $ 179,786,591 $ 81,464,955
Cash 533,620 3,243,429 7,145,101 2,136,972
Subscriptions receivable 434,591 42,960 2,021,792 34,362
Receivable for securities sold -- -- -- 2,047,360
Interest receivable 5,696,754 662,508 2,213,763 1,227,688
Due from DMC 32,830 3,372 21,818 17,940
-------------- ------------ ------------- ------------
Total assets 511,251,743 62,001,916 191,189,065 86,929,277
-------------- ------------ ------------- ------------
Liabilities:
Payable for securities purchased 5,120,950 3,024,190 4,857,733 2,036,920
Liquidations payable 499,966 414,897 522,132 26,699
Distributions payable 330,389 34,414 97,419 62,933
Due to managers and affiliates 397,411 48,875 165,663 74,929
Other accrued expenses 47,040 12,033 9,268 25,640
-------------- ------------ ------------- ------------
Total liabilities 6,395,756 3,534,409 5,652,215 2,227,121
-------------- ------------ ------------- ------------
Total net assets $ 504,855,987 $ 58,467,507 $ 185,536,850 $ 84,702,156
============== ============ ============= ============
Investments at cost $ 47,828,411 $ 55,152,609 $ 175,417,788 $ 77,752,628
============== ============ ============= ============
See accompanying notes
23
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Statements Six Months Ended February 28, 2005 (Unaudited)
- --------------------------------------------------------------------------------
OF OPERATIONS
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 $ 11,744,806 $ 1,396,414 $ 3,506,540 $ 2,320,640
-------------- ------------ ------------- ------------
Expenses:
Management fees 1,318,924 147,809 406,995 229,026
Distribution expenses -- Class A 627,796 68,730 199,803 82,344
Distribution expenses -- Class B 74,179 29,414 13,705 60,798
Distribution expenses -- Class C 30,960 14,034 129,669 26,063
Dividend disbursing and transfer agent fees and
expenses 157,754 17,835 116,512 29,671
Accounting and administration expenses 95,949 11,824 29,559 16,656
Custodian fees 6,108 805 2,264 2,406
Legal and professional fees 39,170 9,302 16,091 10,968
Registration fees 28,750 17,813 20,500 19,036
Reports and statements to shareholders 26,557 4,160 10,734 6,972
Trustees' fees 13,651 1,685 4,738 2,389
Insurance fees 5,624 630 1,990 979
Pricing fees 1,819 714 2,110 1,184
Taxes (other than taxes on income) 891 110 307 261
Other 3,311 1,930 3,077 2,257
-------------- ------------ ------------- ------------
2,431,443 326,795 958,054 491,010
Less expenses absorbed or waived (209,805) (16,222) (126,236) (49,431)
Less waived distribution expenses - Class A (100,566) (10,965) (99,902) --
Less expense paid indirectly (2,416) (304) (1,129) (1,742)
-------------- ------------ ------------- ------------
Total operating expenses 2,118,656 299,304 730,787 439,837
-------------- ------------ ------------- ------------
Net Investment Income 9,626,150 1,097,110 2,775,753 1,880,803
-------------- ------------ ------------- ------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 3,281,753 358,210 (111,783) (695,014)
Net change in unrealized appreciation/depreciation
of investments (10,568,029) (1,214,691) (1,353,760) (264,426)
-------------- ------------ ------------- ------------
Net Realized and Unrealized Loss on Investments (7,286,276) (856,481) (1,465,543) (959,440)
-------------- ------------ ------------- ------------
Net Increase in Net Assets Resulting from Operations $ 2,339,874 $ 240,629 $ 1,310,210 $ 921,363
============== ============ ============= ============
See accompanying notes
24
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Statements
- --------------------------------------------------------------------------------
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
2/28/06 8/31/05 2/28/06 8/31/05
(Unaudited) (Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 9,626,150 $ 20,913,234 $ 1,097,110 $ 2,327,135
Net realized gain on investments 3,281,753 2,541,488 358,210 837,585
Net change in unrealized appreciation/depreciation of investments (10,568,029) 9,862,168 (1,214,691) 173,220
------------- ------------- ------------- ------------
Net increase in net assets resulting from operations 2,339,874 33,316,890 240,629 3,337,940
------------- ------------- ------------- ------------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (9,281,269) (20,004,240) (964,477) (2,060,704)
Class B (243,499) (694,792) (89,791) (194,934)
Class C (101,492) (214,202) (42,830) (71,497)
Net realized gain on investments:
Class A -- -- (807,403) (105,930)
Class B -- -- (95,366) (13,185)
Class C -- -- (45,476) (4,364)
------------- ------------- ------------- ------------
(9,626,260) (20,913,234) (2,045,343) (2,450,614)
------------- ------------- ------------- ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 56,034,774 24,251,474 1,236,714 2,659,855
Class B 727,432 705,667 62,007 184,583
Class C 1,511,627 1,035,529 252,125 1,194,109
Net asset value of shares issued upon reinvestment of dividends
and distributions:
Class A 5,171,921 10,723,495 1,162,074 1,219,344
Class B 151,096 392,819 110,336 117,102
Class C 81,377 170,783 51,480 35,327
------------- ------------- ------------- ------------
63,678,227 37,279,767 2,874,736 5,410,320
------------- ------------- ------------- ------------
Cost of shares repurchased:
Class A (24,794,905) (48,950,197) (3,241,596) (6,731,009)
Class B (2,623,676) (7,473,113) (260,365) (977,643)
Class C (568,979) (1,180,661) (495,452) (309,488)
------------- ------------- ------------- ------------
(27,987,560) (57,603,971) (3,997,413) (8,018,140)
------------- ------------- ------------- ------------
Increase (decrease) in net assets derived from capital share
transactions 35,690,667 (20,324,204) (1,122,677) (2,607,820)
------------- ------------- ------------- ------------
Net Increase (Decrease) in Net Assets 28,404,281 (7,920,548) (2,927,391) (1,720,494)
Net Assets:
Beginning of period 476,451,707 484,372,255 61,394,898 63,115,392
------------- ------------- ------------- ------------
End of period $ 504,855,988 $ 476,451,707 $ 58,467,507 $ 61,394,898
============= ============= ============= ============
Distributions in excess of net investment income $ (12,181) $ (12,071) $ (1,778) $ (1,790)
============= ============= ============= ============
See accompanying notes
25
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Statements
- --------------------------------------------------------------------------------
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
2/28/06 8/31/05 2/28/06 8/31/05
(Unaudited) (Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 2,775,753 $ 4,020,053 $ 1,880,803 $ 3,803,398
Net realized gain (loss) on investments (111,783) 216,425 (695,014) (20,934)
Net change in unrealized appreciation/depreciation of investments (1,353,760) 2,305,659 (264,426) 2,945,238
------------- ------------- ------------- ------------
Net increase in net assets resulting from operations 1,310,210 6,542,137 921,363 6,727,702
------------- ------------- ------------- ------------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (2,384,113) (3,353,356) (1,540,407) (3,012,354)
Class B (37,468) (95,959) (237,959) (584,141)
Class C (354,172) (570,738) (101,874) (212,515)
------------- ------------- ------------- ------------
(2,775,753) (4,020,053) (1,880,240) (3,809,010)
------------- ------------- ------------- ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 48,187,560 60,268,006 4,313,283 11,865,636
Class B 310,732 329,988 496,191 533,475
Class C 4,650,553 8,118,530 777,336 1,761,862
Net asset value of shares issued upon reinvestment of dividends
and distributions:
Class A 1,749,233 2,392,786 979,897 1,690,051
Class B 29,738 68,135 114,240 270,527
Class C 203,983 276,166 62,085 137,144
------------- ------------- ------------- ------------
55,131,799 71,453,611 6,743,032 16,258,695
------------- ------------- ------------- ------------
Cost of shares repurchased:
Class A (13,751,994) (21,868,344) (3,604,626) (6,019,664)
Class B (884,580) (1,002,815) (1,742,619) (2,802,575)
Class C (2,094,176) (2,895,030) (465,536) (1,654,712)
------------- ------------- ------------- ------------
(16,730,750) (25,766,189) (5,812,781) (10,476,951)
------------- ------------- ------------- ------------
Increase in net assets derived from capital share transactions 38,401,049 45,687,422 930,251 5,781,744
------------- ------------- ------------- ------------
Net Increase (Decrease) in Net Assets 36,935,506 48,209,506 (28,626) 8,700,436
Net Assets:
Beginning of period 148,601,344 100,391,838 84,730,782 76,030,346
------------- ------------- ------------- ------------
End of period $ 185,536,850 $ 148,601,344 $ 84,702,156 $ 84,730,782
============= ============= ============= ============
Distributions in excess of net investment income $ -- $ -- $ (4,104) $ (4,104)
============= ============= ============= ============
See accompanying notes
26
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.760 $ 11.460 $ 11.170 $ 11.280 $ 11.320 $ 10.830
Income (loss) from investment operations:
Net investment income 0.232 0.512 0.538 0.537 0.566 0.582
Net realized and unrealized gain (loss) on investments (0.190) 0.300 0.290 (0.110) (0.040) 0.490
----------- --------- --------- ---------- ---------- ---------
Total from investment operations 0.042 0.812 0.828 0.427 0.526 1.072
----------- --------- --------- ---------- ---------- ---------
Less dividends and distributions from:
Net investment income (0.232) (0.512) (0.538) (0.537) (0.566) (0.582)
----------- --------- --------- ---------- ---------- ---------
Total dividends and distributions (0.232) (0.512) (0.538) (0.537) (0.566) (0.582)
----------- --------- --------- ---------- ---------- ---------
Net asset value, end of period $ 11.570 $ 11.760 $ 11.460 $ 11.170 $ 11.280 $ 11.320
=========== ========= ========= ========== ========== =========
Total return(3) 0.38% 7.23% 7.54% 3.84% 4.85% 10.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 483,467 $ 453,982 $ 456,192 $ 460,917 $ 495,731 $ 495,597
Ratio of expenses to average net assets 0.85% 0.86% 0.87% 0.87% 0.87% 0.88%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 0.98% 0.98% 0.93% 0.97% 0.98% 0.89%
Ratio of net investment income to average net assets 4.05% 4.43% 4.72% 4.74% 5.08% 5.29%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.92% 4.31% 4.66% 4.64% 4.97% 5.28%
Portfolio turnover 54% 47% 32% 96% 99% 103%
(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
required 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 and distributor, 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 USA Fund Class B
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.760 $ 11.460 $ 11.170 $ 11.280 $ 11.320 $ 10.830
Income (loss) from investment operations:
Net investment income 0.188 0.423 0.449 0.449 0.479 0.494
Net realized and unrealized gain (loss) on investments (0.190) 0.300 0.290 (0.110) (0.040) 0.490
----------- --------- --------- ---------- ---------- ---------
Total from investment operations (0.002) 0.723 0.739 0.339 0.439 0.984
----------- --------- --------- ---------- ---------- ---------
Less dividends and distributions from:
Net investment income (0.188) (0.423) (0.449) (0.449) (0.479) (0.494)
----------- --------- --------- ---------- ---------- ---------
Total dividends and distributions (0.188) (0.423) (0.449) (0.449) (0.479) (0.494)
----------- --------- --------- ---------- ---------- ---------
Net asset value, end of period $ 11.570 $ 11.760 $ 11.460 $ 11.170 $ 11.280 $ 11.320
=========== ========= ========= ========== ========== =========
Total return(3) 0.00% 6.42% 6.71% 3.03% 4.04% 9.32%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 14,491 $ 16,507 $ 22,396 $ 31,052 $ 37,448 $ 39,317
Ratio of expenses to average net assets 1.62% 1.63% 1.65% 1.65% 1.65% 1.68%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 1.71% 1.71% 1.71% 1.75% 1.76% 1.69%
Ratio of net investment income to average net assets 3.28% 3.66% 3.94% 3.96% 4.30% 4.49%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.19% 3.58% 3.88% 3.86% 4.19% 4.48%
Portfolio turnover 54% 47% 32% 96% 99% 103%
(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
required amortization of all premiums and discounts on debt securities.
The effect of this change 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
28
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.760 $ 11.460 $ 11.170 $ 11.280 $ 11.320 $ 10.830
Income (loss) from investment operations:
Net investment income 0.188 0.423 0.449 0.449 0.479 0.494
Net realized and unrealized gain (loss) on
investments (0.190) 0.300 0.290 (0.110) (0.040) 0.490
----------- --------- --------- ---------- ---------- ---------
Total from investment operations (0.002) 0.723 0.739 0.339 0.439 0.984
----------- --------- --------- ---------- ---------- ---------
Less dividends and distributions from:
Net investment income (0.188) (0.423) (0.449) (0.449) (0.479) (0.494)
----------- --------- --------- ---------- ---------- ---------
Total dividends and distributions (0.188) (0.423) (0.449) (0.449) (0.479) (0.494)
----------- --------- --------- ---------- ---------- ---------
Net asset value, end of period $ 11.570 $ 11.760 $ 11.460 $ 11.170 $ 11.280 $ 11.320
=========== ========= ========= ========== ========== =========
Total return(3) 0.00% 6.42% 6.71% 3.03% 4.04% 9.32%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 6,898 $ 5,963 $ 5,784 $ 5,508 $ 5,979 $ 6,457
Ratio of expenses to average net assets 1.62% 1.63% 1.65% 1.65% 1.65% 1.68%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 1.71% 1.71% 1.71% 1.75% 1.76% 1.69%
Ratio of net investment income to average net assets 3.28% 3.66% 3.94% 3.96% 4.30% 4.49%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.19% 3.58% 3.88% 3.86% 4.19% 4.48%
Portfolio turnover 54% 47% 32% 96% 99% 103%
(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
required amortization of all premiums and discounts on debt securities.
The effect of this change 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
29
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.280 $ 11.110 $ 10.880 $ 11.020 $ 10.950 $ 10.390
Income (loss) from investment operations:
Net investment income 0.209 0.432 0.471 0.473 0.487 0.483
Net realized and unrealized gain (loss) on investments (0.164) 0.192 0.230 (0.140) 0.070 0.560
----------- --------- --------- ---------- ---------- ---------
Total from investment operations 0.045 0.624 0.701 0.333 0.557 1.043
----------- --------- --------- ---------- ---------- ---------
Less dividends and distributions from:
Net investment income (0.209) (0.432) (0.471) (0.473) (0.487) (0.483)
Net realized gain on investments (0.176) (0.022) -- -- -- --
----------- --------- --------- ---------- ---------- ---------
Total dividends and distributions (0.385) (0.454) (0.471) (0.473) (0.487) (0.483)
----------- --------- --------- ---------- ---------- ---------
Net asset value, end of period $ 10.940 $ 11.280 $ 11.110 $ 10.880 $ 11.020 $ 10.950
=========== ========= ========= ========== ========== =========
Total return(2) 0.44% 5.73% 6.55% 3.02% 5.27% 10.30%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 49,915 $ 52,291 $ 54,384 $ 57,630 $ 60,365 $ 62,397
Ratio of expenses to average net assets 0.90% 0.90% 0.93% 0.92% 0.92% 1.02%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 0.99% 0.99% 0.93% 0.92% 0.92% 1.02%
Ratio of net investment income to average net assets 3.82% 3.87% 4.26% 4.25% 4.51% 4.58%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.73% 3.78% 4.26% 4.25% 4.51% 4.58%
Portfolio turnover 21% 28% 54% 109% 136% 113%
(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, as applicable. Performance would have been
lower had the expense limitation not been in effect.
(3) Ratio for the period ended February 28, 2006, including fees paid
indirectly in accordance with Securities an Exchange Commission rules was
0.93%.
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 Insured Fund Class B
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.280 $ 11.110 $ 10.880 $ 11.020 $ 10.950 $ 10.390
Income (loss) from investment operations:
Net investment income 0.167 0.346 0.385 0.386 0.403 0.399
Net realized and unrealized gain (loss) on investments (0.164) 0.192 0.230 (0.140) 0.070 0.560
----------- --------- --------- ---------- ---------- ---------
Total from investment operations 0.003 0.538 0.615 0.246 0.473 0.959
----------- --------- --------- ---------- ---------- ---------
Less dividends and distributions from:
Net investment income (0.167) (0.346) (0.385) (0.386) (0.403) (0.399)
Net realized gain on investments (0.176) (0.022) -- -- -- --
----------- --------- --------- ---------- ---------- ---------
Total dividends and distributions (0.343) (0.368) (0.385) (0.386) (0.403) (0.399)
----------- --------- --------- ---------- ---------- ---------
Net asset value, end of period $ 10.940 $ 11.280 $ 11.110 $ 10.880 $ 11.020 $ 10.950
=========== ========= ========= ========== ========== =========
Total return(2) 0.06% 4.92% 5.72% 2.22% 4.46% 9.43%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 5,871 $ 6,141 $ 6,728 $ 7,614 $ 7,677 $ 7,506
Ratio of expenses to average net assets 1.67% 1.67% 1.71% 1.70% 1.70% 1.82%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 1.72% 1.72% 1.71% 1.70% 1.70% 1.82%
Ratio of net investment income to average net assets 3.05% 3.10% 3.48% 3.47% 3.73% 3.78%
Ratio of net investment income to average net
assets prior to expense limitation and expenses
paid indirectly 3.00% 3.05% 3.48% 3.47% 3.73% 3.78%
Portfolio turnover 21% 28% 54% 109% 136% 113%
(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
31
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.280 $ 11.110 $ 10.880 $ 11.020 $ 10.950 $ 10.390
Income (loss) from investment operations:
Net investment income 0.167 0.346 0.385 0.386 0.403 0.399
Net realized and unrealized gain (loss) on investments (0.154) 0.192 0.230 (0.140) 0.070 0.560
----------- --------- --------- ---------- ---------- ---------
Total from investment operations 0.013 0.538 0.615 0.246 0.473 0.959
----------- --------- --------- ---------- ---------- ---------
Less dividends and distributions from:
Net investment income (0.167) (0.346) (0.385) (0.386) (0.403) (0.399)
Net realized gain on investments (0.176) (0.022) -- -- -- --
----------- --------- --------- ---------- ---------- ---------
Total dividends and distributions (0.343) (0.368) (0.385) (0.386) (0.403) (0.399)
----------- --------- --------- ---------- ---------- ---------
Net asset value, end of period $ 10.950 $ 11.280 $ 11.110 $ 10.880 $ 11.020 $ 10.950
=========== ========= ========= ========== ========== =========
Total return(2) 0.15% 4.92% 5.72% 2.22% 4.46% 9.42%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 2,682 $ 2,963 $ 2,003 $ 1,448 $ 1,488 $ 1,588
Ratio of expenses to average net assets 1.67% 1.67% 1.71% 1.70% 1.70% 1.82%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 1.72% 1.72% 1.71% 1.70% 1.70% 1.82%
Ratio of net investment income to average net assets 3.05% 3.10% 3.48% 3.47% 3.73% 3.78%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.00% 3.05% 3.48% 3.47% 3.73% 3.78%
Portfolio turnover 21% 28% 54% 109% 136% 113%
(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
32
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.610 $ 11.390 $ 11.010 $ 11.020 $ 10.890 $ 10.360
Income (loss) from investment operations:
Net investment income 0.203 0.410 0.419 0.435 0.462 0.480
Net realized and unrealized gain (loss) on investments (0.120) 0.220 0.380 (0.010) 0.130 0.530
----------- --------- -------- -------- -------- --------
Total from investment operations 0.083 0.630 0.799 0.425 0.592 1.010
----------- --------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.203) (0.410) (0.419) (0.435) (0.462) (0.480)
----------- --------- -------- -------- -------- --------
Total dividends and distributions (0.203) (0.410) (0.419) (0.435) (0.462) (0.480)
----------- --------- -------- -------- -------- --------
Net asset value, end of period $ 11.490 $ 11.610 $ 11.390 $ 11.010 $ 11.020 $ 10.890
=========== ========= ======== ======== ======== ========
Total return(2) 0.73% 5.63% 7.36% 3.89% 5.63% 10.01%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 155,286 $ 120,273 $ 77,448 $ 51,479 $ 26,075 $ 19,471
Ratio of expenses to average net assets(3) 0.75% 0.79% 0.80% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.05% 1.11% 1.09% 1.15% 0.94% 1.06%
Ratio of net investment income to average net assets 3.56% 3.55% 3.70% 3.85% 4.28% 4.55%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.26% 3.23% 3.41% 3.50% 4.14% 4.29%
Portfolio turnover 39% 18% 27% 130% 195% 231%
(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, as applicable. 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 an Exchange Commission rules was 0.82%.
See accompanying notes
33
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.610 $ 11.380 $ 11.010 $ 11.020 $ 10.890 $ 10.360
Income (loss) from investment operations:
Net investment income 0.155 0.313 0.323 0.340 0.371 0.391
Net realized and unrealized gain (loss) on investments (0.130) 0.230 0.370 (0.010) 0.130 0.530
----------- --------- -------- -------- -------- --------
Total from investment operations 0.025 0.543 0.693 0.330 0.501 0.921
----------- --------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.155) (0.313) (0.323) (0.340) (0.371) (0.391)
----------- --------- -------- -------- -------- --------
Total dividends and distributions (0.155) (0.313) (0.323) (0.340) (0.371) (0.391)
----------- --------- -------- -------- -------- --------
Net asset value, end of period $ 11.480 $ 11.610 $ 11.380 $ 11.010 $ 11.020 $ 10.890
=========== ========= ======== ======== ======== ========
Total return(2) 0.22% 4.83% 6.36% 3.02% 4.74% 9.08%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 2,625 $ 3,203 $ 3,743 $ 4,538 $ 3,384 $ 2,366
Ratio of expenses to average net assets(3) 1.60% 1.64% 1.65% 1.65% 1.65% 1.65%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.75% 1.81% 1.79% 1.87% 1.79% 1.91%
Ratio of net investment income to average net assets 2.71% 2.70% 2.85% 3.00% 3.43% 3.70%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 2.56% 2.53% 2.71% 2.78% 3.29% 3.44%
Portfolio turnover 39% 18% 27% 130% 195% 231%
(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.
(3) Ratio for the year ended August 31, 2004 including fees paid indirectly in
accordance with Securities an Exchange Commission rules was 1.67%.
See accompanying notes
34
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02 8/31/01
(Unaudited)
Net asset value, beginning of period $ 11.610 $ 11.390 $ 11.010 $ 11.020 $ 10.890 $ 10.360
Income (loss) from investment operations:
Net investment income 0.155 0.313 0.323 0.340 0.371 0.391
Net realized and unrealized gain (loss) on investments (0.120) 0.220 0.380 (0.010) 0.130 0.530
----------- --------- -------- -------- -------- --------
Total from investment operations 0.035 0.533 0.703 0.330 0.501 0.921
----------- --------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.155) (0.313) (0.323) (0.340) (0.371) (0.391)
----------- --------- -------- -------- -------- --------
Total dividends and distributions (0.155) (0.313) (0.323) (0.340) (0.371) (0.391)
----------- --------- -------- -------- -------- --------
Net asset value, end of period $ 11.490 $ 11.610 $ 11.390 $ 11.010 $ 11.020 $ 10.890
=========== ========= ======== ======== ======== ========
Total return(2) 0.31% 4.74% 6.45% 3.02% 4.74% 9.08%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 27,626 $ 25,125 $ 19,201 $ 10,542 $ 7,291 $ 3,602
Ratio of expenses to average net assets(3) 1.60% 1.64% 1.65% 1.65% 1.65% 1.65%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.75% 1.81% 1.79% 1.87% 1.79% 1.91%
Ratio of net investment income to average net assets 2.71% 2.70% 2.85% 3.00% 3.43% 3.70%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 2.56% 2.53% 2.71% 2.78% 3.29% 3.44%
Portfolio turnover 39% 18% 27% 130% 195% 231%
(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.
(3) Ratio for the year ended August 31, 2004 including fees paid indirectly in
accordance with Securities an Exchange Commission rules was 1.67%.
See accompanying notes
35
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01
(Unaudited)
Net asset value, beginning of period $ 10.380 $ 10.010 $ 9.730 $ 9.950 $ 10.240 $ 9.950
Income (loss) from investment operations:
Net investment income 0.238 0.503 0.496 0.522 0.542 0.556
Net realized and unrealized gain (loss) on investments (0.120) 0.371 0.280 (0.219) (0.290) 0.293
----------- --------- -------- -------- -------- --------
Total from investment operations 0.118 0.874 0.776 0.303 0.252 0.849
----------- --------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.238) (0.504) (0.496) (0.523) (0.542) (0.559)
----------- --------- -------- -------- -------- --------
Total dividends and distributions (0.238) (0.504) (0.496) (0.523) (0.542) (0.559)
----------- --------- -------- -------- -------- --------
Net asset value, end of period $ 10.260 $ 10.380 $ 10.010 $ 9.730 $ 9.950 $ 10.240
=========== ========= ======== ======== ======== ========
Total return(3) 1.16% 8.93% 8.13% 3.13% 2.59% 8.81%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 67,390 $ 66,451 $ 56,698 $ 59,829 $ 64,259 $ 76,018
Ratio of expenses to average net assets 0.90% 0.93% 1.00% 0.99% 0.96% 0.97%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.02% 1.01% 1.02% 1.05% 1.04% 0.97%
Ratio of net investment income to average net assets 4.67% 4.92% 5.00% 5.30% 5.42% 5.55%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 4.55% 4.84% 4.98% 5.24% 5.34% 5.55%
Portfolio turnover 74% 36% 46% 64% 53% 49%
(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
required amortization of all premiums and discounts on debt securities.
The effect of this change for the year ended August 31, 2002 was a
increase in net investment income per share of $0.001, an decrease in net
realized and unrealized gain (loss) per share of $0.001, and a increase 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
36
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01
(Unaudited)
Net asset value, beginning of period $ 10.400 $ 10.030 $ 9.760 $ 9.980 $ 10.260 $ 9.980
Income (loss) from investment operations:
Net investment income 0.199 0.426 0.421 0.448 0.467 0.480
Net realized and unrealized gain (loss) on investments (0.110) 0.371 0.270 (0.219) (0.281) 0.284
----------- --------- -------- -------- -------- --------
Total from investment operations 0.089 0.797 0.691 0.229 0.186 0.764
----------- --------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.199) (0.427) (0.421) (0.449) (0.466) (0.484)
----------- --------- -------- -------- -------- --------
Total dividends and distributions (0.199) (0.427) (0.421) (0.449) (0.466) (0.484)
----------- --------- -------- -------- -------- --------
Net asset value, end of period $ 10.290 $ 10.400 $ 10.030 $ 9.760 $ 9.980 $ 10.260
=========== ========= ======== ======== ======== ========
Total return(3) 0.88% 8.10% 7.20% 2.36% 1.91% 7.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 11,765 $ 13,046 $ 14,534 $ 16,499 $ 20,021 $ 20,277
Ratio of expenses to average net assets 1.65% 1.68% 1.75% 1.74% 1.71% 1.72%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.77% 1.76% 1.77% 1.80% 1.79% 1.72%
Ratio of net investment income to average net assets 3.92% 4.17% 4.25% 4.55% 4.67% 4.80%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.80% 4.09% 4.23% 4.49% 4.59% 4.80%
Portfolio turnover 74% 36% 46% 64% 53% 49%
(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
required amortization of all premiums and discounts on debt securities.
The effect of this change for the year ended August 31, 2002 was a
increase in net investment income per share of $0.001, an decrease in net
realized and unrealized gain (loss) per share of $0.001, and a increase 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
37
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
2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01
(Unaudited)
Net asset value, beginning of period $ 10.420 $ 10.040 $ 9.770 $ 9.990 $ 10.270 $ 9.990
Income (loss) from investment operations:
Net investment income 0.199 0.426 0.421 0.448 0.467 0.480
Net realized and unrealized gain (loss) on investments (0.120) 0.381 0.270 (0.219) (0.281) 0.284
----------- --------- -------- -------- -------- --------
Total from investment operations 0.079 0.807 0.691 0.229 0.186 0.764
----------- --------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.199) (0.427) (0.421) (0.449) (0.466) (0.484)
----------- --------- -------- -------- -------- --------
Total dividends and distributions (0.199) (0.427) (0.421) (0.449) (0.466) (0.484)
----------- --------- -------- -------- -------- --------
Net asset value, end of period $ 10.300 $ 10.420 $ 10.040 $ 9.770 $ 9.990 $ 10.270
=========== ========= ======== ======== ======== ========
Total return(3) 0.78% 8.19% 7.19% 2.35% 1.92% 7.98%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 5,547 $ 5,234 $ 4,798 $ 5,318 $ 6,405 $ 7,187
Ratio of expenses to average net assets 1.65% 1.68% 1.75% 1.74% 1.71% 1.72%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 1.77% 1.76% 1.77% 1.80% 1.79% 1.72%
Ratio of net investment income to average net assets 3.92% 4.17% 4.25% 4.55% 4.67% 4.80%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.80% 4.09% 4.23% 4.49% 4.59% 4.80%
Portfolio turnover 74% 36% 46% 64% 53% 49%
(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
required amortization of all premiums and discounts on debt securities.
The effect of this change for the year ended August 31, 2002 was a
increase in net investment income per share of $0.001, an decrease in net
realized and unrealized gain (loss) per share of $0.001, and a increase 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
38
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Notes February 28, 2006 (Unaudited)
- --------------------------------------------------------------------------------
TO FINANCIAL STATEMENTS
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 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, 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) for
financial reporting purposes. 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."
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%
39
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Notes
- --------------------------------------------------------------------------------
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 through December 31,
2006 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
----------------- ----------------- --------------------- ----------------------------
0.62% 0.67% 0.60% 0.65%
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. Each Fund pays
DSC a monthly fee computed at the annual rate of 0.04% of each Fund's average
daily net assets 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, each Fund pays
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. The Board of Trustees has adopted a formula for
calculating 12b-1 plan fees for Delaware Tax-Free USA Fund's Class A shares and
Delaware Tax-Free Insured Fund's Class A shares that went into effect on June 1,
1992. The total 12b-1 fees to be paid by Class A shareholders of each Fund will
be the sum of 0.10% of the average daily net assets representing shares that
were acquired prior to June 1, 1992 and 0.30%, waived to 0.25%, of the average
daily net assets representing shares that were acquired on or after June 1,
1992. The contractual 12b-1 fee waiver of 0.25% of average daily net assets is
applied to the shares of each Fund that were acquired on or after June 1, 1992
in calculating the applicable 12b-1 fee rate. All Class A shareholders will bear
12b-1 fees at the same rate, the blended rate based upon the allocation of the
rates described above. DDLP has contracted to waive distribution and service
fees through December 31, 2006 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, 2006, 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 fees payable
to DMC $179,524 $19,160 $47,327 $27,106
Dividend disbursing, transfer agent,
accounting and administration
fees and other expenses payable
to DSC 89,609 11,358 55,064 16,837
Distribution fees payable to DDLP 94,587 14,713 53,103 24,146
Other expenses payable to DMC and
affiliates* 33,691 3,643 10,169 6,840
* 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
the Funds by DMC employees. For the six months ended February 28, 2006, 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
----------------- ----------------- --------------------- ----------------------------
$17,779 $2,202 $6,107 $3,111
For the six months ended February 28, 2006, 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
----------------- ----------------- --------------------- ----------------------------
$14,201 $2,538 $11,222 $7,930
For the six months ended February 28, 2006, DDLP received gross contingent
deferred sales charge commissions on redemption of each Fund's Class A, Class B
and Class C shares. These commissions were entirely used to offset up-front
commissions previously paid by DDLP to broker-dealers on sales of those shares.
The amounts received 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
----------------- ----------------- --------------------- ----------------------------
Class A $ 155 $ -- $ -- $ --
Class B 6,731 1,424 1,641 5,716
Class C 1,583 -- 1,294 69
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the
Trusts. These officers and trustees are paid no compensation by the Funds.
40
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Notes
- --------------------------------------------------------------------------------
TO FINANCIAL STATEMENTS (CONTINUED)
3. Investments
For the six months ended February 28, 2006, 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 $146,331,270 $5,780,385 $58,506,098 $30,657,825
Sales 122,201,112 8,900,694 29,403,413 31,607,995
At February 28, 2006, the cost of investments for federal income tax purposes
has been estimated since the final tax characteristics cannot be determined
until the fiscal year end. At February 28, 2006, the cost of investments and
unrealized appreciation (depreciation) for federal income tax purposes 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 $478,308,497 $55,152,609 $175,417,788 $ 77,791,215
Aggregate unrealized appreciation 27,464,626 2,904,240 4,558,626 4,079,358
Aggregate unrealized depreciation (1,219,175) (7,202) (189,823) (405,618)
------------ ----------- ------------ ------------
Net unrealized appreciation $ 26,245,451 $ 2,897,038 $ 4,368,803 $ 3,673,740
============ =========== ============ ============
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, 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, 2006 and the year ended August 31, 2005 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 2/28/06*
Tax-exempt income $ 9,626,260 $1,097,098 $ 2,775,753 $1,880,240
Ordinary Income -- 53,878 -- --
Long-term capital gain -- 894,367 -- --
----------- ---------- ----------- ----------
Total $ 9,626,260 $2,045,343 $ 2,775,753 $1,880,240
=========== ========== =========== ==========
Year Ended 8/31/05
Tax-exempt income $20,913,234 $2,327,135 $ 4,020,053 $3,809,010
Ordinary Income -- 33,676 -- --
Long-term capital gain -- 89.803 -- --
----------- ---------- ----------- ----------
Total $20,913,234 $2,450,614 $ 4,020,053 $3,809,010
=========== ========== =========== ==========
* Tax information for the six months ended February 28, 2006 is an estimate
and the tax character of dividends and distributions may be redesignated
at fiscal year end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of February 28, 2006, 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 $483,617,831 $55,452,807 $181,640,252 $87,593,294
Undistributed ordinary income -- 850 -- --
Distributions in excess of
tax-exempt income (12,181) (1,778) -- (4,104)
Six month period gain (loss) 3,281,753 -- (111,783) 44,021
Post-October losses -- -- -- (777,244)
Capital loss Carryforwards (8,276,866) -- (360,422) (5,827,551)
Undistributed long-term capital
gains -- 118,590 -- --
Unrealized appreciation of
investments 26,245,451 2,897,038 4,368,803 3,673,740
------------ ----------- ------------ -----------
Net assets $504,855,988 $58,467,507 $185,536,850 $84,702,156
============ =========== ============ ===========
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales.
41
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Notes
- --------------------------------------------------------------------------------
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. Reclassifications are primarily
due to tax treatment of market discount and premium on certain debt instruments.
Results of operations and net assets were not affected by these
reclassifications. For the six months ended February 28, 2006, the Funds
recorded an estimate of these differences since the final tax characteristics
cannot be determined until fiscal year end.
Delaware National High-Yield
Municipal Bond Fund
-----------------------------
Undistributed net investment income $(563)
Accumulated net realized gain (loss) 563
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Capital loss carryforwards
outstanding at February 28, 2006 will expire as follows:
Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund USA Intermediate Fund Municipal Bond Fund
----------------- --------------------- ----------------------------
2008 $ 8,276,548 $ 63,767 $ 752,701
2009 318 -- 3,025,716
2010 -- -- 70,671
2011 -- 290,864 997,721
2012 -- 5,791 980,742
----------- -------- -----------
Total $ 8,276,866 $360,422 $ 5,827,551
=========== ======== ===========
For the six months ended February 28, 2006, each Fund had capital gains
(losses), which may reduce (increase) the capital loss carryforwards as follows:
Delaware Tax-Free Delaware Tax-Free Delaware National High-Yield
USA Fund USA Intermediate Fund Municipal Bond Fund
----------------- --------------------- ----------------------------
$ 3,281,753 $ (111,783) $ 44,021
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
2/28/06 8/31/05 2/28/06 8/31/05
Shares sold:
Class A 4,884,841 2,090,513 112,812 237,100
Class B 63,327 60,705 5,626 16,473
Class C 131,144 89,160 23,077 106,968
Shares issued upon reinvestment
of dividends and distributions:
Class A 447,978 923,604 106,378 109,000
Class B 13,086 33,850 10,105 10,470
Class C 7,049 14,713 4,715 3,158
---------- ---------- --------- --------
5,547,425 3,212,545 262,713 483,169
---------- ---------- --------- --------
Shares repurchased:
Class A (2,152,811) (4,224,229) (295,046) (602,318)
Class B (227,630) (645,620) (23,811) (87,777)
Class C (49,179) (101,597) (45,415) (27,732)
---------- ---------- --------- --------
(2,429,620) (4,971,446) (364,272) (717,827)
---------- ---------- --------- --------
Net increase (decrease) 3,117,805 (1,758,901) (101,559) (234,658)
========== ========== ========= ========
42
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Notes
- --------------------------------------------------------------------------------
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
2/28/06 8/31/05 2/28/06 8/31/05
Shares sold:
Class A 4,210,745 5,248,577 420,526 1,161,795
Class B 27,136 28,724 48,261 52,179
Class C 406,709 705,277 75,509 172,207
Shares issued upon reinvestment
of dividends and distributions:
Class A 152,627 208,201 95,506 165,542
Class B 2,596 5,933 11,108 26,452
Class C 17,803 24,033 6,030 13,388
---------- ---------- -------- ----------
4,817,616 6,220,745 656,940 1,591,563
---------- ---------- -------- ----------
Shares repurchased:
Class A (1,202,400) (1,903,878) (351,242) (590,900)
Class B (77,031) (87,601) (169,633) (273,683)
Class C (182,883) (252,321) (45,404) (160,929)
---------- ---------- -------- ----------
(1,462,314) (2,243,800) (566,279) (1,025,512)
---------- ---------- -------- ----------
Net increase 3,355,302 3,976,945 90,661 566,051
========== ========== ======== ==========
For the six months ended February 28, 2006 and the year ended August 31, 2005,
the following shares were converted from Class B to Class A shares. The
respective amounts are included in Class B redemptions and Class A subscriptions
in the tables below and the Statements of Changes in Net Assets.
Six Months Ended Year Ended
2/28/06 8/31/05
------------------------------ ------------------------------
Class B Class A Class B Class A
shares shares Value shares shares Value
------- ------- ---------- ------- ------- ----------
Delaware Tax-Free USA Fund 91,253 91,253 $1,055,204 365,813 365,721 $4,231,193
Delaware Tax-Free Insured Fund 2,118 2,119 23,290 21,036 21,036 233,581
Delaware Tax-Free USA Intermediate Fund 16,869 16,869 194,128 16,264 16,264 185,879
Delaware National High-Yield Municipal Bond Fund 41,522 41,422 425,754 38,897 38,974 397,935
6. Line of Credit
The Funds, along with certain other funds in the Delaware Investment Family of
Funds (the "Participants"), participate in a $225,000,000 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, 2006 or at any time during
the six month period.
43
- --------------------------------------------------------------------------------
Delaware National Tax-Free Funds
Notes
- --------------------------------------------------------------------------------
TO FINANCIAL STATEMENTS (CONTINUED)
7. Credit and Market Risk
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, regional or local economic conditions, and differing levels
of supply and demand for municipal bonds. Many municipalities insure repayment
for their obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that market value
may fluctuate for other reasons and there is no assurance that the insurance
company will meet its obligations. These securities have been identified in the
Statements of Net Assets.
Delaware National High-Yield Municipal Bond Fund invests a portion of its assets
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.
The Fund may invest in advanced refunded bonds, escrow secured bonds or defeased
bonds. Under current federal tax laws and regulations, state and local
government borrowers are permitted to refinance outstanding bonds by issuing new
bonds. The issuer refinances the outstanding debt to either reduce interest
costs or to remove or alter restrictive covenants imposed by the bonds being
refinanced. A refunding transaction where the municipal securities are being
refunded within 90 days from the issuance of the refunding issue is known as a
"current refunding". "Advance refunded bonds" are bonds in which the refunded
bond issue remains outstanding for more than 90 days following the issuance of
the refunding issue. In an advance refunding, the issuer will use the proceeds
of a new bond issue to purchase high grade interest bearing debt securities
which are then deposited in an irrevocable escrow account held by an escrow
agent to secure all future payments of principal and interest and bond premium
of the advance refunded bond. Bonds are "escrowed to maturity" when the proceeds
of the refunding issue are deposited in an escrow account for investment
sufficient to pay all of the principal and interest on the original interest
payment and maturity dates. Bonds are considered "pre-refunded" when the
refunding issue's proceeds are escrowed only until a permitted call date or
dates on the refunded issue with the refunded issue being redeemed at the time,
including any required premium. Bonds become "defeased" when the rights and
interests of the bondholders and of their lien on the pledged revenues or other
security under the terms of the bond contract and are substituted with an
alternative source of revenues (the escrow securities) sufficient to meet
payments of principal and interest to maturity or to the first call dates.
Escrowed secured bonds will often receive a rating of AAA from Moody's Investors
Service, Inc., Standard & Poor's Ratings Group, and/or Fitch due to the strong
credit quality of the escrow securities and the irrevocable nature of the escrow
deposit agreement. The Tax Free Insured Funds will purchase escrow secured bonds
without additional insurance only where the escrow is invested in securities of
the U.S. government or agencies or instrumentalities of the U.S. government.
Delaware Tax-Free USA Fund, Delaware Tax-Free Insured Fund and Delaware Tax-Free
Intermediate Fund may invest up to 10% of their total assets in illiquid
securities, which may include securities with contractual restrictions on
resale, securities exempt from registration under Rule 144A of the Securities
Act of 1933, as amended, and other securities which may not be readily
marketable. Delaware National High-Yield Municipal Bond Fund may invest up to
15% in such securities. The relative illiquidity of these securities may impair
each Fund from disposing of them in a timely manner and at a fair price when it
is necessary or desirable to do so. While maintaining oversight, the Funds'
Board of Trustees has delegated to DMC the day-to-day functions of determining
whether individual securities are liquid for purposes of the Fund's limitation
on investments in illiquid assets. At February 28, 2006, there were no Rule 144A
securities. Illiquid securities have been denoted on the Statement of Net
Assets.
8. 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.
- --------------------------------------------------------------------------------
Other
- --------------------------------------------------------------------------------
FUND INFORMATION
Effective as of the close of business on March 1, 2006, the Delaware Tax-Free
Insured Fund will be closed to new investors. Shareholders of the Reorganizing
Funds will receive a proxy statement/prospectus providing them with information
about the Delaware Tax-Free USA Fund and requesting their votes on the proposed
reorganization of their Fund at a special meeting of shareholders to be held in
late June 2006. If approved, the reorganization would be expected to take place
in late August 2006. Additionally, the Delaware Tax-Free Insured Fund would
continue to accept purchases from existing shareholders (including reinvested
dividends or capital gains) until the last business day before the
reorganization.
44
- --------------------------------------------------------------------------------
About
- --------------------------------------------------------------------------------
THE ORGANIZATION
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 the 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 the Fund will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Board of Trustees
Jude T. Driscoll
Chairman
Delaware Investments(R) Family of Funds
Philadelphia, PA
Thomas L. Bennett
Private Investor
Rosemont, PA
John A. Fry
President
Franklin & Marshall College
Lancaster, PA
Anthony D. Knerr
Founder/Managing Director
Anthony Knerr & Associates
New York, NY
Lucinda S. Landreth
Former Chief Investment Officer
Assurant, Inc.
Philadelphia, PA
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 and Treasurer
3M Corporation
St. Paul, MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
Affiliated Officers
Michael P. Bishof
Senior Vice President and
Chief Financial Officer
Delaware Investments(R) Family of Funds
Philadelphia, PA
David F. Connor
Vice President, Deputy General Counsel
and Secretary
Delaware Investments(R) Family of Funds
Philadelphia, PA
David P. O'Connor
Senior Vice President, General Counsel
and Chief Legal Officer
Delaware Investments(R) Family of Funds
Philadelphia, PA
John J. O'Connor
Senior Vice President and Treasurer
Delaware Investments(R) Family of Funds
Philadelphia, PA
Contact Information
Investment Manager
Delaware Management Company,
a Series of Delaware Management Business Trust
Philadelphia, PA
National Distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder Servicing, Dividend
Disbursing and Transfer Agent
Delaware Service Company, Inc.
2005 Market Street
Philadelphia, PA 19103-7094
For Shareholders
800 523-1918
For Securities Dealers and Financial
Institutions Representatives Only
800 362-7500
Web Site
www.delawareinvestments.com
Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries.
- --------------------------------------------------------------------------------
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 are available without charge (i) upon request,
by calling 800 523-1918; (ii) on the Funds' 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 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 the Funds' Web site at
http://www.delawareinvestments.com; and (ii) on the Commission's Web site at
http://www.sec.gov.
- --------------------------------------------------------------------------------
45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[DELAWARE INVESTMENTS(R) LOGO]
- --------------------------------------------------------------------------------
Contact Information
Web Site
www.delawareinvestments.com
E-mail
service@delinvest.com
Shareholder Service Center
800 523-1918
Call the Shareholder Service Center Monday to Friday, 8:00 a.m. to 7:00 p.m.
Eastern Time:
o For fund information, literature, price, yield, and performance figures.
o For information on existing regular investment accounts and retirement
plan accounts including wire investments, wire redemptions, telephone
redemptions, and telephone exchanges.
Delaphone Service
800 362-FUND (800 362-3863)
o For convenient access to account information or current performance
information on all Delaware Investments(R) Funds seven days a week, 24
hours a day, use this Touch-Tone(R) service.
- --------------------------------------------------------------------------------
(350) Printed in the USA
SA-011 [2/06] CGI 4/06 SEMI-0603 TFNAT'L PO10920
2
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
3
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: Chief Executive Officer
Date: April 26, 2006
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.
4
JUDE T. DRISCOLL
- ------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: April 26, 2006
MICHAEL P. BISHOF
- ------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: April 26, 2006
5