-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NZ3m7GQzmJuF51Y4pdHgxmedjNJkFbI+h2W27LSxakMGdapxiKyE8wyoyeFLOxYI yCdZvlH4EZUCqaLXxKUpLg== 0001145443-06-001458.txt : 20060502 0001145443-06-001458.hdr.sgml : 20060502 20060502095730 ACCESSION NUMBER: 0001145443-06-001458 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060228 FILED AS OF DATE: 20060502 DATE AS OF CHANGE: 20060502 EFFECTIVENESS DATE: 20060502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAWARE GROUP TAX FREE FUND CENTRAL INDEX KEY: 0000728352 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03850 FILM NUMBER: 06797496 BUSINESS ADDRESS: STREET 1: 2005 MARKET ST COMMERCE SQ CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2157512127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP TAX FREE FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DMC TAX FREE INCOME USA INC DATE OF NAME CHANGE: 19890904 FORMER COMPANY: FORMER CONFORMED NAME: DMC TAX FREE BOND FUND INC DATE OF NAME CHANGE: 19831122 0000728352 S000002402 DELAWARE TAX-FREE INSURED FUND C000006382 DELAWARE TAX-FREE INSURED FUND CLASS A DMFIX C000006383 DELAWARE TAX-FREE INSURED FUND CLASS B DTXBX C000006384 DELAWARE TAX-FREE INSURED FUND CLASS C DTXCX 0000728352 S000002403 DELAWARE TAX-FREE USA FUND C000006385 DELAWARE TAX-FREE USA FUND CLASS A DMTFX C000006386 DELAWARE TAX-FREE USA FUND CLASS B DTFCX C000006387 DELAWARE TAX-FREE USA FUND CLASS C DUSCX 0000728352 S000002404 DELAWARE TAX-FREE USA INTERMEDIATE FUND C000006388 DELAWARE TAX-FREE USA INTERMEDIATE FUND CLASS A DMUSX C000006389 DELAWARE TAX-FREE USA INTERMEDIATE FUND CLASS B DUIBX C000006390 DELAWARE TAX-FREE USA INTERMEDIATE FUND CLASS C DUICX N-CSR 1 d19151.txt 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [DELAWARE INVESTMENTS(R) LOGO] - -------------------------------------------------------------------------------- [GRAPHIC] - --------------------------- FIXED INCOME APRIL 28, 2006 - -------------------------------------------------------------------------------- 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 -------------------------------------------------- Get shareholder reports and prospectuses online instead of in the mail. Visit www.delawareinvestments.com/edelivery. -------------------------------------------------- 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [GRAPHIC] DELAWARE INVESTMENTS(R) - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DELAWARE INVESTMENTS(R) - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT. iv - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [DELAWERE INVESTMENTS(R) LOGO] FIXED INCOME - -------------------------------------------------------------------------------- Semiannual Report FEBRUARY 28, 2006 - -------------------------------------------------------------------------------- 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 - ------------------------------------------------------------ DISCLOSURE OF FUND EXPENSES 1 - ------------------------------------------------------------ SECTOR ALLOCATION 3 - ------------------------------------------------------------ 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 - ------------------------------------------------------------ OTHER FUND INFORMATION 44 - ------------------------------------------------------------ ABOUT THE ORGANIZATION 45 - ------------------------------------------------------------ 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. - -------------------------------------------------------------------------------- Disclosure For the Period September 1, 2005 to February 28, 2006 - -------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------
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 - ------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------
1 - -------------------------------------------------------------------------------- Disclosure For the Period September 1, 2005 to February 28, 2006 - -------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------
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 - ------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------
2 - -------------------------------------------------------------------------------- Sector Allocation As of February 28, 2006 - -------------------------------------------------------------------------------- Sector designations may be different than the sector designations presented in other Fund materials. DELAWARE TAX-FREE USA FUND Percentage Sector of Net Assets - --------------------------------------------------------------- Municipal Bonds 94.25% - --------------------------------------------------------------- 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% - --------------------------------------------------------------- Variable Rate Demand Notes 5.69% - --------------------------------------------------------------- Total Market Value of Securities 99.94% - --------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 0.06% - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- DELAWARE TAX-FREE INSURED FUND (Closed to new investors) Percentage Sector of Net Assets - --------------------------------------------------------------- Municipal Bonds 94.16% - --------------------------------------------------------------- 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% - --------------------------------------------------------------- Variable Rate Demand Notes 5.13% - --------------------------------------------------------------- Total Market Value of Securities 99.29% - --------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 0.71% - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- Sector Allocation As of February 28, 2006 - -------------------------------------------------------------------------------- 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 - --------------------------------------------------------------- Municipal Bonds 90.00% - --------------------------------------------------------------- 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% - --------------------------------------------------------------- Variable Rate Demand Notes 6.90% - --------------------------------------------------------------- Total Market Value of Securities 96.90% - --------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 3.10% - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND Percentage Sector of Net Assets - --------------------------------------------------------------- Municipal Bonds 96.18% - --------------------------------------------------------------- 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% - --------------------------------------------------------------- Total Market Value of Securities 96.18% - --------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 3.82% - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- Delaware Tax-Free USA Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 94.25% - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 EX-99.1 2 ex99_1.txt EXHIBIT 99.CERT CERTIFICATION I, Jude T. Driscoll certify that: 1. I have reviewed this report on Form N-CSR of Delaware Group Tax Free Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the 6 period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 26, 2006 JUDE T. DRISCOLL - ------------------------------ By: Jude T. Driscoll Title: Chief Executive Officer CERTIFICATION I, Michael P. Bishof, certify that: 1. I have reviewed this report on Form N-CSR of Delaware Group Tax Free Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 7 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 8 Date: April 26, 2006 MICHAEL P. BISHOF - ------------------------------ By: Michael P. Bishof Title: Chief Financial Officer EX-99.906 3 ex99_906.txt EXHIBIT 99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the attached report of the registrant on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify, to the best of such officer's knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. Date: April 26, 2006 JUDE T. DRISCOLL - -------------------------------------- By: Jude T. Driscoll Title: Chief Executive Officer MICHAEL P. BISHOF - -------------------------------------- By: Michael P. Bishof Title: Chief Financial Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----