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: 811-4977
Exact name of registrant as specified in charter: Voyageur Insured Funds
Address of principal executive offices: 2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service: Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: August 31
Date of reporting period: August 31, 2003
Item 1. Reports to Stockholders
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 Arizona Insured Fund and Delaware Tax-Free Minnesota Insured
Fund of the Registrant, information on which is included in the following
shareholder reports.
Delaware
Investments(SM)
--------------------------------------
FIXED INCOME A member of Lincoln Financial Group(R)
Annual Report 2003
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DELAWARE TAX-FREE ARIZONA FUND
DELAWARE TAX-FREE ARIZONA INSURED FUND
DELAWARE TAX-FREE CALIFORNIA FUND
DELAWARE TAX-FREE CALIFORNIA INSURED FUND
DELAWARE TAX-FREE COLORADO FUND
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
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PORTFOLIO MANAGEMENT REVIEW 1
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PERFORMANCE SUMMARIES:
Delaware Tax-Free Arizona Fund 4
Delaware Tax-Free Arizona Insured Fund 5
Delaware Tax-Free California Fund 6
Delaware Tax-Free California Insured Fund 7
Delaware Tax-Free Colorado Fund 8
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FINANCIAL STATEMENTS:
Statements of Net Assets 9
Statements of Operations 21
Statements of Changes in Net Assets 22
Financial Highlights 25
Notes to Financial Statements 40
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REPORT OF INDEPENDENT AUDITORS 45
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BOARD OF TRUSTEES/OFFICERS 46
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Funds are not FDIC insured and are not guaranteed. It is possible to lose
the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a
series of Delaware Management Business Trust, which is a registered
investment advisor.
(C) 2003 Delaware Distributors, L.P.
Portfolio September 10, 2003
MANAGEMENT REVIEW
Fund Manager
Andrew M. McCullagh
Senior Portfolio Manager
Q: How did the fixed-income markets fare during the
12-month period?
A: Municipal bonds produced modestly positive returns during the fiscal year
ended August 31, 2003. Declining interest rates in a lackluster economy
generally provided a positive bond market environment for most of the year.
Interest rates steadily declined through mid-June when the bellwether 10-year
U.S. Treasury bond yield fell to 3.07%. However, the bond market was jolted in
early summer by an uncharacteristically ambiguous message from the Federal
Reserve Board. In June, the Fed shared its concern relating to deflation along
with possible remedial steps, such as purchasing Treasury bonds. Investors
expected that this action would bolster bond prices and reduce interest rates
even further. A few weeks after this statement, the Fed inexplicably reversed
course, saying deflation was no longer the primary policy issue. This caused
yields to rise and bond prices to decline sharply in one of the worst sell-offs
in years.
Fortunately, our strategy prior to this dramatic bond market move was to shorten
the Funds' durations. Duration is a common measure of a bond's or bond fund's
sensitivity to interest rate changes. The longer the duration, the more
sensitive the bond or bond fund is to changes in interest rates. In fact, we had
shortened duration as early as late 2002 because we anticipated that interest
rates would rise as the economy recovered. While we didn't know exactly when
this reversal would take place, we also knew that it can take months to
reposition a bond portfolio's duration. By doing so early in the fiscal year,
the funds were not nearly as vulnerable to a selloff as their peers. Indeed,
four out of the five funds discussed below outperformed their peers, as measured
by Lipper Inc.
Q: What were some of the factors that influenced performance in
the Funds during the fiscal year?
A: One of our general strategies was to buy bonds with intermediate maturities
rather than lengthier 30-year debt, because the former offered more attractive
yields on a risk/reward basis. In addition, we attempted to lighten our exposure
to multifamily housing bonds, as rentals were vacated in favor of home purchases
given historically low mortgage rates.
A focus on call protection was another positive factor, particularly when
interest rates were declining and issuers were seeking to refinance debt.
Finally, we sought to generate a competitive income stream for the portfolios
relative to their fund peer groups, as measured by Lipper Inc. The yields for
all funds, except for the Tax-Free Arizona Insured Fund, exceeded the average
yield of their respective Lipper fund peer groups for the 12-month period. We
believed this measure would help protect against the effect of price declines in
a rising interest rate environment.
Still, municipal securities lagged behind the overall bond market during the
fiscal year. The primary reason was record issuance by states and municipalities
seeking to take advantage of low interest rates, which in turn exerted downward
pressure on bond prices. In addition, the economies of Arizona, California, and
Colorado -- which have become heavily dependent on the technology sector in
recent years -- continued to be negatively affected by the slow recovery in
capital spending.
Q: Please discuss performance and your strategies in each of the Funds during
the year.
For the 12 months ended August 31, 2003, Delaware Tax-Free Arizona Fund's return
of -0.88% (Class A shares at net asset value with distributions reinvested)
lagged the +1.92% return of the Lipper Arizona Municipal Debt Funds Average. In
addition, the benchmark Lehman Brothers Municipal Bond Index gained +3.14% for
the same period.
Two bond issues in particular contributed to the Fund's underperformance
relative to its peer group and benchmark during the year. Maricopa County
Industrial Development Authority Multifamily Housing Revenue (Bay Club at Mesa
Cove Project) bonds declined in value, reflecting dwindling apartment occupancy
rates. Because this investment did not work out as planned, we are hoping to
negotiate an arrangement with the underwriter of these bonds in an effort to
restore some value. Yet we cannot know if these efforts will be successful. In
addition, our investment in Winslow Industrial Development Authority Hospital
Revenue bonds have created challenges, although we think a pending merger might
boost their price. Overall, though, the Fund's credit quality is quite strong,
with an average rating of AA by Standard & Poor's (S&P).
During the past six months, we have cut the Fund's allocation to multifamily
housing bonds in half. Currently, the largest percentage of the Fund's holdings
are issues related to education, both K-12 and college, with the next largest
allocation in healthcare.
1
================================================================================
For the 12-month period ended August 31, 2003, Delaware Tax-Free Arizona Insured
Fund returned +2.17% (Class A shares at net asset value with distributions
reinvested), surpassing its peer group, as measured by the Lipper Arizona
Municipal Debt Funds Average, which returned +1.92%. The Lehman Brothers
Municipal Bond Index managed to rise +3.14% during the same period.
We took a very conservative approach in managing the Fund during the fiscal
year, investing more than 80 percent of its total net assets in AAA-rated
insured bonds and keeping portfolio duration shorter than that of its Lipper
peer group average.
Although tourism is down, our investment in airport bonds remains strong. The
state's tourism industry has not rebounded, with airline passenger miles and
hotel receipts below levels of one year ago.
Arizona's economy mirrors that of the nation in general, with flat job growth
and a decline in construction activity. Arizona was forced to deplete its
reserve funds in order to cover a projected shortfall in its fiscal 2003 budget.
However, we believe that the recent strength in the high-technology sector is a
positive sign for the future. The state's exposure to industries was a negative
factor in recent years.
================================================================================
Delaware Tax-Free California Fund returned +2.51% (Class A shares at net asset
value with distributions reinvested) for the fiscal year ended August 31, 2003.
For the same period, the Lipper California Municipal Debt Funds Average returned
+1.36%, while the Lehman Brothers Municipal Bond Index gained +3.14%.
Although the state has a large budget deficit, its economy is actually outpacing
the nation in terms of employment and personal income growth. It is also
benefiting from federal defense and homeland security spending. Orders are
rising among the state's defense contractors, particularly in aerospace and
shipbuilding. Although the state's technology sector is not expected to rebound
much over the near term, it is also not expected to be the drag on the economy
that it has been over the past two years. Still, the state's general obligation
bond ratings have recently been downgraded to BBB (S&P) amid controversy
surrounding the budget and the recent recall election.
The Fund's relatively strong performance is partly due to above- average
dividends, as well as a broadly diversified portfolio. In addition, we have
generally avoided bonds that have had problems that can be linked to
California's economic woes. Despite the state's well-publicized budget problems,
the Fund's credit rating remains strong at A (S&P).
================================================================================
For the 12 months ended August 31, 2003, Delaware Tax-Free California Insured
Fund's return of +1.84% (Class A shares at net asset value with distributions
reinvested) compared favorably to the +1.53% return of the Lipper California
Insured Municipal Debt Funds Average for the same period. The Fund's benchmark,
the Lehman Brothers Municipal Bond Index, rose +3.14% for the same period.
The Fund's slight relative advantage over its peer group partly reflects a
portfolio with a higher-than-average distribution yield. We have been able to
generate this yield advantage by allocating 20 percent of the Fund's assets to
non-insured bonds.
The State of California continues to issue billions of dollars in general
obligation bonds, causing upward pressure on yields and downward pressure on
prices throughout the municipal bond market. It is important for shareholders to
note that, at fiscal year-end, the Fund held less than 10 percent of total net
assets in general obligation bonds issued by the state. We believe this has been
a good decision, since the state government's credit rating was downgraded by
Standard & Poor's and Moody's Investors Service. General obligation bonds are
secured by the taxing and borrowing power of the issuing municipality. Your Fund
instead is focused on revenue bonds, where regular interest payments are made
from revenues generated by the specific projects. The Fund's average credit
quality at fiscal year-end was AA.
2
================================================================================
For the 12 months ended August 31, 2003, Delaware Tax-Free Colorado Fund's
return of +2.52% (Class A shares at net asset value with distributions
reinvested) compared favorably to the +2.29% return of the Lipper Colorado
Municipal Debt Funds Average. The Lehman Brothers Municipal Bond Index gained
+3.14% during the same period.
Colorado's economy performed relatively well during the period, with
unemployment below the national average and per capita personal income above the
national average. While the state's exposure to the technology and
telecommunication sectors has resulted in slower growth in recent years, capital
spending for education, roads, and other public services remained strong.
We have continued to upgrade the credit quality of the portfolio. One
problematic bond issue resulted in less of a loss than we had earlier
anticipated. Once dependent on a financially troubled Denver aquarium,
Colorado's Ocean Journey, the bond appeared more stable to investors when the
aquarium was acquired by Landry's Restaurants, a national restaurant chain based
in Houston, Texas.
3
Delaware
TAX-FREE ARIZONA FUND
Fund Basics
As of August 31, 2003
- --------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from the Arizona state personal income tax as is
consistent with preservation of capital.
- --------------------------------------------------
Total Fund Net Assets:
$35.78 million
- --------------------------------------------------
Number of Holdings:
41
- --------------------------------------------------
Fund Start Date:
March 2, 1995
- --------------------------------------------------
Your Fund Manager:
Andrew M. McCullagh is a graduate of
Washington College and has a Graduate
Certificate in public finance from the University
of Michigan. Prior to joining Delaware
Investments, he served as a Senior Vice
President and Senior Portfolio Manager of
Voyageur Asset Management. Mr. McCullagh
currently has over 28 years' experience in
municipal bond trading, underwriting, and
portfolio management.
- --------------------------------------------------
Nasdaq Symbols:
Class A DVAAX
Class B DVATX
Class C DVAZX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime Five Years One Year
- -----------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +5.78% +3.15% -0.88%
Including Sales Charge +5.21% +2.20% -5.35%
- -----------------------------------------------------------------------------
Class B (Est. 6/29/95)
Excluding Sales Charge +4.66% +2.41% -1.62%
Including Sales Charge +4.66% +2.16% -5.40%
- -----------------------------------------------------------------------------
Class C (Est. 5/13/95)
Excluding Sales Charge +4.76% +2.38% -1.53%
Including Sales Charge +4.76% +2.38% -2.48%
- -----------------------------------------------------------------------------
Returns reflect the reinvestment of distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Arizona
Fund during the periods shown. Performance would have been lower had the expense
limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
March 2, 1995 (Fund's inception) through August 31, 2003
Delaware Tax-Free
Arizona Fund -- Class A Lehman Brothers
Shares Municipal Bond Index
----------------------- --------------------
Mar-95 $ 9,630 $10,000
Aug-95 $10,073 $10,469
Aug-96 $10,961 $11,017
Aug-97 $11,991 $12,036
Aug-98 $13,127 $13,077
Aug-99 $12,985 $13,148
Aug-00 $13,460 $14,033
Aug-01 $14,738 $15,466
Aug-02 $15,466 $16,431
Aug-03 $15,397 $16,947
Chart assumes $10,000 invested on March 2, 1995 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The chart also assumes $10,000 invested in the Lehman Brothers
Municipal Bond Index at that month's end, March 31, 1995. After March 31, 1995,
returns plotted on the chart were as of the last day of each month shown. The
Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks
the performance of municipal bonds. An index is unmanaged and does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities.
You cannot invest directly in an index. Past performance is not a guarantee of
future results.
4
Delaware
TAX-FREE ARIZONA INSURED FUND
Fund Basics
As of August 31, 2003
- -------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from the Arizona state personal income tax as is
consistent with preservation of capital.
- -------------------------------------------------
Total Fund Net Assets:
$152.89 million
- -------------------------------------------------
Number of Holdings:
66
- -------------------------------------------------
Fund Start Date:
April 1, 1991
- -------------------------------------------------
Your Fund Manager:
Andrew M. McCullagh
- -------------------------------------------------
Nasdaq Symbols:
Class A VAZIX
Class B DVABX
Class C DVACX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------------------------
Class A (Est. 4/1/91)
Excluding Sales Charge +6.50% +5.01% +4.34% +2.17%
Including Sales Charge +6.10% +4.53% +3.39% -2.40%
- --------------------------------------------------------------------------------------------------
Class B (Est. 3/10/95)
Excluding Sales Charge +5.06% +3.57% +1.41%
Including Sales Charge +5.06% +3.32% -2.46%
- --------------------------------------------------------------------------------------------------
Class C (Est. 5/26/94)
Excluding Sales Charge +5.04% +3.57% +1.40%
Including Sales Charge +5.04% +3.57% +0.43%
- --------------------------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Arizona
Insured Fund during the periods shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free
Arizona Insured Fund -- Lehmann Brothers
Class A Shares Municipal Bond Index
------------------------ --------------------
Aug-93 $ 9,550 $10,000
Aug-94 $ 9,346 $10,014
Aug-95 $10,167 $10,902
Aug-96 $10,724 $11,474
Aug-97 $11,662 $12,534
Aug-98 $12,583 $13,618
Aug-99 $12,537 $13,692
Aug-00 $13,222 $14,614
Aug-01 $14,429 $16,106
Aug-02 $15,228 $17,102
Aug-03 $15,573 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
5
Delaware
TAX-FREE CALIFORNIA FUND
Fund Basics
As of August 31, 2003
- ------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from the California state personal income tax as
is consistent with preservation of capital.
- ------------------------------------------------
Total Fund Net Assets:
$45.35 million
- ------------------------------------------------
Number of Holdings:
43
- ------------------------------------------------
Fund Start Date:
March 2, 1995
- ------------------------------------------------
Your Fund Manager:
Andrew M. McCullagh
- ------------------------------------------------
Nasdaq Symbols:
Class A DVTAX
Class B DVTFX
Class C DVFTX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime Five Years One Year
- -------------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +6.49% +4.36% +2.51%
Including Sales Charge +5.91% +3.40% -2.12%
- -------------------------------------------------------------------------------
Class B (Est. 8/23/95)
Excluding Sales Charge +5.91% +3.57% +1.73%
Including Sales Charge +5.91% +3.32% -2.18%
- -------------------------------------------------------------------------------
Class C (Est. 4/9/96)
Excluding Sales Charge +5.62% +3.58% +1.74%
Including Sales Charge +5.62% +3.58% +0.76%
- -------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
California Fund during the periods shown. Performance would have been lower had
the expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
March 2, 1995 (Fund's inception) through August 31, 2003
Delaware Tax-Free
California Fund -- Lehman Brothers
Class A Shares Municipal Bond Index
------------------ --------------------
Mar-95 $ 9,657 $10,000
Aug-95 $ 9,913 $10,469
Aug-96 $10,629 $11,017
Aug-97 $11,830 $12,036
Aug-98 $13,086 $13,077
Aug-99 $12,885 $13,148
Aug-00 $13,529 $14,033
Aug-01 $14,940 $15,466
Aug-02 $15,801 $16,431
Aug-03 $16,296 $16,947
Chart assumes $10,000 invested on March 2, 1995 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The chart also assumes $10,000 invested in the Lehman Brothers
Municipal Bond Index at that month's end, March 31, 1995. After March 31, 1995,
returns plotted on the chart were as of the last day of each month shown. The
Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks
the performance of municipal bonds. An index is unmanaged and does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
6
Delaware
TAX-FREE CALIFORNIA INSURED FUND
Fund Basics
As of August 31, 2003
- -------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from the California state personal income tax as
is consistent with preservation of capital.
- -------------------------------------------------
Total Fund Net Assets:
$40.39 million
- -------------------------------------------------
Number of Holdings:
35
- -------------------------------------------------
Fund Start Date:
October 15, 1992
- -------------------------------------------------
Your Fund Manager:
Andrew M. McCullagh
- -------------------------------------------------
Nasdaq Symbols:
Class A VCINX
Class B DVNBX
Class C DVNCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- -------------------------------------------------------------------------------------------------
Class A (Est. 10/15/92)
Excluding Sales Charge +5.85% +4.84% +4.06% +1.84%
Including Sales Charge +5.41% +4.36% +3.12% -2.79%
- -------------------------------------------------------------------------------------------------
Class B (Est. 3/2/94)
Excluding Sales Charge +4.43% +3.29% +1.07%
Including Sales Charge +4.43% +3.03% -2.83%
- -------------------------------------------------------------------------------------------------
Class C (Est. 4/12/95)
Excluding Sales Charge +4.74% +3.32% +1.17%
Including Sales Charge +4.74% +3.32% +0.19%
- -------------------------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
California Insured Fund during the periods shown. Performance would have been
lower had the expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free
Californa Insured Fund -- Lehman Brothers
Class A Shares Municipal Bond Index
--------------------------- --------------------
Aug-93 $ 9,550 $10,000
Aug-94 $ 9,256 $10,014
Aug-95 $ 9,897 $10,902
Aug-96 $10,489 $11,474
Aug-97 $11,524 $12,534
Aug-98 $12,548 $13,618
Aug-99 $12,301 $13,692
Aug-00 $13,174 $14,614
Aug-01 $14,428 $16,106
Aug-02 $15,039 $17,102
Aug-03 $15,321 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
7
Delaware
TAX-FREE COLORADO FUND
Fund Basics
As of August 31, 2003
- -----------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from the Colorado state personal income tax as
is consistent with preservation of capital.
- -----------------------------------------------
Total Fund Net Assets:
$321.24 million
- -----------------------------------------------
Number of Holdings:
98
- -----------------------------------------------
Fund Start Date:
April 23, 1987
- -----------------------------------------------
Your Fund Manager:
Andrew M. McCullagh
- -----------------------------------------------
Nasdaq Symbols:
Class A VCTFX
Class B DVBTX
Class C DVCTX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- ------------------------------------------------------------------------------------------------------------
Class A (Est. 4/23/87)
Excluding Sales Charge +6.95% +5.09% +3.81% +2.52%
Including Sales Charge +6.65% +4.61% +2.86% -2.08%
- ------------------------------------------------------------------------------------------------------------
Class B (Est. 3/22/95)
Excluding Sales Charge +5.02% +3.03% +1.66%
Including Sales Charge +5.02% +2.77% -2.25%
- ------------------------------------------------------------------------------------------------------------
Class C (Est. 5/6/94)
Excluding Sales Charge +5.06% +3.04% +1.74%
Including Sales Charge +5.06% +3.04% +0.77%
- ------------------------------------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
Colorado Fund during the periods shown. Performance would have been lower had
the expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free
Colorado Fund -- Lehman Brothers
Class A Shares Municipal Bond Index
------------------- --------------------
Aug-93 $ 9,550 $10,000
Aug-94 $ 9,356 $10,014
Aug-95 $10,137 $10,902
Aug-96 $10,768 $11,474
Aug-97 $11,845 $12,534
Aug-98 $13,004 $13,618
Aug-99 $12,783 $13,692
Aug-00 $13,280 $14,614
Aug-01 $14,616 $16,106
Aug-02 $15,291 $17,102
Aug-03 $15,691 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
8
Statements Delaware Tax-Free Arizona Fund
OF NET ASSETS August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 100.66%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 9.78%
Phoenix Civic Improvement Corporation
Series B
5.25% 7/1/27 (FGIC/AMT) $2,500,000 $ 2,498,125
5.25% 7/1/32 (FGIC/AMT) 1,000,000 999,190
-----------
3,497,315
-----------
Charter School Revenue Bonds - 9.23%
Maricopa County Industrial Development
Authority School District Revenue
6.75% 7/1/29 1,000,000 982,490
Pima County Industrial Development
Authority (Arizona Charter Schools
Project II) Series A
6.75% 7/1/31 500,000 491,015
Pima County Industrial Development
Authority (Life School College Project)
Series A 7.875% 7/1/21 2,000,000 1,827,140
-----------
3,300,645
-----------
Dedicated Tax & Fees Revenue Bonds - 9.87%
Arizona Tourism & Sports Authority Tax
Revenue Multipurpose Stadium
Facilities Series A 5.00% 7/1/31 (MBIA) 1,000,000 990,290
Glendale Municipal Property Corporation
Excise Tax Revenue Series A
5.00% 7/1/33 (AMBAC) 750,000 742,485
Marana Municipal Property Corporation
5.00% 7/1/28 (AMBAC) 575,000 571,159
Phoenix Civic Improvement Corporation
Excise Tax Revenue 4.50% 7/1/29 1,350,000 1,226,219
-----------
3,530,153
-----------
Higher Education Revenue Bonds - 15.89%
Glendale Industrial Development Authority
5.875% 5/15/31 1,000,000 1,024,539
Northern Arizona University Systems
Revenue 5.00% 6/1/34 (FGIC) 1,000,000 987,850
Southern Arizona Capital Facilities Finance
(University of Arizona Project)
5.10% 9/1/33 (MBIA) 850,000 851,029
Tucson Industrial Development Authority
(University of Arizona-Marshall
Foundation) Series A
5.00% 7/15/27 (AMBAC) 1,000,000 995,390
University of Arizona Certificates of
Participation (University of Arizona
Projects) Series B
5.125% 6/1/22 (AMBAC) 1,000,000 1,016,279
West Campus Housing Revenue
(Arizona State University Project)
6.375% 7/1/22 (ACA) 750,000 808,748
-----------
5,683,835
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds - 12.50%
Mesa Industrial Development Authority
(Discovery Health Systems) Series A
5.625% 1/1/29 (MBIA) $ 750,000 $ 779,288
Mohave County Industrial Development
Authority (Chris/Silver Ridge)
6.375% 11/1/31 (GNMA) 550,000 579,343
Scottsdale Industrial Development Authority
Hospital Revenue
(Scottsdale Healthcare)
5.70% 12/1/21 500,000 504,280
Winslow Industrial Development Authority
Hospital Revenue
(Winslow Memorial Hospital Project)
5.50% 6/1/22 1,000,000 673,430
Yavapai County Industrial Development
Authority Hospital Revenue
(Yavapai Regional Medical Center)
Series A 5.25% 8/1/21 (RADIAN) 1,000,000 1,004,179
Yuma Industrial Development Authority
Hospital Revenue
(Yuma Regional Medical Center)
5.00% 8/1/31 (FSA) 950,000 933,812
-----------
4,474,332
-----------
Investor Owned Utilities Revenue Bonds - 5.67%
Maricopa County Pollution Control
(Palo Verde Project) Series A
5.05% 5/1/29 (AMBAC) 1,000,000 994,370
Maricopa County Pollution Control
Corporation Pollution Control Revenue
(El Paso Electric Company Project)
Series A 6.375% 8/1/15 1,000,000 1,034,490
-----------
2,028,860
-----------
Multifamily Housing Revenue Bonds - 10.75%
**Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Bay Club at Mesa Cove Project)
Series B 8.25% 9/1/35 1,875,000 656,250
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Sly-Mar Apartments)
6.10% 4/20/36 (GNMA/AMT) 700,000 729,722
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Villas at Augusta Project)
6.50% 10/20/33 (GNMA) 850,000 886,941
Peoria Casa Del Rio Industrial Development
Authority Multifamily Housing Revenue
(Casa Del Rio) 7.30% 2/20/28 (GNMA) 500,000 524,905
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Camelback Crossing)
6.35% 9/20/35 (GNMA) 500,000 531,285
Pima County Industrial Development
Authority Multifamily Housing Revenue
(Sunbriar Apartments Project)
7.25% 7/1/25 (MBIA/FHA) 500,000 518,675
-----------
3,847,778
-----------
9
Statements Delaware Tax-Free Arizona Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Municipal Lease Revenue Bonds - 5.55%
Maricopa County Industrial Development
Authority Correctional Facilities
(Phoenix West Prison)
5.375% 7/1/22 (ACA) $ 750,000 $ 751,508
Prescott Valley Municipal Property
Corporate Facilities Revenue
5.00% 1/1/27 (FGIC) 700,000 700,210
Sedona Partner Certificates of
Participation Series 1999
5.75% 7/1/16 500,000 535,735
----------
1,987,453
----------
Political Subdivision General Obligation Bonds - 9.94%
DC Ranch Community Facilities
5.00% 7/15/27 (AMBAC) 500,000 498,865
Eagle Mountain Community Facility District
6.50% 7/1/21 1,010,000 1,122,049
Phoenix Variable Purpose Series B
5.00% 7/1/27 1,935,000 1,937,342
----------
3,558,256
----------
Public Power Revenue Bonds - 2.77%
Salt River Project Arizona Agricultural
Improvement & Power District Electric
System Revenue (Salt River Project)
Series A 5.00% 1/1/31 1,000,000 991,830
----------
991,830
----------
School District General Obligation Bonds - 0.52%
Maricopa County School District #69
(Paradise Valley) 3.375% 7/1/13 (FGIC) 200,000 185,430
----------
185,430
----------
Single Family Housing Revenue Bonds - 0.55%
Pima County Industrial Development
Authority Single Family Mortgage
Revenue Series A 6.125% 11/1/33
(GNMA/FNMA/FHLMC/AMT) 190,000 198,421
----------
198,421
----------
Territorial General Obligation Bonds - 2.77%
Puerto Rico Commonwealth Public
Improvement Series A 5.125% 7/1/31 1,000,000 989,690
----------
989,690
----------
Territorial Revenue Bonds - 2.78%
Puerto Rico Public Buildings Authority
Guaranteed Government Facilities
Revenue Series D 5.25% 7/1/36 1,000,000 994,810
----------
994,810
----------
Water & Sewer Revenue Bonds - 2.09%
Phoenix Civic Improvement Corporation
Water Systems Revenue
5.00% 7/1/26 (FGIC) 750,000 747,420
----------
747,420
----------
Total Municipal Bonds
(cost $37,497,256) 36,016,228
----------
Total Market Value of Securities - 100.66%
(cost $37,497,256) $36,016,228
Liabilities Net of Receivables and
Other Assets - (0.66%) (235,270)
-----------
Net Assets Applicable to 3,573,341 Shares
Outstanding - 100.00% $35,780,958
===========
Net Asset Value - Delaware Tax-Free
Arizona Fund Class A
($22,400,694/2,237,570 Shares) $10.01
------
Net Asset Value - Delaware Tax-Free
Arizona Fund Class B
($8,956,323/894,988 Shares) $10.01
------
Net Asset Value - Delaware Tax-Free
Arizona Fund Class C
($4,423,941/440,783 Shares) $10.04
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $38,557,252
Distributions in excess of net investment income (1,660)
Accumulated net realized loss on investments (1,293,606)
Net unrealized depreciation of investments (1,481,028)
-----------
Total net assets $35,780,958
===========
**Non-income producing security. Security is currently in default.
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FHLMC - Insured by the Federal Home Loan Mortgage Corporation
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Arizona Fund
Net asset value Class A (A) $10.01
Sales charge (4.50% of offering price, or 4.70% of
amount invested per share) (B) 0.47
------
Offering price $10.48
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
10
Statements Delaware Tax-Free Arizona Insured Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 98.77%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 9.68%
Phoenix Civic Improvement Corporation
Series B
5.25% 7/1/27 (FGIC/AMT) $ 500,000 $ 499,625
5.25% 7/1/32 (FGIC/AMT) 9,300,000 9,292,467
Tucson Airport Authority
5.35% 6/1/31 (AMBAC/AMT) 5,000,000 5,004,250
-----------
14,796,342
-----------
Charter School Revenue Bonds - 4.54%
Pima County Industrial Development
Authority (Arizona Charter Schools
Project II) Series A 6.75% 7/1/31 500,000 491,015
Pima County Industrial Development
Authority (Arizona Charter
Schools Project) Series C 6.75% 7/1/31 6,570,000 6,451,937
-----------
6,942,952
-----------
Continuing Care/Retirement Revenue Bonds - 2.59%
Maricopa County Industrial Development
Authority Health Facilities Revenue
(Pennington Gardens) Series A
6.30% 9/20/38 (GNMA/FHA) 3,715,000 3,954,395
-----------
3,954,395
-----------
Dedicated Tax & Fees Revenue Bonds - 7.49%
Arizona Tourism & Sports Authority Tax
Revenue Multipurpose Stadium Facilities
Series A
5.00% 7/1/28 (MBIA) 2,500,000 2,483,300
5.00% 7/1/31 (MBIA) 1,500,000 1,485,435
Oro Valley Common Trust Funds Partnership
5.75% 7/1/17 (MBIA) 1,000,000 1,094,060
Phoenix Civic Improvement Corporation
Excise Tax Revenue 5.00% 7/1/26 1,000,000 999,260
Surprise Municipal Property Excise Tax
Revenue 5.70% 7/1/20 (FGIC) 5,000,000 5,394,350
-----------
11,456,405
-----------
Escrowed to Maturity Bonds - 0.23%
Phoenix Street & Highway Revenue
6.50% 7/1/09 (AMBAC) 350,000 355,611
-----------
355,611
-----------
Higher Education Revenue Bonds - 9.77%
Arizona State Board of Regents Certificates
of Participation 5.125% 6/1/25 (AMBAC) 1,250,000 1,263,613
Glendale Industrial Development Authority
Educational Facilities (American
Graduate School International)
5.625% 7/1/20 (Connie Lee) 1,000,000 1,069,890
5.875% 7/1/15 (Connie Lee) 2,500,000 2,713,575
Mohave County Community College
6.00% 3/1/20 (MBIA) 1,000,000 1,114,110
South Campus Group Student Housing
Revenue (Arizona State University South
Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,051,790
Southern Arizona Capital Facilities Finance
(University of Arizona Project)
5.10% 9/1/33 (MBIA) 2,400,000 2,402,904
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Higher Education Revenue Bonds (continued)
University of Arizona Certificates
of Participation
4.75% 6/1/23 (AMBAC) $1,000,000 $ 973,060
5.125% 6/1/21 (AMBAC) 1,000,000 1,020,570
5.75% 6/1/19 (AMBAC) 1,000,000 1,091,250
West Campus Housing
(Arizona State University Project)
5.50% 7/1/34 (ACA) 2,250,000 2,239,560
-----------
14,940,322
-----------
Hospital Revenue Bonds - 10.84%
Mesa Industrial Development Authority
(Discovery Health Systems) Series A
5.625% 1/1/29 (MBIA) 9,250,000 9,611,212
Phoenix Industrial Development Authority
Hospital Revenue (John C. Lincoln Health)
Series B 5.75% 12/1/16 (Connie Lee) 4,110,000 4,488,531
University of Arizona Medical Center
6.25% 7/1/10 (MBIA) 1,445,000 1,465,143
Yavapai County Industrial Development
Authority Hospital Revenue
(Yavapai Regional Medical Center)
Series A 5.25% 8/1/21 (RADIAN) 1,000,000 1,004,180
-----------
16,569,066
-----------
Investor Owned Utilities Revenue Bonds - 4.60%
Maricopa County Pollution Control
(Palo Verde Project) Series A
5.05% 5/1/29 (AMBAC) 5,000,000 4,971,850
Puerto Rico Industrial Tourist Facilities
Financing Authority
6.625% 6/1/26 (AMT) 2,000,000 2,061,140
-----------
7,032,990
-----------
Multifamily Housing Revenue Bonds - 13.14%
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Sly-Mar Apartments)
6.10% 4/20/36 (GNMA/AMT) 1,300,000 1,355,198
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Villas at Augusta Project)
6.50% 10/20/33 (GNMA/AMT) 1,650,000 1,721,709
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Camelback Crossing)
6.35% 9/20/35 (GNMA) 1,500,000 1,593,855
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Capital Mews Apartments)
5.70% 12/20/40 (GNMA/AMT) 4,000,000 4,078,919
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Ventana Palms Apartments)
6.15% 10/1/29 (MBIA) 510,000 536,168
6.20% 10/1/34 (MBIA) 940,000 997,105
Pima County Industrial Development
Authority Multifamily Housing Revenue
(Columbus Village) Series A
6.00% 10/20/31 (GNMA) 1,150,000 1,201,785
6.05% 10/20/41 (GNMA) 1,520,000 1,586,652
11
Statements Delaware Tax-Free Arizona Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multifamily Housing Revenue Bonds (continued)
Pima County Industrial Development
Authority Multifamily Housing Revenue
(Sunbriar Apartments Project)
7.25% 7/1/25 (MBIA/FHA) $1,225,000 $ 1,270,754
Tolleson Industrial Development Authority
Multifamily Housing Revenue
(Copper Cove Project) Series A
5.45% 11/20/32 (GNMA/AMT) 1,285,000 1,295,691
Yuma Industrial Development Authority
Multifamily Revenue
6.10% 9/20/19 (GNMA/AMT) 2,340,000 2,450,354
Yuma Industrial Development Authority
Multifamily Revenue
(Regency Apartments)
Series A 5.50% 12/20/32 (GNMA/FHA) 2,000,000 2,009,460
-----------
20,097,650
-----------
Municipal Lease Revenue Bonds - 9.28%
Maricopa County Industrial Development
Authority Correctional Facilities
(Phoenix West Prison)
5.375% 7/1/22 (ACA) 250,000 250,503
Phoenix Industrial Development Authority
Lease Revenue (Capitol Mall LLC Project)
5.50% 9/15/27 (AMBAC) 5,000,000 5,196,399
Phoenix Industrial Development Authority
Lease Revenue (Capitol Mall LLC II Project)
5.00% 9/15/28 (AMBAC) 4,000,000 3,971,080
Pinal County Certificates of Participation
5.125% 6/1/21 (AMBAC) 4,675,000 4,771,165
-----------
14,189,147
-----------
Political Subdivision General Obligation Bonds - 1.31%
DC Ranch Community Facilities
5.00% 7/15/27 (AMBAC) 1,000,000 997,730
Phoenix Variable Purpose Series B
5.00% 7/1/27 1,000,000 1,001,210
-----------
1,998,940
-----------
Public Power Revenue Bonds - 5.60%
Energy Management Services
(Arizona State University - Main Campus)
5.25% 7/1/17 (MBIA) 1,500,000 1,593,000
Puerto Rico Electric Power Authority Power
Revenue 5.00% 7/1/32 2,000,000 2,006,800
Salt River Project Arizona Agricultural
Improvement & Power District Electric
System Revenue (Salt River Project)
Series A 5.00% 1/1/31 3,000,000 2,975,490
Series B 5.00% 1/1/31 (MBIA) 2,000,000 1,983,660
-----------
8,558,950
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
School District General Obligation Bonds - 5.20%
Cochise County Unified School District #68
7.50% 7/1/10 (FGIC) $1,000,000 $ 1,238,940
Maricopa County School District #3
(Tempe Elementary) Series E
5.70% 7/1/16 (FGIC) 1,025,000 1,133,835
Maricopa County School District #14
(Creighton School Improvement Project
of 1990) Series C 6.50% 7/1/08 (FGIC) 1,000,000 1,168,530
Maricopa County School District #69
(Paradise Valley) 3.375% 7/1/13 (FGIC) 4,750,000 4,403,962
-----------
7,945,267
-----------
Single Family Housing Revenue Bonds - 0.81%
Pima County Industrial Development
Authority Single Family Housing
Revenue 6.10% 5/1/31 (GNMA/AMT) 1,200,000 1,242,372
-----------
1,242,372
-----------
Territorial General Obligation Bonds - 4.62%
Puerto Rico Commonwealth Public
Improvement Series A
5.125% 7/1/30 (FSA) 1,250,000 1,264,550
5.125% 7/1/31 4,450,000 4,404,121
Puerto Rico Commonwealth Refunding
Public Improvements Series A
5.50% 7/1/19 1,300,000 1,390,337
-----------
7,059,008
-----------
Transportation Revenue Bonds - 3.02%
Arizona State Transportation Board Highway
Revenue Series A 5.00% 7/1/21 2,500,000 2,549,500
Arizona State Transportation Board Highway
Revenue Series B
5.25% 7/1/21 1,000,000 1,039,710
5.25% 7/1/22 1,000,000 1,035,320
-----------
4,624,530
-----------
Water & Sewer Revenue Bonds - 6.05%
Gilbert Water & Waste Water Revenue
6.50% 7/1/12 (FGIC) 1,000,000 1,052,510
6.50% 7/1/22 (FGIC) 2,650,000 2,780,645
Phoenix Civic Improvement Corporation
Wastewater Systems Revenue
5.00% 7/1/24 (FGIC) 1,000,000 1,000,900
5.00% 7/1/26 (FGIC) 3,750,000 3,737,100
Prescott Valley Sewer Revenue
5.00% 1/1/23 (MBIA) 670,000 674,677
-----------
9,245,832
-----------
Total Municipal Bonds (cost $147,511,486) 151,009,779
-----------
12
Statements Delaware Tax-Free Arizona Insured Fund
OF NET ASSETS (CONTINUED)
Total Market Value of Securities - 98.77%
(cost $147,511,486) $151,009,779
Receivables and Other Assets
Net of Liabilities - 1.23% 1,883,142
------------
Net Assets Applicable to 13,697,515 Shares
Outstanding - 100.00% $152,892,921
============
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund Class A
($129,682,965/11,620,196 Shares) $11.16
------
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund Class B
($14,665,502/1,313,229 Shares) $11.17
------
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund Class C
($8,544,454/764,090 Shares) $11.18
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $148,675,771
Undistributed net investment income 7,314
Accumulated net realized gain on investments 711,543
Net unrealized appreciation of investments 3,498,293
------------
Total net assets $152,892,921
============
Summary of Abbreviations:
ACA -- Insured by American Capital Access
AMBAC -- Insured by the AMBAC Indemnity Corporation
AMT -- Subject to Alternative Minimum Tax
Connie Lee -- Insured by the College Construction Insurance Association
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
RADIAN -- Insured by Radian Asset Assurance
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Arizona Insured Fund
Net asset value Class A (A) $11.16
Sales charge (4.50% of offering price, or 4.75% of
amount invested per share) (B) 0.53
------
Offering price $11.69
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
13
Statements Delaware Tax-Free California Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 98.81%
- --------------------------------------------------------------------------------
Continuing Care/Retirement Revenue Bonds - 5.80%
Abag Finance Authority of California
(Nonprofit Corporations)
Certificates of Participation
(Lincoln Glen Manor Senior Citizens)
6.10% 2/15/25 $2,575,000 $ 2,630,620
-----------
2,630,620
-----------
Dedicated Tax & Fees Revenue Bonds - 4.19%
Poway Unified School District
5.60% 9/1/33 1,000,000 947,960
San Bernardino County Special Tax
Community Facilities 5.90% 9/1/33 1,000,000 952,570
-----------
1,900,530
-----------
Higher Education Revenue Bonds - 7.77%
California Educational Facilities Authority
Revenue (Pepperdine University)
Series A 5.50% 8/1/32 1,000,000 1,020,950
California Statewide Communities Revenue
Authority East Campus Apartments LLC
Series A 5.625% 8/1/34 (ACA) 1,000,000 1,007,130
San Diego County Certificates of Participation
(University of San Diego)
5.375% 10/1/41 1,000,000 1,002,290
University of California Revenues Series A
5.00% 5/15/33 (AMBAC) 500,000 491,975
-----------
3,522,345
-----------
Hospital Revenue Bonds - 9.18%
Abag Finance Authority of California
(Nonprofit Corporations-San Diego
Hospital Association) Series A
6.125% 8/15/20 1,250,000 1,288,875
California Health Facilities Financing
Authority (Adventist Health Systems)
Series A 5.00% 3/1/33 1,000,000 901,240
California Health Facilities Financing
Authority (The Episcopal Home)
5.30% 2/1/32 1,000,000 979,390
California Infrastructure & Economic
Development Bank Revenue
(Kaiser Hospital Associates I, LLC)
Series A 5.55% 8/1/31 1,000,000 990,280
-----------
4,159,785
-----------
Miscellaneous Revenue Bonds - 6.97%
California Statewide Communities
Development Authority Revenue
(Bentley School) 6.75% 7/1/32 1,000,000 1,005,940
San Diego County Certificates of
Participation 5.70% 2/1/28 1,200,000 1,130,544
San Diego County Certificates of
Participation (The Burnham Institute)
6.25% 9/1/29 1,000,000 1,024,310
-----------
3,160,794
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multifamily Housing Revenue Bonds - 19.50%
California Mobile Home Park Financing
Authority Revenue (Ranch Vallecitos,
San Marcos) Series A
5.25% 11/15/36 (ACA) $1,000,000 $ 973,560
California Statewide Communities
Development Authority Multifamily
Housing Revenue
(Citrus Gardens Apartments Project)
Series D1 5.375% 7/1/32 1,000,000 974,190
California Statewide Communities
Development Authority Multifamily
Housing Revenue
(Silver Ridge Apartments)
5.80% 8/1/33 (AMT) 1,000,000 1,041,179
California Statewide Communities
Development Authority Multifamily
Housing Revenue
(Stonehaven Apartments Project)
Series A 5.875% 7/1/32 (ACA) 1,000,000 1,017,090
Fairfield Housing Authority 5.625% 9/1/23 1,000,000 965,670
Monterey County Housing Authority
(Parkside Manor Apartments)
5.00% 7/1/19 1,000,000 941,460
Palm Springs Mobile Home Park Revenue
(Sahara Mobile Home Park)
5.625% 5/15/26 1,000,000 984,160
5.75% 5/15/37 1,000,000 976,630
Santa Clara County Housing Authority
(Rivertown Apartments Project)
Series A 5.85% 8/1/31 (AMT) 1,000,000 964,280
-----------
8,838,219
-----------
Municipal Lease Revenue Bonds - 6.91%
California State Public Works Board
Lease Revenue 5.00% 12/1/27 (AMBAC) 1,000,000 988,430
Orange County Water Distribution Revenue
5.00% 8/15/34 (MBIA) 1,180,000 1,159,893
San Jose Financing Authority Lease Revenue
(Civic Center Project) Series B
5.00% 6/1/32 (AMBAC) 1,000,000 984,180
-----------
3,132,503
-----------
Parking Revenue Bonds - 2.33%
San Diego Redevelopment Agency
6.40% 9/1/25 1,000,000 1,056,970
-----------
1,056,970
-----------
*Pre-Refunded Bonds - 2.62%
Tustin Unified School District
6.375% 9/1/35-08 1,000,000 1,189,930
-----------
1,189,930
-----------
Public Power Revenue Bonds - 5.55%
California State Department Water Reserve
Power Supply Revenue Series A
5.375% 5/1/21 1,000,000 1,014,990
Puerto Rico Electric Power Authority
Power Revenue 5.00% 7/1/32 (MBIA) 1,000,000 1,003,400
Vernon Electric Systems Revenue
5.30% 4/1/26 515,000 498,577
-----------
2,516,967
-----------
14
Statements Delaware Tax-Free California Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
School District General Obligation Bonds - 6.53%
Gilroy Unified School District
(Malbor Generating State Project)
5.00% 8/1/27 (FGIC) $1,000,000 $ 989,360
Lawndale Elementary School District
5.00% 8/1/32 (FSA) 1,000,000 984,180
San Diego Unified School District
5.00% 7/1/28 (FSA) 1,000,000 988,020
-----------
2,961,560
-----------
State General Obligation Bonds - 1.43%
California State Veterans Series B
5.70% 12/1/32 (AMT) 640,000 649,728
-----------
649,728
-----------
Tax Increment/Special Assessment Bonds - 9.08%
Lake Elisnore Public Financing Authority
5.50% 9/1/30 1,000,000 999,300
5.80% 9/2/15 1,110,000 1,136,074
San Francisco City & County Redevelopment
Agency 6.125% 8/1/31 1,000,000 979,000
Southern California Logistics Airport
Authority (Southern California Logistics
Airport Project) 6.50% 12/1/31 1,000,000 1,003,130
-----------
4,117,504
-----------
Transportation Revenue Bonds - 2.23%
Port of Oakland
5.375% 11/1/27 (FGIC/AMT) 1,000,000 1,012,630
-----------
1,012,630
-----------
Waste Disposal Revenue Bonds - 4.42%
Salinas Valley Solid Waste Authority
Revenue 5.25% 8/1/31 (AMBAC/AMT) 2,000,000 2,003,440
-----------
2,003,440
-----------
Water & Sewer Revenue Bonds - 4.30%
Los Angeles Department of Water & Power
Waterworks Revenue Series A
5.00% 7/1/43 (FGIC) 1,000,000 968,400
San Juan Basin Authority
(Ground Water Recovery Project)
5.00% 12/1/34 (AMBAC) 1,000,000 982,540
-----------
1,950,940
-----------
Total Municipal Bonds (cost $44,643,718) 44,804,465
-----------
Number
of Shares
- --------------------------------------------------------------------------------
Short-Term Investments - 1.26%
- --------------------------------------------------------------------------------
Federated California Municipal Trust 573,362 573,362
-----------
Total Short-Term Investments (cost $573,362) 573,362
-----------
Total Market Value of Securities - 100.07%
(cost $45,217,080) 45,377,827
Liabilities Net of Receivables and
Other Assets - (0.07%) (30,754)
-----------
Net Assets Applicable to 4,212,731 Shares
Outstanding - 100.00% $45,347,073
===========
Net Asset Value - Delaware Tax-Free
California Fund Class A
($22,168,838/2,062,824 Shares) $10.75
------
Net Asset Value - Delaware Tax-Free
California Fund Class B
($16,164,902/1,498,224 Shares) $10.79
------
Net Asset Value - Delaware Tax-Free
California Fund Class C
($7,013,333/651,683 Shares) $10.76
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization-- no par) $46,492,842
Undistributed net investment income 1,300
Accumulated net realized loss on investments (1,307,816)
Net unrealized appreciation of investments 160,747
-----------
Total net assets $45,347,073
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free California Fund
Net asset value Class A (A) $10.75
Sales charge (4.50% of offering price, or 4.74% of
amount invested per share) (B) 0.51
------
Offering price $11.26
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
15
Statements Delaware Tax-Free California Insured Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 99.05%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 4.87%
Sacramento County Airport System
Revenue Series A 5.00% 7/1/32 (FSA) $1,000,000 $ 984,170
San Jose Airport Revenue Series A
5.00% 3/1/31 (FGIC) 1,000,000 984,570
----------
1,968,740
----------
Dedicated Tax & Fees Revenue Bonds - 4.83%
San Bernardino County Special Tax
Community Facilities 5.90% 9/1/33 1,000,000 952,570
San Francisco Bay Area Rapid Transit
District Sales Tax Revenue
5.125% 7/1/36 (AMBAC) 1,000,000 998,510
----------
1,951,080
----------
Higher Education Revenue Bonds - 13.97%
California Educational Facilities
Authority Revenue
5.00% 10/1/32 1,000,000 991,620
5.75% 11/1/30 (MBIA) 1,000,000 1,065,610
California State Los Angeles University
Auxiliary Services
5.125% 6/1/33 (MBIA) 1,600,000 1,600,880
San Diego County Certificates
of Participation
(University of San Diego)
5.375% 10/1/41 1,000,000 1,002,290
University of California Revenues Series A
5.00% 5/15/33 (AMBAC) 1,000,000 983,950
----------
5,644,350
----------
Hospital Revenue Bonds - 5.97%
California Health Facilities Financing
Authority (The Episcopal Home)
5.30% 2/1/32 1,000,000 979,390
Oakland Industrial Revenue
(Harrison Foundation) Series B
6.00% 1/1/29 (AMBAC) 1,300,000 1,433,289
----------
2,412,679
----------
Miscellaneous Revenue Bonds - 5.16%
California Statewide Communities
Development Authority Revenue
(Bentley School) 6.75% 7/1/32 1,000,000 1,005,940
San Diego County Certificates of
Participation 5.75% 7/1/31 (MBIA) 1,000,000 1,076,940
----------
2,082,880
----------
Multifamily Housing Revenue Bonds - 12.08%
California Statewide Communities
Development Authority Multifamily
Housing Revenue
(Citrus Gardens Apartments Project)
Series D1 5.375% 7/1/32 800,000 779,352
California Statewide Communities
Development Authority Multifamily
Housing Revenue (East Tabor Apartments)
6.85% 8/20/36 (GNMA) 1,500,000 1,588,754
Los Angeles Multifamily Housing Revenue
(Park Plaza) 5.50% 1/20/43 (GNMA) 1,430,000 1,449,520
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multifamily Housing Revenue Bonds (continued)
Ventura County Area Housing Authority
Multifamily Housing Revenue
(Glen Oaks Apartments) Series A
6.35% 7/20/34 (GNMA) $1,027,000 $ 1,061,672
-----------
4,879,298
-----------
Municipal Lease Revenue Bonds - 7.32%
California State Public Works Board
Lease Revenue
5.00% 3/1/27 (AMBAC) 1,000,000 984,100
5.00% 12/1/27 (AMBAC) 1,000,000 988,430
San Jose Financing Authority Lease Revenue
(Civic Center Project) Series B
5.00% 6/1/32 (AMBAC) 1,000,000 984,180
-----------
2,956,710
-----------
Public Power Revenue Bonds - 5.00%
California State Department Water Reserve
Power Supply Revenue Series A
5.375% 5/1/21 1,000,000 1,014,990
Puerto Rico Electric Power Authority
Power Revenue 5.00% 7/1/32 (MBIA) 1,000,000 1,003,400
-----------
2,018,390
-----------
School District General Obligation Bonds - 9.83%
Gilroy Unified School District
(Malbor Generating State Project)
5.00% 8/1/27 (FGIC) 1,000,000 989,360
Placer Unified High School District
5.00% 8/1/25 (FSA) 1,000,000 992,720
San Diego Unified School District
5.00% 7/1/28 (FSA) 1,000,000 988,020
Sequoia Unified High School District
5.125% 7/1/31 (FSA) 1,000,000 1,000,700
-----------
3,970,800
-----------
School District Revenue Bonds - 2.59%
Franklin-McKinley School District Certificates
of Participation (Financing Project)
Series B 5.00% 9/1/27 (AMBAC) 1,060,000 1,044,259
-----------
1,044,259
-----------
Tax Increment/Special Assessment Bonds - 15.05%
La Quinta Redevelopment Agency Tax
Allocation 5.10% 9/1/31 (AMBAC) 2,000,000 1,987,300
Poway Redevelopment Agency Certificates
of Participation 5.75% 6/15/33 (MBIA) 1,400,000 1,509,116
Riverside County Redevelopment Agency
5.25% 10/1/35 (AMBAC) 1,590,000 1,606,298
San Francisco City & County Redevelopment
Agency 6.125% 8/1/31 1,000,000 979,000
-----------
6,081,714
-----------
Transportation Revenue Bonds - 2.57%
Port of Oakland 5.75% 11/1/29 (FGIC/AMT) 1,000,000 1,038,870
-----------
1,038,870
-----------
Waste Disposal Revenue Bonds - 4.97%
Salinas Valley Solid Waste Authority Revenue
5.25% 8/1/27 (AMBAC) 2,000,000 2,007,260
-----------
2,007,260
-----------
16
Statements Delaware Tax-Free California Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Water & Sewer Revenue Bonds - 4.84%
California State Department of Water
Resources Water Systems Revenue
(Central Valley Project) Series X
5.00% 12/1/29 (FGIC) $1,000,000 $ 986,250
Los Angeles Department of Water & Power
Waterworks Revenue Series A
5.00% 7/1/43 (FGIC) 1,000,000 968,400
-----------
1,954,650
-----------
Total Municipal Bonds (cost $39,298,008) 40,011,680
-----------
Number
of Shares
- --------------------------------------------------------------------------------
Short-Term Investments - 2.35%
- --------------------------------------------------------------------------------
Federated California Municipal Trust 947,474 947,474
-----------
Total Short-Term Investments
(cost $947,474) 947,474
-----------
Total Market Value of Securities - 101.40%
(cost $40,245,482) 40,959,154
Liabilities Net of Receivables and
Other Assets - (1.40%) (566,598)
-----------
Net Assets Applicable to 3,786,656 Shares
Outstanding - 100.00% $40,392,556
===========
Net Asset Value - Delaware Tax-Free
California Insured Fund Class A
($28,822,019/2,701,617 Shares) $10.67
------
Net Asset Value - Delaware Tax-Free
California Insured Fund Class B
($8,628,328/808,553 Shares) $10.67
------
Net Asset Value - Delaware Tax-Free
California Insured Fund Class C
($2,942,209/276,486 Shares) $10.64
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $39,698,745
Accumulated net realized loss on investments (19,861)
Net unrealized appreciation of investments 713,672
-----------
Total net assets $40,392,556
===========
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free California Insured Fund
Net asset value Class A (A) $10.67
Sales charge (4.50% of offering price, or 4.69% of
amount invested per share) (B) 0.50
------
Offering price $11.17
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
17
Statements Delaware Tax-Free Colorado Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 98.50%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 3.81%
Denver City & County Airport
5.00% 11/15/33 (XLCA) $4,000,000 $ 3,887,360
5.25% 11/15/23 (MBIA) 8,250,000 8,371,523
-----------
12,258,883
-----------
Charter School Revenue Bonds - 8.91%
Colorado Educational & Cultural Facilities
Authority (Aspen Foundation Colorado)
6.125% 7/1/12 560,000 551,331
6.50% 7/1/24 1,710,000 1,606,990
Colorado Educational & Cultural Facilities
Authority (Collegiate Academy Charter
School Project)
7.375% 12/15/21 1,000,000 1,021,570
7.50% 12/15/31 1,000,000 1,023,030
Colorado Educational & Cultural Facilities
Authority (Compass Montessori Charter
School Project) 7.75% 7/15/31 2,125,000 2,041,785
Colorado Educational & Cultural Facilities
Authority (Compass Montessori R1
Charter School Project) 8.00% 2/15/32 2,645,000 2,679,623
Colorado Educational & Cultural Facilities
Authority (Core Knowledge Charter
School Project) 7.00% 11/1/29 1,000,000 1,061,670
Colorado Educational & Cultural Facilities
Authority (Frontier Academy Charter
School Project)
7.25% 6/1/20 1,450,000 1,490,803
7.375% 6/1/31 1,775,000 1,827,398
Colorado Educational & Cultural Facilities
Authority (Lincoln Academy Charter
School Project) 8.375% 3/1/26 2,400,000 2,430,288
Colorado Educational & Cultural Facilities
Authority (Littleton Academy Charter
School Project) 6.125% 1/15/31 2,000,000 1,927,960
Colorado Educational & Cultural Facilities
Authority (Montessori Districts Charter
School Projects) 6.125% 7/15/32 5,590,000 5,349,350
Colorado Educational & Cultural Facilities
Authority (Pinnacle Charter
School Project) 6.00% 12/1/21 1,750,000 1,729,753
Colorado Educational & Cultural Facilities
Authority (Renaissance Charter School
Project) 6.75% 6/1/29 2,000,000 1,925,440
Colorado Educational & Cultural Facilities
Authority (Stargate Charter
School Project) 6.125% 5/1/33 2,000,000 1,951,740
-----------
28,618,731
-----------
Continuing Care/Retirement Revenue Bonds - 3.79%
Colorado Health Facilities Authority
(Covenant Retirement Communities)
5.50% 12/1/33 (RADIAN) 5,000,000 5,012,100
Colorado Health Facilities Authority
(Porter Place) 6.00% 1/20/36 (GNMA) 5,000,000 5,209,050
Mesa County Residential Care Facilities
Mortgage Revenue (Hilltop Community
Resources) Series A
5.375% 12/1/28 (RADIAN) 2,000,000 1,969,940
-----------
12,191,090
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Dedicated Tax & Fees Revenue Bonds - 0.60%
Broomfield Sales & Use Tax Revenue
Refunding & Improvement Series A
5.00% 12/1/31 (AMBAC) $1,950,000 $ 1,930,910
-----------
1,930,910
-----------
Higher Education Revenue Bonds - 12.81%
Boulder County Development Revenue
University Corporation for Atmospheric
Research 5.00% 9/1/33 (MBIA) 1,200,000 1,186,200
Colorado Educational & Cultural Facilities
Authority (Johnson & Wales University
Project) Series A 4.75% 4/1/33 (XLCA) 2,500,000 2,339,850
Colorado Educational & Cultural Facilities
Authority (University of Colorado
Foundation Project)
5.00% 7/1/32 (AMBAC) 6,000,000 5,936,280
Colorado Educational & Cultural Facilities
Authority (University of Denver Project)
5.375% 3/1/23 (AMBAC) 2,000,000 2,067,300
Colorado Educational & Cultural Facilities
Authority (University of Denver Project)
Series A 5.00% 3/1/27 (MBIA) 5,000,000 4,974,650
Colorado Educational & Cultural Facilities
Authority (University of Northern
Colorado Student Housing Project)
5.125% 7/1/37 (MBIA) 7,500,000 7,510,049
Colorado School Mines Auxiliary Facilities
Revenue 5.00% 12/1/37 (AMBAC) 3,630,000 3,574,098
Colorado Springs Revenue
(Colorado College Project)
5.375% 6/1/32 5,570,000 5,710,030
Colorado State University Systems
Series B 5.00% 3/1/35 (AMBAC) 3,500,000 3,457,860
University of Colorado Enterprise System
5.375% 6/1/26 1,000,000 1,028,640
University of Colorado Enterprise System
Series B 5.125% 6/1/28 (FGIC) 3,350,000 3,367,353
-----------
41,152,310
-----------
Hospital Revenue Bonds - 9.63%
Boulder County Hospital Revenue
Development (Longmont United
Hospital Project)
5.60% 12/1/27 (RADIAN) 1,250,000 1,265,288
5.875% 12/1/20 3,000,000 3,011,610
6.00% 12/1/30 (RADIAN) 5,000,000 5,298,199
Colorado Health Facilities Authority
(Catholic Health Initiatives)
5.50% 3/1/32 5,000,000 5,042,200
Colorado Health Facilities Authority
(Vail Valley Medical Center Project)
5.75% 1/15/22 500,000 503,100
5.80% 1/15/27 3,475,000 3,483,201
6.60% 1/15/20 (ACA) 1,000,000 1,032,410
Delta County Memorial Hospital District
5.35% 9/1/17 4,000,000 3,900,760
Denver Health & Hospital Authority
Healthcare Revenue Series A
5.375% 12/1/28 (ACA) 2,770,000 2,739,558
6.00% 12/1/31 1,000,000 983,190
18
Statements Delaware Tax-Free Colorado Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
University of Colorado Hospital Authority
Series A 5.60% 11/15/31 $3,650,000 $ 3,667,520
-----------
30,927,036
-----------
Miscellaneous Revenue Bonds - 8.07%
Colorado Educational & Cultural Facilities
Authority Revenue 5.25% 6/1/21 2,000,000 2,006,780
**Colorado Post Secondary Education
(Ocean Journey Project) 8.375% 12/1/26 8,000,000 252,000
Denver Convention Center Series A
5.00% 12/1/33 (XLCA) 11,000,000 10,690,020
Lowry Economic Redevelopment Authority
Revenue 7.80% 12/1/10 11,040,000 11,852,986
Lowry Economic Redevelopment Authority
Revenue Series A (Private Placement)
7.30% 12/1/10 1,055,000 1,117,266
-----------
25,919,052
-----------
Multifamily Housing Revenue Bonds - 9.71%
Adams County Housing Authority Mortgage
Revenue (Aztec Villa Apartments Project)
5.85% 12/1/27 1,825,000 1,867,632
Adams County Housing Authority Mortgage
Revenue (Greenbriar Project)
6.75% 7/1/21 1,730,000 1,797,574
Burlingame Multifamily Housing Revenue
Series A 6.00% 11/1/29 (MBIA) 1,250,000 1,302,675
Colorado Housing & Finance Authority
(Multifamily Housing Insured Mortgage)
Series A3 6.25% 10/1/26 (FHA) 6,205,000 6,443,272
Series C3 6.15% 10/1/41 1,590,000 1,660,119
Colorado Housing & Finance Authority
(Multifamily Project Class I)
Series A5 5.45% 10/1/33 720,000 688,126
Denver City & County Multifamily Housing
Revenue Federal Housing Authority
(Insured Mortgage Loan - Garden Court)
5.40% 7/1/39 (FHA) 2,000,000 2,020,100
Englewood Multifamily Housing Revenue
(Marks Apartments Project)
6.65% 12/1/26 5,700,000 5,767,089
Englewood Multifamily Housing Revenue
(Marks Apartments Project) Series B
6.00% 12/15/18 7,515,000 7,521,087
Lake County Multifamily Housing Mortgage
Revenue (Sawatch Apartments)
6.80% 10/20/35 (GNMA) 1,955,000 2,112,866
-----------
31,180,540
-----------
Municipal Lease Revenue Bonds - 8.48%
Aurora Certificates of Participation
5.50% 12/1/30 (AMBAC) 8,000,000 8,273,680
Conejos & Alamosa Counties School
District Region Certificates of
Participation 6.50% 4/1/11 1,315,000 1,371,769
El Paso County Certificates of Participation
(Detention Facilities Project) Series B
5.00% 12/1/27 (AMBAC) 1,500,000 1,486,560
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Municipal Lease Revenue Bonds (continued)
El Paso County Certificates of Participation
(Judicial Building Project) Series A
5.00% 12/1/27 (AMBAC) $2,000,000 $ 1,982,080
Fremont County Certificates of Participation
Refunding & Improvement Series A
5.25% 12/15/24 (MBIA) 3,045,000 3,126,423
5.25% 12/15/26 (MBIA) 1,025,000 1,041,093
Greeley County Building Authority
Certificates of Participation
6.10% 8/15/16 2,600,000 2,725,814
Paint Brush Hills Metropolitan District
Certificates of Participation
7.75% 9/1/21 1,594,248 1,564,723
Pueblo County Certificates of Participation
6.50% 12/1/24 5,460,000 5,671,684
-----------
27,243,826
-----------
Political Subdivision General Obligation Bonds - 11.79%
Arapahoe County Water & Wastewater
Public Improvement District Series A
5.125% 12/1/32 (MBIA) 5,000,000 5,018,600
Bowles Metropolitan District
5.00% 12/1/33 (FSA) 2,000,000 1,979,820
Concord Metropolitan District
8.00% 12/1/19 5,000,000 5,180,800
Galleria Metropolitan District
7.25% 12/1/09 1,125,000 1,169,696
Lincoln Park Metropolitan District
7.75% 12/1/26 2,610,000 2,675,328
Meridian Metropolitan District Refunding
Series A 5.00% 12/1/31 (RADIAN) 7,000,000 6,677,790
North Range Metropolitan District #1
7.25% 12/15/31 3,400,000 3,381,266
Saddle Rock Colorado Metropolitan District
5.35% 12/1/31 1,580,000 1,575,070
Silver Dollar Metropolitan District
7.05% 12/1/30 5,000,000 5,086,900
Tri-Pointe Commercial Metropolitan District
7.75% 12/1/19 5,000,000 5,138,400
-----------
37,883,670
-----------
Public Utility District Revenue Bonds - 3.09%
Colorado Springs Utilities Revenue
Series A 5.00% 11/15/29 10,000,000 9,919,800
-----------
9,919,800
-----------
Recreational Area Revenue Bonds - 1.71%
Aurora Golf Course Enterprise System
Revenue (Saddle Rock Golf Course)
6.20% 12/1/15 2,000,000 2,047,620
South Suburban Park & Recreation District
(Golf & Ice Arena Facility)
6.00% 11/1/15 2,330,000 2,412,785
Westminster Golf Course
5.55% 12/1/23 (RADIAN) 1,000,000 1,026,180
-----------
5,486,585
-----------
19
Statements Delaware Tax-Free Colorado Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
School District General Obligation Bonds - 5.59%
Arapahoe County Colorado School District
5.00% 12/1/22 (FGIC) $1,000,000 $ 1,010,630
Douglas County School District No Re 1
Building (Douglas & Elbert Counties)
Series B 5.125% 12/15/25 (FSA) 5,000,000 5,051,950
El Paso County School District #2
(Harrison) 5.00% 12/1/27 (MBIA) 2,615,000 2,606,423
El Paso County School District #49
(Falcon) 5.50% 12/1/21 (FGIC) 3,580,000 3,788,642
Garfield County School District No Re 2
5.00% 12/1/25 (FSA) 1,000,000 997,920
La Plata County School District No 9-R
5.125% 11/1/24 (MBIA) 1,000,000 1,011,230
Larimer Weld & Boulder Counties School
Districts No R-2J 5.00% 12/15/15 (FSA) 3,260,000 3,503,392
------------
17,970,187
------------
Tax Increment/Special Assessment Bonds - 2.53%
Loveland Special Improvements District #1
7.50% 7/1/29 6,140,000 6,153,692
Pueblo Urban Renewal Authority Tax
Increment Revenue 6.625% 12/1/19 1,890,000 1,965,222
------------
8,118,914
------------
Territorial General Obligation Bonds - 0.46%
Puerto Rico Commonwealth Public
Improvement Series A
5.00% 7/1/27 1,000,000 974,780
5.125% 7/1/31 500,000 494,845
------------
1,469,625
------------
Territorial Revenue Bonds - 0.55%
Puerto Rico Public Buildings Authority
Revenue Series D 5.25% 7/1/27 1,750,000 1,752,695
------------
1,752,695
------------
Turnpike/Toll Road Revenue Bonds - 5.12%
E-470 Public Highway Authority
5.75% 9/1/35 (MBIA) 3,100,000 3,333,709
Northwest Parkway Public Highway
Authority Series A 5.25% 6/15/41 (FSA) 13,000,000 13,122,850
------------
16,456,559
------------
Water & Sewer Revenue Bonds - 1.85%
Erie Water Enterprise Revenue
5.00% 12/1/23 (ACA) 1,750,000 1,671,740
Lafayette Water Revenue Series A
5.00% 12/1/27 (MBIA) 1,100,000 1,093,180
Ute Utility Water Conservancy District Water
Revenue 5.75% 6/15/20 (MBIA) 2,900,000 3,167,525
------------
5,932,445
------------
Total Municipal Bonds (cost $313,338,478) 316,412,858
------------
Total Market Value of Securities - 98.50%
(cost $313,338,478) $316,412,858
Receivables and Other Assets
Net of Liabilities - 1.50% 4,829,417
------------
Net Assets Applicable to 29,662,747 Shares
Outstanding - 100.00% $321,242,275
============
Net Asset Value - Delaware Tax-Free
Colorado Fund Class A
($299,528,129/27,659,508 Shares) $10.83
------
Net Asset Value - Delaware Tax-Free
Colorado Fund Class B
($13,108,408/1,209,840 Shares) $10.83
------
Net Asset Value - Delaware Tax-Free
Colorado Fund Class C
($8,605,738/793,399 Shares) $10.85
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization-- no par) $320,225,904
Accumulated net realized loss on investments (2,058,009)
Net unrealized appreciation of investments 3,074,380
------------
Total net assets $321,242,275
------------
**Non-income producing security. Security currently in default.
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by the AMBAC Indemnity Corporation
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
RADIAN - Insured by Radian Asset Assurance
XLCA - Insured by XL Capital Assurance
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Colorado Fund
Net asset value Class A (A) $10.83
Sales charge (4.50% of offering price, or 4.71% of
amount invested per share) (B) 0.51
------
Offering price $11.34
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
20
Statements Year Ended August 31, 2003
OF OPERATIONS
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
Investment Income:
Interest $2,160,169 $8,433,286 $2,552,829 $2,094,859 $19,185,116
---------- ---------- ---------- ---------- -----------
Expenses:
Management fees 216,689 806,609 262,705 203,606 1,836,240
Dividend disbursing and transfer agent fees
and expenses 17,700 88,960 24,906 23,070 196,200
Distribution expenses-- Class A 61,854 342,504 61,650 74,125 776,218
Distribution expenses-- Class B 100,986 147,937 161,084 92,336 146,361
Distribution expenses-- Class C 45,831 94,365 69,498 18,180 87,649
Accounting and administration expenses 17,576 73,353 21,582 18,124 148,765
Registration fees 8,026 6,709 572 696 5,394
Reports and statements to shareholders 1,894 16,813 -- 9,724 91,136
Professional fees 13,146 19,100 4,590 7,458 62,748
Custodian fees 3,147 7,820 3,684 3,768 17,091
Trustees' fees 1,610 8,317 2,644 2,700 17,750
Other 10,931 38,724 7,729 10,021 91,246
---------- ---------- ---------- ---------- -----------
499,390 1,651,211 620,644 463,808 3,476,798
Less expenses absorbed or waived (92,635) (78,576) (207,820) -- --
Less expenses paid indirectly (1,007) (3,946) (1,187) (1,215) (8,956)
---------- ---------- ---------- ---------- -----------
Total expenses 405,748 1,568,689 411,637 462,593 3,467,842
---------- ---------- ---------- ---------- -----------
Net Investment Income 1,754,421 6,864,597 2,141,192 1,632,266 15,717,274
---------- ---------- ---------- ---------- -----------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments 140,622 754,322 216,651 166,983 631,030
Net change in unrealized appreciation/
depreciation of investments (2,328,563) (4,291,338) (1,294,988) (1,149,222) (8,259,671)
---------- ---------- ---------- ---------- -----------
Net Realized and Unrealized Loss
on Investments (2,187,941) (3,537,016) (1,078,337) (982,239) (7,628,641)
---------- ---------- ---------- ---------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations ($433,520) $3,327,581 $1,062,855 $650,027 $8,088,633
========== ========== ========== ========== ===========
See accompanying notes
21
Statements
OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free
Arizona Fund Arizona Insured Fund
Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 1,754,421 $ 1,783,251 $ 6,864,597 $ 6,941,384
Net realized gain (loss) on investments 140,622 (73,813) 754,322 2,596,988
Net change in unrealized appreciation/depreciation of investments (2,328,563) 33,806 (4,291,338) (1,097,360)
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from operations (433,520) 1,743,244 3,327,581 8,441,012
----------- ----------- ------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (1,170,970) (1,213,829) (5,989,214) (6,301,205)
Class B (401,931) (413,805) (534,860) (432,125)
Class C (181,499) (155,617) (340,523) (208,054)
Net realized gain on investments:
Class A -- -- (1,396,185) (865,976)
Class B -- -- (143,720) (62,839)
Class C -- -- (91,428) (28,435)
----------- ----------- ------------ ------------
(1,754,400) (1,783,251) (8,495,930) (7,898,634)
----------- ----------- ------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 3,550,052 10,514,069 13,366,725 13,506,834
Class B 833,181 2,176,368 3,326,803 5,743,574
Class C 573,736 1,971,388 3,929,559 5,512,689
Net asset value of shares issued upon reinvestment of dividends and
distributions:
Class A 502,292 549,306 3,663,972 3,385,866
Class B 159,824 153,041 380,126 259,825
Class C 132,415 123,314 334,202 190,296
----------- ----------- ------------ ------------
5,751,500 15,487,486 25,001,387 28,599,084
----------- ----------- ------------ ------------
Cost of shares repurchased:
Class A (6,928,421) (3,162,787) (24,391,768) (17,114,099)
Class B (2,123,309) (365,597) (2,246,828) (1,297,726)
Class C (579,367) (192,302) (3,517,552) (905,756)
----------- ----------- ------------ ------------
(9,631,097) (3,720,686) (30,156,148) (19,317,581)
----------- ----------- ------------ ------------
Increase (decrease) in net assets derived from capital share transactions (3,879,597) 11,766,800 (5,154,761) 9,281,503
----------- ----------- ------------ ------------
Net Increase (Decrease) in Net Assets (6,067,517) 11,726,793 (10,323,110) 9,823,881
Net Assets:
Beginning of year 41,848,475 30,121,682 163,216,031 153,392,150
----------- ----------- ------------ ------------
End of year $35,780,958 $41,848,475 $152,892,921 $163,216,031
=========== =========== ============ ============
See accompanying notes
22
Statements
OF CHANGES IN NET ASSETS (CONTINUED)
Delaware Tax-Free Delaware Tax-Free
California Fund California Insured Fund
Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 2,141,192 $ 2,115,292 $ 1,632,266 $ 1,539,100
Net realized gain (loss) on investments 216,651 (157,317) 166,983 (35,039)
Net change in unrealized appreciation/depreciation of investments (1,294,988) 314,498 (1,149,222) (12,835)
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations 1,062,855 2,272,473 650,027 1,491,226
----------- ----------- ----------- -----------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (1,198,163) (1,205,949) (1,249,365) (1,194,000)
Class B (658,337) (615,935) (319,704) (316,220)
Class C (284,692) (293,408) (63,197) (28,880)
Net realized gain on investments:
Class A -- -- -- (431,988)
Class B -- -- -- (134,873)
Class C -- -- -- (12,025)
----------- ----------- ----------- -----------
(2,141,192) (2,115,292) (1,632,266) (2,117,986)
----------- ----------- ----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
Class A 6,900,365 4,478,047 4,039,278 3,028,178
Class B 3,123,917 1,924,681 1,648,826 3,012,575
Class C 2,400,582 1,660,298 2,003,403 1,342,130
Net asset value of shares issued upon reinvestment of dividends and
distributions:
Class A 420,231 523,361 655,264 845,801
Class B 225,516 198,541 161,774 242,589
Class C 190,408 170,057 26,743 13,665
----------- ----------- ----------- -----------
13,261,019 8,954,985 8,535,288 8,484,938
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A (8,123,457) (6,495,544) (3,785,642) (2,796,439)
Class B (1,891,459) (1,886,367) (2,732,015) (1,037,452)
Class C (2,745,126) (749,274) (360,679) (179,715)
----------- ----------- ----------- -----------
(12,760,042) (9,131,185) (6,878,336) (4,013,606)
----------- ----------- ----------- -----------
Increase (decrease) in net assets derived from capital share transactions 500,977 (176,200) 1,656,952 4,471,332
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets (577,360) (19,019) 674,713 3,844,572
Net Assets:
Beginning of year 45,924,433 45,943,452 39,717,843 35,873,271
----------- ----------- ----------- -----------
End of year $45,347,073 $45,924,433 $40,392,556 $39,717,843
=========== =========== =========== ===========
See accompanying notes
23
Statements
OF CHANGES IN NET ASSETS (CONTINUED)
Delaware Tax-Free Colorado Fund
Year Ended
8/31/03 8/31/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 15,717,274 $ 16,136,974
Net realized gain on investments 631,030 2,605,316
Net change in unrealized appreciation/depreciation of investments (8,259,671) (3,729,898)
------------ ------------
Net increase in net assets resulting from operations 8,088,633 15,012,392
------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (14,774,600) (15,269,995)
Class B (586,453) (592,108)
Class C (349,930) (275,325)
------------ ------------
(15,710,983) (16,137,428)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 18,044,255 18,451,081
Class B 1,399,969 2,320,838
Class C 4,139,859 3,462,982
Net asset value of shares issued upon reinvestment of dividends and
distributions:
Class A 8,886,403 9,541,898
Class B 378,269 400,849
Class C 252,301 207,164
------------ ------------
33,101,056 34,384,812
------------ ------------
Cost of shares repurchased:
Class A (35,022,951) (30,747,830)
Class B (3,195,659) (2,173,560)
Class C (3,630,231) (1,223,433)
------------ ------------
(41,848,841) (34,144,823)
------------ ------------
Increase (decrease) in net assets derived from capital share transactions (8,747,785) 239,989
------------ ------------
Net Decrease in Net Assets (16,370,135) (885,047)
Net Assets:
Beginning of year 337,612,410 338,497,457
------------ ------------
End of year $321,242,275 $337,612,410
============ ============
See accompanying notes
24
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
---------------------------------------------------------
Delaware Tax-Free Arizona Fund Class A
----------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.590 $10.620 $10.250 $10.450 $11.210
Income (loss) from investment operations:
Net investment income 0.491 0.532 0.572 0.555 0.538
Net realized and unrealized gain (loss) on investments (0.580) (0.030) 0.370 (0.200) (0.645)
------- ------- ------- ------- -------
Total from investment operations (0.089) 0.502 0.942 0.355 (0.107)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.491) (0.532) (0.572) (0.555) (0.538)
Net realized gain on investments -- -- -- -- (0.115)
------- ------- ------- ------- -------
Total dividends and distributions (0.491) (0.532) (0.572) (0.555) (0.653)
------- ------- ------- ------- -------
Net asset value, end of period $10.010 $10.590 $10.620 $10.250 $10.450
======= ======= ======= ======= =======
Total return(1) (0.88%) 4.93% 9.48% 3.68% (1.09%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $22,401 $26,664 $18,809 $13,873 $18,586
Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.60%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.99% 0.98% 1.01% 1.06% 1.10%
Ratio of net investment income to average net assets 4.73% 5.09% 5.50% 5.53% 4.88%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 4.49% 4.86% 5.24% 5.22% 4.38%
Portfolio turnover 70% 111% 108% 115% 68%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
25
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
---------------------------------------------------------
Delaware Tax-Free Arizona Fund Class B
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.590 $10.620 $10.240 $10.450 $11.200
Income (loss) from investment operations:
Net investment income 0.413 0.454 0.495 0.481 0.456
Net realized and unrealized gain (loss) on investments (0.580) (0.030) 0.380 (0.210) (0.635)
------- ------- ------- ------- -------
Total from investment operations (0.167) 0.424 0.875 0.271 (0.179)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.413) (0.454) (0.495) (0.481) (0.456)
Net realized gain on investments -- -- -- -- (0.115)
------- ------- ------- ------- -------
Total dividends and distributions (0.413) (0.454) (0.495) (0.481) (0.571)
------- ------- ------- ------- -------
Net asset value, end of period $10.010 $10.590 $10.620 $10.240 $10.450
======= ======= ======= ======= =======
Total return(1) (1.62%) 4.16% 8.78% 2.82% (1.74%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $8,956 $10,629 $8,681 $4,911 $5,956
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.35%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.74% 1.73% 1.76% 1.81% 1.85%
Ratio of net investment income to average net assets 3.98% 4.34% 4.75% 4.78% 4.13%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.74% 4.11% 4.49% 4.47% 3.63%
Portfolio turnover 70% 111% 108% 115% 68%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
26
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
---------------------------------------------------------
Delaware Tax-Free Arizona Fund Class C
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.610 $10.640 $10.270 $10.470 $11.230
Income (loss) from investment operations:
Net investment income 0.413 0.454 0.492 0.478 0.456
Net realized and unrealized gain (loss) on investments (0.570) (0.030) 0.370 (0.200) (0.645)
------- ------- ------- ------- -------
Total from investment operations (0.157) 0.424 0.862 0.278 (0.189)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.413) (0.454) (0.492) (0.478) (0.456)
Net realized gain on investments -- -- -- -- (0.115)
------- ------- ------- ------- -------
Total dividends and distributions (0.413) (0.454) (0.492) (0.478) (0.571)
------- ------- ------- ------- -------
Net asset value, end of period $10.040 $10.610 $10.640 $10.270 $10.470
======= ======= ======= ======= =======
Total return(1) (1.53%) 4.14% 8.62% 2.88% (1.82%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,424 $4,555 $2,632 $1,880 $1,957
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.35%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.74% 1.73% 1.76% 1.81% 1.85%
Ratio of net investment income to average net assets 3.98% 4.34% 4.75% 4.78% 4.13%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.74% 4.11% 4.49% 4.47% 3.63%
Portfolio turnover 70% 111% 108% 115% 68%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 Arizona Insured Fund Class A
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.530 $11.500 $11.040 $10.990 $11.550
Income (loss) from investment operations:
Net investment income 0.502 0.510 0.521 0.525 0.528
Net realized and unrealized gain (loss) on investments (0.253) 0.100 0.460 0.050 (0.560)
------- ------- ------- ------- -------
Total from investment operations 0.249 0.610 0.981 0.575 (0.032)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.502) (0.510) (0.521) (0.525) (0.528)
Net realized gain on investments (0.117) (0.070) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.619) (0.580) (0.521) (0.525) (0.528)
------- ------- ------- ------- -------
Net asset value, end of period $11.160 $11.530 $11.500 $11.040 $10.990
======= ======= ======= ======= =======
Total return(1) 2.17% 5.54% 9.12% 5.47% (0.36%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $129,683 $141,424 $141,298 $142,018 $166,368
Ratio of expenses to average net assets 0.86% 0.90% 0.95% 0.95% 0.91%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.91% 0.90% 0.97% 0.98% 0.91%
Ratio of net investment income to average net assets 4.37% 4.50% 4.65% 4.88% 4.60%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 4.32% 4.50% 4.63% 4.85% 4.60%
Portfolio turnover 29% 46% 45% 50% 29%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 Arizona Insured Fund Class B
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.540 $11.500 $11.040 $10.990 $11.550
Income (loss) from investment operations:
Net investment income 0.416 0.426 0.437 0.444 0.441
Net realized and unrealized gain (loss) on investments (0.253) 0.110 0.460 0.050 (0.560)
------- ------- ------- ------- -------
Total from investment operations 0.163 0.536 0.897 0.494 (0.119)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.416) (0.426) (0.437) (0.444) (0.441)
Net realized gain on investments (0.117) (0.070) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.533) (0.496) (0.437) (0.444) (0.441)
------- ------- ------- ------- -------
Net asset value, end of period $11.170 $11.540 $11.500 $11.040 $10.990
======= ======= ======= ======= =======
Total return(1) 1.41% 4.83% 8.31% 4.68% (1.11%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $14,666 $13,678 $8,864 $6,630 $6,059
Ratio of expenses to average net assets 1.61% 1.65% 1.70% 1.70% 1.66%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.66% 1.65% 1.72% 1.73% 1.66%
Ratio of net investment income to average net assets 3.62% 3.75% 3.90% 4.13% 3.85%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.57% 3.75% 3.88% 4.10% 3.85%
Portfolio turnover 29% 46% 45% 50% 29%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 Arizona Insured Fund Class C
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.550 $11.520 $11.040 $10.990 $11.560
Income (loss) from investment operations:
Net investment income 0.415 0.426 0.438 0.444 0.441
Net realized and unrealized gain (loss) on investments (0.253) 0.100 0.480 0.050 (0.570)
------- ------- ------- ------- -------
Total from investment operations 0.162 0.526 0.918 0.494 (0.129)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.415) (0.426) (0.438) (0.444) (0.441)
Net realized gain on investments (0.117) (0.070) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.532) (0.496) (0.438) (0.444) (0.441)
------- ------- ------- ------- -------
Net asset value, end of period $11.180 $11.550 $11.520 $11.040 $10.990
======= ======= ======= ======= =======
Total return(1) 1.40% 4.73% 8.50% 4.68% (1.20%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $8,544 $8,115 $3,230 $1,322 $1,373
Ratio of expenses to average net assets 1.61% 1.65% 1.70% 1.70% 1.66%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.66% 1.65% 1.72% 1.73% 1.66%
Ratio of net investment income to average net assets 3.62% 3.75% 3.90% 4.13% 3.85%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.57% 3.75% 3.88% 4.10% 3.85%
Portfolio turnover 29% 46% 45% 50% 29%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 California Fund Class A
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.010 $10.950 $10.430 $10.490 $11.220
Income (loss) from investment operations:
Net investment income 0.537 0.546 0.538 0.547 0.556
Net realized and unrealized gain (loss) on investments (0.260) 0.060 0.520 (0.060) (0.709)
------- ------- ------- ------- -------
Total from investment operations 0.277 0.606 1.058 0.487 (0.153)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.537) (0.546) (0.538) (0.547) (0.554)
Net realized gain on investments -- -- -- -- (0.023)
------- ------- ------- ------- -------
Total dividends and distributions (0.537) (0.546) (0.538) (0.547) (0.577)
------- ------- ------- ------- -------
Net asset value, end of period $10.750 $11.010 $10.950 $10.430 $10.490
======= ======= ======= ======= =======
Total return(1) 2.51% 5.77% 10.43% 5.00% (1.53%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $22,169 $23,462 $24,925 $24,794 $24,515
Ratio of expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.33%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.93% 0.97% 0.99% 1.04% 0.97%
Ratio of net investment income to average net assets 4.84% 5.05% 5.07% 5.46% 4.95%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 4.41% 4.58% 4.58% 4.92% 4.31%
Portfolio turnover 56% 93% 130% 82% 123%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 California Fund Class B
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.050 $10.990 $10.460 $10.520 $11.260
Income (loss) from investment operations:
Net investment income 0.453 0.465 0.459 0.473 0.470
Net realized and unrealized gain (loss) on investments (0.260) 0.060 0.530 (0.060) (0.717)
------- ------- ------- ------- -------
Total from investment operations 0.193 0.525 0.989 0.413 (0.247)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.453) (0.465) (0.459) (0.473) (0.470)
------- ------- ------- ------- -------
Net realized gain on investments -- -- -- -- (0.023)
------- ------- ------- ------- -------
Total dividends and distributions (0.453) (0.465) (0.459) (0.473) (0.493)
------- ------- ------- ------- -------
Net asset value, end of period $10.790 $11.050 $10.990 $10.460 $10.520
======= ======= ======= ======= =======
Total return(1) 1.73% 4.95% 9.58% 4.31% (2.35%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $16,165 $15,105 $14,792 $14,449 $13,676
Ratio of expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.08%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.68% 1.72% 1.74% 1.79% 1.72%
Ratio of net investment income to average net assets 4.09% 4.30% 4.32% 4.71% 4.20%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.66% 3.83% 3.83% 4.17% 3.56%
Portfolio turnover 56% 93% 130% 82% 123%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 California Fund Class C
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.020 $10.970 $10.440 $10.500 $11.230
Income (loss) from investment operations:
Net investment income 0.454 0.465 0.459 0.472 0.470
Net realized and unrealized gain (loss) on investments (0.260) 0.050 0.530 (0.060) (0.707)
------- ------- ------- ------- -------
Total from investment operations 0.194 0.515 0.989 0.412 (0.237)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.454) (0.465) (0.459) (0.472) (0.470)
Net realized gain on investments -- -- -- -- (0.023)
------- ------- ------- ------- -------
Total dividends and distributions (0.454) (0.465) (0.459) (0.472) (0.493)
------- ------- ------- ------- -------
Net asset value, end of period $10.760 $11.020 $10.970 $10.440 $10.500
======= ======= ======= ======= =======
Total return(1) 1.74% 4.86% 9.70% 4.22% (2.26%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $7,013 $7,357 $6,227 $4,179 $5,132
Ratio of expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.08%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.68% 1.72% 1.74% 1.79% 1.72%
Ratio of net investment income to average net assets 4.09% 4.30% 4.32% 4.71% 4.20%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.66% 3.83% 3.83% 4.17% 3.56%
Portfolio turnover 56% 93% 130% 82% 123%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 California Insured Fund Class A
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.930 $11.130 $10.640 $10.430 $11.130
Income (loss) from investment operations:
Net investment income 0.463 0.470 0.496 0.500 0.497
Net realized and unrealized gain (loss) on investments (0.260) (0.027) 0.490 0.210 (0.700)
------- ------- ------- ------- -------
Total from investment operations 0.203 0.443 0.986 0.710 (0.203)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.463) (0.470) (0.496) (0.500) (0.497)
Net realized gain on investments -- (0.173) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.463) (0.643) (0.496) (0.500) (0.497)
------- ------- ------- ------- -------
Net asset value, end of period $10.670 $10.930 $11.130 $10.640 $10.430
======= ======= ======= ======= =======
Total return(1) 1.84% 4.23% 9.51% 7.10% (1.97%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $28,822 $28,630 $28,045 $23,877 $25,042
Ratio of expenses to average net assets 0.93% 0.92% 0.87% 1.00% 0.99%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.93% 0.92% 0.87% 1.09% 1.10%
Ratio of net investment income to average net assets 4.21% 4.36% 4.59% 4.87% 4.51%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 4.21% 4.36% 4.59% 4.78% 4.40%
Portfolio turnover 44% 111% 162% 91% 114%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
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 California Insured Fund Class B
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.930 $11.130 $10.640 $10.430 $11.130
Income (loss) from investment operations:
Net investment income 0.381 0.389 0.415 0.423 0.414
Net realized and unrealized gain (loss) on investments (0.260) (0.027) 0.490 0.210 (0.700)
------- ------- ------- ------- -------
Total from investment operations 0.121 0.362 0.905 0.633 (0.286)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.381) (0.389) (0.415) (0.423) (0.414)
Net realized gain on investments -- (0.173) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.381) (0.562) (0.415) (0.423) (0.414)
------- ------- ------- ------- -------
Net asset value, end of period $10.670 $10.930 $11.130 $10.640 $10.430
======= ======= ======= ======= =======
Total return(1) 1.07% 3.44% 8.70% 6.30% (2.70%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $8,628 $9,714 $7,628 $6,440 $6,588
Ratio of expenses to average net assets 1.68% 1.67% 1.62% 1.75% 1.74%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.68% 1.67% 1.62% 1.84% 1.85%
Ratio of net investment income to average net assets 3.46% 3.61% 3.84% 4.12% 3.76%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.46% 3.61% 3.84% 4.03% 3.65%
Portfolio turnover 44% 111% 162% 91% 114%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
35
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
---------------------------------------------------------
Delaware Tax-Free California Insured Fund Class C
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.890 $11.090 $10.600 $10.390 $11.090
Income (loss) from investment operations:
Net investment income 0.380 0.392 0.417 0.423 0.414
Net realized and unrealized gain (loss) on investments (0.250) (0.027) 0.490 0.210 (0.700)
------- ------- ------- ------- -------
Total from investment operations 0.130 0.365 0.907 0.633 (0.286)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.380) (0.392) (0.417) (0.423) (0.414)
Net realized gain on investments -- (0.173) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.380) (0.565) (0.417) (0.423) (0.414)
------- ------- ------- ------- -------
Net asset value, end of period $10.640 $10.890 $11.090 $10.600 $10.390
======= ======= ======= ======= =======
Total return(1) 1.17% 3.45% 8.75% 6.32% (2.70%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,942 $1,374 $200 $439 $592
Ratio of expenses to average net assets 1.68% 1.67% 1.62% 1.75% 1.74%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.68% 1.67% 1.62% 1.84% 1.85%
Ratio of net investment income to average net assets 3.46% 3.61% 3.84% 4.12% 3.76%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.46% 3.61% 3.84% 4.03% 3.65%
Portfolio turnover 44% 111% 162% 91% 114%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
36
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
---------------------------------------------------------
Delaware Tax-Free Colorado Fund Class A
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.080 $11.120 $10.630 $10.780 $11.510
Income (loss) from investment operations:
Net investment income 0.527 0.532 0.549 0.543 0.552
Net realized and unrealized gain (loss) on investments (0.250) (0.040) 0.490 (0.150) (0.730)
------- ------- ------- ------- -------
Total from investment operations 0.277 0.492 1.039 0.393 (0.178)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.527) (0.532) (0.549) (0.543) (0.552)
------- ------- ------- ------- -------
Total dividends and distributions (0.527) (0.532) (0.549) (0.543) (0.552)
------- ------- ------- ------- -------
Net asset value, end of period $10.830 $11.080 $11.120 $10.630 $10.780
======= ======= ======= ======= =======
Total return(1) 2.52% 4.60% 10.05% 3.89% (1.69%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $299,528 $314,695 $318,550 $304,409 $338,184
Ratio of expenses to average net assets 0.99% 0.95% 1.00% 1.00% 0.91%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.99% 0.95% 1.00% 1.04% 0.91%
Ratio of net investment income to average net assets 4.76% 4.86% 5.09% 5.22% 4.86%
Ratio of net investment income to average net assets prior to
expense limitation and expenses paid indirectly 4.76% 4.86% 5.09% 5.18% 4.86%
Portfolio turnover 30% 36% 64% 53% 55%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of less than $0.001, a decrease in net realized
and unrealized gain (loss) per share of less than $0.001, and an increase in
the ratio of net investment income to average net assets of less than 0.01%.
Per share data and ratios for periods prior to September 1, 2001 have not
been restated to reflect this change in accounting.
See accompanying notes
37
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
---------------------------------------------------------
Delaware Tax-Free Colorado Fund Class B
---------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.090 $11.120 $10.630 $10.790 $11.510
Income (loss) from investment operations:
Net investment income 0.444 0.450 0.468 0.463 0.466
Net realized and unrealized gain (loss) on investments (0.260) (0.030) 0.490 (0.160) (0.719)
------- ------- ------- ------- -------
Total from investment operations 0.184 0.420 0.958 0.303 (0.253)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.444) (0.450) (0.468) (0.463) (0.467)
------- ------- ------- ------- -------
Total dividends and distributions (0.444) (0.450) (0.468) (0.463) (0.467)
------- ------- ------- ------- -------
Net asset value, end of period $10.830 $11.090 $11.120 $10.630 $10.790
======= ======= ======= ======= =======
Total return(1) 1.66% 3.92% 9.24% 3.00% (2.34%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $13,108 $14,843 $14,330 $13,441 $13,530
Ratio of expenses to average net assets 1.74% 1.70% 1.75% 1.75% 1.66%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.74% 1.70% 1.75% 1.79% 1.66%
Ratio of net investment income (loss) to average net assets 4.01% 4.11% 4.34% 4.47% 4.11%
Ratio of net investment income (loss) to average net assets prior to
expense limitation and expenses paid indirectly 4.01% 4.11% 4.34% 4.43% 4.11%
Portfolio turnover 30% 36% 64% 53% 55%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
that requires amortization of all premium and discounts on debt securities.
The effect of this change for the year ended August 31, 2002 was an increase
in net investment income per share of less than $0.001, a decrease in net
realized and unrealized gain (loss) per share of less than $0.001, and an
increase in the ratio of net investment income to average net assets of less
than 0.01%. Per share data and ratios for periods prior to September 1, 2001
have not been restated to reflect this change in accounting.
See accompanying notes
38
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
----------------------------------------------------------
Delaware Tax-Free Colorado Fund Class C
----------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.100 $11.130 $10.640 $10.790 $11.520
Income (loss) from investment operations:
Net investment income 0.444 0.450 0.468 0.465 0.463
Net realized and unrealized gain (loss) on investments (0.250) (0.030) 0.490 (0.150) (0.726)
------ ------ ----- ------ ------
Total from investment operations 0.194 0.420 0.958 0.315 (0.263)
===== ===== ===== ===== ======
Less dividends and distributions from:
Net investment income (0.444) (0.450) (0.468) (0.465) (0.467)
------ ------ ------ ------ ------
Total dividends and distributions (0.444) (0.450) (0.468) (0.465) (0.467)
------ ------ ------ ------ ------
Net asset value, end of period $10.850 $11.100 $11.130 $10.640 $10.790
======= ======= ======= ======= =======
Total return1 1.74% 3.91% 9.23% 3.11% (2.42%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $8,606 $8,074 $5,617 $4,254 $4,332
Ratio of expenses to average net assets 1.74% 1.70% 1.75% 1.75% 1.66%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.74% 1.70% 1.75% 1.79% 1.66%
Ratio of net investment income to average net assets 4.01% 4.11% 4.34% 4.47% 4.11%
Ratio of net investment income to average net assets prior to
expense limitation and expenses paid indirectly 4.01% 4.11% 4.34% 4.43% 4.11%
Portfolio turnover 30% 36% 64% 53% 55%
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects a waiver and payment of fees by
the manager, as applicable. Performance would have been lower had the
expense limitation not been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
requires amortization of all premiums and discounts on debt securities. The
effect of this change for the year ended August 31, 2002 was an increase in
net investment income per share of less than $0.001, a decrease in net
realized and unrealized gain (loss) per share of less than $0.001, and an
increase in the ratio of net investment income to average net assets of
less than 0.01%. Per share data and ratios for periods prior to September
1, 2001 have not been restated to reflect this change in accounting.
See accompanying notes
39
Notes August 31, 2003
TO FINANCIAL STATEMENTS
Voyageur Mutual Funds (the "Trust") is organized as a Delaware business trust
and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free
California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield
Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund and
Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is
organized as a Delaware business trust and offers two series: Delaware Tax-Free
Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur
Investment Trust (the "Trust") is organized as a Massachusetts business trust
and offers five series: Delaware Tax-Free California Insured Fund, Delaware
Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Tax-Free
Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund. Voyageur Mutual
Funds II (the "Trust") is organized as a Delaware business trust and offers one
series: Delaware Tax-Free Colorado Fund. These financial statements and the
related notes pertain to Delaware Tax-Free Arizona Fund, Delaware Tax-Free
Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free
California Insured Fund and Delaware Tax-Free Colorado Fund (each a "Fund" and,
collectively, 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%. Class B shares are
sold with a contingent deferred sales charge that declines from 4% to zero
depending upon the period of time the shares are held. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately eight
years after purchase. Class C shares are sold with a contingent deferred sales
charge of 1%, if redeemed during the first 12 months.
The investment objective of Delaware Tax-Free Arizona Fund, Delaware Tax-Free
Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free
California Insured Fund and Delaware Tax-Free Colorado Fund is to seek as high a
level of current income exempt from federal income tax and personal income tax
in their respective states, as is consistent with preservation of capital.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds.
Security Valuation -- Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of each Fund's Board of
Trustees.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of each Fund 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 each Fund on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Discounts and premiums are
amortized to interest income over the lives of the respective securities. Each
Fund declares dividends daily from net investment income and pays such dividends
monthly and declares and pays distributions from net realized gain on
investments, if any, annually.
Certain expenses of the Funds are paid through commission arrangements with
brokers. These transactions are done subject to best execution. In addition, the
Funds may receive earnings credits from their custodian when positive balances
are maintained, which are used to offset custody fees. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statements of Operations with the corresponding expense offset shown as
"expenses paid indirectly". The amounts of these expenses for the year ended
August 31, 2003 were as follows:
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------
Commission reimbursements $946 $3,872 $1,147 $977 $8,015
Earnings credits 61 74 40 238 941
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 Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------
On the first $500 million 0.550% 0.500% 0.550% 0.500% 0.550%
On the next $500 million 0.500% 0.475% 0.500% 0.475% 0.500%
On the next $1.5 billion 0.450% 0.450% 0.450% 0.450% 0.450%
In excess of $2.5 billion 0.425% 0.425% 0.425% 0.425% 0.425%
40
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, and extraordinary expenses do not exceed specified
percentages of average daily net assets of the Funds through October 31, 2004
and until revoked for the Delaware Tax-Free California Fund, as shown below:
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------
Operating expense limitations
a percentage of average daily
net assets (per annum) 0.50% 0.70% 0.25% 0.75% 0.75%
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. The Funds pay
DSC a monthly fee based on average net assets subject to certain minimums for
accounting and administration services. Each Fund pays DSC a monthly fee based
on the number of shareholder accounts for dividend and disbursing and transfer
agent services. Prior to June 1, 2003, the monthly fee for dividend disbursing
and transfer agent services was based on the number of shareholder accounts and
shareholder transactions.
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 0.25% of the average daily net
assets of the Class A shares and 1.00% of the average daily net assets of the
Class B and C shares.
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the
Trusts. These officers and/or trustees are paid no compensation by the Funds.
At August 31, 2003, each Fund had liabilities payable to affiliates as follows:
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------
Investment management fee
payable to DMC $9,976 $50,352 $3,975 $7,139 $14,917
Dividend disbursing, transfer
agent fees, accounting and
other expenses payable to DSC 2,938 14,489 4,098 3,530 31,326
Other expenses payable to DMC
and affiliates 4,880 20,874 6,029 5,606 44,121
For the year ended August 31, 2003, DDLP earned commissions on sales of
Class A shares for each Fund as follows:
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------
$7,297 $36,679 $15,919 $7,447 $47,613
3. Investments
For the year ended August 31, 2003, the Funds made purchases and sales of
investment securities other than short-term investments as follows:
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------
Purchases $27,381,668 $46,430,802 $27,068,223 $19,770,785 $98,578,683
Sales 30,388,395 53,518,119 26,342,281 17,968,179 105,936,604
At August 31, 2003, the cost of investments and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------
Cost of investments $37,497,256 $147,511,486 $45,217,080 $40,247,192 $313,342,462
----------- ------------ ----------- ----------- ------------
Aggregate unrealized appreciation $507,357 $ 4,504,235 $716,432 $937,034 $10,283,358
Aggregate unrealized depreciation (1,988,385) (1,005,942) (555,685) (225,072) (7,212,962)
---------- ---------- -------- -------- ----------
Net unrealized appreciation (depreciation) $(1,481,028) $3,498,293 $160,747 $711,962 $3,070,396
=========== ========== ======== ======== ==========
41
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the years ended August 31, 2003 and 2002 was as
follows:
Delaware Tax-Free Delaware Tax-Free
Arizona Fund Arizona Insured Fund
2003 2002 2003 2002
---------------------- -------------------------
Tax-exempt income $1,754,400 $1,783,251 $6,864,597 $6,941,384
Long-term capital gain -- -- 1,631,333 957,250
---------- ---------- ---------- ----------
Total $1,754,400 $1,783,251 $8,495,930 $7,898,634
========== ========== ========== ==========
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
California Fund California Insured Fund Colorado Fund
2003 2002 2003 2002 2003 2002
----------------- ----------------------- -------------------
Tax-exempt income $2,141,192 $2,115,292 $1,632,266 $1,539,100 $15,710,983 $16,137,428
Long-term capital gain -- -- -- 578,886 -- --
---------- ---------- ---------- ---------- ----------- -----------
Total $2,141,192 $2,115,292 $1,632,266 $2,117,986 $15,710,983 $16,137,428
========== ========== ========== ========== =========== ===========
As of August 31, 2003, the components of net assets on a tax basis were as
follows:
Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado
Fund Fund Fund Fund Fund
--------- ---------------- ---------- ------------------- ----------
Shares of beneficial interest $38,557,252 $148,675,771 $46,492,842 $39,698,745 $320,225,904
Undistributed ordinary income -- 267,384 -- -- --
Undistributed tax-exempt income (1,660) 7,314 1,300 -- --
Undistributed long-term capital gains -- 444,159 -- -- --
Capital loss carryforwards (1,293,606) -- (1,307,816) (18,151) (2,054,025)
Unrealized appreciation (depreciation)
of investments (1,481,028) 3,498,293 160,747 711,962 3,070,396
----------- ------------ ----------- ----------- ------------
Net assets $35,780,958 $152,892,921 $45,347,073 $40,392,556 $321,242,275
=========== ============ =========== =========== ============
For federal income tax purposes, certain Funds had accumulated capital
carryforwards as of August 31, 2003, which may be carried forward and applied
against future capital gains. Such capital loss carryforward amounts will expire
as follows:
Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free
Arizona California California Colorado
Fund Fund Insured Fund Fund
- --------------------------------------------------------------------------------
2008 $178,280 $312,850 $ -- $ --
2009 1,115,326 988,927 -- 2,054,025
2011 -- 6,039 18,151 --
---------- ---------- ------- ----------
Total $1,293,606 $1,307,816 $18,151 $2,054,025
========== ========== ======= ==========
42
Notes
TO FINANCIAL STATMENTS (CONTINUED)
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free
Arizona Fund Arizona Insured Fund
------------------- -------------------------
Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02
Shares sold:
Class A 337,393 998,634 1,161,855 1,188,859
Class B 80,252 207,042 289,628 506,895
Class C 54,996 188,502 340,061 485,497
Shares issued upon
reinvestment of
dividends and
distributions:
Class A 48,516 52,596 321,230 299,499
Class B 15,446 14,627 33,321 22,972
Class C 12,766 11,787 29,256 16,802
------- ------ --------- ----------
549,369 1,473,188 2,175,351 2,520,524
------- --------- --------- ----------
Shares repurchased:
Class A (666,442) (303,849) (2,129,562) (1,508,141)
Class B (204,908) (35,111) (195,453) (114,718)
Class C (56,113) (18,407) (307,819) (80,204)
-------- --------- ---------- ----------
(927,463) (357,367) (2,632,834) (1,703,063)
-------- --------- ---------- ----------
Net increase (decrease) (378,094) 1,115,821 (457,483) 817,461
======== ========= ========== ==========
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
California Fund California Insured Fund Colorado Fund
------------------- ------------------------ -----------------
Year Ended Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02
Shares sold:
Class A 621,318 415,654 367,203 280,614 1,626,357 1,686,867
Class B 281,164 177,634 150,611 278,036 126,659 212,572
Class C 215,978 153,338 180,673 123,676 371,742 315,903
Shares issued upon
reinvestment of dividends
and distributions:
Class A 38,142 48,533 59,858 78,531 804,609 872,985
Class B 20,392 18,345 14,770 22,516 34,219 36,659
Class C 17,256 15,747 2,450 1,274 22,801 18,930
--------- ------- ------- ------- --------- ---------
1,194,250 829,251 775,565 784,647 2,986,387 3,143,916
========= ======= ======= ======= ========= =========
Shares repurchased:
Class A (728,137) (607,868) (345,875) (258,049) (3,170,253) (2,812,639)
Class B (170,371) (174,325) (245,676) (96,865) (289,898) (198,732)
Class C (248,969) (69,388) (32,732) (16,875) (328,831) (111,812)
---------- -------- -------- -------- ---------- ----------
(1,147,477) (851,581) (624,283) (371,789) (3,788,982) (3,123,183)
---------- -------- -------- -------- ---------- ----------
Net increase (decrease) 46,773 (22,330) 151,282 412,858 (802,595) 20,733
========== ========= ======== ======== ========== ==========
For the year ended August 31, 2003, the following shares were converted from
Class B to Class A. The respective amounts are included in Class B redemptions
and Class A subscriptions in the table above and in the Statements of Changes in
Net Assets.
Year Ended Year Ended
8/31/03 8/31/02
Class B shares Class A shares Amount Class B shares Class A shares Amount
-------------- -------------- -------- -------------- -------------- -------
Delaware Tax-Free Arizona Fund 1,366 1,366 $ 14,383 -- -- $ --
Delaware Tax-Free Arizona Insured Fund 43,904 43,915 512,431 -- -- --
Delaware Tax-Free California Insured Fund 69,884 69,884 782,105 20,221 20,221 215,940
Delaware Tax-Free Colorado Fund 14,623 14,635 165,677 -- -- --
43
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
6. Line of Credit
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $202,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of August 31, 2003, or at any time during
the fiscal year.
7. Credit and Market Risks
The Funds concentrate their investments in securities issued by each
corresponding state's 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.
8. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes is sent to them in January of each year.
Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2003, each Fund designates distributions
paid during the year as follows:
(A) (B) (C)
Long Term Ordinary Tax-
Capital Gains Income Exempt Total
Distributions Distributions Distributions Distributions
(Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis)
---------------- -------------- ------------- -------------
Delaware Tax-Free Arizona Fund -- -- 100% 100%
Delaware Tax-Free Arizona Insured Fund 19% -- 81% 100%
Delaware Tax-Free California Fund -- -- 100% 100%
Delaware Tax-Free California Insured Fund -- -- 100% 100%
Delaware Tax-Free Colorado Fund -- -- 100% 100%
(A), (B), and (C) are based on a percentage of each Fund's total
distributions.
44
Report
OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
Voyageur Mutual Funds - Delaware Tax-Free Arizona Fund
Voyageur Insured Funds - Delaware Tax-Free Arizona
Insured Fund
Voyageur Mutual Funds - Delaware Tax-Free California Fund
Voyageur Investment Trust - Delaware Tax-Free California
Insured Fund
Voyageur Mutual Funds II - Delaware Tax-Free Colorado Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free
California Fund, Delaware Tax-Free California Insured Fund and Delaware Tax-Free
Colorado Fund (the "Funds") as of August 31, 2003, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above listed Funds at August 31, 2003, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and their financial highlights for each of the
five years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
Ernst + Young LLP
Philadelphia, Pennsylvania
October 3, 2003
45
Delaware Investments Family of Funds
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees which has oversight
responsibility for the management of a fund's business affairs. Trustees
establish procedures and oversee and review the performance of the investment
manager, the distributor and others that perform services for the fund. The
independent fund trustees, in particular, are advocates for shareholder
interests. The following is a list of the Trustees/Officers and certain
background and related information.
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee/Director Trustee/Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Jude T. Driscoll(2) Chairman and 3 Years - Since August 2000, 83 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Trustee since at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process --
Conseco Capital Management
(June 1998 -- August 2000)
Managing Director --
NationsBanc Capital Markets
(February 1996 -- June 1998)
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Walter P. Babich Trustee 15 Years Board Chairman -- 101 None
2005 Market Street Citadel Construction Corporation
Philadelphia, PA (1989 -- Present)
19103
October 1, 1927
- ------------------------------------------------------------------------------------------------------------------------------------
John H. Durham Trustee 24 Years(3) Private Investor 101 Trustee -- Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103 President/Director --
22 WR Corporation
August 7, 1937
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Fry Trustee(4) 2 Years President -- 83 None
2005 Market Street Franklin & Marshall College
Philadelphia, PA (June 2002 - Present)
19103
Executive Vice President --
May 28, 1960 University of Pennsylvania
(April 1995 -- June 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr Trustee 10 Years Founder/Managing Director -- 101 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 -- Present)
December 7, 1938
46
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee/Director Trustee/Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
Ann R. Leven Trustee 14 Years Treasurer/Chief Fiscal 101 Director -- Andy
2005 Market Street Officer -- Warhol Foundation
Philadelphia, PA National Gallery of Art Director -- Systemax Inc.
19103 (1994 -- 1999)
November 1, 1940
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas F. Madison Trustee 9 Years President/Chief 101 Director --
2005 Market Street Executive Officer -- CenterPoint Energy
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -- Digital
and Consulting) River Inc.
February 25, 1936 (January 1993 -- Present) Director -- Rimage
Corporation
Director -- Valmont
Industries, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans Trustee 4 Years Vice President/Mergers & 101 None
2005 Market Street Acquisitions -- 3M Corporation
Philadelphia, PA (January 2003 -- Present)
19103
Ms. Yeomans has held
July 31,1948 various management positions
at 3M Corporation since 1983.
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Joseph H. Hastings Executive Executive Mr. Hastings has served in 101 None
2005 Market Street Vice President Vice President various executive capacities
Philadelphia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments.
Officer Officer since
December 19, 1949 August 21, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice Chief Legal Ms. Maestro has served in 101 None
2005 Market Street President, Officer various executive capacities
Philadelphia, PA Chief Legal Officer since at different times at
19103 and Secretary March 17, 2003 Delaware Investments.
November 26, 1957
- ------------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President 7 Years Mr. Bishof has served in 101 None
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Registrant's investment advisor,
principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees and Officers and is available, without charge,
upon request by calling 800 523-1918.
47
This page intentionally left blank.
Delaware
Investments(SM)
- ---------------
A member of Lincoln Financial Group(R)
This annual report is for the information of Delaware Tax-Free Arizona Fund,
Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund,
Delaware Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Tax-Free Arizona Fund, Delaware
Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware
Tax-Free California Insured Fund, and Delaware Tax-Free Colorado 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 Funds. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Funds will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION
Walter P. Babich Jude T. Driscoll Investment Manager
Board Chairman Chairman Delaware Management Company
Citadel Construction Corporation Delaware Investments Family of Funds Philadelphia, PA
King of Prussia, PA Philadelphia, PA
International Affiliate
John H. Durham Joseph H. Hastings Delaware International Advisers Ltd.
Private Investor Executive Vice President and London, England
Gwynedd Valley, PA Chief Financial Officer
Delaware Investments Family of Funds National Distributor
Anthony D. Knerr Philadelphia, PA Delaware Distributors, L.P.
Managing Director Philadelphia, PA
Anthony Knerr & Associates Richelle S. Maestro
New York, NY Senior Vice President, Shareholder Servicing, Dividend
Chief Legal Officer and Secretary Disbursing and Transfer Agent
Ann R. Leven Delaware Investments Family of Funds Delaware Service Company, Inc.
Former Treasurer/Chief Fiscal Officer Philadelphia, PA 2005 Market Street
National Gallery of Art Philadelphia, PA 19103-7094
Washington, DC Michael P. Bishof
Senior Vice President and Treasurer For Shareholders
Thomas F. Madison Delaware Investments Family of Funds 800 523-1918
President and Chief Executive Officer Philadelphia, PA
MLM Partners, Inc. For Securities Dealers and Financial
Minneapolis, MN Institutions Representatives Only
800 362-7500
Janet L. Yeomans
Vice President/Mergers & Acquisitions Web site
3M Corporation www.delawareinvestments.com
St. Paul, MN
- -------------------------------------------------------------------------------
A description of the policies and procedures that each Fund uses to determine
how to vote proxies (if any) relating to portfolio securities is available
without charge (i) upon request, by calling 800 523-1918; (ii) on the Funds'
website at http://www.delawareinvestments.com; and (iii) on the Commission's
website at http://www.sec.gov. Beginning no later than August 31, 2004,
information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 is available
without charge (i) through the Funds' website at
http://www.delawareinvestments.com; and (ii) on the Commission's website at
http://www.sec.gov.
- -------------------------------------------------------------------------------
(8249) Printed in the USA
AR-WEST [8/03] IVES 10/03 J9414
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
Annual Report 2003
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE IDAHO FUND
DELAWARE TAX-FREE MISSOURI INSURED FUND
DELAWARE TAX-FREE OREGON INSURED FUND
[Graphic Omitted:Logo] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
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PORTFOLIO MANAGEMENT REVIEW 1
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PERFORMANCE SUMMARIES:
Delaware Tax-Free Idaho Fund 4
Delaware Tax-Free Missouri Insured Fund 5
Delaware Tax-Free Oregon Insured Fund 6
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FINANCIAL STATEMENTS:
Statements of Net Assets 7
Statements of Operations 15
Statements of Changes in Net Assets 16
Financial Highlights 17
Notes to Financial Statements 26
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REPORT OF INDEPENDENT AUDITORS 30
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BOARD OF TRUSTEES/OFFICERS 31
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Funds are not FDIC insured and are not guaranteed. It is possible to lose
the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a
series of Delaware Management Business Trust, which is a registered
investment advisor.
(C) 2003 Delaware Distributors, L.P.
Portfolio
MANAGEMENT REVIEW September 10, 2003
Fund Managers
Patrick P. Coyne
Chief Investment Officer - Fixed Income
M. L. Conery
Senior Portfolio Manager
Q: How did the fixed-income markets fare during the 12-month period?
A: During the past 12 months, investors became increasingly confident about the
U.S. economy's growth potential. Although we are far from out of the woods,
favorable data surrounding corporate earnings, consumer spending, and business
investment support an optimistic view.
During the year, the stock market was the primary beneficiary of improved
sentiment. Once depressed by concerns about corporate accounting scandals, war
in Iraq, and the spread of SARS, stocks suddenly recorded their sharpest gains
in years --especially during the Spring of 2003. Between March 11, 2003, when
the stock market reached a low, and August 31, the Standard & Poor's 500 Index
gained a surprising +26% (Source: Lipper Inc.).
As investors gravitated to stocks, an increasing number became reluctant to
invest in fixed income. Bonds have been very strong performers in recent years
and remained so early in our fiscal year. During the fiscal first half, bonds,
and especially U.S. Treasuries and high-quality municipal securities, benefited
from the preference for stable investments during an uncertain economic climate.
As interest rates gradually declined, so did bond yields, while prices rose
accordingly (bond prices and yields move in opposite directions).
Over time, however, conditions became less favorable in the fixed-income
markets. Seeking to spur growth, the Federal Reserve this summer revealed its
intention to keep interest rates low for the foreseeable future. This caused
bond investors to worry about the future potential for inflation, which often
occurs when the economy is expanding. Inflation is troublesome because it causes
interest payments to be worth less over time and, thus, depresses bond values.
In this environment, municipal bond yields with relatively short maturities fell
in line with interest rates during the period, while 10-year municipal bond
yields rose on inflation fears.
Q: What factors affected the municipal bond markets in particular?
A: States and municipalities continued to struggle with their budgets due to the
increased demand for services. Finding it politically difficult to raise taxes
or cut spending, many governments experienced substantial budget shortfalls and
issued municipal debt to raise needed funds. This higher rate of issuance, along
with historically low interest rates, led to an extremely large supply of new
bonds.
During the first eight months of 2003, $254 million in new bonds were issued
nationwide, a 13 percent increase over the prior year's record (Source: Thomson
Financial). The rise in supply was evident in Oregon, for example, a state that
experienced a 51 percent jump in issuance during those eight months. However,
Idaho and Missouri did not follow this national trend. Missouri saw its supply
increase by a more modest one percent, while Idaho saw new supply decline three
percent and was ranked third-to-last nationwide in issuance of municipal bonds
between January and August 2003.
Also of note, municipal new issuance in August 2003 was
31 percent below the amount issued in August 2002 despite the large national
supply overall (Source: Thomson Financial). The sharp decline resulted from an
increase in interest rates, which made debt issuance a less-attractive
proposition for states and municipalities.
Q: How did the three funds perform during the year, and what were your
strategies in each?
Delaware Tax-Free Idaho Fund returned +2.81% (Class A shares at net asset value
with distributions reinvested) for the 12 months ended August 31, 2003, beating
the performance of the Lipper Other States Municipal Debt Funds Average, which
returned +1.75% during the same time frame. As an additional point of
comparison, the Lehman Brothers Municipal Bond Index gained +3.14%. The Fund's
outperformance relative to its peers can be attributed, in part, to a
higher-than-average yield, which provided a steady stream of income payments as
well as a regular boost to total return. The Fund's dividend payments during the
last 12 months were exempt from federal and Idaho state taxes.*
*A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
1
Idaho's state government endured a very challenging financial environment during
the period. The state depleted its budget reserves while also temporarily
raising sales taxes to address its fiscal problems. As of period end, the
state's credit rating was AA, as issued by Standard & Poor's (S&P).
Throughout the year, the Fund received a significant amount of new investment.
This situation posed a management challenge due to the limited supply of new
Idaho bonds from which to choose. We kept a close eye on the state's municipal
market and looked to invest in suitable opportunities as they became available.
As a result, we purchased new revenue bonds issued by Boise State University
during the past year.
When we were unable to find suitable Idaho opportunities, we continued to look
to Puerto Rico, which we believe has served the Fund well as an alternative
municipal market in the past. Bonds issued by Puerto Rico and other U.S.
territories are generally exempt from federal, state, and local taxes. During
the period, however, the percentage of Idaho bonds in the portfolio increased
from 72 percent of total net assets on August 31, 2002, to 75 percent on August
31, 2003. The portfolio's Puerto Rican holdings declined from 24 percent to 22
percent.
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Delaware Tax-Free Missouri Insured Fund returned +2.75% (Class A shares at net
asset value with distributions reinvested) for the fiscal year ended August 31,
2003. This performance surpassed that of the Fund's peer group, the Lipper
Missouri Municipal Debt Funds Average, which returned +2.48% during the same
period. As an additional point of comparison, the Lehman Brothers Municipal Bond
Index returned +3.14%. The Fund's dividend payments during the last 12 months
were exempt from federal and Missouri state taxes.*
The State of Missouri faced substantial financial challenges during the period
and expects a $1 billion budget gap in 2004. To address that shortfall, state
government looked to a combination of increased taxes and spending cuts,
including cuts in Medicaid spending. Despite those budget problems, Missouri was
in generally solid financial shape, and the state earned the highest credit
rating from S&P (AAA).
With interest rates remaining low, we generally looked to avoid making excessive
trades. We believe it is not a good idea to sell older bonds offering higher
coupon payments and reinvest the proceeds in new bonds offering lower prevailing
yields. Toward the end of the period, however, as interest rates inched upward,
we increasingly sought opportunities to remove lower-yielding securities from
the portfolio and replace them with higher-coupon, longer-term bonds.
Most of the Fund's assets were invested in insured municipal securities issued
in Missouri. We did, however, pursue select non-insured, investment-grade
opportunities when we believed those offerings provided additional yield
potential without adding excessive risk.
On August 31, 2003, nearly 22 percent of the Fund's total net assets were held
in pre-refunded securities, up from nearly 19 percent the previous year.
Pre-refunded securities are longer-maturity bonds issued at low interest rates
and are used to redeem older bonds paying higher rates. Until the older bonds
leave the portfolio, their income payments are backed by high-quality securities
such as U.S. Treasuries. We managed the Fund's exposure to pre-refunded bonds by
holding on to them as long as possible when interest rates were low and
reinvestment options were therefore limited. We believe that it made sense to
continue receiving the high-quality income stream provided by these bonds. If
rates continue to rise as we anticipate, we would look to reinvest the proceeds
at higher future yields.
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Delaware Tax-Free Oregon Insured Fund returned +2.97% (Class A shares at net
asset value with distributions reinvested) for the 12 months ended August 31,
2003. This result surpassed that of its peer group, the Lipper Oregon Municipal
Debt Funds Average, which returned +2.44% during the same time frame. As an
additional point of comparison, the Lehman Brothers Municipal Bond Index
returned +3.14%. Relative to its peer group, the Fund benefited from having a
shorter-than-average duration, which made it somewhat less vulnerable when
interest rates rose late in the period. The Fund's dividend payments during the
last 12 months were exempt from federal and Oregon state taxes.*
*A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
2
The State of Oregon encountered financial problems of its own during the period.
To balance its $1.1 billion budget gap, the government depended on funds gained
from a legal settlement with the tobacco industry, and also looked to a
combination of tax increases and debt issuance. As of August 2003, Oregon earned
a credit rating of AA from S&P, which noted a negative bias to its outlook.
We focused on managing the Fund's duration, seeking to keep it relatively short.
Duration is a common measure of a bond's or bond fund's sensitivity to interest
rate changes. The longer the duration, the more sensitive the bond or bond fund
is to changes in interest rates. Given that the Fund is composed predominantly
of insured bonds, we thought it made equal sense to minimize interest-rate risk
for our shareholders.
Although the supply of new Oregon bonds rose sharply during the period, much of
that issuance came to market without insurance, and thus was not a primary focus
for us. When we did have new cash to invest -- either because of new investments
into the Fund or because of pre-refunded securities leaving the portfolio -- we
looked to invest the proceeds in a handful of opportunities that we believed
were attractive. The vast majority of the Fund's assets was invested in insured
municipal securities, though we did look to take advantage of select
non-insured, investment-grade opportunities when we believed that we could
obtain added yield while assuming only modest additional risk. For example, we
bought a series of Catholic Health Initiative hospital bonds, issued by Umatilla
County. These bonds were rated AA (S&P) and offered attractive income potential,
in our opinion.
3
Delaware
TAX-FREE IDAHO FUND
Fund Basics
As of August 31, 2003
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Fund Objective:
The Fund seeks as high a level of current income exempt from federal income tax
and Idaho state personal income tax, as is consistent with preservation of
capital.
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Total Fund Net Assets:
$84.78 million
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Number of Holdings:
78
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Fund Start Date:
January 4, 1995
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Your Fund Managers:
Patrick P. Coyne is a graduate of Harvard University with an MBA from the
University of Pennsylvania's Wharton School. Patrick Coyne joined Delaware
Investments' fixed-income department in 1990. Prior to joining Delaware
Investments, he was a manager of Kidder, Peabody & Co. Inc.'s trading desk, and
specialized in trading high-grade municipal bonds and municipal futures
contracts.
M. L. Conery joined Delaware Investments in January 1997 and holds a
bachelor's degree from Boston University and an MBA in finance from the State
University of New York at Albany. Prior to joining Delaware, M. L. Conery has
served as an investment officer with Travelers Insurance and as a research
analyst with CS First Boston and MBIA Corporation.
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Nasdaq Symbols:
Class A VIDAX
Class B DVTIX
Class C DVICX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime Five Years One Year
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Class A (Est. 1/4/95)
Excluding Sales Charge +6.48% +4.07% +2.81%
Including Sales Charge +5.91% +3.12% -1.79%
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Class B (Est. 3/16/95)
Excluding Sales Charge +5.13% +3.30% +2.05%
Including Sales Charge +5.13% +3.04% -1.89%
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Class C (Est. 1/11/95)
Excluding Sales Charge +5.60% +3.30% +2.05%
Including Sales Charge +5.60% +3.30% +1.07%
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Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Idaho
Fund during the periods shown. Performance would have been lower had the expense
limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
January 4, 1995 (Fund's inception) through August 31, 2003
Delaware Tax-Free
Idaho Fund -- Class Lehman Brothers
A Shares Municipal Bond Index
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Jan-95 $9,810 $10,000
Aug-95 $10,594 $10,897
Aug-96 $11,227 $11,468
Aug-97 $12,341 $12,528
Aug-98 $13,456 $13,612
Aug-99 $13,322 $13,686
Aug-00 $13,754 $14,607
Aug-01 $15,164 $16,099
Aug-02 $15,978 $17,104
Aug-03 $16,426 $17,641
Chart assumes $10,000 invested on January 4, 1995 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The chart also assumes $10,000 invested in the Lehman Brothers
Municipal Bond Index at that month's end, January 31, 1995. After January 31,
1995, returns plotted on the chart were as of the last day of each month shown.
The Lehman Brothers Municipal Bond Index is an unmanaged index that generally
tracks the performance of municipal bonds. An index is unmanaged and does not
reflect the costs of operating a mutual fund, such as the costs of buying,
selling, and holding securities. You cannot invest directly in an index. Past
performance is not a guarantee of future results.
4
Delaware
TAX-FREE MISSOURI INSURED FUND
Fund Basics
As of August 31, 2003
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Fund Objective:
The Fund seeks as high a level of current income exempt from federal income tax
and Missouri state personal income tax, as is consistent with preservation of
capital.
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Total Fund Net Assets:
$52.69 million
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Number of Holdings:
50
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Fund Start Date:
November 2, 1992
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Your Fund Managers:
Patrick P. Coyne
M. L. Conery
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Nasdaq Symbols:
Class A VMOIX
Class B DVTBX
Class C DVTCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
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Class A (Est. 11/2/92)
Excluding Sales Charge +5.71% +5.04% +4.28% +2.75%
Including Sales Charge +5.27% +4.55% +3.33% -1.87%
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Class B (Est. 3/12/94)
Excluding Sales Charge +4.60% +3.50% +1.99%
Including Sales Charge +4.60% +3.25% -1.95%
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Class C (Est. 11/11/95)
Excluding Sales Charge +4.36% +3.52% +2.08%
Including Sales Charge +4.36% +3.52% +1.09%
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Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
Missouri Insured Fund during the periods included in the lifetime and five-year
total return numbers shown. Performance would have been lower had the expense
limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free
Missouri Insured Fund Lehman Brothers
- Class A Shares Municipal Bond Index
--------------------- --------------------
Aug-93 $9,550 $10,000
Aug-94 $9,394 $10,014
Aug-95 $10,157 $10,902
Aug-96 $10,729 $11,474
Aug-97 $11,703 $12,534
Aug-98 $12,653 $13,618
Aug-99 $12,605 $13,692
Aug-00 $13,233 $14,614
Aug-01 $14,410 $16,106
Aug-02 $15,187 $17,102
Aug-03 $15,602 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
5
Delaware
TAX-FREE OREGON INSURED FUND
Fund Basics
As of August 31, 2003
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Fund Objective:
The Fund seeks as high a level of current income exempt from federal income tax
and Oregon state personal income tax, as is consistent with preservation of
capital.
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Total Fund Net Assets:
$43.56 million
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Number of Holdings:
48
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Fund Start Date:
August 1, 1993
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Your Fund Managers:
Patrick P. Coyne
M. L. Conery
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Nasdaq Symbols:
Class A VORIX
Class B DVYBX
Class C DVYCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
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Class A (Est. 8/1/93)
Excluding Sales Charge +5.29% +5.14% +4.55% +2.97%
Including Sales Charge +4.81% +4.65% +3.60% -1.70%
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Class B (Est. 3/12/94)
Excluding Sales Charge +4.75% +3.79% +2.20%
Including Sales Charge +4.75% +3.53% -1.74%
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Class C (Est. 7/7/95)
Excluding Sales Charge +4.92% +3.78% +2.19%
Including Sales Charge +4.92% +3.78% +1.20%
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Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Oregon
Insured Fund during the periods shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free
Oregon Insured Fund Lehman Brothers
- Class A Shares Municipal Bond Index
------------------- --------------------
Aug-93 $9,550 $10,000
Aug-94 $9,348 $10,014
Aug-95 $10,085 $10,902
Aug-96 $10,611 $11,474
Aug-97 $11,589 $12,534
Aug-98 $12,606 $13,618
Aug-99 $12,395 $13,692
Aug-00 $13,144 $14,614
Aug-01 $14,511 $16,106
Aug-02 $15,297 $17,102
Aug-03 $15,758 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
6
Statements Delaware Tax-Free Idaho Fund
OF NET ASSETS August 31, 2003
Principal Market
Amount Value
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Municipal Bonds - 96.72%
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Continuing Care/Retirement Revenue Bonds - 3.47%
Idaho Health Facilities Authority Revenue
Refunding (Valley Vista Care) Series A
7.875% 11/15/22 $3,000,000 $ 2,938,500
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2,938,500
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Corporate-Backed Revenue Bonds - 6.71%
Meridan Economic Development Corporation
Revenue Refunding Industrial
Development (Hi-Micro Project)
5.85% 8/15/11 (AMT) 1,250,000 1,292,238
Nez Perce County Pollution Control Revenue
Refunding (Potlatch Corporation Project)
6.00% 10/1/24 2,535,000 2,239,774
Power County Pollution Control Revenue
Refunding (FMC Corporation Project)
5.625% 10/1/14 2,475,000 2,157,383
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5,689,395
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Escrowed to Maturity Bonds - 2.15%
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Series A
5.375% 10/1/24 1,750,000 1,823,273
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1,823,273
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Higher Education Revenue Bonds - 12.38%
Boise State University Revenue
5.00% 4/1/17 (AMBAC) 500,000 524,240
5.125% 4/1/31 (FGIC) 1,000,000 1,006,310
Idaho State University Revenue
Improvement Refunding
5.00% 4/1/20 (FSA) 1,130,000 1,151,945
5.00% 4/1/23 (FSA) 3,115,000 3,125,465
North Idaho College Dormitory Housing
Certificate of Participation
6.45% 10/1/16 1,000,000 1,031,910
University of Idaho University Revenue
Student Fee (Housing Improvements
Project) 5.25% 4/1/31 (FGIC) 2,195,000 2,228,496
University of Idaho University Revenue
Student Fee Telecommunications
5.85% 4/1/11 (FSA) 1,300,000 1,429,987
-----------
10,498,353
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Hospital Revenue Bonds - 5.83%
Idaho Health Facilities Authority Hospital Revenue
(Bannock Regional Medical Center Project)
6.375% 5/1/17 1,445,000 1,516,282
(Bingham Memorial Hospital Project)
6.00% 3/1/29 1,000,000 955,700
(Idaho Elks Rehabilitation Hospital Project)
5.30% 7/15/18 625,000 593,138
5.45% 7/15/23 2,000,000 1,873,119
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4,938,239
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Miscellaneous Revenue Bonds - 0.60%
Boise City Revenue Refunding Series A
5.375% 12/1/31 (MBIA) 500,000 512,005
-----------
512,005
-----------
Principal Market
Amount Value
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Municipal Bonds (continued)
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Multi Family Housing Revenue Bonds - 1.18%
Idaho State Housing Agency Housing Revenue
(Park Place Project) Series A
6.50% 12/1/36 (AMT) $ 975,000 $ 996,041
-----------
996,041
-----------
Municipal Lease Revenue Bonds - 9.70%
Blaine Idaho School District #61
Certificate of Participation
5.00% 7/30/10 (AMBAC) 1,000,000 1,092,220
Boise City Certificate of Participation
5.375% 9/1/20 (FGIC) (AMT) 2,100,000 2,136,497
Idaho State Building Authority Revenue
Series A 5.00% 9/1/21 (MBIA) 1,150,000 1,158,085
Series A 5.00% 9/1/33 (XLCA) 1,500,000 1,473,675
Series A 5.00% 9/1/43 (XLCA) 1,630,000 1,608,321
Series B 5.00% 9/1/21 (MBIA) 750,000 758,625
-----------
8,227,423
-----------
Political Subdivision General Obligation Bonds - 2.57%
Lemhi County 5.20% 8/1/27 (FSA) 2,145,000 2,176,682
-----------
2,176,682
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*Pre-Refunded Bonds - 6.15%
Ada & Canyon Counties Joint
School District #2 Meridian
5.60% 7/30/12-05 1,125,000 1,226,509
Ammon Urban Renewal Agency Revenue
Sub Lien Tax Increment Series B
6.25% 8/1/18-06 445,000 500,060
Ammon Urban Renewal Agency Revenue
Tax Increment 5.875% 8/1/17-04 350,000 372,460
Boise City Independent School District
5.50% 7/30/16-05 400,000 439,236
Gooding & Lincoln Counties Joint
School District #231 Gooding
6.30% 2/1/14-04 (FSA) 100,000 102,249
Idaho Health Facilities Authority Revenue
(Bonner General Hospital Project)
6.50% 10/1/28-07 1,500,000 1,761,149
Pocatello Development Authority Revenue
Allocation Tax Increment Series B
7.25% 12/1/08-04 280,000 294,935
Puerto Rico Public Buildings Authority
Guaranteed Public Education & Health
Facilities Series M 5.50% 7/1/21-05 485,000 521,288
-----------
5,217,886
-----------
School District General Obligation Bonds - 9.17%
Ada & Canyon Counties Joint
School District #2 Meridan
5.00% 7/30/20 2,155,000 2,197,647
5.125% 7/30/19 1,005,000 1,042,909
5.50% 7/30/16 1,055,000 1,186,706
Canyon County School District #132
5.00% 7/30/15 (FGIC) 2,000,000 2,145,860
Power & Cassia Counties Joint
School District #381
(American Falls Project) 5.00% 8/1/17 1,155,000 1,204,342
-----------
7,777,464
-----------
7
Statements Delaware Tax-Free Idaho Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Single Family Housing Revenue Bonds - 7.89%
Idaho Housing & Finance Association
Single Family Mortgage
Series A Class I 5.55% 1/1/33 (AMT) $ 750,000 $ 758,715
Series A-2 Class I 5.20% 1/1/34 (AMT) 500,000 490,830
Series B Class I 5.00% 7/1/34 (AMT) 1,000,000 950,239
Series C Class I
4.55% 7/1/34 (AMT) 1,000,000 877,030
5.55% 1/1/33 (AMT) 750,000 758,715
Series D Class III 5.45% 7/1/23 (AMT) 500,000 509,265
Series E Class I
5.35% 1/1/33 (AMT) 250,000 249,688
5.45% 1/1/31 (AMT) 290,000 292,627
Idaho State Housing Agency
Single Family Mortgage
Series A 6.05% 7/1/13 (AMBAC) (AMT) 165,000 169,991
Series A 6.10% 7/1/16 (AMT) 215,000 221,538
Series A-1 6.85% 7/1/12 (AMT) 40,000 40,438
Series B 6.45% 7/1/15 (AMT) 90,000 92,678
Series C-2 6.35% 7/1/15 (AMT) 110,000 113,144
Series E 6.35% 7/1/15 (AMT) 210,000 217,256
Series E-1 6.60% 7/1/11 45,000 45,651
Series G-2 6.15% 7/1/15 (AMT) 880,000 902,194
-----------
6,689,999
-----------
Tax Increment/Special Assessment Bonds - 6.48%
Boise Urban Renewal Agency Parking
Revenue Refunding Tax Increment
Series A 6.125% 9/1/15 2,370,000 2,468,686
Series B 6.125% 9/1/15 1,930,000 2,010,365
Bonner County Local Improvement
District #93-1
6.20% 4/30/05 150,000 152,454
6.35% 4/30/06 185,000 187,892
6.40% 4/30/07 195,000 197,900
6.50% 4/30/08 110,000 111,577
6.50% 4/30/10 100,000 101,303
Coeur D'Alene Local Improvement District #6
Series 1995 6.00% 7/1/09 85,000 86,491
Series 1996 6.05% 7/1/10 90,000 91,478
Series 1997 6.10% 7/1/12 40,000 40,563
Series 1998 6.10% 7/1/14 45,000 45,568
-----------
5,494,277
-----------
Territorial General Obligation Bonds - 3.50%
Puerto Rico Commonwealth Refunding
Public Improvement
Series A 5.125% 7/1/31 3,000,000 2,969,070
-----------
2,969,070
-----------
Territorial Revenue Bonds - 16.03%
Puerto Rico Commonwealth Highway &
Transportation Authority Highway Revenue
Series D 5.25% 7/1/38 1,000,000 991,230
Series G 5.00% 7/1/33 4,000,000 3,876,198
Series W 5.50% 7/1/15 175,000 190,495
Series Y 5.00% 7/1/36 2,000,000 1,926,220
Puerto Rico Electric Power Authority
Power Revenue
5.00% 7/1/20 (MBIA) 1,000,000 1,049,460
Series N 5.125% 7/1/29 500,000 495,720
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Territorial Revenue Bonds (continued)
+Puerto Rico Electric Power Authority
Revenue Inverse Floater ROLs
5.93% 7/1/19 (FSA) $3,100,000 $ 3,054,554
Puerto Rico Electric Power Authority
Revenue Series II 5.25% 7/1/31 1,000,000 1,000,310
Puerto Rico Public Finance Corporation
Commonwealth Appropriated
Series A 5.00% 8/1/31 (MBIA) 1,000,000 1,002,880
-----------
13,587,067
-----------
Water & Sewer Revenue Bonds - 2.91%
Chubbuck Water Revenue Certificate
of Participation
6.35% 4/1/08 125,000 130,079
6.40% 4/1/10 135,000 139,054
Moscow Sewer Revenue
5.00% 11/1/22 (FSA) 2,175,000 2,194,771
-----------
2,463,904
-----------
Total Municipal Bonds (cost $81,327,540) 81,999,578
-----------
Number of
Shares
- --------------------------------------------------------------------------------
Short-Term Investments - 2.20%
- --------------------------------------------------------------------------------
Dreyfus Tax-Exempt Cash
Management Fund 1,860,821 1,860,821
-----------
Total Short-Term Investments (cost $1,860,821) 1,860,821
-----------
Total Market Value of Securities - 98.92%
(cost $83,188,361) 83,860,399
Receivables and Other Assets
Net of Liabilities - 1.08% 917,950
-----------
Net Assets Applicable to 7,613,435 Shares
Outstanding - 100.00% $84,778,349
===========
Net Asset Value - Delaware Tax-Free Idaho Fund
Class A ($51,681,689 / 4,639,846 Shares) $11.14
------
Net Asset Value - Delaware Tax-Free Idaho Fund
Class B ($16,800,537 / 1,509,985 Shares) $11.13
------
Net Asset Value - Delaware Tax-Free Idaho Fund
Class C ($16,296,123 / 1,463,604 Shares) $11.13
------
8
Statements Delaware Tax-Free Idaho Fund
OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $84,919,111
Distributions in excess of net investment income (11,301)
Accumulated net realized loss on investments (801,499)
Net unrealized appreciation of investments 672,038
-----------
Total net assets $84,778,349
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2003.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
ROLs -- Residual Options Long
XLCA - Insured by XL Capital Assurance
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Idaho Fund
Net asset value Class A (A) $11.14
Sales charge (4.50% of offering price, or 4.67% of
amount invested per share) (B) 0.52
------
Offering price $11.66
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See current prospectus for purchases of $100,000 or more.
See accompanying notes
9
Statements Delaware Tax-Free Missouri Insured Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 99.15%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 3.24%
St. Louis Airport
(Capital Improvement Project)
Series A 5.375% 7/1/21 (MBIA) $1,635,000 $ 1,706,155
-----------
1,706,155
-----------
Corporate-Backed Revenue Bonds - 2.77%
Missouri State Development Finance Board
Solid Waste Disposal
(Procter & Gamble Paper Products)
5.20% 3/15/29 500,000 500,340
Sugar Creek, Missouri Industrial
Development Revenue
(Lafarge North America) Series A
5.65% 6/1/37 1,000,000 956,860
-----------
1,457,200
-----------
Dedicated Tax & Fees Revenue Bonds - 5.21%
Bi-State Development Agency Missouri
Illinois Metropolitan District
(Metrolink Cross County Project)
Series B 5.00% 10/1/32 (FSA) 1,500,000 1,494,915
Jackson County Special Obligation
5.00% 12/1/27 (MBIA) 1,250,000 1,249,375
-----------
2,744,290
-----------
Escrowed to Maturity Bonds - 2.17%
Cape Girardeau County Industrial
Development Authority Health Care
Facilities Revenue
(Southeast Missouri Hospital)
5.25% 6/1/16 (MBIA) 440,000 478,108
**Greene County Single Family Mortgage
Revenue Municipal Multiplier
(Private Mortgage Insurance)
6.10% 3/1/16 1,225,000 664,612
-----------
1,142,720
-----------
Higher Education Revenue Bonds - 3.94%
Missouri State Health & Educational
Facilities Authority Educational
Facilities Revenue
(Central Missouri State University Project)
5.75% 10/1/25 (AMBAC) 1,000,000 1,089,990
(University of Health Sciences)
5.00% 6/1/31 (MBIA) 1,000,000 982,970
-----------
2,072,960
-----------
Hospital Revenue Bonds - 11.98%
Cape Girardeau County Industrial
Development Authority Health Care
Facilities Revenue
(Southeast Missouri Hospital)
5.25% 6/1/16 (MBIA) 560,000 598,422
(St. Francis Medical Center)
Series A 5.50% 6/1/32 (MBIA) 2,000,000 2,005,060
Hannibal Industrial Development Authority
Health Facilities Revenue Refunding
(Hannibal Regional Hospital) Series A
5.625% 3/1/12 (FSA) 1,000,000 1,077,820
5.75% 3/1/22 (FSA) 1,000,000 1,044,690
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
Missouri State Health & Educational
Facilities Authority Health Facilities
Revenue Refunding
(SSM Health Care) Series AA
6.40% 6/1/10 (MBIA) 500,000 $ 585,155
(St. Luke's Health System)
5.125% 11/15/19 (MBIA) 1,000,000 1,001,890
-----------
6,313,037
-----------
Investor Owned Utilities Revenue Bonds - 4.53%
Missouri State Environmental
Improvement & Energy Resource Authority
Pollution Control Revenue Refunding
(St. Joseph Light & Power Company Project)
5.85% 2/1/13 (AMBAC) 2,200,000 2,388,826
-----------
2,388,826
-----------
Miscellaneous Revenue Bonds - 2.12%
Missouri State Environmental Improvement
& Energy Resource Authority Water
Pollution Control Revenue Unrefunded
Balance (State Revolving Fund Project)
Series A 6.05% 7/1/16 (FSA) 1,060,000 1,118,565
-----------
1,118,565
-----------
Multi Family Housing Revenue Bonds - 4.58%
Missouri State Housing Development
Commission Multifamily Housing-Hyder
Series 3 5.60% 7/1/34 1,435,000 1,439,405
St. Louis County Industrial Development
Authority Housing Development Revenue
Refunding Sub (Southfield & Oak
Forest Apartment-A) 5.20% 1/20/36 1,000,000 975,170
-----------
2,414,575
-----------
Municipal Lease Revenue Bonds - 9.29%
Kansas City Land Clearance Redevelopment
Authority Lease Revenue
(Muehlebach Hotel) Series A
5.90% 12/1/18 (FSA) 1,000,000 1,104,440
Kansas City Municipal Assistance
Corporation Revenue Refunding
Leasehold (Bartle Convention Center)
Series A 5.60% 4/15/16 (MBIA) 940,000 1,001,279
St. Charles County Public Water Supply
District #2 Certificate of Participation
(Missouri Project) Series A
5.25% 12/1/28 (MBIA) 1,000,000 1,018,420
St. Charles County Public Water Supply
District #2 Certificates of Participation
Series B 5.10% 12/1/25 (MBIA) 500,000 502,540
**St. Louis Missouri Industrial Development
Authority Leasehold Revenue
(Convention Center Hotel)
5.80% 7/15/20 (AMBAC) 3,035,000 1,265,625
-----------
4,892,304
-----------
10
Statements Delaware Tax-Free Missouri Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Political Subdivision General Obligation Bonds - 5.10%
Kearney 5.00% 3/1/21 (AMBAC) $ 625,000 $ 632,600
St. Charles 5.75% 3/1/15 (FSA) 1,000,000 1,043,990
Taney County Reorganization School District
R-V Hollister School District
5.00% 3/1/22 (FSA) 1,000,000 1,010,930
-----------
2,687,520
-----------
*Pre-Refunded Bonds - 21.90%
Jackson County Industrial Development
Authority Health Care Corporation
Revenue (Carondelet Health
St. Mary's Hospital) 5.75% 7/1/24-04 1,750,000 1,853,880
Kansas City Airport Revenue General
Improvement Series B
6.875% 9/1/14-04 (FSA) 1,675,000 1,789,403
Missouri State Environmental
Improvement & Energy Resource
Authority Water Pollution Control Revenue
(State Revolving Fund) Series A
6.05% 7/1/16-04 (FSA) 1,205,000 1,279,855
St. Charles School District
6.50% 2/1/14-06 (FGIC) 1,250,000 1,391,800
St. Louis Municipal Finance Corporation
Leasehold Revenue Improvement
(City Justice Center) Series A
5.95% 2/15/16-06 (AMBAC) 1,000,000 1,118,860
St. Louis Municipal Finance Corporation
Leasehold Revenue Refunding &
Improvement 6.25% 2/15/12-05 (FGIC) 1,850,000 1,983,495
Troy Reorganization School District #3
Lincoln County 6.10% 3/1/14-05 (MBIA) 1,235,000 1,320,116
West Platte School District R-11
5.85% 3/1/15-05 (MBIA) 750,000 801,555
-----------
11,538,964
-----------
Public Power Revenue Bonds - 2.19%
Sikeston Electric Revenue Refunding
6.00% 6/1/13 (MBIA) 1,000,000 1,155,880
-----------
1,155,880
-----------
School District General Obligation Bonds - 4.38%
Greene County Reorganization School
District R8 (Direct Deposit Project)
5.10% 3/1/22 (FSA) 1,500,000 1,525,350
**St. Charles County Francis Howell School
District (Capital Appreciation Direct
Deposit Project) Series A
5.15% 3/1/17 (FGIC) 1,500,000 782,160
-----------
2,307,510
-----------
Single-Family Housing Revenue Bonds - 4.86%
Missouri State Housing Development
Commission Mortgage Revenue
Series C 7.45% 9/1/27 (GNMA/FNMA) 540,000 565,682
Missouri State Housing Development
Commission Mortgage Revenue
Single Family Homeowner Loan A
7.20% 9/1/26 (GNMA/FNMA) 500,000 506,505
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Single-Family Housing Revenue Bonds (continued)
Missouri State Housing Development
Commission Mortgage Revenue
Single Family Homeowner Loan B
7.55% 9/1/27 (GNMA/FNMA) $ 280,000 $ 285,102
Single Family Homeowner Loan C
7.25% 9/1/26 (GNMA/FNMA) 555,000 573,270
Missouri State Housing Development
Commission Mortgage Revenue Single
Family Mortgage Series A
7.20% 12/1/17 (GNMA) 45,000 46,183
7.25% 12/1/20 (GNMA) 95,000 97,494
Missouri State Housing Development
Commission Single Family Mortgage
Revenue (Homeowner Loan Project)
Series A 5.20% 9/1/33 (GNMA) 500,000 486,525
-----------
2,560,761
-----------
Territorial Revenue Bonds - 6.37%
Puerto Rico Commonwealth Highway &
Transportation Authority Transportation
Revenue Series A 4.75% 7/1/38 (MBIA) 1,000,000 962,870
Puerto Rico Electric Power Authority
Revenue Series N 5.125% 7/1/29 500,000 495,720
+Puerto Rico Electric Power Authority
Revenue, Inverse Floater ROLs
5.93% 7/1/19 (FSA) 1,925,000 1,896,780
-----------
3,355,370
-----------
Water & Sewer Revenue Bonds - 4.52%
Liberty Sewer System Revenue
6.00% 2/1/08 (MBIA) 600,000 682,752
6.15% 2/1/15 (MBIA) 1,500,000 1,701,060
-----------
2,383,812
-----------
Total Municipal Bonds (cost $49,482,450) 52,240,449
-----------
Total Market Value of Securities - 99.15%
(cost $49,482,450) 52,240,449
Receivables and Other Assets Net of Liabilities - 0.85% 448,201
-----------
Net Assets Applicable to 4,951,073 Shares
Outstanding - 100.00% $52,688,650
===========
Net Asset Value - Delaware Tax-Free
Missouri Insured Fund Class A
($44,025,564 / 4,136,925 Shares) $10.64
------
Net Asset Value - Delaware Tax-Free
Missouri Insured Fund Class B
($7,406,001 / 696,180 Shares) $10.64
------
Net Asset Value - Delaware Tax-Free
Missouri Insured Fund Class C
($1,257,085 / 117,968 Shares) $10.66
------
11
Statements Delaware Tax-Free Missouri Insured Fund
OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization-- no par) $50,356,532
Accumulated net realized loss on investments (425,881)
Net unrealized appreciation of investments 2,757,999
-----------
Total net assets $52,688,650
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**Zero coupon bond. The interest rate shown is the yield at the time of
purchase.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2003.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
ROLs - Residual Options Long
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Missouri Insured Fund
Net asset value Class A (A) $10.64
Sales charge (4.50% of offering price, or 4.70% of
amount invested per share) (B) 0.50
------
Offering price $11.14
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
12
Statements Delaware Tax-Free Oregon Insured Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 96.66%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 3.51%
Portland Oregon Airport Revenue
(Portland International Airport)
Series 11 5.625% 7/1/26 (FGIC) $1,500,000 $ 1,529,295
-----------
1,529,295
-----------
Higher Education Revenue Bonds - 12.78%
**Oregon Health Sciences University Revenue
(Capital Appreciation Insured) Series A
5.50% 7/1/21 (MBIA) 2,000,000 794,880
Oregon Health Sciences University Revenue
Series A 5.00% 7/1/32 (MBIA) 2,000,000 1,996,840
Oregon State Facilities Authority Revenue
(College Housing Northwest Project)
Series A 5.45% 10/1/32 1,700,000 1,650,921
Oregon State Health, Housing,
Educational & Cultural Facilities
Refunding (Lewis & Clark College Project)
Series A 6.125% 10/1/24 (MBIA) 1,055,000 1,122,509
-----------
5,565,150
-----------
Hospital Revenue Bonds - 6.45%
Deschutes County Hospital Facilities
Authority Hospital Revenue
(Cascade Health Services) 5.60% 1/1/32 1,250,000 1,261,075
Umatilla County Hospital Facility Authority
Revenue (Catholic Health Initiatives)
Series A 5.50% 3/1/32 1,000,000 1,021,300
Western Lane Hospital District Hospital
Facility Authority Revenue Refunding
(Sisters of St. Joseph Peace)
5.875% 8/1/12 (MBIA) 500,000 526,710
-----------
2,809,085
-----------
Investor Owned Utilities Revenue Bonds - 1.39%
Port Morrow, Oregon Pollution Control
Revenue (Portland General)
5.20% 5/1/33-03 600,000 603,906
-----------
603,906
-----------
Miscellaneous Revenue Bonds - 1.99%
Oregon State Department Administrative
Services 5.00% 9/1/13 (FSA) 800,000 865,984
-----------
865,984
-----------
Multi Family Housing Revenue Bonds - 2.55%
Oregon Health, Housing, Educational, &
Cultural Facilities Authority
(Pier Park Project) Series A
6.05% 4/1/18 (GNMA) 1,095,000 1,110,078
-----------
1,110,078
-----------
Municipal Lease Revenue Bonds - 2.46%
Oregon State Department Administration
Services Certificate of Participation
Refunding Series C
5.25% 11/1/15 (MBIA) 1,000,000 1,072,970
-----------
1,072,970
-----------
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Political Subdivision General Obligation Bonds - 4.81%
Deschutes County Administrative
School District #1 Series A
5.125% 6/15/21 (FSA) $1,000,000 $ 1,020,010
Deschutes County Refunding
5.00% 12/1/16 (FSA) 500,000 524,705
Malheur County (Jail Buildings)
6.30% 12/1/12 (MBIA) 500,000 549,955
-----------
2,094,670
-----------
*Pre-Refunded Bonds - 27.68%
Central Oregon Community College
District Oregon 5.90% 6/1/09-04 (FGIC) 750,000 777,765
Chemeketa County Community College
District 5.80% 6/1/12-06 (FGIC) 1,500,000 1,660,454
Eugene Electric Utility Revenue Series C
5.80% 8/1/22-04 (MBIA) 1,250,000 1,317,325
Hermiston Oregon
6.20% 8/1/24-04 (AMBAC) 500,000 523,810
Klamath Falls Water Revenue
6.10% 6/1/14-04 (FSA) 500,000 524,225
Lane County School District #019 Springfield
6.30% 10/15/14-04 (MBIA) 500,000 534,270
Multnomah County School District #3
Park Rose 5.50% 12/1/11-05 (FGIC) 500,000 545,725
Multnomah County School District #39
Corbet 6.00% 12/1/13-04 (MBIA) 500,000 530,595
Oregon State Department Administrative
Services Certificate of Participation
Series A 5.80% 5/1/24-07 (AMBAC) 1,000,000 1,133,060
Portland Series A 5.75% 6/1/15-05 (MBIA) 500,000 538,465
Portland Sewer System Revenue Series A
6.25% 6/1/15-04 (FSA) 1,000,000 1,049,580
Salem Water & Sewer Revenue
5.625% 6/1/16-06 (MBIA) 1,000,000 1,102,290
Tillamook County 6.25% 1/1/14-05 (FGIC) 250,000 269,193
Umatilla County School District #016R
Pendelton 6.00% 7/1/14-04 (AMBAC) 500,000 525,890
Washington County Education Services
District Certificate of Participation
7.10% 6/1/25-05 (MBIA) 700,000 770,196
Washington County School District #088
J Sherwood 6.10% 6/1/12-05 (FSA) 235,000 254,500
-----------
12,057,343
-----------
Public Utility District Revenue Bonds - 1.79%
Emerald Peoples Utilities District Series A
5.25% 11/1/22 (FSA) 750,000 778,388
-----------
778,388
-----------
School District General Obligation Bonds - 15.53%
Benton & Linn Counties School
District #509J Corvallis
5.00% 6/1/21 (FSA) 1,000,000 1,018,090
Jackson County School District #6
Central Point 5.25% 6/15/20 (FGIC) 1,175,000 1,217,523
Jefferson County School District #509J
5.00% 6/15/22 (FGIC) 500,000 506,535
Lane County School District #019
Springfield Refunding
6.00% 10/15/14 (FGIC) 500,000 580,530
13
Statements Delaware Tax-Free Oregon Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
School District General Obligation Bonds (continued)
Lincoln County School District
5.25% 6/15/12 (FGIC) $ 700,000 $ 759,654
++Linn County Community School District #9
Lebanon 5.60% 6/15/30 (FGIC) 2,000,000 2,037,320
**Umatilla County School District #6 R
Umatilla Refunding
5.50% 12/15/22 (AMBAC) 200,000 73,032
Washington & Clackamas Counties
School District #13 J Tigard
4.875% 6/15/22 (MBIA) 500,000 501,030
Washington County School District #088 J
Sherwood 6.10% 6/1/12 (FSA) 65,000 70,382
-----------
6,764,096
-----------
Single Family Housing Revenue Bonds - 4.53%
Oregon State Housing & Community Services
Department Mortgage Revenue Single
Family Mortgage Program Series R
5.375% 7/1/32 1,970,000 1,975,477
-----------
1,975,477
-----------
Tax Increment/Special Assessment Bonds - 2.49%
North Unit Irrigation District
5.75% 6/1/16 (MBIA) 1,000,000 1,082,920
-----------
1,082,920
-----------
Territorial Revenue Bonds - 6.76%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series G 5.00% 7/1/42 500,000 477,190
Puerto Rico Electric Power Authority
Revenue Series N 5.125% 7/1/29 1,000,000 991,440
+Puerto Rico Electric Power Authority
Revenue, Inverse Floater ROLs
5.93% 7/1/19 (FSA) 1,500,000 1,478,010
-----------
2,946,640
-----------
Water & Sewer Revenue Bonds - 1.94%
Beaverton County Water Revenue
6.125% 6/1/14 (FSA) 500,000 521,225
Portland Sewer Systems Revenue
(Second Lien) Series A
5.00% 6/1/23 (FSA) 325,000 326,346
-----------
847,571
-----------
Total Municipal Bonds (cost $40,291,961) 42,103,573
-----------
Number of
Shares
- --------------------------------------------------------------------------------
Short-Term Investments - 2.76%
- --------------------------------------------------------------------------------
Dreyfus Tax-Exempt Cash
Management Fund 1,200,551 1,200,551
-----------
Total Short-Term Investments
(cost $1,200,551) 1,200,551
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Market Value of Securities - 99.42%
(cost $41,492,512) $43,304,124
Receivables and Other Assets
Net of Liabilities - 0.58% 251,196
-----------
Net Assets Applicable to 4,194,175 Shares
Outstanding - 100.00% $43,555,320
===========
Net Asset Value - Delaware Tax-Free
Oregon Insured Fund Class A
($29,410,023 / 2,833,099 Shares) $10.38
------
Net Asset Value - Delaware Tax-Free
Oregon Insured Fund Class B
($8,750,271 / 842,485 Shares) $10.39
------
Net Asset Value - Delaware Tax-Free
Oregon Insured Fund Class C
($5,395,026 / 518,591 Shares) $10.40
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization-- no par) $42,179,666
Accumulated net realized loss on investments (435,958)
Net unrealized appreciation of investments 1,811,612
-----------
Total net assets $43,555,320
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**Zero coupon bond. The interest rate shown is the yield at the time of
purchase.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2003.
++Step coupon bond.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
ROLs - Residual Options Long
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Oregon Insured Fund
Net asset value Class A (A) $10.38
Sales charge (4.50% of offering price, or 4.72% of amount
invested per share) (B) 0.49
------
Offering price $10.87
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
14
Statements
OF OPERATIONS Year Ended August 31, 2003
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Idaho Missouri Insured Oregon Insured
Fund Fund Fund
Investment Income:
Interest $4,273,774 $2,861,977 $2,108,240
---------- ---------- ----------
Expenses:
Management fees 444,719 270,332 203,522
Distribution expenses-- Class A 127,086 110,940 68,531
Distribution expenses-- Class B 160,720 83,551 88,553
Distribution expenses-- Class C 137,064 13,197 43,052
Dividend disbursing and transfer agent fees and expenses 55,336 47,333 30,781
Accounting and administration expenses 35,948 24,600 18,200
Reports and statements to shareholders 15,189 16,160 7,600
Professional fees 21,147 13,908 12,157
Registration fees 5,871 4,680 1,735
Custodian fees 4,841 4,319 2,707
Trustees' fees 3,057 3,162 2,610
Other 18,783 14,282 10,398
---------- ---------- ----------
1,029,761 606,464 489,846
Less expenses absorbed or waived (56,236) - (50,054)
Less expenses paid indirectly (2,121) (1,392) (1,132)
---------- ---------- ----------
Total expenses 971,404 605,072 438,660
---------- ---------- ----------
Net Investment Income 3,302,370 2,256,905 1,669,580
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 355,852 281,149 214,112
Net change in unrealized appreciation/depreciation of investments (1,839,181) (1,135,869) (924,292)
---------- ---------- ----------
Net Realized and Unrealized Loss on Investments (1,483,329) (854,720) (710,180)
---------- ---------- ----------
Net Increase in Net Assets Resulting from Operations $1,819,041 $1,402,185 $ 959,400
========== ========== ==========
See accompanying notes
15
Statements
OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
Year Ended Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $3,302,370 $2,695,449 $2,256,905 $2,293,224 $1,669,580 $1,467,546
Net realized gain (loss) on investments 355,852 (268,373) 281,149 147,916 214,112 44,183
Net change in unrealized
appreciation/depreciation of investments (1,839,181) 704,757 (1,135,869) 253,738 (924,292) 282,015
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting from operations 1,819,041 3,131,833 1,402,185 2,694,878 959,400 1,793,744
---------- ---------- ---------- ---------- ---------- ----------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (2,218,414) (1,897,634) (1,906,317) (1,887,783) (1,192,516) (1,067,623)
Class B (582,004) (536,959) (295,924) (359,927) (318,633) (302,631)
Class C (495,347) (253,783) (46,691) (37,619) (154,374) (93,153)
---------- ---------- ---------- ---------- ---------- ----------
(3,295,765) (2,688,376) (2,248,932) (2,285,329) (1,665,523) (1,463,407)
---------- ---------- ---------- ---------- ---------- ----------
Capital Share Transactions:
Proceeds from shares sold:
Class A 16,371,596 10,485,386 5,521,827 3,584,351 6,845,055 2,824,677
Class B 3,331,668 2,829,608 440,239 358,082 2,122,381 1,409,340
Class C 8,793,031 5,452,541 649,304 620,108 3,223,917 1,650,211
Net asset value of shares issued upon reinvestment
of dividends and distributions:
Class A 1,505,826 1,246,173 934,595 952,960 697,048 602,070
Class B 345,692 332,034 176,563 221,803 174,625 168,039
Class C 296,266 165,168 39,136 33,459 89,992 58,050
---------- ---------- ---------- ---------- ---------- ----------
30,644,079 20,510,910 7,761,664 5,770,763 13,153,018 6,712,387
---------- ---------- ---------- ---------- ---------- ----------
Cost of shares repurchased:
Class A (10,420,017) (5,120,599) (4,318,513) (2,610,120) (2,735,631) (1,525,920)
Class B (1,409,479) (818,538) (2,372,010) (1,067,791) (1,896,972) (1,089,559)
Class C (2,304,901) (794,760) (650,350) (56,194) (1,082,332) (324,977)
---------- ---------- ---------- ---------- ---------- ----------
(14,134,397) (6,733,897) (7,340,873) (3,734,105) (5,714,935) (2,940,456)
---------- ---------- ---------- ---------- ---------- ----------
Increase in net assets derived
from capital share transactions 16,509,682 13,777,013 420,791 2,036,658 7,438,083 3,771,931
---------- ---------- ---------- ---------- ---------- ----------
Net Increase (Decrease) in Net Assets 15,032,958 14,220,470 (425,956) 2,446,207 6,731,960 4,102,268
Net Assets:
Beginning of year 69,745,391 55,524,921 53,114,606 50,668,399 36,823,360 32,721,092
---------- ---------- ---------- ---------- ---------- ----------
End of year $84,778,349 $69,745,391 $52,688,650 $53,114,606 $43,555,320 $36,823,360
=========== =========== =========== =========== =========== ===========
See accompanying notes
16
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Idaho Fund Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.320 $11.260 $10.730 $10.940 $11.560
Income (loss) from investment operations:
Net investment income 0.497 0.522 0.541 0.541 0.517
Net realized and unrealized gain (loss) on investments (0.181) 0.059 0.530 (0.210) (0.620)
------- ------- ------- ------- -------
Total from investment operations 0.316 0.581 1.071 0.331 (0.103)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.496) (0.521) (0.541) (0.541) (0.517)
------- ------- ------- ------- -------
Total dividends and distributions (0.496) (0.521) (0.541) (0.541) (0.517)
------- ------- ------- ------- -------
Net asset value, end of period $11.140 $11.320 $11.260 $10.730 $10.940
======= ======= ======= ======= =======
Total return(2) 2.81% 5.36% 10.24% 3.25% (0.99%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $51,682 $45,108 $38,228 $34,674 $44,299
Ratio of expenses to average net assets 0.93% 1.00% 1.00% 1.00% 1.00%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.00% 1.03% 1.03% 1.09% 1.04%
Ratio of net investment income to average net assets 4.36% 4.69% 4.94% 5.13% 4.52%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.29% 4.66% 4.91% 5.04% 4.48%
Portfolio turnover 18% 11% 14% 10% 2%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
17
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Idaho Fund Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.310 $11.250 $10.720 $10.920 $11.550
Income (loss) from investment operations:
Net investment income 0.412 0.439 0.460 0.462 0.432
Net realized and unrealized gain (loss) on investments (0.181) 0.059 0.530 (0.200) (0.630)
------- ------- ------- ------- -------
Total from investment operations 0.231 0.498 0.990 0.262 (0.198)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.411) (0.438) (0.460) (0.462) (0.432)
------- ------- ------- ------- -------
Total dividends and distributions (0.411) (0.438) (0.460) (0.462) (0.432)
------- ------- ------- ------- -------
Net asset value, end of period $11.130 $11.310 $11.250 $10.720 $10.920
======= ======= ======= ======= =======
Total return(2) 2.05% 4.58% 9.43% 2.58% (1.82%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $16,801 $14,809 $12,366 $10,320 $10,199
Ratio of expenses to average net assets 1.68% 1.75% 1.75% 1.75% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.75% 1.78% 1.78% 1.84% 1.79%
Ratio of net investment income to average net assets 3.61% 3.94% 4.19% 4.38% 3.77%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.54% 3.91% 4.16% 4.29% 3.73%
Portfolio turnover 18% 11% 14% 10% 2%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
18
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Idaho Fund Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.310 $11.250 $10.720 $10.920 $11.550
Income (loss) from investment operations:
Net investment income 0.413 0.439 0.460 0.462 0.432
Net realized and unrealized gain (loss) on investments (0.181) 0.059 0.530 (0.200) (0.630)
------- ------- ------- ------- -------
Total from investment operations 0.232 0.498 0.990 0.262 (0.198)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.412) (0.438) (0.460) (0.462) (0.432)
------- ------- ------- ------- -------
Total dividends and distributions (0.412) (0.438) (0.460) (0.462) (0.432)
------- ------- ------- ------- -------
Net asset value, end of period $11.130 $11.310 $11.250 $10.720 $10.920
======= ======= ======= ======= =======
Total return(2) 2.05% 4.57% 9.43% 2.58% (1.82%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $16,296 $9,829 $4,931 $3,621 $3,411
Ratio of expenses to average net assets 1.68% 1.75% 1.75% 1.75% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.75% 1.78% 1.78% 1.84% 1.79%
Ratio of net investment income to average net assets 3.61% 3.94% 4.19% 4.38% 3.77%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.54% 3.91% 4.16% 4.29% 3.73%
Portfolio turnover 18% 11% 14% 10% 2%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
19
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Missouri Insured Fund Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.810 $10.740 $10.340 $10.340 $10.870
Income (loss) from investment operations:
Net investment income 0.469 0.489 0.497 0.494 0.498
Net realized and unrealized gain (loss) on investments (0.172) 0.068 0.400 -- (0.530)
------- ------- ------- ------- -------
Total from investment operations 0.297 0.557 0.897 0.494 (0.032)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.467) (0.487) (0.497) (0.494) (0.498)
------- ------- ------- ------- -------
Total dividends and distributions (0.467) (0.487) (0.497) (0.494) (0.498)
------- ------- ------- ------- -------
Net asset value, end of period $10.640 $10.810 $10.740 $10.340 $10.340
======= ======= ======= ======= =======
Total return(2) 2.75% 5.38% 8.89% 4.99% (0.38%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $44,026 $42,610 $40,349 $38,314 $42,337
Ratio of expenses to average net assets 0.98% 0.97% 0.95% 1.03% 0.97%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.98% 0.97% 0.95% 1.03% 1.02%
Ratio of net investment income to average net assets 4.31% 4.61% 4.74% 4.88% 4.62%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.31% 4.61% 4.74% 4.88% 4.57%
Portfolio turnover 31% 23% 14% 1% 7%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(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 a waiver 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
20
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Missouri Insured Fund Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.810 $10.730 $10.340 $10.340 $10.870
Income (loss) from investment operations:
Net investment income 0.387 0.410 0.418 0.418 0.416
Net realized and unrealized gain (loss) on investments (0.172) 0.078 0.390 -- (0.530)
------- ------- ------- ------- -------
Total from investment operations 0.215 0.488 0.808 0.418 (0.114)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.385) (0.408) (0.418) (0.418) (0.416)
------- ------- ------- ------- -------
Total dividends and distributions (0.385) (0.408) (0.418) (0.418) (0.416)
------- ------- ------- ------- -------
Net asset value, end of period $10.640 $10.810 $10.730 $10.340 $10.340
======= ======= ======= ======= =======
Total return(2) 1.99% 4.70% 7.98% 4.21% (1.13%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $7,406 $9,264 $9,693 $10,053 $10,572
Ratio of expenses to average net assets 1.73% 1.72% 1.70% 1.78% 1.72%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.73% 1.72% 1.70% 1.78% 1.77%
Ratio of net investment income to average net assets 3.56% 3.86% 3.99% 4.13% 3.87%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.56% 3.86% 3.99% 4.13% 3.82%
Portfolio turnover 31% 23% 14% 1% 7%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(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 a waiver 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
21
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Missouri Insured Fund Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.820 $10.740 $10.350 $10.350 $10.880
Income (loss) from investment operations:
Net investment income 0.387 0.410 0.418 0.418 0.419
Net realized and unrealized gain (loss) on investments (0.162) 0.078 0.390 -- (0.530)
------- ------- ------- ------- -------
Total from investment operations 0.225 0.488 0.808 0.418 (0.111)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.385) (0.408) (0.418) (0.418) (0.419)
------- ------- ------- ------- -------
Total dividends and distributions (0.385) (0.408) (0.418) (0.418) (0.419)
------- ------- ------- ------- -------
Net asset value, end of period $10.660 $10.820 $10.740 $10.350 $10.350
======= ======= ======= ======= =======
Total return(2) 2.08% 4.68% 7.97% 4.20% (1.12%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $1,257 $1,241 $626 $343 $231
Ratio of expenses to average net assets 1.73% 1.72% 1.70% 1.78% 1.72%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.73% 1.72% 1.70% 1.78% 1.77%
Ratio of net investment income to average net assets 3.56% 3.86% 3.99% 4.13% 3.87%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.56% 3.86% 3.99% 4.13% 3.82%
Portfolio turnover 31% 23% 14% 1% 7%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(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 a waiver 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
22
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Oregon Insured Fund Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.530 $10.450 $9.910 $9.810 $10.430
Income (loss) from investment operations:
Net investment income 0.461 0.467 0.465 0.467 0.458
Net realized and unrealized gain (loss) on investments (0.151) 0.079 0.540 0.100 (0.620)
------- ------- ------- ------- -------
Total from investment operations 0.310 0.546 1.005 0.567 (0.162)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.460) (0.466) (0.465) (0.467) (0.458)
------- ------- ------- ------- -------
Total dividends and distributions (0.460) (0.466) (0.465) (0.467) (0.458)
------- ------- ------- ------- -------
Net asset value, end of period $10.380 $10.530 $10.450 $9.910 $9.810
======= ======= ======= ======= =======
Total return(2) 2.97% 5.41% 10.39% 6.04% (1.67%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $29,410 $25,082 $22,973 $22,712 $27,518
Ratio of expenses to average net assets 0.84% 0.85% 0.85% 0.85% 0.80%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.96% 1.00% 0.99% 1.01% 1.02%
Ratio of net investment income to average net assets 4.35% 4.52% 4.59% 4.85% 4.44%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.23% 4.37% 4.45% 4.69% 4.22%
Portfolio turnover 16% 20% 28% 0% 10%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
23
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Oregon Insured Fund Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.540 $10.450 $9.910 $9.810 $10.430
Income (loss) from investment operations:
Net investment income 0.382 0.390 0.389 0.394 0.381
Net realized and unrealized gain (loss) on investments (0.151) 0.089 0.540 0.100 (0.620)
------- ------- ------- ------- -------
Total from investment operations 0.231 0.479 0.929 0.494 (0.239)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.381) (0.389) (0.389) (0.394) (0.381)
------- ------- ------- ------- -------
Total dividends and distributions (0.381) (0.389) (0.389) (0.394) (0.381)
------- ------- ------- ------- -------
Net asset value, end of period $10.390 $10.540 $10.450 $9.910 $9.810
======= ======= ======= ======= =======
Total return(2) 2.20% 4.73% 9.57% 5.24% (2.41%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $8,750 $8,489 $7,928 $7,484 $7,999
Ratio of expenses to average net assets 1.59% 1.60% 1.60% 1.60% 1.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.71% 1.75% 1.74% 1.76% 1.77%
Ratio of net investment income to average net assets 3.60% 3.77% 3.84% 4.10% 3.69%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.48% 3.62% 3.70% 3.94% 3.47%
Portfolio turnover 16% 20% 28% 0% 10%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
24
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Oregon Insured Fund Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.550 $10.470 $9.920 $9.820 $10.440
Income (loss) from investment operations:
Net investment income 0.381 0.389 0.388 0.394 0.380
Net realized and unrealized gain (loss) on investments (0.151) 0.079 0.550 0.100 (0.620)
------- ------- ------- ------- -------
Total from investment operations 0.230 0.468 0.938 0.494 (0.240)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.380) (0.388) (0.388) (0.394) (0.380)
------- ------- ------- ------- -------
Total dividends and distributions (0.380) (0.388) (0.388) (0.394) (0.380)
------- ------- ------- ------- -------
Net asset value, end of period $10.400 $10.550 $10.470 $9.920 $9.820
======= ======= ======= ======= =======
Total return(2) 2.19% 4.62% 9.66% 5.24% (2.41%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,395 $3,253 $1,820 $1,609 $1,603
Ratio of expenses to average net assets 1.59% 1.60% 1.60% 1.60% 1.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.71% 1.75% 1.74% 1.76% 1.77%
Ratio of net investment income to average net assets 3.60% 3.77% 3.84% 4.10% 3.69%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.48% 3.62% 3.70% 3.94% 3.47%
Portfolio turnover 16% 20% 28% 0% 10%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
25
Notes August 31, 2003
TO FINANCIAL STATEMENTS
Voyageur Mutual Funds (the "Trust") is organized as a Delaware business trust
and offers six series: Delaware Minnesota High-Yield Municipal Bond Fund,
Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free Arizona
Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and
Delaware Tax-Free New York Fund. Voyageur Investment Trust (the "Trust") is
organized as a Massachusetts business trust and offers five series: Delaware
Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware
Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund and
Delaware Tax-Free Oregon Insured Fund. These financial statements and the
related notes pertain to Delaware Tax-Free Idaho Fund, Delaware Tax-Free
Missouri Insured Fund, and Delaware Tax-Free Oregon Insured Fund (each 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%. Class B
shares are sold with a contingent deferred sales charge that declines from 4.00%
to zero depending upon the period of time the shares are held. Class B shares
will automatically convert to Class A shares on a quarterly basis approximately
eight years after purchase. Class C shares are sold with a contingent deferred
sales charge of 1%, if redeemed during the first 12 months.
The investment objective of Delaware Tax-Free Idaho Fund, Delaware Tax-Free
Missouri Insured Fund, and Delaware Tax-Free Oregon Insured Fund is to seek as
high a level of current income exempt from federal income tax and personal
income tax in their respective states, as is consistent with preservation of
capital.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds.
Security Valuation -- Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of each Fund's Board of
Trustees.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Discounts and premiums are
amortized to interest income over the lives of the respective securities. Each
Fund declares dividends daily from net investment income and pays such dividends
monthly and declares and pays distributions from net realized gain on
investments, if any, annually.
Certain expenses of the Funds are paid through commission arrangements with
brokers. These transactions are done subject to best execution. In addition, the
Funds may receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statements of Operations with the corresponding expense offset
shown as "expenses paid indirectly". The amounts of these expenses for the year
ended August 31, 2003 were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Commission reimbursements $1,940 $1,298 $975
Earnings credits 181 94 157
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
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
On the first $500 million 0.55% 0.50% 0.50%
On the next $500 million 0.50% 0.475% 0.475%
On the next $1.5 billion 0.45% 0.45% 0.45%
In excess of $2.5 billion 0.425% 0.425% 0.425%
26
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, and extraordinary expenses, do not exceed specified
percentages of average daily net assets through October 31, 2004, as shown
below.
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
The operating expense limitation as a percentage
of average daily net assets (per annum) 0.75% N/A 0.60%
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. Each Fund pays
DSC a monthly fee based on average net assets subject to certain minimums for
accounting and administration services. Each Fund pays DSC a monthly fee based
on the number of shareholder accounts for dividend disbursing and transfer agent
services. Prior to June 1, 2003, the monthly fee for dividend disbursing and
transfer agent services was based on the number of shareholder accounts and
shareholder transactions.
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 0.25% of the average daily net
assets of the Class A shares and 1.00% of the average daily net assets of the
Class B and C shares.
At August 31, 2003, each Fund had liabilities payable to affiliates as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Investment management fee payable to DMC $9,604 $7,449 $8,522
Dividend disbursing, transfer agent fees, accounting
and other expenses payable to DSC 8,414 5,985 4,560
Other expenses payable to DMC and affiliates 11,466 7,183 5,906
For the year ended August 31, 2003, DDLP earned commissions on sales of Class A
shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
$54,962 $6,900 $24,860
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.
3. Investments
For the year ended August 31, 2003, 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
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Purchases $31,208,243 $17,870,514 $13,391,035
Sales 14,553,084 16,579,537 6,386,535
At August 31, 2003, 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
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Cost of investments $83,165,350 $49,440,809 $41,469,744
----------- ----------- -----------
Aggregate unrealized appreciation $2,201,564 $3,016,453 $1,973,931
Aggregate unrealized depreciation (1,506,515) (216,813) (139,551)
----------- ----------- -----------
Net unrealized appreciation $695,049 $2,799,640 $1,834,380
----------- ----------- -----------
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the years ended August 31, 2003, and 2002 was as
follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Year Ended Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02
Tax-exempt income $3,295,765 $2,688,376 $2,248,932 $2,285,329 $1,665,523 $1,463,407
27
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
4. Dividend and Distribution Information (continued)
As of August 31, 2003, the components of net assets on a tax basis were as
follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Shares of beneficial interest $84,919,111 $50,356,532 $42,179,666
Undistributed tax-exempt income (11,301) -- --
Capital loss carryforwards (824,510) (467,522) (458,726)
Net unrealized appreciation of investments 695,049 2,799,640 1,834,380
----------- ----------- -----------
Net assets $84,778,349 $52,688,650 $43,555,320
=========== =========== ===========
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss carryforward
amounts will expire as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Year of expiration
- ------------------
2004 $ -- $279,740 $162,740
2008 -- 187,782 --
2009 657,561 -- 217,063
2010 166,949 -- 78,923
-------- -------- --------
Total $824,510 $467,522 $458,726
======== ======== ========
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
Year Ended Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02
Shares sold:
Class A 1,441,194 940,628 506,831 339,265 644,131 273,549
Class B 293,778 254,042 40,296 33,865 199,885 136,072
Class C 773,442 487,362 59,018 58,513 303,936 160,470
Shares issued upon reinvestment of
dividends and distributions:
Class A 132,956 112,086 86,307 89,875 66,096 58,418
Class B 30,561 29,886 16,310 20,924 16,553 16,296
Class C 26,162 14,866 3,613 3,153 8,512 5,621
---------- --------- -------- -------- --------- --------
2,698,093 1,838,870 712,375 545,595 1,239,113 650,426
---------- --------- -------- -------- --------- --------
Shares repurchased:
Class A (919,781) (462,545) (397,871) (245,854) (259,058) (148,535)
Class B (124,210) (73,529) (217,615) (100,721) (179,667) (105,017)
Class C (204,972) (71,616) (59,346) (5,294) (102,244) (31,622)
---------- --------- -------- -------- --------- --------
(1,248,963) (607,690) (674,832) (351,869) (540,969) (285,174)
---------- --------- -------- -------- --------- --------
Net increase 1,449,130 1,231,180 37,543 193,726 698,144 365,252
========== ========= ======== ======== ========= ========
28
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Shares (continued)
For the years ended August 31, 2003 and 2002, the following shares were
converted from Class B to Class A. The respective amounts are included in Class
B redemptions and Class A subscriptions in the table above and the Statements of
Changes in Net Assets.
Year Ended Year Ended
8/31/03 8/31/02
Class B Shares Class A Shares Value Class B Shares Class A Shares Value
-------------- -------------- ----- -------------- -------------- -----
Delaware Tax-Free Idaho Fund 8,678 8,671 $ 100,845 -- -- $ --
Delaware Tax-Free Missouri Insured Fund 126,971 126,971 1,389,281 5,483 5,483 58,227
Delaware Tax-Free Oregon Insured Fund 80,709 80,756 860,427 24,568 24,568 254,101
6. Line of Credit
Each Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participates in a $202,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of August 31, 2003 or at any time during the
year.
7. Credit And Market Risks
The Funds concentrate their investments in securities issued by each
corresponding state's 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.
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.
8. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2003, each Fund designates distributions
paid during the year as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Idaho Fund Missouri Insured Fund Oregon Insured Fund
----------------- --------------------- -------------------
(A) Long-Term Capital Gains Distributions (Tax Basis) -- -- --
(B) Ordinary Income Distributions (Tax Basis) -- -- --
(C) Tax-Exempt Distributions (Tax Basis) 100% 100% 100%
---- ---- ----
Total Distributions (Tax Basis) 100% 100% 100%
---- ---- ----
(A), (B) and (C) are based on a percentage of each Fund's total distributions.
29
Report
OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
Voyageur Mutual Funds -- Delaware Tax-Free Idaho Fund
Voyageur Investment Trust -- Delaware Tax-Free
Missouri Insured Fund
Voyageur Investment Trust -- Delaware Tax-Free
Oregon Insured Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Idaho Fund, Delaware Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon
Insured Fund (the "Funds") as of August 31, 2003, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above listed Funds at August 31, 2003, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and their financial highlights for each of the
five years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 3, 2003
30
Delaware Investments Family of Funds
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees which has oversight
responsibility for the management of a fund's business affairs. Trustees
establish procedures and oversee and review the performance of the investment
manager, the distributor and others that perform services for the fund. The
independent fund trustees, in particular, are advocates for shareholder
interests. The following is a list of the Trustees/Officers and certain
background and related information.
Principal Number of Other
Name, Position(s) Occupation(s) Portfolios in Fund Directorships
Address Held with Length of Time During Complex Overseen Held by
and Birthdate Fund(s) Served Past 5 Years by Trustee Trustee
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Jude to Driscoll(2) Chairman and 3 Years - Since August 2000, 83 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Trustee since at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process-
Conseco Capital Management
(June 1998 - August 2000)
Managing Director-
NationsBanc Capital Markets
(February 1996 - June 1998)
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Walter P. Babich Trustee 15 Years Board Chairman - 101 None
2005 Market Street Citadel Construction Corporation
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
John H. Durham Trustee 24 Years(3) Private Investor 101 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
John A. Fry Trustee(4) 2 Years President - 83 None
2005 Market Street Franklin & Marshall College
Philadelphia, PA (June 2002 - Present)
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
Anthony D. Knerr Trustee 10 Years Founder/Managing Director - 101 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
31
Principal Number of Other
Name, Position(s) Occupation(s) Portfolios in Fund Directorships
Address Held with Length of Time During Complex Overseen Held by
and Birthdate Fund(s) Served Past 5 Years by Trustee/Director Trustee/Director
or Officer or Officer
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
Ann R. Leven Trustee 14 Years Treasurer/Chief Fiscal Officer - 101 Director - Andy
2005 Market Street National Gallery of Art Warhol Foundation
Philadelphia, PA (1994 - 1999)
19103 Director -
Systemax Inc.
November 1, 1940
Thomas F. Madison Trustee 9 Years President/Chief 101 Director -
2005 Market Street Executive Officer - CenterPoint Energy
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director - Digital
and Consulting) River Inc.
(January 1993 - Present)
February 25, 1936 Director - Rimage
Corporation
Director - Valmont
Industries, Inc.
Janet L. Yeomans Trustee 4 Years Vice President/Mergers & 101 None
2005 Market Street Acquisitions - 3M Corporation
Philadelphia, PA (January 2003 - Present)
19103
Ms. Yeomans has held
July 31, 1948 various management
positions at 3M Corporation
since 1983.
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Joseph H. Hastings Executive Vice President Executive Mr. Hastings has served in 101 None
2005 Market Street and Chief Vice President various executive capacities
Philadelphia, PA Financial Officer and at different times at
19103 Chief Financial Delaware Investments
Officer since
December 19, 1949 August 21, 2003
Richelle S. Maestro Senior Vice President, Chief Legal Ms. Maestro has served in 101 None
2005 Market Street Chief Legal Officer Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments.
November 26, 1957
Michael P. Bishof Senior Vice President 7 Years Mr. Bishof has served in 101 None
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
(1) Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Registrant's investment advisor,
principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees and Officers and is available, without charge,
upon request by calling 800 523-1918.
32
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This annual report is for the information of Delaware Tax-Free Idaho Fund,
Delaware Tax-Free Missouri Insured Fund, and Delaware Tax-Free Oregon Insured
Fund shareholders, but it may be used with prospective investors when preceded
or accompanied by a current prospectus for Delaware Tax-Free Idaho Fund,
Delaware Tax-Free Missouri Insured Fund, and Delaware Tax-Free Oregon Insured
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 Funds. You should
read the prospectus carefully before you invest. The figures in this report
represent past results which are not a guarantee of future results. The return
and principal value of an investment in the Funds will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information
Walter P. Babich Jude T. Driscoll Investment Manager
Board Chairman Chairman Delaware Management Company
Citadel Construction Corporation Delaware Investments Family of Funds Philadelphia, PA
King of Prussia, PA Philadelphia, PA
International Affiliate
John H. Durham Joseph H. Hastings Delaware International Advisers Ltd.
Private Investor Executive Vice President and London, England
Gwynedd Valley, PA Chief Financial Officer
Delaware Investments Family of Funds National Distributor
Anthony D. Knerr Philadelphia, PA Delaware Distributors, L.P.
Managing Director Philadelphia, PA
Anthony Knerr & Associates Richelle S. Maestro
New York, NY Senior Vice President, Shareholder Servicing, Dividend
Chief Legal Officer and Secretary Disbursing and Transfer Agent
Ann R. Leven Delaware Investments Family of Funds Delaware Service Company, Inc.
Former Treasurer/Chief Fiscal Officer Philadelphia, PA 2005 Market Street
National Gallery of Art Philadelphia, PA 19103-7094
Washington, DC Michael P. Bishof
Senior Vice President and Treasurer For Shareholders
Thomas F. Madison Delaware Investments Family of Funds 800 523-1918
President and Chief Executive Officer Philadelphia, PA
MLM Partners, Inc. For Securities Dealers and Financial
Minneapolis, MN Institutions Representatives Only
800 362-7500
Janet L. Yeomans
Vice President/Mergers & Acquisitions Web site
3M Corporation www.delawareinvestments.com
St. Paul, MN
---------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at
http://www.delawareinvestments.com; and (iii) on the Commission's website at
http://www.sec.gov.; and beginning no later than August 31, 2004, information
(if any) regarding how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
---------------------------------------------------------------------------------
(8232) Printed in the USA
AR-CORN [8/03] IVES 10/03 (J9413) EXP: 10/04
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
Annual Report 2003
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE MINNESOTA FUND
DELAWARE TAX-FREE MINNESOTA INSURED FUND
DELAWARE TAX-FREE MINNESOTA INTERMEDIATE FUND
DELAWARE MINNESOTA HIGH-YIELD MUNICIPAL BOND FUND
[Graphic Omitted: Logo] POWERED BY REASEARCH.(SM)
Table
OF CONTENTS
- -----------------------------------------------------------------
PORTFOLIO MANAGEMENT REVIEW 1
- -----------------------------------------------------------------
PERFORMANCE SUMMARIES:
Delaware Tax-Free Minnesota Fund 4
Delaware Tax-Free Minnesota Insured Fund 5
Delaware Tax-Free Minnesota Intermediate Fund 6
Delaware Minnesota High-Yield
Municipal Bond Fund 7
- -----------------------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 8
Statements of Operations 20
Statements of Changes in Net Assets 21
Financial Highlights 23
Notes to Financial Statements 35
- -----------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 41
- -----------------------------------------------------------------
BOARD OF TRUSTEES/OFFICERS 42
- -----------------------------------------------------------------
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) 2003 Delaware Distributors, L.P.
Portfolio Delaware Minnesota Municipal Bond Funds
MANAGEMENT REVIEW September 10, 2003
Fund Managers
M. L. Conery
Senior Portfolio Manager
Patrick P. Coyne
Chief Investment Officer -- Fixed Income
Q: How did the fixed-income markets fare during the 12-month period?
A: During the past 12 months, investors became increasingly confident about the
U.S. economy's growth potential. Although we are far from out of the woods,
favorable data surrounding corporate earnings, consumer spending, and business
investment support an optimistic view.
During the year, the stock market was the primary beneficiary of improved
sentiment. Once depressed by concerns about corporate accounting scandals, war
in Iraq, and the spread of SARS, stocks suddenly recorded their sharpest gains
in years -- especially during the Spring of 2003. Between March 11, 2003, when
the stock market reached a low, and August 31, the Standard & Poor's 500 Index
gained a surprising +26% (Source: Lipper Inc.).
As investors gravitated to stocks, an increasing number became reluctant to
invest in fixed income. Bonds have been very strong performers in recent years
and remained so early in our fiscal year. During the fiscal first half, bonds,
and especially U.S. Treasuries and high-quality municipal securities, benefited
from the preference for stable investments during an uncertain economic climate.
As interest rates gradually declined, so did bond yields, while prices rose
accordingly (bond prices and yields move in opposite directions).
Over time, however, conditions became less favorable in the fixed-income
markets. Seeking to spur growth, the Federal Reserve this summer revealed its
intention to keep interest rates low for the foreseeable future. This caused
bond investors to worry about the future potential for inflation, which often
occurs when the economy is expanding. Inflation is troublesome because it causes
interest payments to be worth less over time and, thus, depresses bond values.
In this environment, municipal bond yields with relatively short maturities fell
in line with interest rates during the period, while 10-year municipal bond
yields rose on inflation fears.
Q: What factors affected the municipal bond markets in particular?
A: States and municipalities continued to struggle with their budgets due to the
increased demand for services. Finding it politically difficult to raise taxes
or cut spending, many governments experienced substantial budget shortfalls and
issued municipal debt to raise needed funds. This higher rate of issuance, along
with historically low interest rates, led to an extremely large supply of new
bonds.
During the first eight months of 2003, $254 million in new bonds were issued
nationwide, a 13 percent increase over the prior year's record. This trend was
not evident in Minnesota, however, which saw new municipal issuance decline more
than 11 percent in the same period (Source: Thomson Financial).
Minnesota, paralleling trends around the country, faced substantial financial
challenges during the past 12 months. To meet a growing budget gap, the state
proposed a variety of spending cuts. Nevertheless, concerns remained whether
those cuts would be sufficient to tackle Minnesota's deficit. Because of these
concerns, Moody's lowered the state's credit rating to Aa1 from AAA. Standard &
Poor's (S&P), however, maintained its rating of AAA -- the highest possible.
Q: How did the four funds perform during the fiscal year, and what strategies
did you pursue in each?
Delaware Tax-Free Minnesota Fund returned +3.80% (Class A shares at net asset
value with distributions reinvested) for the fiscal year ended August 31, 2003.
This result surpassed that of the Lipper Minnesota Municipal Debt Funds Average,
which returned +2.60% during the same time frame. As an additional point of
comparison, the Lehman Brothers Municipal Bond Index rose +3.14%. The Fund's
dividend payments during the last 12 months were exempt from federal and
Minnesota state taxes.*
In part, we attribute the Fund's outperformance relative to its peers to a
shorter-than-average duration. The shorter duration meant that the Fund was less
vulnerable to a July 2003 rise in interest rates. Duration is a common measure
of a bonds or bond fund's sensitivity to interest rate changes. The longer the
duration, the more sensitive the bond or bond fund is to changes in interest
rates. While duration remained shorter than
* A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
1
average, it nevertheless rose throughout the period, reflecting a need to
reinvest the proceeds of pre-refunded securities leaving the portfolio. Also
contributing to the Fund's total return was a relatively high distribution
yield, which helped to balance the negative effect of rising interest rates.
Interest rates were at historic lows throughout most of the period, despite a
rise in the final weeks. Thus, we generally believed it made sense to maintain
existing positions in the portfolio rather than selling them and reinvesting the
proceeds in new bonds offering lower prevailing yields.
During the year, we sought to generate an attractive yield for the Fund and
avoid taking on more credit risk than we believed was desirable for
shareholders. We constantly looked to buy attractive new Minnesota bonds when
they became available, although identifying these opportunities was not always
as easy as we would have liked. We did purchase a variety of bonds in the
hospital sector, which was the Fund's largest weighting and composed more than
18 percent of total net assets as of the August 31, 2003.
- --------------------------------------------------------------------------------
Delaware Tax-Free Minnesota Insured Fund had a total return of +2.75% (Class A
shares at net asset value with distributions reinvested) for the 12 months ended
August 31, 2003. This result outpaced its peer group, the Lipper Minnesota
Municipal Debt Funds Average, which returned +2.60% during the same period. As
an additional point of comparison, the Lehman Brothers Municipal Bond Index
gained +3.14%. The Fund's dividend payments during the last 12 months were
exempt from federal and Minnesota state taxes.*
In part, we attribute the Fund's outperformance relative to its peers to a
slightly shorter-than-average duration. The portfolio, positioned to be somewhat
less sensitive to changes in interest rates, was hurt less than some of our
peers when interest rates rose late in the period.
We generally sought to minimize trading activity in the Fund during the past
year. With interest rates near historic lows, we preferred to hold on to bonds
offering higher coupon payments as long as we could, rather than sell and
reinvest the proceeds at lower prevailing yields. At the same time, bonds being
called from the portfolio sometimes left us with cash to reinvest. When we
bought new securities, we tended to invest further out on the yield curve to
generate added income for our shareholders. This had the effect of increasing
the Fund's duration.
Although the vast majority of the Fund's assets were invested in insured
Minnesota municipal securities, we did seek out select non-insured,
investment-grade opportunities to enhance yield. The healthcare sector was one
area of the market where we found attractive bonds to choose from. For example,
during the period we bought new A-rated Minneapolis bonds issued for Fairview
Health Services. In our opinion, the bond provided the Fund with a healthy yield
while adding only an incremental amount of risk. As of the end of August 2003,
roughly 17 percent of the Fund's total net assets were invested in hospital
bonds, up from approximately 15 percent a year earlier.
- --------------------------------------------------------------------------------
Delaware Tax-Free Minnesota Intermediate Fund had a total return of +3.59%
(Class A shares at net asset value with distributions reinvested) for the
12-month period ended August 31, 2003. This result beat that of its peer group,
the Lipper Other States Intermediate Municipal Debt Funds Average, which
returned +2.22%. As an additional point of comparison, the Lehman Brothers
Five-Year Municipal Bond Index rose +3.70%. The Fund's dividend payments during
the last 12 months were exempt from federal and Minnesota state taxes.*
We attribute the Fund's relative outperformance in part to a barbell portfolio
structure. In other words, the Fund was disproportionately weighted in short and
long bonds, but underweighted in securities due to mature in approximately 10
years. 10-year bonds were generally poor performers during the period, and
de-emphasizing them helped the Fund's results relative to its peers.
We continued to develop a diverse portfolio of intermediate Minnesota municipal
securities and to provide our shareholders with an appropriate balance of yield
potential and risk. In addition, we generally looked to reduce portfolio
turnover. With interest rates near historic lows during most of the period, we
believed it was unwise to sell older bonds offering higher yields and reinvest
the proceeds in newer bonds with lower yields. As interest rates began to rise
late in the period, however, we became increasingly willing to adjust this
approach.
Hospital bonds were among the new investments added to the portfolio during the
reporting period. At 13 percent of the portfolio's total net assets on August
31, 2003, hospitals represented the Fund's second-largest sector weighting, up
from seven percent of total net assets the previous August. Among the new
opportunities we invested in were North Country Health Services bonds, as well
as Allina hospital bonds.
*A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
2
- --------------------------------------------------------------------------------
Delaware Minnesota High-Yield Municipal Bond Fund earned a total return of
+5.33% (Class A shares at net asset value with distributions reinvested) for the
12 months ended August 31, 2003. This result was better than that of the Fund's
peer group, the Lipper High-Yield Municipal Debt Funds Average, which returned
+2.74% during the same time period. As an additional point of comparison, the
Lehman Brothers Municipal Bond Index gained +3.14%. The Fund's dividend payments
during the last 12 months were exempt from federal and Minnesota state taxes.*
During the period, we completed a process begun several years ago of upgrading
the Fund's credit quality. Our goal was to reduce risk and improve the
portfolio's liquidity. To do so, we sought to balance some of the Fund's
lower-rated holdings with a variety of higher-rated securities. We saw the low
interest rate environment as an opportunity to sell some of our riskier
positions, as many investors were eager to accept the risk in exchange for a
generous yield. Although this approach did enable us to accomplish our
risk-reduction goal, it did slightly curtail the Fund's income-generating
ability.
As of the end of the reporting period, multi family housing bonds were the
Fund's largest sector weighting. These represented nearly 23 percent of total
net assets, down from approximately 24 percent the previous year. In the
healthcare sector, we eliminated a number of continuing care facility bonds;
these occupied 23 percent of total net assets on August 31, 2003 -- a 5 percent
decline from the start of the period. Among the Fund's new investments were a
number of hospital bonds, including Allina Health System and Fairview Health
Services. Both of these opportunities had a credit rating of A (S&P) and helped
us in our efforts to reduce portfolio risk.
*A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
3
Delaware
TAX-FREE MINNESOTA FUND
Fund Basics
As of August 31, 2003
- --------------------------------------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current income exempt from federal income tax
and from the Minnesota state personal income tax, as is consistent with
preservation of capital.
- --------------------------------------------------------------------------------
Total Fund Net Assets:
$366.58 million
- --------------------------------------------------------------------------------
Number of Holdings:
132
- --------------------------------------------------------------------------------
Fund Start Date:
February 29, 1984
- --------------------------------------------------------------------------------
Your Fund Managers:
Patrick P. Coyne is a graduate of Harvard University with an MBA from the
University of Pennsylvania's Wharton School. Patrick Coyne joined Delaware
Investments' fixed-income department in 1990. Prior to joining Delaware
Investments, he was a manager of Kidder, Peabody & Co. Inc.'s trading desk, and
specialized in trading high-grade municipal bonds and municipal futures
contracts.
M. L. Conery joined Delaware Investments in January 1997 and holds a bachelor's
degree from Boston University and an MBA in finance from the State University of
New York at Albany. Prior to joining Delaware, M. L. Conery has served as an
investment officer with Travelers Insurance and as a research analyst with CS
First Boston and MBIA Corporation.
- --------------------------------------------------------------------------------
Nasdaq Symbols:
Class A DEFFX
Class B DMOBX
Class C DMOCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 2/29/84)
Excluding Sales Charge +7.75% +5.12% +4.29% +3.80%
Including Sales Charge +7.49% +4.64% +3.34% -0.84%
- --------------------------------------------------------------------------------
Class B (Est. 3/11/95)
Excluding Sales Charge +5.08% +3.51% +3.02%
Including Sales Charge +5.08% +3.26% -0.93%
- --------------------------------------------------------------------------------
Class C (Est. 5/4/94)
Excluding Sales Charge +4.98% +3.51% +3.01%
Including Sales Charge +4.98% +3.51% +2.03%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
Minnesota Fund through August 31, 2001. Performance would have been lower had
the expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free Lehman Brothers
Minnesota Fund Municipal Bond Index
----------------- --------------------
8/31/1993 $9,550 $10,000
8/31/1994 $9,512 $10,014
8/31/1995 $10,176 $10,902
8/31/1996 $10,735 $11,474
8/31/1997 $11,726 $12,534
8/31/1998 $12,754 $13,618
8/31/1999 $12,617 $13,692
8/31/2000 $13,171 $14,614
8/31/2001 $14,360 $16,106
8/31/2002 $15,156 $17,102
8/31/2003 $15,730 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
4
Delaware
TAX-FREE MINNESOTA INSURED FUND
Fund Basics
As of August 31, 2003
- --------------------------------------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current income exempt from federal income tax
and from the Minnesota state personal income tax, as is consistent with
preservation of capital.
- --------------------------------------------------------------------------------
Total Fund Net Assets:
$259.35 million
- --------------------------------------------------------------------------------
Number of Holdings:
86
- --------------------------------------------------------------------------------
Fund Start Date:
May 1, 1987
- --------------------------------------------------------------------------------
Your Fund Managers:
Patrick P. Coyne
M. L. Conery
- --------------------------------------------------------------------------------
Nasdaq Symbols:
Class A MNINX
Class B DVMBX
Class C DVMCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 5/1/87)
Excluding Sales Charge +6.55% +4.94% +4.28% +2.75%
Including Sales Charge +6.25% +4.46% +3.32% -1.91%
- --------------------------------------------------------------------------------
Class B (Est. 3/7/95)
Excluding Sales Charge +4.89% +3.50% +1.89%
Including Sales Charge +4.89% +3.25% -2.03%
- --------------------------------------------------------------------------------
Class C (Est. 5/4/94)
Excluding Sales Charge +4.77% +3.52% +1.97%
Including Sales Charge +4.77% +3.52% +0.99%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
Minnesota Insured Fund through August 31, 2001. Performance would have been
lower had the expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free Lehman Brothers
Minnesota Insured Municipal Bond
Fund Index
----------------- ---------------
8/31/1993 $9,550 $10,000
8/31/1994 $9,474 $10,014
8/31/1995 $10,177 $10,902
8/31/1996 $10,719 $11,474
8/31/1997 $11,606 $12,534
8/31/1998 $12,551 $13,618
8/31/1999 $12,529 $13,692
8/31/2000 $13,110 $14,614
8/31/2001 $14,308 $16,106
8/31/2002 $15,058 $17,102
8/31/2003 $15,473 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
5
Delaware
TAX-FREE MINNESOTA INTERMEDIATE FUND
Fund Basics
As of August 31, 2003
- --------------------------------------------------------------------------------
Fund Objective:
The Fund seeks to provide investors with preservation of capital and,
secondarily, current income exempt from federal income tax and the Minnesota
state personal income tax, by maintaining a dollar-weighted average effective
portfolio maturity of 10 years or less.
- --------------------------------------------------------------------------------
Total Fund Net Assets:
$68.18 million
- --------------------------------------------------------------------------------
Number of Holdings:
58
- --------------------------------------------------------------------------------
Fund Start Date:
October 27, 1985
- --------------------------------------------------------------------------------
Your Fund Managers:
Patrick P. Coyne
M. L. Conery
- --------------------------------------------------------------------------------
Nasdaq Symbols:
Class A DXCCX
Class B DVSBX
Class C DVSCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 10/27/85)
Excluding Sales Charge +5.54% +4.43% +3.98% +3.59%
Including Sales Charge +5.38% +4.15% +3.39% +0.77%
- --------------------------------------------------------------------------------
Class B (Est. 8/15/95)
Excluding Sales Charge +3.74% +3.09% +2.70%
Including Sales Charge +3.74% +3.09% +0.72%
- --------------------------------------------------------------------------------
Class C (Est. 5/4/94)
Excluding Sales Charge +3.92% +3.09% +2.71%
Including Sales Charge +3.92% +3.09% +1.72%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 2.75% and have an annual distribution and
service fee of up to 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 2% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately five years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
Minnesota Intermediate Fund during the periods shown. Performance would have
been lower had the expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free Lehman Brothers
Minnesota Five-year Municipal
Intermediate Fund Bond Index
----------------- -------------------
8/31/1993 $9,725 $10,000
8/31/1994 $9,885 $10,182
8/31/1995 $10,579 $10,987
8/31/1996 $10,942 $11,393
8/31/1997 $11,639 $12,147
8/31/1998 $12,371 $12,950
8/31/1999 $12,354 $13,241
8/31/2000 $12,695 $13,952
8/31/2001 $13,648 $15,225
8/31/2002 $14,515 $16,243
8/31/2003 $15,038 $16,844
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
2.75% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Five-Year Municipal Bond Index is an unmanaged index
that tracks municipal bonds which have an approximate maturity of five years. An
index is unmanaged and does not reflect the costs of operating a mutual fund,
such as the costs of buying, selling, and holding securities. You cannot invest
directly in an index. Past performance is not a guarantee of future results.
6
Delaware
MINNESOTA HIGH-YIELD MUNICIPAL BOND FUND
Fund Basics
As of August 31, 2003
- --------------------------------------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current income exempt from federal income tax
and from the Minnesota state personal income tax, primarily through investment
in medium-and lower-grade municipal obligations.
- --------------------------------------------------------------------------------
Total Fund Net Assets:
$59.91 million
- --------------------------------------------------------------------------------
Number of Holdings:
60
- --------------------------------------------------------------------------------
Fund Start Date:
June 4, 1996
- --------------------------------------------------------------------------------
Your Fund Manager:
Patrick P. Coyne
M. L. Conery
- --------------------------------------------------------------------------------
Nasdaq Symbols:
Class A DVMHX
Class B DVMYX
Class C DVMMX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 6/4/96)
Excluding Sales Charge +5.88% +4.13% +5.33%
Including Sales Charge +5.21% +3.18% +0.58%
- --------------------------------------------------------------------------------
Class B (Est. 6/12/96)
Excluding Sales Charge +5.43% +3.37% +4.55%
Including Sales Charge +5.43% +3.13% +0.57%
- --------------------------------------------------------------------------------
Class C (Est. 6/12/96)
Excluding Sales Charge +5.12% +3.37% +4.54%
Including Sales Charge +5.12% +3.37% +3.54%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Minnesota
High-Yield Municipal Bond Fund during the periods shown. Performance would have
been lower had the expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
June 4, 1996 (Fund's inception) through August 31, 2003
Delaware
Minnesota High- Lehman Brothers
Yield Municipal Municipal Bond
Bond Fund Index
Jun-96 $9,641 $10,000
Aug-96 $9,656 $10,088
Aug-97 $10,672 $11,021
Aug-98 $11,786 $11,974
Aug-99 $11,754 $12,039
Aug-00 $11,791 $12,849
Aug-01 $12,834 $14,161
Aug-02 $13,698 $15,045
Aug-03 $14,431 $15,517
Chart assumes $10,000 invested on June 4, 1996 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The chart also assumes $10,000 invested in the Lehman Brothers
Municipal Bond Index at that month's end, June 30, 1996. After June 30, 1996,
returns plotted on the chart were as of the last day of each month shown. The
Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks
the performance of municipal bonds. An index is unmanaged and does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
7
Statements Delaware Tax-Free Minnesota Fund
OF NET ASSETS August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 98.34%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 2.87%
Minneapolis/St. Paul Metropolitan
Airports Commission Revenue
Series A 5.00% 1/1/22 (AMBAC) $3,440,000 $ 3,457,406
Series A 5.25% 1/1/32 (FGIC) 5,000,000 5,039,000
Series C 5.25% 1/1/32 (FGIC) 2,000,000 2,015,600
-----------
10,512,006
-----------
City General Obligation Bonds - 0.93%
Minneapolis Library 5.00% 12/1/25 1,500,000 1,509,270
St. Peter's Hospital Series A
5.00% 9/1/24 (MBIA) 1,905,000 1,908,905
-----------
3,418,175
-----------
Continuing Care/Retirement Revenue Bonds - 5.28%
Bloomington Housing & Redevelopment
Authority Housing Revenue (Senior
Summerhouse Bloomington Project,
Presbyterian Homes Housing &
Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,222,187
Coon Rapids Senior Housing Revenue
(Epiphany Senior Citizens Project)
6.00% 11/1/28 1,000,000 835,130
Minneapolis Housing Facilities Revenue
(Augustana Chapel View Project)
7.00% 4/1/18 1,000,000 975,000
Minnesota Agriculture & Economic
Development Board Revenue
(Benedictine Health Systems)
5.75% 2/1/29 1,195,000 1,106,618
Minnetonka Housing Facilities Revenue
(Beacon Hill Housing Project,
Presbyterian Homes & Services)
7.70% 6/1/25 3,225,000 3,239,416
Oakdale Revenue (Oak Meadows Project,
Family Resources Development, Inc.)
7.00% 4/1/27 6,800,000 6,502,364
Rochester Multifamily Revenue (Wedum
Shorewood Campus) 6.60% 6/1/36 3,535,000 3,492,474
-----------
19,373,189
-----------
Corporate Backed Revenue Bonds - 4.64%
Cloquet Pollution Control Revenue
(Potlatch Corp. Projects)
5.90% 10/1/26 6,500,000 5,607,160
International Falls Pollution Control
Revenue (Boise Cascade Corp. Project)
5.65% 12/1/22 1,930,000 1,695,312
Sartell Environmental Improvement
Revenue (International Paper)
Series A 5.20% 6/1/27 5,465,000 4,940,305
Seaway Port Authority of Duluth
Industrial Development Dock & Wharf
Revenues (Cargill, Inc. Project)
Series E 6.125% 11/1/14 4,500,000 4,767,030
-----------
17,009,807
-----------
Dedicated Tax & Fees Revenue Bonds - 1.29%
++Minneapolis Community Development
Agency Tax Increment Revenue
6.67% 9/1/09 (MBIA) 5,750,000 4,715,518
-----------
4,715,518
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Escrowed to Maturity Bonds - 0.35%
Southern Minnesota Municipal Power
Agency Supply System Revenue
Series B 5.50% 1/1/15 (AMBAC) $ 990,000 $ 1,013,602
Western Minnesota Municipal Power
Agency Supply Revenue Series A
9.75% 1/1/16 (MBIA) 185,000 278,012
-----------
1,291,614
-----------
Higher Education Revenue Bonds - 4.82%
Minnesota State Higher Education
Facilities Authority Revenue
(College of St. Benedict)
Series 4-G 6.20% 3/1/16 1,000,000 1,028,280
(Hamline University)
Series 4-I 6.00% 10/1/12 1,250,000 1,300,788
(Hamline University)
Series 4-I 6.00% 10/1/16 1,790,000 1,833,103
(St. Catherine College)
Series 5-N1 5.25% 10/1/22 1,500,000 1,495,440
(St. Thomas University)
Series 3-R2 5.60% 9/1/14 1,100,000 1,111,891
(University of Minnesota)
Series A 5.50% 7/1/21 2,000,000 2,192,920
+University of Minnesota,
Inverse Floater ROLs Series II-R-29
8.40% 7/1/21 5,250,000 6,262,935
8.84% 7/1/18 1,920,000 2,446,483
-----------
17,671,840
-----------
Hospital Revenue Bonds - 18.41%
Bemidji Hospital Facilities Revenue
(North County Health Services)
6.05% 9/1/16 600,000 619,374
6.05% 9/1/24 1,825,000 1,864,238
Brainerd Health Care Facilities Revenue
Benedictine Health
(St. Joseph's Hospital)
Series E 6.00% 2/15/12 (Connie Lee) 2,250,000 2,303,303
Duluth Economic Development
Authority Health Care Facilities
Revenue Benedictine Health System
(St. Mary's Hospital) Series C
6.00% 2/15/20 (Connie Lee) 9,450,000 9,668,957
Maplewood Healthcare Facility Revenue
(Health East Project) 5.95% 11/15/06 2,200,000 2,192,806
Marshall Medical Center Gross Revenue
(Weiner Memorial Medical Center
Project) 6.00% 11/1/28 1,000,000 1,000,150
Minneapolis Health Care System
Revenue Series A
(Allina Health System)
5.75% 11/15/32 8,000,000 8,180,000
(Fairview Health Services)
5.625% 5/15/32 10,525,000 10,667,718
Northfield Hospital Revenue
Series C 6.00% 11/1/31 1,500,000 1,486,755
Rochester Health Care Facilities
Revenue (Mayo Foundation)
Series B 5.50% 11/15/27 700,000 708,155
8
Statements Delaware Tax-Free Minnesota Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
+Rochester Health Care Facilities
Revenue (Mayo Foundation),
Inverse Floater ROLs
Series II-R-28-A 8.40% 11/15/27 $ 2,100,000 $ 2,148,909
Series II-R-28-B 8.40% 11/15/27 8,375,000 8,570,054
St. Louis Park Health Care Facilities
Revenue (Healthsystem of Minnesota)
Series A 5.20% 7/1/23 (AMBAC) 10,220,000 10,221,022
St. Paul Housing & Redevelopment
Authority Hospital Revenue
(Health East Project) Series A
5.70% 11/1/15 1,300,000 1,207,115
6.625% 11/1/17 5,775,000 5,755,423
Washington County Housing &
Redevelopment Authority Hospital
Facilities Revenue (Health East Project)
5.50% 11/15/27 1,000,000 845,540
-----------
67,439,519
-----------
Investor Owned Utilities Revenue Bonds - 4.49%
Bass Brook Pollution Control Revenue
(Minnesota Power & Light Co. Project)
6.00% 7/1/22 (MBIA) 750,000 759,975
6.00% 7/1/22 15,500,000 15,703,515
-----------
16,463,490
-----------
Miscellaneous Revenue Bonds - 2.43%
Minneapolis Community Development
Agency Supported Development
Revenue Limited Tax (Common Bond
Fund) Series 2A 7.125% 12/1/05 325,000 332,543
Minnesota Public Facilities Authority
Water Pollution Control Revenue
Series A 5.00% 3/1/20 3,000,000 3,060,900
Richfield Commercial Development
Revenue (Richfield Shoppes Project)
8.375% 10/1/13 2,200,000 2,257,838
St. Cloud Commercial Development
Revenue (Northwest Center
Association Project) 7.50% 8/1/12 3,328,971 3,272,412
-----------
8,923,693
-----------
Multi Family Housing Revenue Bonds - 12.83%
Austin Housing & Redevelopment
Authority Housing Gross Revenue
(Courtyard Residence Project)
Series A 7.25% 1/1/26 500,000 502,875
Brooklyn Center Multifamily Housing
Revenue (Ponds Family Housing
Project-Section 8) 5.90% 1/1/20 1,250,000 1,252,850
Burnsville Multifamily Housing Revenue
(Bridgeway Apartments Project)
7.625% 2/1/24 3,370,000 3,370,169
Carver County Housing & Redevelopment
Authority Multifamily Revenue
(Lake Grace Apartments Project)
Series A 6.00% 7/1/28 1,435,000 1,443,266
Coon Rapids Multifamily Housing
Revenue (Browns Meadow
Manor Project) Series A
4.70% 1/1/38 (FHA) (AMT) 1,000,000 899,700
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multi Family Housing Revenue Bonds (continued)
Dakota County Housing &
Redevelopment Authority Multifamily
Housing Revenue (Affordable Housing
View Pointe Project) 6.125% 11/1/17 $2,475,000 $ 2,322,119
Eden Prairie Multifamily Housing Revenue
(Tanager Creek) Series A
8.05% 6/20/31 (GNMA) 7,605,000 8,170,051
(Windslope Apartments Project)
7.10% 11/1/17 1,585,000 1,588,012
Hopkins Multifamily Housing Revenue
(Hopkins Renaissance Project-
Section 8) 6.375% 4/1/20 1,000,000 1,030,890
Hutchinson Multifamily Housing
Revenue (Evergreen Apartments
Project-Section 8) 5.75% 11/1/28 1,000,000 915,640
Little Canada Multifamily Housing
Revenue (Housing Alternative
Development Co. Project) Series A
6.10% 12/1/17 1,430,000 1,399,241
6.25% 12/1/27 2,900,000 2,784,435
Minneapolis Multifamily Housing Revenue
(Grant Street Apartments Project)
Series A 7.25% 11/1/29 750,000 728,528
(Trinity Apartments-Section 8)
Series A 6.75% 5/1/21 1,940,000 1,890,996
Minneapolis Multifamily Housing
Revenue (Sumner Field) Series A
5.50% 11/20/26 (GNMA) (AMT) 1,045,000 1,061,521
Park Rapids Multifamily Revenue
(The Court Apartments
Project-Section 8) 6.30% 2/1/20 3,020,000 2,812,556
St. Louis Park Multifamily
Housing Revenue
(Knollwood Apartments Project)
6.25% 12/1/28 (FHA) 3,855,000 3,959,315
(Westwind Apartments Project)
5.75% 1/1/29 (GNMA) 3,865,000 3,900,365
St. Paul Housing & Redevelopment
Authority Multifamily Housing
Revenue (900 Como Lake Project)
Series B 7.50% 3/1/26 (FHA) 1,000,000 1,000,000
Stillwater Multifamily Housing Revenue
(Stillwater Cottages Project)
Series A 7.00% 11/1/27 1,000,000 962,740
Wadena Housing & Redevelopment
Authority Multifamily Housing
Revenue (Humphrey Manor East
Project) 6.00% 2/1/19 2,130,000 2,130,639
Washington County Housing &
Redevelopment Authority
Governmental Revenue (Briar Pond)
Series C 7.25% 8/20/34 (GNMA) 985,000 932,834
Wells Housing & Redevelopment
Authority Housing Revenue
(Broadway Apartments Project)
7.00% 1/1/19 920,000 913,910
Willmar Housing & Redevelopment
Authority Multifamily Housing Revenue
(Highland Apartments-Section 8)
5.85% 6/1/19 1,050,000 1,048,814
-----------
47,021,466
-----------
9
Statements Delaware Tax-Free Minnesota Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Municipal Lease Revenue Bonds - 0.97%
Beltrami County Housing &
Redevelopment Authority Revenue
6.20% 2/1/14 $ 1,010,000 $ 1,034,129
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 2,500,000 2,524,725
-----------
3,558,854
-----------
Political Subdivision General Obligation Bonds - 2.31%
Dakota County Capital Improvement
Series A 4.75% 2/1/26 2,250,000 2,196,810
Hennepin County Regional Railroad
Authority 5.00% 12/1/31 4,030,000 4,014,565
+Minnesota State, Inverse Floater
ROLs 6.91% 11/1/18 1,145,000 1,209,944
Ramsey County State Aid Series C
5.00% 2/1/28 1,060,000 1,064,622
-----------
8,485,941
-----------
*Pre-Refunded Bonds - 7.30%
Andover Commercial Development
Revenue (Downtown Center Project)
Series A 7.00% 12/1/12-03 1,000,000 1,034,460
Bloomington Tax Increment Bonds
9.75% 2/1/08-05 500,000 559,205
Faribault Independent School District
#656 6.10% 6/1/10-04 1,000,000 1,037,130
Hennepin County Solid Waste
5.75% 10/1/10-03 4,990,000 5,061,008
Kenyon Wanamingo Independent
School District #2172
6.00% 2/1/18-05 (MBIA) 2,350,000 2,498,403
Minnesota Public Facilities Authority
Water Pollution Control Revenue
Series A 6.25% 3/1/16-05 4,400,000 4,726,568
North St. Paul Maplewood Independent
School District #622 Series A
7.10% 2/1/25-05 (FSA) 10,000,000 10,823,099
Southern Minnesota Municipal Power
Agency Supply System Revenue
Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,023,910
-----------
26,763,783
-----------
Public Power Revenue Bonds - 8.70%
Chaska Electric Revenue Series A
6.00% 10/1/25 1,000,000 1,039,970
Northern Minnesota Municipal Power
Agency Electric System Revenue
++Series A 5.85% 1/1/09 (AMBAC) 3,815,000 3,198,305
Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,498,450
Rochester Electric Utilities Revenue
5.25% 12/1/30 4,915,000 4,948,471
Shakopee Public Utilities Commission
Public Utilities Revenue
5.125% 2/1/26 (MBIA) 1,000,000 1,005,270
Southern Minnesota Municipal Power
Agency Supply System Revenue Series A
5.00% 1/1/12 (AMBAC) 3,000,000 3,236,160
5.25% 1/1/15 (AMBAC) 2,010,000 2,195,885
5.25% 1/1/16 (AMBAC) 2,500,000 2,724,175
++5.663% 1/1/19 (MBIA) 8,210,000 3,918,879
++6.136% 1/1/21 (MBIA) 3,000,000 1,265,610
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Public Power Revenue Bonds (continued)
+Southern Minnesota Municipal Power
Agency Supply System Revenue,
Inverse Floater ROLs
Series II-R-189 7.44% 1/1/14 (AMBAC) $2,000,000 $ 2,368,400
Series II-R-189 7.44% 1/1/15 (AMBAC) 2,950,000 3,495,603
-----------
31,895,178
-----------
School District General Obligation Bonds - 5.91%
Bloomington Independent School
District #271 Series B 5.00% 2/1/17 5,300,000 5,471,560
++Farmington Independent School District
#192 Capital Appreciation Series B
5.424% 2/1/20 (FSA) 1,650,000 692,885
5.34% 2/1/21 (FSA) 1,500,000 592,815
++Lakeville Independent School
District #194 Capital Appreciation
Series B 5.45% 2/1/19 (FSA) 8,000,000 3,559,280
++Mahtomedi Independent School
District #832 Capital Appreciation
Series B 5.90% 2/1/14 (MBIA) 1,540,000 967,505
+Rockford Independent School
District #883, Inverse Floater ROLs
Series II-R-30-A 8.62% 2/1/23 (FSA) 3,510,000 3,950,786
++Rosemont Independent School
District #196 Capital Appreciation
Series B
5.931% 4/1/11 (FSA) 2,600,000 1,920,750
5.961% 4/1/12 (FSA) 1,850,000 1,290,227
6.008% 4/1/13 (FSA) 1,915,000 1,266,351
++Sartell Independent School District #748
Capital Appreciation Series B
5.976% 2/1/13 (MBIA) 540,000 358,835
6.10% 2/1/15 (MBIA) 1,075,000 631,993
6.15% 2/1/16 (MBIA) 1,750,000 967,890
-----------
21,670,877
-----------
Single Family Housing Revenue Bonds - 2.53%
Minnesota State Housing Finance
Agency Single Family Mortgage
Series A 4.30% 7/1/22 (AMT) 3,160,000 2,844,032
Series A 5.30% 7/1/19 895,000 909,562
Series B 5.35% 1/1/33 (AMT) 4,000,000 3,983,239
Series J 5.90% 7/1/28 (AMT) 1,070,000 1,093,583
St. Louis Park Residential Mortgage
Revenue Series A
7.25% 4/20/23 (GNMA) 128,000 128,095
St. Paul Housing & Redevelopment
Authority Single Family Mortgage
Revenue Series C
6.90% 12/1/21 (FNMA) 325,000 325,702
-----------
9,284,213
-----------
State General Obligation Bonds - 4.00%
Minnesota State
5.00% 11/1/20 (FSA) 8,175,000 8,354,768
5.00% 8/1/21 2,400,000 2,445,768
+Minnesota State, Inverse Floater ROLs
6.91% 11/1/16 2,420,000 2,648,787
6.91% 11/1/17 1,135,000 1,220,908
-----------
14,670,231
-----------
10
Statements Delaware Tax-Free Minnesota Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Tax Increment/Special Assessment Bonds - 2.35%
Minneapolis Tax Increment
Series E 5.00% 3/1/13 $6,265,000 $ 6,595,541
Rochester Tax Increment 6.50% 12/1/04 1,000,000 1,013,350
St. Paul Housing & Redevelopment
Authority Tax Increment
(Upper Landing Project) Series A
6.80% 3/1/29 1,000,000 988,660
------------
8,597,551
------------
Territorial General Obligation Bonds - 1.12%
Puerto Rico Commonwealth Public
Improvement Series A
5.125% 7/1/30 (FSA) 1,000,000 1,011,640
5.125% 7/1/31 2,000,000 1,979,380
5.50% 7/1/19 (MBIA) 1,000,000 1,111,740
------------
4,102,760
------------
Territorial Revenue Bonds - 2.75%
Puerto Rico Electric Power Authority
Revenue Series X 5.50% 7/1/25 3,080,000 3,086,160
+Puerto Rico Electric Power Authority
Revenue, Inverse Floater ROLs
5.93% 7/1/19 (FSA) 3,050,000 3,005,287
Puerto Rico Public Buildings Authority
Guaranteed Government Facilities
Revenue Series D 5.25% 7/1/36 4,000,000 3,979,240
------------
10,070,687
------------
Water & Sewer Revenue Bonds - 2.06%
Minnesota Public Facilities Authority
Water Pollution Control Revenue
Series B 4.75% 3/1/19 2,000,000 2,008,640
+Minnesota Public Facilities Authority
Water Pollution Control Revenue,
Inverse Floater ROLs Series II-R-31
6.83% 3/1/14 5,000,000 5,551,450
------------
7,560,090
------------
Total Municipal Bonds
(cost $348,130,214) 360,500,482
------------
Total Market Value of Securities - 98.34%
(cost $348,130,214) 360,500,482
Receivables and Other Assets
Net of Liabilities - 1.66% 6,083,964
------------
Net Assets Applicable to 29,440,770
Shares Outstanding - 100.00% $366,584,446
============
Net Asset Value - Delaware Tax-Free Minnesota
Fund Class A ($340,029,385 / 27,310,571 Shares) $12.45
------
Net Asset Value - Delaware Tax-Free Minnesota
Fund Class B ($16,394,097 / 1,315,825 Shares) $12.46
------
Net Asset Value - Delaware Tax-Free Minnesota
Fund Class C ($10,160,964 / 814,374 Shares) $12.48
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $349,128,010
Distributions in excess of net investment income (22,418)
Accumulated net realized gain on investments 5,108,586
Net unrealized appreciation of investments 12,370,268
------------
Total net assets $366,584,446
============
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
+Inverse Floater Bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2003.
++Zero Coupon Bond. The interest rate shown is the yield at the time of
purchase.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
Connie Lee - Insured by the College Construction Insurance Association
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
ROLs - Residual Option Longs
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Minnesota Fund
Net asset value Class A (A) $12.45
Sales charge (4.50% of offering price,
or 4.74% of amount invested per share) (B) 0.59
------
Offering price $13.04
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
11
Statements Delaware Tax-Free Minnesota Insured Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 97.44%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 4.55%
Minneapolis/St. Paul Metropolitan
Airports Commission Revenue
Series A 5.00% 1/1/28 (MBIA) $ 3,000,000 $ 2,995,620
Series A 5.125% 1/1/25 (FGIC) 100,000 100,680
Series C 5.125% 1/1/20 (FGIC) 2,000,000 2,049,240
Series C 5.25% 1/1/32 (FGIC) 6,595,000 6,646,441
-----------
11,791,981
-----------
City General Obligation Bonds - 0.77%
Moorhead Series B 5.00% 2/1/33 (MBIA) 2,000,000 1,992,280
-----------
1,992,280
-----------
Corporate-Backed Revenue Bonds - 0.63%
Sartell Environmental Improvement
Revenue (International Paper)
Series A 5.20% 6/1/27 1,800,000 1,627,182
-----------
1,627,182
-----------
Escrowed to Maturity Bonds - 15.64%
Dakota/Washington Counties Housing
& Redevelopment Authority Anoka
Single Family Residential Mortgage
Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 12,530,700
Dakota/Washington Counties Housing
& Redevelopment Authority
Bloomington Single Family
Residential Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 549,873
8.375% 9/1/21 (GNMA) (FHA) (AMT) 14,115,000 19,819,435
Southern Minnesota Municipal Power
Agency Supply Revenue Series A
5.75% 1/1/18 (AMBAC) 670,000 686,020
5.75% 1/1/18 (MBIA) 3,790,000 3,880,619
Western Minnesota Municipal Power
Agency Supply Revenue Series A
6.60% 1/1/10 2,000,000 2,298,140
9.75% 1/1/16 (MBIA) 530,000 796,468
-----------
40,561,255
-----------
Higher Education Revenue Bonds - 3.62%
Minnesota State Colleges & Universities
Revenue Series A 5.00% 10/1/22 (FSA) 5,135,000 5,185,220
Minnesota State Higher Education
Facilities Authority Revenue
(St. Catherine College)
Series 5-N1 5.00% 10/1/18 2,200,000 2,191,838
St. Cloud Housing & Redevelopment
Authority Revenue (State University
Foundation Project) 5.00% 5/1/23 2,000,000 1,998,620
-----------
9,375,678
-----------
Hospital Revenue Bonds - 16.72%
Bemidji Health Care Facilities First
Mortgage Revenue
(North Country Health Services)
5.00% 9/1/31 (RADIAN) 1,500,000 1,483,275
Brainerd Health Care Facilities Revenue
Benedictine Health
(St. Joseph's Hospital) Series E
6.00% 2/15/12 (Connie Lee) 1,500,000 1,535,535
6.00% 2/15/20 (Connie Lee) 2,000,000 2,046,340
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
Duluth Economic Development
Authority Health Care Facilities
Revenue Benedictine Health System
(St. Mary's Hospital) Series C
6.00% 2/15/20 (Connie Lee) $ 1,300,000 $ 1,330,121
Minneapolis Health Care Facilities
Revenue (Fairview Hospital &
Healthcare Service) Series A
5.25% 11/15/19 (MBIA) 2,250,000 2,267,865
Minneapolis Health Care System
Revenue Series A
(Allina Health System)
5.75% 11/15/32 11,300,000 11,554,249
(Fairview Health Services)
5.625% 5/15/32 6,400,000 6,486,784
Minneapolis/St. Paul Housing &
Redevelopment Authority Health
Care Systems Revenue Series A
(Children's Health Care Series)
5.50% 8/15/25 (FSA) 2,250,000 2,312,528
(Healthspan Health System)
5.00% 11/15/13 (AMBAC) 6,490,000 6,665,360
+Minnesota Agriculture & Economic
Development Board Revenue
(Fairview Hospital & Healthcare Service),
Inverse Floater ROLs Series II-R-33
8.84% 11/15/26 (MBIA) 5,125,000 5,662,613
St. Paul Housing & Redevelopment
Authority Hospital Revenue
(St. Paul/Ramsey Medical Center
Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,023,220
Willmar (Rice Memorial Hospital
Project) 5.00% 2/1/25 (FSA) 1,000,000 1,007,060
-----------
43,374,950
-----------
Miscellaneous Revenue Bonds - 0.78%
Minneapolis Community Development
Agency Supported Development
Revenue Series G-3 5.45% 12/1/31 2,000,000 2,018,200
-----------
2,018,200
-----------
Multi Family Housing Revenue Bonds - 7.45%
Chaska Waters Edge Multifamily Revenue
Series A 7.30% 1/20/30 (GNMA) 3,257,000 3,479,974
Eagan Multifamily Revenue
(Woodridge Apartments)
5.90% 8/1/20 (GNMA) 1,000,000 1,040,070
Hopkins Multifamily Revenue
(Auburn Apartments Project)
Series A 8.05% 6/20/31 (GNMA) 3,790,000 4,066,480
Minneapolis Multifamily Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,506,450
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 4,000,000 3,909,560
Minneapolis/St. Paul Housing Finance
Board Revenue (Trinity Apartments)
Series A 8.125% 12/1/14
(GNMA) (FHA) (AMT) 25,000 25,016
12
Statements Delaware Tax-Free Minnesota Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multi Family Housing Revenue Bonds (continued)
Minnesota State Housing Finance
Agency Rental Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) $ 1,882,000 $ 1,935,788
Washington County Housing &
Redevelopment Authority Revenue
(Woodland Park Apartments Project)
4.70% 10/1/32 2,425,000 2,276,566
White Bear Lake Multifamily Revenue
(Lake Square) Series A
5.875% 2/1/15 (FHA) 1,055,000 1,089,224
-----------
19,329,128
-----------
Municipal Lease Revenue Bonds - 3.87%
Hopkins Housing & Redevelopment
Authority Public Works and Fire Station
Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,216,728
Minneapolis Special School
District #001 Series A
5.00% 2/1/18 (FSA) 1,545,000 1,596,958
5.00% 2/1/19 (FSA) 1,535,000 1,575,800
5.00% 2/1/20 (FSA) 1,690,000 1,723,090
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.25% 12/1/27 3,840,000 3,921,831
-----------
10,034,407
-----------
Political Subdivision General Obligation Bonds - 1.23%
Dakota County Community Agency
Governmental Housing Development
5.00% 1/1/21 1,275,000 1,291,830
Western Lake Superior Sanitation
District Series A
6.00% 10/1/08 (MBIA) (AMT) 400,000 431,112
6.10% 10/1/09 (MBIA) (AMT) 425,000 461,690
6.20% 10/1/10 (MBIA) (AMT) 450,000 489,803
6.20% 10/1/11 (MBIA) (AMT) 475,000 511,428
-----------
3,185,863
-----------
*Pre-Refunded Bonds - 8.62%
Becker Wastewater Treatment Facility
Series A 5.95% 2/1/14-04 (MBIA) 500,000 510,510
Duluth Economic Development Authority
Health Care Facilities Revenue (Duluth
Clinic) 6.30% 11/1/22-04 (AMBAC) 1,060,000 1,124,490
Hennepin County Solid Waste
5.75% 10/1/10-03 (MBIA) 1,800,000 1,825,614
North St. Paul Maplewood Independent
School District #622 Series A
7.10% 2/1/19-05 (MBIA) 5,935,000 6,423,510
7.10% 2/1/25-05 (FSA) 11,525,000 12,473,623
-----------
22,357,747
-----------
Public Power Revenue Bonds - 9.05%
Northern Municipal Power Agency
Electric System Revenue Series B
4.75% 1/1/20 (AMBAC) 1,100,000 1,099,318
+Northern Municipal Power Agency
Electric System Revenue,
Inverse Floater ROLs Series II-R-32
7.97% 1/1/13 (FSA) 4,585,000 5,279,903
Shakopee Public Utilities Commission
Public Utilities Revenue
5.125% 2/1/26 (MBIA) 1,850,000 1,859,750
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Public Power Revenue Bonds (continued)
Southern Minnesota Municipal Power
Agency Supply System Revenue
Series A
5.00% 1/1/12 (AMBAC) $2,205,000 $ 2,378,578
5.25% 1/1/15 (AMBAC) 1,350,000 1,474,848
5.25% 1/1/16 (AMBAC) 5,000,000 5,448,349
+Southern Minnesota Municipal Power
Agency Supply System Revenue
Inverse Floater ROLs II-R-189-B
7.44% 1/1/16 (AMBAC) 2,500,000 2,948,350
Western Minnesota Municipal Power
Agency Supply System
5.00% 1/1/30 (MBIA) 3,000,000 2,984,580
-----------
23,473,676
-----------
School District General Obligation Bonds - 16.92%
Big Lake Independent School
District #727 Series A
5.00% 2/1/17 (FSA) 1,040,000 1,072,490
5.00% 2/1/20 (FSA) 1,000,000 1,014,490
Centennial Independent School District
#012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,312,710
Morris Independent School District
#769 5.00% 2/1/24 (MBIA) 4,875,000 4,891,185
Mounds View Independent School
District #621
5.00% 2/1/20 (MBIA) 2,970,000 3,028,153
5.375% 2/1/24 (FGIC) 6,170,000 6,359,973
Osseo Independent School District
#279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,620,087
Robbinsdale Independent School District
#281 5.00% 2/1/21 (FSA) 1,310,000 1,328,379
+Rockford Independent School
District #883, Inverse Floater ROLs
Series II-R-30-B 8.57% 2/1/21 (FSA) 1,605,000 1,823,136
++Rosemount Independent School
District #196 Series B
5.80% 4/1/09 (FSA) 1,860,000 1,545,660
5.85% 4/1/10 (FSA) 2,240,000 1,755,891
++Sauk Rapids Independent School
District #047 Series B
5.983% 2/1/15 (FSA) 2,700,000 1,510,191
6.083% 2/1/17 (FSA) 2,245,000 1,098,501
+South Washington County Independent
School District #833,
Inverse Floater ROLs
Series II-R-34-A 8.57% 2/1/20 (MBIA) 3,440,000 3,946,299
Series II-R-34-B 8.57% 2/1/21 (MBIA) 3,645,000 4,140,392
St. Michael Independent School
District #885
5.00% 2/1/20 (FSA) 1,970,000 2,008,573
5.00% 2/1/27 (FSA) 3,435,000 3,440,256
-----------
43,896,366
-----------
Single Family Housing Revenue Bonds - 1.02%
Dakota County Housing &
Redevelopment Authority Single
Family Mortgage Revenue
5.85% 10/1/30 (GNMA/FNMA) (AMT) 2,090,000 2,119,971
6.70% 10/1/17 (FNMA) 515,000 517,101
-----------
2,637,072
-----------
13
Statements Delaware Tax-Free Minnesota Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
State General Obligation Bonds - 2.50%
Minnesota State 5.00% 11/1/20 (FSA) $5,500,000 $ 5,620,945
+Minnesota State, Inverse Floater ROLs
6.91% 11/1/17 800,000 860,552
-----------
6,481,497
-----------
Tax Increment/Special Assessment Bonds - 2.51%
Becker Tax Increment Series D
6.25% 8/1/15 (MBIA) (AMT) 6,300,000 6,520,374
-----------
6,520,374
-----------
Territorial General Obligation Bonds - 0.21%
Puerto Rico Commonwealth Public
Improvement Series A
5.50% 7/1/19 (MBIA) 500,000 555,870
-----------
555,870
-----------
Territorial Revenue Bonds - 1.35%
++Puerto Rico Commonwealth Highway &
Transportation Authority
Transportation Revenue Series A
5.207% 7/1/18 (AMBAC) 5,000,000 2,509,500
Puerto Rico Electric Power Authority
Power Revenue Series GG
4.75% 7/1/21 (FSA) 1,000,000 1,000,860
-----------
3,510,360
-----------
Total Municipal Bonds
(cost $240,718,367) 252,723,886
-----------
Number of
Shares
- --------------------------------------------------------------------------------
Short-Term Investments - 2.56%
- --------------------------------------------------------------------------------
Federated Minnesota Municipal Cash Trust 6,628,366 6,628,366
------------
Total Short-Term Investments
(cost $6,628,366) 6,628,366
------------
Total Market Value of Securities - 100.00%
(cost $247,346,733) 259,352,252
Liabilities Net of Receivables and
Other Assets - 0.00% (824)
------------
Net Assets Applicable to 24,147,736
Shares Outstanding - 100.00% $259,351,428
============
Net Asset Value - Delaware Tax-Free
Minnesota Insured Fund Class A
($231,738,082 / 21,576,962 Shares) $10.74
------
Net Asset Value - Delaware Tax-Free
Minnesota Insured Fund Class B
($15,646,754 / 1,457,975 Shares) $10.73
------
Net Asset Value - Delaware Tax-Free
Minnesota Insured Fund Class C
($11,966,592 / 1,112,799 Shares) $10.75
------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $247,661,352
Accumulated net realized loss on investments (315,443)
Net unrealized appreciation of investments 12,005,519
------------
Total net assets $259,351,428
============
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2003.
++Zero coupon bond. The interest rate shown is the yield at the time of
purchase.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
Connie Lee - Insured by the College Construction Insurance Association
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
ROLs - Residual Option Longs
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Minnesota Insured Fund
Net asset value Class A (A) $10.74
Sales charge (4.50% of offering price,
or 4.75% of amount invested per share) (B) 0.51
------
Offering price $11.25
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
14
Statements Delaware Tax-Free Minnesota Intermediate Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 96.99%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 1.20%
Minneapolis/St. Paul Metropolitan
Airports Commission Series 14
5.50% 1/1/11 (AMT) $ 750,000 $ 815,678
-----------
815,678
-----------
Continuing Care/Retirement Revenue Bonds - 4.02%
Minneapolis Health Care Facilities
Revenue (Jones-Harrison Residence
Project) 5.90% 10/1/16 125,000 120,116
Oakdale Elderly Housing Revenue
(PHM/Oakdale, Inc. Project)
5.75% 3/1/18 1,400,000 1,360,072
Oakdale Revenue
(Oak Meadows Project)
6.20% 4/1/07 150,000 153,062
6.30% 4/1/08 260,000 265,179
6.50% 4/1/10 295,000 300,387
Rochester Nursing Home &
Multifamily Housing Revenue
(Samaritan Bethany, Inc.) Series A
6.00% 5/1/04 300,000 297,120
6.10% 5/1/05 250,000 246,295
-----------
2,742,231
-----------
Escrowed to Maturity Bonds - 6.06%
Duluth Gross Revenue (Duluth
Entertainment) 7.00% 12/1/03 440,000 446,741
Metropolitan Council, Minneapolis/
St. Paul Area Sports Facilities Revenue
(Hubert H. Humphrey Metrodome)
6.00% 10/1/09 3,520,000 3,684,701
-----------
4,131,442
-----------
Higher Education Revenue Bonds - 3.98%
Minnesota State Higher Education
Facilities Authority Revenue
(College of Art & Design)
Series 5-D 6.625% 5/1/20 1,000,000 1,070,950
(St. Catherine College)
Series 5-N1 5.375% 10/1/32 500,000 497,785
University of Minnesota Series A
5.75% 7/1/16 1,000,000 1,142,390
-----------
2,711,125
-----------
Hospital Revenue Bonds - 13.42%
Bemidji Health Care Facilities First
Mortgage Revenue
(North Country Health Services)
5.00% 9/1/24 (RADIAN) 1,240,000 1,206,210
Minneapolis Health Care System Revenue
(Allina Health System)
Series A 5.75% 11/15/32 3,000,000 3,067,500
(Fairview Health Services)
Series A 5.625% 5/15/32 2,750,000 2,787,290
St. Paul Housing & Redevelopment
Authority Hospital Revenue (Health
East Project) Series B 5.85% 11/1/17 1,160,000 1,074,438
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 1,000,000 1,013,090
-----------
9,148,528
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Investor Owned Utilities Revenue Bonds - 3.71%
Eveleth Industrial Development Revenue
(Minnesota Power & Light Co. Project)
Series A 6.125% 1/1/04 $2,500,000 $2,532,400
-----------
2,532,400
-----------
Miscellaneous Revenue Bonds - 5.48%
Minneapolis Art Center Facilities
Revenue (Walker Art Center Project)
5.125% 7/1/21 2,250,000 2,284,965
Minneapolis Community Development
Agency Supported Revenue
Common Bond Fund Series 4
6.20% 6/1/17 (AMT) 1,055,000 1,084,930
Richfield Shoppes Commercial
Development Revenue (Richfield
Shoppes Project) 7.50% 10/1/04 365,000 367,967
-----------
3,737,862
-----------
Multi Family Housing Revenue Bonds - 6.59%
Minneapolis Multifamily Revenue
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 1,000,000 977,390
(Trinity Apartments-Section 8)
Series A 6.75% 5/1/21 2,775,000 2,704,904
Park Rapids Multifamily Revenue
(The Court Apartments Project-
Section 8) 6.05% 8/1/12 845,000 808,504
-----------
4,490,798
-----------
Municipal Lease Revenue Bonds - 5.95%
Beltrami County Housing &
Redevelopment Authority Revenue
5.90% 2/1/08 355,000 368,983
6.00% 2/1/09 380,000 393,532
6.00% 2/1/10 405,000 417,320
6.10% 2/1/11 430,000 442,113
Edina Housing & Redevelopment
Authority Public Project Revenue
5.125% 2/1/19 1,000,000 1,012,920
Hibbing Economic Development
Authority Revenue (Hibbing Lease
Obligation) 6.10% 2/1/08 650,000 683,820
St. Paul Port Authority Lease Revenue
(Robert Street Site) 5.25% 12/1/27 725,000 740,450
-----------
4,059,138
-----------
Political Subdivision General Obligation Bonds - 8.61%
Dakota County Series A
4.75% 2/1/17 1,000,000 1,020,340
5.00% 2/1/13 1,125,000 1,213,841
Hennepin County
Series A 4.50% 12/1/17 1,000,000 1,003,320
Series B 4.75% 12/1/14 1,000,000 1,040,060
Ramsey County Series B 5.25% 2/1/11 1,445,000 1,596,277
-----------
5,873,838
-----------
*Pre-Refunded Bonds - 2.64%
Andover Commercial Development
Revenue (Downtown Center Project)
Series A 6.50% 12/1/06-03 1,480,000 1,529,121
Duluth Gross Revenue (Duluth
Entertainment) 7.30% 12/1/06-04 250,000 273,535
-----------
1,802,656
-----------
15
Statements Delaware Tax-Free Minnesota Intermediate Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Public Power Revenue Bonds - 5.99%
Southern Minnesota Municipal Power
Agency Supply System
Revenue Series A
5.00% 1/1/12 (AMBAC) $1,000,000 $ 1,078,720
5.25% 1/1/15 (AMBAC) 1,000,000 1,092,480
5.25% 1/1/16 (AMBAC) 775,000 844,494
Western Minnesota Municipal Power
Agency Revenue Series B
5.00% 1/1/15 (MBIA) 1,000,000 1,069,200
-----------
4,084,894
-----------
School District General Obligation Bonds - 17.81%
Big Lake Independent School
District #727 Series C
5.00% 2/1/16 (FSA) 1,180,000 1,229,312
5.00% 2/1/17 (FSA) 1,000,000 1,035,370
Centennial Independent School
District #012 Series A
5.00% 2/1/18 (FSA) 1,000,000 1,033,630
5.00% 2/1/20 (FSA) 750,000 764,685
Hopkins Independent School
District #270 5.125% 2/1/17 (FGIC) 2,000,000 2,100,480
Moorhead Independent School
District #152 5.00% 4/1/10 (FGIC) 2,585,000 2,821,657
Osseo Independent School
District #279 Series A
5.00% 2/1/21 (FSA) 1,500,000 1,521,045
South Washington County Independent
School District #833 Series B
5.00% 2/1/16 (FSA) 1,560,000 1,634,740
-----------
12,140,919
-----------
Single Family Housing Revenue Bonds - 1.51%
Minnesota State Housing Finance
Agency Single Family Housing
Series J 5.90% 7/1/28 (AMT) 980,000 1,001,599
St. Paul Housing & Redevelopment
Authority Single Family Mortgage
Revenue Series C
6.90% 12/1/21 (FNMA) 25,000 25,054
-----------
1,026,653
-----------
State General Obligation Bonds - 8.56%
Minnesota State 5.00% 8/1/21 3,050,000 3,108,164
+Minnesota State, Inverse Floater ROLs
6.91% 11/1/16 2,000,000 2,189,080
6.91% 11/1/17 500,000 537,845
-----------
5,835,089
-----------
Territorial Revenue Bonds - 1.46%
+Puerto Rico Electric Power Authority
Revenue, Inverse Floater ROLs
5.93% 7/1/19 (FSA) 500,000 492,670
Puerto Rico Public Buildings Authority
Revenue Series D 5.25% 7/1/27 500,000 500,770
-----------
993,440
-----------
Total Municipal Bonds (cost $64,903,153) 66,126,691
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Short-Term Investments - 3.30%
- --------------------------------------------------------------------------------
Federated Minnesota Municipal Cash Trust 2,252,959 $ 2,252,959
-----------
Total Short-Term Investments
(cost $2,252,959) 2,252,959
-----------
Total Market Value of Securities - 100.29%
(cost $67,156,112) 68,379,650
Liabilities Net of Receivables and
Other Assets - (0.29%) (198,583)
-----------
Net Assets Applicable to 6,415,078
Shares Outstanding - 100.00% $68,181,067
-----------
Net Asset Value - Delaware Tax-Free Minnesota
Intermediate Fund Class A
($57,635,498 / 5,424,384 Shares) $10.63
------
Net Asset Value - Delaware Tax-Free Minnesota
Intermediate Fund Class B
($4,001,570 / 375,725 Shares) $10.65
------
Net Asset Value - Delaware Tax-Free Minnesota
Intermediate Fund Class C
($6,543,999 / 614,969 Shares) $10.64
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $69,064,649
Undistributed net investment income 1,470
Accumulated net realized loss on investments (2,108,590)
Net unrealized appreciation of investments 1,223,538
-----------
Total net assets $68,181,067
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2003.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by Financial Guaranty Insurance Company
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN -- Insured by Radian Asset Assurance
ROLs - Residual Option Longs
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Minnesota Intermediate Fund
Net asset value Class A (A) $10.63
Sales charge (2.75% of offering price,
or 2.82% of amount invested per share) (B) 0.30
------
Offering price $10.93
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
16
Statements Delaware Minnesota High-Yield Municipal Bond Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 98.05%
- --------------------------------------------------------------------------------
Airline Revenue Bonds - 1.39%
Minneapolis/St. Paul Metropolitan
Airports Commission Special Facilities
Revenue (Northwest Airlines, Inc.
Project) Series A 7.00% 4/1/25 (AMT) $1,000,000 $ 830,120
-----------
830,120
-----------
Airport Revenue Bonds - 3.33%
Minneapolis/St. Paul Metropolitan
Airports Commission Revenue
5.00% 1/1/28 Series A (MBIA) 2,000,000 1,997,080
-----------
1,997,080
-----------
Continuing Care/Retirement Revenue Bonds - 22.52%
Buhl Nursing Home Revenue (Forest
Health Services Project) Series A
6.75% 8/1/33 1,000,000 972,420
Coon Rapids Senior Housing Revenue
(Epiphany Senior Citizens Project)
6.00% 11/1/28 2,455,000 2,050,244
Mankato Health Facilities Revenue
(Mankato Lutheran Homes Project)
Series A 6.875% 10/1/26 300,000 295,038
Minneapolis Health Care Facility Revenue
(Jones-Harrison Residence Project)
6.00% 10/1/27 1,000,000 910,280
Minnesota Agriculture & Economic
Development Board Revenue
(Benedictine Health Systems)
5.75% 2/1/29 1,000,000 926,040
Minnetonka Housing Facilities Revenue
(Beacon Hill Senior Housing Project,
Presbyterian Homes & Services)
7.55% 6/1/19 200,000 201,638
Moorhead Economic Development
Authority Multifamily Revenue
(Eventide Lutheran Home Project)
Series B 6.00% 6/1/18 870,000 871,897
Northfield Health Care Facilities Revenue
(Northfield Retirement Center Project)
Series A 6.00% 5/1/28 1,405,000 1,315,473
Oakdale Elderly Housing Revenue
(PHM/Oakdale, Inc. Project)
6.00% 3/1/28 1,800,000 1,703,448
Perham Hospital District Senior
Congregate Housing Facilities
Revenue (Briarwood Project)
6.25% 11/1/22 620,000 553,009
Rochester Multifamily Revenue
(Wedum Shorewood Campus)
6.60% 6/1/36 1,000,000 987,970
Shoreview Elderly Housing Revenue
(PHM/Shoreview, Inc. Project)
6.15% 12/1/33 1,250,000 1,216,750
Twin Valley Congregate Housing Revenue
(Living Options, Inc. Project)
5.95% 11/1/28 1,825,000 1,496,135
-----------
13,500,342
-----------
Corporate-Backed Revenue Bonds - 5.95%
Cloquet Pollution Control Revenue
(Potlatch Corp. Projects)
5.90% 10/1/26 1,700,000 1,466,488
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Corporate-Backed Revenue Bonds (continued)
International Falls Solid Waste Disposal
Revenue (Boise Cascade Corp. Project)
6.85% 12/1/29 (AMT) $1,000,000 $ 985,370
Red Wing Industrial Development
Revenue (Kmart Corp. Project)
5.50% 7/1/08 300,000 205,875
Sartell Environmental Improvement
Revenue (International Paper)
Series A 5.20% 6/1/27 1,000,000 903,990
-----------
3,561,723
-----------
Higher Education Revenue Bonds - 6.56%
Minnesota State Higher Education
Facilities Authority Revenue
(College of Art & Design)
Series 5-D 6.75% 5/1/26 500,000 535,185
(St. Catherine College)
Series 5-N1 5.375% 10/1/32 2,500,000 2,488,925
(St. Mary's College)
Series 3-Q 6.15% 10/1/23 900,000 909,333
-----------
3,933,443
-----------
Hospital Revenue Bonds - 12.55%
Bermidji Health Care Facilities First
Meeting Revenue
(North Country Health Services)
5.00% 9/1/31 (RADIAN) 1,100,000 1,087,735
Minneapolis Health Care System
Revenue Series A
(Allina Health System)
5.75% 11/15/32 2,500,000 2,556,250
(Fairview Health Services)
5.625% 5/15/32 2,450,000 2,483,222
St. Paul Housing & Redevelopment
Authority Hospital Revenue
(Health East Project)
Series A 5.70% 11/1/15 800,000 742,840
Series B 5.85% 11/1/17 250,000 231,560
Series B 6.625% 11/1/17 425,000 423,559
-----------
7,525,166
-----------
Investor Owned Utilities Revenue Bonds - 2.54%
Bass Brook Pollution Control Revenue
(Minnesota Power & Light Co.
Project) 6.00% 7/1/22 1,500,000 1,519,695
-----------
1,519,695
-----------
Multi Family Housing Revenue Bonds - 22.92%
Brooklyn Center Multifamily Housing
Revenue (Four Courts Apartments
Project) Series A 7.50% 6/1/25 (AMT) 370,000 344,196
Chanhassen Multifamily Housing
Revenue (Heritage Park Project-
Section 8) 6.20% 7/1/30 (FHA) (AMT) 300,000 304,452
Chaska Multifamily Housing Revenue
(West Suburban Housing Partners
Project) 5.875% 3/1/31 (AMT) 1,000,000 885,580
Coon Rapids Multifamily Housing
Revenue (Browns Meadow
Manor Project) Series A
4.70% 1/1/38 (FHA) (AMT) 1,000,000 899,700
17
Statements Delaware Minnesota High-Yield Municipal Bond Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multi Family Housing Revenue Bonds (continued)
Hutchinson Multifamily Housing
Revenue (Evergreen Apartments
Project-Section 8) 5.75% 11/1/28 $2,200,000 $ 2,014,408
Little Canada Multifamily Housing
Revenue (Housing Alternative
Development Co. Project)
Series A 6.25% 12/1/27 1,250,000 1,200,188
Minneapolis Multifamily
Housing Revenue
(Grant Street Apartments Project)
Series A 7.25% 11/1/29 2,085,000 2,025,306
(Olson Townhomes Project)
6.00% 12/1/19 (AMT) 1,675,000 1,644,163
St. Anthony Multifamily Housing
Revenue (Chandler Place Project)
Series A 6.05% 11/20/16 (FHA)(GNMA) 135,000 147,425
St. Cloud Housing & Redevelopment
Authority Revenue (Sterling
Heights Apartments Project)
7.55% 4/1/39 (AMT) 1,530,000 1,494,795
St. Paul Housing & Redevelopment
Authority Multifamily Housing
Revenue (Grotto Housing Project)
5.50% 9/20/44 (GNMA) 750,000 743,925
Stillwater Multifamily Revenue
(Stillwater Cottages Project) Series A
6.75% 11/1/11 205,000 206,482
7.00% 11/1/16 (AMT) 680,000 672,432
7.00% 11/1/27 340,000 327,332
Washington County Housing &
Redevelopment Authority
Governmental Revenue (Briar
Pond Project) Series B
7.125% 8/20/34 (GNMA) 870,000 825,439
-----------
13,735,823
-----------
Municipal Lease Revenue Bonds - 3.36%
Beltrami County Housing &
Redevelopment Authority Revenue
6.10% 2/1/12 460,000 471,873
Hibbing Economic Development
Authority Revenue (Hibbing Lease
Obligation Project) 6.40% 2/1/12 530,000 519,723
Rice County Certificates of Participation
Series A 6.00% 12/1/21 125,000 128,796
St. Paul Housing & Redevelopment
Authority Lease Revenue (Acorn
Dual Language Community Project)
6.60% 11/1/24 1,000,000 890,130
-----------
2,010,522
-----------
Political Subdivision General Obligation Bonds - 2.54%
Perham Disposal System
6.00% 5/1/22 (AMT) 1,500,000 1,519,605
-----------
1,519,605
-----------
*Pre-Refunded Bonds - 3.34%
Andover Commercial Development
Revenue (Downtown Center Project)
Series A 7.00% 12/1/12-03 1,640,000 1,696,514
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
*Pre-Refunded Bonds (continued)
Glencoe Health Care Revenue
6.40% 12/1/15-05 $ 275,000 $ 303,295
-----------
1,999,809
-----------
Public Power Revenue Bonds - 1.82%
Southern Minnesota Municipal Power
Agency Supply System Revenue
Series A 5.25% 1/1/16 (AMBAC) 1,000,000 1,089,670
-----------
1,089,670
-----------
Recreational Area Revenue Bonds - 0.58%
Woodbury Gross Revenue (Golf Course
Bonds) 6.75% 2/1/22 365,000 347,111
-----------
347,111
-----------
Single Family Housing Revenue Bonds - 2.70%
Minnesota State Housing Finance
Agency Single Family Mortgage
Series E 6.25% 1/1/23 (AMT) 55,000 56,761
Series J 5.90% 7/1/28 (AMT) 1,465,000 1,497,288
Series M 5.875% 1/1/17 60,000 62,815
-----------
1,616,864
-----------
State General Obligation Bonds - 1.80%
+Minnesota State, Inverse Floater ROLs
6.91% 11/1/17 1,000,000 1,075,690
-----------
1,075,690
-----------
Tax Increment/Special Assessment Bonds - 1.65%
St. Paul Housing & Redevelopment
Authority Tax Increment
(Upper Landing Project)
Series A 6.80% 3/1/29 1,000,000 988,660
-----------
988,660
-----------
Territorial Revenue Bonds - 2.50%
Puerto Rico Commonwealth Highway &
Transportation Authority
Transportation Revenue Series D
5.25% 7/1/38 500,000 495,615
Puerto Rico Electric Power Authority
Revenue Series II 5.25% 7/1/31 1,000,000 1,000,310
-----------
1,495,925
-----------
Total Municipal Bonds (cost $60,545,989) 58,747,248
-----------
Number of
Shares
- --------------------------------------------------------------------------------
Short-Term Investments - 0.42%
- --------------------------------------------------------------------------------
Federated Minnesota Municipal Cash Trust 250,264 250,264
-----------
Total Short-Term Investments
(cost $250,264) 250,264
-----------
18
Statements Delaware Minnesota High-Yield Municipal Bond Fund
OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Market Value of Securities - 98.47%
(cost $60,796,253) $58,997,512
Receivables and Other Assets
Net of Liabilities - 1.53% 913,860
-----------
Net Assets Applicable to 6,040,460
Shares Outstanding - 100.00% $59,911,372
===========
Net Asset Value - Delaware Minnesota
High-Yield Municipal Bond Fund Class A
($36,644,367 / 3,697,050 Shares) $9.91
-----
Net Asset Value - Delaware Minnesota
High-Yield Municipal Bond Fund Class B
($12,513,407 / 1,260,298 Shares) $9.93
-----
Net Asset Value - Delaware Minnesota
High-Yield Municipal Bond Fund Class C
($10,753,598 / 1,083,112 Shares) $9.93
-----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $63,877,311
Accumulated net realized loss on investments (2,167,198)
Net unrealized depreciation of investments (1,798,741)
-----------
Total net assets $59,911,372
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2003.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FHA - Insured by the Federal Housing Administration
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN --Insured by Radian Asset Assurance
ROLs - Residual Option Longs
Net Asset Value and Offering Price per Share -
Delaware Minnesota High-Yield Municipal Bond Fund
Net asset value Class A (A) $ 9.91
Sales charge (4.50% of offering price,
or 4.74% of amount invested per share) (B) 0.47
------
Offering price $10.38
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
19
Statements Delaware Minnesota Municipal Bond Funds
OF OPERATIONS Year Ended August 31, 2003
Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
Investment Income:
Interest $22,263,363 $14,446,722 $3,336,757 $3,657,164
----------- ----------- ---------- ----------
Expenses:
Management fees 2,085,202 1,326,132 321,881 322,838
Distribution expenses -- Class A 881,282 600,980 129,521 90,569
Distribution expenses -- Class B 173,135 155,249 34,531 128,924
Distribution expenses -- Class C 92,992 92,295 56,475 95,095
Dividend disbursing and transfer agent fees and expenses 215,321 149,208 44,614 42,241
Accounting and administration expenses 168,907 118,096 28,604 26,056
Registration fees 28,250 21,700 24,345 6,000
Reports and statements to shareholders 49,992 39,084 12,408 8,280
Professional fees 57,991 43,600 10,442 11,744
Custodian fees 17,937 15,810 3,358 30,700
Trustees' fees 21,100 12,880 9,057 3,000
Other 104,146 75,357 14,961 15,760
----------- ----------- ---------- ----------
3,896,255 2,650,391 690,197 781,207
----------- ----------- ---------- ----------
Less expenses absorbed or waived -- -- (13,205) (171,544)
Less waived distribution expenses -- Class A -- -- (46,773) --
Less expenses paid indirectly (9,530) (7,342) (1,777) (1,679)
----------- ----------- ---------- ----------
Total expenses 3,886,725 2,643,049 628,442 607,984
----------- ----------- ---------- ----------
Net Investment Income 18,376,638 11,803,673 2,708,315 3,049,180
----------- ----------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 4,703,590 2,440,481 121,249 (441,678)
Net change in unrealized appreciation/depreciation
of investments (9,247,345) (7,468,306) (834,692) 259,426
----------- ----------- ---------- ----------
Net Realized and Unrealized Loss on Investments (4,543,755) (5,027,825) (713,443) (182,252)
----------- ----------- ---------- ----------
Net Increase in Net Assets Resulting from Operations $13,832,883 $ 6,775,848 $1,994,872 $2,866,928
=========== =========== ========== ==========
See accompanying notes
20
Statements Delaware Minnesota Municipal Bond Funds
OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free
Minnesota Fund Minnesota Insured Fund
Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 18,376,638 $ 19,002,863 $ 11,803,673 $ 11,943,243
Net realized gain on investments 4,703,590 589,019 2,440,481 722,262
Net change in unrealized
appreciation/depreciation of investments (9,247,345) 565,559 (7,468,306) 240,814
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations 13,832,883 20,157,441 6,775,848 12,906,319
------------ ------------ ------------ ------------
Dividends and Distributions to Shareholders from:
Net Investment Income:
Class A (17,359,077) (17,911,817) (10,931,097) (11,176,754)
Class B (721,989) (707,294) (589,404) (524,370)
Class C (387,137) (284,214) (348,888) (196,922)
Net realized gain on investments:
Class A (252,735) -- -- --
Class B (12,269) -- -- --
Class C (5,766) -- -- --
------------ ------------ ------------ ------------
(18,738,973) (18,903,325) (11,869,389) (11,898,046)
------------ ------------ ------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 20,342,994 16,869,206 14,811,513 10,427,770
Class B 2,106,724 2,632,871 3,424,019 2,661,996
Class C 3,551,273 2,604,707 6,800,660 2,822,791
Net asset value of shares issued upon reinvestment
of dividends and distributions:
Class A 10,937,095 11,179,488 7,014,830 7,231,300
Class B 495,977 471,933 430,103 373,487
Class C 299,072 217,770 235,167 151,192
------------ ------------ ------------ ------------
37,733,135 33,975,975 32,716,292 23,668,536
------------ ------------ ------------ ------------
Cost of shares repurchased:
Class A (43,234,963) (35,702,678) (25,326,599) (21,492,616)
Class B (3,026,712) (2,059,640) (2,239,993) (1,496,479)
Class C (1,226,713) (1,223,771) (892,572) (1,213,668)
------------ ------------ ------------ ------------
(47,488,388) (38,986,089) (28,459,164) (24,202,763)
------------ ------------ ------------ ------------
Increase in net assets derived from capital share transactions (9,755,253) (5,010,114) 4,257,128 (534,227)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets (14,661,343) (3,755,998) (836,413) 474,046
Net Assets:
Beginning of year 381,245,789 385,001,787 260,187,841 259,713,795
------------ ------------ ------------ ------------
End of year $366,584,446 $381,245,789 $259,351,428 $260,187,841
============ ============ ============ ============
See accompanying notes
21
Statements Delaware Minnesota Municipal Bond Funds
OF CHANGES IN NET ASSETS (CONTINUED)
Delaware Tax-Free Delaware Minnesota High-Yield
Minnesota Intermediate Fund Municipal Bond Fund
Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 2,708,315 $ 2,606,574 $ 3,049,180 $ 3,032,627
Net realized gain (loss) on investments 121,249 (371,946) (441,678) (265,718)
Net change in unrealized appreciation/depreciation of
investments (834,692) 1,111,501 259,426 565,582
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations 1,994,872 3,346,129 2,866,928 3,332,491
------------ ------------ ------------ ------------
Dividends and Distributions to Shareholders from:
Net Investment Income:
Class A (2,403,125) (2,352,222) (2,027,800) (2,008,681)
Class B (120,101) (91,385) (625,130) (665,433)
Class C (196,496) (150,720) (458,610) (369,795)
------------ ------------ ------------ ------------
(2,719,722) (2,594,327) (3,111,540) (3,043,909)
------------ ------------ ------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 10,958,724 7,136,136 5,099,181 3,612,856
Class B 1,577,749 1,246,593 1,173,857 1,749,876
Class C 3,741,280 2,492,197 3,744,773 2,087,799
Net asset value of shares issued upon reinvestment of
dividends and distributions:
Class A 1,833,098 1,785,882 1,128,540 1,136,703
Class B 75,061 48,722 357,176 377,589
Class C 154,874 136,215 270,604 217,254
------------ ------------ ------------ ------------
18,340,786 12,845,745 11,774,131 9,182,077
------------ ------------ ------------ ------------
Cost of shares repurchased:
Class A (5,595,854) (7,630,163) (4,314,157) (4,666,875)
Class B (454,699) (920,238) (2,339,040) (1,750,937)
Class C (2,156,934) (865,466) (1,049,878) (1,322,121)
------------ ------------ ------------ ------------
(8,207,487) (9,415,867) (7,703,075) (7,739,933)
------------ ------------ ------------ ------------
Increase in net assets derived from capital share
transactions 10,133,299 3,429,878 4,071,056 1,442,144
------------ ------------ ------------ ------------
Net Increase in Net Assets 9,408,449 4,181,680 3,826,444 1,730,726
Net Assets:
Beginning of year 58,772,618 54,590,938 56,084,928 54,354,202
------------ ------------ ------------ ------------
End of year $68,181,067 $58,772,618 $59,911,372 $56,084,928
============ ============ ============ ============
See accompanying notes
22
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Minnesota Fund Class A
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $12.610 $12.570 $12.120 $12.230 $13.020
Income (loss) from investment operations:
Net investment income 0.622 0.634 0.615 0.617 0.628
Net realized and unrealized gain (loss) on investments (0.148) 0.037 0.450 (0.110) (0.752)
------- ------- ------- ------- -------
Total from investment operations 0.474 0.671 1.065 0.507 (0.124)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.625) (0.631) (0.615) (0.617) (0.626)
Net realized gain on investments (0.009) -- -- -- (0.040)
------- ------- ------- ------- -------
Total dividends and distributions (0.634) (0.631) (0.615) (0.617) (0.666)
------- ------- ------- ------- -------
Net asset value, end of period $12.450 $12.610 $12.570 $12.120 $12.230
======= ======= ======= ======= =======
Total return(1) 3.80% 5.54% 9.02% 4.39% (1.06%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $340,029 $356,522 $363,033 $355,573 $394,144
Ratio of expenses to average net assets 0.97% 0.98% 1.00% 1.01% 0.94%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.97% 0.98% 1.00% 1.06% 0.94%
Ratio of net investment income to average net assets 4.90% 5.11% 5.00% 5.20% 4.89%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.90% 5.11% 5.00% 5.15% 4.89%
Portfolio turnover 27% 13% 10% 35% 17%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. An expense limitation was in effect for all classes through
August 31, 2001. Performance would have been lower had the expense
limitation not been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.003, a decrease in net realized and
unrealized gain (loss) per share of $0.003, and an increase in the ratio of
net investment income to average net assets of 0.03%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
See accompanying notes
23
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Minnesota Fund Class B
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $12.620 $12.580 $12.120 $12.240 $13.020
Income (loss) from investment operations:
Net investment income 0.529 0.540 0.523 0.525 0.527
Net realized and unrealized gain (loss) on investments (0.150) 0.037 0.460 (0.120) (0.740)
------- ------- ------- ------- -------
Total from investment operations 0.379 0.577 0.983 0.405 (0.213)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.530) (0.537) (0.523) (0.525) (0.527)
Net realized Gain on investments (0.009) -- -- -- (0.040)
------- ------- ------- ------- -------
Total dividends and distributions (0.539) (0.537) (0.523) (0.525) (0.567)
------- ------- ------- ------- -------
Net asset value, end of period $12.460 $12.620 $12.580 $12.120 $12.240
======= ======= ======= ======= =======
Total return(1) 3.02% 4.75% 8.29% 3.50% (1.74%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $16,394 $17,043 $15,927 $13,412 $13,312
Ratio of expenses to average net assets 1.72% 1.73% 1.75% 1.76% 1.69%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.72% 1.73% 1.75% 1.81% 1.69%
Ratio of net investment income to average net assets 4.15% 4.36% 4.25% 4.45% 4.14%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.15% 4.36% 4.25% 4.40% 4.14%
Portfolio turnover 27% 13% 10% 35% 17%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. An expense limitation was in effect for all classes through
August 31, 2001. Performance would have been lower had the expense
limitation not been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.003, a decrease in net realized and
unrealized gain (loss) per share of $0.003, and an increase in the ratio of
net investment income to average net assets of 0.03%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
See accompanying notes
24
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Minnesota Fund Class C
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $12.640 $12.590 $12.140 $12.250 $13.040
Income (loss) from investment operations:
Net investment income 0.529 0.540 0.523 0.527 0.536
Net realized and unrealized gain (loss) on investments (0.151) 0.047 0.450 (0.110) (0.756)
------- ------- ------- ------- -------
Total from investment operations 0.378 0.587 0.973 0.417 (0.220)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.529) (0.537) (0.523) (0.527) (0.530)
Net realized gain on investments (0.009) -- -- -- (0.040)
------- ------- ------- ------- -------
Total dividends and distributions (0.538) (0.537) (0.523) (0.527) (0.570)
------- ------- ------- ------- -------
Net asset value, end of period $12.480 $12.640 $12.590 $12.140 $12.250
======= ======= ======= ======= =======
Total return(1) 3.01% 4.82% 8.20% 3.60% (1.80%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $10,161 $7,682 $6,042 $6,156 $6,814
Ratio of expenses to average net assets 1.72% 1.73% 1.75% 1.76% 1.69%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.72% 1.73% 1.75% 1.81% 1.69%
Ratio of net investment income to average net assets 4.15% 4.36% 4.25% 4.45% 4.14%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.15% 4.36% 4.25% 4.40% 4.14%
Portfolio turnover 27% 13% 10% 35% 17%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. An expense limitation was in effect for all classes through
August 31, 2001. Performance would have been lower had the expense
limitation not been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.003, a decrease in net realized and
unrealized gain (loss) per share of $0.003, and an increase in the ratio of
net investment income to average net assets of 0.03%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
See accompanying notes
25
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Minnesota Insured Fund Class A
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.940 $10.900 $10.480 $10.520 $11.050
Income (loss) from investment operations:
Net investment income 0.498 0.514 0.514 0.507 0.518
Net realized and unrealized gain (loss) on investments (0.197) 0.038 0.421 (0.041) (0.530)
------- ------- ------- ------- -------
Total from investment operations 0.301 0.552 0.935 0.466 (0.012)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.501) (0.512) (0.515) (0.506) (0.518)
------- ------- ------- ------- -------
Total dividends and distributions (0.501) (0.512) (0.515) (0.506) (0.518)
------- ------- ------- ------- -------
Net asset value, end of period $10.740 $10.940 $10.900 $10.480 $10.520
======= ======= ======= ======= =======
Total return(1) 2.75% 5.25% 9.14% 4.63% (0.17%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $231,738 $239,763 $242,716 $238,486 $268,507
Ratio of expenses to average net assets 0.93% 0.96% 0.90% 1.00% 0.94%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.93% 0.96% 0.90% 1.01% 0.94%
Ratio of net investment income to average net assets 4.52% 4.78% 4.82% 4.93% 4.74%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.52% 4.78% 4.82% 4.92% 4.74%
Portfolio turnover 30% 15% 7% 35% 4%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
See accompanying notes
26
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Minnesota Insured Fund Class B
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.940 $10.890 $10.470 $10.510 $11.040
Income (loss) from investment operations:
Net investment income 0.415 0.433 0.434 0.431 0.436
Net realized and unrealized gain (loss) on investments (0.207) 0.048 0.422 (0.042) (0.529)
------- ------- ------- ------- -------
Total from investment operations 0.208 0.481 0.856 0.389 (0.093)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.418) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- -------
Total dividends and distributions (0.418) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- -------
Net asset value, end of period $10.730 $10.940 $10.890 $10.470 $10.510
======= ======= ======= ======= =======
Total return(1) 1.89% 4.56% 8.34% 3.86% (0.91%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $15,647 $14,341 $12,732 $10,491 $11,827
Ratio of expenses to average net assets 1.68% 1.71% 1.65% 1.75% 1.69%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.68% 1.71% 1.65% 1.76% 1.69%
Ratio of net investment income to average net assets 3.77% 4.03% 4.07% 4.18% 3.99%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.77% 4.03% 4.07% 4.17% 3.99%
Portfolio turnover 30% 15% 7% 35% 4%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
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 Minnesota Insured Fund Class C
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.950 $10.910 $10.480 $10.520 $11.050
Income (loss) from investment operations:
Net investment income 0.414 0.433 0.434 0.431 0.438
Net realized and unrealized gain (loss) on investments (0.197) 0.038 0.432 (0.042) (0.531)
------- ------- ------- ------- -------
Total from investment operations 0.217 0.471 0.866 0.389 (0.093)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.417) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- -------
Total dividends and distributions (0.417) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- -------
Net asset value, end of period $10.750 $10.950 $10.910 $10.480 $10.520
======= ======= ======= ======= =======
Total return(1) 1.97% 4.46% 8.42% 3.85% (0.91%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $11,966 $6,083 $4,265 $3,615 $4,253
Ratio of expenses to average net assets 1.68% 1.71% 1.65% 1.75% 1.69%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.68% 1.71% 1.65% 1.76% 1.69%
Ratio of net investment income to average net assets 3.77% 4.03% 4.07% 4.18% 3.99%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.77% 4.03% 4.07% 4.17% 3.99%
Portfolio turnover 30% 15% 7% 35% 4%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
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 Minnesota Intermediate Fund Class A
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.720 $10.580 $10.350 $10.610 $11.160
Income (loss) from investment operations:
Net investment income 0.469 0.512 0.526 0.538 0.541
Net realized and unrealized gain (loss) on investments (0.088) 0.138 0.230 (0.260) (0.550)
------- ------- ------- ------- -------
Total from investment operations 0.381 0.650 0.756 0.278 (0.009)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.471) (0.510) (0.526) (0.538) (0.541)
------- ------- ------- ------- -------
Total dividends and distributions (0.471) (0.510) (0.526) (0.538) (0.541)
------- ------- ------- ------- -------
Net asset value, end of period $10.630 $10.720 $10.580 $10.350 $10.610
======= ======= ======= ======= =======
Total return(1) 3.59% 6.34% 7.50% 2.77% (0.14%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $57,635 $51,034 $49,089 $46,523 $56,222
Ratio of expenses to average net assets 0.86% 0.85% 0.90% 0.93% 0.79%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.96% 0.85% 0.93% 0.95% 0.79%
Ratio of net investment income to average net assets 4.32% 4.86% 5.04% 5.22% 4.91%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.22% 4.86% 5.01% 5.20% 4.91%
Portfolio turnover 23% 35% 24% 9% 13%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager and
distributor, as applicable. Performance would have been lower had the
expense limitation not been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of less than $0.001, a decrease in net realized
and unrealized gain (loss) per share of less than $0.001, and an increase in
the ratio of net investment income to average net assets of less than
$0.01%. Per share data and ratios for periods prior to September 1, 2001
have not been restated to reflected this change in accounting.
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 Minnesota Intermediate Fund Class B
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.740 $10.600 $10.370 $10.630 $11.180
Income (loss) from investment operations:
Net investment income 0.377 0.423 0.438 0.451 0.450
Net realized and unrealized gain (loss) on investments (0.088) 0.137 0.232 (0.262) (0.552)
------- ------- ------- ------- -------
Total from investment operations 0.289 0.560 0.670 0.189 (0.102)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.379) (0.420) (0.440) (0.449) (0.448)
------- ------- ------- ------- -------
Total dividends and distributions (0.379) (0.420) (0.440) (0.449) (0.448)
------- ------- ------- ------- -------
Net asset value, end of period $10.650 $10.740 $10.600 $10.370 $10.630
======= ======= ======= ======= =======
Total return(1) 2.70% 5.43% 6.59% 1.89% (0.98%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,002 $2,852 $2,443 $2,380 $2,878
Ratio of expenses to average net assets 1.71% 1.70% 1.75% 1.78% 1.64%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.73% 1.70% 1.78% 1.80% 1.64%
Ratio of net investment income to average net assets 3.47% 4.01% 4.19% 4.37% 4.06%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.45% 4.01% 4.16% 4.35% 4.06%
Portfolio turnover 23% 35% 24% 9% 13%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of less than $0.001, a decrease in net realized
and unrealized gain (loss) per share of less than $0.001, and an increase in
the ratio of net investment income to average net assets of less than
$0.01%. Per share data and ratios for periods prior to September 1, 2001
have not been restated to reflected this change in accounting.
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 Minnesota Intermediate Fund Class C
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.730 $10.590 $10.360 $10.610 $11.170
Income (loss) from investment operations:
Net investment income 0.377 0.423 0.437 0.451 0.449
Net realized and unrealized gain (loss) on investments (0.088) 0.137 0.233 (0.253) (0.561)
------- ------- ------- ------- -------
Total from investment operations 0.289 0.560 0.670 0.198 (0.112)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.379) (0.420) (0.440) (0.448) (0.448)
------- ------- ------- ------- -------
Total dividends and distributions (0.379) (0.420) (0.440) (0.448) (0.448)
------- ------- ------- ------- -------
Net asset value, end of period $10.640 $10.730 $10.590 $10.360 $10.610
======= ======= ======= ======= =======
Total return(1) 2.71% 5.44% 6.59% 1.98% (1.08%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $6,544 $4,887 $3,059 $2,358 $2,293
Ratio of expenses to average net assets 1.71% 1.70% 1.75% 1.78% 1.64%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.73% 1.70% 1.78% 1.80% 1.64%
Ratio of net investment income to average net assets 3.47% 4.01% 4.19% 4.37% 4.06%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.45% 4.01% 4.16% 4.35% 4.06%
Portfolio turnover 23% 35% 24% 9% 13%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
this change for the year ended August 31, 2002 was an increase in net
investment income per share of less than $0.001, a decrease in net realized
and unrealized gain (loss) per share of less than $0.001, and an increase in
the ratio of net investment income to average net assets of less than
$0.01%. Per share data and ratios for periods prior to September 1, 2001
have not been restated to reflected this change in accounting.
See accompanying notes
31
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Minnesota High-Yield Municipal Bond Fund Class A
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $9.950 $9.900 $9.650 $10.210 $10.810
Income (loss) from investment operations:
Net investment income 0.550 0.586 0.581 0.576 0.583
Net realized and unrealized gain (loss) on investments (0.030) 0.056 0.243 (0.564) (0.603)
------ ------ ------ ------ -------
Total from investment operations 0.520 0.642 0.824 0.012 (0.020)
------ ------ ------ ------ -------
Less dividends and distributions from:
Net investment income (0.560) (0.592) (0.574) (0.572) (0.580)
------ ------ ------ ------ -------
Total dividends and distributions (0.560) (0.592) (0.574) (0.572) (0.580)
------ ------ ------ ------ -------
Net asset value, end of period $9.910 $9.950 $9.900 $9.650 $10.210
====== ====== ====== ====== =======
Total return(1) 5.33% 6.74% 8.84% 0.32% (0.27%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $36,644 $34,867 $34,615 $35,689 $41,813
Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.57%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.04% 1.01% 0.94% 1.14% 1.07%
Ratio of net investment income to average net assets 5.48% 5.98% 6.01% 5.99% 5.46%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 5.19% 5.72% 5.82% 5.60% 4.96%
Portfolio turnover 32% 33% 13% 8% 35%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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
reflected this change in accounting.
See accompanying notes
32
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Minnesota High-Yield Municipal Bond Fund Class B
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $9.970 $9.910 $9.650 $10.210 $10.810
Income (loss) from investment operations:
Net investment income 0.475 0.513 0.509 0.504 0.507
Net realized and unrealized gain (loss) on investments (0.030) 0.063 0.248 (0.570) (0.604)
------ ------ ------ ------ -------
Total from investment operations 0.445 0.576 0.757 (0.066) (0.097)
------ ------ ------ ------ -------
Less dividends and distributions from:
Net investment income (0.485) (0.516) (0.497) (0.494) (0.503)
------ ------ ------ ------ -------
Total dividends and distributions (0.485) (0.516) (0.497) (0.494) (0.503)
------ ------ ------ ------ -------
Net asset value, end of period $9.930 $9.970 $9.910 $9.650 $10.210
====== ====== ====== ====== =======
Total return(1) 4.55% 6.03% 8.09% (0.49%) (0.99%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $12,513 $13,379 $12,932 $13,743 $15,814
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.32%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.79% 1.76% 1.69% 1.89% 1.82%
Ratio of net investment income to average net assets 4.73% 5.23% 5.26% 5.24% 4.71%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.44% 4.97% 5.07% 4.85% 4.21%
Portfolio turnover 32% 33% 13% 8% 35%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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
reflected this change in accounting.
See accompanying notes
33
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Minnesota High-Yield Municipal Bond Fund Class C
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $9.970 $9.910 $9.650 $10.210 $10.810
Income (loss) from investment operations:
Net investment income 0.475 0.513 0.509 0.504 0.505
Net realized and unrealized gain (loss) on investments (0.030) 0.063 0.248 (0.570) (0.602)
------ ------ ------ ------ -------
Total from investment operations 0.445 0.576 0.757 (0.066) (0.097)
------ ------ ------ ------ -------
Less dividends and distributions from:
Net investment income (0.485) (0.516) (0.497) (0.494) (0.503)
------ ------ ------ ------ -------
Total dividends and distributions (0.485) (0.516) (0.497) (0.494) (0.503)
------ ------ ------ ------ -------
Net asset value, end of period $9.930 $9.970 $9.910 $9.650 $10.210
====== ====== ====== ====== =======
Total return(1) 4.54% 6.03% 8.09% (0.49%) (0.99%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $10,754 $7,840 $6,807 $6,599 $7,515
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.32%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.79% 1.76% 1.69% 1.89% 1.82%
Ratio of net investment income to average net assets 4.73% 5.23% 5.26% 5.24% 4.71%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.44% 4.97% 5.07% 4.85% 4.21%
Portfolio turnover 32% 33% 13% 8% 35%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an 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
reflected this change in accounting.
See accompanying notes
34
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS August 31, 2003
Voyageur Mutual Funds is organized as a Delaware business trust and offers six
series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National
High-Yield Municipal Bond Fund, Delaware Tax-Free Arizona Fund, Delaware
Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free
New York Fund. Voyageur Insured Funds is organized as a Delaware business trust
and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware
Tax-Free Minnesota Insured Fund. Voyageur Tax Free Funds is organized as a
Delaware business trust and offers the Delaware Tax-Free Minnesota Fund.
Voyageur Intermediate Tax Free Funds is organized as a Delaware business trust
and offers the Delaware Tax-Free Minnesota Intermediate Fund. These financial
statements and related notes pertain to Delaware Tax-Free Minnesota Fund,
Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota
Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond Fund (each a
"Fund" or, collectively, 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, and 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 Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware
Minnesota High-Yield Municipal Bond Fund and with a front-end sales charge of up
to 2.75% for Delaware Tax-Free Minnesota Intermediate Fund. Class B shares are
sold with a contingent deferred sales charge that declines from 4% to zero for
Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and
Delaware Minnesota High-Yield Municipal Bond Fund and that declines from 2% to
zero for Delaware Tax-Free Minnesota Intermediate Fund, depending upon the
period of time the shares are held. Class B shares will automatically convert to
Class A shares on a quarterly basis approximately eight years after purchase for
Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and
Delaware Minnesota High-Yield Municipal Bond Fund and approximately five years
after purchase for Delaware Tax-Free Minnesota Intermediate Fund. Class C shares
are sold with a contingent deferred sales charge of 1%, if redeemed during the
first 12 months.
The investment objective of Delaware Tax-Free Minnesota Fund and Delaware
Tax-Free Minnesota Insured Fund is to seek as high a level of current income
exempt from federal income tax and from Minnesota state personal income tax, as
is consistent with preservation of capital. The investment objective of Delaware
Tax-Free Minnesota Intermediate Fund is to seek to provide investors with
preservation of capital and, secondarily, current income exempt from federal
income tax and from Minnesota state personal income tax, by maintaining a
dollar-weighted average effective portfolio maturity of 10 years or less. The
investment objective of Delaware Minnesota High-Yield Municipal Bond Fund is to
seek as high a level of current income exempt from federal income tax and from
Minnesota state personal income tax, primarily through investment in medium- and
lower-grade municipal obligations.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds.
Security Valuation -- Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of the Funds' Board of
Trustees.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Discounts and premiums are
amortized to interest income over the lives of the respective securities. Each
Fund declares dividends daily from net investment income and pays such dividends
monthly and declares and pays distributions from net realized gain on
investments, if any, annually.
35
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS (CONTINUED)
1. Significant Accounting Policies (continued)
Certain expenses of the Funds are paid through commission arrangements with
brokers. These transactions are done subject to best execution. In addition, the
Funds may receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statements of Operations with the corresponding expense offset
shown as "expenses paid indirectly". The amounts of these expenses for the year
ended August 31, 2003 were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
Commission reimbursements $9,101 $6,366 $1,544 $1,409
Earnings credits 429 976 233 270
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 Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund 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%
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, and extraordinary expenses, do not exceed specified
percentages of average daily net assets through October 31, 2004 as shown below:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
The operating expense limitation
as a percentage of average daily
net assets (per annum) 0.75% 0.75% 0.75% 0.50%
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. The Funds pay
DSC a monthly fee based on average net assets subject to certain minimums for
accounting and administration services. Each Fund pays DSC a monthly fee based
on the number of shareholder accounts for dividend disbursing and transfer agent
services. Prior to June 1, 2003, the monthly fee for dividend disbursing and
transfer agent services was based on the number of shareholder accounts and
shareholder transactions.
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 0.25% of the average daily net
assets of the Class A shares and 1.00% of the average daily net assets of the
Class B and C shares for all Funds. DDLP has contracted to waive distribution
fees through October 31, 2004 in order to prevent distribution fees of Class A
Shares from exceeding 0.15% of average daily net assets for the Delaware
Tax-Free Minnesota Intermediate Fund.
At August 31, 2003, each Fund had receivables from or liabilities payable to
affiliates as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
Investment management
fee payable to DMC ($41,267) ($15,786) $ -- ($22,835)
Dividend disbursing,
transfer agent fees,
accounting and other
expenses payable to DSC (35,716) (25,792) (6,798) (6,633)
Other expenses payable
to DMC and affiliates (49,794) (35,481) (9,206) (17,894)
Receivable from DMC under
expense limitation agreement -- -- 2,092 --
36
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS (CONTINUED)
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates (continued)
For the year ended August 31, 2003, DDLP earned commissions on sales of Class A
shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
$49,242 $52,150 $14,769 $16,971
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.
3. Investments
For the year ended August 31, 2003, the Funds made purchases and sales of
investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
Purchases $99,536,509 $81,644,406 $24,567,848 $22,733,138
Sales 111,255,196 77,524,780 14,696,546 18,008,763
At August 31, 2003, the cost of investments and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund was as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
Cost of investments $347,558,866 $246,945,495 $67,149,838 $60,763,407
------------ ------------ ----------- -----------
Aggregate unrealized appreciation $ 17,162,542 $ 13,964,621 $ 1,826,688 $ 538,448
Aggregate unrealized depreciation (4,220,926) (1,557,864) (596,876) (2,304,343)
------------ ------------ ----------- -----------
Net unrealized appreciation
(depreciation) $ 12,941,616 $ 12,406,757 $ 1,229,81 $(1,765,895)
============ ============ =========== ===========
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the years ended August 31, 2003 and 2002 was as
follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
Year ended 8/31/03
- -----------------------
Tax-exempt income $18,468,203 $11,869,389 $2,719,722 $3,111,540
Long-term capital gain 270,770 -- -- --
----------- ----------- ---------- ----------
Total $18,738,973 $11,869,389 $2,719,722 $3,111,540
=========== =========== ========== ==========
Year ended 8/31/02
- -----------------------
Tax-exempt income $18,903,325 $11,898,046 $2,594,327 $3,043,909
As of August 31, 2003, the components of net assets on a tax basis were as
follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Delaware Tax-Free Minnesota Minnesota High-Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------- ----------------- ------------------ -------------------
Shares of beneficial interest $349,128,010 $247,661,352 $69,064,649 $63,877,311
Undistributed ordinary income 199,532 -- -- --
Undistributed tax-exempt income (22,418) -- 1,470 --
Undistributed long-term capital gain 4,337,706 -- -- --
Capital loss carryforwards -- (716,681) (2,114,864) (1,782,389)
Post-October losses -- -- -- (417,655)
Unrealized appreciation
(depreciation) of investments 12,941,616 12,406,757 1,229,812 (1,765,895)
------------ ------------ ----------- -----------
Net assets $366,584,446 $259,351,428 $68,181,067 $59,911,372
============ ============ =========== ===========
Post-October losses represent losses realized on investment transactions from
November 1, 2002 through August 31, 2003 that, in accordance with federal income
tax regulations the Funds have elected to defer and treat as having arisen in
the following fiscal year.
37
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS (CONTINUED)
4. Dividend and Distribution Information (continued)
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss
carryforwards expire as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota
Minnesota Minnesota High-Yield
Year of Expiration Insured Fund Intermediate Fund Municipal Bond Fund
- ----------------------- ----------------- ----------------- -------------------
2004 $ 13,413 $ -- $ 6,809
2005 -- -- 4,334
2006 -- -- 648
2007 -- -- 369
2008 589,183 423,683 201,822
2009 114,085 1,440,485 1,267,552
2010 -- 4,037 57,521
2011 -- 246,659 243,334
--------- ---------- ----------
Total $ 716,681 $2,114,864 $1,782,389
========= ========== ==========
During the year ended August 31, 2003, $2,784,421 of unused capital loss
carryforwards expired for the Delaware Tax-Free Minnesota Insured Fund.
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free
Minnesota Fund Minnesota Insured Fund
----------------- ----------------------
Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02
Shares sold:
Class A 1,598,089 1,357,657 1,341,420 968,339
Class B 165,696 211,626 310,624 247,346
Class C 279,810 209,053 617,494 263,348
Shares issued upon reinvestment
of dividends and distributions:
Class A 865,142 901,116 639,816 672,254
Class B 39,201 38,015 39,247 34,747
Class C 23,598 17,519 21,407 14,038
---------- ---------- ---------- ----------
2,971,536 2,734,986 2,970,008 2,200,072
---------- ---------- ---------- ----------
Shares repurchased:
Class A (3,414,536) (2,873,662) (2,313,055) (1,997,218)
Class B (239,163) (165,708) (203,283) (139,579)
Class C (96,819) (98,569) (81,525) (113,011)
---------- ---------- ---------- ----------
(3,750,518) (3,137,939) (2,597,863) (2,249,808)
---------- ---------- ---------- ----------
Net increase (decrease) (778,982) (402,953) 372,145 (49,736)
========== ========== ========== ==========
38
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Shares (continued)
Delaware Tax-Free Delaware Minnesota High-Yield
Minnesota Intermediate Fund Municipal Bond Fund
--------------------------- -----------------------------
Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02
Shares sold:
Class A 1,012,529 677,876 508,021 367,765
Class B 145,327 117,966 116,993 178,170
Class C 344,972 236,241 374,028 212,604
Shares issued upon reinvestment
of dividends and distributions:
Class A 170,287 169,701 113,106 115,976
Class B 6,948 4,614 35,758 38,464
Class C 14,355 12,929 27,080 22,134
--------- --------- --------- --------
1,694,418 1,219,327 1,174,986 935,113
--------- --------- --------- --------
Shares repurchased:
Class A (519,538) (725,641) (427,831) (476,413)
Class B (42,074) (87,460) (234,605) (179,051)
Class C (199,737) (82,670) (104,635) (134,893)
--------- --------- --------- --------
(761,349) (895,771) (767,071) (790,357)
--------- --------- --------- --------
Net increase 933,069 323,556 407,915 144,756
========= ========= ========= ========
For the years ended August 31, 2003 and 2002, the following shares were
converted from Class B to Class A. The respective amounts are included in Class
B redemptions and Class A subscriptions in the table above and the Statements of
Changes in Net Assets.
Year Ended Year Ended
8/31/03 8/31/02
______________________________________ ____________________________________
Class B Class A Class B Class A
shares shares Amount shares shares Amount
Delaware Tax-Free Minnesota Fund 33,800 33,825 $439,727 -- -- --
Delaware Tax-Free Minnesota Insured Fund 26,832 26,812 301,869 -- -- --
Delaware Tax-Free Minnesota Intermediate Fund 7,322 7,335 80,346 27,324 27,272 $287,894
6. Line of Credit
Each Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participates in a $202,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of August 31, 2003 or at any time during the
year.
7. Credit and Market Risk
The Funds concentrate their investments in securities issued by municipalities,
mainly in Minnesota. The value of these investments may be adversely affected by
new legislation within the state, regional or local economic conditions, and
differing levels of supply and demand for municipal bonds. Many municipalities
insure repayment for their obligations. Although bond insurance reduces the risk
of loss due to default by an issuer, such bonds remain subject to the risk that
market value may fluctuate for other reasons and there is no assurance that the
insurance company will meet its obligations. These securities have been
identified in the Statements of Net Assets.
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 Statement of Net Assets.
39
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS (CONTINUED)
8. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2003, each Fund designates distributions
paid during the year as follows:
(A) (B)
Long-Term Ordinary (C) (D)
Capital Gains Income Tax Exempt Total
Distributions Distributions Distributions Distributions
(Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis)
Delaware Tax-Free Minnesota Fund 1% -- 99% 100%
Delaware Tax-Free Minnesota Insured Fund -- -- 100% 100%
Delaware Tax-Free Minnesota Intermediate Fund -- -- 100% 100%
Delaware Minnesota High-Yield Municipal Bond Fund -- -- 100% 100%
(A), (B), and (C) are based on a percentage of each Fund's total distributions.
40
Report
OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
Voyageur Tax Free Funds -- Delaware Tax-Free Minnesota Fund
Voyageur Insured Funds -- Delaware Tax-Free Minnesota
Insured Fund
Voyageur Intermediate Tax Free Funds -- Delaware Tax-Free
Minnesota Intermediate Fund
Voyageur Mutual Funds -- Delaware Minnesota High-Yield
Municipal Bond Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free
Minnesota Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond
Fund (the "Funds") as of August 31, 2003, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above listed Funds at August 31, 2003, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and their financial highlights for each of the
five years in the period then ended in conformity with accounting principles
generally accepted in the United States.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 3, 2003
41
Delaware Investments Family of Funds
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees which has oversight
responsibility for the management of a fund's business affairs. Trustees
establish procedures and oversee and review the performance of the investment
manager, the distributor and others that perform services for the fund. The
independent fund trustees, in particular, are advocates for shareholder
interests. The following is a list of the Trustees/Officers and certain
background and related information.
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee/Director Trustee/Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Jude T. Driscoll(2) Chairman and 3 Years - Since August 2000, 83 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Trustee as of at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process --
Conseco Capital Management
(June 1998 -- August 2000)
Managing Director --
NationsBanc Capital Markets
(February 1996 -- June 1998)
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Walter P. Babich Trustee 15 Years Board Chairman -- 101 None
2005 Market Street Citadel Construction Corporation
Philadelphia, PA (1989 -- Present)
19103
October 1, 1927
John H. Durham Trustee 24 Years(3) Private Investor 101 Trustee -- Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103 President/Director --
22 WR Corporation
August 7, 1937
John A. Fry Trustee(4) 2 Years President -- 83 None
2005 Market Street Franklin & Marshall College
Philadelphia, PA (June 2002 -- Present)
19103
Executive Vice President --
May 28, 1960 University of Pennsylvania
(April 1995 -- June 2002)
Anthony D. Knerr Trustee 10 Years Founder/Managing Director -- 101 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 -- Present)
December 7, 1938
42
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee/Director Trustee/Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
Ann R. Leven Trustee 14 Years Treasurer/Chief 101 Director -- Andy
2005 Market Street Fiscal Officer -- Warhol Foundation
Philadelphia, PA National Gallery of Art
19103 (1994 -- 1999) Director --
Systemax Inc.
November 1, 1940
Thomas F. Madison Trustee 9 Years President/Chief 101 Director --
2005 Market Street Executive Officer -- CenterPoint Energy
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -- Digital
and Consulting) River Inc.
(January 1993 -- Present)
February 25, 1936 Director -- Rimage
Corporation
Director -- Valmont
Industries, Inc.
Janet L. Yeomans Trustee 4 Years Vice President/Mergers & 101 None
2005 Market Street Acquisitions -- 3M Corporation
Philadelphia, PA (January 2003 -- Present)
19103
Ms. Yeomans has held
July 31, 1948 various management positions
at 3M Corporation since 1983.
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Joseph H. Hastings Executive Vice Executive Vice Mr. Hastings has served in 101 None
2005 Market Street President President and various executive capacities
Philadelphia, PA and Chief Chief at different times at
19103 Financial Officer Financial Officer Delaware Investments.
since
August 21, 2003
December 19, 1949
Richelle S. Maestro Senior Vice President, General Counsel Ms. Maestro has served in 101 None
2005 Market Street Chief Legal Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments.
November 26, 1957
Michael P. Bishof Senior Vice President 7 Years Mr. Bishof has served in 101 None
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
(1) Delaware Investments is the marketing name for Delaware Management
Holdings, Inc. and its subsidiaries, including the Registrant's investment
advisor, principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees and Officers and is available, without charge,
upon request by calling 800 523-1918.
43
This page intentionally left blank.
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This annual report is for the information of Delaware Tax-Free Minnesota Fund,
Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota
Intermediate Fund, and Delaware Minnesota 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 Minnesota Fund,
Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota
Intermediate Fund, and Delaware Minnesota 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 for the Funds. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Funds will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information
Walter P. Babich Jude T. Driscoll Investment Manager
Board Chairman Chairman Delaware Management Company
Citadel Construction Corporation Delaware Investments Family of Funds Philadelphia, PA
King of Prussia, PA Philadelphia, PA
International Affiliate
John H. Durham Joseph H. Hastings Delaware International Advisers Ltd.
Private Investor Executive Vice President and London, England
Gwynedd Valley, PA Chief Financial Officer
Delaware Investments Family of Funds National Distributor
Anthony D. Knerr Philadelphia, PA Delaware Distributors, L.P.
Managing Director Philadelphia, PA
Anthony Knerr & Associates Richelle S. Maestro
New York, NY Senior Vice President, Shareholder Servicing, Dividend
Chief Legal Officer and Secretary Disbursing and Transfer Agent
Ann R. Leven Delaware Investments Family of Funds Delaware Service Company, Inc.
Former Treasurer/Chief Fiscal Officer Philadelphia, PA 2005 Market Street
National Gallery of Art Philadelphia, PA 19103-7094
Washington, DC Michael P. Bishof
Senior Vice President and Treasurer For Shareholders
Thomas F. Madison Delaware Investments Family of Funds 800 523-1918
President and Chief Executive Officer Philadelphia, PA
MLM Partners, Inc. For Securities Dealers and Financial
Minneapolis, MN Institutions Representatives Only
800 362-7500
Janet L. Yeomans
Vice President/Mergers & Acquisitions Web site
3M Corporation www.delawareinvestments.com
St. Paul, MN
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800-523-1918; (ii) on the Fund's website at
http://www.delawareinvestments.com; and (iii) on the Commission's website at
http://www.sec.gov.; and beginning no later than August 31, 2004, information
(if any) regarding how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
- --------------------------------------------------------------------------------
(8240) Printed in the USA
AR-MNALL [8/03] IVES 10/03 J9418
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
Annual Report 2003
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE FLORIDA FUND
DELAWARE TAX-FREE FLORIDA INSURED FUND
DELAWARE TAX-FREE NEW YORK FUND
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
- ------------------------------------------------------------------
PORTFOLIO MANAGEMENT REVIEW 1
- ------------------------------------------------------------------
PERFORMANCE SUMMARIES:
Delaware Tax-Free Florida Fund 3
Delaware Tax-Free Florida Insured Fund 4
Delaware Tax-Free New York Fund 5
- ------------------------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 6
Statements of Operations 12
Statements of Changes in Net Assets 13
Financial Highlights 14
Notes to Financial Statements 23
- ------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 27
- ------------------------------------------------------------------
BOARD OF TRUSTEES/OFFICERS 28
- ------------------------------------------------------------------
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) 2003 Delaware Distributors, L.P.
Portfolio September 10, 2003
MANAGEMENT REVIEW
Fund Managers
Patrick P. Coyne
Chief Investment Officer -- Fixed Income
M. L. Conery
Senior Portfolio Manager
Q: Please describe the overall bond market conditions during the fiscal year.
A: All bond fund performance occurred against a backdrop of much lower
short-term rates throughout the markets, anchored by Federal Reserve interest
rate cuts that left the fed funds rate at 1%. One-year, AAA-rated municipal
bonds began the fiscal year yielding 1.40% and finished at 1.05% on August 31,
2003 (Source: Municipal Market Data).
As short-term yields decreased, longer-term (10- and 30-year) yields increased,
causing the yield curve to steepen slightly. Yields on 10-year, AAA-rated
general obligation bonds rose during the year. 30-year AAA-rated general
obligation bonds began the period yielding 4.89% and went as low as 4.20% on the
Fed's suggestion that it might consider buying long bonds directly. These bonds
ended the period at 5.02%, in part because the Fed concluded that it does not
plan to buy long bonds directly at this time. The yield curve also steepened
because investors seem to anticipate an improving U.S. economy.
Though some states saw their credit ratings improve, a number of states
experienced downgraded credit ratings. This is likely due to weak national and
regional economies, poor equity market performance, and decreased tax revenues.
States have faced unprecedented revenue shortfalls, budget gaps, and increased
social service obligations in a period of high unemployment and high debt levels
in some states.
The past two years have seen soaring bond supply, as municipalities refinanced
older, more expensive debt at lower rates. Municipalities have also seen less
tax revenue since the U.S. economic downturn, and so have been more likely to
finance some projects, conserving their cash. This story continued through the
first seven months of the 2003 calendar year. In August, however, rates jumped,
and the markets saw a 31 percent reduction in new bond issuance. Despite this
one month decline, year-to-date issues were up 13 percent at the end of August
(Source: Thomson Financial).
Q: What conditions prevailed in the Florida and New York municipal debt markets
during the year?
A: Between January 1 and August 31, 2003, the volume of Florida debt increased
by roughly 18 percent. The credit quality was volatile, as is usual in the
state, but we continue to find that the state government itself is well run and
fiscally conservative, with well-structured debt.
Florida is still feeling the loss of tourism dollars, as it has since the events
of September 11, 2001. The 2001 recession caused fewer people to travel long
distances for pleasure. It also made companies more conservative about business
travel, another factor that has hurt Florida's travel revenue stream. Despite
the struggles in the travel industry, we believe we are witnessing the start of
a gradual recovery for both business and vacation travel to Florida.
Debt volume in New York declined between January 1 and August 31, 2003 by
approximately 16 percent, and credit quality was below projections. Taxes and
other revenue streams are still down in New York, as the economy is still
feeling the effects of September 11, 2001. Both New York State and New York City
suffer from high debt levels, large social services burdens, and an ongoing,
expensive overhaul of the city's schools. On the positive side, the city's
service-based economy appears to be rebounding. Financial services, which
suffered considerably in the past two years, is also beginning to recover.
Q: Please discuss performance and your strategies in each of the funds during
the year.
Delaware Tax-Free Florida Fund returned +3.67% (Class A shares at net asset
value with distributions reinvested) for the fiscal year ended August 31, 2003.
It outperformed its benchmark, the Lehman Brothers Municipal Bond Index, which
gained +3.14%. Your Fund also beat its peer group, as represented by the 62
funds of the Lipper Florida Municipal Debt Funds Average, which returned +2.34%.
As rates climbed, we sold some lower-coupon bonds, particularly those that
involve a tax loss. That has allowed us to reinvest at a higher level, providing
a better payout and allowing us to offset capital gains in the Fund.
1
We took advantage of opportunities where we perceived relative value. In some
such cases, we were able to purchase what we believed to be bargain paper when
supply was plentiful, intending to collect the coupon for a time and then resell
the bonds for a profit when the market has shifted in a way that supply is
diminished and demand rises. We employed this strategy when we felt that the
risk/reward profile of using it was favorable. For instance, we watched for
periods of heavy supply from specialty issuer Puerto Rico. At present, we intend
to sell certain Puerto Rico bonds once supply diminishes and we see heavier
demand from buyers.
We purchased bonds issued by Miami-Dade County Airport Authority -- the
financing and operating entity for Miami International Airport -- as well as
bonds issued through Orlando International Airport, which are backed by national
cargo facility revenues. We feel that the latter issue, which pays 6.75%, is a
good opportunity to be paid for holding a non-investment-grade bond.
We sold hospital debt, as we saw a strong demand for this paper in general.
However, we did acquire a position in Tampa General Hospital.
The Fund's average credit quality at year-end was AA, which represents a small
improvement to credit quality compared to the prior year. We felt that our
average maturity was a bit short when compared with our peer group. This reduced
maturity stance resulted in the Fund underperforming its potential as compared
to a longer maturity posture. We intend to lengthen our average maturity going
forward. We also slightly extended duration throughout the year, based on our
belief for the overall market and on the duration of purchases we made. Duration
is a common measure of a bond's or bond fund's sensitivity to interest rate
changes. The longer the duration, the more sensitive the bond or bond fund is to
changes in interest rates.
.................................................................................
Delaware Tax-Free Florida Insured Fund returned +2.68% (Class A shares at net
asset value with distributions reinvested) for the fiscal year ended August 31,
2003. Its performance was below that of its benchmark, the Lehman Brothers
Municipal Bond Index, which rose +3.14%. Your Fund outperformed its peer group,
as represented by the eight funds in the Lipper Florida Insured Municipal Debt
Funds Average, which returned +2.34% for the same period.
As rates climbed, we sold some lower-coupon bonds, particularly those that
involve a tax loss. That has allowed us to reinvest at a higher level, providing
a better payout offseting capital gains in the Fund.
We also increased our position in Puerto Rican debt obligations from three
percent to 10 percent of total net assets, because we felt it was a better
investment than pricier Florida paper at a time when we needed to reinvest
assets. We continue to favor the healthcare and multifamily housing sectors.
As in Delaware Tax-Free Florida Fund and noted previously, we took advantage of
relative value opportunities, watching for periods of heavy supply in Puerto
Rico. We intend to sell these bonds when supply diminishes and we see heavy
demand.
We increased duration slightly throughout the year. We felt that our generally
short duration posture was a prudent response to volatile market conditions.
.................................................................................
Delaware Tax-Free New York Fund returned +3.56% (Class A shares at net asset
value with distributions reinvested), outperforming the +3.14% gain of its
benchmark, the Lehman Brothers Municipal Bond Index. The Fund also outperformed
its peer group, as represented by the 110 funds of the Lipper New York Municipal
Debt Funds Average, which returned +2.21%.
As rates climbed, we sold some lower-coupon bonds, particularly those that
involve a tax loss. That has allowed us to reinvest at a higher level, providing
a better payout and allowing us to offset capital gains in the Fund.
As mentioned regarding our Florida funds, we took advantage of relative value
opportunities, watching for periods of heavy supply in Puerto Rico. We intend to
sell these bonds when supply diminishes and we see heavy demand. Our search for
good yield and solid credit led us to the healthcare sector, which we increased
from nine percent to 18 percent of total net assets. We decreased our position
in higher education bonds, reducing them from 18 percent to 15 percent.
Notably, we declined to purchase positions in tobacco bonds, which are backed by
the state's share of a $200 billion federal court settlement against large
tobacco companies. We were concerned by our perception that there was more
supply than demand for these bonds. We also avoided airline debt. The airline
industry continues to struggle, as it has for several years, and we felt it was
prudent to avoid the sector in general.
Finally, we lengthened average maturity and duration somewhat, both in response
to market conditions and as an effect of individual trades.
2
Delaware
TAX-FREE FLORIDA FUND
Fund Basics
As of August 31, 2003
- -----------------------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from Florida state personal income tax as is
consistent with preservation of capital.
- -----------------------------------------------------------
Total Fund Net Assets:
$16.84 million
- -----------------------------------------------------------
Number of Holdings:
38
- -----------------------------------------------------------
Fund Start Date:
March 2, 1995
- -----------------------------------------------------------
Your Fund Managers:
Patrick P. Coyne is a graduate of Harvard University with an MBA from the
University of Pennsylvania's Wharton School. Patrick Coyne joined Delaware
Investments' fixed-income department in 1990. Prior to joining Delaware
Investments, he was a manager of Kidder, Peabody & Co. Inc.'s trading desk, and
specialized in trading high-grade municipal bonds and municipal futures
contracts. M. L. Conery joined Delaware Investments in January 1997 and holds a
bachelor's degree from Boston University and an MBA in finance from the State
University of New York at Albany. Prior to joining Delaware, M. L. Conery has
served as an investment officer with Travelers Insurance and as a research
analyst with CS First Boston and MBIA Corporation.
- -----------------------------------------------------------
Nasdaq Symbols:
Class A DVFAX
Class B DVFBX
Class C DVFCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +6.37% +4.37% +3.67%
Including Sales Charge +5.80% +3.41% -1.00%
- --------------------------------------------------------------------------------
Class B (Est. 9/15/95)
Excluding Sales Charge +5.26% +3.61% +2.98%
Including Sales Charge +5.26% +3.35% -0.99%
- --------------------------------------------------------------------------------
Class C (Est. 4/22/95)
Excluding Sales Charge +5.36% +3.60% +2.89%
Including Sales Charge +5.36% +3.60% +1.90%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Florida
Fund during the periods shown. Performance would have been lower had the expense
limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
March 2, 1995 (Fund's inception) through August 31, 2003
Delaware Tax-Free Lehman Brothers
Florida Fund Municipal Bond Index
------------ --------------------
Mar-95 $9,678 $10,000
Aug-95 $10,011 $10,469
Aug-96 $10,713 $11,017
Aug-97 $11,804 $12,036
Aug-98 $13,022 $13,077
Aug-99 $12,825 $13,148
Aug-00 $13,352 $14,033
Aug-01 $14,619 $15,466
Aug-02 $15,558 $16,423
Aug-03 $16,128 $16,939
Chart assumes $10,000 invested on March 2, 1995 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The chart also assumes $10,000 invested in the Lehman Brothers
Municipal Bond Index at that month's end, March 31, 1995. After March 31, 1995,
returns plotted on the chart were as of the last day of each month shown. The
Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks
the performance of municipal bonds. An index is unmanaged and does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
3
Delaware
TAX-FREE FLORIDA INSURED FUND
Fund Basics
As of August 31, 2003
- ----------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from Florida state personal income tax as is
consistent with preservation of capital.
- ----------------------------------------------
Total Fund Net Assets:
$102.60 million
- ----------------------------------------------
Number of Holdings:
43
- ----------------------------------------------
Fund Start Date:
January 1, 1992
- ----------------------------------------------
Your Fund Managers:
Patrick P. Coyne
M. L. Conery
- ----------------------------------------------
Nasdaq Symbols:
Class A VFLIX
Class B DVDBX
Class C DVDCX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------------------
Class A (Est. 1/1/92)
Excluding Sales Charge +6.32% +5.16% +4.42% +2.68%
Including Sales Charge +5.90% +4.68% +3.45% -1.91%
- --------------------------------------------------------------------------------------------
Class B (Est. 3/11/94)
Excluding Sales Charge +4.88% +3.64% +2.00%
Including Sales Charge +4.88% +3.39% -1.92%
- --------------------------------------------------------------------------------------------
Class C (Est. 9/29/97)*
Excluding Sales Charge +4.21% +3.65% +2.00%
Including Sales Charge +4.21% +3.65% +1.02%
- --------------------------------------------------------------------------------------------
* Class C shares were sold and outstanding from September 29, 1997 until
December 18, 1997, when all of the outstanding Class C shares were redeemed.
There were no outstanding Class C shares or shareholder activity from December
19, 1997 through January 7, 1999. The performance for Class C shares during
the period from December 19, 1997 through January 7, 1999 is based on the
performance of Class B shares.
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Florida
Insured Fund during the periods shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free Lehman Brothers
Florida Insured Fund Municipal Bond Index
-------------------- --------------------
Aug-93 $9,550 $10,000
Aug-94 $9,292 $10,014
Aug-95 $10,049 $10,902
Aug-96 $10,643 $11,474
Aug-97 $11,680 $12,534
Aug-98 $12,729 $13,618
Aug-99 $12,622 $13,692
Aug-00 $13,291 $14,614
Aug-01 $14,539 $16,106
Aug-02 $15,388 $17,102
Aug-03 $15,799 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
4
Delaware
TAX-FREE NEW YORK FUND
Fund Basics
As of August 31, 2003
- ----------------------------------------------
Fund Objective:
The Fund seeks as high a level of current
income exempt from federal income tax and
from New York state personal income tax as is
consistent with preservation of capital.
- ----------------------------------------------
Total Fund Net Assets:
$17.50 million
- ----------------------------------------------
Number of Holdings:
34
- ----------------------------------------------
Fund Start Date:
November 6, 1987
- ----------------------------------------------
Your Fund Managers:
Patrick P. Coyne
M. L. Conery
- ----------------------------------------------
Nasdaq Symbols:
Class A FTNYX
Class B DVTNX
Class C DVFNX
Fund Performance
Average Annual Total Returns
Through August 31, 2003 Lifetime 10 Years Five Years One Year
- ----------------------------------------------------------------------------------------------------------
Class A (Est. 11/6/87)
Excluding Sales Charge +6.44% +4.50% +4.35% +3.56%
Including Sales Charge +6.13% +4.01% +3.40% -1.13%
- ----------------------------------------------------------------------------------------------------------
Class B (Est. 11/14/94)
Excluding Sales Charge +4.68% +3.58% +2.69%
Including Sales Charge +4.68% +3.33% -1.26%
- ----------------------------------------------------------------------------------------------------------
Class C (Est. 4/26/95)
Excluding Sales Charge +4.11% +3.60% +2.79%
Including Sales Charge +4.11% +3.60% +1.80%
- ----------------------------------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assume either that contingent
deferred sales charges did not apply or the investment was not redeemed. Past
performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free New
York Fund during the periods shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
Performance of a $10,000 Investment
August 31, 1993 through August 31, 2003
Delaware Tax-Free Lehman Brothers
New York Fund Municipal Bond Index
------------- --------------------
Aug-93 $9,550 $10,000
Aug-94 $9,617 $10,014
Aug-95 $10,179 $10,902
Aug-96 $10,536 $11,474
Aug-97 $11,155 $12,534
Aug-98 $11,963 $13,618
Aug-99 $11,669 $13,692
Aug-00 $12,262 $14,614
Aug-01 $13,616 $16,106
Aug-02 $14,295 $17,102
Aug-03 $14,803 $17,639
Chart assumes $10,000 invested on August 31, 1993 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
5
Statements Delaware Tax-Free Florida Fund
OF NET ASSETS August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds- 97.44%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 5.07%
Capital Trust Agency Florida Revenue
(Orlando/Cargo Project)
6.75% 1/1/32 $395,000 $369,313
Miami-Dade County Florida
Aviation Revenue
Series A 5.00% 10/1/33 (FSA)(AMT) 500,000 483,740
--------
853,053
--------
Consumer Non-Durables - 1.60%
Volusia County
Health Facilities Authority
(John Knox Village)
Series A 6.00% 6/1/17
(RADIAN) 250,000 268,573
--------
268,573
--------
Corporate Backed Revenue Bonds - 0.91%
Jacksonville Sewer & Solid Waste
Disposal Facilities Authority
(Anheuser Busch Project)
5.875% 2/1/36 (AMT) 150,000 154,019
--------
154,019
--------
Dedicated Tax & Fees Revenue Bonds - 4.11%
Dade County Special Obligation
Series B 5.00% 10/1/35 (AMBAC) 200,000 196,074
Jacksonville, Florida Sales Tax Revenue
5.00% 10/1/30 (MBIA) 500,000 495,945
--------
692,019
--------
Hospital Revenue Bonds - 22.19%
Escambia County
Health Facilities Authority
(Florida Health Care
Facilities - VHA Program)
5.95% 7/1/20 (AMBAC) 425,000 457,309
Highlands County
Health Facilities Authority
(Adventist Health System/Sunbelt)
Series A 6.00% 11/15/31 500,000 521,344
Hillsborough County Florida
Industrial Development
(Tampa General Hospital Project)
Series B 5.25% 10/1/34 500,000 464,840
North Miami
Health Facilities Authority
(Catholic Health Services)
(LOC Suntrust Bank-Miami)
6.00% 8/15/16 500,000 526,404
Orange County, Florida Health Facilities
Authority Revenue
(Adventist Health System)
5.625% 11/15/32 500,000 502,015
Orange County, Florida Health Facilities
Authority Revenue
(Orlando Regional Healthcare)
5.75% 12/1/32 250,000 253,828
Palm Beach County Health Facilities
Authority Revenue Refunding Hospital
(Boca Raton Community Hospital)
5.625% 12/1/31 500,000 499,250
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
South Broward Hospital District Revenue
(Memorial Healthcare System)
5.625% 5/1/32 $ 500,000 $ 509,670
----------
3,734,660
----------
Miscellaneous Revenue Bonds - 6.75%
Florida State Board of Education
(Lottery Revenue)
Series A 6.00% 7/1/14 (FGIC) 1,000,000 1,137,070
----------
1,137,070
----------
Multi Family Housing Revenue Bonds - 10.85%
Dade County Housing Finance Authority
(Lincoln Fields Apartments Section 8)
6.25% 7/1/24 (MBIA) 500,000 501,770
Duval Housing Finance Authority
(St. Augustine Apartments)
6.00% 3/1/21 300,000 306,453
Florida Housing Finance Agency
(The Vineyards Project)
Series H 6.40% 11/1/15 500,000 516,810
Volusia County Housing Finance Authority
(San Marco Apartments)
Series A 5.60%
1/1/44 (FSA)(AMT) 500,000 501,065
----------
1,826,098
----------
Ports & Harbors Revenue Bonds - 1.81%
Jacksonville Florida Port Authority
Seaport Revenue
5.70% 11/1/30 (MBIA)(AMT) 295,000 304,888
----------
304,888
----------
*Pre-Refunded Bonds - 20.35%
Jacksonville Florida Port Authority
Seaport Revenue
5.70% 11/1/30-10 (MBIA)(AMT) 205,000 231,187
Northern Palm Beach County
Improvement District Special
Assessment (Abacoa Water Control)
7.20% 8/1/16-06 300,000 349,365
Pinellas County
Educational Facilities Authority
(Clearwater Christian College)
Private Placement 8.00% 2/1/11-06 205,000 229,225
Tampa Utilities Tax Revenue Series A
6.00% 10/1/17-09 (AMBAC) 1,000,000 1,174,130
6.125% 10/1/18-09 (AMBAC) 1,000,000 1,181,040
Volusia County, Florida Industrial
Development Authority Mortgage
Revenue (Bishops Glen Retirement
Health Facilities Project)
7.50% 11/1/16-06 230,000 260,813
----------
3,425,760
----------
Public Power Revenue Bonds - 6.18%
Jacksonville, Florida Electric Authority
Revenue Electric System
Series 3-C 5.50%
10/1/30 1,000,000 1,040,720
----------
1,040,720
----------
6
Statements Delaware Tax-Free Florida Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Single Family Housing Revenue Bonds - 3.66%
Florida Housing Finance Agency
Homeowner Mortgage Series 1B
6.00% 7/1/17 $125,000 $ 130,269
Orange County Florida
Housing Finance Authority
Homeowner Revenue Series B 5.25%
3/1/33 (AMT) 500,000 486,120
-----------
616,389
-----------
Tax Increment / Special Assessment Bonds - 6.32%
Julinton Creek Plantation Community
Development District Special Assessment
5.00% 5/1/29 (MBIA) 495,000 486,876
Lake Bernadette Community Development
District Special Assessment Series A
8.00% 5/1/17 240,000 248,158
Orlando, Florida Special Assessment
(Conroy Road Interchange Project)
Series B 5.25% 5/1/05 125,000 124,980
Tampa Palms Community Development
District (Richmond Place Project)
7.50% 5/1/18 195,000 204,222
-----------
1,064,236
-----------
Territorial Revenue Bonds - 2.64%
Puerto Rico Commonwealth
Highway & Transportation Authority
Revenue Series B
6.00% 7/1/26 150,000 157,920
Puerto Rico Commonwealth
Highway & Transportation Authority
Revenue Series G
5.00% 7/1/42 300,000 286,314
-----------
444,234
-----------
Turnpike / Toll Road Revenue Bonds - 2.02%
Dunes, Florida Community Development
District Revenue -Intracoastal
Waterway Bridge (ITT Industries
Corporation) 5.50% 10/1/07 175,000 179,132
Florida State Mid-Bay Bridge Authority
Series D 6.125% 10/1/22 160,000 160,859
-----------
339,991
-----------
Water & Sewer Revenue Bonds - 2.98%
Jacksonville Electric Authority
Revenue Water & Sewer Systems
Series A 5.625% 10/1/37 500,000 502,065
-----------
502,065
-----------
Total Municipal Bonds
(cost $15,590,773) 16,403,775
-----------
Total Market Value of Securities - 97.44%
(cost $15,590,773) 16,403,775
Receivables and Other Assets
Net of Liabilities - 2.56% 431,543
-----------
Net Assets Applicable to 1,541,080
Shares Outstanding - 100.00% $16,835,318
===========
Net Asset Value - Delaware Tax-Free
Florida Fund Class A
($9,694,362 / 888,084 Shares) $10.92
------
Net Asset Value - Delaware Tax-Free
Florida Fund Class B
($5,313,120 / 485,819 Shares) $10.94
------
Net Asset Value - Delaware Tax-Free
Florida Fund Class C
($1,827,836 / 167,177 Shares) $10.93
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $16,751,043
Distributions in excess of net investment income (181)
Accumulated net realized loss on investments (728,546)
Net unrealized appreciation of investments 813,002
-----------
Total net assets $16,835,318
===========
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Florida Fund
Net asset value Class A (A) $10.92
Sales charge (4.50% of offering price,
or 4.67% of amount invested per share)(B) 0.51
------
Offering price $11.43
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
7
Statements Delaware Tax-Free Florida Insured Fund
OF NET ASSETS (CONTINUED) August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 98.68%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 3.11%
Lee County Florida Airport
Revenue Series B 5.75% 10/1/33 (FSA) $3,000,000 $ 3,191,730
-----------
3,191,730
-----------
Dedicated Tax & Fees Revenue Bonds - 12.72%
Florida Department of Transportation
5.00% 7/1/31 (FGIC) 2,000,000 1,977,640
Jacksonville Florida Excise Taxes
Revenue Series B
5.00% 10/1/26 (AMBAC) 1,500,000 1,494,840
+Palm Beach County Florida
Criminal Justice Facilities
Revenue Inverse Floater
9.77% 6/1/12 (FGIC) 7,500,000 9,572,775
-----------
13,045,255
-----------
Higher Education Revenue Bonds - 3.04%
Broward County, Florida
Educational Facilities Authority Revenue
(Nova Southeastern University)
5.25% 4/1/27 (RADIAN) 1,000,000 989,810
Dade County Florida Educational
Facilities Authority (University of Miami)
Series A 5.75% 4/1/29 (AMBAC) 2,000,000 2,128,360
-----------
3,118,170
-----------
Hospital Revenue Bonds - 22.42%
Escambia County
Health Facilities Authority
(Florida Health Care Facilities -
VHA Program) 5.95% 7/1/20 (AMBAC) 4,500,000 4,842,089
Highlands County
Health Facilities Authority
(Adventist Health System/Sunbelt)
Series A 6.00% 11/15/31 1,000,000 1,042,690
Hillsborough County Florida
Industrial Development
(Tampa General Hospital Project)
Series B 5.25% 10/1/34 1,500,000 1,394,520
Indian River County Hospital District
(Indian River Memorial Hospital)
6.10% 10/1/18 (FSA) 3,000,000 3,349,770
Lee Memorial Health Systems
Series A 5.00% 4/1/18 (FSA) 1,250,000 1,287,338
Orange County, Florida
Health Facilities Authority Revenue
(Adventist Health System)
5.625% 11/15/32 3,965,000 3,980,979
Palm Beach County
Health Facilities Authority
Revenue Refunding Hospital
(Boca Raton Community Hospital)
5.625% 12/1/31 2,000,000 1,997,000
South Broward Hospital District Revenue
(Memorial Healthcare System)
5.625% 5/1/32 2,500,000 2,548,350
Tallahassee Health Facilities
(Tallahassee Memorial
Regional Medical Center)
Series B 6.00% 12/1/15 (MBIA) 2,500,000 2,558,300
-----------
23,001,036
-----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Multi Family Housing Revenue Bonds - 26.58%
Florida Housing Finance Agency
(Crossings Indian Run Apartments HUD)
Series V (LOC First Union National
Bank of North Carolina)
6.10% 12/1/26 (AMBAC)(AMT) $ 750,000 $ 770,018
Florida Housing Finance Agency
(Landings at Sea Forest Apartments)
Series T (LOC First Union National
Bank of North Carolina)
5.85% 12/1/18 (AMBAC)(FHA)(AMT) 440,000 451,990
6.05% 12/1/36 (AMBAC)(FHA)(AMT) 700,000 714,861
Florida Housing Finance Agency
(Leigh Meadows Apartments Section 8)
Series N (LOC First Union National
Bank of North Carolina)
6.20% 9/1/26 (AMBAC)(AMT) 2,765,000 2,846,015
6.30% 9/1/36 (AMBAC)(AMT) 2,000,000 2,058,880
Florida Housing Finance Agency
(Mariner Club Apartments) Series K-1
6.25% 9/1/26 (AMBAC)(AMT) 2,000,000 2,062,220
6.375% 9/1/36 (AMBAC)(AMT) 3,500,000 3,611,125
Florida Housing Finance Agency
(Riverfront Apartments Section 8)
Series A 6.25% 4/1/37 (AMBAC)(AMT) 1,000,000 1,035,610
Florida Housing Finance Agency
(Spinnaker Cove Apartments)
Series G (LOC First Union National
Bank of North Carolina)
6.50% 7/1/36 (AMBAC)(FHA)(AMT) 500,000 517,300
Florida Housing Finance Agency
(Sterling Palms Apartments) Series D-1
(LOC First Union National
Bank of North Carolina)
6.30% 12/1/16 (AMBAC)(AMT) 1,000,000 1,037,630
6.40% 12/1/26 (AMBAC)(AMT) 1,500,000 1,551,105
6.50% 6/1/36 (AMBAC)(AMT) 6,540,000 6,763,340
Florida Housing Finance Agency
(Woodbridge Apartments) Series L
6.15% 12/1/26 (AMBAC)(AMT) 1,750,000 1,799,998
6.25% 6/1/36 (AMBAC)(AMT) 2,000,000 2,058,460
-----------
27,278,552
-----------
Municipal Lease Revenue Bonds - 4.93%
Osceola County Florida School Board
Series A 5.25% 6/1/27 (AMBAC) 4,000,000 4,069,040
Palm Beach County Florida School Board
Certificates of Participation
Series D 5.00% 8/1/28 (FSA) 1,000,000 991,930
-----------
5,060,970
-----------
*Pre-Refunded Bonds - 7.65%
Miramar Wastewater Improvement
Assessment 6.75% 10/1/25-04 (FGIC) 2,425,000 2,599,188
Port St. Lucie Florida
Utility Revenue 6.00% 9/1/24-04 (FGIC) 5,000,000 5,249,900
-----------
7,849,088
-----------
8
Statements Delaware Tax-Free Florida Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Public Power Revenue Bonds - 1.94%
Florida State Municipal Power Agency
Revenue (Stanton II Project)
5.00% 10/1/26 (AMBAC) $2,000,000 $ 1,993,120
------------
1,993,120
------------
Tax Increment / Special Assessment Bonds - 1.30%
Osceola County Celebration Community
Development District Assessment
6.10% 5/1/16 (MBIA) 560,000 581,689
Osceola County Enterprise Community
Development District Special Assessment
6.10% 5/1/16 (MBIA) 720,000 747,885
------------
1,329,574
------------
Territorial General Obligation Bonds - 4.19%
Puerto Rico Commonwealth
Public Improvement Series A
5.125% 7/1/30 (FSA) 1,500,000 1,517,460
5.50% 7/1/19 (MBIA) 2,500,000 2,779,350
------------
4,296,810
------------
Territorial Revenue Bonds - 6.23%
Puerto Rico Commonwealth
Highway & Transportation Authority
Transportation Revenue Series D
5.25% 7/1/38 5,500,000 5,451,765
Puerto Rico Public Buildings Authority
Revenue 5.25% 7/1/25
(Commonwealth Guaranteed) 930,000 935,357
------------
6,387,122
------------
Turnpike / Toll Road Revenue Bonds - 1.44%
Tampa-Hillsborough County
Expressway Authority
5.00% 7/1/35 (FGIC) 1,500,000 1,480,590
------------
1,480,590
------------
Water & Sewer Revenue Bonds - 3.13%
JEA, Florida Water and Sewer Systems
Revenue Series A
5.375% 10/1/30 (MBIA) 2,000,000 2,042,960
Tampa Water and Sewer Revenue
6.00% 10/1/16 (FSA) 1,000,000 1,166,030
------------
3,208,990
------------
Total Municipal Bonds
(cost $96,611,195) 101,241,007
------------
Total Market Value of Securities - 98.68%
(cost $96,611,195) 101,241,007
Receivables and Other Assets
Net of Liabilities - 1.32% 1,355,572
------------
Net Assets Applicable to 9,233,448
Shares Outstanding - 100.00% $102,596,579
============
Net Asset Value - Delaware Tax-Free
Florida Insured Fund Class A
($95,950,606 / 8,635,590 Shares) $11.11
------
Net Asset Value - Delaware Tax-Free
Florida Insured Fund Class B
($5,799,858 / 521,738 Shares) $11.12
------
Net Asset Value - Delaware Tax-Free
Florida Insured Fund Class C
($846,115 / 76,120 Shares) $11.12
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $ 99,209,906
Accumulated net realized loss on investments (1,243,139)
Net unrealized appreciation of investments 4,629,812
------------
Total net assets $102,596,579
============
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FSA - Insured by Financial Security Assurance
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term rates. Interest rate
disclosed is in effect as of August 31, 2003.
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Florida Insured Fund
Net asset value Class A (A) $11.11
Sales charge (4.50% of offering price,
or 4.68% of amount invested per share)(B) 0.52
------
Offering price $11.63
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
9
Statements Delaware Tax-Free New York Fund
OF NET ASSETS August 31, 2003
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds- 97.75%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 5.50%
New York City, New York
Industrial Development
(JFK Airis Project)
5.50% 7/1/28 (AMT) $500,000 $ 462,370
Onondaga County, New York
Industrial Development Authority
Revenue Subordinated
(Air Cargo Project)
7.25% 1/1/32 (AMT) 500,000 500,435
----------
962,805
----------
City General Obligation Bonds - 5.44%
New York City Series C
5.375% 11/15/27 450,000 453,029
New York City, New York
Series J 5.25% 6/1/28 500,000 498,925
----------
951,954
----------
Dedicated Tax & Fees Revenue Bonds - 2.89%
Schenectady, New York
Metroplex Development Authority
Revenue Series A
5.375% 12/15/21 500,000 505,790
----------
505,790
----------
Higher Education Revenue Bonds - 14.92%
Amherst, New York
Industrial Agency
Civic Facilities Revenue
(UBF Faculty Student Housing)
Series A 5.75% 8/1/30 (AMBAC) 200,000 214,626
Dutchess County Industrial
Development Agency
(Marist College)
5.00% 7/1/20 500,000 491,865
New York State
Dormitory Authority Revenue
(Columbia University)
Series A 5.00% 7/1/23 500,000 506,760
New York State
Dormitory Authority Revenue
(Pratt Institute)
6.00% 7/1/20 (RADIAN) 500,000 561,105
New York State
Dormitory Authority Revenue
(State University)
Series B 7.50% 5/15/11 270,000 326,249
Onondaga County
Industrial Development Agency
(Le Moyne College)
Series A 5.625% 12/1/21 500,000 510,805
----------
2,611,410
----------
Hospital Revenue Bonds - 18.18%
New York State
Dormitory Authority Revenue
(Chapel Oaks) (LOC Allied Irish Bank)
5.45% 7/1/26 450,000 452,691
New York State
Dormitory Authority Revenue
(Mental Health)
Series D 5.90% 2/15/12 250,000 275,748
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds (continued)
New York State
Dormitory Authority Revenue
(Millard Fillmore Hospital)
5.375% 2/1/32 (AMBAC) (FHA) $ 450,000 $ 457,961
New York State
Dormitory Authority Revenue
(North Shore Long Island Jewish Group)
5.50% 5/1/33 500,000 502,939
New York State
Dormitory Authority Revenue
(Sloan-Kettering Center)
Series 1 5.00% 7/1/34 500,000 486,855
New York State
Dormitory Authority Revenue
(Winthrop South Nassau Hospital)
Series B 5.50% 7/1/23 500,000 503,169
New York State
Dormitory Authority Revenue
(Winthrop University Hospital)
Series A 5.50% 7/1/32 500,000 500,900
----------
3,180,263
----------
Investor Owned Utilities Revenue Bonds - 5.21%
New York City
Industrial Development Agency
(Brooklyn Navy Yard Cogen Partners)
5.75% 10/1/36 (AMT) 450,000 397,683
New York State
Energy Research & Development
Authority Pollution Control Revenue
(Central Hudson Gas)
Series A 5.45% 8/1/27 (AMBAC) 500,000 514,685
----------
912,368
----------
Municipal Lease Revenue Bonds - 5.76%
Albany, New York Industrial Development
Agency Civic Facility Revenue
(Charitable Leadership Project)
Series A 5.75% 7/1/26 500,000 497,125
New York State Dormitory Authority Lease
5.375% 5/15/21 500,000 511,735
----------
1,008,860
----------
Parking Revenue Bonds - 2.89%
Albany, New York Parking Authority
Revenue Series A 5.625% 7/15/25 500,000 505,535
----------
505,535
----------
*Pre-Refunded Bonds - 10.71%
Metropolitan Transportation Authority
New York Dedicated Tax
Series A 6.125% 4/1/17-10 (FGIC) 1,000,000 1,163,780
New York State Dormitory Authority
Revenue (State University)
Series B 7.50% 5/15/11-09 130,000 162,195
New York State Thruway Authority Service
Contract Revenue Local Highway & Bridge
6.25% 4/1/14-05 500,000 548,965
----------
1,874,940
----------
10
Statements Delaware Tax-Free New York Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
- --------------------------------------------------------------------------------
Public Power Revenue Bonds - 2.75%
Long Island Power Authority
New York Electric System Revenue
Series C 5.00% 9/1/27 $500,000 $ 481,860
-----------
481,860
-----------
Single Family Housing Revenue Bonds - 5.32%
New York State Mortgage Agency Revenue
Homeowner Mortgage
Series 88 6.25% 4/1/30 (AMT) 890,000 931,447
-----------
931,447
-----------
Territorial Revenue Bonds - 11.24%
Puerto Rico Commonwealth
Highway & Transportation Authority
Highway Revenue
Series Y 5.50% 7/1/36 475,000 487,160
Puerto Rico Commonwealth
Highway & Transportation Authority
Transportation Revenue
Series G 5.00% 7/1/33 500,000 484,525
Puerto Rico Electric Power Authority
Power Revenue
Series N 5.125% 7/1/29 500,000 495,720
Puerto Rico Electric Power Authority
Revenue Series II 5.25% 7/1/31 500,000 500,155
-----------
1,967,560
-----------
Water & Sewer Revenue Bonds - 6.94%
New York City, New York
Municipal Water Finance Authority
Water & Sewer System Revenue
Series A 5.125% 6/15/34 625,000 625,169
New York City, New York
Municipal Water Finance Authority
Water & Sewer System Revenue
Series E 5.00% 6/15/34 600,000 588,858
-----------
1,214,027
-----------
Total Municipal Bonds
(cost $16,643,208) 17,108,819
-----------
Total Market Value of Securities - 97.75%
(cost $16,643,208) 17,108,819
Receivables and Other Assets
Net of Liabilities - 2.25% 393,310
-----------
Net Assets Applicable to 1,713,974 Shares
Outstanding - 100.00% $17,502,129
===========
Net Asset Value - Delaware Tax-Free
New York Fund Class A
($11,436,454 / 1,119,314 Shares) $10.22
------
Net Asset Value - Delaware Tax-Free
New York Fund Class B
($3,238,030 / 317,447 Shares) $10.20
------
Net Asset Value - Delaware Tax-Free
New York Fund Class C
($2,827,645 / 277,213 Shares) $10.20
------
Components of Net Assets at August 31, 2003:
Shares of beneficial interest
(unlimited authorization - no par) $17,357,261
Distributions in excess of net investment income (655)
Accumulated net realized loss on investments (320,088)
Net unrealized appreciation of investments 465,611
-----------
Total net assets $17,502,129
===========
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
LOC - Letter of Credit
RADIAN - Insured by Radian Asset Assurance
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
Net Asset Value and Offering Price per Share --
Delaware Tax-Free New York Fund
Net asset value Class A (A) $10.22
Sales charge (4.50% of offering price,
or 4.70% of amount invested per share)(B) 0.48
------
Offering price $10.70
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
11
Statements Year Ended August 31, 2003
OF OPERATIONS
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Florida Fund Florida Insured Fund New York Fund
Investment Income:
Interest $ 900,009 $ 6,032,497 $836,503
--------- ----------- --------
Expenses:
Management fees 92,696 548,852 89,444
Distribution expenses -- Class A 25,392 258,736 27,795
Distribution expenses -- Class B 54,785 56,796 33,759
Distribution expenses -- Class C 12,118 6,466 17,523
Dividend disbursing and transfer agent fees and expenses 10,955 82,638 15,458
Accounting and administration expenses 7,606 49,552 7,326
Professional fees 2,981 21,470 3,301
Trustees' fees 1,952 5,455 1,678
Registration fees 1,724 10,236 6,365
Reports and statements to shareholders 1,590 9,550 2,942
Custodian fees 1,403 5,396 1,651
Other 4,414 27,393 3,840
--------- ----------- ----------
217,616 1,082,540 211,082
Less expenses absorbed or waived (39,436) (41,495) (89,588)
Less expenses paid indirectly (1,645) (5,409) (1,804)
--------- ----------- ----------
Total expenses 176,535 1,035,636 119,690
--------- ----------- ----------
Net Investment Income 723,474 4,996,861 716,813
--------- ----------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 76,778 614,284 157,510
Net change in unrealized appreciation/depreciation of investments (243,690) (2,605,250) (376,165)
--------- ----------- ----------
Net Realized and Unrealized Loss on Investments (166,912) (1,990,966) (218,655)
--------- ----------- ----------
Net Increase in Net Assets Resulting from Operations $ 556,562 $ 3,005,895 $ 498,158
========= =========== ==========
See accompanying notes
12
Statements
OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
Year Ended Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02
Increase (Decrease) in Net Assets from Operations:
Net investment income $723,474 $711,610 $4,996,861 $5,242,579 $716,813 $661,650
Net realized gain on investments 76,778 182,704 614,284 766,040 157,510 51,624
Net change in unrealized
appreciation/depreciation of investments (243,690) 50,716 (2,605,250) 255,033 (376,165) (50,467)
----------- ----------- ------------ ------------ ----------- -----------
Net increase in net assets resulting from
operations 556,562 945,030 3,005,895 6,263,652 498,158 662,807
----------- ----------- ------------ ------------ ----------- -----------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (466,803) (501,105) (4,753,688) (5,037,013) (516,808) (494,892)
Class B (210,191) (187,869) (218,299) (194,236) (132,026) (118,158)
Class C (46,480) (22,636) (24,874) (11,330) (67,979) (48,600)
----------- ----------- ------------ ------------ ----------- -----------
(723,474) (711,610) (4,996,861) (5,242,579) (716,813) (661,650)
----------- ----------- ------------ ------------ ----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
Class A 1,111,543 1,408,493 5,639,680 6,986,446 2,864,348 965,399
Class B 928,820 1,066,869 1,740,052 969,051 207,630 937,942
Class C 1,165,280 200,000 431,204 500,099 1,959,112 68,645
Net asset value of shares issued upon
reinvestment of dividends and distributions:
Class A 182,417 184,329 1,575,119 1,711,943 374,830 313,811
Class B 67,252 73,100 95,718 80,923 56,078 49,223
Class C 20,496 9,025 17,939 8,714 59,428 45,482
----------- ----------- ------------ ------------ ----------- -----------
3,475,808 2,941,816 9,499,712 10,257,176 5,521,426 2,380,502
----------- ----------- ------------ ------------ ----------- -----------
Cost of shares repurchased:
Class A (1,976,552) (2,023,575) (15,180,505) (11,258,670) (1,168,843) (1,948,355)
Class B (739,284) (756,732) (1,146,474) (883,500) (337,967) (156,584)
Class C (64,239) (5,800) (141,785) (11,382) (250,079) (203,370)
----------- ----------- ------------ ------------ ----------- -----------
(2,780,075) (2,786,107) (16,468,764) (12,153,552) (1,756,889) (2,308,309)
----------- ----------- ------------ ------------ ----------- -----------
Increase (decrease) in net assets derived
from capital share transactions 695,733 155,709 (6,969,052) (1,896,376) 3,764,537 72,193
----------- ----------- ------------ ------------ ----------- -----------
Net Increase (Decrease) in Net Assets 528,821 389,129 (8,960,018) (875,303) 3,545,882 73,350
Net Assets:
Beginning of year 16,306,497 15,917,368 111,556,597 112,431,900 13,956,247 13,882,897
----------- ----------- ------------ ------------ ----------- -----------
End of year $16,835,318 $16,306,497 $102,596,579 $111,556,597 $17,502,129 $13,956,247
----------- ----------- ------------ ------------ ----------- -----------
See accompanying notes
13
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Florida Fund Class A
- ------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.030 $10.870 $10.420 $10.530 $11.230
Income (loss) from investment operations:
Net investment income 0.510 0.514 0.513 0.518 0.532
Net realized and unrealized gain (loss) on investments (0.110) 0.160 0.450 (0.110) (0.688)
------- ------- ------- ------- -------
Total from investment operations 0.400 0.674 0.963 0.408 (0.156)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.510) (0.514) (0.513) (0.518) (0.532)
Net realized gain on investments -- -- -- -- (0.012)
------- ------- ------- ------- -------
Total dividends and distributions (0.510) (0.514) (0.513) (0.518) (0.544)
------- ------- ------- ------- -------
Net asset value, end of period $10.920 $11.030 $10.870 $10.420 $10.530
======= ======= ======= ======= =======
Total return(2) 3.67% 6.42% 9.48% 4.11% (1.50%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $9,694 $10,464 $10,747 $8,711 $11,406
Ratio of expenses to average net assets(3) 0.75% 0.75% 0.75% 0.75% 0.62%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.98% 1.06% 0.97% 1.10% 1.16%
Ratio of net investment income to average net assets 4.59% 4.78% 4.84% 5.11% 4.81%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.36% 4.47% 4.62% 4.76% 4.27%
Portfolio turnover 31% 57% 40% 64% 30%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2002, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 0.76%.
See accompanying notes
14
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Florida Fund Class B
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.040 $10.890 $10.430 $10.540 $11.240
Income (loss) from investment operations:
Net investment income 0.426 0.433 0.434 0.443 0.449
Net realized and unrealized gain (loss) on investments (0.100) 0.150 0.460 (0.110) (0.688)
------- ------- ------- ------- -------
Total from investment operations 0.326 0.583 0.894 0.333 (0.239)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.426) (0.433) (0.434) (0.443) (0.449)
Net realized gain on investments -- -- -- -- (0.012)
------- ------- ------- ------- -------
Total dividends and distributions (0.426) (0.433) (0.434) (0.443) (0.461)
------- ------- ------- ------- -------
Net asset value, end of period $10.940 $11.040 $10.890 $10.430 $10.540
======= ======= ======= ======= =======
Total return(2) 2.98% 5.52% 8.76% 3.34% (2.24%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,313 $5,110 $4,655 $4,045 $4,468
Ratio of expenses to average net assets(3) 1.50% 1.50% 1.50% 1.50% 1.37%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.73% 1.81% 1.72% 1.85% 1.91%
Ratio of net investment income to average net assets 3.84% 4.03% 4.09% 4.36% 4.06%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.61% 3.72% 3.87% 4.01% 3.52%
Portfolio turnover 31% 57% 40% 64% 30%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2002, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 1.51%.
See accompanying notes
15
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Florida Fund Class C
- ------------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.040 $10.880 $10.420 $10.530 $11.240
Income (loss) from investment operations:
Net investment income 0.426 0.433 0.434 0.446 0.449
Net realized and unrealized gain (loss) on investments (0.110) 0.160 0.460 (0.110) (0.698)
------- ------- ------- ------- -------
Total from investment operations 0.316 0.593 0.894 0.336 (0.249)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.426) (0.433) (0.434) (0.446) (0.449)
Net realized gain on investments -- -- -- -- (0.012)
------- ------- ------- ------- -------
Total dividends and distributions (0.426) (0.433) (0.434) (0.446) (0.461)
------- ------- ------- ------- -------
Net asset value, end of period $10.930 $11.040 $10.880 $10.420 $10.530
======= ======= ======= ======= =======
Total return(2) 2.89% 5.63% 8.79% 3.38% (2.33%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $1,828 $732 $516 $433 $722
Ratio of expenses to average net assets(3) 1.50% 1.50% 1.50% 1.50% 1.37%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.73% 1.81% 1.72% 1.85% 1.91%
Ratio of net investment income to average net assets 3.84% 4.03% 4.09% 4.36% 4.06%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.61% 3.72% 3.87% 4.01% 3.52%
Portfolio turnover 31% 57% 40% 64% 30%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2002, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 1.51%.
See accompanying notes
16
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Florida Insured Fund Class A
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.330 $11.230 $10.770 $10.750 $11.370
Income (loss) from investment operations:
Net investment income 0.523 0.532 0.527 0.525 0.537
Net realized and unrealized gain (loss) on investments (0.220) 0.100 0.460 0.020 (0.620)
------- ------- ------- ------- -------
Total from investment operations 0.303 0.632 0.987 0.545 (0.083)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.523) (0.532) (0.527) (0.525) (0.537)
------- ------- ------- ------- -------
Total dividends and distributions (0.523) (0.532) (0.527) (0.525) (0.537)
------- ------- ------- ------- -------
Net asset value, end of period $11.110 $11.330 $11.230 $10.770 $10.750
======= ======= ======= ======= =======
Total return(2) 2.68% 5.83% 9.39% 5.29% (0.83%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $95,951 $105,773 $107,365 $110,708 $125,838
Ratio of expenses to average net assets 0.90% 0.90% 0.90% 0.91% 0.85%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.94% 0.99% 0.97% 1.01% 0.85%
Ratio of net investment income to average net assets 4.60% 4.80% 4.81% 4.98% 4.77%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.56% 4.71% 4.74% 4.88% 4.77%
Portfolio turnover 26% 46% 12% 56% 25%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver 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
17
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Florida Insured Fund Class B
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.330 $11.230 $10.770 $10.750 $11.370
Income (loss) from investment operations:
Net investment income 0.437 0.445 0.443 0.448 0.452
Net realized and unrealized gain (loss) on investments (0.210) 0.100 0.460 0.016 (0.620)
------- ------- ------- ------- -------
Total from investment operations 0.227 0.545 0.903 0.464 (0.168)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.437) (0.445) (0.443) (0.444) (0.452)
------- ------- ------- ------- -------
Total dividends and distributions (0.437) (0.445) (0.443) (0.444) (0.452)
------- ------- ------- ------- -------
Net asset value, end of period $11.120 $11.330 $11.230 $10.770 $10.750
======= ======= ======= ======= =======
Total return(2) 2.00% 5.01% 8.56% 4.50% (1.58%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $5,800 $5,223 $5,014 $5,272 $4,799
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.66% 1.60%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.69% 1.74% 1.72% 1.76% 1.60%
Ratio of net investment income to average net assets 3.85% 4.05% 4.06% 4.23% 4.02%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.81% 3.96% 3.99% 4.13% 4.02%
Portfolio turnover 26% 46% 12% 56% 25%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver 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
18
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Florida Insured Fund Class C
- -------------------------------------------------------------------------------------------------------------------------
Year Ended 1/8/99(2)(3)
to
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $11.330 $11.240 $10.780 $10.760 $11.370
Income (loss) from investment operations:
Net investment income 0.437 0.447 0.443 0.454 0.286
Net realized and unrealized gain (loss) on investments (0.210) 0.090 0.460 0.010 (0.610)
------- ------- ------- ------- -------
Total from investment operations 0.227 0.537 0.903 0.464 (0.324)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.437) (0.447) (0.443) (0.444) (0.286)
------- ------- ------- ------- -------
Total dividends and distributions (0.437) (0.447) (0.443) (0.444) (0.286)
------- ------- ------- ------- -------
Net asset value, end of period $11.120 $11.330 $11.240 $10.780 $10.760
======= ======= ======= ======= =======
Total return(4) 2.00% 4.93% 8.45% 4.49% (2.91%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $846 $560 $53 $51 $107
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.66% 1.60%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.69% 1.74% 1.72% 1.76% 1.60%
Ratio of net investment income to average net assets 3.85% 4.05% 4.06% 4.23% 4.02%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.81% 3.96% 3.99% 4.13% 4.02%
Portfolio turnover 26% 46% 12% 56% 25%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(3) Shares of Delaware Investments Tax-Free Florida Insured Fund Class C were
initially offered on September 29, 1997. On or about September 29, 1997,
Class C sold shares, which were subsequently repurchased on December 18,
1997. There were no shares sold or outstanding from December 19, 1997
through January 7, 1999. Shareholder data for Class C for the period
September 29, 1997 through December 18, 1997 are not disclosed because
Management does not believe them to be meaningful.
(4) 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 a waiver 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
19
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free New York Fund Class A
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.340 $10.350 $9.820 $9.880 $10.670
Income (loss) from investment operations:
Net investment income 0.484 0.503 0.523 0.535 0.523
Net realized and unrealized gain (loss) on investments (0.120) (0.010) 0.530 (0.060) (0.766)
------- ------- ------- ------- -------
Total from investment operations 0.364 0.493 1.053 0.475 (0.243)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.484) (0.503) (0.523) (0.535) (0.523)
Net realized gain on investments -- -- -- -- (0.024)
------- ------- ------- ------- -------
Total dividends and distributions (0.484) (0.503) (0.523) (0.535) (0.547)
------- ------- ------- ------- -------
Net asset value, end of period $10.220 $10.340 $10.350 $9.820 $9.880
======= ======= ======= ======= =======
Total return(2) 3.56% 4.98% 11.03% 5.09% (2.44%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $11,436 $9,490 $10,169 $10,082 $10,580
Ratio of expenses to average net assets(3) 0.50% 0.50% 0.50% 0.50% 0.66%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.05% 1.15% 1.02% 1.25% 1.19%
Ratio of net investment income to average net assets 4.65% 4.98% 5.23% 5.58% 4.99%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.10% 4.33% 4.71% 4.83% 4.46%
Portfolio turnover 64% 43% 27% 34% 21%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratios for the years ended August 31, 2003 and 2002, including fees paid
indirectly in accordance with Securities and Exchange Commission rules, were
0.51%.
See accompanying notes
20
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free New York Fund Class B
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.330 $10.330 $9.810 $9.860 $10.650
Income (loss) from investment operations:
Net investment income 0.406 0.426 0.448 0.462 0.445
Net realized and unrealized gain (loss) on investments (0.130) -- 0.520 (0.050) (0.766)
------- ------- ------- ------- -------
Total from investment operations 0.276 0.426 0.968 0.412 (0.321)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.406) (0.426) (0.448) (0.462) (0.445)
Net realized gain on investments -- -- -- -- (0.024)
------- ------- ------- ------- -------
Total dividends and distributions (0.406) (0.426) (0.448) (0.462) (0.469)
------- ------- ------- ------- -------
Net asset value, end of period $10.200 $10.330 $10.330 $9.810 $9.860
======= ======= ======= ======= =======
Total return(2) 2.69% 4.30% 10.12% 4.41% (3.18%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,238 $3,352 $2,507 $1,297 $1,435
Ratio of expenses to average net assets(3) 1.25% 1.25% 1.25% 1.25% 1.41%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.80% 1.90% 1.77% 2.00% 1.94%
Ratio of net investment income to average net assets 3.90% 4.23% 4.48% 4.83% 4.24%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.35% 3.58% 3.96% 4.08% 3.71%
Portfolio turnover 64% 43% 27% 34% 21%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratios for the years ended August 31, 2003 and 2002, including fees paid
indirectly in accordance with Securities and Exchange Commission rules, were
1.26%.
See accompanying notes
21
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free New York Fund Class C
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/03 8/31/02(1) 8/31/01 8/31/00 8/31/99
Net asset value, beginning of period $10.320 $10.330 $9.800 $9.860 $10.640
Income (loss) from investment operations:
Net investment income 0.406 0.426 0.449 0.462 0.445
Net realized and unrealized gain (loss) on investments (0.120) (0.010) 0.530 (0.060) (0.756)
------- ------- ------- ------- -------
Total from investment operations 0.286 0.416 0.979 0.402 (0.311)
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.406) (0.426) (0.449) (0.462) (0.445)
Net realized gain on investments -- -- -- -- (0.024)
------- ------- ------- ------- -------
Total dividends and distributions (0.406) (0.426) (0.449) (0.462) (0.469)
------- ------- ------- ------- -------
Net asset value, end of period $10.200 $10.320 $10.330 $9.800 $9.860
======= ======= ======= ======= =======
Total return(2) 2.79% 4.20% 10.23% 4.31% (3.08%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,828 $1,115 $1,206 $66 $112
Ratio of expenses to average net assets(3) 1.25% 1.25% 1.25% 1.25% 1.41%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.80% 1.90% 1.77% 2.00% 1.94%
Ratio of net investment income to average net assets 3.90% 4.23% 4.48% 4.83% 4.24%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.35% 3.58% 3.96% 4.08% 3.71%
Portfolio turnover 64% 43% 27% 34% 21%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(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 a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratios for the years ended August 31, 2003 and 2002, including fees paid
indirectly in accordance with Securities and Exchange Commission rules, were
1.26%.
See accompanying notes
22
Notes August 31, 2003
TO FINANCIAL STATEMENTS
Voyageur Mutual Funds (the "Trust") is organized as a Delaware business trust
and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free
California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield
Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, and
Delaware Tax-Free New York Fund. Voyageur Investment Trust (the "Trust") is
organized as a Massachusetts business trust and offers five series: Delaware
Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware
Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund, and
Delaware Tax-Free Oregon Insured Fund. These financial statements and the
related notes pertain to Delaware Tax-Free Florida Fund, Delaware Tax-Free
Florida Insured Fund, and Delaware Tax-Free New York Fund (each "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%. Class B
shares are sold with a contingent deferred sales charge that declines from 4% to
zero depending upon the period of time the shares are held. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately eight
years after purchase. Class 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 Florida Fund and Delaware Tax-Free
Florida Insured Fund is to seek as high a level of current income exempt from
federal income tax and the Florida state intangibles tax, as is consistent with
preservation of capital. The investment objective of Delaware Tax-Free New York
Fund is to seek as high a level of current income exempt from federal income tax
and from New York state personal income tax, as is consistent with preservation
of capital.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds.
Security Valuation -- Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available, are valued at fair
value as determined in good faith under the direction of each Funds' Board of
Trustees.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Discounts and premiums are
amortized to interest income over the lives of the respective securities. Each
Fund declares dividends daily from net investment income and pays such dividends
monthly and declares and pays distributions from net realized gain on
investments, if any, annually.
Certain expenses of the Funds are paid through commission arrangements with
brokers. These transactions are done subject to best execution. In addition, the
Funds may receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statements of Operations with the corresponding expense offset
shown as "expenses paid indirectly". The amounts of these expenses for the year
ended August 31, 2003 were as follows:
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Florida Florida Insured New York
Fund Fund Fund
_________ ______________ _________
Commission
reimbursements $ 404 $2,635 $ 390
Earnings credits 1,241 2,774 1,414
23
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee based on
each Fund's average daily net assets as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
On the first $500 million 0.55% 0.50% 0.55%
On the next $500 million 0.50% 0.475% 0.50%
On the next $1.5 billion 0.45% 0.45% 0.45%
In excess of $2.5 billion 0.425% 0.425% 0.425%
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, and extraordinary expenses, do not exceed specified
percentages of average daily net assets through October 31, 2004 for the
Delaware Tax-Free Florida and Tax-Free Florida Insured Funds and until revoked
for the Delaware Tax-Free New York Fund, as shown below.
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
The operating expense limitation
as a percentage of average daily
net assets (per annum) 0.50% 0.65% 0.25%
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing, and transfer agent services. Each Fund pays
DSC a monthly fee based on average net assets subject to certain minimums for
accounting and administration services. The Funds pay DSC a monthly fee based on
the number of shareholder accounts for dividend and disbursing and transfer
agent services. Prior to June 1, 2003, the monthly fee for dividend disbursing
and transfer agent services was based on the number of shareholder accounts and
shareholder transactions.
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 0.25% of the average daily net
assets of the Class A shares and 1.00% of the average daily net assets of the
Class B and C shares.
At August 31, 2003, the Funds had liabilities payable to affiliates as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
Investment management fee payable to DMC $9,344 $47,199 $457
Dividend disbursing, transfer agent fees,
accounting and other expenses payable to DSC 1,579 12,466 1,954
Other expenses payable to DMC and affiliates 12,482 6,700 2,355
For the year ended August 31, 2003, DDLP earned commissions on sales of
Class A shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
$3,942 $5,379 $2,155
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.
3. Investments
For the year ended August 31, 2003, 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
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
Purchases $5,722,240 $27,800,797 $13,717,621
Sales 5,053,493 33,934,446 10,145,421
24
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
3. Investments (continued)
At August 31, 2003, the cost of investment and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
Cost of investments $15,590,773 $96,611,195 $16,643,208
=========== =========== ===========
Aggregate unrealized appreciation $895,008 $4,914,861 $650,517
Aggregate unrealized depreciation (82,006) (285,049) (184,906)
----------- ----------- -----------
Net unrealized appreciation $813,002 $4,629,812 $465,611
=========== =========== ===========
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the years ended August 31, 2003 and 2002 was as
follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
Year Ended Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02
------- ------- ------- ------- ------- -------
Tax-exempt income $723,474 $711,610 $4,996,861 $5,242,579 $716,813 $661,650
As of August 31, 2003, the components of net assets on a tax basis were
as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
Shares of beneficial interest $16,751,043 $99,209,906 $17,357,261
Undistributed tax-exempt income (181) -- (655)
Capital loss carryforwards (728,546) (1,243,139) (320,088)
Unrealized appreciation of investments 813,002 4,629,812 465,611
----------- ------------ -----------
Net assets $16,835,318 $102,596,579 $17,502,129
=========== ============ ===========
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss
carryforwards expire as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
2004 $ -- $ 735,445 $ --
2008 85,428 507,694 --
2009 643,118 -- 320,088
-------- ---------- --------
Total $728,546 $1,243,139 $320,088
======== ========== ========
During the year ended August 31, 2003, the Delaware Tax-Free Florida Insured
Fund had $3,713,679 of unused capital loss carryforward expire.
25
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
----------------- -------------------- -----------------
Year Ended Year Ended Year Ended
8/31/03 8/31/02 8/31/03 8/31/02 8/31/03 8/31/02
Shares sold:
Class A 100,615 131,609 498,628 631,311 278,394 95,323
Class B 83,873 99,043 152,690 86,670 19,961 92,435
Class C 104,884 18,621 37,398 44,972 187,110 6,765
Shares issued upon reinvestment
of dividends and distributions:
Class A 16,498 17,131 138,879 154,363 36,152 30,996
Class B 6,071 6,776 8,436 7,291 5,417 4,868
Class C 1,847 838 1,582 785 5,722 4,500
------- ------- ------- ------- ------- -------
313,788 274,018 837,613 925,392 532,756 234,887
------- ------- ------- ------- ------- -------
Shares repurchased:
Class A (178,105) (188,236) (1,336,825)(1,014,758) (112,653) (191,366)
Class B (66,791) (70,614) (100,200) (79,670) (32,493) (15,392)
Class C (5,869) (530) (12,304) (1,028) (23,563) (20,091)
------- ------- ------- ------- ------- -------
(250,765) (259,380) (1,449,329) (1,095,456) (168,709) (226,849)
------- ------- ------- ------- ------- -------
Net increase (decrease) 63,023 14,638 (611,716) (170,064) 364,047 8,038
====== ====== ======== ======== ======= =====
For the year ended August 31, 2003 and 2002, 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 table above and the Statements of
Changes in Net Assets.
Year Ended Year Ended
8/31/03 8/31/02
-------------------------------------------- --------------------------------------------
Class B Shares Class A Shares Amount Class B Shares Class A Shares Amount
Delaware Tax-Free
Florida Fund 5,872 5,883 $ 65,055 -- -- $ --
Delaware Tax-Free
Florida Insured Fund 40,697 40,704 465,070 16,818 16,820 186,792
6. Line of Credit
The Funds, along with certain other funds in the Delaware Investments
Family of Funds (the "Participants"), participate in a $203,300,000 revolving
line of credit facility to be used for temporary or emergency purposes as an
additional source of liquidity to fund redemptions of investor shares. The
Participants are charged an annual commitment fee, which is allocated across the
Participants on the basis of each fund's allocation of the entire facility. The
Participants may borrow up to a maximum of one third of their net assets under
the agreement. The Funds had no amounts outstanding as of August 31, 2003 or at
any time during the year.
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
7. Credit and Market Risks
The Funds concentrate their investments in securities issued by each
corresponding state's 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.
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 Statement of Net Assets.
8. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distribution on a calendar year
basis for income tax purposes, which may include distributions for portions of
two fiscal years of a fund. Accordingly, the information needed by shareholders
for income tax purposes will be sent to them in January of each year. Please
consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2003, each Fund designates distributions
paid during the year as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund New York Fund
------------------- ---------------------- -------------------
(A) Long Term Capital Gains
Distributions (Tax Basis) -- -- --
(B) Ordinary Income
Distributions (Tax Basis) -- -- --
(C) Tax-Exempt Distributions (Tax Basis) 100% 100% 100%
---- ---- ----
Total Distributions (Tax Basis) 100% 100% 100%
---- ---- ----
(A), (B) and (C) are based on a percentage of each Fund's total distributions.
26
Report
OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
Voyageur Investment Trust - Delaware Tax-Free Florida Fund
Voyageur Investment Trust - Delaware Tax-Free
Florida Insured Fund
Voyageur Mutual Funds - Delaware Tax-Free New York Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Florida Fund, Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New
York Fund (the "Funds") as of August 31, 2003, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2003, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above listed Funds at August 31, 2003, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and their financial highlights for each of the
periods presented therein, in conformity with accounting principles generally
accepted in the United States.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 3, 2003
27
Delaware Investments Family of Funds
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees which has oversight
responsibility for the management of a fund's business affairs. Trustees
establish procedures and oversee and review the performance of the investment
manager, the distributor and others that perform services for the fund. The
independent fund trustees, in particular, are advocates for shareholder
interests. The following is a list of the Officers/Trustees and certain
background and related information.
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee/Director Trustee/Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Jude T. Driscoll(2) Chairman and 3 Years - Since August 2000, 83 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Trustee since at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998 - August 2000)
Managing Director -
NationsBanc Capital Markets
(February 1996 - June 1998)
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Walter P. Babich Trustee 15 Years Board Chairman - 101 None
2005 Market Street Citadel Construction Corporation
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
- ------------------------------------------------------------------------------------------------------------------------------------
John H. Durham Trustee 24 Years(3) Private Investor 101 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Fry Trustee(4) 2 Years President - 83 None
2005 Market Street Franklin & Marshall College
Philadelphia, PA (June 2002 - Present)
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr Trustee 10 Years Founder/Managing Director - 101 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
28
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee/Director Trustee/Director
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
Ann R. Leven Trustee 14 Years Treasurer/Chief Fiscal Officer - 101 Director - Andy
2005 Market Street National Gallery of Art Warhol Foundation
Philadelphia, PA (1994 - 1999)
19103 Director -
Systemax, Inc.
November 1, 1940
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas F. Madison Trustee 9 Years President/Chief 101 Director -
2005 Market Street Executive Officer - CenterPoint Energy
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director - Digital
and Consulting) River Inc.
(January 1993 - Present)
February 25, 1936 Director - Rimage
Corporation
Director - Valmont
Industries, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans Trustee 4 Years Vice President/Mergers & 101 None
2005 Market Street Acquisitions - 3M Corporation
Philadelphia, PA (January 2003 - Present)
19103
Ms. Yeomans has held
July 31, 1948 various management
positions at 3M Corporation
since 1983.
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Joseph H. Hastings Executive Executive Mr. Hastings has served in 101 None
2005 Market Street Vice President Vice President various executive capacities
Philadephia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments.
Officer Officer since
December 19, 1949 August 21,2003
- -----------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Executive Vice President, Chief Legal Ms. Maestro has served in 101 None
2005 Market Street Chief Legal Officer Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments.
November 26, 1957
- -----------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President 7 Years Mr. Bishof has served in 101 None
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Registrant's investment advisor,
principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees and Officers and is available, without charge,
upon request by calling 800 523-1918.
29
Delaware
Investments(SM)
- -------------------------------------
A member of Lincoln Financial Group(R)
This annual report is for the information of Delaware Tax-Free Florida Fund,
Delaware Tax-Free Florida Insured Fund, and Delaware Tax-Free New York Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Tax-Free Florida Fund, Delaware
Tax-Free Florida Insured Fund, and Delaware Tax-Free New York 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 Funds. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Funds will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information
Walter P. Babich Jude T. Driscoll Investment Manager
Board Chairman Chairman Delaware Management Company
Citadel Construction Corporation Delaware Investments Family of Funds Philadelphia, PA
King of Prussia, PA Philadelphia, PA
International Affiliate
John H. Durham Joseph H. Hastings Delaware International Advisers Ltd.
Private Investor Executive Vice President and London, England
Gwynedd Valley, PA Chief Financial Officer
Delaware Investments Family of Funds National Distributor
Anthony D. Knerr Philadelphia, PA Delaware Distributors, L.P.
Managing Director Philadelphia, PA
Anthony Knerr & Associates Richelle S. Maestro
New York, NY Senior Vice President, Shareholder Servicing, Dividend
Chief Legal Officer and Secretary Disbursing and Transfer Agent
Ann R. Leven Delaware Investments Family of Funds Delaware Service Company, Inc.
Former Treasurer/Chief Fiscal Officer Philadelphia, PA 2005 Market Street
National Gallery of Art Philadelphia, PA 19103-7094
Washington, DC Michael P. Bishof
Senior Vice President and Treasurer For Shareholders
Thomas F. Madison Delaware Investments Family of Funds 800 523-1918
President and Chief Executive Officer Philadelphia, PA
MLM Partners, Inc. For Securities Dealers and Financial
Minneapolis, MN Institutions Representatives Only
800 362-7500
Janet L. Yeomans
Vice President/Mergers & Acquisitions Web site
3M Corporation www.delawareinvestments.com
St. Paul, MN
--------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800-523-1918; (ii) on the Fund's website at
http://www.delawareinvestments.com; and (iii) on the Commission's website at
http://www.sec.gov.; and beginning no later than August 31, 2004, information
(if any) regarding how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
--------------------------------------------------------------------------------
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on Delaware Investments' internet website at www.delawareinvesments.com. Any
amendments to the Code of Business Ethics, and information on any waiver from
its provisions granted by the registrant, will also be posted on this website
within five business days of such amendment or waiver and will remain on the
website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or person
performing similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that
each member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any committee thereof, accept directly or indirectly any consulting, advisory
or other compensatory fee from the issuer; or (ii) be an "interested person" of
the registrant as defined in Section 2(a)(19) of the Investment Company Act of
1940.
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Ann R. Leven
Thomas F. Madison
Janet L. Yeomans(1)
Item 4. Principal Accountant Fees and Services
Required only for fiscal years ending after December 15, 2003.
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
- -----------------------
(1) The instructions to Form N-CSR require disclosure on the relevant experience
of persons who qualify as audit committee financial experts based on "other
relevant experience." The Board of Trustees/Directors has determined that Ms.
Yeomans qualifies as an audit committee financial expert by virtue of her
education and experience as the Treasurer of a large global corporation.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal control
over financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 10. Exhibits
(a)(1) Code of Ethics
Not applicable.
(a)(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.
(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.
Voyageur Insured Funds
By: Jude T. Driscoll
---------------------------
Name: Jude T. Driscoll
Title: Chairman
Date: October 28, 2003
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.
By: Jude T. Driscoll
---------------------------
Name: Jude T. Driscoll
Title: Chairman
Date: October 28, 2003
By: Joseph H. Hastings
-----------------------------------
Name: Joseph H. Hastings
Title: Chief Financial Officer
Date: October 28, 2003