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: February 29, 2004
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 report.
Delaware
Investments(SM)
--------------------------------------
FIXED INCOME A member of Lincoln Financial Group(R)
Semiannual Report FEBRUARY 29, 2004
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE ARIZONA INSURED FUND
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
- ---------------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 1
Statements of Operations 4
Statements of Changes in Net Assets 5
Financial Highlights 6
Notes to Financial Statements 9
- ---------------------------------------------------------
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C) 2004 Delaware Distributors, L.P.
Delaware Tax-Free Arizona Insured Fund
Statements February 29, 2004 (Unaudited)
OF NET ASSETS
Principal Market
Amount Value
Municipal Bonds - 97.54%
Airport Revenue Bonds - 9.78%
Phoenix Civic Improvement Corporation
Series B 5.25% 7/1/32 (FGIC)(AMT) $9,300,000 $ 9,806,664
Tucson Airport Authority 5.35% 6/1/31
(AMBAC)(AMT) 5,000,000 5,271,800
-----------
15,078,464
-----------
Charter School Revenue Bonds - 2.64%
Pima County Industrial Development
Authority (Arizona Charter Schools
Project) Series C 6.75% 7/1/31 4,000,000 4,067,720
-----------
4,067,720
-----------
City General Obligation Bonds - 0.69%
DC Ranch Community Facilities
5.00% 7/15/27 (AMBAC) 1,000,000 1,058,050
-----------
1,058,050
-----------
Convention Center/Auditorium/Hotel Revenue Bonds - 2.73%
Arizona Tourism & Sports Authority
Tax Revenue Multipurpose Stadium
Facilities Series A
5.00% 7/1/28 (MBIA) 2,500,000 2,630,025
5.00% 7/1/31 (MBIA) 1,500,000 1,574,715
-----------
4,204,740
-----------
Dedicated Tax & Fees Revenue Bonds - 6.66%
Phoenix Civic Improvement Corporation
Excise Tax Revenue 5.00% 7/1/26 1,000,000 1,055,310
Phoenix Industrial Development
Authority Lease Revenue
(Capitol Mall LLC II Project)
5.00% 9/15/28 (AMBAC) 4,000,000 4,182,920
Pinal County Certificates of Participation
5.125% 6/1/21 (AMBAC) 4,675,000 5,034,414
-----------
10,272,644
-----------
Escrowed to Maturity Bonds - 0.23%
Phoenix Street & Highway Revenue
6.50% 7/1/09 (AMBAC) 350,000 355,716
-----------
355,716
-----------
Higher Education Revenue Bonds - 7.89%
Arizona State Board of Regents Certificates
of Participation 5.125% 6/1/25 (AMBAC) 1,250,000 1,325,488
Glendale Industrial Development Authority
Educational Facilities (American
Graduate School International)
5.625% 7/1/20 (Connie Lee) 1,000,000 1,088,660
5.875% 7/1/15 (Connie Lee) 2,500,000 2,727,350
Mohave County Community College
6.00% 3/1/20 (MBIA) 1,000,000 1,167,480
South Campus Group Student Housing
Revenue (Arizona State University South
Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,113,860
Southern Arizona Capital Facilities Finance
(University of Arizona Project)
5.10% 9/1/33 (MBIA) 2,400,000 2,528,976
University of Arizona Certificates
of Participation
5.125% 6/1/21 (AMBAC) 1,000,000 1,077,470
5.75% 6/1/19 (AMBAC) 1,000,000 1,148,030
-----------
12,177,314
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Hospital Revenue Bonds - 11.95%
Mesa Industrial Development Authority
(Discovery Health Systems)
Series A 5.625% 1/1/29 (MBIA) $9,250,000 $10,216,902
Phoenix Industrial Development Authority
Hospital Revenue (John C. Lincoln Health)
Series B 5.75% 12/1/16 (Connie Lee) 4,110,000 4,684,208
University Medical Center of Arizona
Hospital Revenue 5.00% 7/1/33 1,000,000 1,001,140
University of Arizona Medical Center
6.25% 7/1/10 (MBIA) 1,445,000 1,467,730
Yavapai County Industrial Development
Authority Hospital Revenue (Yavapai
Regional Medical Center) Series A
5.25% 8/1/21 (RADIAN) 1,000,000 1,069,360
-----------
18,439,340
-----------
Investor Owned Utilities Revenue Bonds - 1.38%
Puerto Rico Industrial Tourist Facilities
Financing Authority
6.625% 6/1/26 (AMT) 2,000,000 2,131,300
-----------
2,131,300
-----------
Multifamily Housing Revenue Bonds - 10.45%
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Sly-Mar Apartments) 6.10% 4/20/36
(GNMA)(AMT) 1,300,000 1,433,354
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Capital Mews Apartments)
5.70% 12/20/40 (GNMA)(AMT) 4,000,000 4,255,959
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Ventana Palms Apartments)
6.15% 10/1/29 (MBIA) 510,000 552,560
6.20% 10/1/34 (MBIA) 940,000 1,020,831
Pima County Industrial Development
Authority Multifamily Housing Revenue
(Columbus Village) Series A
6.00% 10/20/31 (GNMA) 1,150,000 1,281,756
6.05% 10/20/41 (GNMA) 1,520,000 1,689,632
Pima County Industrial Development
Authority Multifamily Housing Revenue
(Sunbriar Apartments Project)
7.25% 7/1/25 (MBIA)(FHA) 1,225,000 1,259,349
Yuma Industrial Development Authority
Multifamily Revenue 6.10% 9/20/19
(GNMA)(AMT) 2,340,000 2,611,065
Yuma Industrial Development Authority
Multifamily Revenue (Regency
Apartments) Series A 5.50% 12/20/32
(GNMA)(FHA) 2,000,000 2,015,580
-----------
16,120,086
-----------
Municipal Lease Revenue Bonds - 7.54%
Maricopa County Industrial Development
Authority Correctional Facilities
(Phoenix West Prison)
5.375% 7/1/22 (ACA) 250,000 262,665
Phoenix Industrial Development Authority
Lease Revenue (Capitol Mall LLC Project)
5.50% 9/15/27 (AMBAC) 5,000,000 5,519,150
1
Statements Delaware Tax-Free Arizona Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Municipal Lease Revenue Bonds (continued)
Prescott Valley Municipal Property
Corporate Facilities Revenue
5.00% 1/1/27 (FGIC) $ 700,000 $ 739,123
Salt River Project Arizona Agricultural
Improvement & Power District
Certificates of Participation
5.00% 12/1/18 (MBIA) 2,500,000 2,752,250
University of Arizona Certificates of
Participation Series B
5.00% 6/1/31 (AMBAC) 2,250,000 2,361,240
-----------
11,634,428
-----------
Political Subdivision General Obligation Bonds - 0.68%
Phoenix Variable Purpose Series B
5.00% 7/1/27 1,000,000 1,052,030
-----------
1,052,030
-----------
*Pre-Refunded Bonds - 4.55%
Oro Valley Common Trust Funds
Partnership 5.75% 7/1/17-06 (MBIA) 1,000,000 1,112,480
Surprise Municipal Property Excise
Tax Revenue 5.70% 7/1/20-09 (FGIC) 5,000,000 5,909,650
-----------
7,022,130
-----------
Public Power Revenue Bonds - 4.50%
Energy Management Services (Arizona
State University - Main Campus)
5.25% 7/1/17 (MBIA) 1,500,000 1,688,010
Salt River Project Arizona Agricultural
Improvement & Power District Electric
System Revenue (Salt River Project)
Series A 5.00% 1/1/31 3,000,000 3,147,360
Series B 5.00% 1/1/31 (MBIA) 2,000,000 2,104,240
-----------
6,939,610
-----------
Public Utility District Revenue Bonds - 3.41%
Maricopa County Pollution Control
(Palo Verde Project) Series A
5.05% 5/1/29 (AMBAC) 5,000,000 5,262,600
-----------
5,262,600
-----------
School District General Obligation Bonds - 3.66%
Cochise County Unified School
District #68 7.50% 7/1/10 (FGIC) 1,000,000 1,281,130
Maricopa County School District #3
(Tempe Elementary) Series E
5.70% 7/1/16 (FGIC) 1,025,000 1,183,701
Maricopa County School District #14
(Creighton School Improvement Project
of 1990) Series C 6.50% 7/1/08 (FGIC) 1,000,000 1,184,260
Maricopa County School District #38
(Madison Elementary)
5.00% 7/1/14 (FSA) 1,750,000 1,999,777
-----------
5,648,868
-----------
Single Family Housing Revenue Bonds - 0.58%
Pima County Industrial Development
Authority Single Family Housing Revenue
6.10% 5/1/31 (GNMA)(AMT) 835,000 890,586
-----------
890,586
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Territorial General Obligation Bonds - 4.92%
Puerto Rico Commonwealth
Public Improvement Series A
5.00% 7/1/27 $1,000,000 $ 1,037,790
5.125% 7/1/30 (FSA) 1,250,000 1,327,875
5.125% 7/1/31 3,575,000 3,721,146
Puerto Rico Commonwealth Refunding
Public Improvements Series A
5.50% 7/1/19 1,300,000 1,508,117
------------
7,594,928
------------
Territorial Revenue Bonds - 2.40%
Puerto Rico Electric Power Authority Power
Revenue Series NN 5.00% 7/1/32 (MBIA) 1,500,000 1,593,075
Puerto Rico Public Buildings Authority
Guaranteed Government Facilities
Revenue Series D 5.25% 7/1/27 1,000,000 1,067,050
Virgin Islands Public Finance Authority
5.00% 10/1/31 (ACA) 1,000,000 1,033,630
------------
3,693,755
------------
Transportation Revenue Bonds - 3.87%
Arizona State Transportation Board
Highway Revenue Series A
5.00% 7/1/21 2,500,000 2,702,300
5.00% 7/1/23 1,000,000 1,071,280
Arizona State Transportation Board
Highway Revenue Series B
5.25% 7/1/21 1,000,000 1,098,680
5.25% 7/1/22 1,000,000 1,092,710
------------
5,964,970
------------
Water & Sewer Revenue Bonds - 7.03%
Gilbert Water & Waste Water Revenue
6.50% 7/1/12 (FGIC) 1,000,000 1,029,150
6.50% 7/1/22 (FGIC) 2,650,000 2,727,248
Glendale Water & Sewer Revenue
5.00% 7/1/28 (AMBAC) 2,000,000 2,113,480
Phoenix Civic Improvement Corporation
Wastewater Systems Revenue
5.00% 7/1/24 (FGIC) 1,000,000 1,046,510
5.00% 7/1/26 (FGIC) 3,750,000 3,933,562
------------
10,849,950
------------
Total Municipal Bonds (cost $139,715,340) 150,459,229
------------
Number
of Shares
Short-Term Investments - 2.04%
Federated Arizona Municipal Cash Trust 3,142,084 3,142,084
------------
Total Short-Term Investments
(cost $3,142,084) 3,142,084
------------
2
Statements Delaware Tax-Free Arizona Insured Fund
OF NET ASSETS (CONTINUED)
Total Market Value of Securities - 99.58%
(cost $142,857,424) $153,601,313
Receivables and Other Assets
Net of Liabilities - 0.42% 650,621
------------
Net Assets Applicable to 13,240,569
Shares Outstanding - 100.00% $154,251,934
============
Net Asset Value - Delaware Tax-Free Arizona Insured
Fund Class A ($131,560,042 / 11,294,693 Shares) $11.65
------
Net Asset Value - Delaware Tax-Free Arizona Insured
Fund Class B ($14,580,250 / 1,250,879 Shares) $11.66
------
Net Asset Value - Delaware Tax-Free Arizona Insured
Fund Class C ($8,111,642 / 694,997 Shares) $11.67
------
Components of Net Assets at February 29, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $143,465,205
Undistributed net investment income 7,314
Accumulated net realized gain on investments 35,526
Net unrealized appreciation of investments 10,743,889
------------
Total net assets $154,251,934
============
*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 Assurance 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 Authority
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) $11.65
Sales charge (4.50% of offering price,
or 4.72% of amount invested per share) (B) 0.55
------
Offering price $12.20
======
(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
3
Statements Six Months Ended February 29, 2004 (Unaudited)
OF OPERATIONS
Delaware
Tax-Free Arizona
Insured Fund
Investment Income:
Interest $ 3,879,349
-----------
Expenses:
Management fees 383,092
Distribution expenses -- Class A 163,684
Distribution expenses -- Class B 72,034
Distribution expenses -- Class C 39,974
Dividend disbursing and transfer agent fees and expenses 45,148
Accounting and administration expenses 29,835
Legal and professional fees 20,341
Reports and statements to shareholders 13,900
Registration fees 9,800
Custodian fees 3,794
Trustees' fees 3,803
Other 6,166
-----------
791,571
Less expenses absorbed or waived --
Less expenses paid indirectly (2,001)
-----------
Total expenses 789,570
-----------
Net Investment Income 3,089,779
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 109,767
Net change in unrealized appreciation/depreciation of investments 7,245,596
-----------
Net Realized and Unrealized Gain on Investments 7,355,363
-----------
Net Increase in Net Assets Resulting from Operations $10,445,142
===========
See accompanying notes
4
Statements
OF CHANGES IN NET ASSETS
Delaware Tax-Free
Arizona Insured Fund
Six Months Year
Ended Ended
2/29/04 8/31/03
(Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 3,089,779 $ 6,864,597
Net realized gain (loss) on investments 109,767 754,322
Net change in unrealized appreciation/depreciation of investments 7,245,596 (4,291,338)
------------ ------------
Net increase (decrease) in net assets resulting from operations 10,445,142 3,327,581
------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (2,710,569) (5,989,214)
Class B (243,997) (534,860)
Class C (135,213) (340,523)
Net realized gain on investments:
Class A (670,678) (1,396,185)
Class B (74,157) (143,720)
Class C (40,949) (91,428)
------------ ------------
(3,875,563) (8,495,930)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 5,273,387 13,366,725
Class B 725,044 3,326,803
Class C 568,658 3,929,559
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 1,790,633 3,663,972
Class B 178,477 380,126
Class C 147,763 334,202
------------ ------------
8,683,962 25,001,387
------------ ------------
Cost of shares repurchased:
Class A (10,795,952) (24,391,768)
Class B (1,609,200) (2,246,828)
Class C (1,489,376) (3,517,552)
------------ ------------
(13,894,528) (30,156,148)
------------ ------------
Decrease in net assets derived from capital share transactions (5,210,566) (5,154,761)
------------ ------------
Net Increase (Decrease) in Net Assets 1,359,013 (10,323,110)
Net Assets:
Beginning of period 152,892,921 163,216,031
------------ ------------
End of period (including undistributed (distributions in excess of) net investment
income of ($1,681), ($1,660), $7,314 and $7,314, respectively) $154,251,934 $152,892,921
============ ============
See accompanying notes
5
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/29/04(1) 8/31/03 8/31/02(3) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $ 11.160 $ 11.530 $ 11.500 $ 11.040 $ 10.990 $ 11.550
Income (loss) from investment operations:
Net investment income 0.236 0.502 0.510 0.521 0.525 0.528
Net realized and unrealized gain (loss) on investments 0.548 (0.253) 0.100 0.460 0.050 (0.560)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.784 0.249 0.610 0.981 0.575 (0.032)
-------- -------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.236) (0.502) (0.510) (0.521) (0.525) (0.528)
Net realized gain on investments (0.058) (0.117) (0.070) -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (0.294) (0.619) (0.580) (0.521) (0.525) (0.528)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 11.650 $ 11.160 $ 11.530 $ 11.500 $ 11.040 $ 10.990
======== ======== ======== ======== ======== ========
Total return(2) 7.09% 2.17% 5.54% 9.12% 5.47% (0.36%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $131,560 $129,683 $141,424 $141,298 $142,018 $166,368
Ratio of expenses to average net assets 0.92% 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 0.92% 0.91% 0.90% 0.97% 0.98% 0.91%
Ratio of net investment income to average net assets 4.14% 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 4.14% 4.32% 4.50% 4.63% 4.85% 4.60%
Portfolio turnover 24% 29% 46% 45% 50% 29%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(3) 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. 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
6
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/29/04(1) 8/31/03 8/31/02(3) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.170 $11.540 $11.500 $11.040 $10.990 $11.550
Income (loss) from investment operations:
Net investment income 0.193 0.416 0.426 0.437 0.444 0.441
Net realized and unrealized gain (loss) on investments 0.548 (0.253) 0.110 0.460 0.050 (0.560)
------- ------- ------- ------- ------- -------
Total from investment operations 0.741 0.163 0.536 0.897 0.494 (0.119)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.193) (0.416) (0.426) (0.437) (0.444) (0.441)
Net realized gain on investments (0.058) (0.117) (0.070) -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.251) (0.533) (0.496) (0.437) (0.444) (0.441)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.660 $11.170 $11.540 $11.500 $11.040 $10.990
======= ======= ======= ======= ======= =======
Total return(2) 6.69% 1.41% 4.83% 8.31% 4.68% (1.11%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $14,580 $14,666 $13,678 $ 8,864 $6,630 $ 6,059
Ratio of expenses to average net assets 1.67% 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 1.67% 1.66% 1.65% 1.72% 1.73% 1.66%
Ratio of net investment income to average net assets 3.39% 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 3.39% 3.57% 3.75% 3.88% 4.10% 3.85%
Portfolio turnover 24% 29% 46% 45% 50% 29%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(3) 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. 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
7
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/29/04(1) 8/31/03 8/31/02(3) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $11.180 $11.550 $11.520 $11.040 $10.990 $11.560
Income (loss) from investment operations:
Net investment income 0.193 0.415 0.426 0.438 0.444 0.441
Net realized and unrealized gain (loss) on investments 0.548 (0.253) 0.100 0.480 0.050 (0.570)
------- ------- ------- ------- ------- -------
Total from investment operations 0.741 0.162 0.526 0.918 0.494 (0.129)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.193) (0.415) (0.426) (0.438) (0.444) (0.441)
Net realized gain on investments (0.058) (0.117) (0.070) -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.251) (0.532) (0.496) (0.438) (0.444) (0.441)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.670 $11.180 $11.550 $11.520 $11.040 $10.990
======= ======= ======= ======= ======= =======
Total return2 6.68% 1.40% 4.73% 8.50% 4.68% (1.20%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 8,112 $ 8,544 $8,115 $3,230 $1,322 $ 1,373
Ratio of expenses to average net assets 1.67% 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 1.67% 1.66% 1.65% 1.72% 1.73% 1.66%
Ratio of net investment income to average net assets 3.39% 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 3.39% 3.57% 3.75% 3.88% 4.10% 3.85%
Portfolio turnover 24% 29% 46% 45% 50% 29%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(3) 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. 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
8
Notes February 29, 2004 (Unaudited)
TO FINANCIAL STATEMENTS
Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust
and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free
California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield
Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund and
Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is
organized as a Delaware statutory 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 statutory 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 statutory trust and offers one
series: Delaware Tax-Free Colorado Fund. These financial statements and related
footnotes 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 each Fund. 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.
Management fees and other expenses are paid monthly. Security transactions are
recorded on the date the securities are purchased or sold (trade date). Costs
used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Interest income is
recorded on the accrual basis. Each Fund declares dividends daily from net
investment income and pays such dividends monthly and declares and pays
distributions from net realized gain on investments, if any, annually.
Certain expenses of the Funds are paid through commission arrangements with
brokers. In addition, the Funds may receive earnings credits from their
custodian when positive balances are maintained, which are used to offset
custody fees. The expenses paid under the above arrangements are included in
their respective expense captions on the Statements of Operations with the
corresponding expense offset shown as "expenses paid indirectly". The amount of
these expenses for the six months ended February 29, 2004 were as follows:
Delaware
Tax-Free Arizona
Insured Fund
------------
Commission reimbursements $1,835
Earnings credits 166
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 Arizona
Insured Fund
------------
On the first $500 million 0.500%
On the next $500 million 0.475%
On the next $1.5 billion 0.450%
In excess of $2.5 billion 0.425%
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburses each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses do not
exceed specified percentages of average daily net assets of the Funds through
October 31, 2004 and until revoked for the Delaware Tax-Free California Fund, as
shown below.
9
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates (continued)
Delaware
Tax-Free Arizona
Insured Fund
------------
Operating expense limitation as a percentage
of average daily net assets (per annum) 0.70%
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.
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 February 29, 2004, each Fund had liabilities payable to affiliates as
follows:
Delaware
Tax-Free Arizona
Insured Fund
------------
Investment management fees payable to DMC $15,718
Dividend disbursing, transfer agent fees,
accounting and other expenses
payable to DSC 12,020
Other expenses payable to DMC and affiliates* 2,344
*DMC, as a part of its administrative services, pays operating expenses on
behalf of the Funds and is reimbursed on a periodic basis. Such expenses include
items such as printing of shareholder reports, professional fees, custodian fees
and trustees' fees.
Certain internal legal expenses are allocated to the Funds. For the six months
ended February 29, 2004, the Delaware Tax-Free Arizona Fund, Delaware Tax-Free
Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free
California Insured Fund, and the Delaware Tax-Free Colorado Fund had costs of
$1,715, $8,341, $2,078, $1,849, and $15,274, respectively.
For the six months ended February 29, 2004, DDLP earned commissions on sales of
Class A shares for each Fund as follows:
Delaware
Tax-Free Arizona
Insured Fund
------------
$11,689
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.
3. Investments
For the six months ended February 29, 2004, the Funds made purchases and sales
of investment securities as follows:
Delaware
Tax-Free Arizona
Insured Fund
------------
Purchases other than U.S. government
securities and short-term investments $18,032,834
Sales other than U.S. government securities
and short-term investments 25,899,398
At February 29, 2004, the cost of investments for federal income tax purposes
has been estimated since the final tax characteristics cannot be determined
until fiscal year end. At February 29, 2004, the cost of investments and
unrealized appreciation (depreciation) for each Fund were as follows:
Delaware
Tax-Free Arizona
Insured Fund
----------------
Cost of investments $142,857,424
Aggregate unrealized appreciation $ 10,770,109
Aggregate unrealized depreciation (26,220)
------------
Net unrealized appreciation $ 10,743,889
============
10
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 six months ended February 29, 2004 and the year
ended August 31, 2003 was as follows:
Delaware Tax-Free
Arizona Insured Fund
-----------------------
Six Months Year
Ended Ended
2/29/04* 8/31/03
Tax-exempt income $3,292,999 $6,864,597
Long-term capital gain 582,564 1,631,333
---------- ----------
Total $3,875,563 $8,495,930
========== ==========
*Tax information for the period ended February 29, 2004, is an estimate and the
tax character of dividends and distributions may be redesignated at the fiscal
year end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of February 29, 2004, the
estimated components of net assets on a tax basis was as follows:
Delaware
Tax-Free Arizona
Insured Fund
------------
Shares of beneficial interest $143,465,205
Undistributed tax-exempt income 7,314
Undistributed long-term capital gains --
Net realized capital gain (losses)
on investments 35,526
Capital loss carryforwards --
Unrealized appreciation of investments 10,743,889
------------
Net assets $154,251,934
============
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:
11
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free
Arizona Insured Fund
--------------------------
Six Months Year
Ended Ended
2/29/04 8/31/03
Shares sold:
Class A 463,359 1,161,855
Class B 63,242 289,628
Class C 49,173 340,061
Shares issued upon reinvestments
of dividends and distributions:
Class A 156,497 321,230
Class B 15,576 33,321
Class C 12,893 29,256
---------- ----------
760,740 2,175,351
---------- ----------
Shares repurchased:
Class A (945,359) (2,129,562)
Class B (141,168) (195,453)
Class C (131,159) (307,819)
---------- ----------
(1,217,686) (2,632,834)
---------- ----------
Net decrease (456,946) (457,483)
========== ==========
12
Notes
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Shares (continued)
For the six months ended February 29, 2004 and the year ended August 31, 2003,
the following shares and value were converted from Class B to Class A.
The respective amounts are included in Class B redemptions and Class A
subscriptions in the table below and the Statements of Changes in Net Assets.
Six Months Ended Year Ended
2/29/04 8/31/03
--------------------------------- -------------------------------
Class B Class A Class B Class A
shares shares Amount shares shares Amount
Delaware Tax-Free Arizona Insured Fund 27,307 27,327 309,818 43,904 43,915 512,431
6. Line of Credit
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $177,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each Fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of February 29, 2004, or at any time during
the period.
7. Credit and Market Risk
The Funds concentrate their investments in securities issued by 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.
13
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual 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 each Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in each Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information
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 Funds use 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.; 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 Funds' website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
- --------------------------------------------------------------------------------
(8620) Printed in the USA
SA-WEST [2/04] IVES 4/04 J9612
Delaware
Investments(SM)
--------------------------------------
FIXED INCOME A member of Lincoln Financial Group(R)
Semiannual Report FEBRUARY 29, 2004
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE MINNESOTA INSURED FUND
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
- --------------------------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 1
Statements of Operations 4
Statements of Changes in Net Assets 5
Financial Highlights 6
Notes to Financial Statements 9
- --------------------------------------------------------------------
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C) 2004 Delaware Distributors, L.P.
Delaware Tax-Free Minnesota Insured Fund
Statements February 29, 2004 (Unaudited)
OF NET ASSETS
Principal Market
Amount Value
Municipal Bonds - 98.20%
Airport Revenue Bonds - 3.49%
Minneapolis/St. Paul Metropolitan
Airports Commission Revenue
Series A 5.125% 1/1/25 (FGIC) $ 100,000 $ 105,830
Series C 5.125% 1/1/20 (FGIC) 2,000,000 2,168,960
Series C 5.25% 1/1/32 (FGIC) 6,595,000 7,066,477
-----------
9,341,267
-----------
Corporate-Backed Revenue Bonds - 0.69%
Sartell Environmental Improvement
Revenue (International Paper) Series A
5.20% 6/1/27 1,800,000 1,856,592
-----------
1,856,592
-----------
Escrowed to Maturity Bonds - 16.00%
Dakota/Washington Counties Housing &
Redevelopment Authority Anoka
Single Family Residential Mortgage
Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 13,330,170
Dakota/Washington Counties
Housing & Redevelopment Authority
Bloomington Single Family Residential
Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 580,693
8.375% 9/1/21 (GNMA) (FHA) (AMT) 14,115,000 21,172,782
Southern Minnesota Municipal Power
Agency Supply Revenue Series A
5.75% 1/1/18 3,790,000 3,881,491
5.75% 1/1/18 (AMBAC) 670,000 686,174
Western Minnesota Municipal Power
Agency Supply Revenue Series A
6.60% 1/1/10 2,000,000 2,327,780
9.75% 1/1/16 (MBIA) 530,000 836,568
-----------
42,815,658
-----------
Higher Education Revenue Bonds - 3.70%
Minnesota State Colleges & Universities
Revenue Series A 5.00% 10/1/22 (FSA) 5,135,000 5,480,123
Minnesota State Higher Education
Facilities Authority Revenue
(St. Catherine College)
Series 5-N1 5.00% 10/1/18 2,200,000 2,310,396
St. Cloud Housing & Redevelopment
Authority Revenue
(State University Foundation Project)
5.00% 5/1/23 2,000,000 2,108,960
-----------
9,899,479
-----------
Hospital Revenue Bonds - 16.81%
Minneapolis Health Care Facilities
Revenue (Fairview Hospital &
Healthcare Service) Series A
5.25% 11/15/19 (MBIA) 2,250,000 2,300,895
Minneapolis Health Care System
Revenue Series A
(Allina Health System)
5.75% 11/15/32 7,800,000 8,325,018
(Fairview Health Services)
5.625% 5/15/32 6,400,000 6,800,128
Principal Market
Amount Value
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Minneapolis/St. Paul Housing &
Redevelopment Authority Health
Care Systems Revenue
(Children's Health Care Series)
5.50% 8/15/25 Series A (FSA) $ 2,250,000 $ 2,397,690
(Healthpartners Obligation
Group Project)
5.625% 12/1/22 650,000 676,689
5.875% 12/1/29 1,000,000 1,042,900
(Healthspan Health System)
5.00% 11/15/13 Series A (AMBAC) 6,490,000 6,638,621
Minnesota Agricultural & Economic
Development Health Care System
(Fairview Hospital) Series 97A
5.75% 11/15/26 (MBIA) 10,250,000 11,515,260
St. Louis Park Health Care Facilities
Revenue (Park Nicollet Health
Services) Series B 5.50% 7/1/25 2,000,000 2,113,800
St. Paul Housing & Redevelopment
Authority Hospital Revenue
(St. Paul/Ramsey Medical Center
Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,023,360
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 1,000,000 1,072,490
5.00% 2/1/25 (FSA) 1,000,000 1,067,080
-----------
44,973,931
-----------
Miscellaneous Revenue Bonds - 0.79%
Minneapolis Community Development
Agency Supported Development
Revenue Series G-3 5.45% 12/1/31 2,000,000 2,116,580
-----------
2,116,580
-----------
Multi Family Housing Revenue Bonds - 6.53%
Chaska Waters Edge Multifamily
Revenue Series A
7.30% 1/20/30 (GNMA) 3,257,000 3,477,336
Eagan Multifamily Revenue
(Woodridge Apartments)
5.90% 8/1/20 (GNMA) 1,000,000 1,061,620
Hopkins Multifamily Revenue
(Auburn Apartments Project)
Series A 8.05% 6/20/31 (GNMA) 3,790,000 4,111,430
Minneapolis Multifamily Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,571,190
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 4,000,000 4,171,320
Minneapolis/St. Paul Housing
Finance Board Revenue
(Trinity Apartments) Series A
8.125% 12/1/14 (GNMA) (FHA) (AMT) 15,000 15,014
Minnesota State Housing Finance
Agency Rental Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) 1,882,000 1,947,362
White Bear Lake Multifamily Revenue
(Lake Square) Series A
5.875% 2/1/15 (FHA) 1,055,000 1,117,192
-----------
17,472,464
-----------
1
Delaware Tax-Free Minnesota Insured Fund
Statements
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Municipal Lease Revenue Bonds - 5.53%
Hopkins Housing & Redevelopment
Authority Public Works and Fire Station
Series A 5.00% 2/1/23 (MBIA) $ 1,210,000 $ 1,287,440
Minneapolis Special School District
#001 Series A
5.00% 2/1/18 (FSA) 1,545,000 1,683,540
5.00% 2/1/19 (FSA) 1,535,000 1,662,758
5.00% 2/1/20 (FSA) 1,690,000 1,819,860
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.125% 12/1/27 2,000,000 2,134,060
5.25% 12/1/27 3,840,000 4,127,193
(Robert Street Office Building Project)
4.75% 12/1/23 2,000,000 2,071,820
------------
14,786,671
------------
Political Subdivision General Obligation Bonds - 1.20%
Dakota County Community Agency
Governmental Housing Development
5.00% 1/1/21 1,275,000 1,350,811
Western Lake Superior Sanitation
District Series A
6.00% 10/1/08 (MBIA) (AMT) 400,000 427,000
6.10% 10/1/09 (MBIA) (AMT) 425,000 454,703
6.20% 10/1/10 (MBIA) (AMT) 450,000 482,157
6.20% 10/1/11 (MBIA) (AMT) 475,000 507,386
------------
3,222,057
------------
*Pre-Refunded Bonds - 7.30%
Duluth Economic Development Authority
Health Care Facilities Revenue
(Duluth Clinic)
6.30% 11/1/22-04 (AMBAC) 1,060,000 1,098,287
North St. Paul Maplewood Independent
School District #622 Series A
7.10% 2/1/19-05 (MBIA) 5,935,000 6,267,775
7.10% 2/1/25-05 (FSA) 11,525,000 12,171,207
------------
19,537,269
------------
Public Power Revenue Bonds - 10.73%
Northern Minnesota Municipal Power
Agency Electric System Revenue Series B
4.75% 1/1/20 (AMBAC) 1,100,000 1,149,797
**Northern Minnesota Municipal Power
Agency Electric System Revenue,
Inverse Floater ROLs Series II-R-32
9.42% 1/1/13 (FSA) 4,585,000 5,887,598
Shakopee Public Utilities Commission
Public Utilities Revenue
5.125% 2/1/26 (MBIA) 1,850,000 1,922,650
**Southern Minnesota Municipal
Power Agency Supply System
Revenue, Inverse Floater ROLs
Series II-R-189-B
9.44% 1/1/16 (AMBAC) 2,500,000 3,292,225
Southern Minnesota Municipal
Power Agency Supply System
Revenue Series A
5.00% 1/1/12 (AMBAC) 2,205,000 2,518,573
5.00% 10/1/13 (MBIA) 1,000,000 1,139,730
5.25% 1/1/15 (AMBAC) 2,350,000 2,721,794
5.25% 1/1/16 (AMBAC) 5,000,000 5,792,200
Principal Market
Amount Value
Municipal Bonds (continued)
Public Power Revenue Bonds (continued)
Western Minnesota Municipal
Power Agency Supply System
Series B 5.00% 1/1/15 (MBIA) $ 1,000,000 $ 1,137,740
Series A 5.00% 1/1/30 (MBIA) 3,000,000 3,156,360
-----------
28,718,667
-----------
School District General Obligation Bonds - 17.57%
Big Lake Independent School District
#727 Series A
5.00% 2/1/17 (FSA) 1,040,000 1,133,236
5.00% 2/1/20 (FSA) 1,000,000 1,076,430
Centennial Independent School District
#012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,383,881
Morris Independent School District
#769 5.00% 2/1/24 (MBIA) 4,875,000 5,175,788
Mounds View Independent School
District #621
5.00% 2/1/20 (MBIA) 2,970,000 3,198,215
5.375% 2/1/24 (FGIC) 6,170,000 6,720,795
Osseo Independent School District
#279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,819,150
Robbinsdale Independent School District
#281 5.00% 2/1/21 (FSA) 1,310,000 1,401,425
**Rockford Independent School
District #883, Inverse Floater
ROLs Series II-R-30-B
10.13% 2/1/21 (FSA) 1,605,000 2,034,530
+Rosemount Independent School District
#196 Series B
5.80% 4/1/09 (FSA) 1,860,000 1,628,188
5.85% 4/1/10 (FSA) 2,240,000 1,881,197
+Sauk Rapids Independent School District
#047 Series B
5.983% 2/1/15 (FSA) 2,700,000 1,627,371
6.083% 2/1/17 (FSA) 2,245,000 1,205,722
**South Washington County
Independent School District #833,
Inverse Floater ROLs
Series II-R-34-A 10.13% 2/1/20 (MBIA) 3,440,000 4,392,639
Series II-R-34-B 10.13% 2/1/21 (MBIA) 3,645,000 4,620,475
St. Michael Independent School
District #885
5.00% 2/1/20 (FSA) 1,970,000 2,121,375
5.00% 2/1/27 (FSA) 3,435,000 3,610,048
-----------
47,030,465
-----------
Single Family Housing Revenue Bonds - 0.74%
Dakota County Housing & Redevelopment
Authority Single Family Mortgage Revenue
5.85% 10/1/30 (GNMA/FNMA) (AMT) 1,618,000 1,685,244
6.70% 10/1/17 (FNMA) 285,000 286,186
-----------
1,971,430
-----------
State General Obligation Bonds - 2.58%
Minnesota State 5.00% 11/1/20 (FSA) 5,500,000 5,947,755
**Minnesota State, Inverse Floater ROLs
9.05% 11/1/17 800,000 960,192
-----------
6,907,947
-----------
2
Statements Delaware Tax-Free Minnesota Insured Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Tax Increment / Special Assessment Bonds - 2.40%
Becker Tax Increment Series D
6.25% 8/1/15 (MBIA) (AMT) $ 6,300,000 $ 6,417,180
------------
6,417,180
------------
Territorial Revenue Bonds - 0.39%
Puerto Rico Electric Power Authority
Power Revenue Series GG
4.75% 9/1/21 (FSA) 1,000,000 1,043,560
------------
1,043,560
------------
++Variable Rate Demand Notes - 1.75%
Robbinsdale Health Care Facilities
Revenue (North Memorial Health
Care-Tranche I)
0.90% 5/15/33 (AMBAC) 1,175,000 1,175,000
Rochester Healthcare 0.93% 3/2/04 3,500,000 3,500,000
------------
4,675,000
------------
Total Municipal Bonds
(cost $240,035,112) 262,786,217
------------
Number of
Shares
Short-Term Investment - 1.16%
Federated Minnesota Municipal Cash Trust 3,103,494 3,103,494
------------
Total Short-Term Investment
(cost $3,103,494) 3,103,494
------------
Total Market Value of Securities - 99.36%
(cost $243,138,606) 265,889,711
Receivables and Other Assets
Net of Liabilities - 0.64% 1,716,710
------------
Net Assets Applicable to 23,801,847
Shares Outstanding - 100.00% $267,606,421
============
Net Asset Value - Delaware Tax-Free Minnesota Insured
Fund Class A ($239,459,011 / 21,298,581 Shares) $11.24
------
Net Asset Value - Delaware Tax-Free Minnesota Insured
Fund Class B ($15,726,158 / 1,399,908 Shares) $11.23
------
Net Asset Value - Delaware Tax-Free Minnesota Insured
Fund Class C ($12,421,252 / 1,103,358 Shares) $11.26
------
Components of Net Assets at February 29, 2004:
Shares of beneficial interest
(unlimited authorization-- no par) $243,866,774
Accumulated net realized gain on investments 988,542
Net unrealized appreciation of investments 22,751,105
------------
Total net assets $267,606,421
============
*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 February 29, 2004.
+Zero coupon bond. The interest rate shown is the yield at the time of
purchase.
++The interest shown is the rate as of February 29, 2004.
Summary of Abbreviations:
Ambac - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
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 Insured Fund
Net asset value Class A (A) $11.24
Sales charge (4.50% of offering price,
or 4.72% of amount invested per share) (B) 0.53
------
Offering price $11.77
======
(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
3
Statements Delaware Minnesota Municipal Bond Funds
OF OPERATIONS Six Months Ended February 29, 2004 (Unaudited)
Delaware
Tax-Free Minnesota
Insured Fund
Investment Income:
Interest $ 6,951,609
-----------
Expenses:
Management fees 656,737
Distribution expense-- Class A 294,150
Distribution expense-- Class B 76,794
Distribution expense-- Class C 60,761
Dividend disbursing and transfer agent fees and expenses 89,773
Accounting and administration expenses 51,136
Legal and professional fees 16,911
Reports and statements to shareholders 16,800
Registration fees 21,000
Custodian fees 6,615
Trustees' fees 18,000
Other 23,001
-----------
1,927,223
-----------
Less expenses absorbed or waived --
Less waiver of distribution expenses-- Class A --
Less expenses paid indirectly (3,368)
-----------
Total expenses 1,328,310
-----------
Net Investment Income 5,623,299
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 1,277,062
Net change in unrealized appreciation/depreciation
of investments 10,745,586
-----------
Net Realized and Unrealized Gain on Investments 12,022,648
-----------
Net Increase in Net Assets Resulting from Operations $17,645,947
===========
See accompanying notes
4
Statements Delaware Tax-Free Minnesota Insured Fund
OF CHANGES IN NET ASSETS
Delaware Tax-Free Minnesota
Insured Fund
Six Months Year
Ended Ended
2/29/04 8/31/03
(Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 5,623,299 $ 11,803,673
Net realized gain on investments 1,277,062 2,440,481
Net change in unrealized appreciation/depreciation
of investments 10,745,586 (7,468,306)
------------- -------------
Net increase in net assets resulting from operations 17,645,947 6,775,848
------------- -------------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (5,102,896) (10,931,097)
Class B (275,850) (589,404)
Class C (217,630) (348,888)
Net realized gain on investments:
Class A -- --
Class B -- --
Class C -- --
------------- -------------
(5,596,376) (11,869,389)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 8,516,097 14,811,513
Class B 1,055,921 3,424,019
Class C 865,288 6,800,660
Net asset value of shares issued upon reinvestment
of dividends and distributions:
Class A 3,350,608 7,014,830
Class B 208,301 430,103
Class C 145,189 235,167
------------- -------------
14,141,404 32,716,292
------------- -------------
Cost of shares repurchased:
Class A (14,925,520) (25,326,599)
Class B (1,899,308) (2,239,993)
Class C (1,111,154) (892,572)
------------- -------------
(17,935,982) (28,459,164)
------------- -------------
Increase (decrease) in net assets derived from
capital share transactions (3,794,578) 4,257,128
------------- -------------
Net Increase (Decrease) in Net Assets 8,254,993 (836,413)
Net Assets:
Beginning of period 259,351,428 260,187,841
------------- -------------
End of period (including undistributed distributions
in excess of) net investment income of $94,738 and
($22,418) for Delaware Tax-Free Minnesota Fund and
$0 and $0 for Delaware Tax-Free Minnesota Insured Fund) $ 267,606,421 $ 259,351,428
============= =============
See accompanying notes
5
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/29/04(1) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $10.740 $10.940 $10.900 $10.480 $10.520 $11.050
Income (loss) from investment operations:
Net investment income 0.238 0.498 0.514 0.514 0.507 0.518
Net realized and unrealized gain (loss) on investments 0.500 (0.197) 0.038 0.421 (0.041) (0.530)
------- ------- ------- ------- ------- -------
Total from investment operations 0.738 0.301 0.552 0.935 0.466 (0.012)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.238) (0.501) (0.512) (0.515) (0.506) (0.518)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.238) (0.501) (0.512) (0.515) (0.506) (0.518)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.240 $10.740 $10.940 $10.900 $10.480 $10.520
======= ======= ======= ======= ======= =======
Total return(3) 6.92% 2.75% 5.25% 9.14% 4.63% (0.17%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $239,459 $231,738 $239,763 $242,716 $238,486 $268,507
Ratio of expenses to average net assets 0.93% 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% 0.93% 0.96% 0.90% 1.01% 0.94%
Ratio of net investment income to average net assets 4.34% 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 4.34% 4.52% 4.78% 4.82% 4.92% 4.74%
Portfolio turnover 18% 30% 15% 7% 35% 4%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that 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
reflect this change in accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager and
distributor, as applicable. Performance would have been lower had the
expense limitation not been in effect.
See accompanying notes
6
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/29/04(1) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $10.730 $10.940 $10.890 $10.470 $10.510 $11.040
Income (loss) from investment operations:
Net investment income 0.197 0.415 0.433 0.434 0.431 0.436
Net realized and unrealized gain (loss) on investments 0.500 (0.207) 0.048 0.422 (0.042) (0.529)
------- ------- ------- ------- ------- -------
Total from investment operations 0.697 0.208 0.481 0.856 0.389 (0.093)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.197) (0.418) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.197) (0.418) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.230 $10.730 $10.940 $10.890 $10.470 $10.510
======= ======= ======= ======= ======= =======
Total return(3) 6.54% 1.89% 4.56% 8.34% 3.86% (0.91%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $15,726 $15,647 $14,341 $12,732 $10,491 $11,827
Ratio of expenses to average net assets 1.68% 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% 1.68% 1.71% 1.65% 1.76% 1.69%
Ratio of net investment income to average net assets 3.59% 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 3.59% 3.77% 4.03% 4.07% 4.17% 3.99%
Portfolio turnover 18% 30% 15% 7% 35% 4%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that 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
reflect this change in accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
7
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/29/04(1) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99
(Unaudited)
Net asset value, beginning of period $10.750 $10.950 $10.910 $10.480 $10.520 $11.050
Income (loss) from investment operations:
Net investment income 0.196 0.414 0.433 0.434 0.431 0.438
Net realized and unrealized gain (loss) on investments 0.510 (0.197) 0.038 0.432 (0.042) (0.531)
------- ------- ------- ------- ------- -------
Total from investment operations 0.706 0.217 0.471 0.866 0.389 (0.093)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.196) (0.417) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.196) (0.417) (0.431) (0.436) (0.429) (0.437)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.260 $10.750 $10.950 $10.910 $10.480 $10.520
======= ======= ======= ======= ======= =======
Total return(3) 6.61% 1.97% 4.46% 8.42% 3.85% (0.91%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $12,421 $11,966 $6,083 $4,265 $3,615 $4,253
Ratio of expenses to average net assets 1.68% 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% 1.68% 1.71% 1.65% 1.76% 1.69%
Ratio of net investment income to average net assets 3.59% 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 3.59% 3.77% 4.03% 4.07% 4.17% 3.99%
Portfolio turnover 18% 30% 15% 7% 35% 4%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that 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
reflect this change in accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
8
Notes Delaware Tax-Free Minnesota Insured Fund
TO FINANCIAL STATEMENTS February 29, 2004 (Unaudited)
Voyageur Mutual Funds is organized as a Delaware statutory 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 statutory 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
statutory trust and offers the Delaware Tax-Free Minnesota Fund. Voyageur
Intermediate Tax Free Funds is organized as a Delaware statutory 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 the 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 each Fund's Board of
Trustees.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and other expenses are paid monthly. Security transactions are
recorded on the date the securities are purchased or sold (trade date). Costs
used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Interest income is
recorded on the accrual basis. Discounts and premiums are amortized to interest
income over the lives of the respective securities. Each Fund declares dividends
daily from net investment income and pays such dividends monthly and declares
and pays distributions from net realized gain on investments, if any, annually.
Certain expenses of the Funds are paid through commission arrangements with
brokers. In addition, the Funds may receive earnings credits from their
custodian when positive cash balances are maintained, which are used to offset
custody fees. The expenses paid under the above arrangements are included in
their respective expense captions on the Statements of Operations with the
corresponding expense offset shown as "expenses paid indirectly". The amounts of
these expenses for the period ended February 29, 2004 were as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Commission Reimbursements $3,155
Earnings credits 213
9
Notes Delaware Tax-Free Minnesota Insured Fund
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
Minnesota
Insured Fund
-----------------
On the first $500 million 0.500%
On the next $500 million 0.475%
On the next $1.5 billion 0.450%
In excess of $2.5 billion 0.425%
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs, and extraordinary expenses, do not
exceed specified percentages of average daily net assets through October 31,
2004 as shown below:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
The operating expense limitation
as a percentage of average daily
net assets (per annum) 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 disbursing and transfer agent
services.
Pursuant to a distribution agreement and distribution plan, each Fund pays
Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an
annual distribution and service fee not to exceed 0.25% 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 February 29, 2004, each Fund had receivables from or liabilities payable to
affiliates as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Investment management
fee payable to DMC $10,433
Dividend disbursing,
transfer agent fees,
accounting and other
expenses payable to DSC 43,401
Other expenses payable to
DMC and affiliates* 3,712
*DMC, as part of its administrative services, pays operating expenses on behalf
of the Funds and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, professional fees, registration fees
and trustees' fees.
For the period ended February 29, 2004, DDLP earned commissions on sales of
Class A shares for each Fund as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
$136,214
Certain officers of DMC, DSC, and DDLP are officers and/or trustees of the
Trust. These officers and trustees are paid no compensation by the Funds.
Certain internal legal expenses are allocated to the Funds. For the period ended
February 29, 2004, the Delaware Tax-Free Minnesota Fund, Delaware Tax-Free
Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and the
Delaware Minnesota High-Yield Municipal Bond Fund had costs of $17,229, $11,931,
$3,345, and $2,710, respectively.
10
Notes Delaware Tax-Free Minnesota Insured Fund
TO FINANCIAL STATEMENTS (CONTINUED)
3. Investments
For the six months ended February 29, 2004, the Funds made purchases and sales
of investment securities as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Purchases other than
short-term investments $23,168,809
Sales other than
short-term investments 29,696,127
At February 29, 2004, the cost of investments for federal income tax purposes
has been estimated since the final tax characteristics cannot be determined
until fiscal year end. At February 29, 2004, the cost of investments and
unrealized appreciation (depreciation) for federal income tax purposes for each
fund were as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Cost of investments $242,738,766
============
Aggregate unrealized appreciation $23,156,475
Aggregate unrealized depreciation (5,530)
------------
Net unrealized appreciation $23,150,945
============
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 periods ended February 29, 2004 and August 31,
2003 was as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Period ended 2/29/04
- --------------------
Tax-exempt income $5,596,376
Long-term capital gain --
-----------
Total $5,596,376
===========
Year ended 8/31/03
- ------------------
Tax-exempt income $11,869,389
Long-term capital gain --
-----------
Total $11,869,389
===========
As of February 29, 2004, the components of net assets on a tax basis were as
follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Shares of beneficial interest $243,866,774
Undistributed ordinary income --
Undistributed long-term capital gain 1,706,621
Net realized capital losses on investments --
Capital loss carryforwards (716,681)
Unrealized appreciation (depreciation)
of investments 22,749,707
------------
Net assets $267,606,421
============
11
Notes Delaware Tax-Free Minnesota Insured Fund
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
Minnesota
Year of Expiration Insured Fund
- ------------------ -----------------
2004 $ 13,413
2005 --
2006 --
2007 --
2008 589,183
2009 114,085
2010 --
2011 --
--------
Total $716,681
========
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free
Minnesota Insured Fund
----------------------
Six Months Year
Ended Ended
2/29/04 8/31/03
(Unaudited)
Shares sold:
Class A 773,209 1,341,420
Class B 96,144 310,624
Class C 78,733 617,494
Shares issued upon reinvestment of
dividends and distributions:
Class A 303,474 639,816
Class B 18,882 39,247
Class C 13,129 21,407
---------- ----------
1,283,571 2,970,008
---------- ----------
Shares repurchased:
Class A
Class B (173,093) (203,283)
Class C (101,303) (81,525)
---------- ----------
(3,750,518) (2,597,863)
---------- ----------
Net increase (decrease) (345,889) 372,145
========== ==========
12
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS (CONTINUED)
5. Capital Shares (continued)
For the periods ended February 29, 2004 and August 31, 2003, the following
shares and values 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.
Period Ended Year Ended
2/29/04 8/31/03
-------------------------------- --------------------------------
Class B Class A Class B Class A
shares shares Amount shares shares Amount
Delaware Tax-Free Minnesota Insured Fund 112,397 112,347 1,236,959 26,832 26,812 301,869
6. Line of Credit
Each Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participates in a $177,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of February 29, 2004 or at any time during
the period.
7. Credit and Market Risk
The Funds concentrate their investments in securities issued by municipalities,
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 Statements of Net Assets.
8. Contractual Obligations
The Funds enter into contracts that contain a variety of indemnifications. The
Funds' maximum exposure under these arrangements is unknown. However, the Funds
have not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
13
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual 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 each Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in each Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information
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.
- --------------------------------------------------------------------------------
(8624) Printed in the USA
SA-MNALL [2/04] IVES 4/04 J9627
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 10. Controls and Procedures
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal
control over financial reporting that occurred during the registrant's last
fiscal half-year that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 11. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2 under the Investment Company Act of
1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1
under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf, by the undersigned, thereunto duly authorized.
Voyageur Insured Funds
Jude T. Driscoll
- -----------------------------------
By: Jude T. Driscoll
Title: Chairman
Date: April 27, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Jude T. Driscoll
- -----------------------------------
By: Jude T. Driscoll
Title: Chairman
Date: April 27, 2004
Joseph H. Hastings
- -----------------------------------
By: Joseph H. Hastings
Title: Chief Financial Officer
Date: April 27, 2004