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: 811-4364
Exact name of registrant as specified in charter: Voyageur Intermediate Tax Free 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 report is combined with the shareholder
reports of other investment company registrants. This Form N-CSR
pertains to the Delaware Tax-Free Minnesota Intermediate Fund of the
Registrant, information on which is included in the following
shareholder report
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
Semiannual Report FEBRUARY 29, 2004
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE
MINNESOTA INTERMEDIATE FUND
[LOGO]
POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
- --------------------------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 1
Statements of Operations 3
Statements of Changes in Net Assets 4
Financial Highlights 5
Notes to Financial Statements 8
- --------------------------------------------------------------------
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.
Statements Delaware Tax-Free Minnesota Intermediate Fund
OF NET ASSETS February 29, 2004 (Unaudited)
Principal Market
Amount Value
Municipal Bonds - 96.77%
Airport Revenue Bonds - 1.24%
Minneapolis/St. Paul Metropolitan
Airports Commission Series 14
5.50% 1/1/11 (AMT) $ 750,000 $ 861,458
-----------
861,458
-----------
Continuing Care/Retirement Revenue Bonds - 3.23%
Minneapolis Health Care Facilities
Revenue (Jones-Harrison Residence
Project) 5.90% 10/1/16 125,000 125,118
Oakdale Elderly Housing Revenue
(PHM/Oakdale, Inc. Project)
5.75% 3/1/18 1,400,000 1,405,040
Oakdale Revenue (Oak Meadows Project)
6.20% 4/1/07 150,000 152,445
6.30% 4/1/08 260,000 264,225
6.50% 4/1/10 295,000 299,714
-----------
2,246,542
-----------
Escrowed to Maturity Bonds - 5.25%
Metropolitan Council, Minneapolis/St. Paul
Area Sports Facilities Revenue
(Hubert H. Humphrey Metrodome)
6.00% 10/1/09 3,520,000 3,657,562
-----------
3,657,562
-----------
Higher Education Revenue Bonds - 7.20%
Minnesota State Higher Education
Facilities Authority Revenue
(College of Art & Design)
Series 5-D 6.625% 5/1/20 1,000,000 1,097,040
(St. Catherine College)
Series 5-N1 5.375% 10/1/32 1,000,000 1,041,840
St. Cloud Housing & Redevelopment
Authority Revenue (State University
Foundation Project) 5.00% 5/1/23 1,000,000 1,054,480
University of Minnesota Series A
5.75% 7/1/14 500,000 604,400
5.75% 7/1/16 1,000,000 1,212,150
-----------
5,009,910
-----------
Hospital Revenue Bonds - 13.74%
Bemidji Health Care Facilities First
Mortgage Revenue
(North Country Health Services)
5.00% 9/1/24 (RADIAN) 500,000 519,125
Minneapolis Health Care System Revenue
(Allina Health System)
Series A 5.75% 11/15/32 2,500,000 2,668,274
(Fairview Health Services)
Series A 5.625% 5/15/32 2,250,000 2,390,670
Minneapolis/St. Paul Housing &
Redevelopment Authority Health
Care System (Health Partners
Obligation Group) 6.00% 12/1/17 1,125,000 1,231,425
St. Louis Park Health Care Facilities
Revenue (Park Nicollet Health
Services) Series B 5.50% 7/1/25 1,500,000 1,585,350
St. Paul Housing & Redevelopment
Authority Hospital Revenue
(Health East Project) Series B
5.85% 11/1/17 1,160,000 1,167,227
-----------
9,562,071
-----------
Principal Market
Amount Value
Municipal Bonds (continued)
Miscellaneous Revenue Bonds - 5.33%
Minneapolis Art Center Facilities
Revenue (Walker Art Center Project)
5.125% 7/1/21 $ 2,250,000 $ 2,404,732
Minneapolis Community Development
Agency Supported Revenue
Common Bond Fund Series 4
6.20% 6/1/17 (AMT) 1,055,000 1,110,609
Richfield Shoppes Commercial
Development Revenue (Richfield
Shoppes Project) 7.50% 10/1/04 190,000 191,129
-----------
3,706,470
-----------
Multi Family Housing Revenue Bonds - 6.90%
Minneapolis Multifamily Revenue
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 1,000,000 1,042,830
(Trinity Apartments-Section 8)
Series A 6.75% 5/1/21 2,000,000 1,959,980
Minnesota State Housing
Finance Agency Series A
4.875% 8/1/24 (AMT) 1,000,000 1,019,660
Park Rapids Multifamily Revenue
(The Court Apartments Project-
Section 8) 6.05% 8/1/12 810,000 778,977
-----------
4,801,447
-----------
Municipal Lease Revenue Bonds - 3.12%
Edina Housing & Redevelopment
Authority Public Project Revenue
5.125% 2/1/19 1,000,000 1,071,200
Hibbing Economic Development
Authority Revenue (Hibbing Lease
Obligation) 6.10% 2/1/08 540,000 575,737
St. Paul Port Authority Lease Revenue
(Robert Street Office Building Project)
5.00% 12/1/27 500,000 527,670
-----------
2,174,607
-----------
Political Subdivision General Obligation Bonds - 8.86%
Dakota County Series A
4.75% 2/1/17 1,000,000 1,066,460
5.00% 2/1/13 1,125,000 1,284,154
Hennepin County
Series A 4.50% 12/1/17 1,000,000 1,046,500
Series B 4.75% 12/1/14 1,000,000 1,086,230
Ramsey County Series B
5.25% 2/1/11 1,445,000 1,680,130
-----------
6,163,474
-----------
*Pre-Refunded Bonds - 2.74%
Beltrami County Housing &
Redevelopment Authority Revenue
5.90% 2/1/08-05 355,000 370,574
6.00% 2/1/09-05 380,000 397,020
6.00% 2/1/10-05 405,000 423,140
6.10% 2/1/11-05 430,000 449,655
Duluth Gross Revenue
(Duluth Entertainment)
7.30% 12/1/06-04 250,000 266,573
-----------
1,906,962
-----------
1
Statements Delaware Tax-Free Minnesota Intermediate Fund
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
Municipal Bonds (continued)
Public Power Revenue Bonds - 7.47%
Southern Minnesota Municipal Power
Agency Supply System Revenue Series A
5.00% 10/1/13 (MBIA) $ 2,500,000 $ 2,849,325
5.25% 1/1/15 (AMBAC) 700,000 810,747
5.25% 1/1/16 (AMBAC) 775,000 897,791
**Southern Minnesota Municipal Power
Agency Supply System Revenue,
Inverse Floater ROLs Series II-R-189-1
8.93% 1/1/12 500,000 642,210
-----------
5,200,073
-----------
School District General Obligation Bonds - 18.35%
Big Lake Independent School
District #727 Series C
5.00% 2/1/16 (FSA) 1,180,000 1,300,844
5.00% 2/1/17 (FSA) 1,000,000 1,096,120
Centennial Independent School
District #012 Series A
5.00% 2/1/18 (FSA) 1,000,000 1,089,670
5.00% 2/1/20 (FSA) 750,000 807,630
Hopkins Independent School
District #270
5.125% 2/1/17 (FGIC) 2,000,000 2,212,460
Moorhead Independent School
District #152
5.00% 4/1/10 (FGIC) 2,585,000 2,948,166
Osseo Independent School
District #279 Series A
5.00% 2/1/21 (FSA) 1,500,000 1,604,685
South Washington County Independent
School District #833 Series B
5.00% 2/1/16 (FSA) 1,560,000 1,716,764
-----------
12,776,339
-----------
Single Family Housing Revenue Bonds - 2.81%
Minnesota State Housing Finance
Agency Residential Housing
Series I 5.10% 7/1/20 1,000,000 1,051,810
Minnesota State Housing Finance
Agency Single Family Housing
Series J 5.90% 7/1/28 (AMT) 850,000 894,353
St. Paul Housing & Redevelopment
Authority Single Family Mortgage
Revenue Series C
6.90% 12/1/21 (FNMA) 10,000 10,009
-----------
1,956,172
-----------
State General Obligation Bonds - 9.09%
Minnesota State 5.00% 8/1/21 3,050,000 3,298,728
**Minnesota State, Inverse Floater ROLs
9.05% 11/1/16 2,000,000 2,425,340
9.05% 11/1/17 500,000 600,120
-----------
6,324,188
-----------
++Variable Rate Demand Notes - 1.44%
Robbinsdale Health Care Facilities
Revenue (North Memorial Health
Care-Tranche I)
0.90% 5/15/33 (AMBAC) 1,000,000 1,000,000
-----------
1,000,000
-----------
Total Municipal Bonds (cost $63,226,275) 67,347,275
-----------
Number of Market
Shares Value
Short-Term Investment - 4.58%
Federated Minnesota Municipal Cash Trust 3,187,659 $ 3,187,659
-----------
Total Short-Term Investment (cost $3,187,659) 3,187,659
-----------
Total Market Value of Securities - 101.35%
(cost $66,413,934) 70,534,934
Liabilities Net of Receivables
and Other Assets - (1.35%) (938,471)
-----------
Net Assets Applicable to 6,277,531
Shares Outstanding - 100.00% $69,596,463
-----------
Net Asset Value - Delaware Tax-Free Minnesota
Intermediate Fund Class A
($58,468,194 / 5,275,368 Shares) $11.08
------
Net Asset Value - Delaware Tax-Free Minnesota
Intermediate Fund Class B
($3,561,389 / 320,559 Shares) $11.11
------
Net Asset Value - Delaware Tax-Free Minnesota
Intermediate Fund Class C
($7,566,880 / 681,604 Shares) $11.10
------
Components of Net Assets at February 29, 2004:
Shares of beneficial interest
(unlimited authorization-- no par) $67,656,175
Accumulated net realized loss on investments (2,180,712)
Net unrealized appreciation of investments 4,121,000
-----------
Total net assets $69,596,463
===========
*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.
++The interest rate 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 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 the Asset Guaranty Insurance Company
ROLs - Residual Option Longs
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Minnesota Intermediate Fund
Net asset value Class A (A) $11.08
Sales charge (2.75% of offering price,
or 2.80% of amount invested per share) (B) 0.31
------
Offering price $11.39
======
(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
2
Statements Delaware Minnesota Municipal Bond Funds
OF OPERATIONS Six Months Ended February 29, 2004 (Unaudited)
Delaware
Tax-Free Minnesota
Intermediate Fund
Investment Income:
Interest $1,630,157
----------
Expenses:
Management fees 164,282
Distribution expense-- Class A 71,769
Distribution expense-- Class B 17,625
Distribution expense-- Class C 35,026
Dividend disbursing and transfer agent fees and expenses 22,387
Accounting and administration expenses 12,820
Legal and professional fees 9,020
Reports and statements to shareholders 10,470
Registration fees 2,500
Custodian fees 2,851
Trustees' fees 4,000
Other 3,785
----------
397,871
----------
Less expenses absorbed or waived (1,837)
Less waiver of distribution expenses-- Class A (30,347)
Less expenses paid indirectly (821)
----------
Total expenses 323,530
----------
Net Investment Income 1,306,627
----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments (72,122)
Net change in unrealized appreciation/depreciation
of investments 2,897,462
----------
Net Realized and Unrealized Gain on Investments 2,825,340
----------
Net Increase in Net Assets Resulting from Operations $4,131,967
==========
See accompanying notes
3
Statements Delaware Minnesota Municipal Bond Funds
OF CHANGES IN NET ASSETS
Delaware Tax-Free
Minnesota Intermediate Fund
Six Months Year
Ended Ended
2/29/04 8/31/03
(Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 1,306,627 $ 2,708,315
Net realized gain (loss) on investments (72,122) 121,249
Net change in unrealized appreciation/depreciation of investments 2,897,462 (834,692)
----------- -----------
Net increase in net assets resulting from operations 4,131,967 1,994,872
----------- -----------
Dividends and Distributions to Shareholders from:
Net Investment Income:
Class A (1,136,603) (2,403,125)
Class B (57,428) (120,101)
Class C (114,066) (196,496)
----------- -----------
(1,308,097) (2,719,722)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
Class A 5,984,603 10,958,724
Class B 368,273 1,577,749
Class C 1,248,836 3,741,280
Net asset value of shares issued upon reinvestment of dividends
and distributions:
Class A 855,254 1,833,098
Class B 39,191 75,061
Class C 83,614 154,874
----------- -----------
8,579,771 18,340,786
----------- -----------
Cost of shares repurchased:
Class A (8,374,126) (5,595,854)
Class B (1,004,031) (454,699)
Class C (610,088) (2,156,934)
----------- -----------
(9,988,245) (8,207,487)
----------- -----------
Increase (decrease) in net assets derived from capital share transactions (1,408,474) 10,133,299
----------- -----------
Net Increase in Net Assets 1,415,396 9,408,449
Net Assets:
Beginning of period 68,181,067 58,772,618
----------- -----------
End of period (including undistributed net investment income of $0 and $1,470
for Delaware Tax-Free Minnesota Intermediate Fund and $0 and
$0 for Delaware Minnesota High-Yield Municipal Bond Fund) $69,596,463 $68,181,067
=========== ===========
See accompanying notes
4
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota Intermediate 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 $10.630 $10.720 $10.580 $10.350 $10.610 $11.160
Income (loss) from investment operations:
Net investment income 0.223 0.469 0.512 0.526 0.538 0.541
Net realized and unrealized gain (loss) on investments 0.450 (0.088) 0.138 0.230 (0.260) (0.550)
------- ------- ------- ------- ------- -------
Total from investment operations 0.673 0.381 0.650 0.756 0.278 (0.009)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.223) (0.471) (0.510) (0.526) (0.538) (0.541)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.223) (0.471) (0.510) (0.526) (0.538) (0.541)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.080 $10.630 $10.720 $10.580 $10.350 $10.610
======= ======= ======= ======= ======= =======
Total return(3) 6.38% 3.59% 6.34% 7.50% 2.77% (0.14%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $58,468 $57,635 $51,034 $49,089 $46,523 $56,222
Ratio of expenses to average net assets 0.75% 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 0.95% 0.96% 0.85% 0.93% 0.95% 0.79%
Ratio of net investment income to average net assets 4.20% 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 4.00% 4.22% 4.86% 5.01% 5.20% 4.91%
Portfolio turnover 39% 23% 35% 24% 9% 13%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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 premiums and discounts on debt securities.
The effect of this change for the year ended August 31, 2002 was an increase
in net investment income per share of less than $0.001, a decrease in net
realized and unrealized gain (loss) per share of less than $0.001, and an
increase in the ratio of net investment income to average net assets of less
than $0.01%. Per share data and ratios for periods prior to September 1,
2001 have not been restated to reflect this change in accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager and
distributor, as applicable. Performance would have been lower had the
expense limitation not been in effect.
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 Intermediate 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 $10.650 $10.740 $10.600 $10.370 $10.630 $11.180
Income (loss) from investment operations:
Net investment income 0.177 0.377 0.423 0.438 0.451 0.450
Net realized and unrealized gain (loss) on investments 0.460 (0.088) 0.137 0.232 (0.262) (0.552)
------- ------- ------- ------- ------- -------
Total from investment operations 0.637 0.289 0.560 0.670 0.189 (0.102)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.177) (0.379) (0.420) (0.440) (0.449) (0.448)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.177) (0.379) (0.420) (0.440) (0.449) (0.448)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.110 $10.650 $10.740 $10.600 $10.370 $10.630
======= ======= ======= ======= ======= =======
Total return(3) 6.02% 2.70% 5.43% 6.59% 1.89% (0.98%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,561 $4,002 $2,852 $2,443 $2,380 $2,878
Ratio of expenses to average net assets 1.60% 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 1.70% 1.73% 1.70% 1.78% 1.80% 1.64%
Ratio of net investment income to average net assets 3.35% 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 3.25% 3.45% 4.01% 4.16% 4.35% 4.06%
Portfolio turnover 39% 23% 35% 24% 9% 13%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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 premiums and discounts on debt securities.
The effect of this change for the year ended August 31, 2002 was an increase
in net investment income per share of less than $0.001, a decrease in net
realized and unrealized gain (loss) per share of less than $0.001, and an
increase in the ratio of net investment income to average net assets of less
than $0.01%. Per share data and ratios for periods prior to September 1,
2001 have not been restated to reflect this change in accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
See accompanying notes
6
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
- ------------------------------------------------------------------------------------------------------------------------------------
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 $10.640 $10.730 $10.590 $10.360 $10.610 $11.170
Income (loss) from investment operations:
Net investment income 0.177 0.377 0.423 0.437 0.451 0.449
Net realized and unrealized gain (loss) on investments 0.460 (0.088) 0.137 0.233 (0.253) (0.561)
------- ------- ------- ------- ------- -------
Total from investment operations 0.637 0.289 0.560 0.670 0.198 (0.112)
------- ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.177) (0.379) (0.420) (0.440) (0.448) (0.448)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.177) (0.379) (0.420) (0.440) (0.448) (0.448)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.100 $10.640 $10.730 $10.590 $10.360 $10.610
======= ======= ======= ======= ======= =======
Total return(3) 6.03% 2.71% 5.44% 6.59% 1.98% (1.08%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $7,567 $6,544 $4,887 $3,059 $2,358 $2,293
Ratio of expenses to average net assets 1.60% 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 1.70% 1.73% 1.70% 1.78% 1.80% 1.64%
Ratio of net investment income to average net assets 3.35% 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 3.25% 3.45% 4.01% 4.16% 4.35% 4.06%
Portfolio turnover 39% 23% 35% 24% 9% 13%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(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 premiums and discounts on debt securities.
The effect of this change for the year ended August 31, 2002 was an increase
in net investment income per share of less than $0.001, a decrease in net
realized and unrealized gain (loss) per share of less than $0.001, and an
increase in the ratio of net investment income to average net assets of less
than $0.01%. Per share data and ratios for periods prior to September 1,
2001 have not been restated to reflect this change in accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
See accompanying notes
7
Notes Delaware Minnesota Municipal Bond Funds
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
Intermediate Fund
-----------------
Commission Reimbursements $789
Earnings credits 32
8
Notes Delaware Minnesota Municipal Bond Funds
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
Intermediate 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
Intermediate 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
Intermediate Fund
-----------------
Investment management
fee payable to DMC $12,082
Dividend disbursing,
transfer agent fees,
accounting and other
expenses payable to DSC 5,830
Other expenses payable to
DMC and affiliates* 1,733
*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
Intermediate Fund
-----------------
$9,761
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.
9
Notes Delaware Minnesota Municipal Bond Funds
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
Intermediate Fund
-----------------
Purchases other than
short-term investments $12,541,969
Sales other than
short-term investments 15,079,610
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
Intermediate Fund
-----------------
Cost of investments $66,413,934
===========
Aggregate unrealized appreciation $ 4,192,050
Aggregate unrealized depreciation (71,050)
-----------
Net unrealized appreciation $ 4,121,000
===========
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
Intermediate Fund
-----------------
Period ended 2/29/04
-----------------------
Tax-exempt income $1,308,097
Long-term capital gain --
----------
Total $1,308,097
==========
Year ended 8/31/03
-----------------------
Tax-exempt income $2,719,722
Long-term capital gain --
----------
Total $2,719,722
==========
As of February 29, 2004, the components of net assets on a tax basis were as
follows:
Delaware Tax-Free
Minnesota
Intermediate Fund
-----------------
Shares of beneficial interest $67,656,175
Undistributed ordinary income --
Undistributed long-term capital gain --
Net realized capital losses on investments (65,848)
Capital loss carryforwards (2,114,864)
Unrealized appreciation (depreciation)
of investments 4,121,000
-----------
Net assets $69,596,463
===========
10
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
Minnesota
Year of Expiration Intermediate Fund
- ------------------ -----------------
2004 $ --
2005 --
2006 --
2007 --
2008 423,683
2009 1,440,485
2010 4,037
2011 246,659
----------
Total $2,114,864
==========
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free
Minnesota Intermediate Fund
---------------------------
Six Months Year
Ended Ended
2/29/04 8/31/03
(Unaudited)
Shares sold:
Class A 549,067 1,012,529
Class B 33,891 145,327
Class C 114,959 344,972
Shares issued upon reinvestment
of dividends and distributions:
Class A 78,478 170,287
Class B 3,588 6,948
Class C 7,655 14,355
-------- ---------
787,638 1,694,418
-------- ---------
Shares repurchased:
Class A (776,561) (519,538)
Class B (92,645) (42,074)
Class C (55,979) (199,737)
-------- ---------
(925,185) (761,349)
-------- ---------
Net increase (decrease) (137,547) 933,069
======== =========
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 Intermediate Fund 40,909 41,022 443,047 7,322 7,335 80,346
11
Notes Delaware Minnesota Municipal Bond Funds
TO FINANCIAL STATEMENTS (CONTINUED)
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.
12
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 INTERMEDIATE TAX FREE 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