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: 811-6411
Exact name of registrant as specified in charter: Voyageur Investment Trust
Address of principal executive offices: 2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service: Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: August 31
Date of reporting period: August 31, 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 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 of the Registrant, information on
which is included in the following shareholder reports.
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
ANNUAL REPORT AUGUST 31, 2004
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DELAWARE TAX-FREE CALIFORNIA INSURED FUND
[LOGO]
POWERED BY RESEARCH.(SM)
PORTFOLIO SEPTEMBER 10, 2004
MANAGEMENT REVIEW
FUND MANAGERS
Andrew M. McCullagh
Senior Portfolio Manager
Joseph R. Baxter
Senior Portfolio Manager
Robert F. Collins
Senior Portfolio Manager
Q: HOW DID THE FIXED-INCOME MARKETS AND THE DELAWARE WESTERN STATES TAX-FREE
FUNDS PERFORM DURING THE PAST YEAR?
A: For the 12-months ended August 31, 2004, the fixed-income markets produced
positive returns as ongoing uncertainties surrounding the domestic economy, a
"too-close-to-call" presidential campaign, and continued geo-political threats
highlighted the period. Such uncertain times often result in a
"flight-to-quality" as many investors seek the perceived safe-haven of
fixed-income securities. Despite a late shift in Federal Reserve policy
resulting in two short-term rate increases, bond prices generally rose across
most fixed-income markets. The benchmark 10-year U.S. Treasury note, which began
the period yielding around 4.50%, experienced some volatile price swings before
ending the fiscal year with a yield of roughly 4.15%. An inverse relationship
exists between bond prices and bond yields.
Despite lagging its fixed-income counterparts in prior fiscal years, the
tax-free municipal bond market performed quite well for the 12-month period,
benefiting from both the overall lower interest rate environment and economic
recoveries within many states. The broad national average, as measured by the
Lehman Brothers Municipal Bond Index, returned +7.11% during the fiscal year,
while state-specific indexes produced similar results. Many states, including
Arizona, California and Colorado, experienced improved tax rolls and upgrades
among tax-free bond issues as their economies moved beyond the previous
recessionary environments.
Q: WHAT DEVELOPMENTS IMPACTED YOUR INVESTMENT DECISIONS DURING THE 12-MONTH
PERIOD?
A: First, as the state economies recovered, many lower-rated bonds that had been
negatively impacted by the recent period of recession and ensuing modest
economic recovery significantly appreciated in price. Early in the fiscal year,
we were able to catch the wave of this rebound as certain lower-quality holdings
in the Funds' portfolios contributed to solid return for the fiscal year.
As the 12-month period progressed, we took advantage of this "compression" of
yields by upgrading the quality of securities within the Funds. In some cases,
certain debt issues were upgraded by the credit rating services. In other cases,
this strategy involved a rebalancing out of lower-quality bonds into
higher-quality issues. As a result, we sought to reduce overall risk within the
Funds without forgoing much upside yield potential.
Second, the Federal Reserve finally raised short-term interest rates, with the
fed funds rate moving from 1.0% to 1.5%. Because of these anticipated moves to
higher rates, we reduced the overall durations (and risks) of the Funds by
shifting into less volatile shorter-term securities. Duration, which is
calculated in years, is a common measure of a bond's or bond fund's sensitivity
to interest rate changes. The longer the duration, the more sensitive the bond
or bond fund is to changes in interest rates.
Q: PLEASE DISCUSS THE PERFORMANCES AND UNDERLYING INVESTMENT STRATEGIES IN EACH
OF THE FUNDS DURING THE FISCAL YEAR.
A: For the 12 months ended August 31, 2004, DELAWARE TAX-FREE ARIZONA FUND
appreciated +7.53% (Class A shares at net asset value with distributions
reinvested), outperforming the +6.33% return of the Lipper Arizona Municipal
Debt Funds Average, the Fund's peer group, and the +7.11% return of the Lehman
Brothers Municipal Bond Index, the Fund's benchmark (Source: Lipper Inc.).*
During the period, the state of Arizona reaped substantial benefit of strong
revenue growth from both state sales taxes and personal income taxes. These
increased receipts helped to remedy the serious budget issues that had plagued
the state in recent years. Further, the overall employment rate dropped
significantly during the 12-month period. The bond rating services took note of
these economic developments, as both Moody's and Standard & Poor's changed their
respective outlooks from "negative" to "stable" for the state.
Because the supply of tax-free debt is limited in Arizona, we used our stringent
fundamental analysis and bottom-up security selection process to seek out bonds
with the best relative value, regardless of sector. During the period, we
generated a competitive dividend stream while upgrading the Fund's credit
quality and shortening its duration. Duration, which is calculated in years, is
a common measure of a bond's or bond fund's sensitivity to interest rate
changes. The longer the duration, the more sensitive the bond or bond fund is to
changes in interest rates.
*A portion of the income from tax-exempt Funds may be subject to the
alternative minimum tax.
1
At fiscal year-end, higher education-related bonds (including those issued for
public universities, which dominate the holdings in your Fund and are typically
of a higher credit quality) made up the largest sector allocation by net assets
within your Fund. Also notable, the Maricopa County Industrial Development
Authority multi-family housing revenue bonds that had been a drag on Fund
performance in the past were partially liquidated from the portfolio. On the
other hand, Winslow Memorial Hospital Revenue Bonds experienced internal
management challenges that hindered expected revenues. While we pared down our
exposure this year, the bonds negatively impacted the Fund's return and remain a
candidate for upcoming sale.
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For the 12 months ended August 31, 2004, DELAWARE TAX-FREE ARIZONA INSURED FUND
appreciated +7.09% (Class A shares at net asset value with distributions
reinvested). During the same timeframe, the Lipper Arizona Muni Debt Funds
Average, which serves as the Fund's peer group, returned +6.33%. The Fund
slightly underperformed its benchmark, the Lehman Brothers Municipal Bond Index,
which returned +7.11% (Source: Lipper Inc.).*
During the 12-month period, your Fund benefited significantly from economic
strength experienced throughout the state. While our selection of bonds is
largely limited to insured status, we were able to enhance Fund return by
identifying selected higher yielding mid-investment-grade issues for up to 20
percent of the Fund's net assets. Despite its majority AAA-rated insured
holdings, your Fund generated a competitive stream of dividends. However,
because of our high-quality requirements and your Fund's insured profile, the
dividend yield is not as high as many other tax-free funds and its performance
does not rank in the top quartile.
At fiscal year-end, the main bond market sectors held within your Fund were
hospitals and institutions of higher education, representing 12.3% and 10.3% of
net assets, respectively. We avoided certain charter school issues because the
Arizona legislature, in our opinion, does not embrace these public education
entities as do the legislatures of other states.
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For the 12 months ended August 31, 2004, DELAWARE TAX-FREE CALIFORNIA FUND
returned +8.34% (Class A shares at net asset value with distributions
reinvested). This performance surpassed the +7.04% return of the Lipper
California Muni Debt Funds Average, the Fund's peer group, and the +7.11% return
of the Lehman Brothers Municipal Bond Index, the Fund's benchmark (Source:
Lipper Inc.).*
During the fiscal year, a new governor was elected in California. Arnold
Schwarzenegger is considered pro-business and has repeatedly spoken of his goals
to create jobs and further improve an economy that generally expanded in line
with the rest of the country during the 12-month period. The state has moved to
overcome its significant budgetary issues, including the issuance of economic
recovery bonds to improve the liquidity and strive for a balanced budget. In
late August, Standard & Poor's upgraded its rating for the state from BBB+ to A,
a move that should reap significant benefits for California's debt. Likewise,
Moody's placed California's A3 rating on a "positive" track.
Still, we exercised caution, as we are not convinced that all of the state's
financial problems have been solved, there still being structural imbalances in
the State's forward budgets. Anticipating the rating moves and improving
economic outlook, we invested in state general obligation bonds that performed
well during the fiscal period.
Also benefiting from California's upward credit trend are the state
appropriation supported tobacco settlement bonds. While we have avoided the
stand-alone tobacco bonds, which have been highly volatile and are subject to
litigation risk, our bonds are double barreled, with State appropriations
backing up any shortfalls from the master settlement agreement.
One holding, San Diego County Museum Bonds, which are certificates of
participation for the Natural History Museum, under-performed during the year as
the museum suffered from lower than anticipated attendance. While we still owned
this issue at year-end, its status remains under review and is a candidate for
sale.
*A portion of the income from tax-exempt Funds may be subject to the
alternative minimum tax.
2
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For the 12 months ended August 31, 2004, DELAWARE TAX-FREE CALIFORNIA INSURED
FUND gained +7.85% (Class A shares at net asset value with distributions
reinvested). The Fund outperformed its peer group, as measured by the Lipper
California Insured Muni Debt Funds Average, which returned +6.50%, and its
benchmark, the Lehman Brothers Municipal Bond Index, which returned +7.11%
(Source: Lipper Inc.).*
During the 12-month period, the state of California experienced an improved
employment situation and increased receipts from sales taxes and personal income
taxes. Likewise, the state's improved credit rating picture boded well for the
issues held by your Fund. We invested in select higher-yielding,
mid-investment-grade holdings to enhance Fund return, while avoiding some of the
hardest hit issues, such as development projects in the Silicon Valley region.
At fiscal year-end, multi-family housing issues represented the largest sector
allocation within your Fund at 15.1% of net assets. On a negative note, San
Diego School District general obligation bonds encountered some financial
challenges that negatively impacted performance. During the year, the school
district faced ongoing budgetary issues.
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For the 12 months ended August 31, 2004, DELAWARE TAX-FREE COLORADO FUND
appreciated +7.04% (Class A shares at net asset value with distributions
reinvested). The Fund's performance bested the +6.49% return of its peer group,
the Lipper Colorado Municipal Debt Funds Average, and slightly trailed the
+7.11% return of its benchmark, the Lehman Brothers Municipal Bond Index
(Source: Lipper Inc.).*
The Colorado economy continued to lag much of the country during the 12-month
period as state employment and growth in personal income trailed national
averages. Voter initiatives such as TABOR (Colorado's Taxpayer's Bill of Rights)
and education funding also served to limit the state's financial flexibility.
Despite such ongoing economic issues, Moody's revised the outlook for the state
from "negative" to "stable."
Political subdivisions and higher education bonds are the top two sectors
represented in your fund. Political subdivisions have been among the largest
bond issuers in the state over the past few years and higher education bonds
issued for public universities are typically of high credit quality. However,
the Fund's return was affected by some challenges faced by one related issue,
Colorado Education and Cultural Facility Authority Revenue Bonds. The
beneficiary of this funding, The Renaissance School, experienced decreased
enrollment following a move from charter to magnet school status.
*A portion of the income from tax-exempt Funds may be subject to the
alternative minimum tax.
3
DELAWARE
TAX-FREE CALIFORNIA INSURED FUND
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or visiting our Web site at
www.delawareinvestments.com/performance. You should consider the investment
objectives, risks, charges, and expenses of the investment carefully before
investing. The Delaware Tax-Free California Insured Fund prospectus contains
this and other important information about the investment company. Please
request a prospectus by calling 800 523-1918. Read it carefully before you
invest or send money. Performance includes reinvestment of all distributions.
FUND PERFORMANCE
Average Annual Total Returns
Through August 31, 2004 Lifetime 10 Years Five Years One Year
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Class A (Est. 10/15/92)
Excluding Sales Charge +6.02% +5.96% +6.07% +7.85%
Including Sales Charge +5.61% +5.48% +5.10% +3.02%
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Class B (Est. 3/2/94)
Excluding Sales Charge +4.86% +5.44% +5.28% +7.04%
Including Sales Charge +4.86% +5.44% +5.03% +3.04%
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Class C (Est. 4/12/95)
Excluding Sales Charge +4.98% +5.31% +7.07%
Including Sales Charge +4.98% +5.31% +6.07%
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Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of up to 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%. Lifetime and 10-year performance figures for
class B shares reflect conversion to Class A shares after approximately eight
years.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
California Insured Fund during the periods shown. Performance would have been
lower had the expense limitation not been in effect.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
A portion of the income from tax-exempt Funds may be subject to the alternative
minimum tax.
4
DELAWARE
TAX-FREE CALIFORNIA INSURED FUND
FUND BASICS
As of August 31, 2004
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FUND OBJECTIVE:
The Fund seeks as high a level of current interest income exempt from federal
income tax and the California state personal income tax as is consistent with
preservation of capital.
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TOTAL FUND NET ASSETS:
$33.01 million
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NUMBER OF HOLDINGS:
28
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FUND START DATE:
October 15, 1992
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YOUR FUND MANAGERS:
Andrew M. McCullagh, Jr.
Joseph R. Baxter
Robert F. Collins
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NASDAQ SYMBOLS:
Class A VCINX
Class B DVNBX
Class C DVNCX
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PERFORMANCE OF A $10,000 INVESTMENT
August 31, 1994 through August 31, 2004
DELAWARE TAX-FREE NEW YORK FUND GROWTH OF $10,000 INVESTMENT CHART
DELAWARE TAX-FREE
CALIFORNIA INSURED LEHMAN BROTHERS
FUND-CLASS A SHARES MUNICIPAL BOND INDEX
31-AUG-94 $ 9,554 $10,000
31-AUG-95 $10,216 $10,886
31-AUG-96 $10,827 $11,456
31-AUG-97 $11,895 $12,514
31-AUG-98 $12,952 $13,597
31-AUG-99 $12,697 $13,665
31-AUG-00 $13,598 $14,590
31-AUG-01 $14,893 $16,077
31-AUG-02 $15,524 $17,080
31-AUG-03 $15,807 $17,617
31-AUG-04 $17,051 $18,869
Chart assumes $10,000 invested on August 31, 1994 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
An expense limitation was in effect for the period shown. Performance would have
been lower had the expense limitation not been in effect.
The performance graph does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
5
DISCLOSURE FOR THE PERIOD MARCH 1, 2004 TO AUGUST 31, 2004
OF FUND EXPENSES
As a shareholder of a fund, you incur two types of costs (1) transaction costs,
including sales charges (loads) on purchase payments, reinvested dividends, or
other distributions; redemption fees; end exchange fees; and (2) ongoing costs,
including management fees; distribution, and/or service (12b-1) fees; and other
fund expenses. This example is intended to help you understand your ongoing
costs (in dollars) of investing in a fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period March 1, 2004 to August 31, 2004.
ACTUAL EXPENSES
The first section of the table shown, "Actual Fund Return," provides information
about actual account values and actual expenses. You may use the information in
this section together with the amount you invested, to estimate the expenses
that you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first section under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during the
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table shown, "Hypothetical 5% Return," provides
information about hypothetical account values and hypothetical expenses based on
a fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the fund and other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the second
section of the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher. The Funds' actual expenses shown in the tables reflect fee waivers in
effect. The expenses shown in the tables assume reinvestment of all dividends
and distributions.
In each case, "Expenses Paid During Period" are equal to the Fund's annualized
expense ratio, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
6
DISCLOSURE FOR THE PERIOD MARCH 1, 2004 TO AUGUST 31, 2004
OF FUND EXPENSES (CONTINUED)
DELAWARE TAX-FREE CALIFORNIA INSURED FUND
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expense
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/04 to
3/1/04 8/31/04 Ratio 8/31/04
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ACTUAL FUND RETURN
Class A $1,000.00 $1,001.50 0.91% $4.58
Class B 1,000.00 997.70 1.66% 8.34
Class C 1,000.00 997.70 1.66% 8.34
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HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.37 0.91% $4.63
Class B 1,000.00 1,016.55 1.66% 8.45
Class C 1,000.00 1,016.55 1.66% 8.45
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7
SECTOR ALLOCATION DELAWARE TAX-FREE CALIFORNIA INSURED FUND
As of August 31, 2004
The following chart lists the Fund's categories of portfolio holdings as a
percent of total net assets, and is provided in compliance with such
requirement.
PERCENTAGE
SECTOR OF NET ASSETS
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MUNICIPAL BONDS 97.21%
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Airport Revenue Bonds 3.07%
Continuing Care/Retirement Revenue Bonds 3.09%
Dedicated Tax & Fees Revenue Bonds 6.13%
Higher Education Revenue Bonds 6.43%
Hospital Revenue Bonds 1.49%
Miscellaneous Revenue Bonds 3.33%
Multifamily Housing Revenue Bonds 15.13%
Municipal Lease Revenue Bonds 9.43%
Ports & Harbors Revenue Bonds 3.26%
Pre-Refunded Bonds 4.59%
Public Power Revenue Bonds 3.25%
School District General Obligation Bonds 9.30%
State General Obligation Bonds 3.21%
Tax Increment/Special Assessment Bonds 12.80%
Territorial Revenue Bonds 3.37%
Waste Disposal Revenue Bonds 6.24%
Water & Sewer Revenue Bonds 3.09%
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SHORT-TERM INVESTMENTS 0.27%
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TOTAL MARKET VALUE OF SECURITIES 97.48%
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RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.52%
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TOTAL NET ASSETS 100.00%
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8
STATEMENTS DELAWARE TAX-FREE CALIFORNIA INSURED FUND
OF NET ASSETS August 31, 2004
Principal Market
Amount Value
MUNICIPAL BONDS - 97.21%
Airport Revenue Bonds - 3.07%
Sacramento County Airport System
Revenue Series A 5.00% 7/1/32 (FSA) $1,000,000 $1,012,870
----------
1,012,870
----------
Continuing Care/Retirement Revenue Bonds - 3.09%
California Health Facilities Financing
(The Episcopal Home)
5.30% 2/1/32 (RADIAN) 1,000,000 1,021,280
----------
1,021,280
----------
Dedicated Tax & Fees Revenue Bonds - 6.13%
San Bernardino County Special Tax
Community Facilities 5.90% 9/1/33 1,000,000 1,000,370
San Francisco Bay Area Rapid Transit
District Sales Tax Revenue
5.125% 7/1/36 (AMBAC) 1,000,000 1,022,650
----------
2,023,020
----------
Higher Education Revenue Bonds - 6.43%
California Educational Facilities Authority
Revenue (University of The Pacific)
5.75% 11/1/30 (MBIA) 1,000,000 1,097,490
California Statewide Communities
Development Authority Revenue
(Bentley School) 6.75% 7/1/32 1,000,000 1,024,910
----------
2,122,400
----------
Hospital Revenue Bonds - 1.49%
California Health Facilities Financing
Authority (Catholic Healthcare West)
Series G 5.25% 7/1/23 500,000 490,875
----------
490,875
----------
Miscellaneous Revenue Bonds - 3.33%
San Diego County Certificates of
Participation 5.75% 7/1/31 (MBIA) 1,000,000 1,100,170
----------
1,100,170
----------
Multifamily Housing Revenue Bonds - 15.13%
California Statewide Communities
Development Authority
Multifamily Housing Revenue
(Citrus Gardens Apartments Project)
Series D1 5.375% 7/1/32 800,000 809,384
California Statewide Communities
Development Authority
Multifamily Housing Revenue
(East Tabor Apartments)
6.85% 8/20/36 (GNMA) (AMT) 1,500,000 1,594,981
Los Angeles Multifamily Housing
Revenue (Park Plaza)
5.50% 1/20/43 (GNMA)(AMT) 1,430,000 1,484,354
Ventura County Area Housing Authority
Multifamily Housing Revenue
(Glen Oaks Apartments)
Series A 6.35% 7/20/34 (GNMA) 1,018,000 1,100,987
----------
4,989,706
----------
Municipal Lease Revenue Bonds - 9.43%
California State Public Works Board Lease
Revenue 5.00% 3/1/27 (AMBAC) 1,000,000 1,019,100
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Municipal Lease Revenue Bonds (continued)
Franklin-McKinley School District
Certificates of Participation
(Financing Project)
Series B 5.00% 9/1/27 (AMBAC) $ 1,060,000 $ 1,078,836
San Juan Basin Authority
(Ground Water Recovery Project)
5.00% 12/1/34 (AMBAC) 1,000,000 1,015,870
-----------
3,113,806
-----------
Ports & Harbors Revenue Bonds - 3.26%
Port of Oakland 5.75% 11/1/29 (FGIC)(AMT) 1,000,000 1,076,440
-----------
1,076,440
-----------
*Pre-Refunded Bonds - 4.59%
Oakland Industrial Revenue
(Harrison Foundation)
Series B 6.00% 1/1/29-10 (AMBAC) 1,300,000 1,514,162
-----------
1,514,162
-----------
Public Power Revenue Bonds - 3.25%
California State Department Water
Reserve Power Supply Revenue
Series A 5.375% 5/1/21 1,000,000 1,073,290
-----------
1,073,290
-----------
School District General Obligation Bonds - 9.30%
Lawndale Elementary School District
5.00% 8/1/32 (FSA) 1,000,000 1,018,210
San Diego Unified School District
5.00% 7/1/28 (FSA) 1,000,000 1,022,510
Sequoia Unified High School District
5.125% 7/1/31 (FSA) 1,000,000 1,030,740
-----------
3,071,460
-----------
State General Obligation Bonds - 3.21%
California State 5.50% 11/1/33 1,000,000 1,058,570
-----------
1,058,570
-----------
Tax Increment/Special Assessment Bonds - 12.80%
La Quinta Redevelopment Agency Tax
Allocation 5.10% 9/1/31 (AMBAC) 1,000,000 1,023,260
Poway Redevelopment Agency Certificates
of Participation 5.75% 6/15/33 (MBIA) 1,400,000 1,547,112
Riverside County Redevelopment Agency
5.25% 10/1/35 (AMBAC) 1,590,000 1,655,301
-----------
4,225,673
-----------
Territorial Revenue Bonds - 3.37%
Puerto Rico Electric Power Authority Power
Revenue Series OO 5.00% 7/1/13 (CIFG) 1,000,000 1,112,680
-----------
1,112,680
-----------
Waste Disposal Revenue Bonds - 6.24%
Salinas Valley Solid Waste Authority
Revenue 5.25% 8/1/27 (AMBAC) (AMT) 2,000,000 2,060,340
-----------
2,060,340
-----------
Water & Sewer Revenue Bonds - 3.09%
California State Department of Water
Resources Water Systems Revenue
(Central Valley Project)
Series X 5.00% 12/1/29 (FGIC) 1,000,000 1,020,590
-----------
1,020,590
-----------
TOTAL MUNICIPAL BONDS (cost $30,484,157) 32,087,332
-----------
9
STATEMENTS DELAWARE TAX-FREE CALIFORNIA INSURED FUND
OF NET ASSETS (CONTINUED)
Number Market
of Shares Value
SHORT-TERM INVESTMENTS - 0.27%
Federated California Municipal Trust 90,190 $ 90,190
-----------
TOTAL SHORT-TERM INVESTMENTS (cost $90,190) 90,190
-----------
TOTAL MARKET VALUE OF SECURITIES - 97.48%
(cost $30,574,347) 32,177,522
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 2.52% 831,547
-----------
NET ASSETS APPLICABLE TO 2,999,315
SHARES OUTSTANDING - 100.00% $33,009,069
===========
Net Asset Value - Delaware Tax-Free California
Insured Fund Class A ($24,748,327 / 2,248,556 Shares) $11.01
------
Net Asset Value - Delaware Tax-Free California
Insured Fund Class B ($6,894,516 / 626,275 Shares) $11.01
------
Net Asset Value - Delaware Tax-Free California
Insured Fund Class C ($1,366,226 / 124,484 Shares) $10.98
------
COMPONENTS OF NET ASSETS AT AUGUST 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $31,333,825
Accumulated net realized gain on investments 72,069
Net unrealized appreciation of investments 1,603,175
-----------
Total net assets $33,009,069
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
CIFG - Insured by CDC IXIS Financial Guaranty
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE CALIFORNIA INSURED FUND
Net asset value Class A (A) $11.01
Sales charge (4.50% of offering price,
or 4.72% of amount invested per share) (B) 0.52
------
Offering price $11.53
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
10
STATEMENTS YEAR ENDED AUGUST 31, 2004
OF OPERATIONS
Delaware
Tax-Free California
Insured Fund
INVESTMENT INCOME:
Interest $1,994,904
----------
EXPENSES:
Management fees 195,234
Distribution expenses -- Class A 72,176
Distribution expenses -- Class B 75,423
Distribution expenses -- Class C 27,298
Dividend disbursing and transfer agent fees and expenses 18,516
Accounting and administration expenses 14,630
Registration fees 2,340
Reports and statements to shareholders 1,855
Legal and professional fees 13,842
Custodian fees 3,930
Trustees' fees 2,399
Other 5,376
----------
433,019
Less expenses absorbed or waived --
Less expenses paid indirectly (359)
----------
Total expenses 432,660
----------
NET INVESTMENT INCOME 1,562,244
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 187,797
Net change in unrealized appreciation/depreciation of investments 889,503
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,077,300
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,639,544
==========
See accompanying notes
11
STATEMENTS
OF CHANGES IN NET ASSETS
Delaware Tax-Free
California Insured Fund
Year Ended
8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,562,244 $ 1,632,266
Net realized gain on investments 187,797 166,983
Net change in unrealized appreciation/depreciation of investments 889,503 (1,149,222)
----------- -----------
Net increase in net assets resulting from operations 2,639,544 650,027
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (1,208,781) (1,249,365)
Class B (259,578) (319,704)
Class C (93,885) (63,197)
Net realized gain on investments:
Class A (70,273) --
Class B (18,623) --
Class C (6,971) --
----------- -----------
(1,658,111) (1,632,266)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 3,866,935 4,039,278
Class B 370,983 1,648,826
Class C 525,389 2,003,403
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 606,478 655,264
Class B 158,794 161,774
Class C 44,658 26,743
----------- -----------
5,573,237 8,535,288
----------- -----------
Cost of shares repurchased:
Class A (9,237,607) (3,785,642)
Class B (2,522,736) (2,732,015)
Class C (2,177,814) (360,679)
----------- -----------
(13,938,157) (6,878,336)
----------- -----------
Increase (decrease) in net assets derived from capital share transactions (8,364,920) 1,656,952
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (7,383,487) 674,713
NET ASSETS:
Beginning of year 40,392,556 39,717,843
----------- -----------
End of year(1) $33,009,069 $40,392,556
=========== ===========
(1) Including undistributed net investment income $ -- $ --
=========== ===========
See accompanying notes
12
FINANCIAL
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free California Insured Fund Class A
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.670 $10.930 $11.130 $10.640 $10.430
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.458 0.463 0.470 0.496 0.500
Net realized and unrealized gain (loss) on investments 0.365 (0.260) (0.027) 0.490 0.210
------- ------- ------- ------- -------
Total from investment operations 0.823 0.203 0.443 0.986 0.710
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.458) (0.463) (0.470) (0.496) (0.500)
Net realized gain on investments (0.025) -- (0.173) -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.483) (0.463) (0.643) (0.496) (0.500)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.010 $10.670 $10.930 $11.130 $10.640
======= ======= ======= ======= =======
TOTAL RETURN(1) 7.85% 1.84% 4.23% 9.51% 7.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $24,748 $28,822 $28,630 $28,045 $23,877
Ratio of expenses to average net assets 0.91% 0.93% 0.92% 0.87% 1.00%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.91% 0.93% 0.92% 0.87% 1.09%
Ratio of net investment income to average net assets 4.20% 4.21% 4.36% 4.59% 4.87%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.20% 4.21% 4.36% 4.59% 4.78%
Portfolio turnover 20% 44% 111% 162% 91%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
13
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free California Insured Fund Class B
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.670 $10.930 $11.130 $10.640 $10.430
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.377 0.381 0.389 0.415 0.423
Net realized and unrealized gain (loss) on investments 0.365 (0.260) (0.027) 0.490 0.210
------- ------- ------- ------- -------
Total from investment operations 0.742 0.121 0.362 0.905 0.633
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.377) (0.381) (0.389) (0.415) (0.423)
Net realized gain on investments (0.025) -- (0.173) -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.402) (0.381) (0.562) (0.415) (0.423)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.010 $10.670 $10.930 $11.130 $10.640
======= ======= ======= ======= =======
TOTAL RETURN(1) 7.04% 1.07% 3.44% 8.70% 6.30%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $6,895 $8,628 $9,714 $7,628 $6,440
Ratio of expenses to average net assets 1.66% 1.68% 1.67% 1.62% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.66% 1.68% 1.67% 1.62% 1.84%
Ratio of net investment income to average net assets 3.45% 3.46% 3.61% 3.84% 4.12%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.45% 3.46% 3.61% 3.84% 4.03%
Portfolio turnover 20% 44% 111% 162% 91%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
14
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free California Insured Fund Class C
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(2) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.640 $10.890 $11.090 $10.600 $10.390
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.377 0.380 0.392 0.417 0.423
Net realized and unrealized gain (loss) on investments 0.365 (0.250) (0.027) 0.490 0.210
------- ------- ------- ------- -------
Total from investment operations 0.742 0.130 0.365 0.907 0.633
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.377) (0.380) (0.392) (0.417) (0.423)
Net realized gain on investments (0.025) -- (0.173) -- --
------- ------- ------- ------- -------
Total dividends and distributions (0.402) (0.380) (0.565) (0.417) (0.423)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.980 $10.640 $10.890 $11.090 $10.600
======= ======= ======= ======= =======
TOTAL RETURN(1) 7.07% 1.17% 3.45% 8.75% 6.32%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,366 $2,942 $1,374 $200 $439
Ratio of expenses to average net assets 1.66% 1.68% 1.67% 1.62% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.66% 1.68% 1.67% 1.62% 1.84%
Ratio of net investment income to average net assets 3.45% 3.46% 3.61% 3.84% 4.12%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.45% 3.46% 3.61% 3.84% 4.03%
Portfolio turnover 20% 44% 111% 162% 91%
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(2) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that requires
amortization of all premiums and discounts on debt securities. This change
in accounting had no impact for the year ended August 31, 2002. Per share
data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
15
NOTES AUGUST 31, 2004
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
notes pertain to Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona
Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California
Insured Fund and Delaware Tax-Free Colorado Fund (each a "Fund" and,
collectively, the "Funds"). The above Trusts are open-end investment companies.
The Funds are considered non-diversified under the Investment Company Act of
1940, as amended. The Funds offer Class A, Class B, and Class C shares. Class A
shares are sold with a front-end sales charge of up to 4.50%. Class B shares are
sold with a contingent deferred sales charge that declines from 4% to zero
depending upon the period of time the shares are held. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately eight
years after purchase. Class C shares are sold with a contingent deferred sales
charge of 1%, if redeemed during the first 12 months.
The investment objective of Delaware Tax-Free Arizona Fund, Delaware Tax-Free
Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free
California Insured Fund and Delaware Tax-Free Colorado Fund is to seek as high a
level of current income exempt from federal income tax and personal income tax
in their respective states, as is consistent with preservation of capital.
1. SIGNIFICANT ACCOUNTING
Policies The following accounting policies are in accordance with U.S. generally
accepted accounting principles and are consistently followed by the Funds.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of each Fund's Board of
Trustees.
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
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and 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.
Through December 31, 2003, certain expenses of the Funds were 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 year ended August 31, 2004
were as follows:
Delaware
Tax-Free California
Insured Fund
-------------------
Commission reimbursements $330
Earnings credits 29
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 California
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%
16
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
DMC has contractually agreed to waive that portion, if any, of its management
fee and 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, as shown below.
Delaware
Tax-Free California
Insured Fund
-------------------
Operating expense limitation as a percentage
of average daily net assets (per annum) 0.75%
Expiration date 10/31/04
Effective November 1, 2004, operating
expense limitation as a percentage of
average daily net assets (per annum) 0.68%
Expiration date 3/31/06
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 August 31, 2004, each Fund had liabilities payable to affiliates as follows:
Delaware
Tax-Free California
Insured Fund
-------------------
Investment management fee payable
to (receivable from) DMC $5,909
Dividend disbursing, transfer agent fees,
accounting and administration fees
and other expenses payable to DSC 2,354
Other expenses payable to DMC and affiliates* 760
*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, fees for audit, legal
and tax services, registration fees and trustees' fees.
As provided in the investment management agreement, the Funds bear the cost of
certain legal services expenses, including in-house legal services provided to
the Funds by DMC employees. For the year ended August 31, 2004, 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 had costs of $1,744, $13,646, $3,664, $1,867, and
$20,562, respectively.
For the year ended August 31, 2004, DDLP earned commissions on sales of Class A
shares for each Fund as follows:
Delaware
Tax-Free California
Insured Fund
-------------------
$6,031
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 year ended August 31, 2004, the Funds made purchases and sales of
investment securities as follows:
Delaware
Tax-Free California
Insured Fund
-------------------
Purchases other than short-term investments $7,625,050
Sales other than short-term investments 16,621,605
17
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
At August 31, 2004, the cost of investments and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Delaware
Tax-Free California
Insured Fund
-------------------
Cost of investments $30,574,347
-----------
Aggregate unrealized appreciation $ 1,637,030
Aggregate unrealized depreciation (33,855)
-----------
Net unrealized appreciation $ 1,603,175
===========
4. DIVIDEND AND DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. The tax character of dividends and distributions
paid during the years ended August 31, 2004 and 2003 was as follows:
Delaware Tax-Free
California Insured Fund
2004 2003
---------------------------
Tax-exempt income $1,562,244 $1,632,266
Long-term capital gain 95,867 --
---------- ----------
Total $1,658,111 $1,632,266
========== ==========
As of August 31, 2004, the components of net assets on a tax basis was as
follows:
Delaware
Tax-Free California
Insured Fund
-------------------
Shares of beneficial interest $31,333,825
Undistributed ordinary income 23,345
Undistributed tax-exempt income --
Undistributed long-term capital gains 48,724
Post-October losses --
Capital loss carryforwards --
Unrealized appreciation of investments 1,603,175
-----------
Net assets $33,009,069
===========
Post-October losses represent losses realized on investment transactions from
November 1, 2003, through August 31, 2004 that, in accordance with federal
income tax regulations, the Funds have elected to defer and treat as having
arisen in the following fiscal year.
For the year ended August 31, 2004, the Funds had capital loss carryforward that
were utilized as follows:
Delaware Tax-Free California Insured Fund $18,151
18
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Delaware Tax-Free
California Insured Fund
-----------------------
Year Ended
8/31/04 8/31/03
Shares sold:
Class A 354,340 367,203
Class B 33,989 150,611
Class C 48,899 180,673
Shares issued upon reinvestments
of dividends and distributions:
Class A 55,519 59,858
Class B 14,541 14,770
Class C 4,096 2,450
---------- --------
511,384 775,565
---------- --------
Shares repurchased:
Class A (862,920) (345,875)
Class B (230,808) (245,676)
Class C (204,997) (32,732)
---------- --------
(1,298,725) (624,283)
---------- --------
Net increase (decrease) (787,341) 151,282
========== ========
19
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES (CONTINUED)
For the years ended August 31, 2004 and 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 on the prior page and
the Statements of Changes in Net Assets.
Year Ended Year Ended
8/31/04 8/31/03
-------------------------------- -------------------------------
Class B Class A Class B Class A
shares shares Amount shares shares Amount
Delaware Tax-Free California Insured Fund 87,591 87,607 $956,483 141,516 141,543 $1,570,564
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 Funds' allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of August 31, 2004, or at any time during
the fiscal year.
7. CREDIT AND MARKET RISK
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, regional or local economic conditions, and differing levels
of supply and demand for municipal bonds. Many municipalities insure repayment
for their obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that market value
may fluctuate for other reasons and there is no assurance that the insurance
company will meet its obligations. These securities have been identified in the
Statements of Net Assets.
8. CONTRACTUAL OBLIGATIONS
The Funds enter into contracts in the normal course of business that contain a
variety of indemnifications. The Funds' maximum exposure under these
arrangements is unknown. However, the Funds have not had prior claims or losses
pursuant to these contracts. Management has reviewed the Funds' existing
contracts and expects the risk of loss to be remote.
9. TAX INFORMATION (UNAUDITED)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2004, each Fund designates distributions
paid during the year as follows:
(A) (B) (C)
Long Term Ordinary Tax-
Capital Gains Income Exempt Total
Distributions Distributions Distribution Distributions
(Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis)
------------- ------------- ------------ -------------
Delaware Tax-Free California Insured Fund 6% -- 94% 100%
(A), (B), and (C) are based on a percentage of each Fund's total distributions.
20
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
Voyageur Mutual Funds - Delaware Tax-Free Arizona Fund
and Delaware Tax-Free California Fund
Voyageur Insured Funds - Delaware Tax-Free Arizona
Insured Fund
Voyageur Investment Trust - Delaware Tax-Free California
Insured Fund
Voyageur Mutual Funds II - Delaware Tax-Free Colorado Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Arizona Fund and Delaware Tax-Free California Fund (two of the series
constituting Voyageur Mutual Funds), Delaware Tax-Free Arizona Insured Fund (one
of the series constituting Voyageur Insured Funds), Delaware Tax-Free California
Insured Fund (one of the series constituting Voyageur Investment Trust) and
Voyageur Mutual Funds II (comprised of Delaware Tax-Free Colorado Fund) (the
"Funds") as of August 31, 2004, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of August 31, 2004, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Fund of Voyageur
Mutual Funds, the Delaware Tax-Free Arizona Insured Fund of Voyageur Insured
Funds, the Delaware Tax-Free California Insured Fund of Voyageur Investment
Trust, and the Delaware Tax-Free Colorado Fund of Voyageur Mutual Funds II at
August 31, 2004, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for each of the five years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 4, 2004
21
DELAWARE INVESTMENTS FAMILY OF FUNDS
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees/Directors which has oversight
responsibility for the management of a fund's business affairs.
Trustees/Directors establish procedures and oversee and review the performance
of the investment manager, the distributor and others that perform services for
the fund. The independent fund trustees, in particular, are advocates for
shareholder interests. The following is a list of the Trustees/Directors and
Officers with certain background and related information.
NUMBER OF OTHER
PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS
NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY
ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
JUDE T. DRISCOLL(2) Chairman and 4 Years - Since August 2000, 77 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Trustee since at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998 - August 2000)
Managing Director -
NationsBanc Capital Markets
(February 1996 - June 1998)
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
WALTER P. BABICH Trustee 16 Years Board Chairman - 94 None
2005 Market Street Citadel Constructors, Inc.
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
JOHN H. DURHAM Trustee 25 Years(3) Private Investor 94 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
JOHN A. FRY Trustee(4) 3 Years President - 77 Director -
2005 Market Street Franklin & Marshall College Community Health
Philadelphia, PA (June 2002 - Present) Systems
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
ANTHONY D. KNERR Trustee 11 Years Founder/Managing Director - 94 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
22
NUMBER OF OTHER
PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS
NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY
ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
ANN R. LEVEN Trustee 15 Years Treasurer/Chief Fiscal Officer - 94 Director and
2005 Market Street National Gallery of Art Audit Committee
Philadelphia, PA (1994 - 1999) Chairperson - Andy
19103 Warhol Foundation
Director -
Systemax Inc.
November 1, 1940
THOMAS F. MADISON Trustee 10 Years President/Chief 94 Director -
2005 Market Street Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993 - Present)
Director -
Digital River, Inc.
Director - Rimage
Corporation
JANET L. YEOMANS Trustee 5 Years Vice President/Mergers & 94 None
2005 Market Street Acquisitions - 3M Corporation
Philadelphia, PA (January 2003 - Present)
19103
Ms. Yeomans has held
July 31, 1948 various management
positions at 3M Corporation
since 1983.
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
JOSEPH H. HASTINGS Executive Executive Mr. Hastings has served in 94 None(5)
2005 Market Street Vice President Vice President various executive capacities
Philadelphia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments.
Officer Officer since
December 19, 1949 August 21, 2003
RICHELLE S. MAESTRO Executive Vice President, Chief Legal Ms. Maestro has served in 94 None(5)
2005 Market Street Chief Legal Officer Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments.
November 26, 1957
MICHAEL P. BISHOF Senior Vice President 8 Years Mr. Bishof has served in 94 None(5)
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
(1) Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Registrant's investment advisor,
principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
(5) Mr. Hastings, Mr. Bishof and Ms. Maestro also serve in similar capacities
for the six portfolios of the Optimum Fund Trust, which have the same
investment advisor, principal underwriter, and transfer agent as the
registrant.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees/Directors and Officers and is available, without
charge, upon request by calling 800 523-1918.
23
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This annual report is for the information of Delaware Tax-Free Arizona Fund,
Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund,
Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund, but may
be used with a 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, 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 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 Executive 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
- --------------------------------------------------------------------------------
Each Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and
procedures that each Fund uses to determine how to vote proxies (if any)
relating to portfolio securities is available without charge (i) upon request,
by calling 800 523-1918; (ii) on each Fund's Web site at
http://www.delawareinvestments.com; and (iii) on the Commission's Web site at
http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the
Commission's Public Reference Room in Washington, DC; information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Information (if any) regarding how each Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through each Fund's Web site at
http://www.delawareinvestments.com; and (ii) on the Commission's Web site at
http://www.sec.gov.
- --------------------------------------------------------------------------------
(8919) Printed in the USA
AR-WEST [8/04] IVES 10/04 J9813
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
ANNUAL REPORT AUGUST 31, 2004
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE FLORIDA FUND
DELAWARE TAX-FREE FLORIDA INSURED FUND
[LOGO]
POWERED BY RESEARCH.(SM)
PORTFOLIO SEPTEMBER 10, 2004
MANAGEMENT REVIEW
FUND MANAGERS
Patrick Coyne
MANAGING DIRECTOR/HEAD OF EQUITY INVESTMENTS
Joseph R. Baxter
SENIOR PORTFOLIO MANAGER
Robert F. Collins
SENIOR PORTFOLIO MANAGER
Q: PLEASE DESCRIBE OVERALL BOND MARKET CONDITIONS DURING THE FISCAL YEAR.
A: During the fiscal year ended August 31, 2004, economic recovery continued,
though not without uncertainty and volatility that resulted from rising oil
prices, events in the Middle East and the dollar's weakness versus other major
world currencies. Also troubling the markets, the twin deficits (U.S. budget and
trade) grew and are at or close to record levels. Job creation, often a spur for
sustained growth, never quite reached the levels that economists expected to see
well into an economic recovery.
The Federal Reserve elected to raise the fed funds target rate (the rate at
which banks make short-term loans to other banks) from 1.0% as the fiscal year
began to 1.5% at year's end, reflecting their conviction that economic growth is
sustainable and that the current inflationary pressures are temporary.
For the municipal bond market, two-year, AAA-rated securities began the 12-month
period at 1.41% and ended at 1.72% (Source: Municipal Market Data). Though
short-term rates rose, those of longer-term bonds fell. For AAA-rated bonds
during the fiscal-year period, those of 10-year maturities began at 3.9% and
ended at 3.5% while 30-year issues started at 5.0% and concluded at 4.7%.
In 2004 the yield curve flattened. The difference in yield between two-year and
30-year, AAA-rated municipal bonds began the year at 3.6% and ended the year at
2.9%. Interestingly, this was a "bull-flattening." Short rates rose in sympathy
with the Federal Reserve tightening, but rates for bonds in the intermediate and
long maturities fell (recall that bond yields and prices are inversely related -
prices rise as yields fall). The markets seem to be indicating that the Federal
Reserve is correct in ascertaining that the inflation pressures were transitory.
Normally, in a Federal Reserve tightening, long rates would rise, but less than
those of short rates, resulting in what is termed a "bear-flattening".
The difference in yield between municipal and Treasury bonds saw little change.
Among two-year issues, the AAA-rated, general obligation municipal bond yield
began the 12-month period at 72.7% of like-maturity Treasuries and ended the
period at 71.7%. Among 30-year issues, the yield difference began the fiscal
year at 96.4% and ended at 95.1%.
10-year bonds, however, showed more significant relative yield movement, with
the municipal-to-Treasury bond yield difference moving from 88.8% at the
period's beginning to 84.8% at its end. The change was likely driven by
non-traditional buyers - including hedge funds, arbitrage accounts, and taxable
accounts - purchasing municipal bonds, which are typically less sensitive to
interest rate changes, as a hedge against the expectation that rates would rise.
Credit quality, which deteriorated in the prior fiscal year, showed signs of
recovery. Many states have experienced increased revenues, although low
employment numbers could impede that progress. Improving credit conditions
contributed to the narrowing yield difference of bonds with different credit
ratings; the "spread" between AAA- and BBB-rated municipal bonds shrank by 0.2%
between January 1 and August 31, 2004. Also contributing to the narrowing spread
was investors desire to "reach" for yield. With overall market yields as such
low levels, investors seek ways to maintain income levels. One way to add yield
is to add credit risk. This increased demand for lower-quality bonds lowered the
yield of these securities relative to higher-grade bonds.
Debt supply was good during the fiscal year, though trending down from the
record paces of 2002 and 2003 when new issue bonds in the amounts of $359 and
$383 billion, respectively, came to market. Between January 1 and August 31,
2004, about $265 billion in new debt was issued, a decrease of approximately
nine percent from 2003's rate. The drop was likely due to healthier state
balance sheets - states issue less debt when they have more cash - and to a 24
percent drop in refinancing, as most states have already restructured debt where
it made sense to do so.
1
Q: WHAT ECONOMIC CONDITIONS EXISTED IN FLORIDA DURING THE FISCAL YEAR?
A: Florida enjoys good fiscal management, healthy revenues, and an economy that
outperformed those of many other states during the recent economic downturn.
Florida created more jobs - 163,200 - than any other state during the fiscal
year, and has a low unemployment rate at 4.4%. State tax revenues increased
10.0% over last year's figures in the first nine months of the fiscal year.
Also, the state's fiscal reserves may likely go on to be the nation's
healthiest, with revenue forecasts suggesting continued improvement. Beginning
in 2005, Florida will begin a 14 percent increase in education and human
services spending.
Florida, however, is in the path of many hurricanes and tropical storms, and
that can adversely impact both the state's overall budget and local economies.
As of this writing, four hurricanes have hit the state and total cost of
cleanup, repair, and rebuilding is not yet clear. While the initial impact of
the storms is devastation and destruction, our duty to be forward looking
provides a glimpse of better days a head. The rebuilding effort will provide a
needed burst to Florida's economy in the year ahead.
New issuance of state municipal bonds dropped by 42 percent during the fiscal
year. Last year experienced higher supply, which was due in part to several
large refinancing deals. Supply for the 12-month period also dropped because the
state has experienced better revenue flows and therefore less need to issue debt
(Source: The Bond Buyer).
Q: HOW DID DELAWARE TAX-FREE FLORIDA FUND PERFORM DURING THE FISCAL YEAR?
DELAWARE TAX-FREE FLORIDA FUND appreciated +5.72% (Class A shares at net asset
value with distributions reinvested) for the fiscal year ended August 31, 2004.
The Fund trailed the +5.76% return of its peer group, as represented by the 62
funds of the Lipper Florida Municipal Debt Funds Average. The Fund also
underperformed its benchmark, the Lehman Brothers Municipal Bond Index, which
returned +7.11% (Source: Lipper Inc.). *
Q: WHAT STRATEGIES CONTRIBUTED TO FUND PERFORMANCE?
A: Positions in hospital, multi-family housing, and pre-refunded bonds
contributed to the Fund's performance during the 12-month period. We doubled the
Fund's position in Puerto Rico bonds in May, when we saw heavy supply at
attractive prices. Prices for these bonds have increased as supply has gone
down; we continue to hold the Puerto Rico securities.
Q: WHAT DETRACTED FROM FUND PERFORMANCE?
A: The Fund might have performed better by owning longer-term bonds. As a result
of market forces, the Fund's duration shortened to 4.6 years, considerably less
than our starting point of 6.5 years. Duration, which is calculated in years, is
a common measure of a bond's or bond fund's sensitivity to interest rate
changes. The longer the duration, the more sensitive the bond or bond fund is to
changes in interest rates. Moving forward, we will examine opportunities to
lengthen Fund duration when prices appear attractive to us.
Q: HOW DID DELAWARE TAX-FREE FLORIDA INSURED FUND PERFORM DURING THE FISCAL
YEAR?
DELAWARE TAX-FREE FLORIDA INSURED FUND gained +6.15% (Class A shares at net
asset value with distributions reinvested) for the fiscal year ended August 31,
2004. The Fund bested the +5.49% return of its peer group, as represented by the
Lipper Florida Insured Municipal Debt Funds Average. However, it underperformed
its benchmark, the Lehman Brothers Municipal Bond Index, which returned +7.11%
(Source: Lipper Inc.).*
Q: WHAT STRATEGIES CONTRIBUTED TO FUND PERFORMANCE?
A: While we continue to invest in the sector as a whole, relative value
considerations during the 12-month period led us to reduce the Fund's exposure
in one hospital bond and eliminate our holdings in another. Also consistent with
our income-first strategy, we held on to our high-coupon, short-duration bonds
during the period. While the shorter call provisions on these securities result
in limited price appreciation potential, the high coupons provide an
above-market income stream that cannot be replaced by comparable securities in
this current environment. Income-producing bonds would also result in avoiding
passing on capital gains taxes to our investors.
The above strategy combined with the drop in duration of the overall market, led
to a shorter duration for this Fund versus its peer group. Duration, which is
calculated in years, is a common measure of a bond's or bond fund's sensitivity
to interest rate changes. The longer the duration, the more sensitive the bond
or bond fund is to changes in interest rates.
*A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
2
Q: WHAT DETRACTED FROM FUND PERFORMANCE?
A: A slightly longer duration might have benefited Fund performance for the
12-month period. Moving forward, once the less accommodative monetary policy
stance of the Federal Reserve takes hold in the market, we think there will be
opportunities to lengthen duration at more attractive yields than were available
during the just concluded fiscal year.
Q: WHAT ECONOMIC CONDITIONS EXISTED IN NEW YORK DURING THE FISCAL YEAR?
A: New York's economy is slowly improving due to stronger financial markets and
recovery from the events of September 11. Employment, which had declined between
2001 and 2003, grew by 0.7% during the fiscal year. State tax revenues increased
by 10.1% in the first nine months of the fiscal year, driven by an 11.3%
increase in personal income taxes.
Even so, we believe the state tends to have relatively weak fiscal management,
as shown by the failure to pass its most recent budget on time. New York faces
such key challenges as a high social services burden, an expensive and ongoing
public school system overhaul, and high debt levels. The state projects a
2005-2006 budget deficit of $6.1 billion and a 2006-2007 deficit of $7.7
billion.
New York's new debt issuance was down about 20% this fiscal year versus the
last, due in large part to a significant amount of refinancing and restructuring
carried out last year.
Q: HOW DID DELAWARE TAX-FREE NEW YORK FUND PERFORM DURING THE FISCAL YEAR?
DELAWARE TAX-FREE NEW YORK FUND gained +7.26% (Class A shares at net asset value
with distributions reinvested) for the fiscal year ended August 31, 2004,
outperforming both its peer group, as represented by the 110 funds of the Lipper
New York Municipal Debt Funds Average, which returned +6.31% and the +7.11%
return of its benchmark, the Lehman Brothers Municipal Bond Index (Source:
Lipper Inc.).*
Q: WHAT STRATEGIES CONTRIBUTED TO FUND PERFORMANCE?
A: The Fund's duration declined from 8.2 years to 6.2 years during the 12-month
period. Duration, which is calculated in years, is a common measure of a bond's
or bond fund's sensitivity to interest rate changes. The longer the duration,
the more sensitive the bond or bond fund is to changes in interest rates. This
was the result of a collapse of duration in the overall market as lower interest
rates led older bonds to trade to their shorter call provisions rather than
their longer stated maturities. Additionally, we took a more conservative
approach by holding more short-term securities after the Federal Reserve began
hiking interest rates. The Fund had somewhat greater liquidity as a result of
this strategy, as it positioned well for further Fed actions.
We reduced the Fund's hospital sector holdings by about eight percent of net
assets on relative value trades, and reduced a specific hospital position by
half in order to further diversify the portfolio.
Q: WHAT DETRACTED FROM THE FUND'S PERFORMANCE?
A: We purchased bonds that were backed by a combination of the tobacco
settlement and the New York state appropriations. We then reduced that position
by half during the 12-month period, only to see the remaining bonds continue to
perform well. Even so, we appreciated the added diversification attributed to
the bonds' liquidations.
*A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
3
DELAWARE
TAX-FREE FLORIDA FUND
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or visiting our Web site at
www.delawareinvestments.com/performance. You should consider the investment
objectives, risks, charges, and expenses of the investment carefully before
investing. The Delaware Tax-Free Florida Fund prospectus contains this and other
important information about the investment company. Please request a prospectus
by calling 800 523-1918. Read it carefully before you invest or send money.
Performance includes reinvestment of all distributions.
FUND PERFORMANCE
Average Annual Total Returns
Through August 31, 2004 Lifetime Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +6.30% +5.86% +5.72%
Including Sales Charge +5.79% +4.88% +1.01%
- --------------------------------------------------------------------------------
Class B (Est. 9/15/95)
Excluding Sales Charge +5.30% +5.08% +4.92%
Including Sales Charge +5.30% +4.84% +0.92%
- --------------------------------------------------------------------------------
Class C (Est. 4/22/95)
Excluding Sales Charge +5.32% +5.12% +5.02%
Including Sales Charge +5.32% +5.12% +4.02%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of up to 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%. Lifetime performance figures for Class B
shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Florida
Fund for the period shown. Performance would have been lower had the expense
limitation not been in effect.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
4
DELAWARE
TAX-FREE FLORIDA FUND
FUND BASICS
As of August 31, 2004
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
The Fund seeks as high a level of current interest income exempt from federal
income tax as is available from municipal obligations as is consistent with
prudent investment management and preservation of capital.
- --------------------------------------------------------------------------------
TOTAL FUND NET ASSETS:
$ 15.74 million
- --------------------------------------------------------------------------------
NUMBER OF HOLDINGS:
37
- --------------------------------------------------------------------------------
FUND START DATE:
March 2, 1995
- --------------------------------------------------------------------------------
YOUR FUND MANAGERS:
Patrick P. Coyne is a graduate of Harvard University with an MBA from the
University of Pennsylvania's Wharton School. Patrick Coyne joined Delaware
Investments' fixed-income department in 1990. Prior to joining Delaware
Investments, he was a manager of Kidder, Peabody & Co. Inc.'s trading desk, and
specialized in trading high-grade municipal bonds and municipal futures
contracts.
Joseph R. Baxter is a graduate of LaSalle University where he earned his
undergraduate degree in finance and marketing. Prior to joining Delaware
Investments in 1999, he held investment positions with First Union. Most
recently, he served as a municipal portfolio manager for the Evergreen Funds.
Robert F. Collins is a graduate of Ursinus College where he earned his
undergraduate degree in economics. Prior to joining Delaware Investments in
2004, he co-managed the municipal portfolio management group of PNC Advisors,
overseeing the tax-exempt investments of high-net worth and institutional
accounts. Previously, he headed the municipal fixed-income team at Wilmington
Trust Company, managing funds and high-net worth accounts. Mr. Collins is a CFA
charterholder.
- --------------------------------------------------------------------------------
NASDAQ SYMBOLS:
Class A DVFAX
Class B DVFBX
Class C DVFCX
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
March 2, 1995 (Fund's inception) through August 31, 2004
DELAWARE FLORIDA FUND GROWTH OF $10,000 INVESTMENT CHART
DELAWARE FLORIDA LEHMAN BROTHERS
FUND - CLASS A MUNICIPAL BOND
SHARES INDEX
2-Mar-95 $ 9,551 $10,000
31-AUG-95 $10,011 $10,469
31-AUG-96 $10,713 $11,017
31-AUG-97 $11,804 $12,035
31-AUG-98 $13,022 $13,076
31-AUG-99 $12,825 $13,142
31-AUG-00 $13,352 $14,031
31-AUG-01 $14,619 $15,461
31-AUG-02 $15,558 $16,426
31-AUG-03 $16,128 $16,942
31-AUG-04 $17,072 $18,146
Chart assumes $10,000 invested on March 2, 1995 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The chart also assumes $10,000 invested in the Lehman Brothers
Municipal Bond Index at that month's end, March 31, 1995. After March 31, 1995
returns plotted on the chart were as of the last day of each month shown. The
Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks
the performance of municipal bonds. An index is unmanaged and does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
An expense limitation was in effect for the period shown. Performance would have
been lower had the expense limitation not been in effect.
The performance graph does not reflect the deduction of taxes the shareholder
would pay on Fund Distributions or redemptions of Fund shares.
5
DELAWARE
TAX-FREE FLORIDA INSURED FUND
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or visiting our Web site at
www.delawareinvestments.com/performance. You should consider the investment
objectives, risks, charges, and expenses of the investment carefully before
investing. The Delaware Tax-Free Florida Insured Fund prospectus contains this
and other important information about the investment company. Please request a
prospectus by calling 800 523-1918. Read it carefully before you invest or send
money. Performance includes reinvestment of all distributions.
FUND PERFORMANCE
Average Annual Total Returns
Through August 31, 2004 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 1/1/92)
Excluding Sales Charge +6.31% +6.09% +5.85% +6.15%
Including Sales Charge +5.92% +5.60% +4.87% +1.41%
- --------------------------------------------------------------------------------
Class B (Est. 3/11/94)
Excluding Sales Charge +5.10% +5.54% +5.06% +5.36%
Including Sales Charge +5.10% +5.54% +4.82% +1.36%
- --------------------------------------------------------------------------------
Class C (Est. 9/29/97)*
Excluding Sales Charge +4.37% +5.05% +5.36%
Including Sales Charge +4.37% +5.05% +4.36%
- --------------------------------------------------------------------------------
*Class C shares were sold and outstanding from September 29, 1997 until
December 18, 1997, when all outstanding Class C shares were redeemed. There
were no outstanding Class C shares or shareholder activity from December 19,
1997 through January 7, 1999. The performance for Class C shares during the
period from December 19, 1997 through January 7, 1999 is based upon the
performance of Class B shares.
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of up to 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%. Lifetime and 10-year performance figures for
Class B shares reflect conversion to Class A shares after approximately eight
years.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Florida
Insured Fund for the period shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
6
DELAWARE
TAX-FREE FLORIDA INSURED FUND
FUND BASICS
As of August 31, 2004
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
The Fund seeks as high a level of current interest income exempt from federal
income tax as is available from municipal obligations as is consistent with
prudent investment management and preservation of capital.
- --------------------------------------------------------------------------------
TOTAL FUND NET ASSETS:
$ 93.68 million
- --------------------------------------------------------------------------------
NUMBER OF HOLDINGS:
41
- --------------------------------------------------------------------------------
FUND START DATE:
January 1, 1992
- --------------------------------------------------------------------------------
YOUR FUND MANAGER:
Patrick P. Coyne
Joseph R. Baxter
Robert F. Collins
- --------------------------------------------------------------------------------
NASDAQ SYMBOLS:
Class A VFLIX
Class B DVDBX
Class C DVDCX
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
August 31, 1994 (Fund's inception) through August 31, 2004
DELAWARE TAX-FREE FLORIDA INSURED FUND GROWTH OF $10,000 INVESTMENT CHART
DELAWARE FLORIDA LEHMAN BROTHERS
INSURED FUND - MUNICIPAL BOND
CLASS A SHARES INDEX
31-AUG-94 $ 9,551 $10,000
31-AUG-95 $10,328 $10,886
31-AUG-96 $10,938 $11,456
31-AUG-97 $12,004 $12,514
31-AUG-98 $13,082 $13,597
31-AUG-99 $12,973 $13,665
31-AUG-00 $13,660 $14,590
31-AUG-01 $14,943 $16,077
31-AUG-02 $15,815 $17,080
31-AUG-03 $16,238 $17,617
31-AUG-04 $17,243 $18,869
Chart assumes $10,000 invested on August 31, 1994 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
An expense limitation was in effect for the period shown. Performance would have
been lower had the expense limitation not been in effect.
The performance graph does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
7
DISCLOSURE FOR THE PERIOD MARCH 1, 2004 TO AUGUST 31, 2004
OF FUND EXPENSES
As a shareholder of a fund, you incur two types of costs:
(1) transaction costs, including sales charges (loads) on purchase payments,
reinvested dividends, or other distributions; redemption fees; and exchange
fees; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other fund expenses. This Example is intended to help
you understand your ongoing costs (in dollars) of investing in the fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from March 1, 2004 to August 31, 2004.
ACTUAL EXPENSES
The first section of the table shown, "Actual Fund Return," provides information
about actual account values and actual expenses. You may use the information in
this section together with the amount you invested, to estimate the expenses
that you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first section under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during the
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table shown, "Hypothetical 5% Return," provides
information about hypothetical account values and hypothetical expenses based on
a fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the fund and other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the second
section of the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher. The Fund's actual expenses shown in the table reflect fee waivers in
effect. The expenses shown in the table assume reinvestment of all dividends and
distributions.
In each case, "Expenses Paid During Period" are equal to the Fund's annualized
expense ratio, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
DELAWARE TAX-FREE FLORIDA FUND(1)
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expense
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/04 to
3/1/04 8/31/04 Ratio 8/31/04
- -------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,001.70 0.75% $3.77
Class B 1,000.00 997.90 1.50% 7.53
Class C 1,000.00 997.90 1.50% 7.53
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,021.18 0.75% $3.82
Class B 1,000.00 1,017.36 1.50% 7.64
Class C 1,000.00 1,017.36 1.50% 7.64
- --------------------------------------------------------------------------------------------------------------
(1) Effective November 1, 2004, the Fund's manager decreased contractual expense
waivers in effect for the Fund, causing the expenses paid by the Fund to
increase. Had the new expense waiver been in effect during the period, the
Fund's expense analysis would be as follows:
Expense
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/04 to
3/1/04 8/31/04 Ratio 8/31/04
- -------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,000.89 0.91% $4.58
Class B 1,000.00 997.09 1.66% 8.34
Class C 1,000.00 997.09 1.66% 8.34
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.37 0.91% $4.63
Class B 1,000.00 1,016.55 1.66% 8.45
Class C 1,000.00 1,016.55 1.66% 8.45
- --------------------------------------------------------------------------------------------------------------
8
DELAWARE TAX-FREE FLORIDA INSURED FUND(1)
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expense
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/04 to
3/1/04 8/31/04 Ratio 8/31/04
- -------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,001.20 0.90% $4.53
Class B 1,000.00 997.40 1.65% 8.28
Class C 1,000.00 997.40 1.65% 8.28
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.42 0.90% $4.58
Class B 1,000.00 1,016.60 1.65% 8.40
Class C 1,000.00 1,016.60 1.65% 8.40
- --------------------------------------------------------------------------------------------------------------
(1) Effective November 1, 2004, the Fund's manager decreased contractual expense
waivers in effect for the Fund, causing the expenses paid by the Fund to
increase. Had the new expense waiver been in effect during the period, the
Fund's expense analysis would be as follows:
Expense
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/04 to
3/1/04 8/31/04 Ratio 8/31/04
- -------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,001.15 0.91% $4.58
Class B 1,000.00 997.35 1.66% 8.33
Class C 1,000.00 997.35 1.66% 8.33
- --------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.37 0.91% $4.63
Class B 1,000.00 1,016.55 1.66% 8.45
Class C 1,000.00 1,016.55 1.66% 8.45
- --------------------------------------------------------------------------------------------------------------
9
SECTOR ALLOCATIONS AS OF AUGUST 31, 2004
The SEC adopted a requirement that all funds present their categories of
portfolio holdings in a table, chart, or graph format in their annual and
semiannual shareholder reports, whether or not a schedule of investments is
utilized. The following chart which presents portfolio holdings as a percent of
total net assets, and is provided in compliance with such requirements.
DELAWARE TAX-FREE FLORIDA FUND
- ------------------------------------------------------------------------
PERCENTAGE
SECTOR OF NET ASSETS
- ------------------------------------------------------------------------
MUNICIPAL BONDS 98.06%
- ------------------------------------------------------------------------
Airport Revenue Bonds 5.55%
Continuing Care/Retirement Revenue Bonds 1.71%
Corporate Backed Revenue Bonds 0.98%
Dedicated Tax & Fees Revenue Bonds 4.49%
Hospital Revenue Bonds 18.73%
Miscellaneous Revenue Bonds 7.38%
Multi Family Housing Revenue Bonds 11.63%
Ports & Harbors Revenue Bonds 1.99%
Pre-Refunded Bonds 21.13%
Public Power Revenue Bonds 6.54%
Single Family Housing Revenue Bonds 3.43%
Tax Increment/Special Assessment Bonds 7.06%
Territorial Revenue Bonds 5.28%
Turnpike/Toll Road Revenue Bonds 2.16%
- ------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 98.06%
- ------------------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.94%
- ------------------------------------------------------------------------
TOTAL NET ASSETS 100.00%
- ------------------------------------------------------------------------
DELAWARE TAX-FREE FLORIDA INSURED FUND
- ------------------------------------------------------------------------
PERCENTAGE
SECTOR OF NET ASSETS
- ------------------------------------------------------------------------
MUNICIPAL BONDS 98.58%
- ------------------------------------------------------------------------
Airport Revenue Bonds 3.49%
Dedicated Tax & Fees Revenue Bonds 13.79%
Higher Education Revenue Bonds 3.45%
Hospital Revenue Bonds 18.43%
Multi Family Housing Revenue Bonds 29.30%
Municipal Lease Revenue Bonds 4.50%
Pre-Refunded Bonds 7.96%
Public Power Revenue Bonds 2.19%
Tax Increment/Special Assessment Bonds 3.09%
Territorial General Obligation Bonds 3.13%
Territorial Revenue Bonds 7.42%
Water & Sewer Revenue Bonds 1.83%
- ------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 98.58%
- ------------------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.42%
- ------------------------------------------------------------------------
TOTAL NET ASSETS 100.00%
- ------------------------------------------------------------------------
10
STATEMENT DELAWARE TAX-FREE FLORIDA FUND
OF NET ASSETS August 31, 2004
Principal Market
Amount Value
MUNICIPAL BONDS - 98.06%
Airport Revenue Bonds - 5.55%
Capital Trust Agency Florida Revenue
(Orlando/Cargo Project)
6.75% 1/1/32 (AMT) $ 395,000 $ 371,817
Miami-Dade County Florida Aviation
Revenue Series A
5.00% 10/1/33 (FSA)(AMT) 500,000 501,460
----------
873,277
----------
Continuing Care/Retirement Revenue Bonds - 1.71%
Volusia County Health Facilities Authority
(John Knox Village) Series A
6.00% 6/1/17 (RADIAN) 250,000 268,388
----------
268,388
----------
Corporate Backed Revenue Bonds - 0.98%
Jacksonville Sewer & Solid Waste
Disposal Facilities Authority
(Anheuser Busch Project)
5.875% 2/1/36 (AMT) 150,000 154,979
----------
154,979
----------
Dedicated Tax & Fees Revenue Bonds - 4.49%
Dade County Special Obligation
Series B 5.00% 10/1/35 (AMBAC) 700,000 707,070
----------
707,070
----------
Hospital Revenue Bonds - 18.73%
Escambia County Health Facilities
Authority (Florida Health Care
Facilities - VHA Program)
5.95% 7/1/20 (AMBAC) 425,000 440,037
Highlands County Health Facilities
Authority (Adventist Health
System/Sunbelt) Series A
6.00% 11/15/31 500,000 533,869
Hillsborough County Florida Industrial
Development (Tampa General
Hospital Project) Series B
5.25% 10/1/34 150,000 148,715
North Miami Health Facilities Authority
(Catholic Health Services)
LOC Suntrust Bank-Miami
6.00% 8/15/16 500,000 525,790
Orange County, Florida Health Facilities
Authority Revenue (Orlando Regional
Healthcare) 5.75% 12/1/32 250,000 259,700
Palm Beach County Health Facilities
Authority Revenue Refunding Hospital
(Boca Raton Community Hospital)
5.625% 12/1/31 500,000 513,895
South Broward Hospital District Revenue
(Memorial Healthcare System)
5.625% 5/1/32 500,000 525,855
----------
2,947,861
----------
Miscellaneous Revenue Bonds - 7.38%
Florida State Board of Education (Lottery
Revenue) Series A 6.00% 7/1/14 (FGIC) 1,000,000 1,161,680
----------
1,161,680
----------
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Multi Family Housing Revenue Bonds - 11.63%
Dade County Housing Finance Authority
(Lincoln Fields Apartments Section 8)
6.25% 7/1/24 (MBIA) $ 490,000 $ 490,568
Duval Housing Finance Authority
(St. Augustine Apartments)
6.00% 3/1/21 300,000 310,650
Florida Housing Finance Agency
(The Vineyards Project) Series H
6.40% 11/1/15 500,000 514,550
Volusia County Housing Finance
Authority (San Marco Apartments)
Series A 5.60% 1/1/44 (FSA)(AMT) 500,000 513,895
----------
1,829,663
----------
Ports & Harbors Revenue Bonds - 1.99%
Jacksonville Florida Port Authority
Seaport Revenue
5.70% 11/1/30 (MBIA)(AMT) 295,000 313,892
----------
313,892
----------
*Pre-Refunded Bonds - 21.13%
Jacksonville Florida Port Authority
Seaport Revenue
5.70% 11/1/30-10 (MBIA)(AMT) 205,000 232,827
Northern Palm Beach County
Improvement District Special
Assessment (Abacoa Water Control)
7.20% 8/1/16-06 300,000 335,295
Pinellas County Educational Facilities
Authority (Clearwater Christian College)
Private Placement 8.00% 2/1/11-06 205,000 222,634
Tampa Utilities Tax Revenue Series A
6.00% 10/1/17-09 (AMBAC) 1,000,000 1,164,209
6.125% 10/1/18-09 (AMBAC) 1,000,000 1,170,109
Volusia County, Florida Industrial
Development Authority Mortgage
Revenue (Bishops Glen Retirement
Health Facilities Project)
7.50% 11/1/16-06 180,000 201,361
----------
3,326,435
----------
Public Power Revenue Bonds - 6.54%
Jacksonville, Florida Electric Authority
Revenue Electric System Series 3-C
5.50% 10/1/30 1,000,000 1,028,990
----------
1,028,990
----------
Single Family Housing Revenue Bonds - 3.43%
Florida Housing Finance Agency
Homeowner Mortgage Series 1B
6.00% 7/1/17 90,000 93,729
Orange County Florida Housing Finance
Authority Homeowner Revenue Series B
5.25% 3/1/33 (AMT) 440,000 445,588
----------
539,317
----------
11
STATEMENT DELAWARE TAX-FREE FLORIDA FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Tax Increment/Special Assessment Bonds - 7.06%
Hollywood Florida Community
Redevelopment Agency
5.625% 3/1/24 $ 300,000 $ 313,580
Julinton Creek Plantation Community
Development District Special Assessment
5.00% 5/1/29 (MBIA) 200,000 203,576
Lake Bernadette Community Development
District Special Assessment Series A
8.00% 5/1/17 140,000 143,391
Midtown Miami, Florida Community
Development 6.50% 5/1/37 250,000 257,305
Tampa Palms Community Development
District (Richmond Place Project)
7.50% 5/1/18 185,000 194,010
-----------
1,111,862
-----------
Territorial Revenue Bonds - 5.28%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series B 6.00% 7/1/26 150,000 157,260
Puerto Rico Commonwealth Highway &
Transportation Authority Transportation
Revenue Series G 5.00% 7/1/42 300,000 300,618
Puerto Rico Public Buildings Authority
Revenue 5.25% 7/1/33 360,000 372,557
-----------
830,435
-----------
Turnpike/Toll Road Revenue Bonds - 2.16%
Dunes, Florida Community Development
District Revenue-Intracoastal Waterway
Bridge (ITT Industries Corp.)
5.50% 10/1/07 175,000 177,307
Florida State Mid-Bay Bridge Authority
Series D 6.125% 10/1/22 160,000 162,192
-----------
339,499
-----------
TOTAL MUNICIPAL BONDS
(cost $14,492,870) 15,433,348
-----------
TOTAL MARKET VALUE OF SECURITIES - 98.06%
(cost $14,492,870) 15,433,348
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.94% 304,679
-----------
NET ASSETS APPLICABLE TO 1,425,641
SHARES OUTSTANDING - 100.00% $15,738,027
===========
Net Asset Value - Delaware Tax-Free Florida Fund
Class A ($9,824,062 / 890,529 Shares) $11.03
------
Net Asset Value - Delaware Tax-Free Florida Fund
Class B ($3,756,866 / 339,927 Shares) $11.05
------
Net Asset Value - Delaware Tax-Free Florida Fund
Class C ($2,157,099 / 195,185 Shares) $11.05
------
COMPONENTS OF NET ASSETS AT AUGUST 31, 2004:
Shares of beneficial interest
(unlimited authorization -- no par) $15,493,458
Distributions in excess of net investment income (181)
Accumulated net realized loss on investments (695,728)
Net unrealized appreciation of investments 940,478
-----------
Total net assets $15,738,027
===========
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
NET ASSET VALUE AND OFFERING PRICE PER SHARE --
DELAWARE TAX-FREE FLORIDA FUND
Net asset value Class A (A) $11.03
Sales charge (4.50% of offering price,
or 4.71% of amount invested per share)(B) 0.52
------
Offering price $11.55
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
12
STATEMENT DELAWARE TAX-FREE FLORIDA INSURED FUND
OF NET ASSETS (CONTINUED) August 31, 2004
Principal Market
Amount Value
MUNICIPAL BONDS - 98.58%
Airport Revenue Bonds - 3.49%
Lee County Florida Airport Revenue
Series B 5.75% 10/1/33 (FSA) $ 3,000,000 $ 3,273,060
-----------
3,273,060
-----------
Dedicated Tax & Fees Revenue Bonds - 13.79%
Florida State Department of
Transportation 5.00% 7/1/31 (FGIC) 1,875,000 1,913,119
Jacksonville Florida Excise Taxes
Revenue Series B
5.00% 10/1/26 (AMBAC) 1,000,000 1,025,690
+Palm Beach County Florida Criminal
Justice Facilities Revenue Inverse
Floater 9.97% 6/1/12 (FGIC) 7,500,000 9,977,475
-----------
12,916,284
-----------
Higher Education Revenue Bonds - 3.45%
Broward County, Florida Educational
Facilities Authority Revenue
(Nova Southeastern University)
5.25% 4/1/27 (RADIAN) 1,000,000 1,023,240
Dade County Florida Educational
Facilities
Authority (University of Miami)
Series A 5.75% 4/1/29 (AMBAC) 2,000,000 2,206,860
-----------
3,230,100
-----------
Hospital Revenue Bonds - 18.43%
Escambia County Health Facilities
Authority (Florida Health Care
Facilities - VHA Program)
5.95% 7/1/20 (AMBAC) 4,500,000 4,659,210
Highlands County Health Facilities
Authority (Adventist Health
System/Sunbelt) Series A
6.00% 11/15/31 1,000,000 1,067,740
Indian River County Hospital District
(Indian River Memorial Hospital)
6.10% 10/1/18 (FSA) 3,000,000 3,288,990
Orange County, Florida Health
Facilities Authority Revenue
(Adventist Health System)
5.625% 11/15/32 1,000,000 1,036,050
Palm Beach County Health Facilities
Authority Revenue Refunding
Hospital (Boca Raton Community
Hospital) 5.625% 12/1/31 2,000,000 2,055,580
South Broward Hospital District
Revenue (Memorial Healthcare
System) 5.625% 5/1/32 2,500,000 2,629,275
Tallahassee Health Facilities
(Tallahassee Memorial Regional
Medical Center) Series B
6.00% 12/1/15 (MBIA) 2,500,000 2,525,675
-----------
17,262,520
-----------
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Multi Family Housing Revenue Bonds - 29.30%
Florida Housing Finance Agency
(Spinnaker Cove Apartments)
Series G LOC First Union National
Bank of North Carolina
6.50% 7/1/36 (AMBAC)(AMT) $ 500,000 $ 519,435
Florida Housing Finance Agency
(Crossings Indian Run Apartments
HUD) Series V LOC First Union
National Bank of North Carolina
6.10% 12/1/26 (AMBAC)(AMT) 750,000 777,945
Florida Housing Finance Agency
(Landings at Sea Forest Apartments)
Series T LOC First Union National
Bank of North Carolina
5.85% 12/1/18 (AMBAC)(FHA)(AMT) 420,000 438,715
6.05% 12/1/36 (AMBAC)(FHA)(AMT) 700,000 722,337
Florida Housing Finance Agency
(Leigh Meadows Apartments
Section 8) Series N
6.30% 9/1/36 (AMBAC)(AMT) 2,000,000 2,075,480
Florida Housing Finance Agency
(Leigh Meadows Apartments
Section 8) Series N LOC First Union
National Bank of North Carolina
6.20% 9/1/26 (AMBAC)(AMT) 2,765,000 2,870,706
Florida Housing Finance Agency
(Mariner Club Apartments) Series K-1
6.25% 9/1/26 (AMBAC)(AMT) 2,000,000 2,078,020
6.375% 9/1/36 (AMBAC)(AMT) 3,500,000 3,636,080
Florida Housing Finance Agency
(Riverfront Apartments Section 8)
Series A 6.25% 4/1/37 (AMBAC)(AMT) 1,000,000 1,044,390
Florida Housing Finance Agency
(Sterling Palms Apartments)
Series D-1 LOC First Union National
Bank of North Carolina
6.30% 12/1/16 (AMBAC)(AMT) 1,000,000 1,044,320
6.40% 12/1/26 (AMBAC)(AMT) 1,500,000 1,557,600
6.50% 6/1/36 (AMBAC)(AMT) 6,540,000 6,788,978
Florida Housing Finance Agency
(Woodbridge Apartments Project)
Series L 6.25% 6/1/36 (AMBAC)(AMT) 2,000,000 2,077,180
Florida Housing Finance Agency
(Woodbridge Apartments) Series L
LOC First Union National Bank of
North Carolina
6.15% 12/1/26 (AMBAC)(AMT) 1,750,000 1,817,970
-----------
27,449,156
-----------
Municipal Lease Revenue Bonds - 4.50%
Osceola County Florida School Board
Series A 5.25% 6/1/27 (AMBAC) 4,000,000 4,213,560
-----------
4,213,560
-----------
*Pre-Refunded Bonds - 7.96%
Miramar Wastewater Improvement
Assessment 6.75% 10/1/25-04 (FGIC) 2,425,000 2,460,260
Port St. Lucie Florida Utility Revenue
6.00% 9/1/24-04 (FGIC) 5,000,000 5,000,000
-----------
7,460,260
-----------
13
STATEMENT DELAWARE TAX-FREE FLORIDA INSURED FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Public Power Revenue Bonds - 2.19%
Florida State Municipal Power Agency
Revenue (Stanton II Project)
5.00% 10/1/26 (AMBAC) $ 2,000,000 $ 2,051,380
-----------
2,051,380
-----------
Tax Increment/Special Assessment Bonds - 3.09%
Hollywood Florida Community
Redevelopment Agency
5.625% 3/1/24 900,000 940,743
Midtown Miami, Florida Community
Development 6.50% 5/1/37 750,000 771,915
Osceola County Celebration Community
Development District Assessment
6.10% 5/1/16 (MBIA) 470,000 476,401
Osceola County Enterprise Community
Development District Special
Assessment 6.10% 5/1/16 (MBIA) 695,000 704,466
-----------
2,893,525
-----------
Territorial General Obligation Bonds - 3.13%
Puerto Rico Commonwealth Public
Improvement Series A
5.50% 7/1/19 (MBIA) 2,500,000 2,930,175
-----------
2,930,175
-----------
Territorial Revenue Bonds - 7.42%
Puerto Rico Commonwealth
Highway & Transportation Authority
Transportation Revenue Series D
5.25% 7/1/38 5,000,000 5,122,150
Puerto Rico Electric Power Authority
Series OO 5.00% 7/1/13 (CIFG) 750,000 834,510
Puerto Rico Public Buildings Authority
Revenue 5.25% 7/1/25 930,000 991,659
-----------
6,948,319
-----------
Water & Sewer Revenue Bonds - 1.83%
Tampa Water and Sewer Revenue
6.00% 10/1/16 (FSA) 1,000,000 1,209,920
Village Center Community Development
District Florida Utility Revenue
5.00% 10/1/36 (MBIA) 500,000 508,700
-----------
1,718,620
-----------
TOTAL MUNICIPAL BONDS
(cost $86,712,415) 92,346,959
-----------
TOTAL MARKET VALUE OF SECURITIES - 98.58%
(cost $86,712,415) 92,346,959
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.42% 1,333,930
-----------
NET ASSETS APPLICABLE TO 8,324,003
SHARES OUTSTANDING - 100.00% $93,680,889
===========
Net Asset Value -- Delaware Tax-Free Florida Insured Fund
Class A ($87,590,413 / 7,783,120 Shares) $11.25
------
Net Asset Value -- Delaware Tax-Free Florida Insured Fund
Class B ($5,002,341 / 444,251 Shares) $11.26
------
Net Asset Value -- Delaware Tax-Free Florida Insured Fund
Class C ($1,088,135 / 96,632 Shares) $11.26
------
COMPONENTS OF NET ASSETS AT AUGUST 31, 2004**:
Shares of beneficial interest
(unlimited authorization -- no par) $88,554,039
Accumulated net realized loss on investments (507,694)
Net unrealized appreciation of investments 5,634,544
-----------
Total net assets $93,680,889
===========
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT- Subject to Alternative Minimum Tax
CIFG - Insured by the CDS IXIS Financial Guaranty
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Authority
FSA - Insured by Financial Security Assurance
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**See Note 4 in "Notes to Financial Statements" for details of reclassification
of components of net assets.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term rates. Interest rate
disclosed is in effect as of August 31, 2004.
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE FLORIDA INSURED FUND
Net asset value Class A (A) $11.25
Sales charge (4.50% of offering price,
or 4.71% of amount invested per share)(B) 0.53
------
Offering price $11.78
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
14
STATEMENTS YEAR ENDED AUGUST 31, 2004
OF OPERATIONS
Delaware Delaware
Tax-Free Tax-Free
Florida Fund Florida Insured Fund
INVESTMENT INCOME:
Interest $903,319 $5,596,815
-------- ----------
EXPENSES:
Management fees 93,511 497,310
Distribution expenses -- Class A 25,349 232,883
Distribution expenses -- Class B 49,322 55,731
Distribution expenses -- Class C 19,525 9,589
Dividend disbursing and transfer agent fees and expenses 9,538 77,679
Accounting and administration expenses 6,357 37,223
Legal and professional fees 6,500 35,794
Registration fees 3,630 11,324
Reports and statements to shareholders 3,324 10,964
Custodian fees 1,450 4,961
Trustees' fees 1,638 4,202
Other 1,554 6,759
-------- ----------
221,698 984,419
Less expenses absorbed or waived (40,947) (35,069)
Less expenses paid indirectly (1,367) (3,363)
-------- ----------
Total expenses 179,384 945,987
-------- ----------
NET INVESTMENT INCOME 723,935 4,650,828
-------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 32,818 177,786
Net change in unrealized appreciation/depreciation of investments 127,476 1,004,732
-------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 160,294 1,182,518
-------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $884,229 $5,833,346
======== ==========
See accompanying notes
15
STATEMENTS
OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
Year Ended Year Ended
8/31/04 8/31/03 8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 723,935 $ 723,474 $ 4,650,828 $ 4,996,861
Net realized gain on investments 32,818 76,778 177,786 614,284
Net change in unrealized
appreciation/depreciation of investments 127,476 (243,690) 1,004,732 (2,605,250)
----------- ----------- ------------ ------------
Net increase in net assets resulting from operations 884,229 556,562 5,833,346 3,005,895
----------- ----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (462,334) (466,803) (4,392,087) (4,753,688)
Class B (187,329) (210,191) (220,713) (218,299)
Class C (74,272) (46,480) (38,028) (24,874)
----------- ----------- ------------ ------------
(723,935) (723,474) (4,650,828) (4,996,861)
----------- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 933,040 1,111,543 4,069,521 5,639,680
Class B 162,847 928,820 591,446 1,740,052
Class C 649,420 1,165,280 524,409 431,204
Net asset value of shares issued upon
reinvestment of dividends and distributions:
Class A 197,490 182,417 1,422,253 1,575,119
Class B 47,821 67,252 86,919 95,718
Class C 34,530 20,496 24,843 17,939
----------- ----------- ------------ ------------
2,025,148 3,475,808 6,719,391 9,499,712
----------- ----------- ------------ ------------
Cost of shares repurchased:
Class A (1,087,726) (1,976,552) (14,966,660) (15,180,505)
Class B (1,815,553) (739,284) (1,533,316) (1,146,474)
Class C (379,454) (64,239) (317,623) (141,785)
----------- ----------- ------------ ------------
(3,282,733) (2,780,075) (16,817,599) (16,468,764)
----------- ----------- ------------ ------------
Increase (decrease) in net assets derived
from capital share transactions (1,257,585) 695,733 (10,098,208) (6,969,052)
----------- ----------- ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (1,097,291) 528,821 (8,915,690) (8,960,018)
NET ASSETS:
Beginning of year 16,835,318 16,306,497 102,596,579 111,556,597
----------- ----------- ------------ ------------
End of year $15,738,027 $16,835,318 $93,680,889 $102,596,579
=========== =========== ============ ============
(Distributions in excess of net investment income) $ (181) $ (181) $ -- $ --
----------- ----------- ------------ ------------
See accompanying notes
16
FINANCIAL
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Florida Fund Class A
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.920 $11.030 $10.870 $10.420 $10.530
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.505 0.510 0.514 0.513 0.518
Net realized and unrealized gain (loss) on investments 0.110 (0.110) 0.160 0.450 (0.110)
------- ------- ------- ------- -------
Total from investment operations 0.615 0.400 0.674 0.963 0.408
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.505) (0.510) (0.514) (0.513) (0.518)
------- ------- ------- ------- -------
Total dividends and distributions (0.505) (0.510) (0.514) (0.513) (0.518)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.030 $10.920 $11.030 $10.870 $10.420
======= ======= ======= ======= =======
TOTAL RETURN(2) 5.72% 3.67% 6.42% 9.48% 4.11%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $9,824 $9,694 $10,464 $10,747 $8,711
Ratio of expenses to average net assets(3) 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.99% 0.98% 1.06% 0.97% 1.10%
Ratio of net investment income to average net assets 4.55% 4.59% 4.78% 4.84% 5.11%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 4.31% 4.36% 4.47% 4.62% 4.76%
Portfolio turnover 13% 31% 57% 40% 64%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amoritization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2002, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 0.76%.
See accompanying notes
17
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Florida Fund Class B
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.940 $11.040 $10.890 $10.430 $10.540
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.422 0.426 0.433 0.434 0.443
Net realized and unrealized gain (loss) on investments 0.110 (0.100) 0.150 0.460 (0.110)
------- ------- ------- ------- -------
Total from investment operations 0.532 0.326 0.583 0.894 0.333
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.422) (0.426) (0.433) (0.434) (0.443)
------- ------- ------- ------- -------
Total dividends and distributions (0.422) (0.426) (0.433) (0.434) (0.443)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.050 $10.940 $11.040 $10.890 $10.430
======= ======= ======= ======= =======
TOTAL RETURN(2) 4.92% 2.98% 5.52% 8.76% 3.34%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $3,757 $5,313 $5,110 $4,655 $4,045
Ratio of expenses to average net assets(3) 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.74% 1.73% 1.81% 1.72% 1.85%
Ratio of net investment income to average net assets 3.80% 3.84% 4.03% 4.09% 4.36%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.56% 3.61% 3.72% 3.87% 4.01%
Portfolio turnover 13% 31% 57% 40% 64%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amoritization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2002, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 1.51%.
See accompanying notes
18
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Florida Fund Class C
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.930 $11.040 $10.880 $10.420 $10.530
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.421 0.426 0.433 0.434 0.446
Net realized and unrealized gain (loss) on investments 0.120 (0.110) 0.160 0.460 (0.110)
------- ------- ------- ------- -------
Total from investment operations 0.541 0.316 0.593 0.894 0.336
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.421) (0.426) (0.433) (0.434) (0.446)
------- ------- ------- ------- -------
Total dividends and distributions (0.421) (0.426) (0.433) (0.434) (0.446)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.050 $10.930 $11.040 $10.880 $10.420
======= ======= ======= ======= =======
TOTAL RETURN(2) 5.02% 2.89% 5.63% 8.79% 3.38%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $2,157 $1,828 $732 $516 $433
Ratio of expenses to average net assets(3) 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.74% 1.73% 1.81% 1.72% 1.85%
Ratio of net investment income to average net assets 3.80% 3.84% 4.03% 4.09% 4.36%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.56% 3.61% 3.72% 3.87% 4.01%
Portfolio turnover 13% 31% 57% 40% 64%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amoritization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
(3) Ratio for the year ended August 31, 2002, including fees paid indirectly in
accordance with Securities and Exchange Commission rules, was 1.51%.
See accompanying notes
19
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Florida Insured Fund Class A
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $11.110 $11.330 $11.230 $10.770 $10.750
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.533 0.523 0.532 0.527 0.525
Net realized and unrealized gain (loss) on investments 0.140 (0.220) 0.100 0.460 0.020
------- ------- ------- ------- -------
Total from investment operations 0.673 0.303 0.632 0.987 0.545
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.533) (0.523) (0.532) (0.527) (0.525)
------- ------- ------- ------- -------
Total dividends and distributions (0.533) (0.523) (0.532) (0.527) (0.525)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.250 $11.110 $11.330 $11.230 $10.770
======= ======= ======= ======= =======
TOTAL RETURN(2) 6.15% 2.68% 5.83% 9.39% 5.29%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $87,591 $95,951 $105,773 $107,365 $110,708
Ratio of expenses to average net assets 0.90% 0.90% 0.90% 0.90% 0.91%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.94% 0.94% 0.99% 0.97% 1.01%
Ratio of net investment income to average net assets 4.72% 4.60% 4.80% 4.81% 4.98%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 4.68% 4.56% 4.71% 4.74% 4.88%
Portfolio turnover 3% 26% 46% 12% 56%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amoritization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
20
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Florida Insured Fund Class B
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $11.120 $11.330 $11.230 $10.770 $10.750
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.448 0.437 0.445 0.443 0.448
Net realized and unrealized gain (loss) on investments 0.140 (0.210) 0.100 0.460 0.016
------- ------- ------- ------- -------
Total from investment operations 0.588 0.227 0.545 0.903 0.464
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.448) (0.437) (0.445) (0.443) (0.444)
------- ------- ------- ------- -------
Total dividends and distributions (0.448) (0.437) (0.445) (0.443) (0.444)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.260 $11.120 $11.330 $11.230 $10.770
======= ======= ======= ======= =======
TOTAL RETURN(2) 5.36% 2.00% 5.01% 8.56% 4.50%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $5,002 $5,800 $5,223 $5,014 $5,272
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.65% 1.66%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.69% 1.69% 1.74% 1.72% 1.76%
Ratio of net investment income to average net assets 3.97% 3.85% 4.05% 4.06% 4.23%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.93% 3.81% 3.96% 3.99% 4.13%
Portfolio turnover 3% 26% 46% 12% 56%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amoritization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
21
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Florida Insured Fund Class C
- -----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $11.120 $11.330 $11.240 $10.780 $10.760
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.448 0.437 0.447 0.443 0.454
Net realized and unrealized gain (loss) on investments 0.140 (0.210) 0.090 0.460 0.010
------- ------- ------- ------- -------
Total from investment operations 0.588 0.227 0.537 0.903 0.464
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.448) (0.437) (0.447) (0.443) (0.444)
------- ------- ------- ------- -------
Total dividends and distributions (0.448) (0.437) (0.447) (0.443) (0.444)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.260 $11.120 $11.330 $11.240 $10.780
======= ======= ======= ======= =======
TOTAL RETURN(2) 5.36% 2.00% 4.93% 8.45% 4.49%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,088 $846 $560 $53 $51
Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.65% 1.66%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.69% 1.69% 1.74% 1.72% 1.76%
Ratio of net investment income to average net assets 3.97% 3.85% 4.05% 4.06% 4.23%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.93% 3.81% 3.96% 3.99% 4.13%
Portfolio turnover 3% 26% 46% 12% 56%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the
AICPA Audit & Accounting Guide for Investment Companies that requires
amoritization of all premiums and discounts on debt securities. This change
had no impact for the year ended August 31, 2002. Per share data and ratios
for periods prior to September 1, 2001 have not been restated to reflect
this change in accounting.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
22
NOTES AUGUST 31, 2004
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 Investment Trust (the "Trust") is
organized as a Massachusetts business trust and offers five series: Delaware
Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware
Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund, and
Delaware Tax-Free Oregon Insured Fund. These financial statements and the
related notes pertain to Delaware Tax-Free Florida Fund, Delaware Tax-Free
Florida Insured Fund, and Delaware Tax-Free New York Fund (each a "Fund" or,
collectively, as the "Funds"). The Trusts are open-end investment companies. The
Funds are considered non-diversified under the Investment Company Act of 1940,
as amended. The Funds offer Class A, Class B, and Class C shares. Class A shares
are sold with a front-end sales charge of up to 4.50%. Class B shares are sold
with a contingent deferred sales charge that declines from 4% to zero depending
upon the period of time the shares are held. Class B shares will automatically
convert to Class A shares on a quarterly basis approximately eight years after
purchase. Class C shares are sold with a contingent deferred sales charge of 1%,
if redeemed during the first twelve months.
The investment objective of Delaware Tax-Free Florida Fund and Delaware Tax-Free
Florida Insured Fund is to seek as high a level of current income exempt from
federal income tax and the Florida state intangibles tax, as is consistent with
preservation of capital. The investment objective of Delaware Tax-Free New York
Fund is to seek as high a level of current income exempt from federal income tax
and from New York state personal income tax, as is consistent with preservation
of capital.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation -- Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of the Funds' Board of
Trustees.
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates -- The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and 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.
Through December 31, 2003, certain expenses of the Funds were 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 amount of these expenses for the year ended
August 31, 2004 were as follows:
Delaware Delaware
Tax-Free Tax-Free
Florida Florida Insured
Fund Fund
-------- ---------------
Commission reimbursements $137 $818
Earnings credits 1,230 2,545
23
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee based on
each Fund's average daily net assets as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
On the first $500 million 0.55% 0.50%
On the next $500 million 0.50% 0.475%
On the next $1.5 billion 0.45% 0.45%
In excess of $2.5 billion 0.425% 0.425%
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed specified percentages of average daily net assets as shown below.
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
The operating expense limitation
as a percentage of average daily
net assets (per annum) 0.50% 0.65%
Expiration date October 31, 2004 October 31, 2004
Effective November 1, 2004,
the operating expense limitation
as a percentage of average daily
net assets (per annum) 0.66% 0.66%
Expiration date March 31, 2006 March 31, 2006
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.
At August 31, 2004, the Funds had receivables from or liabilities payable to
affiliates as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
Receivable from DMC under expense
limitation agreement $-- $--
Investment Management fee payable to DMC (362) (13,928)
Dividend disbursing, transfer agent fees,
accounting and administration fees
and other expenses payable to DSC (1,266) (8,679)
Other expenses payable to DMC and
affiliates* (582) (1,782)
*DMC, as part of its administrative services, pays operating expenses on behalf
of the Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax
services, registration fees and trustees' fees.
As provided in the investment management agreement, the Fund bears the cost of
certain legal services expenses, including in-house legal services provided to
the Funds by DMC employees. For the year ended August 31, 2004, the Funds costs
were as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
$791 $4,560
For the year ended August 31, 2004, DDLP earned commissions on sales of Class A
shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
$2,930 $10,391
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the
Trusts. These officers and trustees are paid no compensation by the Funds.
24
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
For the year ended August 31, 2004, the Funds made purchases and sales of
investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
Purchases $2,166,890 $2,978,489
Sales 3,292,266 12,991,877
At August 31, 2004, the cost of investments and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
Cost of investments $14,492,870 $86,712,415
----------- -----------
Aggregate unrealized appreciation $ 953,556 $ 5,634,544
Aggregate unrealized depreciation (13,078) --
----------- -----------
Net unrealized appreciation $ 940,478 $ 5,634,544
=========== ===========
4. DIVIDEND AND DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. The tax character of dividends and distributions
paid during the years ended August 31, 2004 and 2003 was as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
Year Ended Year Ended
8/31/04 8/31/03 8/31/04 8/31/03
------- ------- ------- -------
Tax-exempt Income $723,935 $723,474 $4,650,828 $4,996,861
As of August 31, 2004, the components of net assets on a tax basis were as
follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
Shares of beneficial interest $15,493,458 $88,554,039
Distributions in excess of net
investment income (181) --
Post-October loss -- --
Capital loss carryforwards (695,728) (507,694)
Unrealized appreciation of investments 940,478 5,634,544
----------- -----------
Net Assets $15,738,027 $93,680,889
=========== ===========
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss carryforward
expire as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
2008 $ 52,610 $507,694
2009 643,118 --
-------- --------
Total $695,728 $507,694
======== ========
During the year ended August 31, 2004, the Delaware Tax-Free Florida Insured
Fund had $557,659 of capital loss carryforward expire. The Delaware Tax-Free
Florida Fund and the Delaware Tax-Free New York Fund utilized capital loss
carryforward of $32,818 and $25,039, respectively.
Post-October losses represent losses realized on investment transactions from
November 1, 2003 through August 31, 2004 that, in accordance with federal income
tax regulations, the Delaware Tax-Free New York Fund has elected to defer and
treat as having arisen in the following fiscal year.
For financial reporting purposes, capital accounts and distributions to
shareholders are adjusted to reflect the tax character of permanent book/tax
differences. For the year ended August 31, 2004, the Delaware Tax-Free Florida
Insured Fund recorded the following permanent reclassifications.
Reclassifications are primarily due to tax treatment of expiration of capital
loss carryforward. Results of operations and net assets were not affected by
these reclassifications.
Accumulated realized loss Paid-in capital
------------------------- ---------------
$557,659 ($557,659)
25
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
Year Ended Year Ended
8/31/04 8/31/03 8/31/04 8/31/03
Shares sold:
Class A 84,436 100,615 361,036 498,628
Class B 14,638 83,873 52,775 152,690
Class C 58,853 104,884 46,726 37,398
Shares issued upon reinvestment of
dividends and distributions:
Class A 17,890 16,498 126,274 138,879
Class B 4,318 6,071 7,699 8,436
Class C 3,122 1,847 2,205 1,582
-------- -------- ---------- ----------
183,257 313,788 596,715 837,613
-------- -------- ---------- ----------
Shares repurchased:
Class A (99,881) (178,105) (1,339,780) (1,336,825)
Class B (164,848) (66,791) (137,961) (100,200)
Class C (33,967) (5,869) (28,419) (12,304)
-------- -------- ---------- ----------
(298,696) (250,765) (1,506,160) (1,449,329)
-------- -------- ---------- ----------
Net increase (decrease) (115,439) 63,023 (909,445) (611,716)
======== ======== ========== ==========
For the year ended August 31, 2004 and 2003, the following shares and value were
converted from Class B to Class A shares. The respective amounts are included in
Class B redemptions and Class A subscriptions in the table above and the
Statements of Changes in Net Assets.
Year Ended Year Ended
8/31/04 8/31/03
-------------------------------------------- --------------------------------------------
Class B Shares Class A Shares Amount Class B Shares Class A Shares Amount
Delaware Tax-Free Florida Fund 3,312 3,317 $36,842 5,872 5,883 $65,055
Delaware Tax-Free Florida Insured Fund 16,704 16,705 189,023 40,697 40,704 465,070
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 funds' allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of August 31, 2004, or at any time during
the year.
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.
The Funds may invest in inverse floating rate securities ("inverse floaters"), a
type of derivative tax-exempt obligation with floating or variable interest
rates that move in the opposite direction of short-term interest rates, usually
at an accelerated speed. Consequently, the market values of inverse floaters
will generally be more volatile than other tax-exempt investments. Such
securities are denoted on the Statement of Net Assets.
8. CONTRACTUAL OBLIGATIONS
The Funds enter into contracts in the normal course of business that contain a
variety of indemnifications. The Funds' maximum exposure under these
arrangements is unknown. However, the Funds have not had prior claims or losses
pursuant to these contracts. Management has reviewed the Funds' existing
contracts and expects the risk of loss to be remote.
26
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
9. TAX INFORMATION (UNAUDITED)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distribution on a calendar year
basis for income tax purposes, which may include distributions for portions of
two fiscal years of a fund. Accordingly, the information needed by shareholders
for income tax purposes will be sent to them in January of each year. Please
consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2004, each Fund designates distributions
paid during the year as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Fund Florida Insured Fund
----------------- --------------------
(A) Long Term Capital Gains
Distributions (Tax Basis) -- --
(B) Ordinary Income Distributions
(Tax Basis) -- --
(C) Tax-Exempt Distributions (Tax Basis) 100% 100%
---- ----
Total Distributions (Tax Basis) 100% 100%
---- ----
(A), (B) and (C) are based on a percentage of each Fund's total distributions.
27
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
Voyageur Investment Trust - Delaware Tax-Free Florida Fund
and Delaware Tax-Free Florida Insured Fund
Voyageur Mutual Funds - Delaware Tax-Free New York Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Florida Fund and Delaware Tax-Free Florida Insured Fund (two of the series
constituting Voyageur Investment Trust) and Delaware Tax-Free New York Fund (one
of the series constituting Voyageur Mutual Funds) (the "Funds") as of August 31,
2004, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of August 31, 2004, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Tax-Free Florida Fund and Delaware Tax-Free Florida Insured Fund of
Voyageur Investment Trust and the Delaware Tax-Free New York Fund of Voyageur
Mutual Funds at August 31, 2004, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended, and their financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 4, 2004
28
DELAWARE INVESTMENTS FAMILY OF FUNDS
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees/Directors which has oversight
responsibility for the management of a fund's business affairs.
Trustees/Directors establish procedures and oversee and review the performance
of the investment manager, the distributor and others that perform services for
the fund. The independent fund trustees, in particular, are advocates for
shareholder interests. The following is a list of the Trustees/Directors and
Officers with certain background and related information.
NUMBER OF OTHER
PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS
NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY
ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
JUDE T. DRISCOLL(2) Chairman and 4 Years - Since August 2000, 77 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Trustee since at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998 - August 2000)
Managing Director -
NationsBanc Capital Markets
(February 1996 - June 1998)
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
WALTER P. BABICH Trustee 16 Years Board Chairman - 94 None
2005 Market Street Citadel Constructors, Inc.
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
JOHN H. DURHAM Trustee 25 Years(3) Private Investor 94 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
JOHN A. FRY Trustee(4) 3 Years President - 77 Director -
2005 Market Street Franklin & Marshall College Community Health
Philadelphia, PA (June 2002 - Present) Systems
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
ANTHONY D. KNERR Trustee 11 Years Founder/Managing Director - 94 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
29
NUMBER OF OTHER
PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS
NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY
ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
ANN R. LEVEN Trustee 15 Years Treasurer/Chief Fiscal Officer - 94 Director and
2005 Market Street National Gallery of Art Audit Committee
Philadelphia, PA (1994 - 1999) Chairperson - Andy
19103 Warhol Foundation
Director -
Systemax Inc.
November 1, 1940
THOMAS F. MADISON Trustee 10 Years President/Chief 94 Director -
2005 Market Street Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993 - Present)
Director -
Digital River, Inc.
Director - Rimage
Corporation
JANET L. YEOMANS Trustee 5 Years Vice President/Mergers & 94 None
2005 Market Street Acquisitions - 3M Corporation
Philadelphia, PA (January 2003 - Present)
19103
Ms. Yeomans has held
July 31, 1948 various management
positions at 3M Corporation
since 1983.
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
JOSEPH H. HASTINGS Executive Executive Mr. Hastings has served in 94 None(5)
2005 Market Street Vice President Vice President various executive capacities
Philadelphia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments.
Officer Officer since
December 19, 1949 August 21, 2003
RICHELLE S. MAESTRO Executive Vice President, Chief Legal Ms. Maestro has served in 94 None(5)
2005 Market Street Chief Legal Officer Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments.
November 26, 1957
MICHAEL P. BISHOF Senior Vice President 8 Years Mr. Bishof has served in 94 None(5)
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
(1) Delaware Investments is the marketing name for Delaware Management Holdings,
Inc. and its subsidiaries, including the Registrant's investment advisor,
principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
(5) Mr. Hastings, Mr. Bishof and Ms. Maestro also serve in similar capacities
for the six portfolios of the Optimum Fund Trust, which have the same
investment advisor, principal underwriter, and transfer agent as the
registrant.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees/Directors and Officers and is available, without
charge, upon request by calling 800 523-1918.
30
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This annual report is for the information of Delaware Tax-Free Florida Fund,
Delaware Tax-Free Florida Insured Fund, and Delaware Tax-Free New York Fund, but
may be used with a prospective investors when preceded or accompanied by a
current prospectus for Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida
Insured Fund, and Delaware Tax-Free New York Fund and the Delaware Investments
Performance Update for the most recently completed calendar quarter. The
prospectus sets forth details about charges, expenses, investment objectives,
and operating policies of each Fund. You should read 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 Executive 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
- --------------------------------------------------------------------------------
Each Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and
procedures that each Fund uses to determine how to vote proxies (if any)
relating to portfolio securities is available without charge (i) upon request,
by calling 800 523-1918; (ii) on each Fund's Web site at
http://www.delawareinvestments.com; and (iii) on the Commission's Web site at
http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the
Commission's Public Reference Room in Washington, DC; information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Information (if any) regarding how each Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through each Fund's Web site at
http://www.delawareinvestments.com; and (ii) on the Commission's Web site at
http://www.sec.gov.
- --------------------------------------------------------------------------------
(8928) Printed in the USA
AR-FLNY [8/04] IVES 10/04 J9823
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
ANNUAL REPORT AUGUST 31, 2004
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE MISSOURI INSURED FUND
DELAWARE TAX-FREE OREGON INSURED FUND
[LOGO]
POWERED BY RESEARCH.(SM)
PORTFOLIO SEPTEMBER 10, 2004
MANAGEMENT REVIEW
FUND MANAGERS
Patrick P. Coyne
Executive Vice President/Chief Investment Officer -
Fixed Income/Head of Equity Investments
Joseph R. Baxter
Senior Vice President/Senior Portfolio Manager
Robert F. Collins
Vice President/Senior Portfolio Manager
Q: WHAT KIND OF ECONOMIC ENVIRONMENT WAS IT FOR THE MUNICIPAL MARKETS DURING THE
PAST 12 MONTHS?
A: In all, the environment for municipal bonds was surprisingly favorable
considering volatile market conditions and generally negative fixed-income
investor sentiment at the start of the period. In September 2003, market data
indicated a rapidly strengthening economy and accelerating corporate earnings.
These results prompted investor fears of rising inflation and Federal Reserve
Board interest rate hikes. Unemployment levels trended higher than expected,
however, suggesting the growing economy was not yet operating at its full
potential. This enabled the Fed to maintain short-term interest rates at
historically low levels throughout the period.
It was not until spring 2004, when a substantial increase in hiring activity
became evident, that concern about rising rates returned. The expectation for
interest rate hikes weighed on the bond markets, as did continued worries about
terrorism, rising oil prices, and weakness in the U.S. dollar. In fact, the Fed
did raise short-term rates twice during the period, first in late June and then
again in August. During the final three months of the period, however, job
growth trailed off unexpectedly, surprising investors who were expecting faster
economic growth. Against this backdrop, tax-free bonds, which had lost ground in
the prior few months, made up some of their recent losses.
For the full 12-month period, yields on shorter-maturity bonds rose in line with
expectations for higher short-term interest rates. By contrast, yields on longer
bonds fell, while their prices rose accordingly (bond yields and prices move in
opposite directions). The difference in yields offered by two-year and 30-year
AAA-rated municipal bonds went from 3.61% to 2.98% during the past 12 months,
reflecting the better relative results of longer bonds. (Source: The Bond Buyer)
Strong performance from lower-rated bonds was a second evident trend. As states'
revenue collections have increased, their credit outlook has improved as well.
Investors have become increasingly willing to invest in lower-rated
investment-grade and non-rated securities to obtain a higher degree of income.
For the first eight months of 2004, national municipal issuance was down about
nine percent nationwide when compared to the same period in 2003. (Source: The
Bond Buyer) This decline in new supply reflected the improved financial position
of states and municipalities. Greater tax collections limited the need to rely
on the debt markets for funds to support needed projects. Higher interest rates
also made it relatively less attractive to refinance outstanding bonds.
Q: WHAT ECONOMIC AND MUNICIPAL ENVIRONMENT DID YOU ENCOUNTER SPECIFICALLY IN THE
THREE STATES PROFILED IN THIS REPORT?
A: Idaho's economy improved steadily throughout the past 12 months, reflecting
national trends. The jobless rate in the state was just 4.9% at the end of July
2004, down from the previous year and significantly below the national average
of 5.5%. Idaho's stronger economy led to significantly increased revenue
collections, with tax income increasing by 12% for the first nine months of the
current fiscal year. Also, revenue for the full 2004 fiscal year was projected
to meet estimates, a significant improvement over the prior year's shortfall.
(Source: Fiscal Studies Program, June 2004) The stronger economy, however,
helped lead to a significant decline in Idaho municipal issuance from already
modest levels. For the first eight months of 2004, supply was down 40 percent on
a year-over-year basis. (Source: The Bond Buyer)
Thanks to strong fiscal management, the State of Missouri has maintained
positive balances in its general fund during recent years, despite facing
declines in tax collections during fiscal 2002 and 2003. For the first eight
months of the 2004 fiscal year, however, Missouri's revenues were 3.3% higher
than the previous year. As of July 2004, the state saw a modest 0.9% increase in
employment, although manufacturing employment -- representing more than 13% of
the state's jobs -- more than doubled that pace. The state's unemployment rate
stood at 5.5% in July, matching the national average. (Source: Fiscal Studies
Program, June 2004) Municipal issuance in Missouri declined by just four percent
for the first eight months of 2004. (Source: The Bond Buyer)
In recent years, Oregon's economy was hit by weakness in the technology market
and in Asian economies. Between 2001 and 2003, the state suffered substantial
job losses. During the past year, however, Oregon's employment picture
brightened considerably. While its July 2004 jobless rate of 6.8% was
considerably higher than average, it represented a substantial improvement over
Oregon's July 2003 rate of 8.7%. The state's
1
recent economic challenges generated significant revenue shortfalls, but those
shortfalls began to ease during the current fiscal year. During the first eight
months of 2004, the state's municipal issuance rose by approximately 15% when
compared to the first eight months of 2003.
Q: HOW DID THE THREE FUNDS PERFORM DURING THE FISCAL YEAR, AND WHAT MANAGEMENT
STRATEGIES DID YOU PURSUE FOR EACH?
A: DELAWARE TAX-FREE IDAHO FUND gained +7.58% (Class A shares at net asset value
with distributions reinvested) during the past 12 months, outpacing the +5.66%
return of the Lipper Other States Municipal Debt Funds Average. As an additional
point of comparison, the Lehman Brothers Municipal Bond Index returned +7.11%.
The Fund's dividend payments during the past 12 months were exempt from federal
and Idaho state taxes.*
During the period, we continued to choose investments based on our assessment of
their income potential. Our focus on bonds' income stream helped the Fund during
a time of tremendous volatility in the municipal market. Also, while the Fund's
duration was somewhat longer than ideal at the beginning of the period, having
this added sensitivity to interest rate movements helped performance in late
2003 and early 2004 when rates generally were falling. The longer duration did
detract from performance when rates rose during the spring and we have since
taken measures to shorten it, thus reducing the Fund's sensitivity to interest
rate movements.
Trading activity remained modest during the period. Idaho's minimal supply of
tax-free bonds creates a continual challenge to find new securities for the
portfolio. This challenge limited total return potential during this period. We
continued to make extensive use of Puerto Rico bonds; securities issued by U.S.
territories generally are tax-exempt for residents of all 50 states. Whenever
possible, however, we sought to buy suitable in-state credits, generating
proceeds for the purchases by selling Puerto Rico bonds as needed. During the
period, we established new positions in bonds issued by Boise State University,
as well as those from three Idaho school districts. Another strategy employed
during the period was to reduce volatility by selling some of the Fund's
longest-duration holdings -- a strategy we believed made sense in a climate of
rising interest rates.
- --------------------------------------------------------------------------------
The total return of DELAWARE TAX-FREE MISSOURI INSURED FUND was +5.06% (Class A
shares at net asset value with distributions reinvested) for the 12 months
ending August 31, 2004. This result fell short of the Lipper Missouri Municipal
Debt Funds Average, which returned +5.96% during the same time period. As an
additional point of comparison, the Lehman Brothers Municipal Bond Index
returned +7.11%. The Fund's dividend payments during the past 12 months were
exempt from federal and Missouri state taxes.*
The Fund's underperformance can be attributed in large part to having a
relatively short duration. Duration measures sensitivity to changes in interest
rates; an investment with a shorter-than-average duration will tend to
underperform a longer-duration investment when rates are falling, as was the
case for much of the period. Later in the period, as rates began rising, we
intended to extend the Fund's duration. This became difficult to achieve,
however, because we did not have sufficient cash flows at opportune times. At
period end, we were awaiting a future window of opportunity to bring duration
more in line with our peer group.
To choose investments for the portfolio, we continued to use a bottom-up
approach, evaluating securities one by one and selecting those we believed
offered the best ratio of reward potential to risk. For this bottom-up approach,
we relied on the experience of our research and trading staffs to help us
identify securities that displayed stable or improving credit trends.
New purchases were limited during the reporting period. When possible, we sought
to take advantage of the Fund's ability to invest a portion of its assets in
noninsured bonds to add to the income stream for our shareholders. For example,
we identified value in certain Puerto Rico bonds; bonds issued by U.S.
territories carry the same tax advantages as do in-state securities. In
addition, we purchased a handful of multifamily housing and hospital bonds that
we believed provided attractive yields.
*A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
2
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE OREGON INSURED FUND had a total return of +6.04% (Class A
shares at net asset value with distributions reinvested) for the 12 months ended
August 31, 2004. The Fund's performance outpaced that of its peer group, the
Lipper Oregon Municipal Debt Funds Average, which returned +5.72%. As an
additional point of comparison, the Lehman Brothers Municipal Bond Index
returned +7.11%. The Fund's dividend payments during the past 12 months were
exempt from federal and Oregon state taxes.*
The Fund's slight underperformance relative to its Lipper peer group average
stemmed from having a shorter-than-average duration when rates were falling
during much of the period. However, as the period progressed, we were able to
lengthen the Fund's duration and, consequently, increase its sensitivity to
changes in interest rates. Such positioning helped the Fund close much of the
performance gap late in the period as yields fell from their summertime highs.
In particular, we purchased a handful of Puerto Rico bonds -- bonds issued by
U.S. territories generally are fully tax-exempt in all 50 states -- as well as
bonds issued by Southwest Oregon Community College.
Also adding to Fund returns was an approximately 20 percent stake in bonds with
credit ratings below AAA. During a market environment in which lower-rated
securities generally outperformed their higher-quality counterparts, taking
advantage of the Fund's ability to invest a portion of its assets in noninsured
bonds helped relative performance.
*A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
3
DELAWARE
TAX-FREE MISSOURI INSURED FUND
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the
performance data quoted. Please obtain the performance data for the most recent
month end by calling 800 523-1918 or visiting our Web site at
www.delawareinvestments.com/performance. You should consider the investment
objectives, risks, charges, and expenses of the investment carefully before
investing. The Delaware Tax-Free Missouri Insured Fund prospectus contains this
and other important information about the investment company. Please request a
prospectus by calling 800 523-1918. Read it carefully before you invest or send
money. Performance includes reinvestment of all distributions.
FUND PERFORMANCE
Average Annual Total Returns
Through August 31, 2004 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 11/2/92)
Excluding Sales Charge +5.66% +5.73% +5.39% +5.06%
Including Sales Charge +5.25% +5.24% +4.42% +0.34%
- --------------------------------------------------------------------------------
Class B (Est. 3/12/94)
Excluding Sales Charge +4.75% +5.14% +4.59% +4.19%
Including Sales Charge +4.75% +5.14% +4.34% +0.19%
- --------------------------------------------------------------------------------
Class C (Est. 11/11/95)
Excluding Sales Charge +4.33% +4.60% +4.17%
Including Sales Charge +4.33% +4.60% +3.17%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of up to 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%. Lifetime and 10 year performance figures for
Class B shares reflect conversion to Class A shares after approximately eight
years.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free
Missouri Insured Fund during the period shown. Performance would have been lower
had the expense limitation not been in effect.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
4
DELAWARE
TAX-FREE MISSOURI INSURED FUND
FUND BASICS
As of August 31, 2004
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
The Fund seeks as high a level of current income exempt from federal income tax
and from Missouri state personal income tax as is consistent with preservation
of capital.
- --------------------------------------------------------------------------------
TOTAL FUND NET ASSETS:
$51.91 million
- --------------------------------------------------------------------------------
NUMBER OF HOLDINGS:
55
- --------------------------------------------------------------------------------
FUND START DATE:
November 2, 1992
- --------------------------------------------------------------------------------
YOUR FUND MANAGERS:
Patrick P. Coyne
Joseph R. Baxter
Robert F. Collins
- --------------------------------------------------------------------------------
NASDAQ SYMBOLS:
Class A VMOIX
Class B DVTBX
Class C DVTCX
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
August 31, 1994 through August 31, 2004
DELAWARE TAX-FREE MISSOURI INSURED FUND GROWTH OF $10,000 INVESTMENT CHART
DELAWARE TAX-FREE LEHMAN BROTHERS
MISSOURI INSURED FUND - MUNICIPAL BOND
CLASS A SHARES INDEX
AUG-94 $ 9,550 $10,000
AUG-95 $10,326 $10,886
AUG-96 $10,907 $11,457
AUG-97 $11,897 $12,516
AUG-98 $12,863 $13,598
AUG-99 $12,814 $13,673
AUG-00 $13,453 $14,593
AUG-01 $14,649 $16,083
AUG-02 $15,439 $17,078
AUG-03 $15,861 $17,614
AUG-04 $16,664 $18,866
Chart assumes $10,000 invested on August 31, 1994 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
An expense limitation was in effect during the period shown. Performance would
have been lower had the expense limitation not been in effect.
The performance graph does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
5
DELAWARE
TAX-FREE OREGON INSURED FUND
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Current performance may be lower or higher than the
performance data quoted. Please obtain the performance data for the most recent
month end by calling 800 523-1918 or visiting our Web site at
www.delawareinvestments.com/performance. You should consider the investment
objectives, risks, charges, and expenses of the investment carefully before
investing. The Delaware Tax-Free Oregon Insured Fund prospectus contains this
and other important information about the investment company. Please request a
prospectus by calling 800 523-1918. Read it carefully before you invest or send
money. Performance includes reinvestment of all distributions.
FUND PERFORMANCE
Average Annual Total Returns
Through August 31, 2004 Lifetime 10 Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 8/1/93)
Excluding Sales Charge +5.36% +5.98% +6.14% +6.04%
Including Sales Charge +4.92% +5.50% +5.18% +1.26%
- --------------------------------------------------------------------------------
Class B (Est. 3/12/94)
Excluding Sales Charge +4.98% +5.40% +5.37% +5.24%
Including Sales Charge +4.98% +5.40% +5.13% +1.24%
- --------------------------------------------------------------------------------
Class C (Est. 7/7/95)
Excluding Sales Charge +4.97% +5.38% +5.33%
Including Sales Charge +4.97% +5.38% +4.33%
- --------------------------------------------------------------------------------
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Performance
for Class B and C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of up to 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%. Lifetime performance figures for Class B
shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Oregon
Insured Fund during the period shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
6
DELAWARE
TAX-FREE OREGON INSURED FUND
FUND BASICS
As of August 31, 2004
- --------------------------------------------------------------------------------
FUND OBJECTIVE:
The Fund seeks as high a level of current income exempt from federal income tax
and from Oregon state personal income tax, as is consistent with preservation of
capital.
- --------------------------------------------------------------------------------
TOTAL FUND NET ASSETS:
$45.04 million
- --------------------------------------------------------------------------------
NUMBER OF HOLDINGS:
50
- --------------------------------------------------------------------------------
FUND START DATE:
August 1, 1993
- --------------------------------------------------------------------------------
YOUR FUND MANAGERS:
Patrick P. Coyne
Joseph R. Baxter
Robert F. Collins
- --------------------------------------------------------------------------------
NASDAQ SYMBOLS:
Class A VORIX
Class B DVYBX
Class C DVYCX
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
August 31, 1994 through August 31, 2004
DELAWARE TAX-FREE OREGON INSURED FUND GROWTH OF $10,000 INVESTMENT CHART
DELAWARE TAX-FREE LEHMAN BROTHERS
OREGON INSURED FUND - MUNICIPAL BOND
CLASS A SHARES INDEX
AUG-94 $ 9,550 $10,000
AUG-95 $10,303 $10,886
AUG-96 $10,840 $11,457
AUG-97 $11,839 $12,516
AUG-98 $12,878 $13,598
AUG-99 $12,663 $13,673
AUG-00 $13,428 $14,593
AUG-01 $14,825 $16,083
AUG-02 $15,628 $17,078
AUG-03 $16,099 $17,614
AUG-04 $17,071 $18,866
Chart assumes $10,000 invested on August 31, 1994 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index. Past performance is
not a guarantee of future results.
An expense limitation was in effect during the period shown. Performance would
have been lower had the expense limitation not been in effect.
The performance graph does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
7
DISCLOSURE FOR THE PERIOD MARCH 1, 2004 TO AUGUST 31, 2004
OF FUND EXPENSES
As a shareholder of a fund, you incur two types of costs, (1) transaction costs,
including sales charges (loads) on purchase or redemption payments; end exchange
fees; and (2) ongoing costs, including management fees; distribution, and/or
service (12b-1) fees; and other fund expenses. This Example is intended to help
you understand your ongoing costs (in dollars) of investing in a fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from March 1, 2004 to August 31, 2004.
ACTUAL EXPENSES
The first section of the table shown, "Actual Fund Return," provides information
about actual account values and actual expenses. You may use the information in
this section of the table, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first section under the heading
entitled "Expenses Paid During Period" to estimate the expenses you paid on your
account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table shown, "Hypothetical 5% Return", provides
information about hypothetical account values and hypothetical expenses based on
a Fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) redemption fees, or exchange fees. Therefore, the second section
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher. The
Funds' actual expenses shown in the table reflect fee waivers in effect. The
expenses shown in the tables assume reinvestment of all dividends and
distributions.
In each case, "Expenses Paid During Period" are equal to the Fund's annualized
expense ratio, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
8
DISCLOSURE FOR THE PERIOD MARCH 1, 2004 TO AUGUST 31, 2004
OF FUND EXPENSES (CONTINUED)
DELAWARE TAX-FREE MISSOURI INSURED FUND(1)
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expense
Beginning Ending Annualized Paid During
Account Account Expense Period
Value Value Ratio 3/1/04 to
3/1/04 8/31/04 8/31/04
- -------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,001.60 0.99% $4.98
Class B 1,000.00 997.80 1.74% 8.74
Class C 1,000.00 997.80 1.74% 8.74
- -------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,019.96 0.99% $5.04
Class B 1,000.00 1,016.14 1.74% 8.86
Class C 1,000.00 1,016.14 1.74% 8.86
- -------------------------------------------------------------------------------------------------------------
(1) Effective November 1, 2004, the Fund's manager implemented contractual
expense waivers for the Fund, causing the expenses paid by the Fund to
decrease. Had the new expense waivers been in effect during the period, the
Fund's expense analysis would be as follows:
Expense
Beginning Ending Annualized Paid During
Account Account Expense Period
Value Value Ratio 3/1/04 to
3/1/04 8/31/04 8/31/04
- -------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,002.05 0.90% $4.53
Class B 1,000.00 998.25 1.65% 8.29
Class C 1,000.00 998.25 1.65% 8.29
- -------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.42 0.90% $4.58
Class B 1,000.00 1,016.60 1.65% 8.40
Class C 1,000.00 1,016.60 1.65% 8.40
- -------------------------------------------------------------------------------------------------------------
DELAWARE TAX-FREE OREGON INSURED FUND
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expense
Beginning Ending Annualized Paid During
Account Account Expense Period
Value Value Ratio 3/1/04 to
3/1/04 8/31/04 8/31/04
- -------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,006.10 0.85% $4.29
Class B 1,000.00 1,003.20 1.60% 8.06
Class C 1,000.00 1,003.20 1.60% 8.06
- -------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.67 0.85% $4.33
Class B 1,000.00 1,016.86 1.60% 8.14
Class C 1,000.00 1,016.86 1.60% 8.14
- -------------------------------------------------------------------------------------------------------------
9
SECTOR ALLOCATION AS OF AUGUST 31, 2004
DELAWARE TAX-FREE MISSOURI INSURED FUND
The following chart lists the Fund's categories of portfolio holdings as a
percent of total net assets, and is provided in compliance with such
requirement.
PERCENTAGE
SECTOR OF NET ASSETS
- -----------------------------------------------------------------------
MUNICIPAL BONDS 98.29%
- -----------------------------------------------------------------------
Airport Revenue Bonds 3.41%
Corporate-Backed Revenue Bonds 2.95%
Dedicated Tax & Fees Revenue Bonds 3.94%
Escrowed to Maturity Bonds 2.37%
Higher Education Revenue Bonds 1.95%
Hospital Revenue Bonds 11.38%
Investor Owned Utilities Revenue Bonds 4.44%
Miscellaneous Revenue Bonds 2.09%
Multi Family Housing Revenue Bonds 5.80%
Municipal Lease Revenue Bonds 11.17%
Political Subdivision General Obligation Bonds 2.02%
Pre-Refunded Bonds 16.18%
Public Power Revenue Bonds 2.29%
School District General Obligation Bonds 4.72%
Single Family Housing Revenue Bonds 2.78%
Territorial General Obligation Bonds 0.99%
Territorial Revenue Bonds 8.75%
Water & Sewer Revenue Bonds 11.06%
- -----------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 98.29%
- -----------------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.71%
- -----------------------------------------------------------------------
NET ASSETS 100.00%
- -----------------------------------------------------------------------
10
SECTOR ALLOCATION AS OF AUGUST 31, 2004
DELAWARE TAX-FREE OREGON INSURED FUND
The following chart lists the Fund's categories of portfolio holdings as a
percent of total net assets, and is provided in compliance with such
requirement.
PERCENTAGE
SECTOR OF NET ASSETS
- -----------------------------------------------------------------------
MUNICIPAL BONDS 96.15%
- -----------------------------------------------------------------------
Airport Revenue Bonds 3.53%
Higher Education Revenue Bonds 13.46%
Hospital Revenue Bonds 7.52%
Investor Owned Utilities Revenue Bonds 1.41%
Miscellaneous Revenue Bonds 3.19%
Multi Family Housing Revenue Bonds 2.48%
Municipal Lease Revenue Bonds 2.46%
Political Subdivision General Obligation Bonds 7.25%
Pre-Refunded Bonds 17.99%
Public Utility District Revenue Bonds 1.80%
School District General Obligation Bonds 15.76%
Single Family Housing Revenue Bonds 4.12%
Tax Increment/Special Assessment Bonds 2.36%
Territorial Revenue Bonds 11.80%
Water & Sewer Revenue Bonds 1.02%
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS 2.78%
- -----------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 98.93%
- -----------------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.07%
- -----------------------------------------------------------------------
NET ASSETS 100.00%
- -----------------------------------------------------------------------
11
STATEMENTS DELAWARE TAX-FREE MISSOURI INSURED FUND
OF NET ASSETS August 31, 2004
Principal Market
Amount Value
MUNICIPAL BONDS - 98.29%
Airport Revenue Bonds - 3.41%
St. Louis Airport (Capital Improvement
Project) Series A 5.375% 7/1/21 (MBIA) $1,635,000 $1,770,525
----------
1,770,525
----------
Corporate-Backed Revenue Bonds - 2.95%
Missouri State Development Finance Board
Infrastructure Facilities (Triumph Foods
Project) 5.25% 3/1/25 500,000 506,960
Missouri State Development Finance Board
Solid Waste Disposal (Procter & Gamble
Paper Products) 5.20% 3/15/29 (AMT) 500,000 523,100
Sugar Creek, Missouri Industrial
Development Revenue (Lafarge North
America) Series A 5.65% 6/1/37 (AMT) 500,000 502,670
----------
1,532,730
----------
Dedicated Tax & Fees Revenue Bonds - 3.94%
Bi-State Development Agency Missouri
Illinois Metropolitan District
(Metrolink Cross County Project)
Series B 5.00% 10/1/32 (FSA) 1,000,000 1,023,270
Jackson County Special Obligation
5.00% 12/1/27 (MBIA) 1,000,000 1,024,240
----------
2,047,510
----------
Escrowed to Maturity Bonds - 2.37%
Cape Girardeau County Industrial
Development Authority Health Care
Facilities Revenue (Southeast Missouri
Hospital) 5.25% 6/1/16 (MBIA) 440,000 494,080
**Greene County Single Family Mortgage
Revenue Municipal Multiplier (Private
Mortgage Insurance) 6.10% 3/1/16 1,225,000 737,622
----------
1,231,702
----------
Higher Education Revenue Bonds - 1.95%
Missouri State Health & Educational
Facilities Authority Educational Facilities
Revenue (University of Health Sciences)
5.00% 6/1/31 (MBIA) 1,000,000 1,013,360
----------
1,013,360
----------
Hospital Revenue Bonds - 11.38%
Cape Girardeau County Industrial
Development Authority Health Care
Facilities Revenue Unrefunded Balance
(Southeast Missouri Hospital)
5.25% 6/1/16 (MBIA) 560,000 622,692
(St. Francis Medical Center)
Series A 5.50% 6/1/32 (MBIA) 1,500,000 1,537,005
Hannibal Industrial Development Authority
Health Facilities Revenue Refunding
(Hannibal Regional Hospital) Series A
5.625% 3/1/12 (FSA) 1,000,000 1,071,040
5.75% 3/1/22 (FSA) 1,000,000 1,062,910
Missouri State Health & Educational
Facilities 5.70% 2/15/34 500,000 512,280
Missouri State Health & Educational
Facilities Authority Health Facilities
Revenue Refunding (SSM Health Care)
Series AA 6.40% 6/1/10 (MBIA) 500,000 589,000
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Hospital Revenue Bonds (continued)
North Kansas City Missouri Hospital
Revenue 5.00% 11/15/28 (FSA) $ 500,000 $ 510,695
----------
5,905,622
----------
Investor Owned Utilities Revenue Bonds - 4.44%
Missouri State Environmental Improvement
& Energy Resource Authority Pollution
Control Revenue Refunding (St. Joseph
Light & Power Company Project)
5.85% 2/1/13 (AMBAC) 2,200,000 2,305,666
----------
2,305,666
----------
Miscellaneous Revenue Bonds - 2.09%
Missouri State Environmental Improvement
& Energy Resource Authority Water
Pollution Control Revenue Unrefunded
Balance (State Revolving Fund Project)
Series A 6.05% 7/1/16 (FSA) 1,060,000 1,084,942
----------
1,084,942
----------
Multi Family Housing Revenue Bonds - 5.80%
Missouri State Housing Development
Commission Multifamily Housing-
Hyder Series 3 5.60% 7/1/34 (AMT) 1,435,000 1,484,063
San Remo Series 5 5.45% 1/1/36 (AMT) 500,000 510,685
St. Louis County Industrial Development
Authority Housing Development Revenue
Refunding Sub (Southfield & Oak Forest
Apartment-A) 5.20% 1/20/36 (GNMA) 1,000,000 1,014,930
----------
3,009,678
----------
Municipal Lease Revenue Bonds - 11.17%
Kansas City Land Clearance Redevelopment
Authority Lease Revenue (Muehlebach
Hotel) Series A 5.90% 12/1/18 (FSA) 1,000,000 1,068,510
Kansas City Municipal Assistance
Corporation Revenue Refunding
Leasehold (Bartle Convention Center)
Series A 5.60% 4/15/16 (MBIA) 940,000 970,926
Missouri State Development Finance
Board Infrastructure Facilities Revenue
(Branson Landing Project)
Series A 5.50% 12/1/24 500,000 517,895
St. Charles County Public Water Supply
District #2 Certificate of Participation
(Missouri Project)
Series A 5.25% 12/1/28 (MBIA) 1,000,000 1,041,990
Series B 5.10% 12/1/25 (MBIA) 500,000 513,970
**St. Louis Missouri Industrial Development
Authority Leasehold Revenue
(Convention Center Hotel)
5.80% 7/15/20 (AMBAC) 3,035,000 1,428,210
St. Charles Missouri Certificates
Participation 5.00% 5/1/24 250,000 254,470
----------
5,795,971
----------
Political Subdivision General Obligation Bonds - 2.02%
Taney County Reorganization School
District R-V Hollister School District
5.00% 3/1/22 (FSA) 1,000,000 1,050,490
----------
1,050,490
----------
12
STATEMENTS DELAWARE TAX-FREE MISSOURI INSURED FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
*Pre-Refunded Bonds - 16.18%
Kansas City Airport Revenue General
Improvement Series B
6.875% 9/1/14-04 (FSA) $1,000,000 $1,010,000
Missouri State Health & Educational
Facilities Authority Educational
Facilities Revenue (Central Missouri
State University Project)
5.75% 10/1/25-05 (AMBAC) 1,000,000 1,045,760
St. Charles School District
6.50% 2/1/14-06 (FGIC) 1,250,000 1,335,275
St. Louis Municipal Finance Corporation
Leasehold Revenue Improvement
(City Justice Center)
Series A 5.95% 2/15/16-06 (AMBAC) 1,000,000 1,080,270
St. Louis Municipal Finance Corporation
Leasehold Revenue Refunding &
Improvement 6.25% 2/15/12-05 (FGIC) 1,850,000 1,890,884
Troy Reorganization School District #3
Lincoln County 6.10% 3/1/14-05 (MBIA) 1,235,000 1,263,269
West Platte School District R-11
5.85% 3/1/15-05 (MBIA) 750,000 766,823
----------
8,392,281
----------
Public Power Revenue Bonds - 2.29%
Sikeston Electric Revenue Refunding
6.00% 6/1/13 (MBIA) 1,000,000 1,187,960
----------
1,187,960
----------
School District General Obligation Bonds - 4.72%
Greene County Reorganization School
District R8 (Direct Deposit Project)
5.10% 3/1/22 (FSA) 1,500,000 1,580,175
**St. Charles County Francis Howell School
District (Capital Appreciation
Direct Deposit Project) Series A
5.15% 3/1/17 (FGIC) 1,500,000 869,535
----------
2,449,710
----------
Single Family Housing Revenue Bonds - 2.78%
Missouri State Housing Development
Commission Mortgage Revenue
Series C 7.45% 9/1/27
(GNMA/FNMA) (AMT) 280,000 282,408
Single Family Homeowner Loan A
7.20% 9/1/26 (GNMA/FNMA) (AMT) 245,000 247,837
Single Family Homeowner Loan B
7.55% 9/1/27 (GNMA/FNMA) (AMT) 135,000 136,200
Single Family Homeowner Loan C
7.25% 9/1/26 (GNMA/FNMA) (AMT) 265,000 266,155
Single Family Mortgage Series A
5.20% 9/1/33 (GNMA/FNMA) (AMT) 430,000 434,400
7.20% 12/1/17 (GNMA) (AMT) 20,000 20,338
7.25% 12/1/20 (GNMA) (AMT) 55,000 55,929
----------
1,443,267
----------
Territorial General Obligation Bonds - 0.99%
University Virgin Islands
Series A 5.375% 6/1/34 500,000 512,795
----------
512,795
----------
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Territorial Revenue Bonds - 8.75%
Puerto Rico Commonwealth Highway &
Transportation Authority Transportation
Revenue Series A 4.75% 7/1/38 (MBIA) $ 1,000,000 $ 1,006,500
Puerto Rico Electric Power Authority Power
Revenue Series N 5.125% 7/1/29 400,000 408,956
+Puerto Rico Electric Power Authority
Power Revenue, Inverse Floater ROLs
7.512% 7/1/19 (FSA) 1,925,000 2,023,079
Puerto Rico Public Buildings Authority
Revenue(Government Facilities)
Series J 5.00% 7/1/36 (AMBAC) 1,000,000 1,101,950
-----------
4,540,485
-----------
Water & Sewer Revenue Bonds - 11.06%
Liberty Sewer System Revenue
6.00% 2/1/08 (MBIA) 495,000 530,749
6.15% 2/1/15 (MBIA) 1,500,000 1,692,795
Metropolitan St. Louis Sewer District
Wastewater Revenue
5.00% 5/1/34 (MBIA) 1,250,000 1,278,975
Missouri State Environmental
Improvement & Energy Resource
Authority Water Pollution Control
Revenue 5.00% 7/1/14 2,000,000 2,240,620
-----------
5,743,139
-----------
TOTAL MUNICIPAL BONDS (cost $48,274,962) 51,017,833
-----------
TOTAL MARKET VALUE OF SECURITIES - 98.29%
(cost $48,274,962) 51,017,833
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.71% 887,182
-----------
NET ASSETS APPLICABLE TO 4,852,408
SHARES OUTSTANDING - 100.00% $51,905,015
===========
Net Asset Value - Delaware Tax-Free Missouri Insured
Fund Class A ($45,745,321 / 4,276,565 Shares) $10.70
------
Net Asset Value - Delaware Tax-Free Missouri Insured
Fund Class B ($4,902,760 / 458,495 Shares) $10.69
------
Net Asset Value - Delaware Tax-Free Missouri Insured
Fund Class C ($1,256,934 / 117,348 Shares) $10.71
------
13
STATEMENTS DELAWARE TAX-FREE MISSOURI INSURED FUND
OF NET ASSETS (CONTINUED)
COMPONENTS OF NET ASSETS AT AUGUST 31, 2004:***
Shares of beneficial interest
(unlimited authorization - no par) $49,306,226
Accumulated net realized loss on investments (144,082)
Net unrealized appreciation of investments 2,742,871
-----------
Total net assets $51,905,015
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**Zero coupon bond. The interest rate shown is the yield at time of purchase.
***See Note #4 in "Notes to Financial Statements" for details of
reclassification of components of net assets.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2004.
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
ROLs - Residual Options Long
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE MISSOURI FUND
Net asset value Class A (A) $10.70
Sales charge (4.50% of offering price,
or 4.67% of amount invested per share) (B) 0.50
------
Offering price $11.20
======
(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
14
STATEMENTS DELAWARE TAX-FREE OREGON INSURED FUND
OF NET ASSETS (CONTINUED) August 31, 2004
Principal Market
Amount Value
MUNICIPAL BONDS - 96.15%
Airport Revenue Bonds - 3.53%
Portland Oregon Airport Revenue
(Portland International Airport)
Series 11 5.625% 7/1/26 (FGIC) (AMT) $1,500,000 $1,589,250
----------
1,589,250
----------
Higher Education Revenue Bonds - 13.46%
**Oregon Health Sciences University Revenue
(Capital Appreciation Insured) Series A
5.50% 7/1/21 (MBIA) 2,000,000 898,560
Oregon Health Sciences University Revenue
Series A 5.00% 7/1/32 (MBIA) 2,000,000 2,040,840
Oregon State Facilities Authority Revenue
(College Housing Northwest Project)
Series A 5.45% 10/1/32 1,000,000 1,020,410
Oregon State Facilities Authority Revenue
(Willamette University Project) Series A
5.00% 10/1/34 (FGIC) 1,000,000 1,024,560
Oregon State Health, Housing, Educational
& Cultural Facilities Refunding
(Lewis & Clark College Project)
Series A 6.125% 10/1/24 (MBIA) 1,055,000 1,079,793
----------
6,064,163
----------
Hospital Revenue Bonds - 7.52%
Deschutes County Hospital Facilities
Authority Hospital Revenue (Cascade
Health Services) 5.60% 1/1/32 1,250,000 1,298,975
Multnomah County Hospital Facilities
Authority Revenue (Providence Health
System) 5.25% 10/1/22 500,000 530,945
Umatilla County Hospital Facility Authority
Revenue (Catholic Health Initiatives)
Series A 5.50% 3/1/32 1,000,000 1,046,090
Western Lane Hospital District Hospital
Facility Authority Revenue Refunding
(Sisters of St. Joseph Peace)
5.875% 8/1/12 (MBIA) 500,000 511,725
----------
3,387,735
----------
Investor Owned Utilities Revenue Bonds - 1.41%
Port Morrow, Oregon Pollution Control
Revenue (Portland General)
5.20% 5/1/33 600,000 636,528
----------
636,528
----------
Miscellaneous Revenue Bonds - 3.19%
Oregon State Department Administrative
Services Lottery Revenue Refunding
Series A 5.00% 4/1/18 (FSA) 500,000 541,740
Oregon State Department Administrative
Services 5.00% 9/1/13 (FSA) 800,000 893,992
----------
1,435,732
----------
Multi Family Housing Revenue Bonds - 2.48%
Oregon Health, Housing, Educational, &
Cultural Facilities Authority
(Pier Park Project) Series A
6.05% 4/1/18 (GNMA) (AMT) 1,095,000 1,115,827
----------
1,115,827
----------
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
Municipal Lease Revenue Bonds - 2.46%
Oregon State Department
Administration Services Certificate of
Participation Refunding
Series C 5.25% 11/1/15 (MBIA) $1,000,000 $1,109,210
----------
1,109,210
----------
Political Subdivision General Obligation Bonds - 7.25%
Deschutes County Administrative School
District #1 Series A 5.125% 6/15/21 (FSA) 1,000,000 1,064,530
Deschutes County Refunding
5.00% 12/1/16 (FSA) 500,000 541,200
Malheur County (Jail Buildings)
6.30% 12/1/12 (MBIA) 500,000 528,185
Southwestern Oregon Community College
District 5.00% 6/1/28 (MBIA) 1,100,000 1,129,656
----------
3,263,571
----------
*Pre-Refunded Bonds - 17.99%
Chemeketa County Community College
District 5.80% 6/1/12-06 (FGIC) 1,500,000 1,605,689
Lane County School District #019
Springfield 6.30% 10/15/14-04 (MBIA) 500,000 508,055
Multnomah County School District #3
Park Rose 5.50% 12/1/11-05 (FGIC) 500,000 524,650
Multnomah County School District #39
Corbet 6.00% 12/1/13-04 (MBIA) 500,000 505,900
Oregon State Department Administrative
Services Certificate of Participation
Series A 5.80% 5/1/24-07 (AMBAC) 1,000,000 1,107,240
Portland Series A 5.75% 6/1/15-05 (MBIA) 500,000 516,075
Puerto Rico Commonwealth Public
Improvement 5.125% 7/1/30-11 (FSA) 920,000 1,036,003
Salem Water & Sewer Revenue
5.625% 6/1/16-06 (MBIA) 1,000,000 1,067,450
Tillamook County 6.25% 1/1/14-05 (FGIC) 250,000 256,590
Washington County Education Services
District Certificate of Participation
7.10% 6/1/25-05 (MBIA) 700,000 729,631
Washington County School District #088 J
Sherwood 6.10% 6/1/12-05 (FSA) 235,000 243,166
----------
8,100,449
----------
Public Utility District Revenue Bonds - 1.80%
Emerald Peoples Utilities District
Series A 5.25% 11/1/22 (FSA) 750,000 809,655
----------
809,655
----------
School District General Obligation Bonds - 15.76%
Benton & Linn Counties School
District #509J Corvallis
5.00% 6/1/21 (FSA) 1,000,000 1,058,390
Jackson County School District #6
Central Point 5.25% 6/15/20 (FGIC) 1,175,000 1,277,354
Jefferson County School District #509J
5.00% 6/15/22 (FGIC) 500,000 523,770
Lane County School District #019
Springfield Refunding
6.00% 10/15/14 (FGIC) 500,000 601,350
Lincoln County School District
5.25% 6/15/12 (FGIC) 700,000 772,366
15
STATEMENTS DELAWARE TAX-FREE OREGON INSURED FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (CONTINUED)
School District General Obligation Bonds (continued)
Linn County Community School District #9
Lebanon 5.60% 6/15/30 (FGIC) $ 2,000,000 $ 2,175,500
Salem-Keizer Oregon School District #24J
Refunding 5.00% 6/15/19 (FSA) 500,000 537,835
**Umatilla County School
District #6 R Umatilla Refunding
5.50% 12/15/22 (AMBAC) 200,000 83,700
Washington County School District #088 J
Sherwood 6.10% 6/1/12 (FSA) 65,000 67,259
-----------
7,097,524
-----------
Single Family Housing Revenue Bonds - 4.12%
Oregon State Housing & Community
Services Department Mortgage Revenue
Single Family Mortgage Program
Series R 5.375% 7/1/32 (AMT) 1,820,000 1,855,799
-----------
1,855,799
-----------
Tax Increment/Special Assessment Bonds - 2.36%
North Unit Irrigation District
5.75% 6/1/16 (MBIA) 1,000,000 1,063,640
-----------
1,063,640
-----------
Territorial Revenue Bonds - 11.80%
Puerto Rico Commonwealth Highway &
Transportation Authority
Transportation Revenue
Series D 5.25% 7/1/38 500,000 512,215
Series G 5.00% 7/1/42 500,000 501,030
Puerto Rico Commonwealth Public
Improvement 5.125% 7/1/30 (FSA) 580,000 599,674
Puerto Rico Electric Power Authority Power
Revenue Series NN 5.125% 7/1/29 1,000,000 1,022,390
+Puerto Rico Electric Power Authority Power
Revenue, Inverse Floater ROLs
7.512% 7/1/19 (FSA) 1,500,000 1,576,425
Puerto Rico Public Buildings Authority
Revenue (Government Facilities)
Series J 5.00% 7/1/36 (AMBAC) 1,000,000 1,101,950
-----------
5,313,684
-----------
Water & Sewer Revenue Bonds - 1.02%
Beaverton County Water Revenue
6.125% 6/1/14 (FSA) 120,000 121,660
Portland Sewer Systems Revenue
(Second Lien) Series A
5.00% 6/1/23 (FSA) 325,000 338,653
-----------
460,313
-----------
TOTAL MUNICIPAL BONDS (cost $40,951,213) 43,303,080
-----------
Number of
Shares
SHORT-TERM INVESTMENTS - 2.78%
Dreyfus Tax-Exempt Cash
Management Fund 1,252,006 1,252,006
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,252,006) 1,252,006
-----------
TOTAL MARKET VALUE OF SECURITIES - 98.93%
(cost $42,203,219) $44,555,086
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.07% 483,502
-----------
NET ASSETS APPLICABLE TO 4,270,338
SHARES OUTSTANDING - 100.00% $45,038,588
===========
Net Asset Value - Delaware Tax-Free Oregon Insured
Fund Class A ($30,817,113 / 2,923,138 Shares) $10.54
------
Net Asset Value - Delaware Tax-Free Oregon Insured
Fund Class B ($7,877,747 / 746,829 Shares) $10.55
------
Net Asset Value - Delaware Tax-Free Oregon Insured
Fund Class C ($6,343,728 / 600,371 Shares) $10.57
------
COMPONENTS OF NET ASSETS AT AUGUST 31, 2004:***
Shares of beneficial interest
(unlimited authorization - no par) $42,972,660
Accumulated net realized loss on investments (285,939)
Net unrealized appreciation of investments 2,351,867
-----------
Total net assets $45,038,588
===========
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
the bond is pre-refunded.
**Zero coupon bond. The interest rate shown is the yield at the time of
purchase.
***See Note #4 in "Notes to Financial Statements" for details of
reclassification of components of net assets.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of August 31, 2004.
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
ROLs - Residual Options Long
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE OREGON INSURED FUND
Net asset value Class A (A) $10.54
Sales charge (4.50% of offering price,
or 4.74% of amount invested per share) (B) 0.50
------
Offering price $11.04
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
16
STATEMENTS YEAR ENDED AUGUST 31, 2004
OF OPERATIONS
Delaware Delaware
Tax-Free Tax-Free
Missouri Insured Oregon Insured
Fund Fund
INVESTMENT INCOME:
Interest $2,772,343 $2,325,678
---------- ----------
EXPENSES:
Management fees 262,747 225,404
Distribution expenses -- Class A 113,297 77,735
Distribution expenses -- Class B 59,719 81,683
Distribution expenses -- Class C 13,508 58,685
Dividend disbursing and transfer agent fees and expenses 39,479 26,624
Accounting and administration expenses 19,537 16,725
Legal and professional fees 16,152 11,433
Reports and statements to shareholders 10,442 2,818
Registration fees 4,270 1,250
Custodian fees 3,705 2,855
Trustees' fees 3,153 2,808
Other 4,045 2,842
---------- ----------
550,054 510,862
Less expenses absorbed or waived -- (21,456)
Less expenses paid indirectly (497) (363)
---------- ----------
Total expenses 549,557 489,043
---------- ----------
NET INVESTMENT INCOME 2,222,786 1,836,635
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 303,361 115,703
Net change in unrealized appreciation/depreciation of investments (15,128) 540,255
---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 288,233 655,958
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,511,019 $2,492,593
========== ==========
See accompanying notes
17
STATEMENTS
OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
Year Ended Year Ended
8/31/04 8/31/03 8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 2,222,786 $ 2,256,905 $ 1,836,635 $ 1,669,580
Net realized gain on investments 303,361 281,149 115,703 214,112
Net change in unrealized
appreciation/depreciation of investments (15,128) (1,135,869) 540,255 (924,292)
----------- ---------- ---------- ----------
Net increase in net assets resulting from operations 2,511,019 1,402,185 2,492,593 959,400
----------- ---------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (1,979,157) (1,906,317) (1,347,305) (1,192,516)
Class B (216,405) (295,924) (292,412) (318,633)
Class C (48,786) (46,691) (209,645) (154,374)
----------- ---------- ---------- ----------
(2,244,348) (2,248,932) (1,849,362) (1,665,523)
----------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 4,941,535 5,521,827 5,392,754 6,845,055
Class B 352,151 440,239 741,742 2,122,381
Class C 314,340 649,304 1,644,889 3,223,917
Net asset value of shares issued upon
reinvestment of dividends and distributions:
Class A 964,654 934,595 765,710 697,048
Class B 144,771 176,563 165,234 174,625
Class C 42,892 39,136 134,610 89,992
----------- ---------- ---------- ----------
6,760,343 7,761,664 8,844,939 13,153,018
----------- ---------- ---------- ----------
Cost of shares repurchased:
Class A (4,404,290) (4,318,513) (5,169,155) (2,735,631)
Class B (3,044,211) (2,372,010) (1,909,275) (1,896,972)
Class C (362,148) (650,350) (926,472) (1,082,332)
----------- ---------- ---------- ----------
(7,810,649) (7,340,873) (8,004,902) (5,714,935)
----------- ---------- ---------- ----------
Increase (decrease) in net assets derived
from capital share transactions (1,050,306) 420,791 840,037 7,438,083
----------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS (783,635) (425,956) 1,483,268 6,731,960
NET ASSETS:
Beginning of period 52,688,650 53,114,606 43,555,320 36,823,360
----------- ---------- ---------- ----------
End of period(1) $51,905,015 $52,688,650 $45,038,588 $43,555,320
----------- ---------- ---------- ----------
(1) Including distributions in excess of
net investment income $ -- $ -- $ -- $ --
----------- ---------- ---------- ----------
See accompanying notes
18
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Missouri Insured Fund Class A
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.640 $10.810 $10.740 $10.340 $10.340
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.464 0.469 0.489 0.497 0.494
Net realized and unrealized gain (loss) on investments 0.065 (0.172) 0.068 0.400 --
-------- -------- -------- -------- --------
Total from investment operations 0.529 0.297 0.557 0.897 0.494
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.469) (0.467) (0.487) (0.497) (0.494)
-------- -------- -------- -------- --------
Total dividends and distributions (0.469) (0.467) (0.487) (0.497) (0.494)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $10.700 $10.640 $10.810 $10.740 $10.340
======== ======== ======== ======== ========
TOTAL RETURN(2) 5.06% 2.75% 5.38% 8.89% 4.99%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $45,745 $44,026 $42,610 $40,349 $38,314
Ratio of expenses to average net assets 0.94% 0.98% 0.97% 0.95% 1.03%
Ratio of net investment income to average net assets 4.33% 4.31% 4.61% 4.74% 4.88%
Portfolio turnover 20% 31% 23% 14% 1%
(1) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. The
effect of this change for the year ended August 31, 2002 was an increase in
net investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge.
See accompanying notes
19
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Missouri Insured Fund Class B
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.640 $10.810 $10.730 $10.340 $10.340
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.385 0.387 0.410 0.418 0.418
Net realized and unrealized gain (loss) on investments 0.054 (0.172) 0.078 0.390 --
-------- -------- -------- -------- --------
Total from investment operations 0.439 0.215 0.488 0.808 0.418
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.389) (0.385) (0.408) (0.418) (0.418)
-------- -------- -------- -------- --------
Total dividends and distributions (0.389) (0.385) (0.408) (0.418) (0.418)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $10.690 $10.640 $10.810 $10.730 $10.340
======== ======== ======== ======== ========
TOTAL RETURN(2) 4.19% 1.99% 4.70% 7.98% 4.21%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $4,903 $7,406 $9,264 $9,693 $10,053
Ratio of expenses to average net assets 1.69% 1.73% 1.72% 1.70% 1.78%
Ratio of net investment income to average net assets 3.58% 3.56% 3.86% 3.99% 4.13%
Portfolio turnover 20% 31% 23% 14% 1%
(1) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. The
effect of this change for the year ended August 31, 2002 was an increase in
net investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge.
See accompanying notes
20
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Missouri Insured Fund Class C
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.660 $10.820 $10.740 $10.350 $10.350
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.384 0.387 0.410 0.418 0.418
Net realized and unrealized gain (loss) on investments 0.054 (0.162) 0.078 0.390 --
-------- -------- -------- -------- --------
Total from investment operations 0.438 0.225 0.488 0.808 0.418
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.388) (0.385) (0.408) (0.418) (0.418)
-------- -------- -------- -------- --------
Total dividends and distributions (0.388) (0.385) (0.408) (0.418) (0.418)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $10.710 $10.660 $10.820 $10.740 $10.350
======== ======== ======== ======== ========
TOTAL RETURN(2) 4.17% 2.08% 4.68% 7.97% 4.20%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,257 $1,257 $1,241 $626 $343
Ratio of expenses to average net assets 1.69% 1.73% 1.72% 1.70% 1.78%
Ratio of net investment income to average net assets 3.58% 3.56% 3.86% 3.99% 4.13%
Portfolio turnover 20% 31% 23% 14% 1%
(1) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. The
effect of this change for the year ended August 31, 2002 was an increase in
net investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge.
See accompanying notes
21
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Oregon Insured Fund Class A
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.380 $10.530 $10.450 $9.910 $9.810
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.453 0.461 0.467 0.465 0.467
Net realized and unrealized gain (loss) on investments 0.163 (0.151) 0.079 0.540 0.100
-------- -------- -------- -------- --------
Total from investment operations 0.616 0.310 0.546 1.005 0.567
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.456) (0.460) (0.466) (0.465) (0.467)
-------- -------- -------- -------- --------
Total dividends and distributions (0.456) (0.460) (0.466) (0.465) (0.467)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $10.540 $10.380 $10.530 $10.450 $9.910
======== ======== ======== ======== ========
TOTAL RETURN(2) 6.04% 2.97% 5.41% 10.39% 6.04%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $30,817 $29,410 $25,082 $22,973 $22,712
Ratio of expenses to average net assets 0.85% 0.84% 0.85% 0.85% 0.85%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.90% 0.96% 1.00% 0.99% 1.01%
Ratio of net investment income to average net assets 4.30% 4.35% 4.52% 4.59% 4.85%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.25% 4.23% 4.37% 4.45% 4.69%
Portfolio turnover 16% 16% 20% 28% 0%
(1) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. The
effect of this change for the year ended August 31, 2002 was an increase in
net investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an increase in the ratio of
net investment income to average net assets of 0.01%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects waivers and payment of fees by the
manager. Performance would have been lower had the expense limitation not
been in effect.
See accompanying notes
22
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Oregon Insured Fund Class B
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.390 $10.540 $10.450 $9.910 $9.810
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.374 0.382 0.390 0.389 0.394
Net realized and unrealized gain (loss) on investments 0.163 (0.151) 0.089 0.540 0.100
-------- -------- -------- -------- --------
Total from investment operations 0.537 0.231 0.479 0.929 0.494
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.377) (0.381) (0.389) (0.389) (0.394)
-------- -------- -------- -------- --------
Total dividends and distributions (0.377) (0.381) (0.389) (0.389) (0.394)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $10.550 $10.390 $10.540 $10.450 $9.910
======== ======== ======== ======== ========
TOTAL RETURN(2) 5.24% 2.20% 4.73% 9.57% 5.24%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $7,878 $8,750 $8,489 $7,928 $7,484
Ratio of expenses to average net assets 1.60% 1.59% 1.60% 1.60% 1.60%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.65% 1.71% 1.75% 1.74% 1.76%
Ratio of net investment income to average net assets 3.55% 3.60% 3.77% 3.84% 4.10%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.50% 3.48% 3.62% 3.70% 3.94%
Portfolio turnover 16% 16% 20% 28% 0%
(1) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. The
effect of this change for the year ended August 31, 2002 was an increase in
net investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an increase in the ratio of
net investment income to average net assets of 0.01%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects waivers and payment of fees by the
manager. Performance would have been lower had the expense limitation not
been in effect.
See accompanying notes
23
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
Delaware Tax-Free Oregon Insured Fund Class C
Year Ended
8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00
NET ASSET VALUE, BEGINNING OF PERIOD $10.400 $10.550 $10.470 $9.920 $9.820
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.374 0.381 0.389 0.388 0.394
Net realized and unrealized gain (loss) on investments 0.173 (0.151) 0.079 0.550 0.100
-------- -------- -------- -------- --------
Total from investment operations 0.547 0.230 0.468 0.938 0.494
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.377) (0.380) (0.388) (0.388) (0.394)
-------- -------- -------- -------- --------
Total dividends and distributions (0.377) (0.380) (0.388) (0.388) (0.394)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $10.570 $10.400 $10.550 $10.470 $9.920
======== ======== ======== ======== ========
TOTAL RETURN(2) 5.33% 2.19% 4.62% 9.66% 5.24%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $6,344 $5,395 $3,253 $1,820 $1,609
Ratio of expenses to average net assets 1.60% 1.59% 1.60% 1.60% 1.60%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.65% 1.71% 1.75% 1.74% 1.76%
Ratio of net investment income to average net assets 3.55% 3.60% 3.77% 3.84% 4.10%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.50% 3.48% 3.62% 3.70% 3.94%
Portfolio turnover 16% 16% 20% 28% 0%
(1) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. The
effect of this change for the year ended August 31, 2002 was an increase in
net investment income per share of $0.001, a decrease in net realized and
unrealized gain (loss) per share of $0.001, and an increase in the ratio of
net investment income to average net assets of 0.01%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflect this change in accounting.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects waivers and payment of fees by the
manager. Performance would have been lower had the expense limitation not
been in effect.
See accompanying notes
24
NOTES August 31, 2004
TO FINANCIAL STATEMENTS
Voyageur Mutual Funds (the "Trust") 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 Investment Trust (the "Trust") is
organized as a Massachusetts business trust and offers five series: Delaware
Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware
Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund and
Delaware Tax-Free Oregon Insured Fund. These financial statements and the
related notes pertain to Delaware Tax-Free Idaho Fund, Delaware Tax-Free
Missouri Insured Fund, and Delaware Tax-Free Oregon Insured Fund (the "Fund" or
collectively as the "Funds"). The above Trusts are open-end investment
companies. The Funds are considered non-diversified under the Investment Company
Act of 1940, as amended. The Funds offer Class A, Class B and Class C shares.
Class A shares are sold with a front-end sales charge of up to 4.50%. Class B
shares are sold with a contingent deferred sales charge that declines from 4.00%
to zero depending upon the period of time the shares are held. Class B shares
will automatically convert to Class A shares on a quarterly basis approximately
eight years after purchase. Class C shares are sold with a contingent deferred
sales charge of 1%, if redeemed during the first 12 months.
The investment objective of Delaware Tax-Free Idaho Fund, Delaware Tax-Free
Missouri Insured Fund, and Delaware Tax-Free Oregon Insured Fund is to seek as
high a level of current income exempt from federal income tax and personal
income tax in their respective states, as is consistent with preservation of
capital.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of the Funds' Board of
Trustees.
Federal Income Taxes - Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting - Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates - The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and 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.
Through December 31, 2003, certain expenses of the Funds were 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 amount of these expenses for the year ended
August 31, 2004 were as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
Commission reimbursements $422 $358
Earnings credits 75 5
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee based on
each Fund's average daily net assets as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
On the first $500 million 0.50% 0.50%
On the next $500 million 0.475% 0.475%
On the next $1.5 billion 0.45% 0.45%
In excess of $2.5 billion 0.425% 0.425%
25
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs, and extraordinary expenses, do not
exceed specified percentages of average daily net assets through October 31,
2004, as shown below.
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
The operating expense limitation as a percentage
of average daily net assets (per annum) N/A 0.60%
Expiration date 10/31/04 10/31/04
Effective November 1, 2004, operating expense
limitation as a percentage of average
daily net assets (per annum) 0.65% 0.60%
Expiration date 10/31/05 10/31/05
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.
At August 31, 2004, each Fund had liabilities payable to affiliates as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
Investment management fee payable to DMC $6,951 $13,818
Dividend disbursing, transfer agent,
accounting and administration fees
and other expenses payable to DSC 4,628 3,541
Other expenses payable to DMC and affiliates* 1,288 1,075
* DMC, as part of its administrative services, pays operating expenses on
behalf of the Fund and is reimbursed on a periodic basis. Such expenses
include items such as printing of shareholder reports, fees for audit,
legal and tax services, registration fees and trustees' fees.
As provided in the investment management agreement, the Funds bear the cost of
certain legal services expenses, including in-house legal services provided to
the Funds by DMC employees. For the year ended August 31, 2004, the Funds had
costs as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
$2,415 $2,115
For the year ended August 31,2004, DDLP earned commissions on sales of Class A
shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
$4,824 $22,365
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. 3.
Investments For the year ended August 31, 2004, the Funds made purchases and
sales of investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
Purchases $10,512,030 $7,757,101
Sales 12,125,619 7,266,278
26
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
At August 31, 2004, the cost of investments and unrealized
appreciation/(depreciation) for federal income tax purposes for each Fund were
as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
Cost of investments $48,255,876 $42,193,172
=========== ===========
Aggregate unrealized appreciation $ 2,826,995 $ 2,392,566
Aggregate unrealized depreciation (65,038) (30,652)
----------- -----------
Net unrealized appreciation $ 2,761,957 $ 2,361,914
=========== ===========
4. DIVIDEND AND DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. The tax character of dividends and distributions
paid during the years ended August 31, 2004 and 2003 was as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
Year Ended Year Ended
8/31/04 8/31/03 8/31/04 8/31/03
Tax-exempt income $2,244,348 $2,248,932 $1,849,362 $1,665,523
As of August 31, 2004, the components of net assets on a tax basis were as
follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
Shares of beneficial interest $49,306,226 $ 42,972,660
Distribution in excess of tax-exempt income -- --
Capital loss carryforwards (163,168) (295,986)
Net unrealized appreciation of investments 2,761,957 2,361,914
------------ ------------
Net assets $ 51,905,015 $45,038,588
============ ============
For financial reporting purposes, capital accounts and distributions to
shareholders are adjusted to reflect the tax character of book/tax differences.
For the year ended August 31, 2004, the Funds recorded the following permanent
reclassifications. Reclassifications are primarily due to tax treatment of
market discount and premium on certain debt instruments and expiration of
capital loss carry forwards. Results of operations and net assets were not
affected by these reclassifications.
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
---------------------- --------------------
Undistributed net investment income $21,562 $12,727
Accumulated realized gain (loss) (21,562) 34,316
Paid-in capital -- (47,043)
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss carryforward
amounts will expire as follows:
Delaware Tax-Free Delaware Tax-Free
Year of expiration Missouri Insured Fund Oregon Insured Fund
-------------------- ---------------------- --------------------
2008 $163,168 $ --
2009 -- 217,063
2010 -- 78,923
-------- --------
Total $163,168 $295,986
======== ========
For the year ended August 31, 2004, each Fund had capital loss carryforwards
that were utilized as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
--------------------- -------------------
$304,354 $115,697
For the year ended August 31, 2004, the Delaware Tax-Free Oregon Insured Fund
had capital loss carryforwards that expired of $47,043.
27
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free
Missouri Insured Fund Oregon Insured Fund
------------------------ ------------------------
Year Year Year Year
Ended Ended Ended Ended
8/31/04 8/31/03 8/31/04 8/31/03
Shares sold:
Class A 460,103 506,831 511,034 644,131
Class B 33,006 40,296 70,440 199,885
Class C 29,155 59,018 157,187 303,936
Shares issued upon reinvestment of dividends
and distributions:
Class A 90,070 86,307 72,920 66,096
Class B 13,510 16,310 15,727 16,553
Class C 4,001 3,613 12,786 8,512
-------- -------- --------- ---------
629,845 712,375 840,094 1,239,113
-------- -------- --------- ---------
Shares repurchased:
Class A (410,533) (397,871) (493,915) (259,058)
Class B (284,201) (217,615) (181,823) (179,667)
Class C (33,776) (59,346) (88,193) (102,244)
-------- -------- --------- ---------
(728,510) (674,832) (763,931) (540,969)
-------- -------- --------- ---------
Net increase (decrease) (98,665) 37,543 76,163 698,144
======== ======== ========= =========
For the years ended August 31, 2004 and 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 above and the
Statements of Changes in Net Assets.
Year Ended Year Ended
8/31/04 8/31/03
Class B Shares Class A Shares Value Class B Shares Class A Shares Value
-------------- -------------- ------ -------------- -------------- ------
Delaware Tax-Free Missouri Insured Fund 197,551 197,405 2,118,117 126,971 126,971 1,389,281
Delaware Tax-Free Oregon Insured Fund 63,867 63,896 676,263 80,709 80,756 860,427
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 August 31, 2004 or at any time during the period.
7. CREDIT AND MARKET RISKS
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, regional or local economic conditions, and differing levels
of supply and demand for municipal bonds. Many municipalities insure repayment
for their obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that market value
may fluctuate for other reasons and there is no assurance that the insurance
company will meet its obligations. These securities have been identified in the
Statements of Net Assets.
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.
28
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
8. TAX INFORMATION (UNAUDITED)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2004, each Fund designates distributions
paid during the year as follows:
(A) (B) (C)
Long Term Ordinary Tax-
Capital Gains Income Exempt Total
Distributions Distributions Distributions Distributions
(Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis)
------------------ ---------------- ----------------- ----------------
Delaware Tax-Free Missouri Insured Fund -- -- 100% 100%
Delaware Tax-Free Oregon Insured Fund -- -- 100% 100%
(A), (B), and (C) are based on a percentage of each Fund's total distributions.
29
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
Voyageur Mutual Funds - Delaware Tax-Free Idaho Fund
Voyageur Investment Trust - Delaware Tax-Free Missouri
Insured Fund and Delaware Tax-Free Oregon
Insured Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Idaho Fund (one of the series constituting Voyageur Mutual Funds) and Delaware
Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund (two of
the series constituting Voyageur Investment Trust) (the "Funds") as of August
31, 2004, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of August 31, 2004, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Tax-Free Idaho Fund of Voyageur Mutual Funds and the Delaware Tax-Free
Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund of Voyageur
Investment Trust at August 31, 2004, the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended, and their financial highlights for each of the five years
in the period then ended in conformity with U.S. generally accepted accounting
principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 4, 2004
30
DELAWARE INVESTMENTS FAMILY OF FUNDS
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees/Directors which has oversight
responsibility for the management of a fund's business affairs.
Trustees/Directors establish procedures and oversee and review the performance
of the investment manager, the distributor and others that perform services for
the fund. The independent fund trustees, in particular, are advocates for
shareholder interests. The following is a list of the Trustees/Directors and
Officers with certain background and related information.
NUMBER OF OTHER
PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS
NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY
ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
JUDE T. DRISCOLL(2) Chairman and 4 Years - Since August 2000, 77 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 Trustee since at different times at
May 15, 2003 Delaware Investments(1)
March 10, 1963
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998 - August 2000)
Managing Director -
NationsBanc Capital Markets
(February 1996 - June 1998)
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
WALTER P. BABICH Trustee 16 Years Board Chairman - 94 None
2005 Market Street Citadel Constructors, Inc.
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
JOHN H. DURHAM Trustee 25 Years(3) Private Investor 94 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
JOHN A. FRY Trustee(4) 3 Years President - 77 Director -
2005 Market Street Franklin & Marshall College Community Health
Philadelphia, PA (June 2002 - Present) Systems
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
ANTHONY D. KNERR Trustee 11 Years Founder/Managing Director - 94 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
31
NUMBER OF OTHER
PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS
NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY
ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR
AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
ANN R. LEVEN Trustee 15 Years Treasurer/Chief Fiscal Officer - 94 Director and
2005 Market Street National Gallery of Art Audit Committee
Philadelphia, PA (1994 - 1999) Chairperson - Andy
19103 Warhol Foundation
Director -
Systemax Inc.
November 1, 1940
THOMAS F. MADISON Trustee 10 Years President/Chief 94 Director -
2005 Market Street Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993 - Present)
Director -
Digital River, Inc.
Director - Rimage
Corporation
JANET L. YEOMANS Trustee 5 Years Vice President/Mergers & 94 None
2005 Market Street Acquisitions - 3M Corporation
Philadelphia, PA (January 2003 - Present)
19103
Ms. Yeomans has held
July 31, 1948 various management
positions at 3M Corporation
since 1983.
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
JOSEPH H. HASTINGS Executive Executive Mr. Hastings has served in 94 None(5)
2005 Market Street Vice President Vice President various executive capacities
Philadelphia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments.
Officer Officer since
December 19,1949 August 21, 2003
RICHELLE S. MAESTRO Executive Vice President, Chief Legal Ms. Maestro has served in 94 None(5)
2005 Market Street Chief Legal Officer Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments.
November 26, 1957
MICHAEL P. BISHOF Senior Vice President 8 Years Mr. Bishof has served in 94 None(5)
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments.
August 18, 1962
(1) Delaware Investments is the marketing name for Delaware Management
Holdings, Inc. and its subsidiaries, including the Registrant's investment
advisor, principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
(5) Mr. Hastings, Mr. Bishof and Ms. Maestro also serve in similar capacities
for the six portfolios of the Optimum Fund Trust, which have the same
investment advisor, principal underwriter, and transfer agent as the
registrant.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees/Directors and Officers and is available, without
charge, upon request by calling 800 523-1918.
32
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This annual report is for the information of Delaware Tax-Free Idaho Fund,
Delaware Tax-Free Missouri Insured Fund, and Delaware Tax-Free Oregon Insured
Fund shareholders, but it may be used with prospective investors when preceded
or accompanied by a current prospectus for Delaware Tax-Free Idaho Fund,
Delaware Tax-Free Missouri Insured Fund, and Delaware Tax-Free Oregon Insured
Fund and the Delaware Investments Performance Update for the most recently
completed calendar quarter. The prospectus sets forth details about charges,
expenses, investment objectives, and operating policies of 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 Executive 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
- --------------------------------------------------------------------------------
Each Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund Forms N-Q, as well as a description of the policies and
procedures that each Fund uses to determine how to vote proxies (if any)
relating to portfolio securities is available without charge (i) upon request,
by calling 800 523-1918; (ii) on each Fund Web site at
http://www.delawareinvestments.com; and (iii) on the Commission's Web site at
http://www.sec.gov. Each Fund Forms N-Q may be reviewed and copied at the
Commission's Public Reference Room in Washington, DC; information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Information (if any) regarding how each Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through each Fund's Web site at
http://www.delawareinvestments.com; and (ii) on the Commission's Web site at
http://www.sec.gov.
- --------------------------------------------------------------------------------
(8924) Printed in the USA
AR-CORN [8/04] IVES 10/04 J9814
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on Delaware Investments' internet website at www.delawareinvestments.com. Any
amendments to the Code of Business Ethics, and information on any waiver from
its provisions granted by the registrant, will also be posted on this website
within five business days of such amendment or waiver and will remain on the
website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the registrant's
financial statements, or experience actively supervising one or more
persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or
experience in one or more positions that involve the performance of
similar functions;
b. Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant, auditor, or
person performing similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or
evaluation of financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that each
member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any committee thereof, accept directly or indirectly any consulting, advisory
or other compensatory fee from the issuer; or (ii) be an "interested person" of
the registrant as defined in Section 2(a)(19) of the Investment Company Act of
1940.
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Ann R. Leven
Thomas F. Madison
Janet L. Yeomans(1)
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the Registrant by its
independent auditors for the audit of the Registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $65,070 for
the fiscal year ended August 31, 2004.
The aggregate fees billed for services provided to the Registrant by its
independent auditors for the audit of the Registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $57,430 for
the fiscal year ended August 31, 2003.
(b) Audit-related fees.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the Registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended August 31, 2004.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the Registrant's investment adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $37,575 for the Registrant's fiscal
year ended August 31, 2004. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: issuance of
reports concerning transfer agent's system of internal accounting control
pursuant to Rule 17Ad-13 of the Securities Exchange Act; and issuance of agreed
upon procedures reports to the Fund's Board in connection with the annual
transfer agent and fund accounting service agent contract renewals and the
pass-through of internal legal cost relating to the operations of the Funds.
- --------
(1) The instructions to Form N-CSR require disclosure on the relevant experience
of persons who qualify as audit committee financial experts based on "other
relevant experience." The Board of Trustees/Directors has determined that Ms.
Yeomans qualifies as an audit committee financial expert by virtue of her
education and experience as the Treasurer of a large global corporation.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the Registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended August 31, 2003.
The aggregate fees billed by the Registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the Registrant's investment adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $39,600 for the Registrant's fiscal
year ended August 31, 2003. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These audit-related services were as follows: issuance of
reports concerning transfer agent's system of internal accounting control
pursuant to Rule 17Ad-13 of the Securities Exchange Act; and issuance of agreed
upon procedures reports to the Fund's Board in connection with the annual
transfer agent and fund accounting service agent contract renewals and the
pass-through of internal legal cost relating to the operations of the Funds.
(c) Tax fees.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant were $8,750 for the fiscal year
ended August 31, 2004. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and annual excise distribution calculations.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant's investment adviser(s) and
other service providers under common control with the adviser(s) and that relate
directly to the operations or financial reporting of the Registrant were $0 for
the Registrant's fiscal year ended August 31, 2004.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant were $6,250 for the fiscal year
ended August 31, 2003. The percentage of these fees relating to services
approved by the Registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and annual excise distribution calculations.
The aggregate fees billed by the Registrant's independent auditors for
tax-related services provided to the Registrant's adviser(s) and other service
providers under common control with the adviser(s) and that relate directly to
the operations or financial reporting of the Registrant were $0 for the
Registrant's fiscal year ended August 31, 2003.
(d) All other fees.
The aggregate fees billed for all services provided by the independent
auditors to the Registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended August 31, 2004.
The aggregate fees billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the Registrant's independent
auditors to the Registrant's adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $0 for the Registrant's fiscal year
ended August 31, 2004.
The aggregate fees billed for all services provided by the independent
auditors to the Registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended August 31, 2003.
The aggregate fees billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the Registrant's independent
auditors to the Registrant's adviser(s) and other service providers under common
control with the adviser(s) and that relate directly to the operations or
financial reporting of the Registrant were $0 for the Registrant's fiscal year
ended August 31, 2003.
(e) The Registrant's Audit Committee has not established pre-approval
policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the Registrant's independent
auditors for services rendered to the Registrant and to its investment
adviser(s) and other service providers under common control with the adviser(s)
were $221,565 and $177,750 for the Registrant's fiscal years ended August 31,
2004 and August 31, 2003, respectively.
(h) In connection with its selection of the independent auditors, the
Registrant's Audit Committee has considered the independent auditors' provision
of non-audit services to the Registrant's investment adviser(s) and other
service providers under common control with the adviser(s) that were not
required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.
The Audit Committee has determined that the independent auditors' provision of
these services is compatible with maintaining the auditors' independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Included as part of report to shareholders filed under Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company 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 (the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 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 INVESTMENT TRUST
Jude T. Driscoll
- ------------------------------------
By: Jude T. Driscoll
Title: Chairman
Date: November 16, 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: November 16, 2004
Joseph H. Hastings
- ------------------------------------
By: Joseph H. Hastings
Title: Chief Financial Officer
Date: November 16, 2004