UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4977
Exact name of registrant as specified in charter: Voyageur Insured Funds
Address of principal executive offices: 2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service: Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: August 31
Date of reporting period: February 28, 2005
Item 1. Reports to Stockholders
The Registrant's shareholder reports are combined with the shareholder
reports of other investment company registrants. This Form N-CSR pertains to the
Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured
Fund of the Registrant, information on which is included in the following
shareholder reports.
DELAWARE
INVESTMENTS(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
SEMIANNUAL REPORT FEBRUARY 28, 2005
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE ARIZONA INSURED FUND
[LOGO] POWERED BY RESEARCH.(SM)
TABLE
OF CONTENTS
- --------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES 1
- --------------------------------------------------------------------------------
SECTOR ALLOCATION 3
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 4
Statements of Operations 7
Statements of Changes in Net Assets 8
Financial Highlights 9
Notes to Financial Statements 12
- --------------------------------------------------------------------------------
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C) 2005 Delaware Distributors, L.P.
DISCLOSURE For the Period September 1, 2004 to February 28, 2005
OF FUND EXPENSES
As a shareholder of a fund, you incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments, reinvested dividends, or
other distributions; redemption fees; and exchange fees; and (2) ongoing costs,
including management fees; distribution and/or service (12b-1) fees; and other
fund expenses. The following examples are intended to help you understand your
ongoing costs (in dollars) of investing in a fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The Examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2004 to February 28,
2005.
ACTUAL EXPENSES
The first section of the tables shown, "Actual Fund Return," provides
information about actual account values and actual expenses. You may use the
information in this section of the table, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number in the first section under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the tables shown, "Hypothetical 5% Return," provides
information about hypothetical account values and hypothetical expenses based on
the 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 this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the 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 181/365 (to reflect the one-half year period).
1
DELAWARE TAX-FREE ARIZONA INSURED FUND(1)
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/04 to
9/1/04 2/28/05 Ratio 2/28/05
- ------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,028.70 0.82% $4.12
Class B 1,000.00 1,024.80 1.57% 7.88
Class C 1,000.00 1,024.80 1.57% 7.88
- ------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.73 0.82% $4.11
Class B 1,000.00 1,017.01 1.57% 7.85
Class C 1,000.00 1,017.01 1.57% 7.85
- ------------------------------------------------------------------------------------------------------------
(1) Effective November 1, 2004, The Fund's manager increased contractual
expense waivers in effect for the Fund, causing the expenses paid by the
Fund to decrease. Had the new expense waiver been in effect during the
period, the Fund's expense analysis would be as follows:
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/04 to
9/1/04 2/28/05 Ratio 2/28/05
- ------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,028.70 0.78% $3.92
Class B 1,000.00 1,024.80 1.53% 7.68
Class C 1,000.00 1,024.80 1.53% 7.68
- ------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.93 0.78% $3.91
Class B 1,000.00 1,017.21 1.53% 7.65
Class C 1,000.00 1,017.21 1.53% 7.65
- ------------------------------------------------------------------------------------------------------------
2
SECTOR ALLOCATION As of February 28, 2005
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 charts list each Fund's categories of portfolio holdings
as a percentage of total net assets and is provided in compliance with such
requirement.
DELAWARE TAX-FREE ARIZONA INSURED FUND
- -----------------------------------------------------------------------
PERCENTAGE
SECTOR OF NET ASSETS
- -----------------------------------------------------------------------
MUNICIPAL BONDS 98.28%
- -----------------------------------------------------------------------
Airport Revenue Bonds 10.92%
City General Obligation Bonds 0.77%
Convention Center/Auditorium/Hotel Revenue Bonds 2.67%
Dedicated Tax & Fees Revenue Bonds 3.04%
Escrowed to Maturity Bonds 0.64%
Higher Education Revenue Bonds 8.78%
Hospital Revenue Bonds 12.24%
Multifamily Housing Revenue Bonds 9.02%
Municipal Lease Revenue Bonds 12.31%
Political Subdivision General Obligation Bonds 1.10%
Pre-Refunded Bonds 10.89%
Public Power Revenue Bonds 3.11%
Public Utility District Revenue Bonds 3.80%
School District General Obligation Bonds 2.75%
School Districts 0.80%
Single Family Housing Revenue Bonds 0.18%
Territorial General Obligation Bonds 1.09%
Territorial Revenue Bonds 6.08%
Transportation Revenue Bonds 2.38%
Water & Sewer Revenue Bonds 5.71%
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS 0.20%
- -----------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 98.48%
- -----------------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.52%
- -----------------------------------------------------------------------
TOTAL NET ASSETS 100.00%
- -----------------------------------------------------------------------
3
STATEMENTS DELAWARE TAX-FREE ARIZONA INSURED FUND
OF NET ASSETS February 28, 2005 (Unaudited)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 98.28%
- --------------------------------------------------------------------------------
Airport Revenue Bonds - 10.92%
Phoenix Civic Improvement Corporation
Airport Revenue Series B
5.25% 7/1/32 (FGIC)(AMT) $9,300,000 $ 9,687,159
Tucson Airport Authority
5.35% 6/1/31 (AMBAC)(AMT) 5,000,000 5,217,550
----------
14,904,709
----------
City General Obligation Bonds - 0.77%
DC Ranch Community Facilities
5.00% 7/15/27 (AMBAC) 1,000,000 1,045,550
----------
1,045,550
----------
Convention Center/Auditorium/Hotel Revenue Bonds - 2.67%
Arizona Tourism & Sports Authority
Tax Revenue Multipurpose Stadium
Facilities Series A
5.00% 7/1/28 (MBIA) 2,500,000 2,608,075
5.00% 7/1/31 (MBIA) 1,000,000 1,038,980
----------
3,647,055
----------
Dedicated Tax & Fees Revenue Bonds - 3.04%
Phoenix Industrial Development Authority
Lease Revenue (Capitol Mall LLC II Project)
5.00% 9/15/28 (AMBAC) 4,000,000 4,142,760
----------
4,142,760
----------
Escrowed to Maturity Bonds - 0.64%
Maricopa County School District #14
(Creighton Elementary) Series C
6.50% 7/1/08 (FGIC) 455,000 509,332
Phoenix Street & Highway Revenue
6.50% 7/1/09 (AMBAC) 350,000 361,743
----------
871,075
----------
Higher Education Revenue Bonds - 8.78%
Arizona State Board of Regents Certificates
of Participation (University of Arizona
Main Campus) Series 2000 A1
5.125% 6/1/25 (AMBAC) 1,250,000 1,321,925
Arizona State University Certificates of
Participation (Research Infrastructure
Project) 5.00% 9/1/30 (AMBAC) 2,500,000 2,604,675
Glendale Industrial Development Authority
Educational Facilities
(American Graduate School International)
5.625% 7/1/20 (Connie Lee) 1,000,000 1,045,860
5.875% 7/1/15 (Connie Lee) 2,500,000 2,615,875
Mohave County Community College
6.00% 3/1/20 (MBIA) 1,000,000 1,121,740
South Campus Group Student Housing
Revenue (Arizona State University South
Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,107,170
University of Arizona Certificates of
Participation (University of Arizona
Parking and Student Housing)
5.75% 6/1/19 (AMBAC) 1,000,000 1,099,240
(University of Arizona Project) Series A
5.125% 6/1/21 (AMBAC) 1,000,000 1,068,000
----------
11,984,485
----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
- --------------------------------------------------------------------------------
Hospital Revenue Bonds - 12.24%
Maricopa County Industrial Development
Authority (Catholic Healthcare West)
Series A 5.50% 7/1/26 $1,000,000 $1,039,910
Mesa Industrial Development Authority
(Discovery Health Systems)
Series A 5.625% 1/1/29 (MBIA) 9,250,000 10,113,950
Phoenix Industrial Development
Authority Hospital Revenue
(John C. Lincoln Health)
Series B 5.75% 12/1/16 (Connie Lee) 4,110,000 4,477,393
Yavapai County Industrial Development
Authority (Yavapai Regional
Medical Center)
5.25% 8/1/21 (RADIAN) 1,000,000 1,064,330
----------
16,695,583
----------
Multifamily Housing Revenue Bonds - 9.02%
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Sly-Mar Apartments Projects)
6.10% 4/20/36 (GNMA) (AMT) 1,300,000 1,398,995
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Capital Mews Apartments)
5.70% 12/20/40 (GNMA) (AMT) 2,000,000 2,091,680
(Ventana Palms Apartments)
6.15% 10/1/29 (MBIA) 510,000 542,462
6.20% 10/1/34 (MBIA) 940,000 1,001,824
Pima County Industrial Development
Authority Multifamily Housing Revenue
(Columbus Village) Series A
6.00% 10/20/31 (GNMA) 1,150,000 1,157,659
6.05% 10/20/41 (GNMA) 1,520,000 1,530,093
Yuma Industrial Development Authority
Multifamily Revenue Series A
(Regency Apartments)
5.50% 12/20/32 (GNMA) 2,000,000 2,004,300
6.10% 9/20/19 (GNMA) (AMT) 2,340,000 2,583,195
----------
12,310,208
----------
Municipal Lease Revenue Bonds - 12.31%
Arizona School Facilities Board
Certificates of Participation Series A
5.00% 9/1/18 (FGIC) 1,000,000 1,075,580
Maricopa County Industrial Development
Authority Correctional Facilities
(Phoenix West Prison)
5.375% 7/1/22 (ACA) 250,000 260,203
Phoenix Industrial Development Authority
Lease Revenue (Capitol Mall LLC Project)
5.50% 9/15/27 (AMBAC) 5,000,000 5,450,149
Pinal County Certificates of Participation
5.125% 6/1/21 (AMBAC) 4,675,000 4,992,058
Salt River Project Arizona Agricultural
Improvement & Power District
Certificates of Participation
5.00% 12/1/18 (MBIA) 2,500,000 2,676,350
University of Arizona Certificates of
Participation Series B
5.00% 6/1/31 (AMBAC) 2,250,000 2,332,238
----------
16,786,578
----------
4
STATEMENTS DELAWARE TAX-FREE ARIZONA INSURED FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
- --------------------------------------------------------------------------------
Political Subdivision General Obligation Bonds - 1.10%
Phoenix Variable Purpose Series B
5.00% 7/1/27 $1,435,000 $1,498,040
----------
1,498,040
----------
*Pre-Refunded Bonds - 10.89%
Maricopa County School District #3
(Tempe Elementary) Series E
5.70% 7/1/16-09 (FGIC) 1,025,000 1,149,620
Oro Valley Common Trust Funds Partnership
5.75% 7/1/17-06 (MBIA) 1,000,000 1,052,590
Puerto Rico Commonwealth Public
Improvement 5.125% 7/1/30-11 (FSA) 770,000 852,806
Puerto Rico Commonwealth Public
Improvement Series A
5.00% 7/1/27-12 1,000,000 1,106,220
5.125% 7/1/31-11 1,205,000 1,334,586
Puerto Rico Public Buildings Authority
Series D 5.25% 7/1/27-12 730,000 807,314
Southern Arizona Capital Facilities Finance
(University of Arizona Project)
5.10% 9/1/33 (MBIA) 2,650,000 2,946,694
Surprise Municipal Property Excise
Tax Revenue 5.70% 7/1/20-09 (FGIC) 5,000,000 5,607,899
----------
14,857,729
----------
Public Power Revenue Bonds - 3.11%
Energy Management Services
(Arizona State University - Main Campus)
5.25% 7/1/17 (MBIA) 1,500,000 1,649,730
Salt River Project Arizona Agricultural
Improvement & Power District Electric
System Revenue (Salt River Project)
Series A 5.00% 1/1/31 500,000 518,845
Series B 5.00% 1/1/31 (MBIA) 2,000,000 2,075,380
----------
4,243,955
----------
Public Utility District Revenue Bonds - 3.80%
Maricopa County Pollution Control
(Palo Verde Project) Series A
5.05% 5/1/29 (AMBAC) 5,000,000 5,190,650
----------
5,190,650
----------
School District General Obligation Bonds - 2.75%
Cochise County Unified School District #68
7.50% 7/1/10 (FGIC) 1,000,000 1,207,620
Maricopa County School District #14
(Creighton School Improvement Project
of 1990) Series C 6.50% 7/1/08 (FGIC) 545,000 608,231
Maricopa County School District #38
(Madison Elementary)
5.00% 7/1/14 (FSA) 1,750,000 1,934,782
----------
3,750,633
----------
School Districts - 0.80%
Coconino County United School District #8
(Aid Revenue) 5.00% 7/1/15 (MBIA) 1,000,000 1,097,280
----------
1,097,280
----------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
- --------------------------------------------------------------------------------
Single Family Housing Revenue Bonds - 0.18%
Pima County Industrial Development
Authority Single Family Housing
Revenue B-1 6.10% 5/1/31
(GNMA) (AMT) $ 240,000 $ 250,944
-----------
250,944
-----------
Territorial General Obligation Bonds - 1.09%
Puerto Rico Commonwealth Refunding
Public Improvements Series A
5.50% 7/1/19 1,300,000 1,481,363
-----------
1,481,363
-----------
Territorial Revenue Bonds - 6.08%
Puerto Rico Commonwealth Public
Improvement (Unrefunded Balance)
5.125% 7/1/30 (FSA) 480,000 506,875
Puerto Rico Commonwealth Public
Improvement Series A 5.125% 7/1/31 2,370,000 2,456,079
Puerto Rico Electric Power Authority
Power Revenue
Series NN 5.00% 7/1/32 (MBIA) 1,750,000 1,830,010
Series OO 5.00% 7/1/13 (CIFG) 1,500,000 1,654,065
Puerto Rico Public Buildings Authority
Revenue (Government Facilities) Series I
5.25% 7/1/33 500,000 531,055
Puerto Rico Public Buildings Authority
Revenue (Unrefunded Balance) Series D
5.25% 7/1/27 270,000 286,335
Virgin Islands Public Finance Authority
(Gross Receipts Taxes)
5.00% 10/1/31 (ACA) 1,000,000 1,029,530
-----------
8,293,949
-----------
Transportation Revenue Bonds - 2.38%
Arizona State Transportation Board
Highway Revenue Series A
5.00% 7/1/23 1,000,000 1,064,820
Arizona State Transportation Board
Highway Revenue Series B
5.25% 7/1/21 1,000,000 1,092,290
5.25% 7/1/22 1,000,000 1,088,340
-----------
3,245,450
-----------
Water & Sewer Revenue Bonds - 5.71%
Gilbert Water Municipal Property
Wastewater System & Utility Revenue
4.90% 4/1/19 750,000 748,455
Glendale Water & Sewer Revenue
5.00% 7/1/28 (AMBAC) 2,000,000 2,087,880
Phoenix Civic Improvement Corporation
Wastewater Systems Revenue Junior Lien
5.00% 7/1/24 (FGIC) 1,000,000 1,042,100
5.00% 7/1/26 (FGIC) 3,750,000 3,917,175
-----------
7,795,610
-----------
TOTAL MUNICIPAL BONDS
(cost $125,910,517) 134,093,606
-----------
5
STATEMENTS DELAWARE TAX-FREE ARIZONA INSURED FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.20%
- --------------------------------------------------------------------------------
Federated Arizona Municipal Cash Trust 268,518 $ 268,518
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $268,518) 268,518
------------
TOTAL MARKET VALUE OF SECURITIES - 98.48%
(cost $126,179,035) 134,362,124
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.52% 2,075,867
------------
NET ASSETS APPLICABLE TO 11,882,916 SHARES
OUTSTANDING - 100.00% $136,437,991
============
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund
Class A ($117,030,910 / 10,194,407 Shares) $11.48
------
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund
Class B ($12,911,815 / 1,123,900 Shares) $11.49
------
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund
Class C ($6,495,266 / 564,609 Shares) $11.50
------
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005:
Shares of beneficial interest
(unlimited authorization - no par) $128,123,551
Undistributed net investment income 7,314
Accumulated net realized gain on investments 124,037
Net unrealized appreciation of investments 8,183,089
------------
Total net assets $136,437,991
============
* Pre-Refunded Bonds are municipals that are generally backed or secured by
U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is
followed by the year in which the bond is pre-refunded.
SUMMARY OF ABBREVIATIONS:
ACA - Insured by American Capital Access
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
CIFG - Insured by CDC IXIS Financial Guaranty
Connie Lee - Insured by the College Construction Insurance Association
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 ARIZONA INSURED FUND
Net asset value Class A (A) $11.48
Sales charge (4.50% of offering price) (B) 0.54
------
Offering price $12.02
------
(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
6
STATEMENTS
OF OPERATIONS Six Months Ended February 28, 2005 (Unaudited)
Delaware
Tax-Free Arizona
Insured Fund
INVESTMENT INCOME:
Interest $ 3,349,192
-----------
EXPENSES:
Management fees 342,866
Distribution expenses -- Class A 147,421
Distribution expenses -- Class B 64,869
Distribution expenses -- Class C 32,796
Legal and professional fees 8,013
Reports and statements to shareholders 12,183
Registration fees 7,360
Dividend disbursement and transfer agent fees and expenses 36,660
Accounting and administration expenses 22,811
Custodian fees 3,673
Trustees' fees 2,689
Other 3,167
-----------
684,508
Less expenses absorbed or waived (44,765)
Less expenses paid indirectly (110)
-----------
Total expenses 639,633
-----------
NET INVESTMENT INCOME 2,709,559
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 151,646
Net change in unrealized appreciation/depreciation
of investments 980,831
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,132,477
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,842,036
===========
See accompanying notes
7
STATEMENTS
OF CHANGES IN NET ASSETS
Delaware Tax-Free
Arizona Insured Fund
Six Months Year
Ended Ended
2/28/05 8/31/04
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 2,709,559 $ 6,003,395
Net realized gain (loss) on investments 151,646 336,166
Net change in unrealized appreciation/depreciation of investments 980,831 3,703,965
------------- -------------
Net increase in net assets resulting from operations 3,842,036 10,043,526
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (2,387,781)
Class B (213,852) (474,572)
Class C (107,926) (251,768)
Net realized gain on investments:
Class A (248,176) (670,678)
Class B (27,489) (74,157)
Class C (13,869) (40,949)
------------- -------------
(2,999,093) (6,789,179)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 2,368,889 8,836,672
Class B 242,894 1,082,105
Class C 360,689 1,206,593
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 1,323,454 3,027,025
Class B 130,854 294,483
Class C 87,565 230,858
------------- -------------
4,514,345 14,677,736
------------- -------------
Cost of shares repurchased:
Class A (9,817,799) (21,886,157)
Class B (897,872) (3,007,102)
Class C (645,298) (3,490,073)
------------- -------------
(11,360,969) (28,383,332)
------------- -------------
Decrease in net assets derived from capital share transactions (6,846,624) (13,705,596)
------------- -------------
NET DECREASE IN NET ASSETS (6,003,681) (10,451,249)
NET ASSETS:
Beginning of period 142,441,672 152,892,921
------------- -------------
End of period(1) $ 136,437,991 $ 142,441,672
============= =============
(1) Including undistributed (distributions in excess of) net investment income $ 7,314 $ 7,314
============= =============
See accompanying notes
8
FINANCIAL
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------------------
DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.410 $11.160 $11.530 $11.500 $11.040 $10.990
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.231 0.469 0.502 0.510 0.521 0.525
Net realized and unrealized gain (loss) on investments 0.094 0.308 (0.253) 0.100 0.460 0.050
------- ------- ------- ------- ------- -------
Total from investment operations 0.325 0.777 0.249 0.610 0.981 0.575
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.231) (0.469) (0.502) (0.510) (0.521) (0.525)
Net realized gain on investments (0.024) (0.058) (0.117) (0.070) -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.255) (0.527) (0.619) (0.580) (0.521) (0.525)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.480 $11.410 $11.160 $11.530 $11.500 $11.040
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.87% 7.09% 2.17% 5.54% 9.12% 5.47%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $117,031 $122,436 $129,683 $141,424 $141,298 $142,018
Ratio of expenses to average net assets 0.82% 0.90% 0.86% 0.90% 0.95% 0.95%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 0.89% 0.90% 0.91% 0.90% 0.97% 0.98%
Ratio of net investment income to average net assets 4.05% 4.14% 4.37% 4.50% 4.65% 4.88%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.98% 4.14% 4.32% 4.50% 4.63% 4.85%
Portfolio turnover 5% 19% 29% 46% 45% 50%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects waivers and payment of fees by the
manager, as applicable. Performance would have been lower had the expense
limitation not been in effect.
(3) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. This
change in accounting had no impact for the year ended August 31, 2002. Per
share data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
9
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------------------
DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.420 $11.170 $11.540 $11.500 $11.040 $10.990
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.188 0.384 0.416 0.426 0.437 0.444
Net realized and unrealized gain (loss) on investments 0.094 0.308 (0.253) 0.110 0.460 0.050
------- ------- ------- ------- ------- -------
Total from investment operations 0.282 0.692 0.163 0.536 0.897 0.494
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.188) (0.384) (0.416) (0.426) (0.437) (0.444)
Net realized gain on investments (0.024) (0.058) (0.117) (0.070) -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.212) (0.442) (0.533) (0.496) (0.437) (0.444)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.490 $11.420 $11.170 $11.540 $11.500 $11.040
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.48% 6.28% 1.41% 4.83% 8.31% 4.68%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $12,912 $13,355 $14,666 $13,678 $8,864 $6,630
Ratio of expenses to average net assets 1.57% 1.65% 1.61% 1.65% 1.70% 1.70%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.64% 1.65% 1.66% 1.65% 1.72% 1.73%
Ratio of net investment income to average net assets 3.30% 3.39% 3.62% 3.75% 3.90% 4.13%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.23% 3.39% 3.57% 3.75% 3.88% 4.10%
Portfolio turnover 5% 19% 29% 46% 45% 50%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects waivers and payment of fees by the
manager, as applicable. Performance would have been lower had the expense
limitation not been in effect.
(3) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. This
change in accounting had no impact for the year ended August 31, 2002. Per
share data and ratios for periods prior to September 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
10
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
- -----------------------------------------------------------------------------------------------------------------------------------
DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.430 $11.180 $11.550 $11.520 $11.040 $10.990
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.188 0.384 0.415 0.426 0.438 0.444
Net realized and unrealized gain (loss) on investments 0.094 0.308 (0.253) 0.100 0.480 0.050
------- ------- ------- ------- ------- -------
Total from investment operations 0.282 0.692 0.162 0.526 0.918 0.494
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.188) (0.384) (0.415) (0.426) (0.438) (0.444)
Net realized gain on investments (0.024) (0.058) (0.117) (0.070) -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.212) (0.442) (0.532) (0.496) (0.438) (0.444)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.500 $11.430 $11.180 $11.550 $11.520 $11.040
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.48% 6.27% 1.40% 4.73% 8.50% 4.68%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $6,495 $6,651 $8,544 $8,115 $3,230 $1,322
Ratio of expenses to average net assets 1.57% 1.65% 1.61% 1.65% 1.70% 1.70%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.64% 1.65% 1.66% 1.65% 1.72% 1.73%
Ratio of net investment income to average net assets 3.30% 3.39% 3.62% 3.75% 3.90% 4.13%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 3.23% 3.39% 3.57% 3.75% 3.88% 4.10%
Portfolio turnover 5% 19% 29% 46% 45% 50%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects waivers and payment of fees by the
manager, as applicable. Performance would have been lower had the expense
limitation not been in effect.
(3) As required, effective September 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies that
require amortization of all premiums and discounts on debt securities. This
change in accounting had no impact for the year ended August 31, 2002. Per
share data and ratios for periods prior toSeptember 1, 2001 have not been
restated to reflect this change in accounting.
See accompanying notes
11
NOTES
TO FINANCIAL STATEMENTS February 28, 2005 (Unaudited)
Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust
and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free
California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield
Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund and
Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is
organized as a Delaware statutory trust and offers two series: Delaware Tax-Free
Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur
Investment Trust (the "Trust") is organized as a Massachusetts statutory trust
and offers five series: Delaware Tax-Free California Insured Fund, Delaware
Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Tax-Free
Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund. Voyageur Mutual
Funds II (the "Trust") is organized as a Delaware statutory trust and offers one
series: Delaware Tax-Free Colorado Fund. These financial statements and related
footnotes pertain to Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona
Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California
Insured Fund and Delaware Tax-Free Colorado Fund (each a "Fund" and,
collectively, the "Funds"). The above Trusts are open-end investment companies.
The Funds are considered non-diversified under the Investment Company Act of
1940, as amended. The Funds offer Class A, Class B, and Class C shares. Class A
shares are sold with a front-end sales charge of up to 4.50%. Class B shares are
sold with a contingent deferred sales charge that declines from 4% to zero
depending upon the period of time the shares are held. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately eight
years after purchase. Class C shares are sold with a contingent deferred sales
charge of 1%, if redeemed during the first 12 months.
The investment objective of Delaware Tax-Free Arizona Fund, Delaware Tax-Free
Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free
California Insured Fund and Delaware Tax-Free Colorado Fund is to seek as high a
level of current income exempt from federal income tax and personal income tax
in their respective states, as is consistent with preservation of capital.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with 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 some 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.
The Funds receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included custodian fees on the Statements of
Operations with the corresponding expense offset shown as "expense paid
indirectly". The amount of this expense for the six months ended February 28,
2005 was as follows:
Delaware
Tax-Free Arizona
Insured Fund
---------------
Earnings credits $110
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee based on
each Fund's average daily net assets as follows:
Delaware
Tax-Free Arizona
Insured Fund
----------------
On the first $500 million 0.500%
On the next $500 million 0.475%
On the next $1.5 billion 0.450%
In excess of $2.5 billion 0.425%
12
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, as shown below.
Delaware
Tax-Free Arizona
Insured Fund
---------------
Operating expense limitation as a percentage
of average daily net assets (per annum) 0.70%
Expiration date 10/31/04
Effective November 1, 2004 operating
expense limitation as a percentage of
average daily net assets (per annum) 0.53%
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 disbursing and transfer agent
services.
Pursuant to a distribution agreement and distribution plan, each Fund pays
Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an
annual distribution and service fee not to exceed 0.25% of the average daily net
assets of the Class A shares and 1.00% of the average daily net assets of the
Class B and C shares.
At February 28, 2005, each Fund had liabilities payable to affiliates as
follows:
Delaware
Tax-Free Arizona
Insured Fund
---------------
Investment management fees payable
to (recievable from) DMC $36,843
Dividend disbursing, transfer agent,
accounting, and administration fees,
and other expenses payable to DSC 11,113
Other expenses payable to DMC
and affiliates* 46,868
* 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 internal legal services provided to
the Funds by DMC employees. For the six months ended February 28, 2005, the
Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Insured Fund was
charged $548 and $822, respectively, for internal legal services provided by
DMC.
For the six months ended February 28, 2005, DDLP earned commissions on
sales of Class A shares for each Fund as follows:
Delaware
Tax-Free Arizona
Insured Fund
---------------
$1,002
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the
Trusts. These officers and/or trustees are paid no compensation by the Funds.
3. INVESTMENTS
For the six months ended February 28, 2005, the Funds made purchases and sales
of investment securities as follows:
Delaware
Tax-Free Arizona
Insured Fund
---------------
Purchases other than short-term investments $3,389,325
Sales other than short-term investments 6,478,828
13
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
At February 28, 2005, the cost of investments for federal income tax purposes
has been estimated since the final tax characteristics cannot be determined
until fiscal year end. At February 28, 2005, the cost of investments and
unrealized appreciation (depreciation) for each Fund were as follows:
Delaware
Tax-Free Arizona
Insured Fund
----------------
Cost of investments $126,179,035
============
Aggregate unrealized appreciation $ 8,395,021
Aggregate unrealized depreciation (211,932)
------------
Net unrealized appreciation $ 8,183,089
============
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 six months ended February 28, 2005 and the year ended August 31,
2004 was as follows:
Delaware Tax-Free
Arizona Insured Fund
Six Months Year
Ended Ended
2/28/05* 8/31/04
-----------------------------
Tax-exempt income $2,709,559 $6,206,615
Long-term capital gain 289,534 582,564
---------- ----------
Total $2,999,093 $6,789,179
========== ==========
* Tax information for the period ended February 28, 2005, is an estimate and the
tax character of dividends and distributions may be redesignated at the fiscal
year end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of February 28, 2005, the
estimated components of net assets on a tax basis were as follows:
Delaware
Tax-Free Arizona
Insured Fund
---------------
Shares of beneficial interest $128,123,551
Undistributed ordinary income 17,917
Undistributed tax-exempt income 7,314
Undistributed long-term capital gains (losses) 106,120
Capital loss carryforwards --
Unrealized appreciation of investments 8,183,089
------------
Net assets $136,437,991
============
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. For the six months ended
February 28, 2005, the Funds recorded an estimate of these differences since the
final tax characteristics cannot be determined until fiscal year end.
Reclassifications are primarily due to tax treatment of market discount and
premium on certain debt instruments. Results of operations and net assets were
not affected by these reclassifications.
14
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Delaware Tax-Free
Arizona Insured Fund
-----------------------
Six Months Year
Ended Ended
2/28/05 8/31/04
Shares sold:
Class A 206,343 778,110
Class B 21,207 95,417
Class C 31,370 105,384
Shares issued upon reinvestments
of dividends and distributions:
Class A 115,393 266,257
Class B 11,401 25,870
Class C 7,618 20,248
-------- ---------
393,332 1,291,286
-------- ---------
Shares repurchased:
Class A (857,919) (1,933,973)
Class B (78,300) (264,924)
Class C (56,090) (308,011)
-------- ---------
(992,309) (2,506,908)
-------- ---------
Net decrease (598,977) (1,215,622)
-------- ---------
15
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
For the six months ended February 28, 2005 and the year ended August 31, 2004,
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 Statement of Changes in Net Assets.
Six Months Ended Year Ended
2/28/05 8/31/04
-------------------------------- --------------------------------
Class B Class A Class B Class A
shares shares Amount shares shares Amount
Delaware Tax-Free Arizona Insured Fund 10,423 10,432 119,470 45,338 45,373 516,109
6. PROXY RESULTS
The shareholders of Voyageur Mutual Funds, Voyageur Insured Funds, Voyageur
Investment Trust and Voyageur Mutual Funds II (each, a "Trust") voted on the
following proposals (as applicable) at the special meeting of shareholders on
March 23, 2005 or as adjourned. The description of each proposal and number of
shares voted are as follows:
1. To elect a Board of Trustees for each of the Trusts.
VOYAGEUR INSURED FUNDS
-----------------------------------------
SHARES VOTED
SHARES VOTED FOR WITHHELD AUTHORITY
- ----------------------------------------------------------------------------
Thomas L. Bennett 25,076,354.183 602,982.118
- ----------------------------------------------------------------------------
Jude T. Driscoll 25,120,168.869 559,167.432
- ----------------------------------------------------------------------------
John A. Fry 25,085,403.645 593,932.656
- ----------------------------------------------------------------------------
Anthony D. Knerr 25,066,460.446 612,875.855
- ----------------------------------------------------------------------------
Lucinda S. Landreth 25,124,950.648 554,385.653
- ----------------------------------------------------------------------------
Ann R. Leven 25,085,383.078 593,953.223
- ----------------------------------------------------------------------------
Thomas F. Madison 25,067,669.009 611,667.292
- ----------------------------------------------------------------------------
Janet L. Yeomans 25,123,301.246 556,035.055
- ----------------------------------------------------------------------------
J. Richard Zecher 25,055,313.488 624,022.813
- ----------------------------------------------------------------------------
16
NOTES
TO FINANCIAL STATEMENTS (CONTINUED)
2. To approve the use of a "manager of managers" structure whereby the
investment manager of the funds of each Trust will be able to hire and replace
subadvisers without shareholder approval.
For Against Abstain
---- ------- -------
Delaware Tax-Free Arizona Insured Fund 6,190,221.176 309,262.809 454,358.291
7. FUND MERGERS
The net assets of Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free
California Fund prior to the Reorganizations were $134,516,467.57 and
$46,891,286.79, respectively.
8. LINE OF CREDIT
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $183,100,000 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 February 28, 2005, or at any time during
the period.
9. 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.
10. 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.
17
DELAWARE
INVESTMENTS(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual report is for the information of Delaware Tax-Free Arizona Fund,
Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund,
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
JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER
Chairman Senior Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA NATIONAL DISTRIBUTOR
THOMAS L. BENNETT Delaware Distributors, L.P.
Private Investor RICHELLE S. MAESTRO Philadelphia, PA
Rosemont, PA Executive Vice President,
Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND
JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT
President Philadelphia, PA Delaware Service Company, Inc.
Franklin & Marshall College 2005 Market Street
Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094
Senior Vice President and Treasurer
ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS
Managing Director Philadelphia, PA 800 523-1918
Anthony Knerr & Associates
New York, NY FOR SECURITIES DEALERS AND FINANCIAL
INSTITUTIONS REPRESENTATIVES ONLY
LUCINDA S. LANDRETH 800 362-7500
Former Chief Investment Officer
Assurant, Inc. WEB SITE
Philadelphia, PA www.delawareinvestments.com
ANN R. LEVEN
Former Treasurer/Chief Fiscal Officer
National Gallery of Art
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
JANET L. YEOMANS
Vice President/Mergers & Acquisitions
3M Corporation
St. Paul, MN
J. RICHARD ZECHER
Founder
Investor Analytics
Scottsdale, AZ
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
(9269) Printed in the USA
SA-WEST [2/05] IVES 4/05 J10087
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
FIXED INCOME
SEMIANNUAL REPORT FEBRUARY 28, 2005
- --------------------------------------------------------------------------------
DELAWARE TAX-FREE MINNESOTA INSURED FUND
[LOGO]
POWERED BY RESEARCH.(SM)
TABLE
OF CONTENTS
- -----------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES 1
- -----------------------------------------------------------------
SECTOR ALLOCATION 2
- -----------------------------------------------------------------
FINANCIAL STATEMENTS:
Statements of Net Assets 3
Statements of Operations 6
Statements of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 11
- -----------------------------------------------------------------
Funds are not FDIC insured and are not guaranteed. It is possible to lose
the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a
series of Delaware Management Business Trust, which is a registered
investment advisor.
(C) 2005 Delaware Distributors, L.P.
DISCLOSURE For the Period September 1, 2004 to February 28, 2005
OF FUND EXPENSES
As a shareholder of a fund, you incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments, reinvested dividends, or
other distributions; redemption fees; and exchange fees; and (2) ongoing costs,
including management fees; distribution and/or service (12b-1) fees; and other
fund expenses. The following examples are intended to help you understand your
ongoing costs (in dollars) of investing in a fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period September 1, 2004 to February 28,
2005.
ACTUAL EXPENSES
The first section of the tables shown, "Actual Fund Return," provides
information about actual account values and actual expenses. You may use the
information in this section of the table, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by $1,000
= 8.6), then multiply the result by the number in the first section under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the tables shown, "Hypothetical 5% Return," provides
information about hypothetical account values and hypothetical expenses based on
the 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 this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the 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 table assume reinvestment of all dividends and
distributions. In each case, "Expenses Paid During Period" are equal to the
Fund's annualized expense ratio, multiplied by the average account value over
the period, multiplied by 181/365 (to reflect the one-half year period).
DELAWARE TAX-FREE MINNESOTA INSURED FUND
EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 9/1/04 to
9/1/04 2/28/05 Ratio 2/28/04
- -------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,025.00 0.89% $4.47
Class B 1,000.00 1,021.30 1.64% 8.22
Class C 1,000.00 1,021.20 1.64% 8.22
- -------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (5% return before expenses)
Class A $1,000.00 $1,020.38 0.89% $4.46
Class B 1,000.00 1,016.66 1.64% 8.20
Class C 1,000.00 1,016.66 1.64% 8.20
- -------------------------------------------------------------------------------------------------------------------
1
SECTOR ALLOCATION As of February 28, 2005
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 lists each Fund's categories of portfolio holdings
as a percentage of total net assets and is provided in compliance with such
requirement.
DELAWARE TAX-FREE MINNESOTA INSURED FUND
PERCENTAGE
SECTOR OF NET ASSETS
- ------------------------------------------------------------------------
MUNICIPAL BONDS 93.49%
- ------------------------------------------------------------------------
Airport Revenue Bonds 4.48%
Corporate Backed Revenue Bonds 0.72%
Escrowed to Maturity Bonds 14.97%
Higher Education Revenue Bonds 3.89%
Hospital Revenue Bonds 18.80%
Miscellaneous Revenue Bonds 0.84%
Multifamily Housing Revenue Bonds 6.72%
Municipal Lease Revenue Bonds 4.99%
Political Subdivision General Obligation Bonds 1.24%
Pre-Refunded Bonds 2.84%
Public Power Revenue Bonds 9.32%
School District General Obligation Bonds 19.35%
Single Family Housing Revenue Bonds 0.25%
State General Obligation Bonds 2.33%
Territorial Revenue Bonds 2.75%
- ------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 5.70%
- ------------------------------------------------------------------------
Money Market 4.99%
Variable Rate Demand Notes 0.71%
- ------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES 99.19%
- ------------------------------------------------------------------------
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.81%
- ------------------------------------------------------------------------
TOTAL NET ASSETS 100.00%
- ------------------------------------------------------------------------
2
STATEMENTS DELAWARE TAX-FREE MINNESOTA INSURED FUND
OF NET ASSETS February 28, 2005 (Unaudited)
Principal Market
Amount Value
MUNICIPAL BONDS - 93.49%
Airport Revenue Bonds - 4.48%
Minneapolis/St. Paul Metropolitan
Airports Commission Revenue
Series A 5.00% 1/1/22 (MBIA) $ 2,000,000 $ 2,115,020
Series A 5.125% 1/1/25 (FGIC) 100,000 103,873
Series C 5.125% 1/1/20 (FGIC) 2,000,000 2,135,400
Series C 5.25% 1/1/32 (FGIC) 6,595,000 6,954,230
-----------
11,308,523
-----------
Corporate Backed Revenue Bonds - 0.72%
Sartell Environmental Improvement
Revenue (International Paper)
Series A 5.20% 6/1/27 1,800,000 1,822,140
-----------
1,822,140
-----------
Escrowed to Maturity Bonds - 14.97%
Dakota/Washington Counties Housing &
Redevelopment Authority Anoka
Single Family Residential Mortgage
Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 13,151,520
Dakota/Washington Counties Housing &
Redevelopment Authority Bloomington
Single Family Residential
Mortgage Revenue
8.15% 9/1/16 (MBIA) (GNMA) (AMT) 405,000 562,966
8.375% 9/1/21 (GNMA) (FHA)(AMT) 14,115,000 21,068,190
Western Minnesota Municipal Power
Agency Supply Revenue Series A
6.60% 1/1/10 2,000,000 2,203,400
9.75% 1/1/16 (MBIA) 530,000 800,311
-----------
37,786,387
-----------
Higher Education Revenue Bonds - 3.89%
Minnesota State Colleges & Universities
Revenue Series A 5.00% 10/1/22 (FSA) 5,135,000 5,445,051
Minnesota State Higher Education
Facilities Authority Revenue
(St. Catherine College)
Series 5-N1 5.00% 10/1/18 2,200,000 2,286,482
St. Cloud Housing & Redevelopment
Authority Revenue (State University
Foundation Project) 5.00% 5/1/23 2,000,000 2,095,220
-----------
9,826,753
-----------
Hospital Revenue Bonds - 18.80%
Duluth Economic Development Authority
Health Care Facilities (Benedictine
Health System) 5.25% 2/15/28 8,500,000 8,752,705
Minneapolis Health Care System Revenue
(Allina Health Systems)
Series A 5.75% 11/15/32 7,800,000 8,285,784
(Fairview Health Services)
Series A 5.625% 5/15/32 5,400,000 5,710,608
Minneapolis/St. Paul Housing &
Redevelopment Authority Health
Care Systems Revenue
5.00% 11/15/13 (AMBAC) 6,490,000 6,569,567
5.625% 12/1/22 650,000 685,783
5.875% 12/1/29 1,000,000 1,057,430
Minnesota Agricultural & Economic
Development Health Care System
(Fairview Hospital) Series 97A
5.75% 11/15/26 (MBIA) 10,250,000 11,120,225
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Hospital Revenue Bonds (continued)
St. Louis Park Health Care
Facilities Revenue
(Park Nicollet Health Services)
Series B 5.50% 7/1/25 $ 2,000,000 $ 2,105,040
St. Paul Housing & Redevelopment
Authority Hospital Revenue
(St. Paul/Ramsey Medical Center Project)
5.50% 5/15/13 (AMBAC) 1,000,000 1,006,520
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 1,000,000 1,062,570
5.00% 2/1/25 (FSA) 1,000,000 1,053,150
-----------
47,409,382
-----------
Miscellaneous Revenue Bonds - 0.84%
Minneapolis Community Development
Agency Supported Series G-3
5.45% 12/1/31 2,000,000 2,110,940
-----------
2,110,940
-----------
Multifamily Housing Revenue Bonds - 6.72%
Chaska Waters Edge Multifamily Revenue
Series A 7.30% 1/20/30 (GNMA) 3,257,000 3,424,768
Eagan Multifamily Revenue
(Woodridge Apartments)
5.90% 8/1/20 (GNMA) 1,000,000 1,049,850
Hopkins Multifamily Revenue
(Auburn Apartments Project)
Series A 8.05% 6/20/31 (GNMA) 3,790,000 4,015,581
Minneapolis Multifamily Housing Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,543,020
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 4,000,000 4,085,839
Minneapolis/St. Paul Housing Finance
Board Revenue (Trinity Apartments)
Series A 8.125% 12/1/14)
(GNMA) (FHA) (AMT) 10,000 10,006
Minnesota State Housing Finance Agency
Rental Housing Revenue Series C-2
5.95% 2/1/15 (AMBAC) 1,692,000 1,727,989
White Bear Lake Multifamily Revenue
(Lake Square) Series A
5.875% 2/1/15 (FHA) 1,055,000 1,101,684
-----------
16,958,737
-----------
Municipal Lease Revenue Bonds - 4.99%
Hopkins Housing & Redevelopment
Authority Public Works and Fire Station
Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,280,918
Minneapolis Special School District #001
Series A
5.00% 2/1/18 (FSA) 1,545,000 1,657,399
5.00% 2/1/19 (FSA) 1,535,000 1,645,704
5.00% 2/1/20 (FSA) 1,690,000 1,803,923
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.125% 12/1/27 2,000,000 2,114,600
5.25% 12/1/27 3,840,000 4,092,326
-----------
12,594,870
-----------
3
STATEMENTS DELAWARE TAX-FREE MINNESOTA INSURED FUND
OF NET ASSETS (CONTINUED)
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
Political Subdivision General Obligation Bonds - 1.24%
Dakota County Community Development
Agency Governmental Housing
Development 5.00% 1/1/21 $ 1,275,000 $ 1,348,248
Western Lake Superior Sanitation
District Series A
6.00% 10/1/08 (MBIA) (AMT) 400,000 407,768
6.10% 10/1/09 (MBIA) (AMT) 425,000 433,742
6.20% 10/1/10 (MBIA) (AMT) 450,000 459,509
6.20% 10/1/11 (MBIA) (AMT) 475,000 484,472
-----------
3,133,739
-----------
*Pre-Refunded Bonds - 2.84%
+Minneapolis/St. Paul Housing &
Redevelopment Authority Health
Care Systems (Children's Health Care)
Series A 5.50% 8/15/25-05 (FSA) 2,250,000 2,328,615
Southern Minnesota Municipal Power
Agency Supply Revenue Series A
5.75% 1/1/18-05 3,790,000 4,116,091
5.75% 1/1/18-05 (AMBAC) 670,000 727,647
-----------
7,172,353
-----------
Public Power Revenue Bonds - 9.32%
Minnesota State Municipal Power Agency
Series A 5.00% 10/1/34 2,000,000 2,053,580
+Northern Municipal Power Agency Electric
System Revenue, Inverse Floater ROLS
Series II-R-32 8.496% 1/1/13 (FSA) 4,585,000 5,468,713
Shakopee Public Utilities Commission
Public Utilities Revenue
5.125% 2/1/26 (MBIA) 1,850,000 1,944,054
+Southern Minnesota Municipal Power
Agency Supply System Revenue,
Inverse Floater ROLs Series II-R-189
5.308% 1/1/16 (AMBAC) 5,000,000 5,636,700
Southern Minnesota Municipal Power
Agency Supply Revenue Series A
5.25% 1/1/15 (AMBAC) 1,500,000 1,689,600
5.25% 1/1/16 (AMBAC) 5,000,000 5,636,700
Western Minnesota Municipal Power Agency
Series B 5.00% 1/1/15 (MBIA) 1,000,000 1,099,010
-----------
23,528,357
-----------
School District General Obligation Bonds - 19.35%
Big Lake Independent School
District #727 Series A
5.00% 2/1/17 (FSA) 1,040,000 1,112,166
5.00% 2/1/20 (FSA) 1,000,000 1,054,330
Centennial Independent School
District #012 Series A
5.00% 2/1/18 (FSA) 1,270,000 1,362,393
Lakeville Independent School
District 194-A 4.75% 2/1/22 (FSA) 2,350,000 2,438,689
Morris Independent School
District #769 5.00% 2/1/24 (MBIA) 4,875,000 5,138,785
Principal Market
Amount Value
MUNICIPAL BONDS (continued)
School District General Obligation Bonds (continued)
Mounds View Independent School
District #621
5.00% 2/1/20 (MBIA) $ 2,970,000 $ 3,170,208
5.375% 2/1/24 (FGIC) 6,170,000 6,811,124
Osseo Independent School District #279
Series A 5.00% 2/1/21 (FSA) 3,570,000 3,796,624
Robbinsdale Independent School
District #281 5.00% 2/1/21 (FSA) 1,310,000 1,393,159
+Rockford Independent School
District #883, Inverse Floater ROLS
Series II-R-30-B 9.206% 2/1/21 (FSA) 1,605,000 1,916,563
++Rosemount Independent School
District #196 Series B
5.80% 4/1/09 (FSA) 1,860,000 1,636,056
5.85% 4/1/10 (FSA) 2,240,000 1,889,507
++Sauk Rapids Independent School
District #047 Series B
5.983% 2/1/15 (FSA) 2,700,000 1,700,541
6.083% 2/1/17 (FSA) 2,245,000 1,251,408
+South Washington County Independent
School District #833, Inverse Floater ROLS
9.206% 2/1/20 (MBIA) 3,440,000 4,107,773
9.206% 2/1/21 (MBIA) 3,645,000 4,352,567
St. Michael Independent School
District #885
5.00% 2/1/20 (FSA) 1,970,000 2,102,798
5.00% 2/1/27 (FSA) 3,435,000 3,574,461
------------
48,809,152
------------
Single Family Housing Revenue Bonds - 0.25%
Dakota County Housing & Redevelopment
Authority Single Family
Mortgage Revenue
5.85% 10/1/30 (GNMA) (FNMA) (AMT) 561,000 576,316
6.70% 10/1/17 (FNMA) 55,000 56,202
------------
632,518
------------
State General Obligation Bonds - 2.33%
Minnesota State 5.00% 11/1/20 (FSA) 5,500,000 5,868,500
------------
5,868,500
------------
Territorial Revenue Bonds - 2.75%
Puerto Rico Electric Power Authority
Power Revenue
Series GG 4.75% 7/1/21 (FSA) 1,000,000 1,031,310
Series OO 5.00% 7/1/13 (CIFG) 3,640,000 4,013,864
Virgin Islands Public Finance Authority
5.25% 10/1/22 1,785,000 1,900,454
------------
6,945,628
------------
TOTAL MUNICIPAL BONDS
(cost $217,995,536) 235,907,979
------------
4
STATEMENTS DELAWARE TAX-FREE MINNESOTA INSURED FUND
OF NET ASSETS (CONTINUED)
Number of / Principal
Shares / Amount
SHORT TERM INVESTMENTS - 5.70%
Money Market -- 4.99%
Federated Minnesota Municipal
Cash Trust 12,600,000 $ 12,600,000
------------
12,600,000
------------
^Variable Rate Demand Notes - 0.71%
Minneapolis Library 1.72% 12/1/32
(SPA, Dexia Credit Local) $ 1,800,000 1,800,000
------------
1,800,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $14,400,000) 14,400,000
------------
TOTAL MARKET VALUE OF SECURITIES - 99.19%
(cost $232,395,536) 250,307,979
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.81% 2,035,723
------------
NET ASSETS APPLICABLE TO 22,904,995 SHARES
OUTSTANDING - 100.00% $252,343,702
============
Net Asset Value -- Delaware Tax-Free
Minnesota Insured Fund Class A
($225,565,943 / 20,474,995 Shares) $11.02
------
Net Asset Value -- Delaware Tax-Free
Minnesota Insured Fund Class B
($13,718,238 / 1,246,272 Shares) $11.01
------
Net Asset Value -- Delaware Tax-Free
Minnesota Insured Fund Class C
($13,059,521 / 1,183,728 Shares) $11.03
-------
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005:
Shares of beneficial interest
(unlimited authorization -- no par) $234,128,281
Distributions in excess of net investment income (7,427)
Accumulated net realized gain on investments 310,405
Net unrealized appreciation of investments 17,912,443
------------
Total net assets $252,343,702
============
*Pre-Refunded Bonds are municipals that are generally backed or secured by
U.S. Treasury Bonds. For Pre-Refunded Bonds, the stated maturity is followed
by the year in which the bond is pre-refunded.
^Variable Rate Notes. The interest rate shown is the rate as of February 28,
2005.
+An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates.
Interest rate disclosed is in effect as of February 28, 2005.
++Zero coupon bond. The interest rate shown is the yield at the time of
purchase.
SUMMARY OF ABBREVIATIONS:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
CIFG - Insured by CDC IXIS Financial Guaranty
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
ROLs - Residual Option Longs
SPA - Stand-by Purchase Agreement
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE TAX-FREE MINNESOTA INSURED FUND
Net asset value Class A (A) $11.02
Sales charge (4.50% of offering price) (B) 0.52
------
Offering price $11.54
======
(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
5
STATEMENTS DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
OF OPERATIONS Six Months Ended February 28, 2005 (Unaudited)
Delaware
Tax-Free Minnesota
Insured Fund
INVESTMENT INCOME:
Interest $6,279,770
----------
EXPENSES:
Management fees 625,557
Distribution expenses -- Class A 280,328
Distribution expenses -- Class B 69,713
Distribution expenses -- Class C 62,150
Dividend disbursing and transfer agent fees and expenses 69,565
Reports and statements to shareholders 34,967
Accounting and administration expenses 41,610
Legal and professional fees 22,351
Registration fees 8,909
Custodian fees 6,827
Trustees' fees 7,081
Pricing fees 3,619
Other 900
----------
1,233,577
Less expenses absorbed or waived (16,601)
Less waived distribution expenses -- Class A --
Less expense paid indirectly (647)
----------
Total expenses 1,216,329
----------
NET INVESTMENT INCOME 5,063,441
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (47,269)
Net change in unrealized appreciation/depreciation
of investments 1,133,212
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,085,943
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,149,384
==========
See accompanying notes
6
STATEMENTS DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
OF CHANGES IN NET ASSETS
Delaware Tax-Free Minnesota
Insured Fund
Six Months Year
Ended Ended
2/28/05 8/31/04
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,063,441 $ 11,137,835
Net realized gain (loss) on investments (47,269) 1,800,275
Net change in unrealized appreciation/depreciation of investments 1,133,212 4,773,712
------------ ------------
Net increase in net assets resulting from operations 6,149,384 17,711,822
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income:
Class A (4,599,354) (10,192,697)
Class B (233,968) (544,393)
Class C (207,827) (438,367)
Net realized gain on investments:
Class A (1,001,478) --
Class B (62,572) --
Class C (55,205) --
------------ ------------
(6,160,404) (11,175,457)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 6,724,239 12,638,625
Class B 143,538 1,540,115
Class C 1,612,845 2,017,231
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 3,898,114 6,622,620
Class B 237,885 408,614
Class C 182,390 290,080
------------ ------------
12,799,011 23,517,285
------------ ------------
Cost of shares repurchased:
Class A (12,064,164) (29,823,120)
Class B (980,373) (3,681,102)
Class C (762,605) (2,538,003)
------------ ------------
(13,807,142) (36,042,225)
------------ ------------
Increase (decrease) in net assets derived from capital share transactions (1,008,131) (12,524,940)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (1,019,151) (5,988,575)
NET ASSETS:
Beginning of period 253,362,853 259,351,428
------------ ------------
End of period(1) $252,343,702 $253,362,853
============ ============
(1)Undistributed (distributions in excess of) net investment income ($7,427) --
See accompanying notes
7
FINANCIAL
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.020 $10.740 $10.940 $10.900 $10.480 $10.520
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.226 0.479 0.498 0.514 0.514 0.507
Net realized and unrealized gain (loss) on investments 0.048 0.282 (0.197) 0.038 0.421 (0.041)
------- ------- ------- ------- ------- -------
Total from investment operations 0.274 0.761 0.301 0.552 0.935 0.466
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.225) (0.481) (0.501) (0.512) (0.515) (0.506)
Net realized gain on investments (0.049) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.274) (0.481) (0.501) (0.512) (0.515) (0.506)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.020 $11.020 $10.740 $10.940 $10.900 $10.480
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.50% 7.20% 2.75% 5.25% 9.14% 4.63%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $225,566 $227,018 $231,738 $239,763 $242,716 $238,486
Ratio of expenses to average net assets 0.89% 0.89% 0.93% 0.96% 0.90% 1.00%
Ratio of expenses to average net assets prior to expense
limitation and expense paid indirectly 0.90% 0.89% 0.93% 0.96% 0.90% 1.01%
Ratio of net investment income to average net assets 4.12% 4.37% 4.52% 4.78% 4.82% 4.93%
Ratio of net investment income to average net assets prior
to expense limitation and expense paid indirectly 4.11% 4.37% 4.52% 4.78% 4.82% 4.92%
Portfolio turnover 9% 15% 30% 15% 7% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(3) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
See accompanying notes
8
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.010 $10.730 $10.940 $10.890 $10.470 $10.510
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.185 0.397 0.415 0.433 0.434 0.431
Net realized and unrealized gain (loss) on investments 0.048 0.282 (0.207) 0.048 0.422 (0.042)
------- ------- ------- ------- ------- -------
Total from investment operations 0.233 0.679 0.208 0.481 0.856 0.389
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.184) (0.399) (0.418) (0.431) (0.436) (0.429)
Net realized gain on investments (0.049) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.233) (0.399) (0.418) (0.431) (0.436) (0.429)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.010 $11.010 $10.730 $10.940 $10.890 $10.470
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.13% 6.41% 1.89% 4.56% 8.34% 3.86%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $13,718 $14,317 $15,647 $14,341 $12,732 $10,491
Ratio of expenses to average net assets 1.64% 1.64% 1.68% 1.71% 1.65% 1.75%
Ratio of expenses to average net assets prior to expense
limitation and expense paid indirectly 1.65% 1.64% 1.68% 1.71% 1.65% 1.76%
Ratio of net investment income to average net assets 3.37% 3.62% 3.77% 4.03% 4.07% 4.18%
Ratio of net investment income to average net assets prior
to expense limitation and expense paid indirectly 3.36% 3.62% 3.77% 4.03% 4.07% 4.17%
Portfolio turnover 9% 15% 30% 15% 7% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(3) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
See accompanying notes
9
FINANCIAL
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $11.030 $10.750 $10.950 $10.910 $10.480 $10.520
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.185 0.396 0.414 0.433 0.434 0.431
Net realized and unrealized gain (loss) on investments 0.048 0.282 (0.197) 0.038 0.432 (0.042)
------- ------- ------- ------- ------- -------
Total from investment operations 0.233 0.678 0.217 0.471 0.866 0.389
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.184) (0.398) (0.417) (0.431) (0.436) (0.429)
Net realized gain on investments (0.049) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.233) (0.398) (0.417) (0.431) (0.436) (0.429)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.030 $11.030 $10.750 $10.950 $10.910 $10.480
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.12% 6.39% 1.97% 4.46% 8.42% 3.85%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $13,060 $12,028 $11,966 $6,083 $4,265 $3,615
Ratio of expenses to average net assets 1.64% 1.64% 1.68% 1.71% 1.65% 1.75%
Ratio of expenses to average net assets prior to expense
limitation and expense paid indirectly 1.65% 1.64% 1.68% 1.71% 1.65% 1.76%
Ratio of net investment income to average net assets 3.37% 3.62% 3.77% 4.03% 4.07% 4.18%
Ratio of net investment income to average net assets prior
to expense limitation and expense paid indirectly 3.36% 3.62% 3.77% 4.03% 4.07% 4.17%
Portfolio turnover 9% 15% 30% 15% 7% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects waivers and payment of fees by the manager, as
applicable. Performance would have been lower had the expense limitation not
been in effect.
(3) As required, effective September 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that required
amortization of all premiums and discounts on debt securities. The effect of
these changes for the year ended August 31, 2002 was an increase in net
investment income per share of $0.002, a decrease in net realized and
unrealized gain (loss) per share of $0.002, and an increase in the ratio of
net investment income to average net assets of 0.02%. Per share data and
ratios for periods prior to September 1, 2001 have not been restated to
reflected this change in accounting.
See accompanying notes
10
NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
TO FINANCIAL STATEMENTS February 28, 2005 (Unaudited)
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 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 Tax
Free Funds (the "Trust") is organized as a Delaware statutory trust and offers
the Delaware Tax-Free Minnesota Fund. Voyageur Intermediate Tax Free Funds (the
"Trust") is organized as a Delaware statutory trust and offers the Delaware
Tax-Free Minnesota Intermediate Fund. These financial statements and related
notes pertain to Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota
Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and Delaware
Minnesota High-Yield Municipal Bond Fund (each referred to as a "Fund" or,
collectively, the "Funds"). The above Trusts are open-end investment companies.
The Funds are considered non-diversified under the Investment Company Act of
1940, as amended, and offer Class A, Class B, and Class C shares. Class A shares
are sold with a front-end sales charge of up to 4.50% for Delaware Tax-Free
Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota
High-Yield Municipal Bond Fund and up to 2.75% for Delaware Tax-Free Minnesota
Intermediate Fund. Class B shares are sold with a contingent deferred sales
charge that declines from 4% to zero for Delaware Tax-Free Minnesota Fund,
Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield
Municipal Bond Fund and that declines from 2% to zero for Delaware Tax-Free
Minnesota Intermediate Fund, depending upon the period of time the shares are
held. Class B shares will automatically convert to Class A shares on a quarterly
basis approximately eight years after purchase for Delaware Tax-Free Minnesota
Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield
Municipal Bond Fund and approximately five years after purchase for Delaware
Tax-Free Minnesota Intermediate Fund. Class C shares are sold with a contingent
deferred sales charge of 1%, if redeemed during the first 12 months.
The investment objective of Delaware Tax-Free Minnesota Fund and Delaware
Tax-Free Minnesota Insured Fund is to seek as high a level of current income
exempt from federal income tax and from the Minnesota state personal income tax,
as is consistent with preservation of capital.
The investment objective of Delaware Tax-Free Minnesota Intermediate Fund is to
seek to provide investors with preservation of capital and, secondarily, current
income exempt from federal income tax and from the Minnesota state personal
income tax, by maintaining a dollar-weighted average effective portfolio
maturity of 10 years or less.
The investment objective of Delaware Minnesota High-Yield Municipal Bond Fund is
to seek as high a level of current income exempt from federal income tax and
from the Minnesota state personal income tax, primarily through investment in
medium- and lower-grade municipal obligations.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation -- Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of each Fund's Board of
Trustees. In determining whether market quotations are readily available or fair
valuation will be used, various factors will be taken into consideration, such
as market closures, or with respect to foreign securities, aftermarket trading
or significant events after local market trading (e.g., government actions or
pronouncements, trading volume or volatility on markets, exchanges among
dealers, or news events).
Federal Income Taxes -- Each Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Funds on the basis of "settled shares" of each class in relation
to the net assets of the Funds. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates -- The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and some other expenses are paid monthly. Security transactions
are recorded on the date the securities are purchased or sold (trade date).
Costs used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Interest income is
recorded on the accrual basis. Discounts and premiums are amortized to interest
income over the lives of the respective securities. Each Fund declares dividends
daily from net investment income and pays such dividends monthly and declares
and pays distributions from net realized gain on investments, if any, annually.
The Funds receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in custodian fees on the Statements of
Operations with the corresponding expense offset shown as "expense paid
indirectly." The amount of this expense for the six months ended February 28,
2005 were as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Earnings credits $647
11
NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee based on
each Fund's average daily net assets as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
On the first $500 million 0.500%
On the next $500 million 0.475%
On the next $1.5 billion 0.450%
In excess of $2.5 billion 0.425%
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed specified percentages of average daily net assets as shown below:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
The operating expense limitation
as a percentage of average daily
net assets (per annum) 0.75%
Expiration date 10/31/04
Effective November 1, 2004,
the operating expense limitation
as a percentage of average daily
net assets (per annum) 0.64%
Expiration date 12/29/05
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 for all Funds. DDLP has contracted to waive distribution
and service fees through December 29, 2005 in order to prevent distribution and
service fees of Class A from exceeding 0.15% of the average daily net assets for
Delaware Tax-Free Minnesota Intermediate Fund.
At February 28, 2005, the Funds had liabilities payable to affiliates as
follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Investment management
fee payable to DMC $84,063
Dividend disbursing,
transfer agent fees,
accounting and administration fees
and other expenses payable to DSC 20,614
Other expenses payable to
DMC and affiliates* 75,833
*DMC, as part of its administrative services, pays operating expenses on behalf
of each Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax
services, registration fees and trustees' fees.
As provided in the investment management agreement, each Fund bears the cost of
certain legal services expenses, including internal legal services provided to
each Fund by DMC employees. For the six months ended February 28, 2005, each
Fund was charged internal legal services provided by DMC as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
$6,964
12
NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
For the six months ended February 28, 2005, DDLP earned commissions on sales of
Class A shares for each Fund as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
$23,685
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 six months ended February 28, 2005, the Funds made purchases
and sales of investment securities other than short-term investments as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Purchases $10,642,758
Sales 21,051,270
At February 28, 2005, the cost of investments for federal income tax purposes
has been estimated since the final tax characteristics cannot be determined
until fiscal year end. At February 28, 2005, the cost of investments and
unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Cost of investments $232,037,862
============
Aggregate unrealized appreciation $ 18,344,882
Aggregate unrealized depreciation (74,765)
------------
Net unrealized appreciation $ 18,270,117
============
4. DIVIDEND AND DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. Additionally, net short-term gains on sales of
investment securities are treated as ordinary income for federal income tax
purposes. The tax character of dividends and distributions paid during the six
months ended February 28, 2005 and the year ended August 31, 2004 was as
follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
SIX MONTHS ENDED 2/28/05*
------------------------
Tax-exempt income $ 5,041,149
Long-term capital gain 1,119,255
-----------
Total $ 6,160,404
===========
YEAR ENDED 8/31/04
------------------
Tax-exempt income $11,175,457
Ordinary income --
Long-term capital gain --
-----------
Total $11,175,457
===========
*Tax information for the six months ended February 28, 2005 is an estimate and
the tax character of dividends and distributions may be redesignated at the
fiscal year end.
13
NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
4. DIVIDEND AND DISTRIBUTION INFORMATION (CONTINUED)
The components of net assets are estimated since the final tax characteristics
cannot be determined until fiscal year end. As of February 28, 2005, the
estimated components of net assets on a tax basis were as follows:
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Shares of beneficial interest $234,128,281
Undistributed tax-exempt income --
Distributions in excess of ordinary income (7,427)
Undistributed long-term capital gain --
Net realized capital loss on investments (47,269)
Capital loss carryforwards --
Unrealized appreciation of investments 18,270,117
------------
Net assets $252,343,702
============
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. For the six months ended
February 28, 2005, each Fund recorded an estimate of these differences since the
final tax characteristics cannot be determined until fiscal year end.
Reclassifications are primarily due to tax treatment of market discounts and
premiums on certain debt instruments. Results of operations and net assets were
not affected by these reclassifications.
Delaware Tax-Free
Minnesota
Insured Fund
-----------------
Undistributed net investment
income (loss) $(29,719)
Accumulated realized gain (loss) 29,719
14
NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Delaware Tax-Free
Minnesota Insured Fund
Six Months Year
Ended Ended
2/28/05 8/31/04
Shares sold:
Class A 608,844 1,150,773
Class B 13,002 140,969
Class C 145,904 184,070
Shares issued upon reinvestment
of dividends and distributions:
Class A 353,154 604,266
Class B 21,568 37,314
Class C 16,497 26,432
---------- ----------
1,158,969 2,143,824
---------- ----------
Shares repurchased:
Class A (1,093,797) (2,725,207)
Class B (88,907) (335,649)
Class C (69,011) (232,963)
---------- ----------
(1,251,715) (3,293,819)
---------- ----------
Net increase (decrease) (92,746) (1,149,995)
========== ==========
For the six months ended February 28, 2005 and the year ended August 31, 2004,
the following shares and values were converted from Class B to Class A shares.
The respective amounts are included in Class B redemptions and Class A
subscriptions in the tables above and the Statements of Changes in Net Assets.
Six Months Ended Year Ended
2/28/05 8/31/04
------------------------------- -------------------------------
Class B Class A Class B Class A
shares shares Value shares shares Value
------ ------ ----- ------ ------ -----
Delaware Tax-Free Minnesota Insured Fund 36,494 36,461 402,222 174,818 174,712 1,927,930
15
NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
6. PROXY RESULTS
The shareholders of Voyageur Mutual Funds, Voyageur Insured Funds, Voyageur Tax
Free Funds and Voyageur Intermediate Tax Free Funds (each, the "Trust") voted on
the following proposals (as applicable) at the special meeting of shareholders
on March 23, 2005 or as adjourned. The description of each proposal and number
of shares voted are as follows:
1. To elect a Board of Trustees for each of the Trusts.
VOYAGEUR INSURED FUNDS
------------------------------------
SHARES VOTED
SHARES VOTED FOR WITHHELD AUTHORITY
- -------------------------------------------------------------------------
Thomas L. Bennett 25,076,354.183 602,982.118
- -------------------------------------------------------------------------
Jude T. Driscoll 25,120,168.869 559,167.432
- -------------------------------------------------------------------------
John A. Fry 25,085,403.645 593,932.656
- -------------------------------------------------------------------------
Anthony D. Knerr 25,066,460.446 612,875.855
- -------------------------------------------------------------------------
Lucinda S. Landreth 25,124,950.648 554,385.653
- -------------------------------------------------------------------------
Ann R. Leven 25,085,383.078 593,953.223
- -------------------------------------------------------------------------
Thomas F. Madison 25,067,669.009 611,667.292
- -------------------------------------------------------------------------
Janet L. Yeomans 25,123,301.246 556,035.055
- -------------------------------------------------------------------------
J. Richard Zecher 25,055,313.488 624,022.813
- -------------------------------------------------------------------------
2. To approve the use of a "manager of managers" structure whereby the
investment manager of the funds of each Trust will be able to hire and replace
subadvisers without shareholder approval.
FOR AGAINST ABSTAIN
--- ------- -------
Delaware Tax-Free Minnesota Insured Fund 12,436,002.703 779,176.132 763,621.190
16
NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS
TO FINANCIAL STATEMENTS (CONTINUED)
7. LINE OF CREDIT
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $183,100,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding as of February 28, 2005 or at any time during
the period.
8. CREDIT AND MARKET RISK
The Funds concentrate their investments in securities issued by municipalities,
mainly in Minnesota. The value of these investments may be adversely affected by
new legislation within the 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.
9. CONTRACTUAL OBLIGATIONS
The Funds enter into contracts in the normal course of business that contain a
variety of indemnifications. The Funds' maximum exposure under these
arrangements is unknown. However, the Funds have not had prior claims or losses
pursuant to these contracts. Management has reviewed each Fund's existing
contracts and expects the risk of loss to be remote.
17
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual report is for the information of Delaware Tax-Free Minnesota
Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota
Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Tax-Free Minnesota Fund,
Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota
Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund and the
Delaware Investments Performance Update for the most recently completed calendar
quarter. The prospectus sets forth details about charges, expenses, investment
objectives, and operating policies for each Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in each Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION
JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER
Chairman Senior Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA NATIONAL DISTRIBUTOR
THOMAS L. BENNETT Delaware Distributors, L.P.
Private Investor RICHELLE S. MAESTRO Philadelphia, PA
Rosemont, PA Executive Vice President,
Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND
JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT
President Philadelphia, PA Delaware Service Company, Inc.
Franklin & Marshall College 2005 Market Street
Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094
Senior Vice President and Treasurer
ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS
Managing Director Philadelphia, PA 800 523-1918
Anthony Knerr & Associates
New York, NY FOR SECURITIES DEALERS AND FINANCIAL
INSTITUTIONS REPRESENTATIVES ONLY
LUCINDA S. LANDRETH 800 362-7500
Former Chief Investment Officer
Assurant, Inc. WEB SITE
Philadelphia, PA www.delawareinvestments.com
ANN R. LEVEN
Former Treasurer/Chief Fiscal Officer
National Gallery of Art
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
JANET L. YEOMANS
Vice President/Mergers & Acquisitions
3M Corporation
St. Paul, MN
J. RICHARD ZECHER
Founder
Investor Analytics
Scottsdale, AZ
- --------------------------------------------------------------------------------
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 the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
800 523-1918; (ii) on 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 the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's Web site at
http://www.delawareinvestments.com; and (ii) on the Commission's Web site at
http://www.sec.gov.
- --------------------------------------------------------------------------------
(9720) Printed in the USA
SA-MNALL [2/05] IVES 4/05 J10079
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Included as part of report to shareholders filed under Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal control
over financial reporting that occurred during the second fiscal quarter of the
period covered by the report to stockholders included herein (i.e., the
registrant's second fiscal quarter) that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are
attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1
under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are
furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf, by the undersigned, thereunto duly authorized.
VOYAGEUR INSURED FUNDS
Jude T. Driscoll
- ---------------------------------------
By: Jude T. Driscoll
Title: Chairman
Date: May 2, 2005
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: May 2, 2005
Michael P. Bishof
- ---------------------------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: May 2, 2005