UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-6411
Exact name of registrant as specified in charter:
Delaware Investments Municipal Trust
Address of principal executive offices:
2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service:
David F. Connor, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: August 31
Date of reporting period: August 31, 2006
Amended and Restated February 21, 2007
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/A pertains to
the DELAWARE TAX FREE FLORIDA INSURED FUND of the Registrant, information on
which is included in the following shareholder reports.
Annual Report Delaware Tax-Free Florida
Insured Fund
Delaware Tax-Free New York
Fund
August 31, 2006 (1)
Fixed income mutual funds
(1) Certain financial statements
and financial highlights in this
report have been restated
[DELAWARE INVESTMENTS LOGO] [LOGO] POWERED BY RESEARCH(R)
Table of contents
> Portfolio management review ............................................1
> Performance summaries ..................................................6
> Disclosure of Fund expenses ...........................................10
> Sector allocation and credit rating breakdown .........................12
> Statements of net assets ..............................................14
> Statements of assets and liabilities ..................................19
> Statements of operations ..............................................20
> Statements of changes in net assets ...................................21
> Financial highlights ..................................................22
> Notes to financial statements .........................................28
> Report of independent registered public accounting firm ...............35
> Other Fund information ................................................36
> Board of trustees/directors and officers addendum .....................38
> About the organization ................................................40
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) 2007 Delaware Distributors, L.P.
Portfolio management review
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
August 31, 2006
Joe Baxter
Robert Collins
Portfolio co-managers
The managers of Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New
York Fund provided the answers to the questions below as a review of the Funds'
activities for the fiscal year ended August 31, 2006.
Q: What was the investment environment for the Delaware Investments municipal
bond mutual funds during the fiscal year ended August 31, 2006?
A: Higher gasoline prices, rising short-term interest rates, and ongoing
uneasiness about changes in the housing market generally caused concerns in the
capital markets and weighed on many investors' outlook for the U.S. economy
during our fiscal year. However, the U.S. economy continued its expansion
throughout the year, recovering somewhat from a period of slower growth that
occurred just after the August and September 2005 hurricanes. Property and
casualty insurers held steady, providing a solid source of capital for the
tax-exempt debt arena as the year progressed. To summarize, we generally viewed
the national-level municipal bond market to be sound over the fiscal year,
despite challenges.
During most of the fiscal year, the U.S. Federal Reserve (Fed) continued to
raise interest rates. After gradually moving the target for the Fed fund rates
from 3.50% to 5.25%, the Fed finally paused a long string of increases at its
August 2006 meeting. A key tool in the Fed's monetary policy, the Fed funds rate
reflects the percentage of interest that banks charge to lend money to each
other overnight. Through the rate increases, the Fed endeavored to moderate the
pace of economic activity and head off inflation.
Earlier in 2006, the interest rate environment was such that the Treasury yield
curve began to flatten, which means that the difference between short- and
long-term bond yields grew smaller across the spectrum of maturities. This
"flattening" was generally present throughout the second half of the fiscal
year. In this type of environment, bonds with intermediate maturities - those in
the three- to seven-year range - tend to underperform.
Low interest rates provided many issuers with refinancing opportunities early in
the fiscal year, but new bond issuances dropped off significantly beginning in
2006 because more and more municipal bond issuers had already taken the
opportunity to refinance bonds. For instance, through August, the pace of new
issuances year-to-date had retreated 15% versus the same period one year earlier
(source: Thomson Financial).
Comparing tax-exempt and taxable holdings, municipal bond yields began the
fiscal year at nearly the same level as Treasuries (98%). By period end,
however, that gap had widened to 87%, which reflected the greater decline in the
value of Treasury bonds versus their municipal peers (source: Thomson
Financial).
Q: What other market-related events influenced performance of the funds?
A: Credit quality among bond issuers remained strong or improved during the
fiscal year, generally contributing to demand for lower-rated securities.
In the fiscal period's later stages, we saw more bonds coming to market that we
believed to be of increased risk. Also of note, non-traditional buyers (those
more interested in the relative valuation of the asset class than the
tax-advantaged status of municipal bonds) continued to make their presence felt.
These changes influenced trading patterns in the market and presented a new
challenge to both mutual fund managers and individual investors.
Q: How did the Funds perform relative to their benchmark indices and peer
groups?
A: Delaware Tax-Free Florida Insured Fund returned 2.78% at net asset value and
- -1.81% at maximum offer price (both figures represent Class A shares with
distributions reinvested) for the fiscal year ended August 31, 2006. The Fund's
performance benchmark, the Lehman Brothers Municipal Bond Index, returned 3.03%.
The Fund's peer group, as measured by the Lipper Insured
1
Portfolio management review
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
Municipal Debt Funds Average, returned 2.14% (source: Lipper). For the complete,
annualized performance of Delaware Tax-Free Florida Insured Fund, please see the
table on page 6.
Delaware Tax-Free New York Fund returned 2.90% at net asset value and -1.70% at
maximum offer price (both figures represent Class A shares with distributions
reinvested) for the fiscal year ended August 31, 2006. The Fund's performance
benchmark, the Lehman Brothers Municipal Bond Index, returned 3.03%. The Fund's
peer group, as measured by the Lipper New York Municipal Debt Funds Average,
returned 2.65% (source: Lipper). For the complete, annualized performance of
Delaware Tax-Free New York Fund, please see the table on page 8.
Q: How did the market environment affect your approach to municipal bond
investing at large?
A: In the current interest rate environment, our approach to municipal bond
markets at times dictated that we retain current holdings and ultimately our
strategy resulted in limited transactions. During much of the year, we preferred
to seek our objective by holding legacy bonds - securities purchased in prior
fiscal periods - and depending on the attractive bond yields that already
existed within our portfolio of investments.
Generally speaking, it became increasingly difficult in the prevailing interest
rate environment to identify bonds in the market that were more attractive than
the holdings in our portfolio. Frequently during the year, we opted to focus our
resources on monitoring the credit of legacy bonds.
Overall, we followed our bottom-up investment style, which is based on
security-by-security analysis and a free exchange of information among the
various members of a deep team that includes portfolio managers, credit
analysts, and traders.
Q: What local factors may have influenced the municipal bond markets in Florida
and New York?
A: Municipal bond issuance nationally declined by -14.6% during the 12-month
period ended June 30, 2006, due in large part to rising interest rates. By
comparison, the rate for Florida over that period climbed 30.6% to a total of
$13.7 billion. The Florida Citizens Property Insurance Corporation and Florida
Hurricane Catastrophe Fund helped Florida displace New York as the nation's
third-largest bond issuer during that time period. Municipal bond issuance in
New York decreased 32.7% during the same period to $13.5 billion, but New York
remained the fourth largest issuer of the states in 2006 (source: The Bond
Buyer).
Despite a crippling hurricane season in 2005 and Florida's reliance on tourism,
the state's economy has continued to grow. Job growth remained robust (source:
Nelson A. Rockefeller State Revenue Report #64). Through July 2006, the state's
3.3% unemployment rate remained low when compared to the national unemployment
rate of 4.8% (source: U.S. Department of Labor). High population growth has
given strength to the state's economy but has also put pressure on government
services for education, corrections, transportation, health, and human services
(source: Moody's).
With the close of fiscal year 2005, Florida's General Fund totaled $6.6 billion,
and its Budget Stabilization Fund was $999 million (source: Moody's). For the
first eight months of fiscal year 2006, tax revenues were up 11%. Roughly 70% of
that increase was a result of sales and user-tax assessments (source: Nelson A.
Rockefeller State Revenue Report #64).
On April 26, 2006, the state intangibles tax, a duty on stocks and bonds that
affects some of Florida's wealthiest, was voted out by the state legislature.
Annual tax savings are predicted to be $161 million for an estimated 300,000
taxpayers. The $74 billion fiscal 2007 budget provides for $298 million in tax
cuts and sets aside $6.4 billion in reserves. The state has conservatively
forecasted net general revenue growth of 1.6% in 2007 compared to a historical
average of 9.8% (source: Moody's).
2
New York's economy has experienced a moderate recovery, strengthened by
improving conditions in New York City, its suburbs, and the Hudson Valley
region. Data collected by the U.S. Department of Labor statistics through March
2006 showed the national averages for job gains and rates of unemployment
slightly outpaced those in New York.
During the New York state 2005 fiscal year, net tax receipts rose 4.7%, despite
a -4.9% decline in sales tax revenues. Assessments against personal income were
major contributors to the growth. Revenues from personal income, constituting
roughly 58% of total tax inflows, grew by 5.3% (source: Nelson A. Rockefeller
State Revenue Report #64).
The state's General Fund balance totaled $2.1 billion in 2006. The spending plan
on an all-funds basis for the 2006-2007 budget totals $110.6 billion, an
increase of approximately 6% over the previous year. Although the 2006-2007
budget is balanced, it calls for a significant increase in debt. It is also
dependent on a growing level of resources that may not be available in the
future (source: State of New York Comptroller 2006-2007 Budget Analysis).
Q: What specific factors or decisions influenced performance in Delaware
Tax-Free Florida Insured Fund during the fiscal year?
A: Despite a high level of refinancing activity in the market, we believed that
many of the Fund's legacy bonds would not be called, and we decided to hold them
for their relatively attractive yields.
This strategy did have the effect of shortening the Fund's average duration,
which is a measure of a bond or a bond fund's sensitivity to changes in interest
rates. Longer duration values indicate greater interest rate sensitivity, and
shorter durations generally limit a bond fund's volatility and total return
potential.
Nonetheless, some bonds held in the portfolio were called during the fiscal
year. For example, multi-family housing bonds (housing revenue bonds) made up
the most heavily weighted sector of the Fund at the close of the prior fiscal
year. That exposure moved lower as some bonds were called.
In keeping with our long-term commitment to holding a high-quality portfolio of
investments, we again generally avoided the tobacco industry bonds that have so
greatly influenced performance in our markets in recent years, as we believe the
sector has an elevated risk for litigation. We also remained significantly
underweighted versus the benchmark index in bonds backed by airline corporation
revenues. Both stances generally were not beneficial to Fund performance when
compared to the benchmark and many of our peer funds, as the airline and tobacco
industries performed well on a total return basis.
During the 12-month span, it seemed that investors tended to seek the added
yield and total return potential of lower-quality bonds, and thus securities
with ratings further down the credit spectrum generally outperformed. At times,
the margin of outperformance between two adjacent credit ratings was
significant.
At fiscal year end, approximately 83% of net assets were allocated to bonds
rated AAA. While the Fund's allocation to securities with A ratings fell
slightly, our exposure to bonds of BBB rating grew. The reason for this shift
could be found in the Fund's 10% exposure to bonds issued by Puerto Rico, which
weakened when Puerto Rico faced budgetary troubles during the period.
Q: What specific factors or decisions influenced performance in Delaware
Tax-Free New York Fund during the fiscal year?
A: Despite a high level of refinancing activity in the market, we believed that
many of the Fund's legacy bonds would not be called, and decided to hold them
for their relatively attractive yields.
In keeping with our long-term commitment to holding a high-quality portfolio of
investments, we again generally avoided the tobacco industry bonds that have so
greatly influenced performance in our markets in recent years, as we believe the
sector has an elevated risk for litigation.
3
Portfolio management review
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
We also remained significantly underweighted versus the benchmark index in bonds
backed by airline corporation revenues. Both stances generally were not
beneficial to Fund performance when compared to the benchmark and many of our
peer funds, as those two sectors did perform well on a total return basis.
During the 12-month span, it seemed that investors tended to seek the added
yield and total return potential of lower-quality bonds, and thus securities
with ratings further down the credit spectrum generally outperformed. At times,
the margin of outperformance between two adjacent credit ratings was
significant.
Over the course of the fiscal year, we increased our exposure to bonds assigned
BBB ratings, adding positions in water bonds and securities issued by New York
City. Higher up the credit quality ladder, we slightly increased the Fund's
allocation to securities rated AAA. We also added to a position in AA-rated NYC
bonds just before their August 31, 2006 credit-quality upgrade.
We maintained a steady exposure to insured bonds over the 12 months, at roughly
23% of Fund net assets, while the allocation to securities issued by Puerto Rico
ran at approximately 10%.
4
Performance summary
Delaware Tax-Free Florida Insured Fund
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than the
original cost. A rise or fall in interest rates can have a significant impact on
bond prices and the NAV (net asset value) of the Fund. Funds that invest in
bonds can lose their value as interest rates rise, and an investor can lose
principal. Current performance may be lower or higher than the performance data
quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or visiting www.delawareinvestments.com/performance.
You should consider the investment objectives, risks, charges, and expenses of
the investment carefully before investing. Funds that invest in bonds may lose
value as interest rates rise and an investor can lose principal. The Delaware
Tax-Free Florida Insured Fund prospectus contains this and other important
information about the Fund. Please request a prospectus through your financial
advisor or by calling 800 523-1918 or visiting our Web site. Read the prospectus
carefully before you invest or send money.
Fund Performance
Average annual total returns
Through August 31, 2006 1 year 5 years 10 years Lifetime
________________________________________________________________________________
Class A (Est. 1/1/92)
Excluding sales charge +2.78% +4.54% +5.49% +6.00%
Including sales charge -1.81% +3.58% +5.01% +5.66%
________________________________________________________________________________
Class B (Est. 3/11/94)
Excluding sales charge +2.11% +3.78% +4.87% +4.93%
Including sales charge -1.82% +3.52% +4.87% +4.93%
________________________________________________________________________________
Class C (Est. 9/29/97)*
Excluding sales charge +2.10% +3.76% - +4.12%
Including sales charge +1.12% +3.76% - +4.12%
________________________________________________________________________________
*Class C shares were sold and outstanding from September 29, 1997 until December
18, 1997, when all of the outstanding Class C shares were redeemed. There were
no outstanding Class C shares or shareholder activity from December 19, 1997
through January 7, 1999. The performance for Class C shares during the period
from December 19, 1997 through January 7, 1999 is based on the performance of
Class B shares.
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Performance for Class B and C shares, excluding sales
charges, assumes either that contingent deferred sales charges did not apply or
that the investment was not redeemed.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending on the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%. Ten-year and lifetime performance figures
for Class B shares reflect conversion to Class A shares after eight years.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free Florida
Insured Fund during the periods shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
6
Fund basics
As of August 31, 2006
________________________________________________________________________________
Fund objective
________________________________________________________________________________
The Fund seeks as high a level of current income exempt from federal income tax
and from Florida state personal income tax as is consistent with preservation of
capital.
________________________________________________________________________________
Total Fund net assets
________________________________________________________________________________
$101 million
________________________________________________________________________________
Number of holdings
________________________________________________________________________________
62
________________________________________________________________________________
Fund start date
________________________________________________________________________________
January 1, 1992
________________________________________________________________________________
Your Fund managers
________________________________________________________________________________
Joseph R. Baxter joined Delaware Investments in 1999. Formerly, he held
investment positions with First Union. He heads the firm's municipal bond
department and is responsible for setting the department's investment strategy.
He is also co-portfolio manager of the firm's municipal bond funds and several
client accounts. Joe Baxter received a bachelor's degree in finance and
marketing from LaSalle University.
Robert F. Collins, CFA, joined Delaware Investments in 2004. Formerly, he spent
five years as a co-manager of the municipal portfolio management group, where he
oversaw the tax-exempt investments of high net worth and institutional accounts.
Before that, Robert F. Collins headed the municipal fixed income team at
Wilmington Trust. He earned a bachelor's degree in economics from Ursinus
College.
________________________________________________________________________________
Nasdaq symbols CUSIPs
________________________________________________________________________________
Class A VFLIX 24610R102
Class B DVDBX 24610R300
Class C DVDCX 24610R706
Performance of a $10,000 Investment
August 31, 1996 through August 31, 2006
[PERFORMANCE OF A $10,000 INVESTMENT LINE GRAPH]
Chart assumes $10,000 invested on August 31, 1996 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
The performance graph does not reflect the deduction of taxes the shareholder
may pay on Fund distributions or redemption of Fund shares. An expense
limitation was in effect for all classes of the Delaware Tax-Free Florida
Insured Fund during the periods shown. Performance would have been lower had the
expense limitation not been in effect. Past performance is not a guarantee of
future results.
(continues) 7
Performance summary
Delaware Tax-Free New York Fund
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than the
original cost. A rise or fall in interest rates can have a significant impact on
bond prices and the NAV (net asset value) of the Fund. Funds that invest in
bonds can lose their value as interest rates rise, and an investor can lose
principal. Current performance may be lower or higher than the performance data
quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or by visiting www.delawareinvestments.com/performance.
You should consider the investment objectives, risks, charges, and expenses of
the investment carefully before investing. Funds that invest in bonds may lose
value as interest rates rise and an investor can lose principal. The Delaware
Tax-Free New York Fund prospectus contains this and other important information
about the Fund. Please request a prospectus through your financial advisor or by
calling 800 523-1918 or visiting our Web site. Read the prospectus carefully
before you invest or send money.
Fund Performance
Average annual total returns
Through August 31, 2006 1 year 5 years 10 years Lifetime
________________________________________________________________________________
Class A (Est. 11/6/87)
Excluding sales charge +2.90% +5.05% +5.17% +6.30%
Including sales charge -1.70% +4.08% +4.69% +6.04%
________________________________________________________________________________
Class B (Est. 11/14/94)
Excluding sales charge +2.23% +4.28% +4.55% +4.96%
Including sales charge -1.72% +4.02% +4.55% +4.96%
________________________________________________________________________________
Class C (Est. 4/26/95)
Excluding sales charge +2.23% +4.28% +4.40% +4.30%
Including sales charge +1.25% +4.28% +4.40% +4.30%
________________________________________________________________________________
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Performance for Class B and C shares, excluding sales
charges, assumes either that contingent deferred sales charges did not apply or
that the investment was not redeemed.
The Fund offers Class A, B, and C shares. Class A shares are sold with a
front-end sales charge of up to 4.50% and have an annual distribution and
service fee of 0.25%.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending on the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1%. Ten-year and lifetime performance figures
for Class B shares reflect conversion to Class A shares after eight years.
Class C shares are sold with a contingent deferred sales charge of 1%, if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
An expense limitation was in effect for all classes of Delaware Tax-Free New
York Fund during the periods shown. Performance would have been lower had the
expense limitation not been in effect.
The performance table and graph do not reflect the deduction of taxes the
shareholder would pay on Fund distributions or redemptions of Fund shares.
A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
8
Fund basics
As of August 31, 2006
________________________________________________________________________________
Fund objective
________________________________________________________________________________
The Fund seeks as high a level of current income exempt from federal income tax
and from New York state personal income tax as is consistent with preservation
of capital.
________________________________________________________________________________
Total Fund net assets
________________________________________________________________________________
$18 million
________________________________________________________________________________
Number of holdings
________________________________________________________________________________
42
________________________________________________________________________________
Fund start date
________________________________________________________________________________
November 6, 1987
________________________________________________________________________________
Your Fund managers
________________________________________________________________________________
Joseph R. Baxter joined Delaware Investments in 1999. Formerly, he held
investment positions with First Union. He heads the firm's municipal bond
department and is responsible for setting the department's investment strategy.
He is also co-portfolio manager of the firm's municipal bond funds and several
client accounts. Joe Baxter received a bachelor's degree in finance and
marketing from LaSalle University.
Robert F. Collins, CFA, joined Delaware Investments in 2004. Formerly, he spent
five years as a co-manager of the municipal portfolio management group, where he
oversaw the tax-exempt investments of high net worth and institutional accounts.
Before that, Robert F. Collins headed the municipal fixed income team at
Wilmington Trust. He earned a bachelor's degree in economics from Ursinus
College.
________________________________________________________________________________
Nasdaq symbols CUSIPs
________________________________________________________________________________
Class A FTNYX 928928274
Class B DVTNX 928928266
Class C DVFNX 928928258
Performance of a $10,000 Investment
August 31, 1996 through August 31, 2006
[PERFORMANCE OF A $10,000 INVESTMENT LINE GRAPH]
Chart assumes $10,000 invested on August 31, 1996 and includes the effect of a
4.50% front-end sales charge and the reinvestment of all distributions.
Performance for other Fund classes will vary due to differing charges and
expenses. The Lehman Brothers Municipal Bond Index is an unmanaged index that
generally tracks the performance of municipal bonds. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
The performance graph does not reflect the deduction of taxes the shareholder
may pay on Fund distributions or redemption of Fund shares. An expense
limitation was in effect for all classes of the Delaware Tax-Free New York Fund
during the periods shown. Performance would have been lower had the expense
limitation not been in effect. Past performance is not a guarantee of future
results.
9
Disclosure of Fund expenses
For the period March 1, 2006 to August 31, 2006
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 March 1, 2006 to August 31, 2006.
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 Funds' actual expense ratios and an assumed rate of return of 5% per year
before expenses, which is not the Funds' 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 tables 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 each 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. Each Fund's actual expenses shown in the tables reflect fee waivers in
effect. The expenses shown in each table assume reinvestment of all dividends
and distributions.
"Expenses Paid During Period" are equal to the Funds' annualized expense ratios,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period).
Delaware Tax-Free Florida Insured Fund (Restated)
Expense Analysis of an Investment of $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/06 to
3/1/06 8/31/06 Ratios 8/31/06
________________________________________________________________________________
Actual fund return
Class A $1,000.00 $1,018.20 1.10% $5.60
Class B 1,000.00 1,015.20 1.85% 9.40
Class C 1,000.00 1,014.30 1.85% 9.39
________________________________________________________________________________
Hypothetical 5% return (5% return before expenses)
Class A $1,000.00 $1,019.66 1.10% $5.60
Class B 1,000.00 1,015.88 1.85% 9.40
Class C 1,000.00 1,015.88 1.85% 9.40
________________________________________________________________________________
The expenses in the table above have been restated to include interest and
related expenses associated with participation in inverse floater programs. See
Note 10 in "Notes to financial statements."
Previously the expense analysis for Delaware Tax-Free Florida Insured Fund was:
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/06 to
3/1/06 8/31/06 Ratios 8/31/06
________________________________________________________________________________
Actual fund return
Class A $1,000.00 $1,018.20 0.86% $4.37
Class B 1,000.00 1,015.20 1.61% 8.18
Class C 1,000.00 1,014.30 1.61% 8.17
________________________________________________________________________________
Hypothetical 5% return (5% return before expenses)
Class A $1,000.00 $1,020.87 0.86% $4.38
Class B 1,000.00 1,017.09 1.61% 8.19
Class C 1,000.00 1,017.09 1.61% 8.19
________________________________________________________________________________
10
Delaware Tax-Free New York Fund
Expense Analysis of an Investment of $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 3/1/06 to
3/1/06 8/31/06 Ratios 8/31/06
________________________________________________________________________________
Actual fund return
Class A $1,000.00 $1,019.00 0.65% $3.31
Class B 1,000.00 1,015.20 1.40% 7.11
Class C 1,000.00 1,015.30 1.40% 7.11
________________________________________________________________________________
Hypothetical 5% return (5% return before expenses)
Class A $1,000.00 $1,021.93 0.65% $3.31
Class B 1,000.00 1,018.15 1.40% 7.12
Class C 1,000.00 1,018.15 1.40% 7.12
________________________________________________________________________________
There were no changes to the expense analysis for this Fund.
11
Sector allocation and credit rating breakdown
Delaware Tax-Free Florida Insured Fund (Restated)*
As of August 31, 2006
Sector designations may be different than the sector designations presented in
other Fund materials.
Percentage
Sector of Net Assets
________________________________________________________________________________
Municipal Bonds 103.67%
Education Revenue Bonds 5.28%
Electric Revenue Bonds 3.29%
Health Care Revenue Bonds 16.60%
Housing Revenue Bonds 13.35%
Lease Revenue Bonds 10.19%
Local General Obligation Bonds 4.26%
Pre-Refunded Bonds 20.47%
Special Tax Bonds 20.53%
State General Obligation Bonds 2.85%
Transportation Revenue Bonds 3.68%
Water & Sewer Revenue Bonds 3.17%
________________________________________________________________________________
Total Market Value of Securities 103.67%
________________________________________________________________________________
Liabilities Net of Receivables and Other Assets (3.67%)
________________________________________________________________________________
Total Net Assets 100.00%
________________________________________________________________________________
* See Restatement Note 10 in "Notes to Financial Statements."
Credit Rating Breakdown
(as a % of fixed income investments)
________________________________________________________________________________
AAA 83.63%
AA 5.82%
A 5.90%
BBB 4.65%
________________________________________________________________________________
Total 100.00%
________________________________________________________________________________
12
Delaware Tax-Free New York Fund
Sector designations may be different than the sector designations presented in
other Fund materials.
Percentage
Sector of Net Assets
________________________________________________________________________________
Municipal Bonds 99.37%
Corporate Revenue Bonds 8.14%
Education Revenue Bonds 12.22%
Electric Revenue Bonds 8.51%
Health Care Revenue Bonds 14.83%
Lease Revenue Bonds 13.65%
Local General Obligation Bonds 7.41%
Pre-Refunded Bonds 11.70%
Special Tax Bonds 5.80%
State General Obligation Bonds 1.44%
Transportation Revenue Bonds 11.41%
Water & Sewer Revenue Bonds 4.26%
________________________________________________________________________________
Total Market Value of Securities 99.37%
________________________________________________________________________________
Receivables and Other Assets Net of Liabilities 0.63%
________________________________________________________________________________
Total Net Assets 100.00%
________________________________________________________________________________
Credit Rating Breakdown
(as a % of fixed income investments)
________________________________________________________________________________
AAA 28.56%
AA 23.05%
A 20.24%
BBB 25.18%
BB 2.97%
________________________________________________________________________________
Total 100.00%
________________________________________________________________________________
13
Statements of net assets
Delaware Tax-Free Florida Insured Fund (Restated)
August 31, 2006
Principal Market
Amount Value
________________________________________________________________________________
Municipal Bonds - 103.67%
________________________________________________________________________________
Education Revenue Bonds - 5.28%
Broward County Educational
Facilities Authority Revenue
(Nova Southeastern University)
5.25% 4/1/27 (RADIAN) $1,000,000 $1,042,890
Miami-Dade County Educational
Facilities Authority (University of
Miami) Series A 5.75% 4/1/29
(AMBAC) 2,000,000 2,145,520
University of Central Florida
Athletics Association Certificates
of Participation Series A
5.25% 10/1/34 (FGIC) 2,000,000 2,121,500
__________
5,309,910
__________
Electric Revenue Bonds - 3.29%
Florida State Municipal Power Agency
Revenue (Stanton II Project)
5.00% 10/1/26 (AMBAC) 2,000,000 2,082,320
Ocala Utility System Revenue Series B
5.25% 10/1/25 (FGIC) 1,125,000 1,225,373
__________
3,307,693
__________
Health Care Revenue Bonds - 16.60%
Escambia County Health Facilities
Authority (Florida Health Care
Facilities - VHA Program)
5.95% 7/1/20 (AMBAC) 560,000 586,466
Highlands County Health Facilities
Authority (Adventist Health
System) Series C
5.25% 11/15/36 1,000,000 1,054,480
Indian River County Hospital District
(Indian River Memorial Hospital)
6.10% 10/1/18 (FSA) 3,000,000 3,065,580
Jacksonville Economic Development
Community Health Care
Facilities Revenue (Mayo Clinic)
5.00% 11/15/36 1,000,000 1,040,100
Miami-Dade County Public Facilities
Revenue (Jackson Health
Systems) Series A 5.00% 6/1/35
(MBIA) 1,500,000 1,567,455
North Miami Health Facilities
Authority (Catholic Health
Services) (LOC Suntrust Bank
Miami) 6.00% 8/15/16 500,000 510,635
Orange County Health Facilities
Authority Revenue (Adventist
Health System)
5.625% 11/15/32 1,000,000 1,073,170
Palm Beach County Health Facilities
Authority Revenue (Boca Raton
Community Hospital)
5.625% 12/1/31 2,000,000 2,094,060
South Broward Hospital District
Revenue (Memorial Health Care
System) 5.625% 5/1/32 3,000,000 3,206,580
Tallahassee Health Facilities
(Tallahassee Memorial Regional
Medical Center) Series B
6.00% 12/1/15 (MBIA) 2,500,000 2,504,350
__________
16,702,876
__________
Housing Revenue Bonds - 13.35%
Florida Housing Finance Agency
(Crossings Indian Run
Apartments HUD) Series V
6.10% 12/1/26
(AMBAC) (AMT) 750,000 766,898
(Landings at Sea Forest
Apartments) Series T
5.85% 12/1/18 (AMBAC)
(FHA) (AMT) 380,000 388,212
6.05% 12/1/36 (AMBAC)
(FHA) (AMT) 700,000 715,064
(Leigh Meadows Apartments
Section 8 HUD) Series N
6.20% 9/1/26 (AMBAC) (AMT) 2,765,000 2,822,732
6.30% 9/1/36 (AMBAC) (AMT) 2,000,000 2,041,680
(Riverfront Apartments Section 8
HUD) Series A 6.25% 4/1/37
(AMBAC) (AMT) 1,000,000 1,026,800
(Spinnaker Cove Apartments)
Series G 6.50% 7/1/36
(AMBAC) (FHA) (AMT) 500,000 510,490
(The Vineyards Project) Series H
6.40% 11/1/15 500,000 511,105
(Woodbridge Apartments) Series
L 6.15% 12/1/26
(AMBAC) (AMT) 1,750,000 1,789,603
6.25% 6/1/36
(AMBAC) (AMT) 2,000,000 2,045,040
Orange County Housing Finance
Authority Homeowner Revenue
Series B 5.25% 3/1/33 (GNMA)
(FNMA) (AMT) 295,000 301,463
Volusia County Multifamily Housing
Finance Authority (San Marco
Apartments) Series A
5.60% 1/1/44 (FSA) (AMT) 500,000 514,850
__________
13,433,937
__________
Lease Revenue Bonds - 10.19%
Florida Municipal Loan Council
Revenue Series B 5.00% 11/1/29
(MBIA) 1,000,000 1,051,350
Lake County School Board Series A
5.00% 6/1/30 (AMBAC) 1,750,000 1,828,698
14
Principal Market
Amount Value
________________________________________________________________________________
Municipal Bonds (continued)
________________________________________________________________________________
Lease Revenue Bonds (continued)
Osceola County School Board
Series A 5.25% 6/1/27 (AMBAC) $4,000,000 $ 4,251,199
Pasco County School Board
Series A 5.00% 8/1/30 (AMBAC) 1,000,000 1,049,470
Puerto Rico Public Buildings
Authority Revenue (Government
Facilities) Series F 5.25% 7/1/25 930,000 1,023,521
St. Augustine Capital Improvement
Revenue 5.00% 10/1/34
(AMBAC) 1,000,000 1,045,940
___________
10,250,178
___________
Local General Obligation Bonds - 4.26%
Enterprise Community
Development District Special
Assessment 6.10% 5/1/16
(MBIA) 695,000 696,383
Hollywood Community
Redevelopment Agency
5.625% 3/1/24 1,200,000 1,278,840
Julington Creek Plantation
Community Development
District Special Assessment
5.00% 5/1/29 (MBIA) 200,000 207,852
Port St. Lucie 5.00% 7/1/35 (MBIA) 2,000,000 2,106,260
___________
4,289,335
___________
$ Pre-Refunded Bonds - 20.47%
Florida Housing Finance Agency
(Mariner Club Apartments)
Series K-1
6.25% 9/1/26-07
(AMBAC) (AMT) 300,000 309,138
6.375% 9/1/36-07
(AMBAC) (AMT) 525,000 541,312
(Sterling Palms Apartments)
Series D-1
6.30% 12/1/16-06
(AMBAC) (AMT) 895,000 917,831
6.40% 12/1/26-06
(AMBAC) (AMT) 1,500,000 1,538,625
6.50% 6/1/36-06
(AMBAC) (AMT) 6,540,000 6,710,040
Highlands County Health Facilities
Authority (Adventist Health
System/Sunbelt) Series A
6.00% 11/15/31-11 1,500,000 1,674,300
Jacksonville Port Authority Seaport
Revenue 5.70% 11/1/30-10
(MBIA) (AMT) 205,000 219,606
Lee County Airport Revenue
Series B 5.75% 10/1/33-10 (FSA) 3,000,000 3,271,710
Puerto Rico Commonwealth
Highway & Transportation
Authority Revenue Series D
5.25% 7/1/38-12 3,000,000 3,250,830
Tampa Utilities Tax Revenue Series A
6.00% 10/1/17-09 (AMBAC) 1,000,000 1,079,130
6.125% 10/1/18-09 (AMBAC) 1,000,000 1,082,600
___________
20,595,122
___________
Special Tax Bonds - 20.53%
Florida State Board of Education
(Lottery Revenue) Series A
6.00% 7/1/14 (FGIC) 1,000,000 1,091,440
Jacksonville Excise Taxes Revenue
Series B
5.00% 10/1/26 (AMBAC) 1,000,000 1,039,530
5.125% 10/1/32 (FGIC) 1,000,000 1,053,560
& Palm Beach County Criminal Justice
Facilities Revenue
5.75% 6/1/12 (FGIC) 15,000,000 16,617,150
^ Puerto Rico Commonwealth
Infrastructure Financing
Authority Series A
4.60% 7/1/30 (FGIC) 2,500,000 846,075
___________
20,647,755
___________
State General Obligation Bonds - 2.85%
Puerto Rico Commonwealth Public
Improvement Series A
5.50% 7/1/19 (MBIA) 2,500,000 2,872,050
___________
2,872,050
___________
Transportation Revenue Bonds - 3.68%
Jacksonville Port Authority Seaport
Revenue 5.70% 11/1/30 (MBIA)
(AMT) 295,000 313,904
Miami-Dade County Aviation
Revenue (Miami International
Airport) Series B 5.00% 10/1/37
(FGIC) 1,000,000 1,042,480
Miami-Dade County Aviation
Revenue Series A
5.00% 10/1/33 (FSA) (AMT) 500,000 513,290
Puerto Rico Commonwealth
Highway & Transportation
Authority Revenue
Series G 5.00% 7/1/42 800,000 812,528
Series K 5.00% 7/1/35 1,000,000 1,023,240
___________
3,705,442
___________
Water & Sewer Revenue Bonds - 3.17%
Tampa Water and Sewer Revenue
6.00% 10/1/16 (FSA) 1,000,000 1,176,850
Village Center Community
Development District Utility
Revenue 5.00% 10/1/36 (MBIA) 500,000 519,685
Winter Haven Utilities Systems
Revenue Refunding &
Improvement 5.00% 10/1/30
(MBIA) 1,415,000 1,491,509
___________
3,188,044
___________
Total Municipal Bonds
(cost $99,557,261) 104,302,342
___________
(continues) 15
Statements of net assets
Delaware Tax-Free Florida Insured Fund
______________________________________________________________________________
______________________________________________________________________________
Total Market Value of Securities - 103.67%
(cost $99,557,261) $104,302,342
Liabilities Net of Receivables
and Other Assets - (3.67%)* (3,689,148)
____________
Net Assets Applicable to 9,029,447
Shares Outstanding - 100.00% $100,613,194
____________
Net Asset Value - Delaware Tax-Free Florida Insured
Fund A Class ($92,726,424 / 8,321,991 Shares) $11.14
______
Net Asset Value - Delaware Tax-Free Florida Insured
Fund B Class ($4,323,253 / 387,828 Shares) $11.15
______
Net Asset Value - Delaware Tax-Free Florida Insured
Fund C Class ($3,563,517 / 319,628 Shares) $11.15
______
Components of Net Assets at August 31, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $ 96,385,804
Accumulated net realized loss on investments (517,691)
Net unrealized appreciation of investments 4,745,081
____________
Total net assets $100,613,194
____________
$ Pre-Refunded Bonds. 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. See Note 8 in "Notes to Financial
Statements."
* Includes $7,500,000 in liability for Inverse Floater programs. See Note 8 and
Note 10 in "Notes to Financial Statements."
& Security held in a trust in connection with the Inverse Floater security
$7,500,000, 7.77%, 6/1/12.
For additional information on the Inverse Floater programs, see Note 8 and
Note 10 in "Notes to Financial Statements."
^ Zero coupon security. The interest rate shown is the yield at the time of
purchase.
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
HUD - Housing and Urban Development
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
VHA - Veterans Health Administration
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Florida Insured Fund
Net asset value Class A (A) $11.14
Sales charge (4.50% of offering price) (B) 0.52
______
Offering price $11.66
______
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
16
Delaware Tax-Free New York Fund
August 31, 2006
Principal Market
Amount Value
______________________________________________________________________________
Municipal Bonds - 99.37%
______________________________________________________________________________
Corporate Revenue Bonds - 8.14%
New York City Industrial
Development Agency (Brooklyn
Navy Yard Cogen Partners)
5.75% 10/1/36 (AMT) $ 450,000 $ 453,861
New York State Energy Research &
Development Authority Pollution
Control Revenue (Central
Hudson Gas) Series A
5.45% 8/1/27 (AMBAC) 500,000 527,295
Suffolk County Industrial
Development Agency Revenue
(Keyspan-Port Jefferson Energy
Center) 5.25% 6/1/27 (AMT) 500,000 519,670
___________
1,500,826
___________
Education Revenue Bonds - 12.22%
Amherst Industrial Development
Agency Civic Facilities Revenue
(UBF Faculty Student Housing)
Series A 5.75% 8/1/30
(AMBAC) 200,000 217,742
Cattaraugus County Industrial
Development Agency
Civic Faculty Revenue (St.
Bonaventure University Project)
Series A 5.10% 5/1/31 250,000 253,008
Dutchess County Industrial
Development Agency (Marist
College) 5.00% 7/1/20 500,000 518,555
New York State Dormitory
Authority Revenue
(Columbia University) Series A
5.00% 7/1/23 500,000 527,010
(Pratt Institute) 6.00% 7/1/20
(RADIAN) 500,000 536,980
(State University) Series B
7.50% 5/15/11 180,000 200,354
___________
2,253,649
___________
Electric Revenue Bonds - 8.51%
Long Island Power Authority New
York Electric Systems Revenue
Series B 5.00% 12/1/35 400,000 417,060
Puerto Rico Electric Power Authority
Power Revenue
Series II 5.25% 7/1/31 500,000 523,465
Series NN 5.125% 7/1/29 600,000 630,090
___________
1,570,615
___________
Health Care Revenue Bonds - 14.83%
East Rochester Housing Authority
Revenue Refunding (Senior
Living -Woodland Village
Project) 5.50% 8/1/33 200,000 202,872
New York State Dormitory
Authority Revenue
(Chapel Oaks) LOC Allied Irish
Bank 5.45% 7/1/26 450,000 467,514
(Mental Health) Series D
5.90% 2/15/12 25,000 25,721
(Millard Fillmore Hospital)
5.375% 2/1/32 (AMBAC)
(FHA) 450,000 464,072
(North Shore Long Island Jewish
Group Project) 5.50% 5/1/33 500,000 532,785
(Winthrop South Nassau Hospital)
Series B 5.50% 7/1/23 500,000 528,950
Suffolk County Industrial
Development Agency
Continuing Care Retirement
Community Refunding
(Jeffersons Ferry Project)
5.00% 11/1/28 500,000 513,000
___________
2,734,914
___________
Lease Revenue Bonds - 13.65%
Albany Industrial Development
Agency Civic Facility Revenue
(Charitable Leadership Project)
Series A 5.75% 7/1/26 500,000 518,950
Battery Park City Authority Revenue
Series A 5.00% 11/1/26 500,000 526,560
New York City Industrial
Development Agency Civic
Facility Revenue (American
National Red Cross Project)
5.00% 2/1/36 (AMBAC) 500,000 525,860
New York City Industrial
Development Revenue
(Queens Baseball Stadium
Project - Pilot) 4.75% 1/1/42
(AMBAC) 200,000 203,010
(Yankee Stadium Project - Pilot)
4.75% 3/1/46 (MBIA) 200,000 203,024
Tobacco Settlement Financing
Series B-1C 5.50% 6/1/21 500,000 541,335
___________
2,518,739
___________
Local General Obligation Bonds - 7.41%
New York City
Series C 5.375% 11/15/27 310,000 318,311
Series D 5.00% 11/1/34 500,000 518,870
Series J 5.25% 6/1/28 500,000 529,490
___________
1,366,671
___________
$ Pre-Refunded Bonds - 11.70%
Metropolitan Transportation
Authority Dedicated Tax Series A
6.125% 4/1/17-10 (FGIC) 1,000,000 1,086,589
New York City Series C
5.375% 11/15/27-07 140,000 144,483
New York State Dormitory
Authority Lease (Court Facilities)
Series A 5.375% 5/15/21-13 500,000 550,865
(continues) 17
Statements of net assets
Delaware Tax-Free New York Fund
Principal Market
Amount Value
______________________________________________________________________________
Municipal Bonds (continued)
______________________________________________________________________________
Pre-Refunded Bonds (continued)
New York State Dormitory
Authority Revenue
(Mental Health) Series D
5.90% 2/15/12-07 $ 225,000 $ 231,874
(State University) Series B
7.50% 5/15/11-09 130,000 144,997
___________
2,158,808
___________
Special Tax Bonds - 5.80%
New York State Sales Tax Asset
Receivables Series A
5.25% 10/15/27 (AMBAC) 500,000 540,255
Schenectady Metroplex
Development Authority Revenue
Series A 5.375% 12/15/21 500,000 529,170
___________
1,069,425
___________
State General Obligation Bonds - 1.44%
Puerto Rico Commonwealth
Series B 5.25% 7/1/32 250,000 264,853
___________
264,853
___________
Transportation Revenue Bonds - 11.41%
Albany Parking Authority Revenue
Series A 5.625% 7/15/25 500,000 532,540
New York City Industrial
Development Agency (JFK Airis
Project A) 5.50% 7/1/28 (AMT) 500,000 514,405
Onondaga County Industrial
Development Authority Revenue
Subordinated (Air Cargo Project)
7.25% 1/1/32 (AMT) 500,000 543,180
Puerto Rico Commonwealth
Highway & Transportation
Authority Revenue Series Y
5.50% 7/1/36 475,000 514,539
___________
2,104,664
___________
Water & Sewer Revenue Bonds - 4.26%
New York City Municipal Water
Finance Authority Water &
Sewer System Revenue
Series A 5.125% 6/15/34 500,000 524,565
Series B 5.00% 6/15/36 250,000 261,505
___________
786,070
___________
Total Municipal Bonds
(cost $17,422,657) 18,329,234
___________
Total Market Value of Securities - 99.37%
(cost $17,422,657) $18,329,234
___________
Receivables and Other Assets
Net of Liabilities - 0.63% 115,647
___________
Net Assets Applicable to 1,749,052
Shares Outstanding - 100.00% $18,444,881
___________
Net Asset Value - Delaware Tax-Free New York Fund
Class A ($13,519,533 / 1,281,294 Shares) $10.55
______
Net Asset Value - Delaware Tax-Free New York Fund
Class B ($2,857,756 / 271,384 Shares) $10.53
______
Net Asset Value - Delaware Tax-Free New York Fund
Class C ($2,067,592 / 196,374 Shares) $10.53
______
Components of Net Assets at August 31, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $17,766,839
Distributions in excess of net investment income (655)
Accumulated net realized loss on investments (227,880)
Net unrealized appreciation of investments 906,577
___________
Total net assets $18,444,881
___________
$ Pre-Refunded Bonds. 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. See Note 8 in "Notes to
Financial Statements."
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
LOC - Letter of Credit
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 New York Fund
Net asset value Class A (A) $10.55
Sales charge (4.50% of offering price) (B) 0.50
______
Offering price $11.05
______
(A) Net asset value per share, as illustrated, is the 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
18
Statements of assets and liabilities
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
August 31, 2006
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
(Restated)
Assets:
Investments at market $104,302,342 $18,329,234
Interest receivable 1,824,306 208,751
Receivable for securities sold 4,768,500 -
____________ ___________
Total assets 110,895,148 18,537,985
____________ ___________
Liabilities:
Liability for Inverse Floater programs 7,500,000 -
Cash overdraft 384,874 24,637
Payable for securities purchased 2,082,740 -
Liquidations payable 23,243 23,335
Distributions payable 109,827 18,854
Due to manager and affiliates 76,803 11,113
Other accrued expenses 31,653 15,165
Interest and related expense payable for Inverse Floater programs 72,814 -
____________ ___________
Total liabilities 10,281,954 93,104
____________ ___________
Total Net Assets $100,613,194 $18,444,881
____________ ___________
Investments at cost $ 99,557,261 $17,422,657
____________ ___________
See accompanying notes
19
Statements of operations
Year Ended August 31, 2006
Delaware
Tax-Free Delaware
Florida Tax-Free
Insured New York
Fund Fund
(Restated)
Investment Income:
Interest $5,742,714 $869,089
__________ ________
Expenses:
Management fees 517,389 97,031
Interest and related Expense 251,788 -
Distribution expenses - Class A 238,110 33,575
Distribution expenses - Class B 48,204 28,468
Distribution expenses - Class C 34,317 13,428
Dividend disbursing and transfer agent fees and expenses 69,194 14,461
Accounting and administration expenses 41,391 7,057
Legal and professional fees 32,454 13,862
Reports and statements to shareholders 18,863 3,282
Custodian fees 4,266 1,744
Trustees' fees 5,874 1,003
Pricing fees 1,943 1,134
Insurance fees 2,573 534
Taxes (other than taxes on income) 467 66
Registration fees 18,017 7,263
Other 5,381 1,723
__________ ________
1,290,231 224,631
Less expenses absorbed or waived (78,757) (76,894)
Less expenses paid indirectly (2,975) (1,514)
__________ ________
Total operating expenses 1,208,499 146,223
__________ ________
Net Investment Income 4,534,215 722,866
__________ ________
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 172,566 (4,673)
Net change in unrealized depreciation of investments (1,964,445) (211,649)
__________ ________
Net Realized and Unrealized Loss on Investments (1,791,879) (216,322)
__________ ________
Net Increase in Net Assets Resulting from Operations $2,742,336 $506,544
__________ ________
See accompanying notes
20
Statements of changes in net assets
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
Year Ended Year Ended
8/31/06 8/31/05 8/31/06 8/31/05
Increase in Net Assets from Operations:
Net investment income $ 4,534,215 $ 4,400,282 $ 722,866 $ 685,440
Net realized gain (loss) on investments 172,566 332,797 (4,673) 73,048
Net change in unrealized appreciation/depreciation of investments (1,964,445) 426,912 (211,649) 267,666
____________ ____________ ____________ ____________
Net increase in net assets resulting from operations 2,742,336 5,159,991 506,544 1,026,154
____________ ____________ ____________ ____________
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (4,229,857) (4,136,398) (574,553) (519,496)
Class B (177,726) (195,487) (100,697) (105,732)
Class C (126,632) (68,397) (47,616) (60,212)
____________ ____________ ____________ ____________
(4,534,215) (4,400,282) (722,866) (685,440)
____________ ____________ ____________ ____________
Capital Share Transactions:
Proceeds from shares sold:
Class A 7,210,250 8,716,486 2,071,330 1,917,681
Class B 176,391 392,192 333,088 388,800
Class C 945,183 339,297 1,263,939 449,842
Net assets from reorganization (1):
Class A - 10,617,811 - -
Class B - 2,665,962 - -
Class C - 2,237,525 - -
Net asset value of shares issued upon reinvestment
of dividends and distributions:
Class A 2,113,643 1,690,235 402,764 374,723
Class B 57,358 49,113 42,018 48,934
Class C 69,024 34,037 39,921 20,784
____________ ____________ ____________ ____________
10,571,849 26,742,658 4,153,060 3,200,764
____________ ____________ ____________ ____________
Cost of shares repurchased:
Class A (13,278,168) (10,965,231) (1,930,227) (921,789)
Class B (1,350,630) (2,629,629) (500,844) (335,650)
Class C (706,793) (419,581) (122,713) (1,931,944)
____________ ____________ ____________ ____________
(15,335,591) (14,014,441) (2,553,784) (3,189,383)
____________ ____________ ____________ ____________
Increase (decrease) in net assets derived from capital share transactions (4,763,742) 12,728,217 1,599,276 11,381
____________ ____________ ____________ ____________
Net Increase (Decrease) in Net Assets: (6,555,621) 13,487,926 1,382,954 352,095
Net Assets:
Beginning of Year 107,168,815 93,680,889 17,061,927 16,709,832
____________ ____________ ____________ ____________
End of Year $100,613,194 $107,168,815 $ 18,444,881 $ 17,061,927
____________ ____________ ____________ ____________
(Distributions in excess of net investment income) $ - $ - $ (655) $ (655)
____________ ____________ ____________ ____________
(1) See Note 6 in "Notes to Financial Statements."
See accompanying notes
21
Financial highlights
Delaware Tax-Free Florida Insured Fund Class A (Restated)
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.330 $11.250 $11.110 $11.330 $11.230
Income (loss) from investment operations:
Net investment income 0.494 0.507 0.533 0.523 0.532
Net realized and unrealized gain (loss) on investments (0.190) 0.080 0.140 (0.220) 0.100
_______ _______ _______ _______ _______
Total from investment operations 0.304 0.587 0.673 0.303 0.632
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.494) (0.507) (0.533) (0.523) (0.532)
_______ _______ _______ _______ _______
Total dividends and distributions (0.494) (0.507) (0.533) (0.523) (0.532)
_______ _______ _______ _______ _______
Net asset value, end of period $11.140 $11.330 $11.250 $11.110 $11.330
_______ _______ _______ _______ _______
Total Return (1) 2.78% 5.32% 6.15% 2.68% 5.83%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $92,726 $98,326 $87,591 $95,951 $105,773
Ratio of expenses to average net assets (2) 1.10% 1.04% 1.02% 1.02% 1.04%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly (2) 1.18% 1.14% 1.06% 1.06% 1.13%
Ratio of net investment income to average net assets 4.44% 4.48% 4.72% 4.60% 4.80%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.36% 4.38% 4.68% 4.56% 4.71%
Portfolio turnover 7% 17% 3% 26% 46%
___________________________________________________________________________________________________________________________________
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in
effect.
(2) The "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and
expenses paid indirectly" have been restated. The Fund participates in inverse floater programs where it has transferred its own
bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount
equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust
in consideration of the conveyance of the municipal bonds to the trust. Previously, the Fund treated this transaction as a sale
of the bonds and a purchase of inverse floating rate securities. Under Statement of Financial Accounting Standards No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the transfer of the bonds is not
considered a sale, but rather a form of financing for accounting purposes. The ratios in the table above have been restated to
include interest and related expenses which include, but are not limited to, interest expense, remarketing fees, liquidity fees,
and trustees' fees. Previously, interest and related expenses were not included in the "Ratio of expenses to average net assets"
and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly." Prior to the
restatements, these ratios were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Ratio of expenses to average net assets 0.86% 0.88% 0.90% 0.90% 0.90%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 0.94% 0.98% 0.94% 0.94% 0.99%
See accompanying notes
22
Delaware Tax-Free Florida Insured Fund Class B (Restated)
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.330 $11.260 $11.120 $11.330 $11.230
Income (loss) from investment operations:
Net investment income 0.411 0.422 0.448 0.437 0.445
Net realized and unrealized gain (loss) on investments (0.180) 0.070 0.140 (0.210) 0.100
_______ _______ _______ _______ _______
Total from investment operations 0.231 0.492 0.588 0.227 0.545
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.411) (0.422) (0.448) (0.437) (0.445)
_______ _______ _______ _______ _______
Total dividends and distributions (0.411) (0.422) (0.448) (0.437) (0.445)
_______ _______ _______ _______ _______
Net asset value, end of period $11.150 $11.330 $11.260 $11.120 $11.330
_______ _______ _______ _______ _______
Total Return (1) 2.11% 4.45% 5.36% 2.00% 5.01%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,323 $5,532 $5,002 $5,800 $5,223
Ratio of expenses to average net assets (2) 1.85% 1.79% 1.77% 1.77% 1.79%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly (2) 1.93% 1.89% 1.81% 1.81% 1.88%
Ratio of net investment income to average net assets 3.69% 3.74% 3.97% 3.85% 4.05%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.61% 3.64% 3.93% 3.81% 3.96%
Portfolio turnover 7% 17% 3% 26% 46%
___________________________________________________________________________________________________________________________________
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in
effect.
(2) The "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and
expenses paid indirectly" have been restated. The Fund participates in inverse floater programs where it has transferred its own
bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount
equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust
in consideration of the conveyance of the municipal bonds to the trust. Previously, the Fund treated this transaction as a sale
of the bonds and a purchase of inverse floating rate securities. Under Statement of Financial Accounting Standards No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the transfer of the bonds is not
considered a sale, but rather a form of financing for accounting purposes. The ratios in the table above have been restated to
include interest and related expenses which include, but are not limited to, interest expense, remarketing fees, liquidity fees,
and trustees' fees. Previously, interest and related expenses were not included in the "Ratio of expenses to average net assets"
and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly." Prior to the
restatements, these ratios were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Ratio of expenses to average net assets 1.61% 1.63% 1.65% 1.65% 1.65%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.69% 1.73% 1.69% 1.69% 1.74%
See accompanying notes
(continues) 23
Financial highlights
Delaware Tax-Free Florida Insured Fund Class C (Restated)
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.330 $11.260 $11.120 $11.330 $11.240
Income (loss) from investment operations:
Net investment income 0.410 0.422 0.448 0.437 0.447
Net realized and unrealized gain (loss) on investments (0.180) 0.070 0.140 (0.210) 0.090
_______ _______ _______ _______ _______
Total from investment operations 0.230 0.492 0.588 0.227 0.537
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.410) (0.422) (0.448) (0.437) (0.447)
_______ _______ _______ _______ _______
Total dividends and distributions (0.410) (0.422) (0.448) (0.437) (0.447)
_______ _______ _______ _______ _______
Net asset value, end of period $11.150 $11.330 $11.260 $11.120 $11.330
_______ _______ _______ _______ _______
Total Return(1) 2.10% 4.45% 5.36% 2.00% 4.93%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,564 $3,311 $1,088 $846 $560
Ratio of expenses to average net assets (2) 1.85% 1.79% 1.77% 1.77% 1.79%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly (2) 1.93% 1.89% 1.81% 1.81% 1.88%
Ratio of net investment income to average net assets 3.69% 3.74% 3.97% 3.85% 4.05%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.61% 3.64% 3.93% 3.81% 3.96%
Portfolio turnover 7% 17% 3% 26% 46%
___________________________________________________________________________________________________________________________________
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in
effect.
(2) The "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and
expenses paid indirectly" have been restated. The Fund participates in inverse floater programs where it has transferred its own
bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount
equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust
in consideration of the conveyance of the municipal bonds to the trust. Previously, the Fund treated this transaction as a sale
of the bonds and a purchase of inverse floating rate securities. Under Statement of Financial Accounting Standards No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the transfer of the bonds is not
considered a sale, but rather a form of financing for accounting purposes. The ratios in the table above have been restated to
include interest and related expenses which include, but are not limited to, interest expense, remarketing fees, liquidity fees,
and trustees' fees. Previously, interest and related expenses were not included in the "Ratio of expenses to average net assets"
and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly." Prior to the
restatements, these ratios were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
__________________________________________________________________________________________________________________________________
Ratio of expenses to average net assets 1.61% 1.63% 1.65% 1.65% 1.65%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.69% 1.73% 1.69% 1.69% 1.74%
See accompanying notes
24
Delaware Tax-Free New York Fund Class A
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $10.700 $10.470 $10.220 $10.340 $10.350
Income (loss) from investment operations:
Net investment income 0.449 0.453 0.479 0.484 0.503
Net realized and unrealized gain (loss) on investments (0.150) 0.230 0.250 (0.120) (0.010)
_______ _______ _______ _______ _______
Total from investment operations 0.299 0.683 0.729 0.364 0.493
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.449) (0.453) (0.479) (0.484) (0.503)
_______ _______ _______ _______ _______
Total dividends and distributions (0.449) (0.453) (0.479) (0.484) (0.503)
_______ _______ _______ _______ _______
Net asset value, end of period $10.550 $10.700 $10.470 $10.220 $10.340
_______ _______ _______ _______ _______
Total Return (1) 2.90% 6.65% 7.26% 3.56% 4.98%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $13,519 $13,153 $11,523 $11,436 $ 9,490
Ratio of expenses to average net assets (2) 0.65% 0.66% 0.50% 0.50% 0.50%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.09% 1.12% 1.02% 1.05% 1.15%
Ratio of net investment income to average net assets 4.28% 4.29% 4.60% 4.65% 4.98%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.84% 3.83% 4.08% 4.10% 4.33%
Portfolio turnover 20% 13% 26% 64% 43%
___________________________________________________________________________________________________________________________________
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been
in effect.
(2) Ratios for the years ended August 31, 2003 and 2002, including fees paid indirectly in accordance with Securities and Exchange
Commission rules, were 0.51%.
See accompanying notes
(continues) 25
Financial highlights
Delaware Tax-Free New York Fund Class B
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $10.670 $10.450 $10.200 $10.330 $10.330
Income (loss) from investment operations:
Net investment income 0.370 0.374 0.401 0.406 0.426
Net realized and unrealized gain (loss) on investments (0.140) 0.220 0.250 (0.130) -
_______ _______ _______ _______ _______
Total from investment operations 0.230 0.594 0.651 0.276 0.426
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.370) (0.374) (0.401) (0.406) (0.426)
_______ _______ _______ _______ _______
Total dividends and distributions (0.370) (0.374) (0.401) (0.406) (0.426)
_______ _______ _______ _______ _______
Net asset value, end of period $10.530 $10.670 $10.450 $10.200 $10.330
_______ _______ _______ _______ _______
Total Return (1) 2.23% 5.77% 6.47% 2.69% 4.30%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,858 $3,023 $2,858 $3,238 $3,352
Ratio of expenses to average net assets (2) 1.40% 1.41% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.84% 1.87% 1.77% 1.80% 1.90%
Ratio of net investment income to average net assets 3.53% 3.54% 3.85% 3.90% 4.23%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.09% 3.08% 3.33% 3.35% 3.58%
Portfolio turnover 20% 13% 26% 64% 43%
___________________________________________________________________________________________________________________________________
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been
in effect.
(2) Ratios for the years ended August 31, 2003 and 2002, including fees paid indirectly in accordance with Securities and Exchange
Commission rules, were 1.26%.
See accompanying notes
26
Delaware Tax-Free New York Fund Class C
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Year Ended
______________________________________________________________
8/31/06 8/31/05 8/31/04 8/31/03 8/31/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $10.670 $10.450 $10.200 $10.320 $10.330
Income (loss) from investment operations:
Net investment income 0.370 0.376 0.401 0.406 0.426
Net realized and unrealized gain (loss) on investments (0.140) 0.220 0.250 (0.120) (0.010)
_______ _______ _______ _______ _______
Total from investment operations 0.230 0.596 0.651 0.286 0.416
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.370) (0.376) (0.401) (0.406) (0.426)
_______ _______ _______ _______ _______
Total dividends and distributions (0.370) (0.376) (0.401) (0.406) (0.426)
_______ _______ _______ _______ _______
Net asset value, end of period $10.530 $10.670 $10.450 $10.200 $10.320
_______ _______ _______ _______ _______
Total Return (1) 2.23% 5.80% 6.47% 2.79% 4.20%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,068 $886 $2,329 $2,828 $1,115
Ratio of expenses to average net assets (2) 1.40% 1.41% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.84% 1.87% 1.77% 1.80% 1.90%
Ratio of net investment income to average net assets 3.53% 3.54% 3.85% 3.90% 4.23%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.09% 3.08% 3.33% 3.35% 3.58%
Portfolio turnover 20% 13% 26% 64% 43%
___________________________________________________________________________________________________________________________________
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been
in effect.
(2) Ratios for the years ended August 31, 2003 and 2002, including fees paid indirectly in accordance with Securities and Exchange
Commission rules, were 1.26%.
See accompanying notes
27
Notes to financial statements
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
August 31, 2006
Voyageur Mutual Funds (the "Voyageur Trust") is organized as a Delaware
statutory trust and offers five series: Delaware Minnesota High-Yield Municipal
Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free
California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free New York
Fund. Delaware Investments Municipal Trust (the "Delaware Trust", and together
with the Voyageur Trust, collectively, the "Trusts") is organized as a Delaware
statutory trust and offers one series: Delaware Tax-Free Florida Insured Fund.
These financial statements and the related notes pertain to Delaware Tax-Free
Florida Insured Fund and Delaware Tax-Free New York Fund (each a "Fund" or,
collectively, as the "Funds"). The Trusts are open-end investment companies.
The Funds are considered non-diversified under the Investment Company Act of
1940, as amended 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%. Class A share purchases
of $1,000,000 or more will incur a contingent deferred sales charge of up to 1%
if redeemed during the first two years, provided that, a financial advisor was
paid commission on the purchase of those shares. Class B shares are sold with a
contingent deferred sales charge that declines from 4% to zero depending upon
the period of time the shares are held. Class B shares will automatically
convert to Class A shares on a quarterly basis approximately eight years after
purchase. Class C shares are sold with a contingent deferred sales charge of
1%, if redeemed during the first twelve months.
The investment objective of Delaware Tax-Free Florida Insured Fund and Delaware
Tax-Free New York Fund is to seek a high a level of current income exempt from
federal income tax and the state personal income tax as is consistent with
preservation of capital. Florida does not currently have a state personal
income tax, and it has repealed its intangible personal property tax.
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, 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.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48).
FIN 48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. Although the Funds' tax
positions are currently being evaluated, management does not expect the
adoption of FIN 48 to have a material impact on the Funds' 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 gains (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.
Interest and Related Expenses - Interest and related expenses include, but are
not limited to interest expense, remarketing fees, liquidity fees, and
trustees' fees from the Delaware Tax-Free Florida Insured Fund's participation
in inverse floater programs where the Fund has transferred its own bonds to a
trust that issues floating rate securities and inverse floating rate securities
with an aggregate principal amount equal to the principal of the transferred
bond. The Fund receives the inverse floating rate securities and cash from the
trust in consideration of the conveyance of the municipal bonds to the trust.
The cash received is treated as a liability for accounting purposes. Interest
expense is recorded by the Fund based on the interest rate of the floating rate
securities. Remarketing fees, liquidity fees, and trustees' fees expenses are
recorded on the accrual basis.
For the year ended August 31, 2006, the Delaware Tax-Free Florida Insured Fund
had an average daily liability from the participation in inverse floater
programs of $7,500,000 and recorded interest expense at an average rate of
3.36%.
Other - Expenses directly attributable to a Fund are charged directly to that
Fund. Other expenses common to various funds within the
Delaware Investments(R) Family of Funds are generally allocated amongst such
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) for financial reporting purposes.
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
28
1. Significant Accounting Policies (continued)
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."
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates
In accordance with the terms of its respective investment management agreement,
each Fund pays Delaware Management Company (DMC), a series of Delaware
Management Business Trust and the investment manager, an annual fee based on
each Fund's average daily net assets as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
On the first $500 million 0.500% 0.550%
On the next $500 million 0.475% 0.500%
On the next $1.5 billion 0.450% 0.450%
In excess of $2.5 billion 0.425% 0.425%
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse each Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed specified percentages of average daily net assets as shown below:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
The operating expense limitation as a percentage of
average daily net assets (per annum) 0.62% 0.40%
Expiration date 12/29/05 12/29/05
Effective December 30, 2005, operating expense limitation
as a percentage of average daily net assets (per annum) 0.61% 0.40%
Expiration date 12/31/06 12/31/06
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. Each Fund pays
DSC a monthly fee computed at the annual rate of 0.04% of such Fund's average
daily net assets for accounting and administration services. Each Fund also
pays DSC a monthly fee based on the number of shareholder accounts for dividend
disbursing and transfer agent services.
Pursuant to a distribution agreement and distribution plan, each Fund pays
Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an
annual distribution and service fee not to exceed 0.25% of the average daily net
assets of the Class A shares and 1.00% of the average daily net assets of the
Class B and C shares.
At August 31, 2006, the Funds had liabilities payable to affiliates as
follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
Investment Management fee payable to DMC $36,560 $1,401
Dividend disbursing, transfer agent fees, accounting and
administration fees and other expenses payable to DSC 8,872 1,862
Distribution fees payable to DDLP 26,397 7,042
Other expenses payable to DMC and affiliates* 4,974 808
*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, the Fund bears the cost of
certain legal services, including internal legal services provided to the Funds
by DMC employees. For the year ended August 31, 2006, the Funds' were charged
for internal legal services provided by DMC as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
$5,965 $1,007
(continues) 29
Notes to financial statements
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates (continued)
For the year ended August 31, 2006, DDLP earned commissions on sales of Class A
shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
$18,631 $5,568
For the year ended August 31, 2006, DDLP received gross contingent deferred
sales charge commissions on redemption of each Fund's Class A, Class B and
Class C shares, respectively. These commissions were entirely used to offset
up-front commissions previously paid by DDLP to broker-dealers on sales of
Class A, Class B and Class C shares. The amounts were as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
Class A $ 46 $ -
Class B 3,271 1,204
Class C 509 130
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the
Trust. These officers and trustees are paid no compensation by the Funds.
3. Investments
For the year ended August 31, 2006, the Funds made purchases and sales of
investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
Purchases $ 6,735,815 $5,169,271
Sales 13,620,088 3,467,042
At August 31, 2006 the cost of investments and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
Cost of investments $92,057,261 $17,422,657
___________ ___________
Aggregate unrealized appreciation $ 4,779,316 $ 906,577
Aggregate unrealized depreciation (34,235) -
___________ ___________
Net unrealized appreciation $ 4,745,081 $ 906,577
___________ ___________
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. The tax character of dividends and
distributions paid during the years ended August 31, 2006 and 2005 was as
follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
________________________ ___________________
Year Ended Year Ended
8/31/06 8/31/05 8/31/06 8/31/05
_______ _______ _______ _______
Tax-exempt income $4,534,215 $4,400,282 $722,866 $685,440
As of August 31, 2006, the components of net assets on a tax basis were as
follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
____________________ _________________
Shares of beneficial interest $ 96,385,804 $17,766,839
Other temporary differences - (655)
Capital loss carryforwards (517,691) (216,360)
Post-October losses - (11,520)
Unrealized appreciation of investments 4,745,081 906,577
____________ ___________
Net assets $100,613,194 $18,444,881
____________ ___________
30
4. Dividend and Distribution Information (continued)
Post-October losses represent losses realized on investment transactions from
November 1, 2005 through August 31, 2006, that, in accordance with federal
income tax regulations, the Delaware Tax-Free New York Fund has elected to
defer and treat as having arisen in the following fiscal year.
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Delaware Tax-Free Florida
Insured Fund and Delaware Tax-Free New York Fund utilized $172,566 and $6,847,
respectively, of capital loss carryforwards from prior years in 2006. Capital
loss carryforward amounts remaining at August 31, 2006 expire as follows:
Delaware Tax-Free Delaware Tax-Free
Year of Expiration Florida Insured Fund New York Fund
__________________ ____________________ _________________
2008 $ 517,691 $ -
2009 - 216,360
____________ ________
Total $ 517,691 $216,360
____________ ________
5. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free
Florida Insured Fund New York Fund
________________________ ___________________
Year Ended Year Ended
8/31/06 8/31/05 8/31/06 8/31/05
Shares sold:
Class A 647,558 771,683 197,010 181,145
Class B 15,964 34,695 31,881 36,925
Class C 84,929 30,020 121,329 42,532
Shares issued from reorganization:
Class A _ 948,019 _ _
Class B _ 238,033 _
Class C _ 199,779 _ _
Shares issued upon reinvestment of
dividends and distributions:
Class A 190,022 149,719 38,341 35,395
Class B 5,154 4,348 4,007 4,632
Class C 6,206 3,014 3,813 1,966
__________ __________ _______ ________
949,833 2,379,310 396,381 302,595
__________ __________ _______ ________
Shares repurchased:
Class A (1,195,082) (973,048) (183,809) (87,166)
Class B (121,397) (233,220) (47,738) (31,706)
Class C (63,645) (37,307) (11,772) (184,316)
__________ __________ _______ ________
(1,380,124) (1,243,575) (243,319) (303,188)
__________ __________ _______ ________
Net increase (decrease) (430,291) 1,135,735 153,062 (593)
__________ __________ _______ ________
For the years ended August 31, 2006 and 2005, the following shares were
converted from Class B to Class A shares. The respective amounts are included
in Class B redemptions and Class A subscriptions in the tables above and the
Statements of Changes in Net Assets.
Year Ended Year Ended
8/31/06 8/31/05
Class B Class A Class B Class A
shares shares Amount shares shares Amount
______ ______ ______ ______ ______ ______
Delaware Tax-Free Florida Insured Fund 48,081 48,107 $534,582 62,454 62,490 $703,111
Delaware Tax-Free New York Fund 17,055 17,007 178,750 8,994 8,977 95,273
(continues) 31
Notes to financial statements
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
6. Fund Reorganization
Effective April 11, 2005, Delaware Tax-Free Florida Insured Fund (the "Fund")
acquired all of the assets and assumed all of the liabilities of Delaware
Tax-Free Florida Fund, an open-end investment company, pursuant to a Plan and
Agreement of Reorganization (the "Reorganization"). The shareholders of
Delaware Tax-Free Florida Fund received shares of the respective class of the
Fund equal to the aggregate net asset value of their shares prior to the
Reorganization based on the net asset value per share of the respective classes
of the Fund.
The Reorganization was treated as a non-taxable event and, accordingly, the
Fund's basis in the securities acquired reflected the historical cost basis as
of the date of transfer. The net assets, net unrealized appreciation and
accumulated net realized loss of Delaware Tax-Free Florida Fund as of the close
of business on April 8, 2005 were as follows:
Accumulated
Net Unrealized Net Realized
Net Assets Appreciation Losses
___________ ______________ ____________
Delaware Tax-Free Florida Fund $15,521,298 $648,070 $(515,360)*
*Includes prior capital loss carry forwards.
The net assets of the Fund prior to the Reorganization were $92,098,392. The
combined net assets of the Funds after the reorganization were $107,619,690.
7. Line of Credit
The Funds, along with certain other funds in the Delaware Investments(R)
Family of Funds (the "Participants"), participate in a $225,000,000 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 Participant's allocation of the entire
facility. The Participants may borrow up to a maximum of one third of their net
assets under the agreement. The Funds had no amounts outstanding as of August
31, 2006, or at any time during the year then ended.
8. Credit and Market Risks
The Funds concentrate their investments in securities issued by each
corresponding state's municipalities. The value of these investments may be
adversely affected by new legislation within the states, regional or local
economic conditions, and differing levels of supply and demand for municipal
bonds. Many municipalities insure repayment for their obligations. Although
bond insurance reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that market value may fluctuate for other reasons
and there is no assurance that the insurance company will meet its obligations.
These securities have been identified in the Statements of Net Assets.
The Funds may participate in inverse floater programs where they transfer their
own bonds to a trust that issues floating rate securities and inverse floating
rate securities ("inverse floaters") with an aggregate principal amount equal
to the principal of the transferred bonds. The inverse floaters received by the
Funds are derivative tax-exempt obligations 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 the inverse
floaters will generally be more volatile than other tax-exempt investments. A
Fund typically uses inverse floaters to adjust the duration of its portfolio.
Duration measures a portfolio's sensitivity to changes in interest rates. By
holding inverse floaters with a different duration than the underlying bonds
that the Fund transferred to the trust, the Fund seeks to adjust its
portfolio's sensitivity to changes in interest rates. A Fund may also invest in
inverse floaters to add additional income to the Fund or to adjust the Fund's
exposure to a specific segment of the yield curve. Such securities are
identified on the Statements of Net Assets.
The Funds may invest in advanced refunded bonds, escrow secured bonds or
defeased bonds. Under current federal tax laws and regulations, state and local
government borrowers are permitted to refinance outstanding bonds by issuing
new bonds. The issuer refinances the outstanding debt to either reduce interest
costs or to remove or alter restrictive covenants imposed by the bonds being
refinanced. A refunding transaction where the municipal securities are being
refunded within 90 days from the issuance of the refunding issue is known as a
"current refunding." "Advance refunded bonds" are bonds in which the refunded
bond issue remains outstanding for more than 90 days following the issuance of
the refunding issue. In an advance refunding, the issuer will use the proceeds
of a new bond issue to purchase high grade interest bearing debt securities
which are then deposited in an irrevocable escrow account held by an escrow
agent to secure all future payments of principal and interest and bond premium
of the advance refunded bond. Bonds are "escrowed to maturity" when the
proceeds of the refunding issue are deposited in an escrow account for
investment sufficient to pay all of the principal and interest on the original
interest payment and maturity dates. Bonds are considered "pre-refunded" when
the refunding issue's proceeds are escrowed only until a permitted call date or
dates on the refunded issue with the refunded issue being redeemed at that
time, including any required premium. Bonds become "defeased" when the rights
and interests of the bondholders and their lien on the pledged revenues or
other security under the terms of the bond contract are substituted with an
alternative source of revenues (the escrow securities) sufficient to meet
payments of principal and interest to maturity or to the first call dates.
Escrowed secured bonds will often receive a rating of AAA from Moody's
Investors Service, Inc., Standard & Poor's Ratings Group, and/or Fitch Ratings
due to the strong credit quality of the escrow securities and the irrevocable
nature of the escrow deposit agreement. The Delaware Tax-Free Florida Insured
Fund will purchase escrow secured bonds without additional insurance only where
the escrow is invested in securities of the U.S. government or agencies or
instrumentalities of the U.S. government.
32
8. Credit and Market Risks (continued)
Each Fund may invest up to 15% of its total assets in illiquid securities,
which may include securities with contractual restrictions on resale,
securities exempt from registration under Rule 144A of the Securities Act of
1933, as amended, and other securities which may not be readily marketable. The
relative illiquidity of these securities may impair each Fund from disposing of
them in a timely manner and at a fair price when it is necessary or desirable
to do so. While maintaining oversight, the Fund's Board of Trustees has
delegated to DMC the day-to-day functions of determining whether individual
securities are liquid for purposes of each Fund's limitation on investments in
illiquid assets. At August 31, 2006, there were no Rule 144A securities and no
securities have been determined to be illiquid under the Funds' Liquidity
Procedures.
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 the Funds' existing
contracts and expects the risk of loss to be remote.
10. Restatement of Financial Statements
The Delaware Tax-Free Florida Insured Fund's financial statements and related
disclosures and financial highlights have been restated. The Fund participates
in inverse floater programs where it has transferred its own bonds to a trust
that issues floating rate securities and inverse floating rate securities with
an aggregate principal amount equal to the principal of the transferred bond.
The Fund receives the inverse floating rate securities and cash from the trust
in consideration of the conveyance of the municipal bonds to the trust.
Previously, the Fund treated this transaction as a sale of the bonds and as a
purchase of the inverse floating rate securities. Under Statement of Financial
Accounting Standards No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities (FAS 140), the transfer of
the bonds is not considered a sale, but rather a form of financing for
accounting purposes. As a result, the Fund restated its financial statements to
include the original transferred bond, and the corresponding obligation,
interest and related expenses associated with participating in these inverse
floater programs. The result of the restatements was an increase in assets and
liabilities and corresponding increases in interest income and expenses. These
changes did not impact the net asset value, total return, or net investment
income of the Fund. The effects of the restatement on the financial highlights
are disclosed therein. The following represents the previously reported
information in the financial statements and the restated information:
Previously Reported Restated
_____________________ _______________
Statement of Net Assets
_______________________
Total market value of securities $ 96,802,342 $104,302,342
Other assets [liabilities], net 3,810,852 (3,689,148)
Total net assets 100,613,194 100,613,194
Investments at cost 92,057,261 99,557,261
Statement of Assets and Liabilities
___________________________________
Investments at market $ 96,802,342 $104,302,342
Interest receivable 1,751,492 1,824,306
Total assets 103,322,334 110,895,148
Liability for Inverse Floater programs - 7,500,000
Interest and related expense payable for Inverse Floater
programs - 72,814
Total liabilities 2,709,140 10,281,954
Total net assets 100,613,194 100,613,194
Investments at cost 92,057,261 99,557,261
Statement of Operations
_______________________
Interest income $ 5,490,926 $ 5,742,714
Interest and related expense - 251,788
Subtotal of gross expenses 1,038,443 1,290,231
Total operating expenses 956,711 1,208,499
Net investment income 4,534,215 4,534,215
Footnotes
_________
Note 1-added accounting policy disclosure for Interest and related expenses
Note 8-added additional information related to Inverse Floater programs
(continues) 33
Notes to financial statements
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
11. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2006, each Fund designates distributions
paid during the year as follows:
(A) (B) (C)
Long Term Ordinary Tax-
Capital Gains Income Exempt Total
Distributions Distributions Distributions Distributions
(Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis)
_____________ _____________ _____________ _____________
Delaware Tax-Free Florida Insured Fund - - 100% 100%
Delaware Tax-Free New York Fund - - 100% 100%
(A), (B), and (C) are based on a percentage of each Fund's total distributions.
34
Report of independent
registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Investments Municipal Trust - Delaware Tax-Free
Florida Insured Fund
Voyager Mutual Funds - Delaware Tax-Free New York
Fund
We have audited the accompanying statements of net assets and statements of
assets and liabilities of Delaware Tax-Free Florida Insured Fund (the sole
series of Delaware Investments Municipal Trust) and Delaware Tax-Free New York
Fund (one of the series constituting Voyageur Mutual Funds) (the "Funds") as of
August 31, 2006, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of August 31, 2006, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Tax-Free Florida Insured Fund of Delaware Investments Municipal Trust
and the Delaware Tax-Free New York Fund of Voyageur Mutual Funds at August 31,
2006, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the five years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
As discussed in Note 10, the financial statements and financial highlights of
the Delaware Tax-Free Florida Insured Fund have been restated to correct the
accounting treatment relating to participation in inverse floater programs in
accordance with Statement of Financial Accounting Standards No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.
/s/ Ernst & Young LLP
October 11, 2006
except for Note 10, as to which the date is
January 2, 2007
35
Other Fund information
Delaware Tax-Free Florida Insured / Tax-Free New York Funds
Board Consideration of Delaware Tax-Free Florida Insured Fund and Delaware
Tax-Free New York Fund Agreement
At a meeting held on May 17-18, 2006 (the "Annual Meeting"), the Board of
Trustees, including a majority of disinterested or independent Trustees,
approved the renewal of the Investment Advisory Agreements for the Delaware
Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund (each a "Fund"
and collectively the "Funds"). In making its decision, the Board considered
information furnished throughout the year at regular Board meetings, as well as
information prepared specifically in connection with the Annual Meeting.
Information furnished and discussed throughout the year included reports
detailing Fund performance, investment strategies, expenses, compliance matters
and other services provided by Delaware Management Company ("DMC"), the
investment advisor. Information furnished specifically in connection with the
Annual Meeting included materials provided by DMC and its affiliates ("Delaware
Investments") concerning, among other things, the level of services provided to
the Funds, the costs of such services to the Funds, economies of scale and the
financial condition and profitability of Delaware Investments. In addition, in
connection with the Annual Meeting, the Board considered independent historical
and comparative reports prepared by Lipper Inc. ("Lipper"), an independent
statistical compilation organization. The Board also considered industry
comparative information presented by representatives from Lipper. The Lipper
reports compared each Fund's investment performance and expenses with those of
other comparable mutual funds. The Board also received certain supplemental
information regarding management's policy with respect to advisory fee levels
and its philosophy with respect to breakpoints; the structure of portfolio
manager compensation; and any constraints or limitations on the availability of
securities in certain investment styles which might inhibit DMC's ability to
fully invest in accordance with Fund policies.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel and representatives from
Lipper. At the meeting with representatives from Lipper, Mr. Driscoll, then
Chairman of the Delaware Investments Family of Funds, and Chairman and Chief
Executive Officer of the investment advisor, was present to respond to questions
by Lipper and the independent Trustees. While the Board considered the
Investment Advisory Agreements for all of the funds in the Delaware Investments
Family of Funds at the same Board meeting, information was provided and
considered by the Board for each fund individually. In approving the continuance
of the Investment Advisory Agreement for each Fund, the Board, including a
majority of independent Trustees, determined that the existing advisory fee
structure was fair and reasonable and that the continuance of the Investment
Advisory Agreement was in the best interests of the Fund and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's deliberations and determination,
including those relating to the selection of the investment advisor and the
approval of the advisory fee.
Nature, Extent and Quality of Service. Consideration was given to the services
provided by Delaware Investments to the Funds and their shareholders. In
reviewing the nature, extent and quality of services, the Board emphasized
reports furnished to it throughout the year at regular Board meetings covering
matters such as the relative performance of the Funds, compliance of portfolio
managers with the investment policies, strategies and restrictions for the
Funds, the compliance of management personnel with the Code of Ethics adopted
throughout the Delaware Investments Family of Funds complex, the adherence to
fair value pricing procedures as established by the Board and the accuracy of
net asset value calculations. The Board noted that it was pleased with the
current staffing of the Funds' investment advisor and management's efforts to
strengthen and deepen portfolio management teams during the past year, the
emphasis on research and the compensation system for advisory personnel.
Favorable consideration was given to DMC's efforts to maintain, and in some
instances increase, financial and human resources committed to fund matters.
Other factors taken into account by the Board were Delaware Investments'
preparedness for, and response to, legal and regulatory matters. The Board also
considered the transfer agent and shareholder services provided to Fund
shareholders by Delaware Investments' affiliate, Delaware Service Company, Inc.
("DSC"), noting DSC's commitment to maintain a high level of service in keeping
with its past receipt of the DALBAR Pyramid Award, and the continuing
expenditures by Delaware Investments to improve the delivery of shareholder
services. Additionally, the Board noted the extent of benefits provided to Fund
shareholders for being part of the Delaware Investments Family of Funds,
including the privilege to exchange investments between the same class of shares
of funds without a sales charge, the ability to reinvest Fund dividends into
other funds and the privilege to combine holdings in other funds to obtain a
reduced sales charge. The Board was satisfied with the nature, extent and
quality of the overall services provided by Delaware Investments.
Investment Performance. The Board considered the investment performance of DMC
and the Funds. The Board was pleased with DMC's investment performance. The
Board placed significant emphasis on the investment performance of the Funds in
view of its importance to shareholders. While consideration was given to
performance reports and discussions with portfolio managers at Board meetings
throughout the year, particular weight was given to the Lipper reports furnished
for the Annual Meeting. The Lipper reports prepared for each Fund showed the
investment performance of its Class A shares in comparison to a group of similar
funds as selected by Lipper (the "Performance Universe"). A fund with the best
performance is ranked first, and a fund with the poorest performance is ranked
last. The highest/best performing 25% of funds in the Performance Universe make
up the first quartile; the next 25% - the second quartile; the next 25% - the
third quartile; and the poorest/worst performing 25% of funds in the Performance
Universe make up the fourth quartile. Comparative annualized performance for the
Funds was shown for the past one, three, five and 10 year periods ended January
31, 2006. The Board noted its objective that each Fund's performance for the
periods considered be at or above the median of its Performance Universe. The
following paragraphs summarize the performance results for each Fund and the
Board's view of such performance.
36
Board Consideration of Delaware Tax-Free Florida Insured Fund and Delaware
Tax-Free New York Fund Agreement (continued)
Delaware Tax-Free Florida Insured Fund - The Performance Universe for the Fund
consisted of the Fund and all retail and institutional Florida insured municipal
debt funds as selected by Lipper. The Lipper report comparison showed that the
Fund's total return for the one, three, five and 10 year periods was in the
first quartile of such Performance Universe. The Board was satisfied with such
performance.
Delaware Tax-Free New York Fund - The Performance Universe for the Fund
consisted of the Fund and all retail and institutional New York municipal debt
funds as selected by Lipper. The Lipper report comparison showed that the Fund's
total return for the one, three and five year periods was in the first quartile
of such Performance Universe. The report further showed that the Fund's total
return for the 10 year period was in the second quartile. The Board was
satisfied with such performance.
Comparative Expenses. The Board considered expense data for the Delaware
Investments Family of Funds. Management provided the Board with information on
pricing levels and fee structures for the Funds. The Board focused particularly
on the comparative analysis of the management fees and total expense ratios of
each Fund and the management fees and expense ratios of a group of similar funds
as selected by Lipper (the "Expense Group"). In reviewing comparative costs,
each Fund's contractual management fee and the actual management fee incurred by
the Fund were compared with the contractual management fees (assuming all funds
in the Expense Group were similar in size to the Fund) and actual management
fees (as reported by each fund) of other funds within the Expense Group, taking
into effect any applicable breakpoints and fee waivers. Each Fund's total
expenses were also compared with those of its Expense Group. The Lipper total
expenses, for comparative consistency, were shown by Lipper for Class A shares
and compared total expenses including 12b-1 and non-12b-1 service fees. The
Board also considered fees paid to Delaware Investments for non-management
services. The Board noted its objective to limit each Fund's total expense ratio
to an acceptable range as compared to the median of the Expense Group. The
following paragraph summarizes the expense results for each Fund and the Board's
view of such expenses.
Delaware Tax-Free Florida Insured Fund - The expense comparisons for the Fund
showed that its actual management fee was in the quartile with the lowest
expenses of its Expense Group and its total expenses were in the quartile with
the second lowest expenses of its Expense Group. The Board was satisfied with
the management fees and total expenses of the Fund in comparison to its Expense
Group as shown in the Lipper report.
Delaware Tax-Free New York Fund - The expense comparisons for the Fund showed
that its actual management fee and total expenses were in the quartile with the
lowest expenses of its Expense Group. The Board was satisfied with the
management fees and total expenses of the Fund in comparison to its Expense
Group as shown in the Lipper report.
Management Profitability. The Board considered the level of profits, if any,
realized by Delaware Investments in connection with the operation of the Funds.
In this respect, the Board reviewed the Investment Management Profitability
Analysis that addressed the overall profitability of Delaware Investments'
business in providing management and other services to each of the individual
funds and the Delaware Investments Family of Funds as a whole. Specific
attention was given to the methodology followed in allocating costs for the
purpose of determining profitability. Management stated that the level of
profits of Delaware Investments, to a certain extent, reflected operational cost
savings and efficiencies initiated by Delaware Investments. The Board considered
Delaware Investments' expenditures to improve services provided to fund
shareholders and to meet additional regulatory and compliance requirements
resulting from recent SEC initiatives. The Board also considered the extent to
which Delaware Investments might derive ancillary benefits from fund operations,
including the potential for procuring additional business as a result of the
prestige and visibility associated with its role as service provider to the
Delaware Investments Family of Funds, the benefits from allocation of fund
brokerage to improve trading efficiencies and the use of "soft" commission
dollars to pay for proprietary and non-proprietary research. The Board did not
find that the level of profits realized by Delaware Investments from the
relationships with the Funds and the Delaware Investments Family of Funds
required negotiation of reduction of fees.
Economies of Scale. The Trustees considered whether economies of scale are
realized by Delaware Investments as each Fund's assets increase and the extent
to which any economies of scale are reflected in the level of management fees
charged. The Trustees took into account the standardized advisory fee pricing
and structure approved by the Board and shareholders as part of a complex-wide
shareholder meeting conducted in 1998/1999. At that time, Delaware Investments
introduced breakpoints to account for management economies of scale. The Board
noted that the fee under each Fund's management contract fell within the
standard structure. Although the Funds have not reached a size at which they can
take advantage of breakpoints, the Board recognized that the fees were
structured so that when the Funds grow, economies of scale may be shared.
37
Board of trustees/directors
and officers addendum
Delaware Investments(R) Family of Funds
A mutual fund is governed by a Board of Trustees/Directors ("Trustees"), which
has oversight responsibility for the management of a fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor, and others who perform services for the
fund. The independent fund trustees, in particular, are advocates for
shareholder interests. Each trustee has served in that capacity since he or she
was elected to or appointed to the Board of Trustees, and will continue to serve
until his or her retirement or the election of a new trustee in his or her
place. The following is a list of the Trustees and Officers with certain
background and related information.
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Interested Trustees
____________________________________________________________________________________________________________________________________
Patrick P. Coyne (1) Chairman, Chairman and Trustee Patrick P. Coyne has served in 84 None
2005 Market Street President, since August 16, 2006 various executive capacities
Philadelphia, PA Chief Executive at different times at
19103 Officer, and President and Delaware Investments. (2)
Trustee Chief Executive Officer
April 14, 1963 since August 1, 2006
____________________________________________________________________________________________________________________________________
Independent Trustees
____________________________________________________________________________________________________________________________________
Thomas L. Bennett Trustee Since Private Investor - 84 None
2005 Market Street March 2005 (March 2004-Present)
Philadelphia, PA
19103 Investment Manager -
Morgan Stanley & Co.
October 4, 1947 (January 1984-March 2004)
____________________________________________________________________________________________________________________________________
John A. Fry Trustee Since President - 84 Director -
2005 Market Street January 2001 Franklin & Marshall College Community Health
Philadelphia, PA (June 2002-Present) Systems
19103
Executive Vice President - Director -
May 28, 1960 University of Pennsylvania Allied Barton
(April 1995-June 2002) Security Holdings
____________________________________________________________________________________________________________________________________
Anthony D. Knerr Trustee Since Founder and Managing Director - 84 None
2005 Market Street April 1990 Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990-Present)
December 7, 1938
____________________________________________________________________________________________________________________________________
Lucinda S. Landreth Trustee Since Chief Investment Officer - 84 None
2005 Market Street March 2005 Assurant, Inc.
Philadelphia, PA (Insurance)
19103 (2002-2004)
June 24, 1947
____________________________________________________________________________________________________________________________________
Ann R. Leven Trustee Since Consultant - 84 Director and
2005 Market Street September 1989 ARL Associates Audit Committee
Philadelphia, PA (Financial Planning) Chairperson - Andy
19103 (1983-Present) Warhol Foundation
November 1, 1940 Director and Audit
Committee Member -
Systemax, Inc.
____________________________________________________________________________________________________________________________________
38
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Independent Trustees (continued)
____________________________________________________________________________________________________________________________________
Thomas F. Madison Trustee Since President and Chief 84 Director -
2005 Market Street May 1997 (3) Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993-Present)
Director and Audit
Committee Member -
Digital River, Inc.
Director and Audit
Committee Member -
Rimage
Corporation
Director - Valmont
Industries, Inc.
____________________________________________________________________________________________________________________________________
Janet L. Yeomans Trustee Since Vice President 84 None
2005 Market Street April 1999 (January 2003-Present)
Philadelphia, PA and Treasurer
19103 (January 2006-Present)
3M Corporation
July 31, 1948
Ms. Yeomans has held
various management positions
at 3M Corporation since 1983.
____________________________________________________________________________________________________________________________________
J. Richard Zecher Trustee Since Founder - 84 Director and Audit
2005 Market Street March 2005 Investor Analytics Committee Member -
Philadelphia, PA (Risk Management) Investor Analytics
19103 (May 1999-Present)
Director and Audit
July 3, 1940 Founder - Committee Member -
Sutton Asset Management Oxigene, Inc.
(Hedge Fund)
(September 1998-Present)
____________________________________________________________________________________________________________________________________
Officers
____________________________________________________________________________________________________________________________________
David F. Connor Vice President, Vice President since David F. Connor has served as 84 None (4)
2005 Market Street Deputy General September 21, 2000 Vice President and Deputy
Philadelphia, PA Counsel, and Secretary General Counsel of
19103 and Secretary since Delaware Investments
October 2005 since 2000.
December 2, 1963
____________________________________________________________________________________________________________________________________
David P. O'Connor Senior Vice Senior Vice President, David P. O'Connor has served in 84 None (4)
2005 Market Street President, General Counsel, and various executive and legal
Philadelphia, PA General Counsel, Chief Legal Officer capacities at different times
19103 and Chief since at Delaware Investments.
Legal Officer October 2005
February 21, 1966
____________________________________________________________________________________________________________________________________
John J. O'Connor Senior Vice President Treasurer John J. O'Connor has served in 84 None (4)
2005 Market Street and Treasurer since various executive capacities
Philadelphia, PA February 2005 at different times at
19103 Delaware Investments.
June 16, 1957
____________________________________________________________________________________________________________________________________
Richard Salus Senior Chief Financial Richard Salus has served in 84 None (4)
2005 Market Street Vice President Officer since various executive capacities
Philadelphia, PA and November 1, 2006 at different times at
19103 Chief Financial Delaware Investments.
Officer
October 4, 1963
____________________________________________________________________________________________________________________________________
(1) Patrick P. Coyne is considered to be an "Interested Trustee" because he is an executive officer of the Fund's(s') investment
advisor.
(2) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund's(s')
investment advisor, principal underwriter, and its transfer agent.
(3) In 1997, several funds managed by Voyageur Fund Managers, Inc. (the "Voyageur Funds") were incorporated into the Delaware
Investments Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997.
(4) David F. Connor, David P. O'Connor, John J. O'Connor, and Richard Salus serve in similar capacities for the six portfolios of
the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
John J. O'Connor also serves in a similar capacity for Lincoln Variable Insurance Products Trust, which has the same investment
advisor as the registrant.
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is
available, without charge, upon request by calling 800 523-1918.
39
About the organization
This annual report is for the information of Delaware Tax-Free Florida Insured
Fund and Delaware Tax-Free New York Fund shareholders, but it may be used with
prospective investors when preceded or accompanied by a current prospectus for
Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund and
the Delaware Investments(R) Performance Update for the most recently completed
calendar quarter. The prospectus sets forth details about charges, expenses,
investment objectives, and operating policies of the Funds. You should read the
prospectus carefully before you invest. The figures in this report represent
past results that are not a guarantee of future results. The return and
principal value of an investment in the Fund will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Board of trustees
Patrick P. Coyne
Chairman, President, and
Chief Executive Officer
Delaware Investments Family of
Funds Philadelphia, PA
Thomas L. Bennett
Private Investor
Rosemont, PA
John A. Fry
President
Franklin & Marshall College
Lancaster, PA
Anthony D. Knerr
Founder and Managing Director
Anthony Knerr & Associates
New York, NY
Lucinda S. Landreth
Former Chief Investment Officer
Assurant, Inc.
Philadelphia, PA
Ann R. Leven
Consultant
ARL Associates
New York, NY
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
Affiliated officers
David F. Connor
Vice President, Deputy General Counsel,
and Secretary
Delaware Investments Family of Funds
Philadelphia, PA
David P. O'Connor
Senior Vice President, General Counsel,
and Chief Legal Officer
Delaware Investments Family of Funds
Philadelphia, PA
John J. O'Connor
Senior Vice President and Treasurer
Delaware Investments Family of Funds
Philadelphia, PA
Richard Salus
Senior Vice President and
Chief Financial Officer
Delaware Investments Family of Funds
Philadelphia, PA
Contact information
Investment manager
Delaware Management Company, a series
of Delaware Management Business Trust
Philadelphia, PA
National distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder servicing, dividend
disbursing, and transfer agent
Delaware Service Company, Inc.
2005 Market Street
Philadelphia, PA 19103-7094
For shareholders
800 523-1918
For securities dealers and financial
institutions representatives only
800 362-7500
Web site
www.delawareinvestments.com
Delaware Investments is the marketing name of Delaware Management Holdings, Inc.
and its subsidiaries.
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 are 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, D.C.; information on the
operation of the Public Reference Room may be obtained by calling 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.
40
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> Visit www.delawareinvestments.com/edelivery
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Register for Account Access today! Please visit us at
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Access.
Please call our Shareholder Service Center at 800 523-1918 Monday through Friday
from 8:00 a.m. to 7:00 p.m., Eastern Time, for assistance with any questions.
[DELAWARE INVESTMENTS LOGO]
(914) Printed in the USA
AR-FLNY [8/06] CGI 1/07 MF-06-09-023 PO11530
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on Delaware Investments' internet website at www.delawareinvestments.com. Any
amendments to the Code of Business Ethics, and information on any waiver from
its provisions granted by the registrant, will also be posted on this website
within five business days of such amendment or waiver and will remain on the
website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal
accounting officer, controller, public accountant, auditor, or person performing
similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that each
member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any committee thereof, accept directly or indirectly any consulting, advisory
or other compensatory fee from the issuer; or (ii) be an "interested person" of
the registrant as defined in Section 2(a)(19) of the Investment Company Act of
1940.
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Thomas L. Bennett (1)
Thomas F. Madison
Janet L. Yeomans (1)
J. Richard Zecher
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
__________
The aggregate fees billed for services provided to the registrant by its
independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $12,100 for
the fiscal year ended August 31, 2006.
____________________
(1) The instructions to Form N-CSR/A require disclosure on the relevant
experience of persons who qualify as audit committee financial experts based on
"other relevant experience." The Board of Trustees/Directors has determined that
Mr. Bennett qualifies as an audit committee financial expert by virtue of his
education, Chartered Financial Analyst designation, and his experience as a
credit analyst, portfolio manager and the manager of other credit analysts and
portfolio managers. The Board of Trustees/Directors has determined that Ms.
Yeomans qualifies as an audit committee financial expert by virtue of her
education and experience as the Treasurer of a large global corporation.
The aggregate fees billed for services provided to the registrant by its
independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $39,000 for
the fiscal year ended August 31, 2005.
(b) Audit-related fees.
__________________
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended August 31, 2006.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $28,300 for the registrant's fiscal year ended
August 31, 2006. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of report concerning
transfer agent's system of internal accounting control pursuant to Rule 17Ad-13
of the Securities Exchange Act; and issuance of agreed upon procedures reports
to the registrant's Board in connection with the pass-through of internal legal
cost relating to the operations of the registrant; and preparation of Report on
Controls Placed in Operation and Tests of Operating Effectiveness Relating to
the Retirement Plan Services Division ("SAS 70 report").
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended August 31, 2005.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $33,875 for the registrant's fiscal year ended
August 31, 2005. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of report concerning
transfer agent's system of internal accounting control pursuant to Rule 17Ad-13
of the Securities Exchange Act; and issuance of agreed upon procedures reports
to the registrant's Board in connection with the annual transfer agent and fund
accounting service agent contract renewals and the pass-through of internal
legal cost relating to the operations of the registrant.
(c) Tax fees.
________
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $9,200 for the fiscal year
ended August 31, 2006. The percentage of these fees relating to services
approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's investment adviser and other
service providers under common control with the adviser and that relate directly
to the operations or financial reporting of the registrant were $0 for the
registrant's fiscal year ended August 31, 2006.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $7,700 for the fiscal year
ended August 31, 2005. The percentage of these fees relating to services
approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's investment adviser and other
service providers under common control with the adviser and that relate directly
to the operations or financial reporting of the registrant were $0 for the
registrant's fiscal year ended August 31, 2005.
(d) All other fees.
______________
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended August 31, 2006.
The aggregate fees billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended
August 31, 2006.
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended August 31, 2005.
The aggregate fees billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended
August 31, 2005.
(e) The registrant's Audit Committee has established pre-approval policies
and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the
"Pre-Approval Policy") with respect to services provided by the registrant's
independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee
has pre-approved the services set forth in the table below with respect to the
registrant up to the specified fee limits. Certain fee limits are based on
aggregate fees to the registrant and other registrants within the Delaware
Investments Family of Funds.
______________________________________________________________________________________________________________________
Service Range of Fees
______________________________________________________________________________________________________________________
Audit Services
______________________________________________________________________________________________________________________
Statutory audits or financial audits for new Funds up to $25,000 per Fund
______________________________________________________________________________________________________________________
Services associated with SEC registration statements (e.g., Form N-1A, Form
N-14, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings (e.g., comfort letters up to $10,000 per Fund
for closed-end Fund offerings, consents), and assistance in responding to SEC
comment letters
______________________________________________________________________________________________________________________
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and/or the actual or potential impact of final or
proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate
regulatory or standard-setting bodies (Note: Under SEC rules, some consultations
may be considered "audit-related services" rather than "audit services")
______________________________________________________________________________________________________________________
Audit-Related Services
______________________________________________________________________________________________________________________
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and /or the actual or potential impact of final or
proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate
regulatory or standard-setting bodies (Note: Under SEC rules, some consultations
may be considered "audit services" rather than "audit-related services")
______________________________________________________________________________________________________________________
Tax Services
______________________________________________________________________________________________________________________
U.S. federal, state and local and international tax planning and advice (e.g.,
consulting on statutory, regulatory or administrative developments, evaluation up to $25,000 in the aggregate
of Funds' tax compliance function, etc.)
______________________________________________________________________________________________________________________
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, up to $5,000 per Fund
etc.)
______________________________________________________________________________________________________________________
Review of federal, state, local and international income, franchise and other up to $5,000 per Fund
tax returns
______________________________________________________________________________________________________________________
Under the Pre-Approval Policy, the Audit Committee has also pre-approved
the services set forth in the table below with respect to the registrant's
investment adviser and other entities controlling, controlled by or under common
control with the investment adviser that provide ongoing services to the
registrant (the "Control Affiliates") up to the specified fee limit. This fee
limit is based on aggregate fees to the investment adviser and its Control
Affiliates.
______________________________________________________________________________________________________________________
Service Range of Fees
______________________________________________________________________________________________________________________
Non-Audit Services
______________________________________________________________________________________________________________________
Services associated with periodic reports and other documents filed with the SEC up to $10,000 in the aggregate
and assistance in responding to SEC comment letters
______________________________________________________________________________________________________________________
The Pre-Approval Policy requires the registrant's independent auditors to
report to the Audit Committee at each of its regular meetings regarding all
services initiated since the last such report was rendered, including those
services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's independent
auditors for services rendered to the registrant and to its investment adviser
and other service providers under common control with the adviser were $263,020
and $212,935 for the registrant's fiscal years ended August 31, 2006 and August
31, 2005, respectively.
(h) In connection with its selection of the independent auditors, the
registrant's Audit Committee has considered the independent auditors' provision
of non-audit services to the registrant's investment adviser and other service
providers under common control with the adviser that were not required to be
pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit
Committee has determined that the independent auditors' provision of these
services is compatible with maintaining the auditors' independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Included as part of report to shareholders filed under Item 1 of this Form
N-CSR/A.
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
Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) 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
fourth fiscal quarter) that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
(b) Subsequent to the filing of the registrant's Form N-CSR for its fiscal
year ended August 31, 2006, management identified a control deficiency in the
registrant's internal control over financial reporting. The registrant's
controls related to the review and analysis of the relevant terms and conditions
of certain transfers of securities were not operating effectively to
appropriately determine whether the transfers qualified for sale accounting
under the provisions of Statement of Financial Accounting Standards No. 140
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." As a result of this control deficiency, the statement of net
assets, the statement of operations and the statement of assets and liabilities
for the year ended August 31, 2006 and certain financial highlights for certain
years during the past five fiscal years were restated in order to appropriately
account for such transfers of securities as secured borrowings and report the
related interest income and expense.
Management notes that other investment companies investing in similar
investments over the same time periods had been accounting for such investments
in a similar manner as the registrant. Accordingly, other investment companies
investing in such investments to a material extent are also confronting the same
restatement issues as the registrant. The changes in the registrant's financial
statements did not impact the net asset value of the shares of any of the
registrant's funds or the net investment income or total return of any of the
registrant's funds for any period.
To address this control deficiency, management has made changes that have
materially affected, or are reasonably like to materially affect, registrant's
internal controls over financial reporting. To seek to increase the controls'
effectiveness, these changes provide for enhanced review of contracts relating
to complex transactions and the applicability of generally accepted accounting
principles to such transactions, including enhanced consultation with
registrant's independent public accountants in connection with such reviews.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
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.
Name of Registrant: Delaware Investments Municipal Trust
PATRICK P. COYNE
_________________________________
By: Patrick P. Coyne
Title: Chief Executive Officer
Date: February 21, 2007
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.
PATRICK P. COYNE
_________________________________
By: Patrick P. Coyne
Title: Chief Executive Officer
Date: February 21, 2007
RICHARD SALUS
_________________________________
By: Richard Salus
Title: Chief Financial Officer
Date: February 21, 2007