-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AHpsfz1QjW4H5KwaEK2tMP/GDtBP7aPkD95J1qAQRdPyUjqzaBDheCnxAcnb+a1E 6O80V287YN2LgouznQjIcQ== 0000950116-05-001697.txt : 20050504 0000950116-05-001697.hdr.sgml : 20050504 20050504160130 ACCESSION NUMBER: 0000950116-05-001697 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050228 FILED AS OF DATE: 20050504 DATE AS OF CHANGE: 20050504 EFFECTIVENESS DATE: 20050504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR TAX FREE FUNDS CENTRAL INDEX KEY: 0000733362 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03910 FILM NUMBER: 05799200 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR TAX FREE FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA TAX FREE FUNDS INC DATE OF NAME CHANGE: 19910226 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE EXEMPT FLEX FUND INC DATE OF NAME CHANGE: 19900131 N-CSR 1 ncsr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-3910 Exact name of registrant as specified in charter: Voyageur Tax Free Funds Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: August 31 Date of reporting period: February 28, 2005 Item 1. Reports to Stockholders The Registrant's shareholder reports are combined with the shareholder reports of other investment company registrants. This Form N-CSR pertains to the Delaware Tax-Free Minnesota Fund of the Registrant, information on which is included in the following shareholder reports. Delaware Investments(SM) -------------------------------------- FIXED INCOME A member of Lincoln Financial Group(R) SEMIANNUAL REPORT FEBRUARY 28, 2005 - -------------------------------------------------------------------------------- DELAWARE TAX-FREE MINNESOTA FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS - ----------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 1 - ----------------------------------------------------------------- SECTOR ALLOCATION 2 - ----------------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 3 Statements of Operations 7 Statements of Changes in Net Assets 8 Financial Highlights 9 Notes to Financial Statements 12 - ----------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2005 Delaware Distributors, L.P. DISCLOSURE For the Period September 1, 2004 to February 28, 2005 OF FUND EXPENSES As a shareholder of a fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2004 to February 28, 2005. ACTUAL EXPENSES The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Funds' actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. In each case, "Expenses Paid During Period" are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). DELAWARE TAX-FREE MINNESOTA FUND EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/04 - ------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,026.40 0.93% $4.67 Class B 1,000.00 1,022.60 1.68% 8.43 Class C 1,000.00 1,022.50 1.68% 8.42 - ------------------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.18 0.93% $4.66 Class B 1,000.00 1,016.46 1.68% 8.40 Class C 1,000.00 1,016.46 1.68% 8.40 - -------------------------------------------------------------------------------------------------------------
1 SECTOR ALLOCATION As of February 28, 2005 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists each Fund's categories of portfolio holdings as a percentage of total net assets and is provided in compliance with such requirement. DELAWARE TAX-FREE MINNESOTA FUND PERCENTAGE SECTOR OF NET ASSETS - ------------------------------------------------------------------------ MUNICIPAL BONDS 92.90% - ------------------------------------------------------------------------ Airport Revenue Bonds 4.04% City General Obligation Bonds 0.93% Continuing Care/Retirement Revenue Bonds 2.28% Corporate Backed Revenue Bonds 4.50% Dedicated Tax & Fees Revenue Bonds 1.29% Escrowed to Maturity Bonds 0.33% Higher Education Revenue Bonds 4.84% Hospital Revenue Bonds 21.91% Miscellaneous Revenue Bonds 1.65% Multifamily Housing Revenue Bonds 10.03% Municipal Lease Revenue Bonds 2.37% Political Subdivision General Obligation Bonds 3.02% Pre-Refunded Bonds 3.43% Public Power Revenue Bonds 12.12% School District General Obligation Bonds 7.88% Single Family Housing Revenue Bonds 1.24% State General Obligation Bonds 2.92% Tax Increment/Special Assessment Bonds 2.25% Territorial General Obligation Bonds 1.66% Territorial Revenue Bonds 2.18% Water & Sewer Revenue Bonds 2.03% - ------------------------------------------------------------------------ SHORT-TERM INVESTMENTS 7.13% - ------------------------------------------------------------------------ Money Market 3.84% Variable Rate Demand Notes 3.29% - ------------------------------------------------------------------------ TOTAL MARKET VALUE OF SECURITIES 100.03% - ------------------------------------------------------------------------ LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS (0.03%) - ------------------------------------------------------------------------ TOTAL NET ASSETS 100.00% - ------------------------------------------------------------------------ 2 STATEMENTS DELAWARE TAX-FREE MINNESOTA FUND OF NET ASSETS February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS - 92.90% Airport Revenue Bonds - 4.04% Minneapolis/St. Paul Metropolitan Airports Commission Series A 5.00% 1/1/22 (AMBAC) $ 3,440,000 $ 3,610,383 Series A 5.25% 1/1/16 (MBIA) 1,460,000 1,599,211 Series A 5.25% 1/1/32 (FGIC) 5,000,000 5,272,350 Series C 5.25% 1/1/32 (FGIC) 2,250,000 2,372,558 Series C 5.50% 1/1/17 (FGIC) 2,500,000 2,764,050 ----------- 15,618,552 ----------- City General Obligation Bonds - 0.93% Minneapolis Library 5.00% 12/1/25 1,500,000 1,583,640 St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 1,905,000 2,004,308 ----------- 3,587,948 ----------- Continuing Care/Retirement Revenue Bonds - 2.28% Bloomington Housing & Redevelopment Authority Housing Revenue (Senior Summerhouse Bloomington Project, Presbyterian Homes Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,422,565 Minnesota Agriculture & Economic Development Board Revenue (Benedictine Health Systems) 5.75% 2/1/29 1,895,000 1,906,597 Rochester Multifamily Revenue (Wedum Shorewood Campus Project) 6.60% 6/1/36 3,490,000 3,498,027 ----------- 8,827,189 ----------- Corporate Backed Revenue Bonds - 4.50% Cloquet Pollution Control Revenue (Potlatch Corp. Project) 5.90% 10/1/26 6,500,000 6,557,005 International Falls Pollution Control Revenue (Boise Cascade Corp. Project) 6.85% 12/1/29 (AMT) 500,000 535,330 Sartell Environmental Improvement Revenue (International Paper) Series A 5.20% 6/1/27 5,465,000 5,532,220 Seaway Port Authority of Duluth Industrial Development Dock & Wharf Revenues (Cargill, Inc. Project) Series E 6.125% 11/1/14 4,500,000 4,765,545 ----------- 17,390,100 ----------- Dedicated Tax & Fees Revenue Bonds - 1.29% ++Minneapolis Community Development Agency Tax Increment Revenue 6.674% 9/1/09 (MBIA) 5,750,000 4,984,790 ----------- 4,984,790 ----------- Escrowed to Maturity Bonds - 0.33% Southern Minnesota Municipal Power Agency Supply System Revenue Series B 5.50% 1/1/15 (AMBAC) 990,000 999,187 Western Minnesota Municipal Power Agency Supply Revenue Series A 9.75% 1/1/16 (MBIA) 185,000 279,354 ----------- 1,278,541 ----------- Principal Market Amount Value MUNICIPAL BONDS (continued) Higher Education Revenue Bonds - 4.84% Minnesota State Higher Education Facilities Authority Revenue (College of St. Benedict) Series 4-G 6.20% 3/1/16 $1,000,000 $ 1,018,160 (Hamline University) Series 4-1 6.00% 10/1/12 1,250,000 1,290,375 Series 4-1 6.00% 10/1/16 1,790,000 1,845,436 (St. Catherine College) Series 5-N1 5.25% 10/1/22 1,500,000 1,570,140 Series 5-N1 5.375% 10/1/32 1,000,000 1,052,090 University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,327,060 +University of Minnesota, Inverse Floater ROLs Series II-R-29 9.003% 7/1/21 5,250,000 6,967,117 9.51% 7/1/18 1,920,000 2,637,850 ----------- 18,708,228 ----------- Hospital Revenue Bonds - 21.91% Bemidji Hospital Facilities Revenue (North County Health Services) 5.00% 9/1/24 (RADIAN) 740,000 769,082 6.05% 9/1/16 600,000 607,536 6.05% 9/1/24 1,825,000 1,847,448 Breckenridge Catholic Health Initiatives 5.00% 5/1/30 2,000,000 2,069,800 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) 5.25% 2/15/33 13,500,000 13,873,679 5.50% 2/15/23 1,000,000 1,054,510 Maplewood Healthcare Facility Revenue (Health East Project) 5.95% 11/15/06 1,510,000 1,511,359 Marshall Medical Center Gross Revenue (Weiner Memorial Medical Center Project) 6.00% 11/1/28 1,000,000 1,010,230 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 9,500,000 10,091,660 (Fairview Health Services) Series A 5.625% 5/15/32 11,525,000 12,187,918 Minnesota Agricultural & Economic Development Health Care System (Fairview Hospital) Series A 6.375% 11/15/29 500,000 548,650 Rochester Health Care Facilities Revenue (Mayo Foundation) Series B 5.50% 11/15/27 700,000 746,445 +Rochester Health Care Facilities Revenue (Mayo Foundation), Inverse Floater ROLs Series II-R-28 A 9.003% 11/15/27 2,100,000 2,378,670 Series II-R-28 B 9.003% 11/15/27 8,375,000 9,486,363 Shakopee Health Care Facilities Revenue (St. Francis Regional Medical Center) 5.10% 9/1/25 2,000,000 2,046,600 5.25% 9/1/34 7,000,000 7,163,030 St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.25% 7/1/30 9,420,000 9,649,942 3 STATEMENTS DELAWARE TAX-FREE MINNESOTA FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) Hospital Revenue Bonds (continued) St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series A 5.70% 11/1/15 $1,300,000 $ 1,306,916 6.625% 11/1/17 5,285,000 5,322,206 Washington County Housing & Redevelopment Authority Hospital Facilities Revenue (Health East Project) 5.50% 11/15/27 1,000,000 963,390 ----------- 84,635,434 ----------- Miscellaneous Revenue Bonds - 1.65% Minneapolis Community Development Agency Supported Development Revenue Limited Tax (Common Bond Fund) Series 2A 7.125% 12/1/05 120,000 121,350 Minnesota Public Facilities Authority Water Pollution Control Revenue Series A 5.00% 3/1/20 3,000,000 3,165,570 St. Cloud Commercial Development Revenue (Northwest Center Association Project) 7.50% 8/1/12 3,093,971 3,071,045 ----------- 6,357,965 ----------- Multifamily Housing Revenue Bonds - 10.03% Austin Housing & Redevelopment Authority Housing Gross Revenue (Courtyard Residence Project) Series A 7.25% 1/1/26 500,000 515,245 Brooklyn Center Multifamily Housing Revenue (Ponds Family Housing Project-Section 8) 5.90% 1/1/20 1,205,000 1,209,254 (Shingle Creek) 5.40% 5/20/43) (GNMA) (AMT) 1,000,000 1,024,720 Carver County Housing & Redevelopment Authority Multifamily Revenue (Lake Grace Apartments Project) Series A 6.00% 7/1/28 1,435,000 1,452,048 Eden Prairie Multifamily Housing Revenue (Tanager Creek) Series A 8.05% 6/20/31(GNMA) 7,605,000 8,033,693 Hopkins Multifamily Housing Revenue (Hopkins Renaissance Project-Section 8) 6.375% 4/1/20 1,000,000 1,047,720 Hutchinson Multifamily Housing Revenue (Evergreen Apartments Project-Section 8) 5.75% 11/1/28 950,000 851,248 Little Canada Multifamily Housing Revenue (Housing Alternative Development Co. Project) Series A 6.10% 12/1/17 1,340,000 1,432,406 6.25% 12/1/27 2,900,000 3,102,014 Minneapolis Multifamily Housing Revenue (Grant Street Apartments Project) Series A 7.25% 11/1/29 750,000 713,243 (Seward Towers Project) 5.00% 5/20/36 (GNMA) 4,000,000 4,085,840 Principal Market Amount Value MUNICIPAL BONDS (continued) Multifamily Housing Revenue Bonds (continued) (Sumner Field) Series A 5.50% 11/20/26 (GNMA) (AMT) $1,020,000 $ 1,065,900 (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 1,860,000 1,781,378 Park Rapids Multifamily Revenue (The Court Apartments Project-Section 8) 6.30% 2/1/20 2,930,000 2,689,740 St. Cloud Housing & Redevelopment Authority Revenue (Sterling Heights Apartments Project) 7.55% 4/1/39 (AMT) 1,000,000 981,300 St. Louis Park Multifamily Housing Revenue (Knollwood Apartments Project) 6.25% 12/1/28 (FHA) 3,855,000 3,961,976 Stillwater Multifamily Housing Revenue (Stillwater Cottages Project) Series A 7.00% 11/1/27 1,000,000 967,380 Wadena Housing & Redevelopment Authority Multifamily Housing Revenue (Humphrey Manor East Project) 6.00% 2/1/19 1,955,000 1,955,156 Washington County Housing & Redevelopment Authority Governmental Revenue (Briar Pond) Series C 7.25% 8/20/34 970,000 898,705 Willmar Housing & Redevelopment Authority Multifamily Housing Revenue (Highland Apartments-Section 8) 5.85% 6/1/19 1,010,000 1,010,000 ----------- 38,778,966 ----------- Municipal Lease Revenue Bonds - 2.37% St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.00% 12/1/22 2,500,000 2,651,825 5.125% 12/1/27 1,000,000 1,057,300 (Robert Street Office Building Project) Series 9 5.25% 12/1/27 725,000 775,605 4.75% 12/1/23 2,000,000 2,055,420 5.00% 12/1/27 2,500,000 2,619,725 ----------- 9,159,875 ----------- Political Subdivision General Obligation Bonds - 3.02% Dakota County Capital Improvement Series A 4.75% 2/1/26 1,000,000 1,021,970 Hennepin County Regional Railroad Authority 5.00% 12/1/31 4,030,000 4,142,276 Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 1,200,000 1,292,568 Ramsey County State Aid Series C 5.00% 2/1/28 1,060,000 1,110,435 Todd Morrison Cass & Wadena Counties United Hospital District (Lakewood Project) 5.00% 12/1/21 2,000,000 2,080,540 5.00% 12/1/34 1,000,000 1,008,230 5.125% 12/1/24 1,000,000 1,029,410 ----------- 11,685,429 ----------- 4 STATEMENTS DELAWARE TAX-FREE MINNESOTA FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) *Pre-Refunded Bonds - 3.43% Minnesota Public Facilities Authority Water Pollution Control Revenue Series A 6.25% 3/1/16-05 $4,400,000 $ 4,401,584 Puerto Rico Commonwealth Public Improvement Series A 5.125% 7/1/31-11 675,000 747,590 5.125% 7/1/30-11 (FSA) 615,000 681,137 Puerto Rico Electric Power Authority Power Revenue Series X 5.50% 7/1/25-05 3,080,000 3,115,389 Puerto Rico Public Buildings Authority Guaranteed Government Facilities Revenue Series D 5.25% 7/1/36-12 2,930,000 3,240,316 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,086,040 ----------- 13,272,056 ----------- Public Power Revenue Bonds - 12.12% Chaska Electric Revenue Series A 6.00% 10/1/25 1,000,000 1,111,180 Minnesota State Municipal Power Agency Series A 5.00% 10/1/34 4,250,000 4,363,858 5.125% 10/1/29 3,000,000 3,125,640 Northern Minnesota Municipal Power Agency Electric System Revenue ++Series A 5.85% 1/1/09 (AMBAC) 3,815,000 3,384,630 Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,580,225 Rochester Electric Utilities Revenue 5.25% 12/1/30 4,915,000 5,128,950 Shakopee Public Utilities Commission Public Utilities Revenue 5.125% 2/1/26 (MBIA) 1,000,000 1,050,840 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.00% 1/1/12 (AMBAC) 1,705,000 1,868,561 5.00% 1/1/13 (MBIA) 5,820,000 6,386,692 5.25% 1/1/15 (AMBAC) 3,410,000 3,841,024 5.25% 1/1/16 (AMBAC) 1,000,000 1,127,340 +Southern Minnesota Municipal Power Agency Supply System Revenue, Inverse Floater ROLs Series II-R-189 5.308% 1/1/16 (AMBAC) 3,500,000 3,945,690 Series II-R-189 8.516% 1/1/15 (AMBAC) 2,950,000 3,695,731 Series II-R-189-1 5.054% 1/1/12 (AMBAC) 2,500,000 2,739,825 Series II-R-189-3 8.516% 1/1/14 (AMBAC) 2,000,000 2,468,520 ----------- 46,818,706 ----------- School District General Obligation Bonds - 7.88% Bloomington Independent School District #271 Series B 5.00% 2/1/17 5,300,000 5,657,909 Cambridge Independent School District 911-A 4.75% 2/1/30 (MBIA) 1,035,000 1,055,079 ++Farmington Independent School District #192 Capital Appreciation Series B 5.34% 2/1/21 (FSA) 1,500,000 671,310 5.42% 2/1/20 (FSA) 1,650,000 783,090 ++Lakeville Independent School District #194 Capital Appreciation Series B 5.45% 2/1/19 (FSA) 8,000,000 4,168,080 Principal Market Amount Value MUNICIPAL BONDS (continued) School District General Obligation Bonds (continued) Lakeville Independent School District 194-A 4.75% 2/1/22 (FSA) $5,500,000 $ 5,707,570 ++Mahtomedi Independent School District #832 Capital Appreciation Series B 5.90% 2/1/14 (MBIA) 1,540,000 1,079,848 +Rockford Independent School District #883, Inverse Floater ROLS Series II-R-30-A 9.256% 2/1/23 (FSA) 3,510,000 4,202,593 ++Rosemont Independent School District #196 Capital Appreciation Series B 5.93% 4/1/11 (FSA) 2,600,000 2,095,834 5.96% 4/1/12 (FSA) 1,850,000 1,422,484 6.01% 4/1/13 (FSA) 1,915,000 1,400,995 ++Sartell Independent School District #748 Capital Appreciation Series B 5.98% 2/1/13 (MBIA) 540,000 394,135 6.10% 2/1/15 (MBIA) 1,075,000 706,995 6.152% 2/1/16 (MBIA) 1,750,000 1,095,360 ----------- 30,441,282 ----------- Single Family Housing Revenue Bonds - 1.24% Minnesota State Housing Finance Agency Single Family Mortgage Series A 5.30% 7/1/19 725,000 771,030 Series B 5.35% 1/1/33 (AMT) 2,990,000 3,048,186 Series J 5.90% 7/1/28 (AMT) 735,000 760,938 St. Louis Park Residential Mortgage Revenue Series A 7.25% 4/20/23 (GNMA) 128,000 128,084 St. Paul Housing & Redevelopment Authority Single Family Mortgage Revenue Series C 6.90% 12/1/21 (FNMA) 100,000 100,105 ----------- 4,808,343 ----------- State General Obligation Bonds - 2.92% Minnesota State 5.00% 11/1/20 (FSA) 8,175,000 8,722,725 5.00% 8/1/21 2,400,000 2,573,184 ----------- 11,295,909 ----------- Tax Increment/Special Assessment Bonds - 2.25% Minneapolis Tax Increment Revenue Series E 5.00% 3/1/13 6,265,000 6,710,191 (St. Anthony Falls Project) 5.75% 2/1/27 1,000,000 993,180 St. Paul Housing & Redevelopment Authority Tax Increment (Upper Landing Project) Series A 6.80% 3/1/29 1,000,000 1,006,690 ----------- 8,710,061 ----------- Territorial General Obligation Bonds - 1.66% Puerto Rico Commonwealth Public Improvement Series A 5.00% 7/1/34 4,500,000 4,659,390 5.50% 7/1/19 (MBIA) 1,500,000 1,758,930 ----------- 6,418,320 ----------- 5 STATEMENTS DELAWARE TAX-FREE MINNESOTA FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) Territorial Revenue Bonds - 2.18% Puerto Rico Commonwealth Public Improvement (Unrefunded Balance) Series A 5.125% 7/1/30 (FSA) $ 385,000 $ 406,556 5.125% 7/1/31 1,325,000 1,373,124 Puerto Rico Electric Power Authority Power Revenue Series OO 5.00% 7/1/13 (CIFG) 5,000,000 5,513,550 Puerto Rico Public Buildings Authority Guaranteed Government Facilities Revenue Series D (Unrefunded Balanced) 5.25% 7/1/36 1,070,000 1,127,641 ----------- 8,420,871 ----------- Water & Sewer Revenue Bonds - 2.03% Minnesota Public Facilities Authority Water Pollution Control Revenue Series B 4.75% 3/1/19 2,000,000 2,093,720 +Minnesota Public Facilities Authority Water Pollution Control Revenue, Inverse Floater ROLs Series II-R-31 8.496% 3/1/14 5,000,000 5,763,450 ----------- 7,857,170 ----------- TOTAL MUNICIPAL BONDS (cost $340,019,238) 359,055,735 ----------- Number of/Principal Shares/Amount SHORT TERM INVESTMENTS - 7.13% Money Market - 3.84% Federated Minnesota Municipal Cash Trust 14,823,970 14,823,970 ------------ 14,823,970 ------------ ^Variable Rate Demand Notes - 3.29% Brown County Purchase Revenue Variable 1.82% 9/1/24 $2,500,000 2,500,000 Eagan Revenue Antic Notes 1.91% 5/30/12 400,000 400,000 Midwest Consortium of Municipal Utilities Series A 1.87% 1/1/25 2,500,000 2,500,000 Minneapolis Library 1.72% 12/1/32 (SPA, Dexia Credit Local) 7,300,000 7,300,000 ------------ 12,700,000 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $27,523,970) 27,523,970 ------------ TOTAL MARKET VALUE OF SECURITIES - 100.03% (cost $367,543,208) 386,579,705 LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.03%) (126,109) ------------ NET ASSETS APPLICABLE TO 30,829,192 SHARES OUTSTANDING - 100.00% $386,453,596 ============ Net Asset Value -- Delaware Tax-Free Minnesota Fund Class A ($360,181,502 / 28,736,417 Shares) $12.53 ------ Net Asset Value -- Delaware Tax-Free Minnesota Fund Class B ($13,838,377 / 1,103,191 Shares) $12.54 ------ Net Asset Value -- Delaware Tax-Free Minnesota Fund Class C ($12,433,717 / 989,584 Shares) $12.56 ------ COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization -- no par) $366,821,980 Undistributed net investment income 148,077 Accumulated net realized gain on investments 447,042 Net unrealized appreciation of investments 19,036,497 ------------ Total net assets $386,453,596 ============ *Pre-Refunded Bonds are municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. ++Zero Coupon Bond. The interest rate shown is the yield at the time of purchase. +An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 28, 2005. ^Variable rate notes. The interest rate shown is the rate as of February 28, 2005. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax CIFG - Insured by CDC IXIS Financial Guaranty FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance ROLs - Residual Option Longs SPA - Stand-by Purchase Agreement NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE TAX-FREE MINNESOTA FUND Net asset value Class A (A) $12.53 Sales charge (4.50% of offering price) (B) 0.59 ------ Offering price $13.12 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 6 STATEMENTS DELAWARE MINNESOTA MUNICIPAL BOND FUNDS OF OPERATIONS Six Months Ended February 28, 2005 (Unaudited) Delaware Tax-Free Minnesota Fund INVESTMENT INCOME: Interest $9,711,166 ---------- EXPENSES: Management fees 1,029,604 Distribution expenses -- Class A 437,099 Distribution expenses -- Class B 70,437 Distribution expenses -- Class C 55,652 Dividend disbursing and transfer agent fees and expenses 91,747 Reports and statements to shareholders 70,529 Accounting and administration expenses 62,251 Legal and professional fees 20,203 Registration fees 12,774 Custodian fees 10,599 Trustees' fees 9,199 Pricing fees 5,971 Other 2,978 ---------- 1,879,043 Less expenses absorbed or waived (35,115) Less waived distribution expenses -- Class A -- Less expense paid indirectly (134) ---------- Total expenses 1,843,794 ---------- NET INVESTMENT INCOME 7,867,372 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments 204,765 Net change in unrealized appreciation/depreciation of investments 1,815,504 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,020,269 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $9,887,641 ========== See accompanying notes 7 STATEMENTS DELAWARE MINNESOTA MUNICIPAL BOND FUNDS OF CHANGES IN NET ASSETS
Delaware Tax-Free Minnesota Fund Six Months Year Ended Ended 2/28/05 8/31/04 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 7,867,372 $ 17,290,044 Net realized gain (loss) on investments 204,765 5,046,477 Net change in unrealized appreciation/depreciation of investments 1,815,504 4,850,725 ------------ ------------ Net increase in net assets resulting from operations 9,887,641 27,187,246 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income: Class A (7,425,432) (16,553,657) Class B (246,138) (624,474) Class C (194,015) (422,143) Net realized gain on investments: Class A (4,220,929) (4,548,007) Class B (174,978) (220,980) Class C (135,698) (133,256) ------------ ------------ (12,397,190) (22,502,517) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 20,303,534 26,453,454 Class B 651,854 1,295,770 Class C 2,372,879 1,853,246 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 7,941,870 13,786,349 Class B 287,924 583,309 Class C 267,198 429,799 ------------ ------------ 31,825,259 44,401,927 ------------ ------------ Cost of shares repurchased: Class A (13,730,154) (36,602,634) Class B (1,592,654) (3,906,516) Class C (938,417) (1,762,841) ------------ ------------ (16,261,225) (42,271,991) ------------ ------------ Increase (decrease) in net assets derived from capital share transactions 15,564,034 2,129,936 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 13,054,485 6,814,665 NET ASSETS: Beginning of period 373,399,111 366,584,446 ------------ ------------ End of period(1) $386,453,596 $373,399,111 ============ ============ (1)Undistributed (distributions in excess of) net investment income $148,077 ($22,418)
See accompanying notes 8 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Fund Class A - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $12.620 $12.450 $12.610 $12.570 $12.120 $12.230 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.265 0.590 0.622 0.634 0.615 0.617 Net realized and unrealized gain (loss) on investments 0.063 0.348 (0.148) 0.037 0.450 (0.110) ------- ------- ------- ------- ------- ------- Total from investment operations 0.328 0.938 0.474 0.671 1.065 0.507 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.265) (0.600) (0.625) (0.631) (0.615) (0.617) Net realized gain on investments (0.153) (0.168) (0.009) -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.418) (0.768) (0.634) (0.631) (0.615) (0.617) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $12.530 $12.620 $12.450 $12.610 $12.570 $12.120 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.64% 7.72% 3.80% 5.54% 9.02% 4.39% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $360,182 $348,000 $340,029 $356,522 $363,033 $355,573 Ratio of expenses to average net assets 0.93% 0.94% 0.97% 0.98% 1.00% 1.01% Ratio of expenses to average net assets prior to expense limitation and expense paid indirectly 0.95% 0.94% 0.97% 0.98% 1.00% 1.06% Ratio of net investment income to average net assets 4.25% 4.68% 4.90% 5.11% 5.00% 5.20% Ratio of net investment income to average net assets prior to expense limitation and expense paid indirectly 4.23% 4.68% 4.90% 5.11% 5.00% 5.15% Portfolio turnover 11% 25% 27% 13% 10% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 9 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Fund Class B - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $12.630 $12.460 $12.620 $12.580 $12.120 $12.240 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.219 0.496 0.529 0.540 0.523 0.525 Net realized and unrealized gain (loss) on investments 0.063 0.348 (0.150) 0.037 0.460 (0.120) ------- ------- ------- ------- ------- ------- Total from investment operations 0.282 0.844 0.379 0.577 0.983 0.405 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.219) (0.506) (0.530) (0.537) (0.523) (0.525) Net realized gain on investments (0.153) (0.168) (0.009) -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.372) (0.674) (0.539) (0.537) (0.523) (0.525) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $12.540 $12.630 $12.460 $12.620 $12.580 $12.120 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.26% 6.91% 3.02% 4.75% 8.29% 3.50% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $13,838 $14,588 $16,394 $17,043 $15,927 $13,412 Ratio of expenses to average net assets 1.68% 1.69% 1.72% 1.73% 1.75% 1.76% Ratio of expenses to average net assets prior to expense limitation and expense paid indirectly 1.70% 1.69% 1.72% 1.73% 1.75% 1.81% Ratio of net investment income to average net assets 3.50% 3.93% 4.15% 4.36% 4.25% 4.45% Ratio of net investment income to average net assets prior to expense limitation and expense paid indirectly 3.48% 3.93% 4.15% 4.36% 4.25% 4.40% Portfolio turnover 11% 25% 27% 13% 10% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 10 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $12.650 $12.480 $12.640 $12.590 $12.140 $12.250 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.219 0.495 0.529 0.540 0.523 0.527 Net realized and unrealized gain (loss) on investments 0.063 0.348 (0.151) 0.047 0.450 (0.110) ------- ------- ------- ------- ------- ------- Total from investment operations 0.282 0.843 0.378 0.587 0.973 0.417 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.219) (0.505) (0.529) (0.537) (0.523) (0.527) Net realized gain on investments (0.153) (0.168) (0.009) -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.372) (0.673) (0.538) (0.537) (0.523) (0.527) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $12.560 $12.650 $12.480 $12.640 $12.590 $12.140 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.25% 6.90% 3.01% 4.82% 8.20% 3.60% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $12,434 $10,811 $10,161 $7,682 $6,042 $6,156 Ratio of expenses to average net assets 1.68% 1.69% 1.72% 1.73% 1.75% 1.76% Ratio of expenses to average net assets prior to expense limitation and expense paid indirectly 1.70% 1.69% 1.72% 1.73% 1.75% 1.81% Ratio of net investment income to average net assets 3.50% 3.93% 4.15% 4.36% 4.25% 4.45% Ratio of net investment income to average net assets prior to expense limitation and expense paid indirectly 3.48% 3.93% 4.15% 4.36% 4.25% 4.40% Portfolio turnover 11% 25% 27% 13% 10% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 11 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS February 28, 2005 (Unaudited) Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers six series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is organized as a Delaware statutory trust and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur Tax Free Funds (the "Trust") is organized as a Delaware statutory trust and offers the Delaware Tax-Free Minnesota Fund. Voyageur Intermediate Tax Free Funds (the "Trust") is organized as a Delaware statutory trust and offers the Delaware Tax-Free Minnesota Intermediate Fund. These financial statements and related notes pertain to Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond Fund (each referred to as a "Fund" or, collectively, the "Funds"). The above Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended, and offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50% for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and up to 2.75% for Delaware Tax-Free Minnesota Intermediate Fund. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and that declines from 2% to zero for Delaware Tax-Free Minnesota Intermediate Fund, depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and approximately five years after purchase for Delaware Tax-Free Minnesota Intermediate Fund. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. The investment objective of Delaware Tax-Free Minnesota Fund and Delaware Tax-Free Minnesota Insured Fund is to seek as high a level of current income exempt from federal income tax and from the Minnesota state personal income tax, as is consistent with preservation of capital. The investment objective of Delaware Tax-Free Minnesota Intermediate Fund is to seek to provide investors with preservation of capital and, secondarily, current income exempt from federal income tax and from the Minnesota state personal income tax, by maintaining a dollar-weighted average effective portfolio maturity of 10 years or less. The investment objective of Delaware Minnesota High-Yield Municipal Bond Fund is to seek as high a level of current income exempt from federal income tax and from the Minnesota state personal income tax, primarily through investment in medium- and lower-grade municipal obligations. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, or with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of the Funds on the basis of "settled shares" of each class in relation to the net assets of the Funds. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Funds receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under the above arrangement is included in custodian fees on the Statements of Operations with the corresponding expense offset shown as "expense paid indirectly." The amount of this expense for the six months ended February 28, 2005 were as follows: Delaware Tax-Free Minnesota Fund ----------------- Earnings credits $134 12 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows: Delaware Tax-Free Minnesota Fund ----------------- On the first $500 million 0.550% On the next $500 million 0.500% On the next $1.5 billion 0.450% In excess of $2.5 billion 0.425% DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed specified percentages of average daily net assets as shown below: Delaware Tax-Free Minnesota Fund ----------------- The operating expense limitation as a percentage of average daily net assets (per annum) 0.75% Expiration date 10/31/04 Effective November 1, 2004, the operating expense limitation as a percentage of average daily net assets (per annum) 0.69% Expiration date 12/29/05 Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares for all Funds. DDLP has contracted to waive distribution and service fees through December 29, 2005 in order to prevent distribution and service fees of Class A from exceeding 0.15% of the average daily net assets for Delaware Tax-Free Minnesota Intermediate Fund. At February 28, 2005, the Funds had liabilities payable to affiliates as follows: Delaware Tax-Free Minnesota Fund ----------------- Investment management fee payable to DMC $127,902 Dividend disbursing, transfer agent fees, accounting and administration fees and other expenses payable to DSC 26,436 Other expenses payable to DMC and affiliates* 105,707 *DMC, as part of its administrative services, pays operating expenses on behalf of each Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement, each Fund bears the cost of certain legal services expenses, including internal legal services provided to each Fund by DMC employees. For the six months ended February 28, 2005, each Fund was charged internal legal services provided by DMC as follows: Delaware Tax-Free Minnesota Fund ----------------- $9,335 13 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) For the six months ended February 28, 2005, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Minnesota Fund ----------------- $32,475 Certain officers of DMC, DSC, and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Funds. 3. INVESTMENTS For the six months ended February 28, 2005, the Funds made purchases and sales of investment securities other than short-term investments as follows: Delaware Tax-Free Minnesota Fund -------------- Purchases $33,777,581 Sales 19,647,767 At February 28, 2005, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 28, 2005, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows: Delaware Tax-Free Minnesota Fund ----------------- Cost of investments $367,279,674 ============ Aggregate unrealized appreciation $ 19,941,146 Aggregate unrealized depreciation (641,115) ------------ Net unrealized appreciation $ 19,300,031 ============ 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended February 28, 2005 and the year ended August 31, 2004 was as follows: Delaware Tax-Free Minnesota Fund ----------------- SIX MONTHS ENDED 2/28/05* ------------------------- Tax-exempt income $7,865,585 Long-term capital gain 4,531,605 ----------- Total $12,397,190 =========== YEAR ENDED 8/31/04 ------------------ Tax-exempt income $17,303,423 Ordinary income 326,031 Long-term capital gain 4,873,063 ----------- Total $22,502,517 =========== *Tax information for the six months ended February 28, 2005 is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end. 14 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 4. DIVIDEND AND DISTRIBUTION INFORMATION (CONTINUED) The components of net assets are estimated since the final tax characteristics cannot be determined until fiscal year end. As of February 28, 2005, the estimated components of net assets on a tax basis were as follows: Delaware Tax-Free Minnesota Fund ----------------- Shares of beneficial interest $366,821,980 Undistributed tax-exempt income 148,077 Distributions in excess of ordinary income -- Undistributed long-term capital gain 183,508 Net realized capital loss on investments -- Capital loss carryforwards -- Unrealized appreciation of investments 19,300,031 ------------ Net assets $386,453,596 ============ For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the six months ended February 28, 2005, each Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of market discounts and premiums on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. Delaware Tax-Free Minnesota Fund ----------------- Undistributed net investment income (loss) $168,708 Accumulated realized gain (loss) (168,708) 15 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARES Transactions in capital shares were as follows:
Delaware Tax-Free Minnesota Fund ----------------------- Six Months Year Ended Ended 2/28/05 8/31/04 Shares sold: Class A 1,615,449 2,097,640 Class B 51,751 103,001 Class C 187,861 146,758 Shares issued upon reinvestment of dividends and distributions: Class A 632,990 1,095,629 Class B 22,942 46,297 Class C 21,257 34,090 ---------- ---------- 2,532,250 3,523,415 ---------- ---------- Shares repurchased: Class A (1,091,474) (2,924,388) Class B (126,745) (309,880) Class C (74,323) (140,433) ---------- ---------- (1,292,542) (3,374,701) ---------- ---------- Net increase (decrease) 1,239,708 148,714 ========== ==========
For the six months ended February 28, 2005 and the year ended August 31, 2004, the following shares and values were converted from Class B to Class A shares. The respective amounts are included in Class B redemptions and Class A subscriptions in the tables above and the Statements of Changes in Net Assets.
Six Months Ended Year Ended 2/28/05 8/31/04 ------------------------------- --------------------------------- Class B Class A Class B Class A shares shares Value shares shares Value ------- -------- -------- ------- -------- ---------- Delaware Tax-Free Minnesota Fund 48,780 48,818 $613,674 129,441 129,542 $1,644,607
16 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 6. PROXY RESULTS The shareholders of Voyageur Mutual Funds, Voyageur Insured Funds, Voyageur Tax Free Funds and Voyageur Intermediate Tax Free Funds (each, the "Trust") voted on the following proposals (as applicable) at the special meeting of shareholders on March 23, 2005 or as adjourned. The description of each proposal and number of shares voted are as follows: 1. To elect a Board of Trustees for each of the Trusts. VOYAGEUR TAX FREE FUNDS ----------------------------------------- SHARES VOTED SHARES VOTED FOR WITHHELD AUTHORITY - ------------------------------------------------------------------------- Thomas L. Bennett 18,586,436.738 608,860.670 - ------------------------------------------------------------------------- Jude T. Driscoll 18,587,461.058 607,836.350 - ------------------------------------------------------------------------- John A. Fry 18,585,558.201 609,739.207 - ------------------------------------------------------------------------- Anthony D. Knerr 18,583,231.072 612,066.336 - ------------------------------------------------------------------------- Lucinda S. Landreth 18,602,679.414 492,617.994 - ------------------------------------------------------------------------- Ann R. Leven 18,594,412.969 600,884.739 - ------------------------------------------------------------------------- Thomas F. Madison 18,543,027.456 652,269.952 - ------------------------------------------------------------------------- Janet L. Yeomans 18,604,510.673 590,786.735 - ------------------------------------------------------------------------- J. Richard Zecher 18,579,609.373 615,688.035 - ------------------------------------------------------------------------- 2. To approve the use of a "manager of managers" structure whereby the investment manager of the funds of each Trust will be able to hire and replace subadvisers without shareholder approval.
FOR AGAINST ABSTAIN --- ------- ------- Delaware Tax-Free Minnesota Fund 13,828,178.393 986,583.099 780,996.916
17 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 7. LINE OF CREDIT The Funds, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participate in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 28, 2005 or at any time during the period. 8. CREDIT AND MARKET RISK The Funds concentrate their investments in securities issued by municipalities, mainly in Minnesota. The value of these investments may be adversely affected by new legislation within the states, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. The Funds may invest in inverse floating rate securities ("inverse floaters"), a type of derivative tax-exempt obligation with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of inverse floaters will generally be more volatile than other tax-exempt investments. Such securities are denoted on the Statements of Net Assets. 9. CONTRACTUAL OBLIGATIONS The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed each Fund's existing contracts and expects the risk of loss to be remote. 18 Delaware Investments(SM) - --------------------------------------- A member of Lincoln Financial Group (R) This semiannual report is for the information of Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies for each Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER Chairman Senior Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR THOMAS L. BENNETT Delaware Distributors, L.P. Private Investor RICHELLE S. MAESTRO Philadelphia, PA Rosemont, PA Executive Vice President, Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT President Philadelphia, PA Delaware Service Company, Inc. Franklin & Marshall College 2005 Market Street Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094 Senior Vice President and Treasurer ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS Managing Director Philadelphia, PA 800 523-1918 Anthony Knerr & Associates New York, NY FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY LUCINDA S. LANDRETH 800 362-7500 Former Chief Investment Officer Assurant, Inc. WEB SITE Philadelphia, PA www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN J. RICHARD ZECHER Founder Investor Analytics Scottsdale, AZ
- -------------------------------------------------------------------------------- Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on each Fund's Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. - -------------------------------------------------------------------------------- (9720) Printed in the USA SA-MNALL [2/05] IVES 4/05 J10079 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert Not applicable. Item 4. Principal Accountant Fees and Services Not applicable. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. Schedule of Investments Included as part of report to shareholders filed under Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers Not applicable. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. Controls and Procedures The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant's second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits (a) (1) Code of Ethics Not applicable. (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized. VOYAGEUR TAX FREE FUNDS Jude T. Driscoll - -------------------------------------------- By: Jude T. Driscoll Title: Chairman Date: May 2, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Jude T. Driscoll - -------------------------------------------- By: Jude T. Driscoll Title: Chairman Date: May 2, 2005 Michael P. Bishof - -------------------------------------------- By: Michael P. Bishof Title: Chief Financial Officer Date: May 2, 2005 EX-99 2 ex99.txt EXHIBIT 99.CERT EXHIBIT 99.CERT CERTIFICATION I, Jude T. Driscoll certify that: 1. I have reviewed this report on Form N-CSR of Voyageur Tax Free Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 2, 2005 Jude T. Driscoll - ------------------------------------ By: Jude T. Driscoll Title: Chairman EXHIBIT 99.CERT CERTIFICATION I, Michael P. Bishof, certify that: 1. I have reviewed this report on Form N-CSR of Voyageur Tax Free Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 2, 2005 Michael P. Bishof - ------------------------------------ By: Michael P. Bishof Title: Chief Financial Officer EX-99 3 ex99-906.txt EXHIBIT 99.906CERT EXHIBIT 99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the attached report of the registrant on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify, to the best of such officer's knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. Date: May 2, 2005 Jude T. Driscoll - ------------------------------------ By: Jude T. Driscoll Title: Chairman Michael P. Bishof - ------------------------------------ By: Michael P. Bishof Title: Chief Financial Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----