N-CSR 1 n-csr.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: 811-4977 Exact name of registrant as specified in charter: Voyageur Insured Funds Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: August 31 Date of reporting period: February 29, 2004 Item 1. Reports to Stockholders The Registrant's shareholder reports are combined with the shareholder reports of other investment company registrants. This Form N-CSR pertains to the Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund of the Registrant, information on which is included in the following shareholder report. Delaware Investments(SM) -------------------------------------- FIXED INCOME A member of Lincoln Financial Group(R) Semiannual Report FEBRUARY 29, 2004 -------------------------------------------------------------------------------- DELAWARE TAX-FREE ARIZONA INSURED FUND [LOGO] POWERED BY RESEARCH.(SM) Table OF CONTENTS --------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 1 Statements of Operations 4 Statements of Changes in Net Assets 5 Financial Highlights 6 Notes to Financial Statements 9 --------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2004 Delaware Distributors, L.P. Delaware Tax-Free Arizona Insured Fund Statements February 29, 2004 (Unaudited) OF NET ASSETS Principal Market Amount Value Municipal Bonds - 97.54% Airport Revenue Bonds - 9.78% Phoenix Civic Improvement Corporation Series B 5.25% 7/1/32 (FGIC)(AMT) $9,300,000 $ 9,806,664 Tucson Airport Authority 5.35% 6/1/31 (AMBAC)(AMT) 5,000,000 5,271,800 ----------- 15,078,464 ----------- Charter School Revenue Bonds - 2.64% Pima County Industrial Development Authority (Arizona Charter Schools Project) Series C 6.75% 7/1/31 4,000,000 4,067,720 ----------- 4,067,720 ----------- City General Obligation Bonds - 0.69% DC Ranch Community Facilities 5.00% 7/15/27 (AMBAC) 1,000,000 1,058,050 ----------- 1,058,050 ----------- Convention Center/Auditorium/Hotel Revenue Bonds - 2.73% Arizona Tourism & Sports Authority Tax Revenue Multipurpose Stadium Facilities Series A 5.00% 7/1/28 (MBIA) 2,500,000 2,630,025 5.00% 7/1/31 (MBIA) 1,500,000 1,574,715 ----------- 4,204,740 ----------- Dedicated Tax & Fees Revenue Bonds - 6.66% Phoenix Civic Improvement Corporation Excise Tax Revenue 5.00% 7/1/26 1,000,000 1,055,310 Phoenix Industrial Development Authority Lease Revenue (Capitol Mall LLC II Project) 5.00% 9/15/28 (AMBAC) 4,000,000 4,182,920 Pinal County Certificates of Participation 5.125% 6/1/21 (AMBAC) 4,675,000 5,034,414 ----------- 10,272,644 ----------- Escrowed to Maturity Bonds - 0.23% Phoenix Street & Highway Revenue 6.50% 7/1/09 (AMBAC) 350,000 355,716 ----------- 355,716 ----------- Higher Education Revenue Bonds - 7.89% Arizona State Board of Regents Certificates of Participation 5.125% 6/1/25 (AMBAC) 1,250,000 1,325,488 Glendale Industrial Development Authority Educational Facilities (American Graduate School International) 5.625% 7/1/20 (Connie Lee) 1,000,000 1,088,660 5.875% 7/1/15 (Connie Lee) 2,500,000 2,727,350 Mohave County Community College 6.00% 3/1/20 (MBIA) 1,000,000 1,167,480 South Campus Group Student Housing Revenue (Arizona State University South Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,113,860 Southern Arizona Capital Facilities Finance (University of Arizona Project) 5.10% 9/1/33 (MBIA) 2,400,000 2,528,976 University of Arizona Certificates of Participation 5.125% 6/1/21 (AMBAC) 1,000,000 1,077,470 5.75% 6/1/19 (AMBAC) 1,000,000 1,148,030 ----------- 12,177,314 ----------- Principal Market Amount Value Municipal Bonds (continued) Hospital Revenue Bonds - 11.95% Mesa Industrial Development Authority (Discovery Health Systems) Series A 5.625% 1/1/29 (MBIA) $9,250,000 $10,216,902 Phoenix Industrial Development Authority Hospital Revenue (John C. Lincoln Health) Series B 5.75% 12/1/16 (Connie Lee) 4,110,000 4,684,208 University Medical Center of Arizona Hospital Revenue 5.00% 7/1/33 1,000,000 1,001,140 University of Arizona Medical Center 6.25% 7/1/10 (MBIA) 1,445,000 1,467,730 Yavapai County Industrial Development Authority Hospital Revenue (Yavapai Regional Medical Center) Series A 5.25% 8/1/21 (RADIAN) 1,000,000 1,069,360 ----------- 18,439,340 ----------- Investor Owned Utilities Revenue Bonds - 1.38% Puerto Rico Industrial Tourist Facilities Financing Authority 6.625% 6/1/26 (AMT) 2,000,000 2,131,300 ----------- 2,131,300 ----------- Multifamily Housing Revenue Bonds - 10.45% Maricopa County Industrial Development Authority Multifamily Housing Revenue (Sly-Mar Apartments) 6.10% 4/20/36 (GNMA)(AMT) 1,300,000 1,433,354 Phoenix Industrial Development Authority Multifamily Housing Revenue (Capital Mews Apartments) 5.70% 12/20/40 (GNMA)(AMT) 4,000,000 4,255,959 Phoenix Industrial Development Authority Multifamily Housing Revenue (Ventana Palms Apartments) 6.15% 10/1/29 (MBIA) 510,000 552,560 6.20% 10/1/34 (MBIA) 940,000 1,020,831 Pima County Industrial Development Authority Multifamily Housing Revenue (Columbus Village) Series A 6.00% 10/20/31 (GNMA) 1,150,000 1,281,756 6.05% 10/20/41 (GNMA) 1,520,000 1,689,632 Pima County Industrial Development Authority Multifamily Housing Revenue (Sunbriar Apartments Project) 7.25% 7/1/25 (MBIA)(FHA) 1,225,000 1,259,349 Yuma Industrial Development Authority Multifamily Revenue 6.10% 9/20/19 (GNMA)(AMT) 2,340,000 2,611,065 Yuma Industrial Development Authority Multifamily Revenue (Regency Apartments) Series A 5.50% 12/20/32 (GNMA)(FHA) 2,000,000 2,015,580 ----------- 16,120,086 ----------- Municipal Lease Revenue Bonds - 7.54% Maricopa County Industrial Development Authority Correctional Facilities (Phoenix West Prison) 5.375% 7/1/22 (ACA) 250,000 262,665 Phoenix Industrial Development Authority Lease Revenue (Capitol Mall LLC Project) 5.50% 9/15/27 (AMBAC) 5,000,000 5,519,150 1 Statements Delaware Tax-Free Arizona Insured Fund OF NET ASSETS (CONTINUED) Principal Market Amount Value Municipal Bonds (continued) Municipal Lease Revenue Bonds (continued) Prescott Valley Municipal Property Corporate Facilities Revenue 5.00% 1/1/27 (FGIC) $ 700,000 $ 739,123 Salt River Project Arizona Agricultural Improvement & Power District Certificates of Participation 5.00% 12/1/18 (MBIA) 2,500,000 2,752,250 University of Arizona Certificates of Participation Series B 5.00% 6/1/31 (AMBAC) 2,250,000 2,361,240 ----------- 11,634,428 ----------- Political Subdivision General Obligation Bonds - 0.68% Phoenix Variable Purpose Series B 5.00% 7/1/27 1,000,000 1,052,030 ----------- 1,052,030 ----------- *Pre-Refunded Bonds - 4.55% Oro Valley Common Trust Funds Partnership 5.75% 7/1/17-06 (MBIA) 1,000,000 1,112,480 Surprise Municipal Property Excise Tax Revenue 5.70% 7/1/20-09 (FGIC) 5,000,000 5,909,650 ----------- 7,022,130 ----------- Public Power Revenue Bonds - 4.50% Energy Management Services (Arizona State University - Main Campus) 5.25% 7/1/17 (MBIA) 1,500,000 1,688,010 Salt River Project Arizona Agricultural Improvement & Power District Electric System Revenue (Salt River Project) Series A 5.00% 1/1/31 3,000,000 3,147,360 Series B 5.00% 1/1/31 (MBIA) 2,000,000 2,104,240 ----------- 6,939,610 ----------- Public Utility District Revenue Bonds - 3.41% Maricopa County Pollution Control (Palo Verde Project) Series A 5.05% 5/1/29 (AMBAC) 5,000,000 5,262,600 ----------- 5,262,600 ----------- School District General Obligation Bonds - 3.66% Cochise County Unified School District #68 7.50% 7/1/10 (FGIC) 1,000,000 1,281,130 Maricopa County School District #3 (Tempe Elementary) Series E 5.70% 7/1/16 (FGIC) 1,025,000 1,183,701 Maricopa County School District #14 (Creighton School Improvement Project of 1990) Series C 6.50% 7/1/08 (FGIC) 1,000,000 1,184,260 Maricopa County School District #38 (Madison Elementary) 5.00% 7/1/14 (FSA) 1,750,000 1,999,777 ----------- 5,648,868 ----------- Single Family Housing Revenue Bonds - 0.58% Pima County Industrial Development Authority Single Family Housing Revenue 6.10% 5/1/31 (GNMA)(AMT) 835,000 890,586 ----------- 890,586 ----------- Principal Market Amount Value Municipal Bonds (continued) Territorial General Obligation Bonds - 4.92% Puerto Rico Commonwealth Public Improvement Series A 5.00% 7/1/27 $1,000,000 $ 1,037,790 5.125% 7/1/30 (FSA) 1,250,000 1,327,875 5.125% 7/1/31 3,575,000 3,721,146 Puerto Rico Commonwealth Refunding Public Improvements Series A 5.50% 7/1/19 1,300,000 1,508,117 ------------ 7,594,928 ------------ Territorial Revenue Bonds - 2.40% Puerto Rico Electric Power Authority Power Revenue Series NN 5.00% 7/1/32 (MBIA) 1,500,000 1,593,075 Puerto Rico Public Buildings Authority Guaranteed Government Facilities Revenue Series D 5.25% 7/1/27 1,000,000 1,067,050 Virgin Islands Public Finance Authority 5.00% 10/1/31 (ACA) 1,000,000 1,033,630 ------------ 3,693,755 ------------ Transportation Revenue Bonds - 3.87% Arizona State Transportation Board Highway Revenue Series A 5.00% 7/1/21 2,500,000 2,702,300 5.00% 7/1/23 1,000,000 1,071,280 Arizona State Transportation Board Highway Revenue Series B 5.25% 7/1/21 1,000,000 1,098,680 5.25% 7/1/22 1,000,000 1,092,710 ------------ 5,964,970 ------------ Water & Sewer Revenue Bonds - 7.03% Gilbert Water & Waste Water Revenue 6.50% 7/1/12 (FGIC) 1,000,000 1,029,150 6.50% 7/1/22 (FGIC) 2,650,000 2,727,248 Glendale Water & Sewer Revenue 5.00% 7/1/28 (AMBAC) 2,000,000 2,113,480 Phoenix Civic Improvement Corporation Wastewater Systems Revenue 5.00% 7/1/24 (FGIC) 1,000,000 1,046,510 5.00% 7/1/26 (FGIC) 3,750,000 3,933,562 ------------ 10,849,950 ------------ Total Municipal Bonds (cost $139,715,340) 150,459,229 ------------ Number of Shares Short-Term Investments - 2.04% Federated Arizona Municipal Cash Trust 3,142,084 3,142,084 ------------ Total Short-Term Investments (cost $3,142,084) 3,142,084 ------------ 2 Statements Delaware Tax-Free Arizona Insured Fund OF NET ASSETS (CONTINUED) Total Market Value of Securities - 99.58% (cost $142,857,424) $153,601,313 Receivables and Other Assets Net of Liabilities - 0.42% 650,621 ------------ Net Assets Applicable to 13,240,569 Shares Outstanding - 100.00% $154,251,934 ============ Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class A ($131,560,042 / 11,294,693 Shares) $11.65 ------ Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class B ($14,580,250 / 1,250,879 Shares) $11.66 ------ Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class C ($8,111,642 / 694,997 Shares) $11.67 ------ Components of Net Assets at February 29, 2004: Shares of beneficial interest (unlimited authorization - no par) $143,465,205 Undistributed net investment income 7,314 Accumulated net realized gain on investments 35,526 Net unrealized appreciation of investments 10,743,889 ------------ Total net assets $154,251,934 ============ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. Summary of Abbreviations: ACA - Insured by American Capital Access AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Authority FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance Net Asset Value and Offering Price per Share - Delaware Tax-Free Arizona Insured Fund Net asset value Class A (A) $11.65 Sales charge (4.50% of offering price, or 4.72% of amount invested per share) (B) 0.55 ------ Offering price $12.20 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 3 Statements Six Months Ended February 29, 2004 (Unaudited) OF OPERATIONS
Delaware Tax-Free Arizona Insured Fund Investment Income: Interest $ 3,879,349 ----------- Expenses: Management fees 383,092 Distribution expenses -- Class A 163,684 Distribution expenses -- Class B 72,034 Distribution expenses -- Class C 39,974 Dividend disbursing and transfer agent fees and expenses 45,148 Accounting and administration expenses 29,835 Legal and professional fees 20,341 Reports and statements to shareholders 13,900 Registration fees 9,800 Custodian fees 3,794 Trustees' fees 3,803 Other 6,166 ----------- 791,571 Less expenses absorbed or waived -- Less expenses paid indirectly (2,001) ----------- Total expenses 789,570 ----------- Net Investment Income 3,089,779 ----------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on investments 109,767 Net change in unrealized appreciation/depreciation of investments 7,245,596 ----------- Net Realized and Unrealized Gain on Investments 7,355,363 ----------- Net Increase in Net Assets Resulting from Operations $10,445,142 ===========
See accompanying notes 4 Statements OF CHANGES IN NET ASSETS
Delaware Tax-Free Arizona Insured Fund Six Months Year Ended Ended 2/29/04 8/31/03 (Unaudited) Increase (Decrease) in Net Assets from Operations: Net investment income $ 3,089,779 $ 6,864,597 Net realized gain (loss) on investments 109,767 754,322 Net change in unrealized appreciation/depreciation of investments 7,245,596 (4,291,338) ------------ ------------ Net increase (decrease) in net assets resulting from operations 10,445,142 3,327,581 ------------ ------------ Dividends and Distributions to Shareholders from: Net investment income: Class A (2,710,569) (5,989,214) Class B (243,997) (534,860) Class C (135,213) (340,523) Net realized gain on investments: Class A (670,678) (1,396,185) Class B (74,157) (143,720) Class C (40,949) (91,428) ------------ ------------ (3,875,563) (8,495,930) ------------ ------------ Capital Share Transactions: Proceeds from shares sold: Class A 5,273,387 13,366,725 Class B 725,044 3,326,803 Class C 568,658 3,929,559 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 1,790,633 3,663,972 Class B 178,477 380,126 Class C 147,763 334,202 ------------ ------------ 8,683,962 25,001,387 ------------ ------------ Cost of shares repurchased: Class A (10,795,952) (24,391,768) Class B (1,609,200) (2,246,828) Class C (1,489,376) (3,517,552) ------------ ------------ (13,894,528) (30,156,148) ------------ ------------ Decrease in net assets derived from capital share transactions (5,210,566) (5,154,761) ------------ ------------ Net Increase (Decrease) in Net Assets 1,359,013 (10,323,110) Net Assets: Beginning of period 152,892,921 163,216,031 ------------ ------------ End of period (including undistributed (distributions in excess of) net investment income of ($1,681), ($1,660), $7,314 and $7,314, respectively) $154,251,934 $152,892,921 ============ ============
See accompanying notes 5 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Arizona Insured Fund Class A ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/29/04(1) 8/31/03 8/31/02(3) 8/31/01 8/31/00 8/31/99 (Unaudited) Net asset value, beginning of period $ 11.160 $ 11.530 $ 11.500 $ 11.040 $ 10.990 $ 11.550 Income (loss) from investment operations: Net investment income 0.236 0.502 0.510 0.521 0.525 0.528 Net realized and unrealized gain (loss) on investments 0.548 (0.253) 0.100 0.460 0.050 (0.560) -------- -------- -------- -------- -------- -------- Total from investment operations 0.784 0.249 0.610 0.981 0.575 (0.032) -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.236) (0.502) (0.510) (0.521) (0.525) (0.528) Net realized gain on investments (0.058) (0.117) (0.070) -- -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.294) (0.619) (0.580) (0.521) (0.525) (0.528) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 11.650 $ 11.160 $ 11.530 $ 11.500 $ 11.040 $ 10.990 ======== ======== ======== ======== ======== ======== Total return(2) 7.09% 2.17% 5.54% 9.12% 5.47% (0.36%) Ratios and supplemental data: Net assets, end of period (000 omitted) $131,560 $129,683 $141,424 $141,298 $142,018 $166,368 Ratio of expenses to average net assets 0.92% 0.86% 0.90% 0.95% 0.95% 0.91% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.92% 0.91% 0.90% 0.97% 0.98% 0.91% Ratio of net investment income to average net assets 4.14% 4.37% 4.50% 4.65% 4.88% 4.60% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.14% 4.32% 4.50% 4.63% 4.85% 4.60% Portfolio turnover 24% 29% 46% 45% 50% 29%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 6 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Arizona Insured Fund Class B ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/29/04(1) 8/31/03 8/31/02(3) 8/31/01 8/31/00 8/31/99 (Unaudited) Net asset value, beginning of period $11.170 $11.540 $11.500 $11.040 $10.990 $11.550 Income (loss) from investment operations: Net investment income 0.193 0.416 0.426 0.437 0.444 0.441 Net realized and unrealized gain (loss) on investments 0.548 (0.253) 0.110 0.460 0.050 (0.560) ------- ------- ------- ------- ------- ------- Total from investment operations 0.741 0.163 0.536 0.897 0.494 (0.119) ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.193) (0.416) (0.426) (0.437) (0.444) (0.441) Net realized gain on investments (0.058) (0.117) (0.070) -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.251) (0.533) (0.496) (0.437) (0.444) (0.441) ------- ------- ------- ------- ------- ------- Net asset value, end of period $11.660 $11.170 $11.540 $11.500 $11.040 $10.990 ======= ======= ======= ======= ======= ======= Total return(2) 6.69% 1.41% 4.83% 8.31% 4.68% (1.11%) Ratios and supplemental data: Net assets, end of period (000 omitted) $14,580 $14,666 $13,678 $ 8,864 $6,630 $ 6,059 Ratio of expenses to average net assets 1.67% 1.61% 1.65% 1.70% 1.70% 1.66% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.67% 1.66% 1.65% 1.72% 1.73% 1.66% Ratio of net investment income to average net assets 3.39% 3.62% 3.75% 3.90% 4.13% 3.85% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.39% 3.57% 3.75% 3.88% 4.10% 3.85% Portfolio turnover 24% 29% 46% 45% 50% 29%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 7 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Arizona Insured Fund Class C ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/29/04(1) 8/31/03 8/31/02(3) 8/31/01 8/31/00 8/31/99 (Unaudited) Net asset value, beginning of period $11.180 $11.550 $11.520 $11.040 $10.990 $11.560 Income (loss) from investment operations: Net investment income 0.193 0.415 0.426 0.438 0.444 0.441 Net realized and unrealized gain (loss) on investments 0.548 (0.253) 0.100 0.480 0.050 (0.570) ------- ------- ------- ------- ------- ------- Total from investment operations 0.741 0.162 0.526 0.918 0.494 (0.129) ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.193) (0.415) (0.426) (0.438) (0.444) (0.441) Net realized gain on investments (0.058) (0.117) (0.070) -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.251) (0.532) (0.496) (0.438) (0.444) (0.441) ------- ------- ------- ------- ------- ------- Net asset value, end of period $11.670 $11.180 $11.550 $11.520 $11.040 $10.990 ======= ======= ======= ======= ======= ======= Total return2 6.68% 1.40% 4.73% 8.50% 4.68% (1.20%) Ratios and supplemental data: Net assets, end of period (000 omitted) $ 8,112 $ 8,544 $8,115 $3,230 $1,322 $ 1,373 Ratio of expenses to average net assets 1.67% 1.61% 1.65% 1.70% 1.70% 1.66% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.67% 1.66% 1.65% 1.72% 1.73% 1.66% Ratio of net investment income to average net assets 3.39% 3.62% 3.75% 3.90% 4.13% 3.85% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.39% 3.57% 3.75% 3.88% 4.10% 3.85% Portfolio turnover 24% 29% 46% 45% 50% 29%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 8 Notes February 29, 2004 (Unaudited) TO FINANCIAL STATEMENTS Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund and Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is organized as a Delaware statutory trust and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur Investment Trust (the "Trust") is organized as a Massachusetts statutory trust and offers five series: Delaware Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund. Voyageur Mutual Funds II (the "Trust") is organized as a Delaware statutory trust and offers one series: Delaware Tax-Free Colorado Fund. These financial statements and related footnotes pertain to Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund and Delaware Tax-Free Colorado Fund (each a "Fund" and, collectively, the "Funds"). The above Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended. The Funds offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. The investment objective of Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund and Delaware Tax-Free Colorado Fund is to seek as high a level of current income exempt from federal income tax and personal income tax in their respective states, as is consistent with preservation of capital. 1. Significant Accounting Policies The following accounting policies are in accordance with accounting principles generally accepted in the United States and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of each Fund on the basis of "settled shares" of each class in relation to the net assets of each Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of each Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. Certain expenses of the Funds are paid through commission arrangements with brokers. In addition, the Funds may receive earnings credits from their custodian when positive balances are maintained, which are used to offset custody fees. The expenses paid under the above arrangements are included in their respective expense captions on the Statements of Operations with the corresponding expense offset shown as "expenses paid indirectly". The amount of these expenses for the six months ended February 29, 2004 were as follows: Delaware Tax-Free Arizona Insured Fund ------------ Commission reimbursements $1,835 Earnings credits 166 2. Investment Management, Administration Agreements and Other Transactions with Affiliates In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows: Delaware Tax-Free Arizona Insured Fund ------------ On the first $500 million 0.500% On the next $500 million 0.475% On the next $1.5 billion 0.450% In excess of $2.5 billion 0.425% DMC has contractually agreed to waive that portion, if any, of its management fee and reimburses each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses do not exceed specified percentages of average daily net assets of the Funds through October 31, 2004 and until revoked for the Delaware Tax-Free California Fund, as shown below. 9 Notes TO FINANCIAL STATEMENTS (CONTINUED) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued) Delaware Tax-Free Arizona Insured Fund ------------ Operating expense limitation as a percentage of average daily net assets (per annum) 0.70% Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend and disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares. At February 29, 2004, each Fund had liabilities payable to affiliates as follows: Delaware Tax-Free Arizona Insured Fund ------------ Investment management fees payable to DMC $15,718 Dividend disbursing, transfer agent fees, accounting and other expenses payable to DSC 12,020 Other expenses payable to DMC and affiliates* 2,344 *DMC, as a part of its administrative services, pays operating expenses on behalf of the Funds and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, professional fees, custodian fees and trustees' fees. Certain internal legal expenses are allocated to the Funds. For the six months ended February 29, 2004, the Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund, and the Delaware Tax-Free Colorado Fund had costs of $1,715, $8,341, $2,078, $1,849, and $15,274, respectively. For the six months ended February 29, 2004, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Arizona Insured Fund ------------ $11,689 Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trusts. These officers and/or trustees are paid no compensation by the Funds. 3. Investments For the six months ended February 29, 2004, the Funds made purchases and sales of investment securities as follows: Delaware Tax-Free Arizona Insured Fund ------------ Purchases other than U.S. government securities and short-term investments $18,032,834 Sales other than U.S. government securities and short-term investments 25,899,398 At February 29, 2004, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 29, 2004, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows: Delaware Tax-Free Arizona Insured Fund ---------------- Cost of investments $142,857,424 Aggregate unrealized appreciation $ 10,770,109 Aggregate unrealized depreciation (26,220) ------------ Net unrealized appreciation $ 10,743,889 ============ 10 Notes TO FINANCIAL STATEMENTS (CONTINUED) 4. Dividend and Distribution Information Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. The tax character of dividends and distributions paid during the six months ended February 29, 2004 and the year ended August 31, 2003 was as follows: Delaware Tax-Free Arizona Insured Fund ----------------------- Six Months Year Ended Ended 2/29/04* 8/31/03 Tax-exempt income $3,292,999 $6,864,597 Long-term capital gain 582,564 1,631,333 ---------- ---------- Total $3,875,563 $8,495,930 ========== ========== *Tax information for the period ended February 29, 2004, is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of February 29, 2004, the estimated components of net assets on a tax basis was as follows: Delaware Tax-Free Arizona Insured Fund ------------ Shares of beneficial interest $143,465,205 Undistributed tax-exempt income 7,314 Undistributed long-term capital gains -- Net realized capital gain (losses) on investments 35,526 Capital loss carryforwards -- Unrealized appreciation of investments 10,743,889 ------------ Net assets $154,251,934 ============ For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Such capital loss carryforwards expire as follows: 11 Notes TO FINANCIAL STATEMENTS (CONTINUED) 5. Capital Shares Transactions in capital shares were as follows: Delaware Tax-Free Arizona Insured Fund -------------------------- Six Months Year Ended Ended 2/29/04 8/31/03 Shares sold: Class A 463,359 1,161,855 Class B 63,242 289,628 Class C 49,173 340,061 Shares issued upon reinvestments of dividends and distributions: Class A 156,497 321,230 Class B 15,576 33,321 Class C 12,893 29,256 ---------- ---------- 760,740 2,175,351 ---------- ---------- Shares repurchased: Class A (945,359) (2,129,562) Class B (141,168) (195,453) Class C (131,159) (307,819) ---------- ---------- (1,217,686) (2,632,834) ---------- ---------- Net decrease (456,946) (457,483) ========== ========== 12 Notes TO FINANCIAL STATEMENTS (CONTINUED) 5. Capital Shares (continued) For the six months ended February 29, 2004 and the year ended August 31, 2003, the following shares and value were converted from Class B to Class A. The respective amounts are included in Class B redemptions and Class A subscriptions in the table below and the Statements of Changes in Net Assets.
Six Months Ended Year Ended 2/29/04 8/31/03 --------------------------------- ------------------------------- Class B Class A Class B Class A shares shares Amount shares shares Amount Delaware Tax-Free Arizona Insured Fund 27,307 27,327 309,818 43,904 43,915 512,431
6. Line of Credit The Funds, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participate in a $177,300,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Fund's allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 29, 2004, or at any time during the period. 7. Credit and Market Risk The Funds concentrate their investments in securities issued by 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. 13 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of each Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information Walter P. Babich Jude T. Driscoll Investment Manager Board Chairman Chairman Delaware Management Company Citadel Construction Corporation Delaware Investments Family of Funds Philadelphia, PA King of Prussia, PA Philadelphia, PA International Affiliate John H. Durham Joseph H. Hastings Delaware International Advisers Ltd. Private Investor Executive Vice President and London, England Gwynedd Valley, PA Chief Financial Officer Delaware Investments Family of Funds National Distributor Anthony D. Knerr Philadelphia, PA Delaware Distributors, L.P. Managing Director Philadelphia, PA Anthony Knerr & Associates Richelle S. Maestro New York, NY Senior Vice President, Shareholder Servicing, Dividend Chief Legal Officer and Secretary Disbursing and Transfer Agent Ann R. Leven Delaware Investments Family of Funds Delaware Service Company, Inc. Former Treasurer/Chief Fiscal Officer Philadelphia, PA 2005 Market Street National Gallery of Art Philadelphia, PA 19103-7094 Washington, DC Michael P. Bishof Senior Vice President and Treasurer For Shareholders Thomas F. Madison Delaware Investments Family of Funds 800 523-1918 President and Chief Executive Officer Philadelphia, PA MLM Partners, Inc. For Securities Dealers and Financial Minneapolis, MN Institutions Representatives Only 800 362-7500 Janet L. Yeomans Vice President/Mergers & Acquisitions Web site 3M Corporation www.delawareinvestments.com St. Paul, MN
-------------------------------------------------------------------------------- A description of the policies and procedures that the Funds use to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Funds' website at http://www.delawareinvestments.com; and (iii) on the Commission's website at http://www.sec.gov.; and beginning no later than August 31, 2004, information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) through the Funds' website at http://www.delawareinvestments.com; and (ii) on the Commission's website at http://www.sec.gov. -------------------------------------------------------------------------------- (8620) Printed in the USA SA-WEST [2/04] IVES 4/04 J9612 Delaware Investments(SM) -------------------------------------- FIXED INCOME A member of Lincoln Financial Group(R) Semiannual Report FEBRUARY 29, 2004 -------------------------------------------------------------------------------- DELAWARE TAX-FREE MINNESOTA INSURED FUND [LOGO] POWERED BY RESEARCH.(SM) Table OF CONTENTS -------------------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 1 Statements of Operations 4 Statements of Changes in Net Assets 5 Financial Highlights 6 Notes to Financial Statements 9 -------------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2004 Delaware Distributors, L.P. Delaware Tax-Free Minnesota Insured Fund Statements February 29, 2004 (Unaudited) OF NET ASSETS Principal Market Amount Value Municipal Bonds - 98.20% Airport Revenue Bonds - 3.49% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.125% 1/1/25 (FGIC) $ 100,000 $ 105,830 Series C 5.125% 1/1/20 (FGIC) 2,000,000 2,168,960 Series C 5.25% 1/1/32 (FGIC) 6,595,000 7,066,477 ----------- 9,341,267 ----------- Corporate-Backed Revenue Bonds - 0.69% Sartell Environmental Improvement Revenue (International Paper) Series A 5.20% 6/1/27 1,800,000 1,856,592 ----------- 1,856,592 ----------- Escrowed to Maturity Bonds - 16.00% Dakota/Washington Counties Housing & Redevelopment Authority Anoka Single Family Residential Mortgage Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 13,330,170 Dakota/Washington Counties Housing & Redevelopment Authority Bloomington Single Family Residential Mortgage Revenue 8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 580,693 8.375% 9/1/21 (GNMA) (FHA) (AMT) 14,115,000 21,172,782 Southern Minnesota Municipal Power Agency Supply Revenue Series A 5.75% 1/1/18 3,790,000 3,881,491 5.75% 1/1/18 (AMBAC) 670,000 686,174 Western Minnesota Municipal Power Agency Supply Revenue Series A 6.60% 1/1/10 2,000,000 2,327,780 9.75% 1/1/16 (MBIA) 530,000 836,568 ----------- 42,815,658 ----------- Higher Education Revenue Bonds - 3.70% Minnesota State Colleges & Universities Revenue Series A 5.00% 10/1/22 (FSA) 5,135,000 5,480,123 Minnesota State Higher Education Facilities Authority Revenue (St. Catherine College) Series 5-N1 5.00% 10/1/18 2,200,000 2,310,396 St. Cloud Housing & Redevelopment Authority Revenue (State University Foundation Project) 5.00% 5/1/23 2,000,000 2,108,960 ----------- 9,899,479 ----------- Hospital Revenue Bonds - 16.81% Minneapolis Health Care Facilities Revenue (Fairview Hospital & Healthcare Service) Series A 5.25% 11/15/19 (MBIA) 2,250,000 2,300,895 Minneapolis Health Care System Revenue Series A (Allina Health System) 5.75% 11/15/32 7,800,000 8,325,018 (Fairview Health Services) 5.625% 5/15/32 6,400,000 6,800,128 Principal Market Amount Value Municipal Bonds (continued) Hospital Revenue Bonds (continued) Minneapolis/St. Paul Housing & Redevelopment Authority Health Care Systems Revenue (Children's Health Care Series) 5.50% 8/15/25 Series A (FSA) $ 2,250,000 $ 2,397,690 (Healthpartners Obligation Group Project) 5.625% 12/1/22 650,000 676,689 5.875% 12/1/29 1,000,000 1,042,900 (Healthspan Health System) 5.00% 11/15/13 Series A (AMBAC) 6,490,000 6,638,621 Minnesota Agricultural & Economic Development Health Care System (Fairview Hospital) Series 97A 5.75% 11/15/26 (MBIA) 10,250,000 11,515,260 St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.50% 7/1/25 2,000,000 2,113,800 St. Paul Housing & Redevelopment Authority Hospital Revenue (St. Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,023,360 Willmar (Rice Memorial Hospital Project) 5.00% 2/1/22 (FSA) 1,000,000 1,072,490 5.00% 2/1/25 (FSA) 1,000,000 1,067,080 ----------- 44,973,931 ----------- Miscellaneous Revenue Bonds - 0.79% Minneapolis Community Development Agency Supported Development Revenue Series G-3 5.45% 12/1/31 2,000,000 2,116,580 ----------- 2,116,580 ----------- Multi Family Housing Revenue Bonds - 6.53% Chaska Waters Edge Multifamily Revenue Series A 7.30% 1/20/30 (GNMA) 3,257,000 3,477,336 Eagan Multifamily Revenue (Woodridge Apartments) 5.90% 8/1/20 (GNMA) 1,000,000 1,061,620 Hopkins Multifamily Revenue (Auburn Apartments Project) Series A 8.05% 6/20/31 (GNMA) 3,790,000 4,111,430 Minneapolis Multifamily Revenue (Bottineau Commons Project) 5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,571,190 (Seward Towers Project) 5.00% 5/20/36 (GNMA) 4,000,000 4,171,320 Minneapolis/St. Paul Housing Finance Board Revenue (Trinity Apartments) Series A 8.125% 12/1/14 (GNMA) (FHA) (AMT) 15,000 15,014 Minnesota State Housing Finance Agency Rental Housing Revenue Series C-2 5.95% 2/1/15 (AMBAC) 1,882,000 1,947,362 White Bear Lake Multifamily Revenue (Lake Square) Series A 5.875% 2/1/15 (FHA) 1,055,000 1,117,192 ----------- 17,472,464 ----------- 1 Delaware Tax-Free Minnesota Insured Fund Statements OF NET ASSETS (CONTINUED) Principal Market Amount Value Municipal Bonds (continued) Municipal Lease Revenue Bonds - 5.53% Hopkins Housing & Redevelopment Authority Public Works and Fire Station Series A 5.00% 2/1/23 (MBIA) $ 1,210,000 $ 1,287,440 Minneapolis Special School District #001 Series A 5.00% 2/1/18 (FSA) 1,545,000 1,683,540 5.00% 2/1/19 (FSA) 1,535,000 1,662,758 5.00% 2/1/20 (FSA) 1,690,000 1,819,860 St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.125% 12/1/27 2,000,000 2,134,060 5.25% 12/1/27 3,840,000 4,127,193 (Robert Street Office Building Project) 4.75% 12/1/23 2,000,000 2,071,820 ------------ 14,786,671 ------------ Political Subdivision General Obligation Bonds - 1.20% Dakota County Community Agency Governmental Housing Development 5.00% 1/1/21 1,275,000 1,350,811 Western Lake Superior Sanitation District Series A 6.00% 10/1/08 (MBIA) (AMT) 400,000 427,000 6.10% 10/1/09 (MBIA) (AMT) 425,000 454,703 6.20% 10/1/10 (MBIA) (AMT) 450,000 482,157 6.20% 10/1/11 (MBIA) (AMT) 475,000 507,386 ------------ 3,222,057 ------------ *Pre-Refunded Bonds - 7.30% Duluth Economic Development Authority Health Care Facilities Revenue (Duluth Clinic) 6.30% 11/1/22-04 (AMBAC) 1,060,000 1,098,287 North St. Paul Maplewood Independent School District #622 Series A 7.10% 2/1/19-05 (MBIA) 5,935,000 6,267,775 7.10% 2/1/25-05 (FSA) 11,525,000 12,171,207 ------------ 19,537,269 ------------ Public Power Revenue Bonds - 10.73% Northern Minnesota Municipal Power Agency Electric System Revenue Series B 4.75% 1/1/20 (AMBAC) 1,100,000 1,149,797 **Northern Minnesota Municipal Power Agency Electric System Revenue, Inverse Floater ROLs Series II-R-32 9.42% 1/1/13 (FSA) 4,585,000 5,887,598 Shakopee Public Utilities Commission Public Utilities Revenue 5.125% 2/1/26 (MBIA) 1,850,000 1,922,650 **Southern Minnesota Municipal Power Agency Supply System Revenue, Inverse Floater ROLs Series II-R-189-B 9.44% 1/1/16 (AMBAC) 2,500,000 3,292,225 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.00% 1/1/12 (AMBAC) 2,205,000 2,518,573 5.00% 10/1/13 (MBIA) 1,000,000 1,139,730 5.25% 1/1/15 (AMBAC) 2,350,000 2,721,794 5.25% 1/1/16 (AMBAC) 5,000,000 5,792,200 Principal Market Amount Value Municipal Bonds (continued) Public Power Revenue Bonds (continued) Western Minnesota Municipal Power Agency Supply System Series B 5.00% 1/1/15 (MBIA) $ 1,000,000 $ 1,137,740 Series A 5.00% 1/1/30 (MBIA) 3,000,000 3,156,360 ----------- 28,718,667 ----------- School District General Obligation Bonds - 17.57% Big Lake Independent School District #727 Series A 5.00% 2/1/17 (FSA) 1,040,000 1,133,236 5.00% 2/1/20 (FSA) 1,000,000 1,076,430 Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,383,881 Morris Independent School District #769 5.00% 2/1/24 (MBIA) 4,875,000 5,175,788 Mounds View Independent School District #621 5.00% 2/1/20 (MBIA) 2,970,000 3,198,215 5.375% 2/1/24 (FGIC) 6,170,000 6,720,795 Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,819,150 Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 1,310,000 1,401,425 **Rockford Independent School District #883, Inverse Floater ROLs Series II-R-30-B 10.13% 2/1/21 (FSA) 1,605,000 2,034,530 +Rosemount Independent School District #196 Series B 5.80% 4/1/09 (FSA) 1,860,000 1,628,188 5.85% 4/1/10 (FSA) 2,240,000 1,881,197 +Sauk Rapids Independent School District #047 Series B 5.983% 2/1/15 (FSA) 2,700,000 1,627,371 6.083% 2/1/17 (FSA) 2,245,000 1,205,722 **South Washington County Independent School District #833, Inverse Floater ROLs Series II-R-34-A 10.13% 2/1/20 (MBIA) 3,440,000 4,392,639 Series II-R-34-B 10.13% 2/1/21 (MBIA) 3,645,000 4,620,475 St. Michael Independent School District #885 5.00% 2/1/20 (FSA) 1,970,000 2,121,375 5.00% 2/1/27 (FSA) 3,435,000 3,610,048 ----------- 47,030,465 ----------- Single Family Housing Revenue Bonds - 0.74% Dakota County Housing & Redevelopment Authority Single Family Mortgage Revenue 5.85% 10/1/30 (GNMA/FNMA) (AMT) 1,618,000 1,685,244 6.70% 10/1/17 (FNMA) 285,000 286,186 ----------- 1,971,430 ----------- State General Obligation Bonds - 2.58% Minnesota State 5.00% 11/1/20 (FSA) 5,500,000 5,947,755 **Minnesota State, Inverse Floater ROLs 9.05% 11/1/17 800,000 960,192 ----------- 6,907,947 ----------- 2 Statements Delaware Tax-Free Minnesota Insured Fund OF NET ASSETS (CONTINUED) Principal Market Amount Value Municipal Bonds (continued) Tax Increment / Special Assessment Bonds - 2.40% Becker Tax Increment Series D 6.25% 8/1/15 (MBIA) (AMT) $ 6,300,000 $ 6,417,180 ------------ 6,417,180 ------------ Territorial Revenue Bonds - 0.39% Puerto Rico Electric Power Authority Power Revenue Series GG 4.75% 9/1/21 (FSA) 1,000,000 1,043,560 ------------ 1,043,560 ------------ ++Variable Rate Demand Notes - 1.75% Robbinsdale Health Care Facilities Revenue (North Memorial Health Care-Tranche I) 0.90% 5/15/33 (AMBAC) 1,175,000 1,175,000 Rochester Healthcare 0.93% 3/2/04 3,500,000 3,500,000 ------------ 4,675,000 ------------ Total Municipal Bonds (cost $240,035,112) 262,786,217 ------------ Number of Shares Short-Term Investment - 1.16% Federated Minnesota Municipal Cash Trust 3,103,494 3,103,494 ------------ Total Short-Term Investment (cost $3,103,494) 3,103,494 ------------ Total Market Value of Securities - 99.36% (cost $243,138,606) 265,889,711 Receivables and Other Assets Net of Liabilities - 0.64% 1,716,710 ------------ Net Assets Applicable to 23,801,847 Shares Outstanding - 100.00% $267,606,421 ============ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class A ($239,459,011 / 21,298,581 Shares) $11.24 ------ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class B ($15,726,158 / 1,399,908 Shares) $11.23 ------ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class C ($12,421,252 / 1,103,358 Shares) $11.26 ------ Components of Net Assets at February 29, 2004: Shares of beneficial interest (unlimited authorization-- no par) $243,866,774 Accumulated net realized gain on investments 988,542 Net unrealized appreciation of investments 22,751,105 ------------ Total net assets $267,606,421 ============ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. **An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 29, 2004. +Zero coupon bond. The interest rate shown is the yield at the time of purchase. ++The interest shown is the rate as of February 29, 2004. Summary of Abbreviations: Ambac - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association ROLs - Residual Option Longs Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Insured Fund Net asset value Class A (A) $11.24 Sales charge (4.50% of offering price, or 4.72% of amount invested per share) (B) 0.53 ------ Offering price $11.77 ====== (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 3 Statements Delaware Minnesota Municipal Bond Funds OF OPERATIONS Six Months Ended February 29, 2004 (Unaudited) Delaware Tax-Free Minnesota Insured Fund Investment Income: Interest $ 6,951,609 ----------- Expenses: Management fees 656,737 Distribution expense-- Class A 294,150 Distribution expense-- Class B 76,794 Distribution expense-- Class C 60,761 Dividend disbursing and transfer agent fees and expenses 89,773 Accounting and administration expenses 51,136 Legal and professional fees 16,911 Reports and statements to shareholders 16,800 Registration fees 21,000 Custodian fees 6,615 Trustees' fees 18,000 Other 23,001 ----------- 1,927,223 ----------- Less expenses absorbed or waived -- Less waiver of distribution expenses-- Class A -- Less expenses paid indirectly (3,368) ----------- Total expenses 1,328,310 ----------- Net Investment Income 5,623,299 ----------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on investments 1,277,062 Net change in unrealized appreciation/depreciation of investments 10,745,586 ----------- Net Realized and Unrealized Gain on Investments 12,022,648 ----------- Net Increase in Net Assets Resulting from Operations $17,645,947 =========== See accompanying notes 4 Statements Delaware Tax-Free Minnesota Insured Fund OF CHANGES IN NET ASSETS
Delaware Tax-Free Minnesota Insured Fund Six Months Year Ended Ended 2/29/04 8/31/03 (Unaudited) Increase (Decrease) in Net Assets from Operations: Net investment income $ 5,623,299 $ 11,803,673 Net realized gain on investments 1,277,062 2,440,481 Net change in unrealized appreciation/depreciation of investments 10,745,586 (7,468,306) ------------- ------------- Net increase in net assets resulting from operations 17,645,947 6,775,848 ------------- ------------- Dividends and Distributions to Shareholders from: Net investment income: Class A (5,102,896) (10,931,097) Class B (275,850) (589,404) Class C (217,630) (348,888) Net realized gain on investments: Class A -- -- Class B -- -- Class C -- -- ------------- ------------- (5,596,376) (11,869,389) ------------- ------------- Capital Share Transactions: Proceeds from shares sold: Class A 8,516,097 14,811,513 Class B 1,055,921 3,424,019 Class C 865,288 6,800,660 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 3,350,608 7,014,830 Class B 208,301 430,103 Class C 145,189 235,167 ------------- ------------- 14,141,404 32,716,292 ------------- ------------- Cost of shares repurchased: Class A (14,925,520) (25,326,599) Class B (1,899,308) (2,239,993) Class C (1,111,154) (892,572) ------------- ------------- (17,935,982) (28,459,164) ------------- ------------- Increase (decrease) in net assets derived from capital share transactions (3,794,578) 4,257,128 ------------- ------------- Net Increase (Decrease) in Net Assets 8,254,993 (836,413) Net Assets: Beginning of period 259,351,428 260,187,841 ------------- ------------- End of period (including undistributed distributions in excess of) net investment income of $94,738 and ($22,418) for Delaware Tax-Free Minnesota Fund and $0 and $0 for Delaware Tax-Free Minnesota Insured Fund) $ 267,606,421 $ 259,351,428 ============= =============
See accompanying notes 5 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Insured Fund Class A ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/29/04(1) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99 (Unaudited) Net asset value, beginning of period $10.740 $10.940 $10.900 $10.480 $10.520 $11.050 Income (loss) from investment operations: Net investment income 0.238 0.498 0.514 0.514 0.507 0.518 Net realized and unrealized gain (loss) on investments 0.500 (0.197) 0.038 0.421 (0.041) (0.530) ------- ------- ------- ------- ------- ------- Total from investment operations 0.738 0.301 0.552 0.935 0.466 (0.012) ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.238) (0.501) (0.512) (0.515) (0.506) (0.518) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.238) (0.501) (0.512) (0.515) (0.506) (0.518) ------- ------- ------- ------- ------- ------- Net asset value, end of period $11.240 $10.740 $10.940 $10.900 $10.480 $10.520 ======= ======= ======= ======= ======= ======= Total return(3) 6.92% 2.75% 5.25% 9.14% 4.63% (0.17%) Ratios and supplemental data: Net assets, end of period (000 omitted) $239,459 $231,738 $239,763 $242,716 $238,486 $268,507 Ratio of expenses to average net assets 0.93% 0.93% 0.96% 0.90% 1.00% 0.94% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.93% 0.93% 0.96% 0.90% 1.01% 0.94% Ratio of net investment income to average net assets 4.34% 4.52% 4.78% 4.82% 4.93% 4.74% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.34% 4.52% 4.78% 4.82% 4.92% 4.74% Portfolio turnover 18% 30% 15% 7% 35% 4%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager and distributor, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 6 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Insured Fund Class B ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/29/04(1) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99 (Unaudited) Net asset value, beginning of period $10.730 $10.940 $10.890 $10.470 $10.510 $11.040 Income (loss) from investment operations: Net investment income 0.197 0.415 0.433 0.434 0.431 0.436 Net realized and unrealized gain (loss) on investments 0.500 (0.207) 0.048 0.422 (0.042) (0.529) ------- ------- ------- ------- ------- ------- Total from investment operations 0.697 0.208 0.481 0.856 0.389 (0.093) ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.197) (0.418) (0.431) (0.436) (0.429) (0.437) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.197) (0.418) (0.431) (0.436) (0.429) (0.437) ------- ------- ------- ------- ------- ------- Net asset value, end of period $11.230 $10.730 $10.940 $10.890 $10.470 $10.510 ======= ======= ======= ======= ======= ======= Total return(3) 6.54% 1.89% 4.56% 8.34% 3.86% (0.91%) Ratios and supplemental data: Net assets, end of period (000 omitted) $15,726 $15,647 $14,341 $12,732 $10,491 $11,827 Ratio of expenses to average net assets 1.68% 1.68% 1.71% 1.65% 1.75% 1.69% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.68% 1.68% 1.71% 1.65% 1.76% 1.69% Ratio of net investment income to average net assets 3.59% 3.77% 4.03% 4.07% 4.18% 3.99% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.59% 3.77% 4.03% 4.07% 4.17% 3.99% Portfolio turnover 18% 30% 15% 7% 35% 4%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 7 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Insured Fund Class C ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/29/04(1) 8/31/03 8/31/02(2) 8/31/01 8/31/00 8/31/99 (Unaudited) Net asset value, beginning of period $10.750 $10.950 $10.910 $10.480 $10.520 $11.050 Income (loss) from investment operations: Net investment income 0.196 0.414 0.433 0.434 0.431 0.438 Net realized and unrealized gain (loss) on investments 0.510 (0.197) 0.038 0.432 (0.042) (0.531) ------- ------- ------- ------- ------- ------- Total from investment operations 0.706 0.217 0.471 0.866 0.389 (0.093) ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.196) (0.417) (0.431) (0.436) (0.429) (0.437) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.196) (0.417) (0.431) (0.436) (0.429) (0.437) ------- ------- ------- ------- ------- ------- Net asset value, end of period $11.260 $10.750 $10.950 $10.910 $10.480 $10.520 ======= ======= ======= ======= ======= ======= Total return(3) 6.61% 1.97% 4.46% 8.42% 3.85% (0.91%) Ratios and supplemental data: Net assets, end of period (000 omitted) $12,421 $11,966 $6,083 $4,265 $3,615 $4,253 Ratio of expenses to average net assets 1.68% 1.68% 1.71% 1.65% 1.75% 1.69% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.68% 1.68% 1.71% 1.65% 1.76% 1.69% Ratio of net investment income to average net assets 3.59% 3.77% 4.03% 4.07% 4.18% 3.99% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.59% 3.77% 4.03% 4.07% 4.17% 3.99% Portfolio turnover 18% 30% 15% 7% 35% 4%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 8 Notes Delaware Tax-Free Minnesota Insured Fund TO FINANCIAL STATEMENTS February 29, 2004 (Unaudited) Voyageur Mutual Funds is organized as a Delaware statutory trust and offers six series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund and Delaware Tax-Free New York Fund. Voyageur Insured Funds is organized as a Delaware statutory trust and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur Tax Free Funds is organized as a Delaware statutory trust and offers the Delaware Tax-Free Minnesota Fund. Voyageur Intermediate Tax Free Funds is organized as a Delaware statutory trust and offers the Delaware Tax-Free Minnesota Intermediate Fund. These financial statements and related notes pertain to Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond Fund (each a "Fund" or, collectively, the "Funds"). The above Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended, and offer Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50% for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and with a front-end sales charge of up to 2.75% for Delaware Tax-Free Minnesota Intermediate Fund. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and that declines from 2% to zero for Delaware Tax-Free Minnesota Intermediate Fund, depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and approximately five years after purchase for Delaware Tax-Free Minnesota Intermediate Fund. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. The investment objective of Delaware Tax-Free Minnesota Fund and Delaware Tax-Free Minnesota Insured Fund is to seek as high a level of current income exempt from federal income tax and from the Minnesota state personal income tax, as is consistent with preservation of capital. The investment objective of Delaware Tax-Free Minnesota Intermediate Fund is to seek to provide investors with preservation of capital and, secondarily, current income exempt from federal income tax and from Minnesota state personal income tax, by maintaining a dollar-weighted average effective portfolio maturity of 10 years or less. The investment objective of Delaware Minnesota High-Yield Municipal Bond Fund is to seek as high a level of current income exempt from federal income tax and from Minnesota state personal income tax, primarily through investment in medium- and lower-grade municipal obligations. 1. Significant Accounting Policies The following accounting policies are in accordance with accounting principles generally accepted in the United States and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of the Funds on the basis of "settled shares" of each class in relation to the net assets of the Funds. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. Certain expenses of the Funds are paid through commission arrangements with brokers. In addition, the Funds may receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expenses paid under the above arrangements are included in their respective expense captions on the Statements of Operations with the corresponding expense offset shown as "expenses paid indirectly". The amounts of these expenses for the period ended February 29, 2004 were as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Commission Reimbursements $3,155 Earnings credits 213 9 Notes Delaware Tax-Free Minnesota Insured Fund TO FINANCIAL STATEMENTS (CONTINUED) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- On the first $500 million 0.500% On the next $500 million 0.475% On the next $1.5 billion 0.450% In excess of $2.5 billion 0.425% DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs, and extraordinary expenses, do not exceed specified percentages of average daily net assets through October 31, 2004 as shown below: Delaware Tax-Free Minnesota Insured Fund ----------------- The operating expense limitation as a percentage of average daily net assets (per annum) 0.75% Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares for all Funds. DDLP has contracted to waive distribution fees through October 31, 2004 in order to prevent distribution fees of Class A shares from exceeding 0.15% of average daily net assets for the Delaware Tax-Free Minnesota Intermediate Fund. At February 29, 2004, each Fund had receivables from or liabilities payable to affiliates as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Investment management fee payable to DMC $10,433 Dividend disbursing, transfer agent fees, accounting and other expenses payable to DSC 43,401 Other expenses payable to DMC and affiliates* 3,712 *DMC, as part of its administrative services, pays operating expenses on behalf of the Funds and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, professional fees, registration fees and trustees' fees. For the period ended February 29, 2004, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- $136,214 Certain officers of DMC, DSC, and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Funds. Certain internal legal expenses are allocated to the Funds. For the period ended February 29, 2004, the Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and the Delaware Minnesota High-Yield Municipal Bond Fund had costs of $17,229, $11,931, $3,345, and $2,710, respectively. 10 Notes Delaware Tax-Free Minnesota Insured Fund TO FINANCIAL STATEMENTS (CONTINUED) 3. Investments For the six months ended February 29, 2004, the Funds made purchases and sales of investment securities as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Purchases other than short-term investments $23,168,809 Sales other than short-term investments 29,696,127 At February 29, 2004, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 29, 2004, the cost of investments and unrealized appreciation (depreciation) for federal income tax purposes for each fund were as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Cost of investments $242,738,766 ============ Aggregate unrealized appreciation $23,156,475 Aggregate unrealized depreciation (5,530) ------------ Net unrealized appreciation $23,150,945 ============ 4. Dividend and Distribution Information Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. The tax character of dividends and distributions paid during the periods ended February 29, 2004 and August 31, 2003 was as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Period ended 2/29/04 -------------------- Tax-exempt income $5,596,376 Long-term capital gain -- ----------- Total $5,596,376 =========== Year ended 8/31/03 ------------------ Tax-exempt income $11,869,389 Long-term capital gain -- ----------- Total $11,869,389 =========== As of February 29, 2004, the components of net assets on a tax basis were as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Shares of beneficial interest $243,866,774 Undistributed ordinary income -- Undistributed long-term capital gain 1,706,621 Net realized capital losses on investments -- Capital loss carryforwards (716,681) Unrealized appreciation (depreciation) of investments 22,749,707 ------------ Net assets $267,606,421 ============ 11 Notes Delaware Tax-Free Minnesota Insured Fund TO FINANCIAL STATEMENTS (CONTINUED) 4. Dividend and Distribution Information (continued) For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Such capital loss carryforwards expire as follows: Delaware Tax-Free Minnesota Year of Expiration Insured Fund ------------------ ----------------- 2004 $ 13,413 2005 -- 2006 -- 2007 -- 2008 589,183 2009 114,085 2010 -- 2011 -- -------- Total $716,681 ======== 5. Capital Shares Transactions in capital shares were as follows: Delaware Tax-Free Minnesota Insured Fund ---------------------- Six Months Year Ended Ended 2/29/04 8/31/03 (Unaudited) Shares sold: Class A 773,209 1,341,420 Class B 96,144 310,624 Class C 78,733 617,494 Shares issued upon reinvestment of dividends and distributions: Class A 303,474 639,816 Class B 18,882 39,247 Class C 13,129 21,407 ---------- ---------- 1,283,571 2,970,008 ---------- ---------- Shares repurchased: Class A Class B (173,093) (203,283) Class C (101,303) (81,525) ---------- ---------- (3,750,518) (2,597,863) ---------- ---------- Net increase (decrease) (345,889) 372,145 ========== ========== 12 Notes Delaware Minnesota Municipal Bond Funds TO FINANCIAL STATEMENTS (CONTINUED) 5. Capital Shares (continued) For the periods ended February 29, 2004 and August 31, 2003, the following shares and values were converted from Class B to Class A. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statements of Changes in Net Assets.
Period Ended Year Ended 2/29/04 8/31/03 -------------------------------- -------------------------------- Class B Class A Class B Class A shares shares Amount shares shares Amount Delaware Tax-Free Minnesota Insured Fund 112,397 112,347 1,236,959 26,832 26,812 301,869
6. Line of Credit Each Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $177,300,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 29, 2004 or at any time during the period. 7. Credit and Market Risk The Funds concentrate their investments in securities issued by municipalities, mainly in Minnesota. The value of these investments may be adversely affected by new legislation within the state, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. The Funds may invest in inverse floating rate securities ("inverse floaters"), a type of derivative tax-exempt obligation with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of inverse floaters will generally be more volatile than other tax-exempt investments. Such securities are denoted on the Statements of Net Assets. 8. Contractual Obligations The Funds enter into contracts that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 13 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies for each Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information Walter P. Babich Jude T. Driscoll Investment Manager Board Chairman Chairman Delaware Management Company Citadel Construction Corporation Delaware Investments Family of Funds Philadelphia, PA King of Prussia, PA Philadelphia, PA International Affiliate John H. Durham Joseph H. Hastings Delaware International Advisers Ltd. Private Investor Executive Vice President and London, England Gwynedd Valley, PA Chief Financial Officer Delaware Investments Family of Funds National Distributor Anthony D. Knerr Philadelphia, PA Delaware Distributors, L.P. Managing Director Philadelphia, PA Anthony Knerr & Associates Richelle S. Maestro New York, NY Senior Vice President, Shareholder Servicing, Dividend Chief Legal Officer and Secretary Disbursing and Transfer Agent Ann R. Leven Delaware Investments Family of Funds Delaware Service Company, Inc. Former Treasurer/Chief Fiscal Officer Philadelphia, PA 2005 Market Street National Gallery of Art Philadelphia, PA 19103-7094 Washington, DC Michael P. Bishof Senior Vice President and Treasurer For Shareholders Thomas F. Madison Delaware Investments Family of Funds 800 523-1918 President and Chief Executive Officer Philadelphia, PA MLM Partners, Inc. For Securities Dealers and Financial Minneapolis, MN Institutions Representatives Only 800 362-7500 Janet L. Yeomans Vice President/Mergers & Acquisitions Web site 3M Corporation www.delawareinvestments.com St. Paul, MN
-------------------------------------------------------------------------------- A description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at http://www.delawareinvestments.com; and (iii) on the Commission's website at http://www.sec.gov.; and beginning no later than August 31, 2004, information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.delawareinvestments.com; and (ii) on the Commission's website at http://www.sec.gov. -------------------------------------------------------------------------------- (8624) Printed in the USA SA-MNALL [2/04] IVES 4/04 J9627 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert Not applicable. Item 4. Principal Accountant Fees and Services Not applicable. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers Not applicable. Item 9. Submission of Matters to a Vote of Security Holders Not applicable. Item 10. Controls and Procedures The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits (a) (1) Code of Ethics Not applicable. (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized. Voyageur Insured Funds Jude T. Driscoll ----------------------------------- By: Jude T. Driscoll Title: Chairman Date: April 27, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Jude T. Driscoll ----------------------------------- By: Jude T. Driscoll Title: Chairman Date: April 27, 2004 Joseph H. Hastings ----------------------------------- By: Joseph H. Hastings Title: Chief Financial Officer Date: April 27, 2004