N-CSR 1 n-csr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-4977 Exact name of registrant as specified in charter: Voyageur Insured Funds Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: August 31 Date of reporting period: February 28, 2005 Item 1. Reports to Stockholders The Registrant's shareholder reports are combined with the shareholder reports of other investment company registrants. This Form N-CSR pertains to the Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund of the Registrant, information on which is included in the following shareholder reports. DELAWARE INVESTMENTS(SM) -------------------------------------- A member of Lincoln Financial Group(R) FIXED INCOME SEMIANNUAL REPORT FEBRUARY 28, 2005 -------------------------------------------------------------------------------- DELAWARE TAX-FREE ARIZONA INSURED FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 1 -------------------------------------------------------------------------------- SECTOR ALLOCATION 3 -------------------------------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 4 Statements of Operations 7 Statements of Changes in Net Assets 8 Financial Highlights 9 Notes to Financial Statements 12 -------------------------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2005 Delaware Distributors, L.P. DISCLOSURE For the Period September 1, 2004 to February 28, 2005 OF FUND EXPENSES As a shareholder of a fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2004 to February 28, 2005. ACTUAL EXPENSES The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund's actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. In each case, "Expenses Paid During Period" are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 1 DELAWARE TAX-FREE ARIZONA INSURED FUND(1) EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN Class A $1,000.00 $1,028.70 0.82% $4.12 Class B 1,000.00 1,024.80 1.57% 7.88 Class C 1,000.00 1,024.80 1.57% 7.88 ------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.73 0.82% $4.11 Class B 1,000.00 1,017.01 1.57% 7.85 Class C 1,000.00 1,017.01 1.57% 7.85 ------------------------------------------------------------------------------------------------------------
(1) Effective November 1, 2004, The Fund's manager increased contractual expense waivers in effect for the Fund, causing the expenses paid by the Fund to decrease. Had the new expense waiver been in effect during the period, the Fund's expense analysis would be as follows:
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN Class A $1,000.00 $1,028.70 0.78% $3.92 Class B 1,000.00 1,024.80 1.53% 7.68 Class C 1,000.00 1,024.80 1.53% 7.68 ------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.93 0.78% $3.91 Class B 1,000.00 1,017.21 1.53% 7.65 Class C 1,000.00 1,017.21 1.53% 7.65 ------------------------------------------------------------------------------------------------------------
2 SECTOR ALLOCATION As of February 28, 2005 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following charts list each Fund's categories of portfolio holdings as a percentage of total net assets and is provided in compliance with such requirement. DELAWARE TAX-FREE ARIZONA INSURED FUND ----------------------------------------------------------------------- PERCENTAGE SECTOR OF NET ASSETS ----------------------------------------------------------------------- MUNICIPAL BONDS 98.28% ----------------------------------------------------------------------- Airport Revenue Bonds 10.92% City General Obligation Bonds 0.77% Convention Center/Auditorium/Hotel Revenue Bonds 2.67% Dedicated Tax & Fees Revenue Bonds 3.04% Escrowed to Maturity Bonds 0.64% Higher Education Revenue Bonds 8.78% Hospital Revenue Bonds 12.24% Multifamily Housing Revenue Bonds 9.02% Municipal Lease Revenue Bonds 12.31% Political Subdivision General Obligation Bonds 1.10% Pre-Refunded Bonds 10.89% Public Power Revenue Bonds 3.11% Public Utility District Revenue Bonds 3.80% School District General Obligation Bonds 2.75% School Districts 0.80% Single Family Housing Revenue Bonds 0.18% Territorial General Obligation Bonds 1.09% Territorial Revenue Bonds 6.08% Transportation Revenue Bonds 2.38% Water & Sewer Revenue Bonds 5.71% ----------------------------------------------------------------------- SHORT-TERM INVESTMENTS 0.20% ----------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 98.48% ----------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.52% ----------------------------------------------------------------------- TOTAL NET ASSETS 100.00% ----------------------------------------------------------------------- 3 STATEMENTS DELAWARE TAX-FREE ARIZONA INSURED FUND OF NET ASSETS February 28, 2005 (Unaudited) Principal Market Amount Value -------------------------------------------------------------------------------- MUNICIPAL BONDS - 98.28% -------------------------------------------------------------------------------- Airport Revenue Bonds - 10.92% Phoenix Civic Improvement Corporation Airport Revenue Series B 5.25% 7/1/32 (FGIC)(AMT) $9,300,000 $ 9,687,159 Tucson Airport Authority 5.35% 6/1/31 (AMBAC)(AMT) 5,000,000 5,217,550 ---------- 14,904,709 ---------- City General Obligation Bonds - 0.77% DC Ranch Community Facilities 5.00% 7/15/27 (AMBAC) 1,000,000 1,045,550 ---------- 1,045,550 ---------- Convention Center/Auditorium/Hotel Revenue Bonds - 2.67% Arizona Tourism & Sports Authority Tax Revenue Multipurpose Stadium Facilities Series A 5.00% 7/1/28 (MBIA) 2,500,000 2,608,075 5.00% 7/1/31 (MBIA) 1,000,000 1,038,980 ---------- 3,647,055 ---------- Dedicated Tax & Fees Revenue Bonds - 3.04% Phoenix Industrial Development Authority Lease Revenue (Capitol Mall LLC II Project) 5.00% 9/15/28 (AMBAC) 4,000,000 4,142,760 ---------- 4,142,760 ---------- Escrowed to Maturity Bonds - 0.64% Maricopa County School District #14 (Creighton Elementary) Series C 6.50% 7/1/08 (FGIC) 455,000 509,332 Phoenix Street & Highway Revenue 6.50% 7/1/09 (AMBAC) 350,000 361,743 ---------- 871,075 ---------- Higher Education Revenue Bonds - 8.78% Arizona State Board of Regents Certificates of Participation (University of Arizona Main Campus) Series 2000 A1 5.125% 6/1/25 (AMBAC) 1,250,000 1,321,925 Arizona State University Certificates of Participation (Research Infrastructure Project) 5.00% 9/1/30 (AMBAC) 2,500,000 2,604,675 Glendale Industrial Development Authority Educational Facilities (American Graduate School International) 5.625% 7/1/20 (Connie Lee) 1,000,000 1,045,860 5.875% 7/1/15 (Connie Lee) 2,500,000 2,615,875 Mohave County Community College 6.00% 3/1/20 (MBIA) 1,000,000 1,121,740 South Campus Group Student Housing Revenue (Arizona State University South Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,107,170 University of Arizona Certificates of Participation (University of Arizona Parking and Student Housing) 5.75% 6/1/19 (AMBAC) 1,000,000 1,099,240 (University of Arizona Project) Series A 5.125% 6/1/21 (AMBAC) 1,000,000 1,068,000 ---------- 11,984,485 ---------- Principal Market Amount Value -------------------------------------------------------------------------------- MUNICIPAL BONDS (CONTINUED) -------------------------------------------------------------------------------- Hospital Revenue Bonds - 12.24% Maricopa County Industrial Development Authority (Catholic Healthcare West) Series A 5.50% 7/1/26 $1,000,000 $1,039,910 Mesa Industrial Development Authority (Discovery Health Systems) Series A 5.625% 1/1/29 (MBIA) 9,250,000 10,113,950 Phoenix Industrial Development Authority Hospital Revenue (John C. Lincoln Health) Series B 5.75% 12/1/16 (Connie Lee) 4,110,000 4,477,393 Yavapai County Industrial Development Authority (Yavapai Regional Medical Center) 5.25% 8/1/21 (RADIAN) 1,000,000 1,064,330 ---------- 16,695,583 ---------- Multifamily Housing Revenue Bonds - 9.02% Maricopa County Industrial Development Authority Multifamily Housing Revenue (Sly-Mar Apartments Projects) 6.10% 4/20/36 (GNMA) (AMT) 1,300,000 1,398,995 Phoenix Industrial Development Authority Multifamily Housing Revenue (Capital Mews Apartments) 5.70% 12/20/40 (GNMA) (AMT) 2,000,000 2,091,680 (Ventana Palms Apartments) 6.15% 10/1/29 (MBIA) 510,000 542,462 6.20% 10/1/34 (MBIA) 940,000 1,001,824 Pima County Industrial Development Authority Multifamily Housing Revenue (Columbus Village) Series A 6.00% 10/20/31 (GNMA) 1,150,000 1,157,659 6.05% 10/20/41 (GNMA) 1,520,000 1,530,093 Yuma Industrial Development Authority Multifamily Revenue Series A (Regency Apartments) 5.50% 12/20/32 (GNMA) 2,000,000 2,004,300 6.10% 9/20/19 (GNMA) (AMT) 2,340,000 2,583,195 ---------- 12,310,208 ---------- Municipal Lease Revenue Bonds - 12.31% Arizona School Facilities Board Certificates of Participation Series A 5.00% 9/1/18 (FGIC) 1,000,000 1,075,580 Maricopa County Industrial Development Authority Correctional Facilities (Phoenix West Prison) 5.375% 7/1/22 (ACA) 250,000 260,203 Phoenix Industrial Development Authority Lease Revenue (Capitol Mall LLC Project) 5.50% 9/15/27 (AMBAC) 5,000,000 5,450,149 Pinal County Certificates of Participation 5.125% 6/1/21 (AMBAC) 4,675,000 4,992,058 Salt River Project Arizona Agricultural Improvement & Power District Certificates of Participation 5.00% 12/1/18 (MBIA) 2,500,000 2,676,350 University of Arizona Certificates of Participation Series B 5.00% 6/1/31 (AMBAC) 2,250,000 2,332,238 ---------- 16,786,578 ---------- 4 STATEMENTS DELAWARE TAX-FREE ARIZONA INSURED FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value -------------------------------------------------------------------------------- MUNICIPAL BONDS (CONTINUED) -------------------------------------------------------------------------------- Political Subdivision General Obligation Bonds - 1.10% Phoenix Variable Purpose Series B 5.00% 7/1/27 $1,435,000 $1,498,040 ---------- 1,498,040 ---------- *Pre-Refunded Bonds - 10.89% Maricopa County School District #3 (Tempe Elementary) Series E 5.70% 7/1/16-09 (FGIC) 1,025,000 1,149,620 Oro Valley Common Trust Funds Partnership 5.75% 7/1/17-06 (MBIA) 1,000,000 1,052,590 Puerto Rico Commonwealth Public Improvement 5.125% 7/1/30-11 (FSA) 770,000 852,806 Puerto Rico Commonwealth Public Improvement Series A 5.00% 7/1/27-12 1,000,000 1,106,220 5.125% 7/1/31-11 1,205,000 1,334,586 Puerto Rico Public Buildings Authority Series D 5.25% 7/1/27-12 730,000 807,314 Southern Arizona Capital Facilities Finance (University of Arizona Project) 5.10% 9/1/33 (MBIA) 2,650,000 2,946,694 Surprise Municipal Property Excise Tax Revenue 5.70% 7/1/20-09 (FGIC) 5,000,000 5,607,899 ---------- 14,857,729 ---------- Public Power Revenue Bonds - 3.11% Energy Management Services (Arizona State University - Main Campus) 5.25% 7/1/17 (MBIA) 1,500,000 1,649,730 Salt River Project Arizona Agricultural Improvement & Power District Electric System Revenue (Salt River Project) Series A 5.00% 1/1/31 500,000 518,845 Series B 5.00% 1/1/31 (MBIA) 2,000,000 2,075,380 ---------- 4,243,955 ---------- Public Utility District Revenue Bonds - 3.80% Maricopa County Pollution Control (Palo Verde Project) Series A 5.05% 5/1/29 (AMBAC) 5,000,000 5,190,650 ---------- 5,190,650 ---------- School District General Obligation Bonds - 2.75% Cochise County Unified School District #68 7.50% 7/1/10 (FGIC) 1,000,000 1,207,620 Maricopa County School District #14 (Creighton School Improvement Project of 1990) Series C 6.50% 7/1/08 (FGIC) 545,000 608,231 Maricopa County School District #38 (Madison Elementary) 5.00% 7/1/14 (FSA) 1,750,000 1,934,782 ---------- 3,750,633 ---------- School Districts - 0.80% Coconino County United School District #8 (Aid Revenue) 5.00% 7/1/15 (MBIA) 1,000,000 1,097,280 ---------- 1,097,280 ---------- Principal Market Amount Value -------------------------------------------------------------------------------- MUNICIPAL BONDS (CONTINUED) -------------------------------------------------------------------------------- Single Family Housing Revenue Bonds - 0.18% Pima County Industrial Development Authority Single Family Housing Revenue B-1 6.10% 5/1/31 (GNMA) (AMT) $ 240,000 $ 250,944 ----------- 250,944 ----------- Territorial General Obligation Bonds - 1.09% Puerto Rico Commonwealth Refunding Public Improvements Series A 5.50% 7/1/19 1,300,000 1,481,363 ----------- 1,481,363 ----------- Territorial Revenue Bonds - 6.08% Puerto Rico Commonwealth Public Improvement (Unrefunded Balance) 5.125% 7/1/30 (FSA) 480,000 506,875 Puerto Rico Commonwealth Public Improvement Series A 5.125% 7/1/31 2,370,000 2,456,079 Puerto Rico Electric Power Authority Power Revenue Series NN 5.00% 7/1/32 (MBIA) 1,750,000 1,830,010 Series OO 5.00% 7/1/13 (CIFG) 1,500,000 1,654,065 Puerto Rico Public Buildings Authority Revenue (Government Facilities) Series I 5.25% 7/1/33 500,000 531,055 Puerto Rico Public Buildings Authority Revenue (Unrefunded Balance) Series D 5.25% 7/1/27 270,000 286,335 Virgin Islands Public Finance Authority (Gross Receipts Taxes) 5.00% 10/1/31 (ACA) 1,000,000 1,029,530 ----------- 8,293,949 ----------- Transportation Revenue Bonds - 2.38% Arizona State Transportation Board Highway Revenue Series A 5.00% 7/1/23 1,000,000 1,064,820 Arizona State Transportation Board Highway Revenue Series B 5.25% 7/1/21 1,000,000 1,092,290 5.25% 7/1/22 1,000,000 1,088,340 ----------- 3,245,450 ----------- Water & Sewer Revenue Bonds - 5.71% Gilbert Water Municipal Property Wastewater System & Utility Revenue 4.90% 4/1/19 750,000 748,455 Glendale Water & Sewer Revenue 5.00% 7/1/28 (AMBAC) 2,000,000 2,087,880 Phoenix Civic Improvement Corporation Wastewater Systems Revenue Junior Lien 5.00% 7/1/24 (FGIC) 1,000,000 1,042,100 5.00% 7/1/26 (FGIC) 3,750,000 3,917,175 ----------- 7,795,610 ----------- TOTAL MUNICIPAL BONDS (cost $125,910,517) 134,093,606 ----------- 5 STATEMENTS DELAWARE TAX-FREE ARIZONA INSURED FUND OF NET ASSETS (CONTINUED) Number of Market Shares Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 0.20% -------------------------------------------------------------------------------- Federated Arizona Municipal Cash Trust 268,518 $ 268,518 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $268,518) 268,518 ------------ TOTAL MARKET VALUE OF SECURITIES - 98.48% (cost $126,179,035) 134,362,124 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.52% 2,075,867 ------------ NET ASSETS APPLICABLE TO 11,882,916 SHARES OUTSTANDING - 100.00% $136,437,991 ============ Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class A ($117,030,910 / 10,194,407 Shares) $11.48 ------ Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class B ($12,911,815 / 1,123,900 Shares) $11.49 ------ Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class C ($6,495,266 / 564,609 Shares) $11.50 ------ COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization - no par) $128,123,551 Undistributed net investment income 7,314 Accumulated net realized gain on investments 124,037 Net unrealized appreciation of investments 8,183,089 ------------ Total net assets $136,437,991 ============ * Pre-Refunded Bonds are municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. SUMMARY OF ABBREVIATIONS: ACA - Insured by American Capital Access AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax CIFG - Insured by CDC IXIS Financial Guaranty Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE TAX-FREE ARIZONA INSURED FUND Net asset value Class A (A) $11.48 Sales charge (4.50% of offering price) (B) 0.54 ------ Offering price $12.02 ------ (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 6 STATEMENTS OF OPERATIONS Six Months Ended February 28, 2005 (Unaudited) Delaware Tax-Free Arizona Insured Fund INVESTMENT INCOME: Interest $ 3,349,192 ----------- EXPENSES: Management fees 342,866 Distribution expenses -- Class A 147,421 Distribution expenses -- Class B 64,869 Distribution expenses -- Class C 32,796 Legal and professional fees 8,013 Reports and statements to shareholders 12,183 Registration fees 7,360 Dividend disbursement and transfer agent fees and expenses 36,660 Accounting and administration expenses 22,811 Custodian fees 3,673 Trustees' fees 2,689 Other 3,167 ----------- 684,508 Less expenses absorbed or waived (44,765) Less expenses paid indirectly (110) ----------- Total expenses 639,633 ----------- NET INVESTMENT INCOME 2,709,559 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments 151,646 Net change in unrealized appreciation/depreciation of investments 980,831 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,132,477 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,842,036 =========== See accompanying notes 7 STATEMENTS OF CHANGES IN NET ASSETS
Delaware Tax-Free Arizona Insured Fund Six Months Year Ended Ended 2/28/05 8/31/04 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 2,709,559 $ 6,003,395 Net realized gain (loss) on investments 151,646 336,166 Net change in unrealized appreciation/depreciation of investments 980,831 3,703,965 ------------- ------------- Net increase in net assets resulting from operations 3,842,036 10,043,526 ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (2,387,781) Class B (213,852) (474,572) Class C (107,926) (251,768) Net realized gain on investments: Class A (248,176) (670,678) Class B (27,489) (74,157) Class C (13,869) (40,949) ------------- ------------- (2,999,093) (6,789,179) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 2,368,889 8,836,672 Class B 242,894 1,082,105 Class C 360,689 1,206,593 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 1,323,454 3,027,025 Class B 130,854 294,483 Class C 87,565 230,858 ------------- ------------- 4,514,345 14,677,736 ------------- ------------- Cost of shares repurchased: Class A (9,817,799) (21,886,157) Class B (897,872) (3,007,102) Class C (645,298) (3,490,073) ------------- ------------- (11,360,969) (28,383,332) ------------- ------------- Decrease in net assets derived from capital share transactions (6,846,624) (13,705,596) ------------- ------------- NET DECREASE IN NET ASSETS (6,003,681) (10,451,249) NET ASSETS: Beginning of period 142,441,672 152,892,921 ------------- ------------- End of period(1) $ 136,437,991 $ 142,441,672 ============= ============= (1) Including undistributed (distributions in excess of) net investment income $ 7,314 $ 7,314 ============= =============
See accompanying notes 8 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS A ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.410 $11.160 $11.530 $11.500 $11.040 $10.990 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.231 0.469 0.502 0.510 0.521 0.525 Net realized and unrealized gain (loss) on investments 0.094 0.308 (0.253) 0.100 0.460 0.050 ------- ------- ------- ------- ------- ------- Total from investment operations 0.325 0.777 0.249 0.610 0.981 0.575 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.231) (0.469) (0.502) (0.510) (0.521) (0.525) Net realized gain on investments (0.024) (0.058) (0.117) (0.070) -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.255) (0.527) (0.619) (0.580) (0.521) (0.525) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.480 $11.410 $11.160 $11.530 $11.500 $11.040 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.87% 7.09% 2.17% 5.54% 9.12% 5.47% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $117,031 $122,436 $129,683 $141,424 $141,298 $142,018 Ratio of expenses to average net assets 0.82% 0.90% 0.86% 0.90% 0.95% 0.95% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.89% 0.90% 0.91% 0.90% 0.97% 0.98% Ratio of net investment income to average net assets 4.05% 4.14% 4.37% 4.50% 4.65% 4.88% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.98% 4.14% 4.32% 4.50% 4.63% 4.85% Portfolio turnover 5% 19% 29% 46% 45% 50%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 9 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS B ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.420 $11.170 $11.540 $11.500 $11.040 $10.990 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.188 0.384 0.416 0.426 0.437 0.444 Net realized and unrealized gain (loss) on investments 0.094 0.308 (0.253) 0.110 0.460 0.050 ------- ------- ------- ------- ------- ------- Total from investment operations 0.282 0.692 0.163 0.536 0.897 0.494 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.188) (0.384) (0.416) (0.426) (0.437) (0.444) Net realized gain on investments (0.024) (0.058) (0.117) (0.070) -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.212) (0.442) (0.533) (0.496) (0.437) (0.444) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.490 $11.420 $11.170 $11.540 $11.500 $11.040 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.48% 6.28% 1.41% 4.83% 8.31% 4.68% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $12,912 $13,355 $14,666 $13,678 $8,864 $6,630 Ratio of expenses to average net assets 1.57% 1.65% 1.61% 1.65% 1.70% 1.70% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.64% 1.65% 1.66% 1.65% 1.72% 1.73% Ratio of net investment income to average net assets 3.30% 3.39% 3.62% 3.75% 3.90% 4.13% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.23% 3.39% 3.57% 3.75% 3.88% 4.10% Portfolio turnover 5% 19% 29% 46% 45% 50%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 10 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS C ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.430 $11.180 $11.550 $11.520 $11.040 $10.990 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.188 0.384 0.415 0.426 0.438 0.444 Net realized and unrealized gain (loss) on investments 0.094 0.308 (0.253) 0.100 0.480 0.050 ------- ------- ------- ------- ------- ------- Total from investment operations 0.282 0.692 0.162 0.526 0.918 0.494 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.188) (0.384) (0.415) (0.426) (0.438) (0.444) Net realized gain on investments (0.024) (0.058) (0.117) (0.070) -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.212) (0.442) (0.532) (0.496) (0.438) (0.444) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.500 $11.430 $11.180 $11.550 $11.520 $11.040 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.48% 6.27% 1.40% 4.73% 8.50% 4.68% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $6,495 $6,651 $8,544 $8,115 $3,230 $1,322 Ratio of expenses to average net assets 1.57% 1.65% 1.61% 1.65% 1.70% 1.70% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.64% 1.65% 1.66% 1.65% 1.72% 1.73% Ratio of net investment income to average net assets 3.30% 3.39% 3.62% 3.75% 3.90% 4.13% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.23% 3.39% 3.57% 3.75% 3.88% 4.10% Portfolio turnover 5% 19% 29% 46% 45% 50%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior toSeptember 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 11 NOTES TO FINANCIAL STATEMENTS February 28, 2005 (Unaudited) Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund and Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is organized as a Delaware statutory trust and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur Investment Trust (the "Trust") is organized as a Massachusetts statutory trust and offers five series: Delaware Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund. Voyageur Mutual Funds II (the "Trust") is organized as a Delaware statutory trust and offers one series: Delaware Tax-Free Colorado Fund. These financial statements and related footnotes pertain to Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund and Delaware Tax-Free Colorado Fund (each a "Fund" and, collectively, the "Funds"). The above Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended. The Funds offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. The investment objective of Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund and Delaware Tax-Free Colorado Fund is to seek as high a level of current income exempt from federal income tax and personal income tax in their respective states, as is consistent with preservation of capital. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of each Fund on the basis of "settled shares" of each class in relation to the net assets of each Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of each Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Funds receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under the above arrangement is included custodian fees on the Statements of Operations with the corresponding expense offset shown as "expense paid indirectly". The amount of this expense for the six months ended February 28, 2005 was as follows: Delaware Tax-Free Arizona Insured Fund --------------- Earnings credits $110 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows: Delaware Tax-Free Arizona Insured Fund ---------------- On the first $500 million 0.500% On the next $500 million 0.475% On the next $1.5 billion 0.450% In excess of $2.5 billion 0.425% 12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued) DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs, and extraordinary expenses do not exceed specified percentages of average daily net assets, as shown below. Delaware Tax-Free Arizona Insured Fund --------------- Operating expense limitation as a percentage of average daily net assets (per annum) 0.70% Expiration date 10/31/04 Effective November 1, 2004 operating expense limitation as a percentage of average daily net assets (per annum) 0.53% Expiration date 3/31/06 Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares. At February 28, 2005, each Fund had liabilities payable to affiliates as follows: Delaware Tax-Free Arizona Insured Fund --------------- Investment management fees payable to (recievable from) DMC $36,843 Dividend disbursing, transfer agent, accounting, and administration fees, and other expenses payable to DSC 11,113 Other expenses payable to DMC and affiliates* 46,868 * DMC, as a part of its administrative services, pays operating expenses on behalf of the Funds and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement, the Funds bear the cost of certain legal services expenses, including internal legal services provided to the Funds by DMC employees. For the six months ended February 28, 2005, the Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Insured Fund was charged $548 and $822, respectively, for internal legal services provided by DMC. For the six months ended February 28, 2005, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Arizona Insured Fund --------------- $1,002 Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trusts. These officers and/or trustees are paid no compensation by the Funds. 3. INVESTMENTS For the six months ended February 28, 2005, the Funds made purchases and sales of investment securities as follows: Delaware Tax-Free Arizona Insured Fund --------------- Purchases other than short-term investments $3,389,325 Sales other than short-term investments 6,478,828 13 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) At February 28, 2005, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 28, 2005, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows: Delaware Tax-Free Arizona Insured Fund ---------------- Cost of investments $126,179,035 ============ Aggregate unrealized appreciation $ 8,395,021 Aggregate unrealized depreciation (211,932) ------------ Net unrealized appreciation $ 8,183,089 ============ 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the six months ended February 28, 2005 and the year ended August 31, 2004 was as follows: Delaware Tax-Free Arizona Insured Fund Six Months Year Ended Ended 2/28/05* 8/31/04 ----------------------------- Tax-exempt income $2,709,559 $6,206,615 Long-term capital gain 289,534 582,564 ---------- ---------- Total $2,999,093 $6,789,179 ========== ========== * Tax information for the period ended February 28, 2005, is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of February 28, 2005, the estimated components of net assets on a tax basis were as follows: Delaware Tax-Free Arizona Insured Fund --------------- Shares of beneficial interest $128,123,551 Undistributed ordinary income 17,917 Undistributed tax-exempt income 7,314 Undistributed long-term capital gains (losses) 106,120 Capital loss carryforwards -- Unrealized appreciation of investments 8,183,089 ------------ Net assets $136,437,991 ============ For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the six months ended February 28, 2005, the Funds recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of market discount and premium on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. 14 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARES Transactions in capital shares were as follows: Delaware Tax-Free Arizona Insured Fund ----------------------- Six Months Year Ended Ended 2/28/05 8/31/04 Shares sold: Class A 206,343 778,110 Class B 21,207 95,417 Class C 31,370 105,384 Shares issued upon reinvestments of dividends and distributions: Class A 115,393 266,257 Class B 11,401 25,870 Class C 7,618 20,248 -------- --------- 393,332 1,291,286 -------- --------- Shares repurchased: Class A (857,919) (1,933,973) Class B (78,300) (264,924) Class C (56,090) (308,011) -------- --------- (992,309) (2,506,908) -------- --------- Net decrease (598,977) (1,215,622) -------- --------- 15 NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the six months ended February 28, 2005 and the year ended August 31, 2004, the following shares and value were converted from Class B to Class A. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statement of Changes in Net Assets.
Six Months Ended Year Ended 2/28/05 8/31/04 -------------------------------- -------------------------------- Class B Class A Class B Class A shares shares Amount shares shares Amount Delaware Tax-Free Arizona Insured Fund 10,423 10,432 119,470 45,338 45,373 516,109
6. PROXY RESULTS The shareholders of Voyageur Mutual Funds, Voyageur Insured Funds, Voyageur Investment Trust and Voyageur Mutual Funds II (each, a "Trust") voted on the following proposals (as applicable) at the special meeting of shareholders on March 23, 2005 or as adjourned. The description of each proposal and number of shares voted are as follows: 1. To elect a Board of Trustees for each of the Trusts. VOYAGEUR INSURED FUNDS ----------------------------------------- SHARES VOTED SHARES VOTED FOR WITHHELD AUTHORITY ---------------------------------------------------------------------------- Thomas L. Bennett 25,076,354.183 602,982.118 ---------------------------------------------------------------------------- Jude T. Driscoll 25,120,168.869 559,167.432 ---------------------------------------------------------------------------- John A. Fry 25,085,403.645 593,932.656 ---------------------------------------------------------------------------- Anthony D. Knerr 25,066,460.446 612,875.855 ---------------------------------------------------------------------------- Lucinda S. Landreth 25,124,950.648 554,385.653 ---------------------------------------------------------------------------- Ann R. Leven 25,085,383.078 593,953.223 ---------------------------------------------------------------------------- Thomas F. Madison 25,067,669.009 611,667.292 ---------------------------------------------------------------------------- Janet L. Yeomans 25,123,301.246 556,035.055 ---------------------------------------------------------------------------- J. Richard Zecher 25,055,313.488 624,022.813 ---------------------------------------------------------------------------- 16 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. To approve the use of a "manager of managers" structure whereby the investment manager of the funds of each Trust will be able to hire and replace subadvisers without shareholder approval.
For Against Abstain ---- ------- ------- Delaware Tax-Free Arizona Insured Fund 6,190,221.176 309,262.809 454,358.291
7. FUND MERGERS The net assets of Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free California Fund prior to the Reorganizations were $134,516,467.57 and $46,891,286.79, respectively. 8. LINE OF CREDIT The Funds, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participate in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Funds' allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 28, 2005, or at any time during the period. 9. CREDIT AND MARKET RISK The Funds concentrate their investments in securities issued by municipalities. The value of these investments may be adversely affected by new legislation within the states, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. 10. CONTRACTUAL OBLIGATIONS The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds' existing contracts and expects the risk of loss to be remote. 17 DELAWARE INVESTMENTS(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund, but may be used with a prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of each Fund. You should read carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER Chairman Senior Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR THOMAS L. BENNETT Delaware Distributors, L.P. Private Investor RICHELLE S. MAESTRO Philadelphia, PA Rosemont, PA Executive Vice President, Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT President Philadelphia, PA Delaware Service Company, Inc. Franklin & Marshall College 2005 Market Street Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094 Senior Vice President and Treasurer ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS Managing Director Philadelphia, PA 800 523-1918 Anthony Knerr & Associates New York, NY FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY LUCINDA S. LANDRETH 800 362-7500 Former Chief Investment Officer Assurant, Inc. WEB SITE Philadelphia, PA www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN J. RICHARD ZECHER Founder Investor Analytics Scottsdale, AZ
-------------------------------------------------------------------------------- Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on each Fund's Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how each Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through each Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. -------------------------------------------------------------------------------- (9269) Printed in the USA SA-WEST [2/05] IVES 4/05 J10087 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) FIXED INCOME SEMIANNUAL REPORT FEBRUARY 28, 2005 -------------------------------------------------------------------------------- DELAWARE TAX-FREE MINNESOTA INSURED FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS ----------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 1 ----------------------------------------------------------------- SECTOR ALLOCATION 2 ----------------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 3 Statements of Operations 6 Statements of Changes in Net Assets 7 Financial Highlights 8 Notes to Financial Statements 11 ----------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2005 Delaware Distributors, L.P. DISCLOSURE For the Period September 1, 2004 to February 28, 2005 OF FUND EXPENSES As a shareholder of a fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2004 to February 28, 2005. ACTUAL EXPENSES The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Funds' actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. In each case, "Expenses Paid During Period" are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). DELAWARE TAX-FREE MINNESOTA INSURED FUND EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/04 ------------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,025.00 0.89% $4.47 Class B 1,000.00 1,021.30 1.64% 8.22 Class C 1,000.00 1,021.20 1.64% 8.22 ------------------------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.38 0.89% $4.46 Class B 1,000.00 1,016.66 1.64% 8.20 Class C 1,000.00 1,016.66 1.64% 8.20 -------------------------------------------------------------------------------------------------------------------
1 SECTOR ALLOCATION As of February 28, 2005 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists each Fund's categories of portfolio holdings as a percentage of total net assets and is provided in compliance with such requirement. DELAWARE TAX-FREE MINNESOTA INSURED FUND PERCENTAGE SECTOR OF NET ASSETS ------------------------------------------------------------------------ MUNICIPAL BONDS 93.49% ------------------------------------------------------------------------ Airport Revenue Bonds 4.48% Corporate Backed Revenue Bonds 0.72% Escrowed to Maturity Bonds 14.97% Higher Education Revenue Bonds 3.89% Hospital Revenue Bonds 18.80% Miscellaneous Revenue Bonds 0.84% Multifamily Housing Revenue Bonds 6.72% Municipal Lease Revenue Bonds 4.99% Political Subdivision General Obligation Bonds 1.24% Pre-Refunded Bonds 2.84% Public Power Revenue Bonds 9.32% School District General Obligation Bonds 19.35% Single Family Housing Revenue Bonds 0.25% State General Obligation Bonds 2.33% Territorial Revenue Bonds 2.75% ------------------------------------------------------------------------ SHORT-TERM INVESTMENTS 5.70% ------------------------------------------------------------------------ Money Market 4.99% Variable Rate Demand Notes 0.71% ------------------------------------------------------------------------ TOTAL MARKET VALUE OF SECURITIES 99.19% ------------------------------------------------------------------------ RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.81% ------------------------------------------------------------------------ TOTAL NET ASSETS 100.00% ------------------------------------------------------------------------ 2 STATEMENTS DELAWARE TAX-FREE MINNESOTA INSURED FUND OF NET ASSETS February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS - 93.49% Airport Revenue Bonds - 4.48% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/22 (MBIA) $ 2,000,000 $ 2,115,020 Series A 5.125% 1/1/25 (FGIC) 100,000 103,873 Series C 5.125% 1/1/20 (FGIC) 2,000,000 2,135,400 Series C 5.25% 1/1/32 (FGIC) 6,595,000 6,954,230 ----------- 11,308,523 ----------- Corporate Backed Revenue Bonds - 0.72% Sartell Environmental Improvement Revenue (International Paper) Series A 5.20% 6/1/27 1,800,000 1,822,140 ----------- 1,822,140 ----------- Escrowed to Maturity Bonds - 14.97% Dakota/Washington Counties Housing & Redevelopment Authority Anoka Single Family Residential Mortgage Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 13,151,520 Dakota/Washington Counties Housing & Redevelopment Authority Bloomington Single Family Residential Mortgage Revenue 8.15% 9/1/16 (MBIA) (GNMA) (AMT) 405,000 562,966 8.375% 9/1/21 (GNMA) (FHA)(AMT) 14,115,000 21,068,190 Western Minnesota Municipal Power Agency Supply Revenue Series A 6.60% 1/1/10 2,000,000 2,203,400 9.75% 1/1/16 (MBIA) 530,000 800,311 ----------- 37,786,387 ----------- Higher Education Revenue Bonds - 3.89% Minnesota State Colleges & Universities Revenue Series A 5.00% 10/1/22 (FSA) 5,135,000 5,445,051 Minnesota State Higher Education Facilities Authority Revenue (St. Catherine College) Series 5-N1 5.00% 10/1/18 2,200,000 2,286,482 St. Cloud Housing & Redevelopment Authority Revenue (State University Foundation Project) 5.00% 5/1/23 2,000,000 2,095,220 ----------- 9,826,753 ----------- Hospital Revenue Bonds - 18.80% Duluth Economic Development Authority Health Care Facilities (Benedictine Health System) 5.25% 2/15/28 8,500,000 8,752,705 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 7,800,000 8,285,784 (Fairview Health Services) Series A 5.625% 5/15/32 5,400,000 5,710,608 Minneapolis/St. Paul Housing & Redevelopment Authority Health Care Systems Revenue 5.00% 11/15/13 (AMBAC) 6,490,000 6,569,567 5.625% 12/1/22 650,000 685,783 5.875% 12/1/29 1,000,000 1,057,430 Minnesota Agricultural & Economic Development Health Care System (Fairview Hospital) Series 97A 5.75% 11/15/26 (MBIA) 10,250,000 11,120,225 Principal Market Amount Value MUNICIPAL BONDS (continued) Hospital Revenue Bonds (continued) St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.50% 7/1/25 $ 2,000,000 $ 2,105,040 St. Paul Housing & Redevelopment Authority Hospital Revenue (St. Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,006,520 Willmar (Rice Memorial Hospital Project) 5.00% 2/1/22 (FSA) 1,000,000 1,062,570 5.00% 2/1/25 (FSA) 1,000,000 1,053,150 ----------- 47,409,382 ----------- Miscellaneous Revenue Bonds - 0.84% Minneapolis Community Development Agency Supported Series G-3 5.45% 12/1/31 2,000,000 2,110,940 ----------- 2,110,940 ----------- Multifamily Housing Revenue Bonds - 6.72% Chaska Waters Edge Multifamily Revenue Series A 7.30% 1/20/30 (GNMA) 3,257,000 3,424,768 Eagan Multifamily Revenue (Woodridge Apartments) 5.90% 8/1/20 (GNMA) 1,000,000 1,049,850 Hopkins Multifamily Revenue (Auburn Apartments Project) Series A 8.05% 6/20/31 (GNMA) 3,790,000 4,015,581 Minneapolis Multifamily Housing Revenue (Bottineau Commons Project) 5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,543,020 (Seward Towers Project) 5.00% 5/20/36 (GNMA) 4,000,000 4,085,839 Minneapolis/St. Paul Housing Finance Board Revenue (Trinity Apartments) Series A 8.125% 12/1/14) (GNMA) (FHA) (AMT) 10,000 10,006 Minnesota State Housing Finance Agency Rental Housing Revenue Series C-2 5.95% 2/1/15 (AMBAC) 1,692,000 1,727,989 White Bear Lake Multifamily Revenue (Lake Square) Series A 5.875% 2/1/15 (FHA) 1,055,000 1,101,684 ----------- 16,958,737 ----------- Municipal Lease Revenue Bonds - 4.99% Hopkins Housing & Redevelopment Authority Public Works and Fire Station Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,280,918 Minneapolis Special School District #001 Series A 5.00% 2/1/18 (FSA) 1,545,000 1,657,399 5.00% 2/1/19 (FSA) 1,535,000 1,645,704 5.00% 2/1/20 (FSA) 1,690,000 1,803,923 St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.125% 12/1/27 2,000,000 2,114,600 5.25% 12/1/27 3,840,000 4,092,326 ----------- 12,594,870 ----------- 3 STATEMENTS DELAWARE TAX-FREE MINNESOTA INSURED FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value MUNICIPAL BONDS (continued) Political Subdivision General Obligation Bonds - 1.24% Dakota County Community Development Agency Governmental Housing Development 5.00% 1/1/21 $ 1,275,000 $ 1,348,248 Western Lake Superior Sanitation District Series A 6.00% 10/1/08 (MBIA) (AMT) 400,000 407,768 6.10% 10/1/09 (MBIA) (AMT) 425,000 433,742 6.20% 10/1/10 (MBIA) (AMT) 450,000 459,509 6.20% 10/1/11 (MBIA) (AMT) 475,000 484,472 ----------- 3,133,739 ----------- *Pre-Refunded Bonds - 2.84% +Minneapolis/St. Paul Housing & Redevelopment Authority Health Care Systems (Children's Health Care) Series A 5.50% 8/15/25-05 (FSA) 2,250,000 2,328,615 Southern Minnesota Municipal Power Agency Supply Revenue Series A 5.75% 1/1/18-05 3,790,000 4,116,091 5.75% 1/1/18-05 (AMBAC) 670,000 727,647 ----------- 7,172,353 ----------- Public Power Revenue Bonds - 9.32% Minnesota State Municipal Power Agency Series A 5.00% 10/1/34 2,000,000 2,053,580 +Northern Municipal Power Agency Electric System Revenue, Inverse Floater ROLS Series II-R-32 8.496% 1/1/13 (FSA) 4,585,000 5,468,713 Shakopee Public Utilities Commission Public Utilities Revenue 5.125% 2/1/26 (MBIA) 1,850,000 1,944,054 +Southern Minnesota Municipal Power Agency Supply System Revenue, Inverse Floater ROLs Series II-R-189 5.308% 1/1/16 (AMBAC) 5,000,000 5,636,700 Southern Minnesota Municipal Power Agency Supply Revenue Series A 5.25% 1/1/15 (AMBAC) 1,500,000 1,689,600 5.25% 1/1/16 (AMBAC) 5,000,000 5,636,700 Western Minnesota Municipal Power Agency Series B 5.00% 1/1/15 (MBIA) 1,000,000 1,099,010 ----------- 23,528,357 ----------- School District General Obligation Bonds - 19.35% Big Lake Independent School District #727 Series A 5.00% 2/1/17 (FSA) 1,040,000 1,112,166 5.00% 2/1/20 (FSA) 1,000,000 1,054,330 Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,362,393 Lakeville Independent School District 194-A 4.75% 2/1/22 (FSA) 2,350,000 2,438,689 Morris Independent School District #769 5.00% 2/1/24 (MBIA) 4,875,000 5,138,785 Principal Market Amount Value MUNICIPAL BONDS (continued) School District General Obligation Bonds (continued) Mounds View Independent School District #621 5.00% 2/1/20 (MBIA) $ 2,970,000 $ 3,170,208 5.375% 2/1/24 (FGIC) 6,170,000 6,811,124 Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,796,624 Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 1,310,000 1,393,159 +Rockford Independent School District #883, Inverse Floater ROLS Series II-R-30-B 9.206% 2/1/21 (FSA) 1,605,000 1,916,563 ++Rosemount Independent School District #196 Series B 5.80% 4/1/09 (FSA) 1,860,000 1,636,056 5.85% 4/1/10 (FSA) 2,240,000 1,889,507 ++Sauk Rapids Independent School District #047 Series B 5.983% 2/1/15 (FSA) 2,700,000 1,700,541 6.083% 2/1/17 (FSA) 2,245,000 1,251,408 +South Washington County Independent School District #833, Inverse Floater ROLS 9.206% 2/1/20 (MBIA) 3,440,000 4,107,773 9.206% 2/1/21 (MBIA) 3,645,000 4,352,567 St. Michael Independent School District #885 5.00% 2/1/20 (FSA) 1,970,000 2,102,798 5.00% 2/1/27 (FSA) 3,435,000 3,574,461 ------------ 48,809,152 ------------ Single Family Housing Revenue Bonds - 0.25% Dakota County Housing & Redevelopment Authority Single Family Mortgage Revenue 5.85% 10/1/30 (GNMA) (FNMA) (AMT) 561,000 576,316 6.70% 10/1/17 (FNMA) 55,000 56,202 ------------ 632,518 ------------ State General Obligation Bonds - 2.33% Minnesota State 5.00% 11/1/20 (FSA) 5,500,000 5,868,500 ------------ 5,868,500 ------------ Territorial Revenue Bonds - 2.75% Puerto Rico Electric Power Authority Power Revenue Series GG 4.75% 7/1/21 (FSA) 1,000,000 1,031,310 Series OO 5.00% 7/1/13 (CIFG) 3,640,000 4,013,864 Virgin Islands Public Finance Authority 5.25% 10/1/22 1,785,000 1,900,454 ------------ 6,945,628 ------------ TOTAL MUNICIPAL BONDS (cost $217,995,536) 235,907,979 ------------ 4 STATEMENTS DELAWARE TAX-FREE MINNESOTA INSURED FUND OF NET ASSETS (CONTINUED) Number of / Principal Shares / Amount SHORT TERM INVESTMENTS - 5.70% Money Market -- 4.99% Federated Minnesota Municipal Cash Trust 12,600,000 $ 12,600,000 ------------ 12,600,000 ------------ ^Variable Rate Demand Notes - 0.71% Minneapolis Library 1.72% 12/1/32 (SPA, Dexia Credit Local) $ 1,800,000 1,800,000 ------------ 1,800,000 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $14,400,000) 14,400,000 ------------ TOTAL MARKET VALUE OF SECURITIES - 99.19% (cost $232,395,536) 250,307,979 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.81% 2,035,723 ------------ NET ASSETS APPLICABLE TO 22,904,995 SHARES OUTSTANDING - 100.00% $252,343,702 ============ Net Asset Value -- Delaware Tax-Free Minnesota Insured Fund Class A ($225,565,943 / 20,474,995 Shares) $11.02 ------ Net Asset Value -- Delaware Tax-Free Minnesota Insured Fund Class B ($13,718,238 / 1,246,272 Shares) $11.01 ------ Net Asset Value -- Delaware Tax-Free Minnesota Insured Fund Class C ($13,059,521 / 1,183,728 Shares) $11.03 ------- COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization -- no par) $234,128,281 Distributions in excess of net investment income (7,427) Accumulated net realized gain on investments 310,405 Net unrealized appreciation of investments 17,912,443 ------------ Total net assets $252,343,702 ============ *Pre-Refunded Bonds are municipals that are generally backed or secured by U.S. Treasury Bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. ^Variable Rate Notes. The interest rate shown is the rate as of February 28, 2005. +An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 28, 2005. ++Zero coupon bond. The interest rate shown is the yield at the time of purchase. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax CIFG - Insured by CDC IXIS Financial Guaranty FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association ROLs - Residual Option Longs SPA - Stand-by Purchase Agreement NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE TAX-FREE MINNESOTA INSURED FUND Net asset value Class A (A) $11.02 Sales charge (4.50% of offering price) (B) 0.52 ------ Offering price $11.54 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 5 STATEMENTS DELAWARE MINNESOTA MUNICIPAL BOND FUNDS OF OPERATIONS Six Months Ended February 28, 2005 (Unaudited) Delaware Tax-Free Minnesota Insured Fund INVESTMENT INCOME: Interest $6,279,770 ---------- EXPENSES: Management fees 625,557 Distribution expenses -- Class A 280,328 Distribution expenses -- Class B 69,713 Distribution expenses -- Class C 62,150 Dividend disbursing and transfer agent fees and expenses 69,565 Reports and statements to shareholders 34,967 Accounting and administration expenses 41,610 Legal and professional fees 22,351 Registration fees 8,909 Custodian fees 6,827 Trustees' fees 7,081 Pricing fees 3,619 Other 900 ---------- 1,233,577 Less expenses absorbed or waived (16,601) Less waived distribution expenses -- Class A -- Less expense paid indirectly (647) ---------- Total expenses 1,216,329 ---------- NET INVESTMENT INCOME 5,063,441 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments (47,269) Net change in unrealized appreciation/depreciation of investments 1,133,212 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,085,943 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,149,384 ========== See accompanying notes 6 STATEMENTS DELAWARE MINNESOTA MUNICIPAL BOND FUNDS OF CHANGES IN NET ASSETS
Delaware Tax-Free Minnesota Insured Fund Six Months Year Ended Ended 2/28/05 8/31/04 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 5,063,441 $ 11,137,835 Net realized gain (loss) on investments (47,269) 1,800,275 Net change in unrealized appreciation/depreciation of investments 1,133,212 4,773,712 ------------ ------------ Net increase in net assets resulting from operations 6,149,384 17,711,822 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net Investment Income: Class A (4,599,354) (10,192,697) Class B (233,968) (544,393) Class C (207,827) (438,367) Net realized gain on investments: Class A (1,001,478) -- Class B (62,572) -- Class C (55,205) -- ------------ ------------ (6,160,404) (11,175,457) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 6,724,239 12,638,625 Class B 143,538 1,540,115 Class C 1,612,845 2,017,231 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 3,898,114 6,622,620 Class B 237,885 408,614 Class C 182,390 290,080 ------------ ------------ 12,799,011 23,517,285 ------------ ------------ Cost of shares repurchased: Class A (12,064,164) (29,823,120) Class B (980,373) (3,681,102) Class C (762,605) (2,538,003) ------------ ------------ (13,807,142) (36,042,225) ------------ ------------ Increase (decrease) in net assets derived from capital share transactions (1,008,131) (12,524,940) ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS (1,019,151) (5,988,575) NET ASSETS: Beginning of period 253,362,853 259,351,428 ------------ ------------ End of period(1) $252,343,702 $253,362,853 ============ ============ (1)Undistributed (distributions in excess of) net investment income ($7,427) --
See accompanying notes 7 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS A ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.020 $10.740 $10.940 $10.900 $10.480 $10.520 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.226 0.479 0.498 0.514 0.514 0.507 Net realized and unrealized gain (loss) on investments 0.048 0.282 (0.197) 0.038 0.421 (0.041) ------- ------- ------- ------- ------- ------- Total from investment operations 0.274 0.761 0.301 0.552 0.935 0.466 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.225) (0.481) (0.501) (0.512) (0.515) (0.506) Net realized gain on investments (0.049) -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.274) (0.481) (0.501) (0.512) (0.515) (0.506) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.020 $11.020 $10.740 $10.940 $10.900 $10.480 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.50% 7.20% 2.75% 5.25% 9.14% 4.63% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $225,566 $227,018 $231,738 $239,763 $242,716 $238,486 Ratio of expenses to average net assets 0.89% 0.89% 0.93% 0.96% 0.90% 1.00% Ratio of expenses to average net assets prior to expense limitation and expense paid indirectly 0.90% 0.89% 0.93% 0.96% 0.90% 1.01% Ratio of net investment income to average net assets 4.12% 4.37% 4.52% 4.78% 4.82% 4.93% Ratio of net investment income to average net assets prior to expense limitation and expense paid indirectly 4.11% 4.37% 4.52% 4.78% 4.82% 4.92% Portfolio turnover 9% 15% 30% 15% 7% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 8 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS B ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.010 $10.730 $10.940 $10.890 $10.470 $10.510 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.185 0.397 0.415 0.433 0.434 0.431 Net realized and unrealized gain (loss) on investments 0.048 0.282 (0.207) 0.048 0.422 (0.042) ------- ------- ------- ------- ------- ------- Total from investment operations 0.233 0.679 0.208 0.481 0.856 0.389 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.184) (0.399) (0.418) (0.431) (0.436) (0.429) Net realized gain on investments (0.049) -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.233) (0.399) (0.418) (0.431) (0.436) (0.429) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.010 $11.010 $10.730 $10.940 $10.890 $10.470 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.13% 6.41% 1.89% 4.56% 8.34% 3.86% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $13,718 $14,317 $15,647 $14,341 $12,732 $10,491 Ratio of expenses to average net assets 1.64% 1.64% 1.68% 1.71% 1.65% 1.75% Ratio of expenses to average net assets prior to expense limitation and expense paid indirectly 1.65% 1.64% 1.68% 1.71% 1.65% 1.76% Ratio of net investment income to average net assets 3.37% 3.62% 3.77% 4.03% 4.07% 4.18% Ratio of net investment income to average net assets prior to expense limitation and expense paid indirectly 3.36% 3.62% 3.77% 4.03% 4.07% 4.17% Portfolio turnover 9% 15% 30% 15% 7% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 9 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS C ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.030 $10.750 $10.950 $10.910 $10.480 $10.520 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.185 0.396 0.414 0.433 0.434 0.431 Net realized and unrealized gain (loss) on investments 0.048 0.282 (0.197) 0.038 0.432 (0.042) ------- ------- ------- ------- ------- ------- Total from investment operations 0.233 0.678 0.217 0.471 0.866 0.389 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.184) (0.398) (0.417) (0.431) (0.436) (0.429) Net realized gain on investments (0.049) -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.233) (0.398) (0.417) (0.431) (0.436) (0.429) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.030 $11.030 $10.750 $10.950 $10.910 $10.480 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 2.12% 6.39% 1.97% 4.46% 8.42% 3.85% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $13,060 $12,028 $11,966 $6,083 $4,265 $3,615 Ratio of expenses to average net assets 1.64% 1.64% 1.68% 1.71% 1.65% 1.75% Ratio of expenses to average net assets prior to expense limitation and expense paid indirectly 1.65% 1.64% 1.68% 1.71% 1.65% 1.76% Ratio of net investment income to average net assets 3.37% 3.62% 3.77% 4.03% 4.07% 4.18% Ratio of net investment income to average net assets prior to expense limitation and expense paid indirectly 3.36% 3.62% 3.77% 4.03% 4.07% 4.17% Portfolio turnover 9% 15% 30% 15% 7% 35%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 10 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS February 28, 2005 (Unaudited) Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers six series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is organized as a Delaware statutory trust and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur Tax Free Funds (the "Trust") is organized as a Delaware statutory trust and offers the Delaware Tax-Free Minnesota Fund. Voyageur Intermediate Tax Free Funds (the "Trust") is organized as a Delaware statutory trust and offers the Delaware Tax-Free Minnesota Intermediate Fund. These financial statements and related notes pertain to Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond Fund (each referred to as a "Fund" or, collectively, the "Funds"). The above Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended, and offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50% for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and up to 2.75% for Delaware Tax-Free Minnesota Intermediate Fund. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and that declines from 2% to zero for Delaware Tax-Free Minnesota Intermediate Fund, depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and approximately five years after purchase for Delaware Tax-Free Minnesota Intermediate Fund. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. The investment objective of Delaware Tax-Free Minnesota Fund and Delaware Tax-Free Minnesota Insured Fund is to seek as high a level of current income exempt from federal income tax and from the Minnesota state personal income tax, as is consistent with preservation of capital. The investment objective of Delaware Tax-Free Minnesota Intermediate Fund is to seek to provide investors with preservation of capital and, secondarily, current income exempt from federal income tax and from the Minnesota state personal income tax, by maintaining a dollar-weighted average effective portfolio maturity of 10 years or less. The investment objective of Delaware Minnesota High-Yield Municipal Bond Fund is to seek as high a level of current income exempt from federal income tax and from the Minnesota state personal income tax, primarily through investment in medium- and lower-grade municipal obligations. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, or with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of the Funds on the basis of "settled shares" of each class in relation to the net assets of the Funds. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Funds receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under the above arrangement is included in custodian fees on the Statements of Operations with the corresponding expense offset shown as "expense paid indirectly." The amount of this expense for the six months ended February 28, 2005 were as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Earnings credits $647 11 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- On the first $500 million 0.500% On the next $500 million 0.475% On the next $1.5 billion 0.450% In excess of $2.5 billion 0.425% DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed specified percentages of average daily net assets as shown below: Delaware Tax-Free Minnesota Insured Fund ----------------- The operating expense limitation as a percentage of average daily net assets (per annum) 0.75% Expiration date 10/31/04 Effective November 1, 2004, the operating expense limitation as a percentage of average daily net assets (per annum) 0.64% Expiration date 12/29/05 Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares for all Funds. DDLP has contracted to waive distribution and service fees through December 29, 2005 in order to prevent distribution and service fees of Class A from exceeding 0.15% of the average daily net assets for Delaware Tax-Free Minnesota Intermediate Fund. At February 28, 2005, the Funds had liabilities payable to affiliates as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Investment management fee payable to DMC $84,063 Dividend disbursing, transfer agent fees, accounting and administration fees and other expenses payable to DSC 20,614 Other expenses payable to DMC and affiliates* 75,833 *DMC, as part of its administrative services, pays operating expenses on behalf of each Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement, each Fund bears the cost of certain legal services expenses, including internal legal services provided to each Fund by DMC employees. For the six months ended February 28, 2005, each Fund was charged internal legal services provided by DMC as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- $6,964 12 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) For the six months ended February 28, 2005, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- $23,685 Certain officers of DMC, DSC, and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Funds. 3. INVESTMENTS For the six months ended February 28, 2005, the Funds made purchases and sales of investment securities other than short-term investments as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Purchases $10,642,758 Sales 21,051,270 At February 28, 2005, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 28, 2005, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Cost of investments $232,037,862 ============ Aggregate unrealized appreciation $ 18,344,882 Aggregate unrealized depreciation (74,765) ------------ Net unrealized appreciation $ 18,270,117 ============ 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Additionally, net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended February 28, 2005 and the year ended August 31, 2004 was as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- SIX MONTHS ENDED 2/28/05* ------------------------ Tax-exempt income $ 5,041,149 Long-term capital gain 1,119,255 ----------- Total $ 6,160,404 =========== YEAR ENDED 8/31/04 ------------------ Tax-exempt income $11,175,457 Ordinary income -- Long-term capital gain -- ----------- Total $11,175,457 =========== *Tax information for the six months ended February 28, 2005 is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end. 13 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 4. DIVIDEND AND DISTRIBUTION INFORMATION (CONTINUED) The components of net assets are estimated since the final tax characteristics cannot be determined until fiscal year end. As of February 28, 2005, the estimated components of net assets on a tax basis were as follows: Delaware Tax-Free Minnesota Insured Fund ----------------- Shares of beneficial interest $234,128,281 Undistributed tax-exempt income -- Distributions in excess of ordinary income (7,427) Undistributed long-term capital gain -- Net realized capital loss on investments (47,269) Capital loss carryforwards -- Unrealized appreciation of investments 18,270,117 ------------ Net assets $252,343,702 ============ For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the six months ended February 28, 2005, each Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of market discounts and premiums on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. Delaware Tax-Free Minnesota Insured Fund ----------------- Undistributed net investment income (loss) $(29,719) Accumulated realized gain (loss) 29,719 14 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARES Transactions in capital shares were as follows: Delaware Tax-Free Minnesota Insured Fund Six Months Year Ended Ended 2/28/05 8/31/04 Shares sold: Class A 608,844 1,150,773 Class B 13,002 140,969 Class C 145,904 184,070 Shares issued upon reinvestment of dividends and distributions: Class A 353,154 604,266 Class B 21,568 37,314 Class C 16,497 26,432 ---------- ---------- 1,158,969 2,143,824 ---------- ---------- Shares repurchased: Class A (1,093,797) (2,725,207) Class B (88,907) (335,649) Class C (69,011) (232,963) ---------- ---------- (1,251,715) (3,293,819) ---------- ---------- Net increase (decrease) (92,746) (1,149,995) ========== ========== For the six months ended February 28, 2005 and the year ended August 31, 2004, the following shares and values were converted from Class B to Class A shares. The respective amounts are included in Class B redemptions and Class A subscriptions in the tables above and the Statements of Changes in Net Assets.
Six Months Ended Year Ended 2/28/05 8/31/04 ------------------------------- ------------------------------- Class B Class A Class B Class A shares shares Value shares shares Value ------ ------ ----- ------ ------ ----- Delaware Tax-Free Minnesota Insured Fund 36,494 36,461 402,222 174,818 174,712 1,927,930
15 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 6. PROXY RESULTS The shareholders of Voyageur Mutual Funds, Voyageur Insured Funds, Voyageur Tax Free Funds and Voyageur Intermediate Tax Free Funds (each, the "Trust") voted on the following proposals (as applicable) at the special meeting of shareholders on March 23, 2005 or as adjourned. The description of each proposal and number of shares voted are as follows: 1. To elect a Board of Trustees for each of the Trusts. VOYAGEUR INSURED FUNDS ------------------------------------ SHARES VOTED SHARES VOTED FOR WITHHELD AUTHORITY ------------------------------------------------------------------------- Thomas L. Bennett 25,076,354.183 602,982.118 ------------------------------------------------------------------------- Jude T. Driscoll 25,120,168.869 559,167.432 ------------------------------------------------------------------------- John A. Fry 25,085,403.645 593,932.656 ------------------------------------------------------------------------- Anthony D. Knerr 25,066,460.446 612,875.855 ------------------------------------------------------------------------- Lucinda S. Landreth 25,124,950.648 554,385.653 ------------------------------------------------------------------------- Ann R. Leven 25,085,383.078 593,953.223 ------------------------------------------------------------------------- Thomas F. Madison 25,067,669.009 611,667.292 ------------------------------------------------------------------------- Janet L. Yeomans 25,123,301.246 556,035.055 ------------------------------------------------------------------------- J. Richard Zecher 25,055,313.488 624,022.813 ------------------------------------------------------------------------- 2. To approve the use of a "manager of managers" structure whereby the investment manager of the funds of each Trust will be able to hire and replace subadvisers without shareholder approval.
FOR AGAINST ABSTAIN --- ------- ------- Delaware Tax-Free Minnesota Insured Fund 12,436,002.703 779,176.132 763,621.190
16 NOTES DELAWARE MINNESOTA MUNICIPAL BOND FUNDS TO FINANCIAL STATEMENTS (CONTINUED) 7. LINE OF CREDIT The Funds, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participate in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 28, 2005 or at any time during the period. 8. CREDIT AND MARKET RISK The Funds concentrate their investments in securities issued by municipalities, mainly in Minnesota. The value of these investments may be adversely affected by new legislation within the states, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. The Funds may invest in inverse floating rate securities ("inverse floaters"), a type of derivative tax-exempt obligation with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of inverse floaters will generally be more volatile than other tax-exempt investments. Such securities are denoted on the Statements of Net Assets. 9. CONTRACTUAL OBLIGATIONS The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed each Fund's existing contracts and expects the risk of loss to be remote. 17 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies for each Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER Chairman Senior Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR THOMAS L. BENNETT Delaware Distributors, L.P. Private Investor RICHELLE S. MAESTRO Philadelphia, PA Rosemont, PA Executive Vice President, Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT President Philadelphia, PA Delaware Service Company, Inc. Franklin & Marshall College 2005 Market Street Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094 Senior Vice President and Treasurer ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS Managing Director Philadelphia, PA 800 523-1918 Anthony Knerr & Associates New York, NY FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY LUCINDA S. LANDRETH 800 362-7500 Former Chief Investment Officer Assurant, Inc. WEB SITE Philadelphia, PA www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN J. RICHARD ZECHER Founder Investor Analytics Scottsdale, AZ
-------------------------------------------------------------------------------- Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on each Fund's Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. -------------------------------------------------------------------------------- (9720) Printed in the USA SA-MNALL [2/05] IVES 4/05 J10079 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert Not applicable. Item 4. Principal Accountant Fees and Services Not applicable. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. Schedule of Investments Included as part of report to shareholders filed under Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers Not applicable. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. Controls and Procedures The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant's second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits (a) (1) Code of Ethics Not applicable. (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized. VOYAGEUR INSURED FUNDS Jude T. Driscoll --------------------------------------- By: Jude T. Driscoll Title: Chairman Date: May 2, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Jude T. Driscoll --------------------------------------- By: Jude T. Driscoll Title: Chairman Date: May 2, 2005 Michael P. Bishof --------------------------------------- By: Michael P. Bishof Title: Chief Financial Officer Date: May 2, 2005