-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FfiHsnGyur71B25sJVpWLz2MIIqb5lXOsUFe9hdhkpTyKDDm0YrpXVrDsvtIZcTv lNyoREVi8mrpjBCXGHEthQ== 0001206774-06-001108.txt : 20060510 0001206774-06-001108.hdr.sgml : 20060510 20060510103300 ACCESSION NUMBER: 0001206774-06-001108 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060228 FILED AS OF DATE: 20060510 DATE AS OF CHANGE: 20060510 EFFECTIVENESS DATE: 20060510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR INSURED FUNDS CENTRAL INDEX KEY: 0000809064 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04973 FILM NUMBER: 06823874 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: (215) 2155-2127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR INSURED FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA INSURED FUNDS INC DATE OF NAME CHANGE: 19910926 FORMER COMPANY: FORMER CONFORMED NAME: MINNESOTA INSURED FUND INC DATE OF NAME CHANGE: 19900131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR MUTUAL FUNDS II CENTRAL INDEX KEY: 0000809872 IRS NUMBER: 841044878 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04989 FILM NUMBER: 06823875 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: (215) 255-2127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MUTUAL FUNDS INC-II DATE OF NAME CHANGE: 19940328 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR COLORADO TAX FREE FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: COLORADO DOUBLE TAX EXEMPT FUND INC DATE OF NAME CHANGE: 19900625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR MUTUAL FUNDS CENTRAL INDEX KEY: 0000906236 IRS NUMBER: 411756458 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07742 FILM NUMBER: 06823876 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH ST STREET 2: STE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4115 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH ST STREET 2: STE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4115 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MUTUAL FUNDS INC DATE OF NAME CHANGE: 19930714 0000809064 S000002406 DELAWARE TAX-FREE ARIZONA INSURED FUND C000006392 DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS A VAZIX C000006393 DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS B DVABX C000006394 DELAWARE TAX-FREE ARIZONA INSURED FUND CLASS C DVACX 0000809064 S000002407 DELAWARE TAX-FREE MINNESOTA INSURED FUND C000006395 DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS A MNINX C000006396 DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS B DVMBX C000006397 DELAWARE TAX-FREE MINNESOTA INSURED FUND CLASS C DVMCX N-CSR 1 d19283.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: David F. Connor, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: August 31 Date of reporting period: February 28, 2006 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(R) LOGO] FIXED INCOME - -------------------------------------------------------------------------------- Semiannual Report FEBRUARY 28, 2006 - -------------------------------------------------------------------------------- DELAWARE TAX-FREE ARIZONA INSURED FUND DELAWARE TAX-FREE CALIFORNIA FUND DELAWARE TAX-FREE COLORADO FUND [POWERED BY RESEARCH(R) LOGO] Table OF CONTENTS - ------------------------------------------------------------ DISCLOSURE OF FUND EXPENSES 1 - ------------------------------------------------------------ SECTOR ALLOCATIONS 2 - ------------------------------------------------------------ FINANCIAL STATEMENTS: Statements of Net Assets 4 Statements of Operations 13 Statements of Changes in Net Assets 14 Financial Highlights 15 Notes to Financial Statements 24 - ------------------------------------------------------------ ABOUT THE ORGANIZATION 30 - ------------------------------------------------------------ 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)2006 Delaware Distributors, L.P. - -------------------------------------------------------------------------------- Disclosure For the Period September 1, 2005 to February 28, 2006 - -------------------------------------------------------------------------------- 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, 2005 to February 28, 2006. Actual Expenses The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of each table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Each Fund's actual expenses shown in the tables reflect fee waivers in effect. The expenses shown in each table assume reinvestment of all dividends and distributions. "Expenses Paid During Period" are equal to the 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 Arizona Insured Fund Expense Analysis of an Investment of $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/05 to 9/1/05 2/28/06 Ratio 2/28/06 - ------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $ 1,000.00 $ 1,006.40 0.77% $ 3.83 Class B 1,000.00 1,002.60 1.52% 7.55 Class C 1,000.00 1,003.50 1.52% 7.55 - ------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (5% return before expenses) Class A $ 1,000.00 $ 1,020.98 0.77% $ 3.86 Class B 1,000.00 1,017.26 1.52% 7.60 Class C 1,000.00 1,017.26 1.52% 7.60 - -------------------------------------------------------------------------------------------------------
Delaware Tax-Free California Fund Expense Analysis of an Investment of $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/05 to 9/1/05 2/28/06 Ratio 2/28/06 - ------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $ 1,000.00 $ 1,011.80 0.88% $ 4.39 Class B 1,000.00 1,008.00 1.63% 8.12 Class C 1,000.00 1,008.00 1.63% 8.12 - ------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (5% return before expenses) Class A $ 1,000.00 $ 1,020.43 0.88% $ 4.41 Class B 1,000.00 1,016.71 1.63% 8.15 Class C 1,000.00 1,016.71 1.63% 8.15 - -------------------------------------------------------------------------------------------------------
Delaware Tax-Free Colorado Fund Expense Analysis of an Investment of $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/05 to 9/1/05 2/28/06 Ratio 2/28/06 - ------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $ 1,000.00 $ 1,011.20 0.93% $ 4.64 Class B 1,000.00 1,008.30 1.68% 8.37 Class C 1,000.00 1,008.30 1.68% 8.37 - ------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (5% return before expenses) Class A $ 1,000.00 $ 1,020.18 0.93% $ 4.66 Class B 1,000.00 1,016.46 1.68% 8.40 Class C 1,000.00 1,016.46 1.68% 8.40 - -------------------------------------------------------------------------------------------------------
1 - -------------------------------------------------------------------------------- Sector Allocations As of February 28, 2006 - -------------------------------------------------------------------------------- Sector designations may be different than the sector designations presented in other Fund materials. DELAWARE TAX-FREE ARIZONA INSURED FUND Percentage Sector of Net Assets - ---------------------------------------------------------------- Municipal Bonds 98.29% - ---------------------------------------------------------------- Airport Revenue Bonds 10.68% Continuing Care/Retirement Revenue Bonds 0.64% Convention Center/Auditorium/Hotel Revenue Bonds 3.38% Dedicated Tax & Fees Revenue Bonds 1.48% Electric & Gas Revenue Bonds 9.26% Escrowed to Maturity Bonds 0.30% Higher Education Revenue Bonds 8.37% Hospital Revenue Bonds 6.32% Multifamily Housing Revenue Bonds 5.15% Municipal Lease Revenue Bonds 12.41% Political Subdivision General Obligation Bonds 2.26% Pre-Refunded Bonds 25.49% School District General Obligation Bonds 2.29% Single Family Housing Revenue Bonds 0.11% Territorial General Obligation Bonds 4.07% Transportation Revenue Bonds 0.67% Water & Sewer Revenue Bonds 5.41% - ---------------------------------------------------------------- Short-Term Investments 0.73% - ---------------------------------------------------------------- Total Market Value of Securities 99.02% - ---------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 0.98% - ---------------------------------------------------------------- Total Net Assets 100.00% - ---------------------------------------------------------------- DELAWARE TAX-FREE CALIFORNIA FUND Percentage Sector of Net Assets - ---------------------------------------------------------------- Municipal Bonds 94.23% - ---------------------------------------------------------------- Airport Revenue Bonds 2.11% Continuing Care/Retirement Revenue Bonds 4.27% Dedicated Tax & Fees Revenue Bonds 8.24% Electric & Gas Revenue Bonds 2.21% Higher Education Revenue Bonds 9.69% Hospital Revenue Bonds 5.65% Multifamily Housing Revenue Bonds 7.93% Municipal Lease Revenue Bonds 8.43% Parking Revenue Bonds 1.07% Ports & Harbors Revenue Bonds 2.19% Pre-Refunded Bonds 8.20% Primary Education Revenue Bonds 1.11% Resource Recovery Revenue Bonds 4.28% School District General Obligation Bonds 5.99% State General Obligation Bonds 6.70% Tax Increment/Special Assessment Bonds 10.77% Water & Sewer Revenue Bonds 5.39% - ---------------------------------------------------------------- Short-Term Investments 5.35% - ---------------------------------------------------------------- Money Market Instruments 2.08% Variable Rate Demand Notes 3.27% - ---------------------------------------------------------------- Total Market Value of Securities 99.58% - ---------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 0.42% - ---------------------------------------------------------------- Total Net Assets 100.00% - ---------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- Sector Allocations (CONTINUED) As of February 28, 2006 - -------------------------------------------------------------------------------- Sector designations may be different than the sector designations presented in other Fund materials. DELAWARE TAX-FREE COLORADO FUND Percentage Sector of Net Assets - ---------------------------------------------------------------- Municipal Bonds 98.22% - ---------------------------------------------------------------- Airport Revenue Bonds 4.48% Charter School Revenue Bonds 7.57% Combined Utility Revenue Bonds 1.82% Continuing Care/Retirement Revenue Bonds 5.58% Dedicated Tax & Fees Revenue Bonds 1.03% Electric & Gas Revenue Bonds 0.37% Escrowed to Maturity Bonds 2.23% Higher Education Revenue Bonds 10.26% Hospital Revenue Bonds 8.63% Library/Museum Revenue Bonds 0.74% Multifamily Housing Revenue Bonds 6.23% Municipal Lease Revenue Bonds 3.39% Political Subdivision General Obligation Bonds 10.63% Pre-Refunded Bonds 14.52% Recreational Area Revenue Bonds 1.20% School District General Obligation Bonds 5.12% Tax Increment/Special Assessment Bonds 5.03% Territorial General Obligation Bonds 2.23% Turnpike/Toll Road Revenue Bonds 5.42% Water & Sewer Revenue Bonds 1.74% - ---------------------------------------------------------------- Short-Term Investments 0.52% - ---------------------------------------------------------------- Total Market Value of Securities 98.74% - ---------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 1.26% - ---------------------------------------------------------------- Total Net Assets 100.00% - ---------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- Delaware Tax-Free Arizona Insured Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 98.29% - -------------------------------------------------------------------------------- Airport Revenue Bonds - 10.68% Phoenix Civic Improvement Corporation Airport Revenue Series B 5.25% 7/1/27 (FGIC) (AMT) $ 1,000,000 $ 1,045,410 5.25% 7/1/32 (FGIC) (AMT) 10,300,000 10,741,664 Tucson Airport Authority 5.35% 6/1/31 (AMBAC) (AMT) 5,000,000 5,210,450 ------------- 16,997,524 ------------- Continuing Care/Retirement Revenue Bonds - 0.64% Maricopa County Industrial Development Authority Senior Living Healthcare Revenue 5.00% 8/20/35 (GNMA) 1,000,000 1,020,630 ------------- 1,020,630 ------------- Convention Center/Auditorium/Hotel Revenue Bonds - 3.38% Arizona Tourism & Sports Authority Tax Revenue Multipurpose Stadium Facilities Series A 5.00% 7/1/28 (MBIA) 2,500,000 2,624,300 5.00% 7/1/31 (MBIA) 1,500,000 1,572,645 Phoenix Civic Improvement Corporation Distribution Revenue (Civic Plaza) Series B 5.50% 7/1/31 (FGIC) 1,500,000 1,189,425 ------------- 5,386,370 ------------- Dedicated Tax & Fees Revenue Bonds - 1.48% Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series K 5.00% 7/1/35 750,000 774,833 San Luis Civic Improvement Corporation Municipal Facilities Excise Tax Revenue 5.00% 7/1/38 (XLCA) 1,500,000 1,573,515 ------------- 2,348,348 ------------- Electric & Gas Revenue Bonds - 9.26% Energy Management Services (Arizona State University - Main Campus) 5.25% 7/1/17 (MBIA) 1,500,000 1,619,280 Maricopa County Pollution Control (Palo Verde Project) Series A 5.05% 5/1/29 (AMBAC) 6,000,000 6,254,460 Puerto Rico Electric Power Authority Revenue Series NN 5.00% 7/1/32 (MBIA) 2,500,000 2,630,750 Series OO 5.00% 7/1/13 (CIFG) 1,500,000 1,624,800 Salt River Project Agricultural Improvement & Power District Electric System Revenue (Salt River Project) Series A 5.00% 1/1/31 500,000 522,185 Series B 5.00% 1/1/31 (MBIA) 2,000,000 2,088,740 ------------- 14,740,215 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Escrowed to Maturity Bonds - 0.30% Maricopa County School District #14 (Creighton School Improvement Project) Series C 6.50% 7/1/08 (FGIC) $ 455,000 $ 486,095 ------------- 486,095 ------------- Higher Education Revenue Bonds - 8.37% Arizona State Board of Regents (Northern Arizona University) 5.00% 6/1/34 (FGIC) 1,000,000 1,037,710 5.50% 6/1/34 (FGIC) 1,250,000 1,376,525 Certificates of Participation (University of Arizona Main Campus) Series 2000 A1 5.125% 6/1/25 (AMBAC) 1,250,000 1,322,825 Arizona State University Certificates of Participation (Research Infrastructure Project) 5.00% 9/1/30 (AMBAC) 3,000,000 3,149,400 Glendale Industrial Development Authority Revenue (Midwestern University) Series A 5.875% 5/15/31 1,000,000 1,071,360 Mohave County Community College District Revenue (State Board of Directors) 6.00% 3/1/20 (MBIA) 1,000,000 1,088,910 South Campus Group Student Housing Revenue (Arizona State University South Campus Project) 5.625% 9/1/35 (MBIA) 1,000,000 1,105,040 Tucson Industrial Development Authority (University of Arizona-Marshall Foundation) Series A 5.00% 7/15/27 (AMBAC) 1,000,000 1,042,900 University of Arizona Certificates of Participation (University of Arizona Project) Series A 5.125% 6/1/21 (AMBAC) 1,000,000 1,062,360 Series B 5.125% 6/1/22 (AMBAC) 1,000,000 1,062,360 ------------- 13,319,390 ------------- Hospital Revenue Bonds - 6.32% Glendale Industrial Development Authority Hospital Revenue 5.00% 12/1/35 1,000,000 1,004,910 Maricopa County Industrial Development Authority Health Facilities Revenue (Catholic Healthcare West) Series A 5.50% 7/1/26 1,000,000 1,060,630 Mohave County Industrial Development Authority (Chris Ridge & Silver) 6.375% 11/1/31 (GNMA) 185,000 191,179 Phoenix Industrial Development Authority Hospital Revenue (John C. Lincoln Health) Series B 5.75% 12/1/16 (Connie Lee) 4,110,000 4,323,556 Scottsdale Industrial Development Authority Hospital Revenue (Scottsdale Healthcare) 5.70% 12/1/21 500,000 539,965 4 - -------------------------------------------------------------------------------- Delaware Tax-Free Arizona Insured Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Hospital Revenue Bonds (continued) University Medical Center Hospital Revenue 5.00% 7/1/24 $ 800,000 $ 819,960 Yavapai County Industrial Development Authority Revenue (Yavapai Regional Medical Center) 5.25% 8/1/21 (RADIAN) 2,000,000 2,111,800 ------------- 10,052,000 ------------- Multifamily Housing Revenue Bonds - 5.15% Phoenix Industrial Development Authority Multifamily Housing Revenue (Capital Mews Apartments) Series A 5.70% 12/20/40 (GNMA) (AMT) 2,000,000 2,091,560 (Ventana Palms Apartments) Series A 6.15% 10/1/29 (MBIA) 510,000 540,524 6.20% 10/1/34 (MBIA) 940,000 997,143 Yuma Industrial Development Authority Multifamily Revenue (Regency Apartments) Series A 5.50% 12/20/32 (GNMA) (FHA) 2,000,000 2,004,920 6.10% 9/20/19 (GNMA) (AMT) 2,340,000 2,561,644 ------------- 8,195,791 ------------- Municipal Lease Revenue Bonds - 12.41% Arizona Agricultural Improvement & Power District Certificates of Participation (Salt River Project) 5.00% 12/1/18 (MBIA) 2,500,000 2,659,175 Arizona School Facilities Board Certificates of Participation Series A 5.00% 9/1/18 (FGIC) 1,000,000 1,070,400 Greater Arizona Development Authority Infrastructure Revenue Series A 5.00% 8/1/22 (MBIA) 500,000 535,880 Marana Municipal Property Corporation Municipal Facilities Revenue 5.00% 7/1/28 (AMBAC) 575,000 601,738 Maricopa County Industrial Development Authority Correctional Contract Facilities (Phoenix West Prison) 5.375% 7/1/22 (ACA) 1,000,000 1,048,030 Phoenix Industrial Development Authority Government Office Lease Revenue (Capitol Mall LLC Project) 5.00% 9/15/27 (AMBAC) 1,000,000 1,054,720 5.00% 9/15/28 (AMBAC) 4,000,000 4,153,000 Pinal County Certificates of Participation 5.125% 6/1/21 (AMBAC) 4,675,000 4,965,784 Puerto Rico Public Buildings Authority Revenue (Guaranteed Government Facilities) Series D 5.25% 7/1/27 470,000 494,261 Series D 5.25% 7/1/36 270,000 283,630 Series I 5.25% 7/1/33 500,000 532,250 University of Arizona Certificates of Participation Series B 5.00% 6/1/31 (AMBAC) 2,250,000 2,346,458 ------------- 19,745,326 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Political Subdivision General Obligation Bonds - 2.26% DC Ranch Community Facilities 5.00% 7/15/27 (AMBAC) $ 1,000,000 $ 1,050,600 Phoenix Variable Purpose Series B 5.00% 7/1/27 2,435,000 2,543,017 ------------- 3,593,617 ------------- - -/-Pre-Refunded Bonds - 25.49% Arizona State Transportation Board Highway Revenue Series B 5.25% 7/1/22-12 1,000,000 1,091,870 Eagle Mountain Community Facility District Revenue Series A 6.50% 7/1/21-06 1,010,000 1,030,877 Glendale Industrial Development Authority Educational Facilities Revenue (American Graduate School International) 5.625% 7/1/20-06 (Connie Lee) 1,000,000 1,017,730 5.875% 7/1/15-06 (Connie Lee) 2,500,000 2,546,425 Maricopa County School District #3 (Tempe Elementary Project of 1997) Series E 5.70% 7/1/16-09 (FGIC) 1,025,000 1,105,791 Mesa Industrial Development Authority (Discovery Health Systems) Series A 5.625% 1/1/29-10 (MBIA) 10,000,000 10,801,499 Phoenix Industrial Development Authority Lease Revenue (Capitol Mall LLC Project) 5.50% 9/15/27-10 (AMBAC) 5,000,000 5,401,000 Puerto Rico Commonwealth Public Improvement Revenue 5.125% 7/1/30-11 (FSA) 770,000 829,475 Series A 5.00% 7/1/27-12 1,000,000 1,080,170 Series A 5.125% 7/1/31-11 1,705,000 1,836,694 Puerto Rico Public Buildings Authority Guaranteed Government Facilities Revenue Series D 5.25% 7/1/36-12 730,000 792,327 5.25% 7/1/27-12 1,280,000 1,389,286 Phoenix Street & Highway Revenue 6.50% 7/1/09-02 (AMBAC) 350,000 351,197 Sedona Certificates of Participation 5.75% 7/1/16-09 500,000 539,370 Southern Arizona Capital Facilities Finance (University of Arizona Project) 5.10% 9/1/33-12 (MBIA) 3,250,000 3,526,283 Surprise Municipal Property Excise Tax Revenue 5.70% 7/1/20-09 (FGIC) 5,000,000 5,394,100 University of Arizona Certificates of Participation (University of Arizona Parking & Student Housing) 5.75% 6/1/19-09 (AMBAC) 1,000,000 1,069,870 Yuma Industrial Development Authority Hospital Revenue (Yuma Regional Medical Center) 5.00% 8/1/31-11 (FSA) 700,000 752,290 ------------- 40,556,254 ------------- 5 - -------------------------------------------------------------------------------- Delaware Tax-Free Arizona Insured Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- School District General Obligation Bonds - 2.29% Cochise County Unified School District #68 7.50% 7/1/10 (FGIC) $ 1,000,000 $ 1,155,830 Maricopa County School District #14 (Creighton School Improvement Project of 1990) Series C 6.50% 7/1/08 (FGIC) 545,000 581,738 Maricopa County School District #38 (Madison Elementary) 5.00% 7/1/14 (FSA) 1,750,000 1,903,405 ------------- 3,640,973 ------------- Single Family Housing Revenue Bonds - 0.11% Pima County Industrial Development Authority Single Family Housing Revenue Series A-1 6.125% 11/1/33 (GNMA) (FNMA) (FHLMC) (AMT) 55,000 55,233 Series B-1 6.10% 5/1/31 (GNMA) (AMT) 115,000 115,469 ------------- 170,702 ------------- Territorial General Obligation Bonds - 4.07% Puerto Rico Commonwealth Public Improvements Refunding Series A 5.50% 7/1/19 1,300,000 1,469,065 Puerto Rico Commonwealth Public Improvement (Unrefunded Balance) Series A 5.125% 7/1/30 (FSA) 480,000 509,510 5.125% 7/1/31 3,370,000 3,467,191 Virgin Islands Public Finance Authority Revenue (Gross Receipts Taxes) 5.00% 10/1/31 (ACA) 1,000,000 1,027,730 ------------- 6,473,496 ------------- Transportation Revenue Bonds - 0.67% Arizona State Transportation Board Highway Revenue Series A 5.00% 7/1/23 1,000,000 1,064,080 ------------- 1,064,080 ------------- Water & Sewer Revenue Bonds - 5.41% Gilbert Water Resource Municipal Property Corporation Wastewater System & Utility Revenue 4.90% 4/1/19 1,500,000 1,512,450 Glendale Water & Sewer Revenue 5.00% 7/1/28 (AMBAC) 2,000,000 2,099,440 Phoenix Civic Improvement Corporation Wastewater Systems Revenue Junior Lien 5.00% 7/1/24 (FGIC) 1,000,000 1,056,480 5.00% 7/1/26 (FGIC) 3,750,000 3,933,375 ------------- 8,601,745 ------------- Total Municipal Bonds (cost $147,940,313) 156,392,556 ------------- Number of Market Shares Value - -------------------------------------------------------------------------------- Short-Term Investments - 0.73% - -------------------------------------------------------------------------------- Money Market Instruments - 0.73% Federated Arizona Municipal Cash Trust 1,153,903 $ 1,153,903 ------------- Total Short-Term Investments (cost $1,153,903) 1,153,903 ------------- Total Market Value of Securities - 99.02% (cost $149,094,216) 157,546,459 Receivables and Other Assets Net of Liabilities - 0.98% 1,567,011 ------------- Net Assets Applicable to 13,949,251 Shares Outstanding - 100.00% $ 159,113,470 ============= Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class A ($132,879,926 / 11,651,711 Shares) $ 11.40 ------------- Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class B ($17,822,544 / 1,561,658 Shares) $ 11.41 ------------- Net Asset Value - Delaware Tax-Free Arizona Insured Fund Class C ($8,411,000 / 735,882 Shares) $ 11.43 ------------- Components of Net Assets at February 28, 2006: Shares of beneficial interest (unlimited authorization - no par) $ 153,572,016 Distributions in excess of net investment income (20,294) Accumulated net realized loss on investments (2,890,495) Net unrealized appreciation of investments 8,452,243 ------------- Total net assets $ 159,113,470 ============= - -/- Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in "Notes to Financial Statements." Summary of Abbreviations: ACA - Insured by American Capital Access AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax CIFG - CDC IXIS Financial Guaranty Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FHLMC - Insured by the Federal Home Loan Mortgage Corporation FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance XLCA - Insured by XL Capital Insurance Net Asset Value and Offering Price per Share - Delaware Tax-Free Arizona Insured Fund Net asset value Class A (A) $ 11.40 Sales charge (4.50% of offering price) (B) 0.54 ------------- Offering price $ 11.94 ============= (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 6 - -------------------------------------------------------------------------------- Delaware Tax-Free California Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 94.23% - -------------------------------------------------------------------------------- Airport Revenue Bonds - 2.11% Sacramento County Airport System Revenue Series A 5.00% 7/1/32 (FSA) $ 1,000,000 $ 1,035,630 San Jose Airport Revenue Series A 5.00% 3/1/31 (FGIC) 1,000,000 1,029,650 ------------- 2,065,280 ------------- Continuing Care/Retirement Revenue Bonds - 4.27% Abag Finance Authority of California (Nonprofit Corporations - Lincoln Glen Manor) 6.10% 2/15/25 (RADIAN) 2,000,000 2,107,560 California Health Facilities Financing Authority Revenue (The Episcopal Home) Series A 5.30% 2/1/32 (RADIAN) 2,000,000 2,079,480 ------------- 4,187,040 ------------- Dedicated Tax & Fees Revenue Bonds - 8.24% Palm Drive Health Care District Parcel Tax Revenue 5.25% 4/1/30 2,000,000 2,096,380 Poway Unified School District Community Facilities District #6 5.60% 9/1/33 1,000,000 1,031,730 Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series K 5.00% 7/1/35 1,750,000 1,807,943 San Bernardino County Special Tax Community Facilities District #2002-1 5.90% 9/1/33 2,000,000 2,097,360 San Francisco Bay Area Rapid Transit District Sales Tax Revenue 5.125% 7/1/36 (AMBAC) 1,000,000 1,040,150 ------------- 8,073,563 ------------- Electric & Gas Revenue Bonds - 2.21% Puerto Rico Electric Power Authority Revenue Series OO 5.00% 7/1/13 (CIFG) 2,000,000 2,166,400 ------------- 2,166,400 ------------- Higher Education Revenue Bonds - 9.69% California Educational Facilities Authority Revenue (University of the Pacific) 5.25% 5/1/34 1,000,000 1,056,030 5.75% 11/1/30 (MBIA) 1,000,000 1,090,120 (Woodbury University) 5.00% 1/1/36 1,000,000 1,006,680 California Public Works Board Lease Revenue (Various University of California Projects) Series D 5.00% 5/1/30 1,000,000 1,045,220 Series F 5.00% 11/1/29 1,000,000 1,042,450 California State University Systemwide Revenue Series A 5.25% 11/1/20 (FSA) 1,000,000 1,099,320 California Statewide Communities Development Authority Student Revenue (East Campus Apartments, LLC) Series A 5.625% 8/1/34 (ACA) 1,000,000 1,056,930 Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Higher Education Revenue Bonds (continued) San Diego County Certificates of Participation (University of San Diego) 5.375% 10/1/41 $ 1,000,000 $ 1,044,400 University of California Revenue 5.00% 5/15/33 (FSA) 1,000,000 1,049,000 ------------- 9,490,150 ------------- Hospital Revenue Bonds - 5.65% Abag Finance Authority of California (Nonprofit Corporations - San Diego Hospital Association) Series A 6.125% 8/15/20 1,250,000 1,360,212 California Health Facilities Financing Authority Revenue (Catholic Healthcare West) Series G 5.25% 7/1/23 1,000,000 1,060,540 California Infrastructure & Economic Development Bank Revenue (Kaiser Hospital Associates I, LLC) Series A 5.55% 8/1/31 1,000,000 1,065,360 California Statewide Community Development Authority Revenue (Health Facilities - Adventist Health) Series A 5.00% 3/1/35 2,000,000 2,045,860 ------------- 5,531,972 ------------- Multifamily Housing Revenue Bonds - 7.93% California Statewide Communities Development Authority Multifamily Housing Revenue (Citrus Gardens Apartments) Series D1 5.375% 7/1/32 1,800,000 1,858,464 (Silver Ridge Apartments) Series H 5.80% 8/1/33 (AMT) (FNMA) 1,000,000 1,068,070 (Village East Tabor Apartments) Series C 6.85% 8/20/36 (GNMA) (AMT) 1,500,000 1,600,350 Palm Springs Mobile Home Park Revenue (Sahara Mobile Home Park) Series A 5.75% 5/15/37 1,000,000 1,069,730 Santa Clara County Housing Authority Multifamily Housing Revenue (Rivertown Apartments Project) Series A 5.85% 8/1/31 (AMT) 1,000,000 1,035,410 Ventura County Area Housing Authority Multifamily Housing Revenue (Glen Oaks Apartments) Series A 6.35% 7/20/34 (GNMA) 1,001,000 1,139,929 ------------- 7,771,953 ------------- Municipal Lease Revenue Bonds - 8.43% California State Public Works Board Lease Revenue (Department of Corrections) Series A 5.00% 3/1/27 (AMBAC) 1,000,000 1,041,820 Series C 5.25% 6/1/28 1,500,000 1,583,235 (Department of General Services-Butterfield) Series A 5.25% 6/1/30 1,000,000 1,065,170 7 - -------------------------------------------------------------------------------- Delaware Tax-Free California Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Municipal Lease Revenue Bonds (continued) Franklin-McKinley School District Certificates of Participation (Financing Project) Series B 5.00% 9/1/27 (AMBAC) $ 1,060,000 $ 1,109,608 Sacramento City Financing Authority Revenue 5.00% 12/1/29 (FGIC) 1,250,000 1,317,525 San Diego County Certificates of Participation 5.75% 7/1/31 (MBIA) 1,000,000 1,100,020 San Juan Basin Authority (Ground Water Recovery Project) 5.00% 12/1/34 (AMBAC) 1,000,000 1,039,190 ------------- 8,256,568 ------------- Parking Revenue Bonds - 1.07% San Diego Redevelopment Agency (Centre City Redevelopment Project) Series A 6.40% 9/1/25 1,000,000 1,049,890 ------------- 1,049,890 ------------- Ports & Harbors Revenue Bonds - 2.19% Port of Oakland Revenue Series K 5.75% 11/1/29 (FGIC) (AMT) 1,000,000 1,069,190 Series L 5.375% 11/1/27 (FGIC) (AMT) 1,000,000 1,072,830 ------------- 2,142,020 ------------- - -/-Pre-Refunded Bonds - 8.20% California Educational Facilities Authority Revenue (Pepperdine University) Series A 5.50% 8/1/32-09 1,000,000 1,069,930 California State Department Water Resources Power Supply Revenue Series A 5.375% 5/1/21-12 2,000,000 2,215,860 Golden State Tobacco Securitization Corporation 5.50% 6/1/43-13 (RADIAN) 1,000,000 1,109,440 5.625% 6/1/33-13 1,000,000 1,117,310 Oakland Industrial Revenue (Harrison Foundation) Series B 6.00% 1/1/29-10 (AMBAC) 1,300,000 1,426,347 San Diego County Certificates of Participation (The Burnham Institute) 6.25% 9/1/29-09 1,000,000 1,096,430 ------------- 8,035,317 ------------- Primary Education Revenue Bonds - 1.11% California Statewide Communities Development Authority Revenue (Viewpoint School Project) 5.75% 10/1/33 (ACA) 1,000,000 1,086,360 ------------- 1,086,360 ------------- Resource Recovery Revenue Bonds - 4.28% Salinas Valley Solid Waste Authority Revenue 5.25% 8/1/27 (AMBAC) (AMT) 2,000,000 2,097,020 5.25% 8/1/31 (AMBAC) (AMT) 2,000,000 2,090,200 ------------- 4,187,220 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- School District General Obligation Bonds - 5.99% Beverly Hills Unified School District Election 2002 Series B 5.00% 8/1/30 $ 1,000,000 $ 1,058,110 Fairfield-Suisun Unified School District Election 2002 5.50% 8/1/28 (MBIA) 500,000 553,745 Lawndale Elementary School District 5.00% 8/1/32 (FSA) 1,000,000 1,040,500 San Diego Unified School District 5.00% 7/1/28 (FSA) 2,000,000 2,157,060 Sequoia Unified High School District Election 2001 5.125% 7/1/31 (FSA) 1,000,000 1,054,950 ------------- 5,864,365 ------------- State General Obligation Bonds - 6.70% California State 5.00% 2/1/26 (AMBAC) 1,500,000 1,565,925 5.00% 2/1/33 1,000,000 1,034,670 5.50% 11/1/33 2,000,000 2,210,800 California State Veterans Series B 5.70% 12/1/32 (AMT) 640,000 658,310 Puerto Rico Public Buildings Authority Revenue (Guaranteed Government Facilities) Series I 5.50% 7/1/23 1,000,000 1,096,530 ------------- 6,566,235 ------------- Tax Increment/Special Assessment Bonds - 10.77% Commerce Joint Powers Financing Authority Revenue (Redevelopment Projects) Series A 5.00% 8/1/28 (RADIAN) 1,000,000 1,026,150 Culver City Redevelopment Agency (Tax Allocation Redevelopment Project) Series A 5.00% 11/1/25 (AMBAC) 1,000,000 1,059,470 Fremont Community Facilities District #1 (Special Tax Pacific Commons) 5.375% 9/1/36 1,000,000 1,014,120 La Quinta Redevelopment Agency (Tax Allocation Redevelopment Project Area #1) Series A 5.10% 9/1/31 (AMBAC) 2,000,000 2,098,199 Lake Elisnore Public Financing Authority Tax Allocation Series A 5.50% 9/1/30 1,000,000 1,027,870 Poway Redevelopment Agency Tax Allocation 5.75% 6/15/33 (MBIA) 1,400,000 1,553,790 Riverside County Redevelopment Agency Tax Allocation (Jurupa Valley Project) 5.25% 10/1/35 (AMBAC) 1,590,000 1,699,631 Southern California Logistics Airport Authority Tax Allocation (Southern California Logistics Airport Project) 6.50% 12/1/31 1,000,000 1,067,660 ------------- 10,546,890 ------------- 8 - -------------------------------------------------------------------------------- Delaware Tax-Free California Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Water & Sewer Revenue Bonds - 5.39% Banning Utilities Authority Water Enterprise Revenue 5.25% 11/1/35 (FGIC) $ 1,000,000 $ 1,088,180 California State Department of Water Resources Water Systems Revenue (Central Valley Project) Series X 5.00% 12/1/29 (FGIC) 1,000,000 1,044,490 Clovis Public Financing Authority Wastewater Revenue 5.25% 8/1/30 (MBIA) 1,000,000 1,078,980 Metropolitan Water District of Southern California Waterworks Authority Revenue Series B-1 5.00% 10/1/36 (FGIC) 1,000,000 1,045,220 San Francisco City & County Public Utilities Commission Series A 4.75% 11/1/36 (FSA) 1,000,000 1,024,100 ------------- 5,280,970 ------------- Total Municipal Bonds (cost $87,804,080) 92,302,193 ------------- Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 5.35% - -------------------------------------------------------------------------------- Money Market Instruments - 2.08% Federated California Municipal Cash Trust 2,040,080 2,040,080 ------------- 2,040,080 ------------- Principal Amount - -------------------------------------------------------------------------------- oVariable Rate Demand Notes - 3.27% California State Department of Water Resources Power Supply Series G-10 3.22% 5/1/18 (FGIC) (SPA - Depfa Bank PLC) $ 1,700,000 1,700,000 East Bay Municipal Utilities District Water System Revenue Series B-2 3.12% 6/1/38 (XLCA) (SPA - Dexia Credit Local) 1,500,000 1,500,000 ------------- 3,200,000 ------------- Total Short-Term Investments (cost $5,240,080) 5,240,080 ------------- Total Market Value of Securities - 99.58% (cost $93,044,160) 97,542,273 Receivables and Other Assets Net of Liabilities - 0.42% 408,369 ------------- Net Assets Applicable to 8,586,072 Shares Outstanding - 100.00% $ 97,950,642 ============= - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net Asset Value - Delaware Tax-Free California Fund Class A ($69,466,316 / 6,094,155 Shares) $ 11.40 ------------- Net Asset Value - Delaware Tax-Free California Fund Class B ($16,430,573 / 1,435,888 Shares) $ 11.44 ------------- Net Asset Value - Delaware Tax-Free California Fund Class C ($12,053,753 / 1,056,029 Shares) $ 11.41 ------------- Components of Net Assets at February 28, 2006: Shares of beneficial interest (unlimited authorization -- no par) $ 94,214,351 Undistributed net investment income 1,300 Accumulated net realized loss on investments (763,122) Net unrealized appreciation of investments 4,498,113 ------------- Total net assets $ 97,950,642 ============= o Variable rate security. The interest rate shown is the rate as of February 28, 2006. - -/- Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in "Notes to Financial Statements." Summary of Abbreviations: ACA - Insured by American Capital Access AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax CIFG - CDC IXIS Financial Guaranty FGIC - Insured by the Financial Guaranty Insurance Company FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance SPA - Stand-by Purchase Agreement XLCA - Insured by XL Capital Assurance Net Asset Value and Offering Price per Share - Delaware Tax-Free California Fund Net asset value Class A (A) $ 11.40 Sales charge (4.50% of offering price) (B) 0.54 ------------- Offering price $ 11.94 ============= (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 9 - -------------------------------------------------------------------------------- Delaware Tax-Free Colorado Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 98.22% - -------------------------------------------------------------------------------- Airport Revenue Bonds - 4.48% Denver City & County Airport Revenue Series B 5.00% 11/15/33 (XLCA) $ 4,000,000 $ 4,177,920 Series E 5.25% 11/15/23 (MBIA) 8,250,000 8,548,650 ------------- 12,726,570 ------------- Charter School Revenue Bonds - 7.57% Colorado Educational & Cultural Facilities Authority Revenue (Charter School Project) 5.50% 5/1/36 (XLCA) 2,280,000 2,493,887 (Liberty Common Charter School Project) 5.125% 12/1/33 (XLCA) 2,740,000 2,883,905 (Littleton Academy Charter School Project) 6.125% 1/15/31 2,000,000 2,072,600 (Montessori Districts Charter School Project) 6.125% 7/15/32 5,590,000 5,805,885 (Pinnacle Charter School Project) 5.00% 6/1/33 (XLCA) 2,170,000 2,258,905 (Renaissance Charter School Project) 6.75% 6/1/29 2,000,000 1,826,600 (Stargate Charter School Project) 6.125% 5/1/33 2,000,000 2,066,520 (Woodrow Wilson Charter School Project) Series A 5.25% 12/1/34 (XLCA) 1,960,000 2,096,514 ------------- 21,504,816 ------------- Combined Utility Revenue Bonds - 1.82% Colorado Springs Utilities Revenue Series A 5.00% 11/15/29 5,000,000 5,176,600 ------------- 5,176,600 ------------- Continuing Care/Retirement Revenue Bonds - 5.58% Colorado Health Facilities Authority Revenue (Covenant Retirement Communities) Series A 5.50% 12/1/33 (RADIAN) 5,000,000 5,309,150 (Evangelical Lutheran) 5.00% 6/1/35 1,000,000 1,017,440 Series A 5.25% 6/1/34 2,000,000 2,063,780 (Porter Place) Series A 6.00% 1/20/36 (GNMA) 5,000,000 5,343,000 Mesa County Residential Care Facilities Mortgage Revenue (Hilltop Community Resources) Series A 5.375% 12/1/28 (RADIAN) 2,000,000 2,115,180 ------------- 15,848,550 ------------- Dedicated Tax & Fees Revenue Bonds - 1.03% Gypsum Sales Tax & General Funding Revenue 5.25% 6/1/30 2,690,000 2,916,444 ------------- 2,916,444 ------------- Electric & Gas Revenue Bonds - 0.37% Puerto Rico Electric Power Authority Revenue Series NN 5.00% 7/1/32 1,000,000 1,052,300 ------------- 1,052,300 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Escrowed to Maturity Bonds - 2.23% Colorado Health Facilities Authority (Catholic Health Initiatives) Series A 5.50% 3/1/32 $ 5,000,000 $ 5,448,550 Galleria Metropolitan District 7.25% 12/1/09 830,000 882,921 ------------- 6,331,471 ------------- Higher Education Revenue Bonds - 10.26% Boulder County Development Revenue University Corporation for Atmospheric Research 5.00% 9/1/33 (MBIA) 1,000,000 1,039,660 5.00% 9/1/35 (AMBAC) 2,000,000 2,090,980 Colorado Educational & Cultural Facilities Authority (Johnson & Wales University Project) Series A 5.00% 4/1/28 (XLCA) 1,000,000 1,043,910 (Regis University Project) 5.00% 6/1/22 (RADIAN) 1,820,000 1,893,528 5.00% 6/1/24 (RADIAN) 1,700,000 1,761,540 (University of Denver Project) Series A 5.00% 3/1/27 (MBIA) 5,000,000 5,203,700 Series B 5.25% 3/1/35 (FGIC) 1,750,000 1,901,113 (University of Northern Colorado Student Housing Project) Series A 5.125% 7/1/37 (MBIA) 7,500,000 7,795,724 Colorado School Mines Auxiliary Facilities Revenue 5.00% 12/1/37 (AMBAC) 3,130,000 3,256,202 Colorado State Board of Governors University Enterprise System Revenue Series B 5.00% 3/1/35 (AMBAC) 2,000,000 2,087,000 University of Colorado Enterprise System Revenue Series A 5.375% 6/1/26 1,000,000 1,065,140 ------------- 29,138,497 ------------- Hospital Revenue Bonds - 8.63% Boulder County Hospital Development Revenue (Longmont United Hospital Project) 5.60% 12/1/27 (RADIAN) 1,250,000 1,294,675 6.00% 12/1/30 (RADIAN) 5,000,000 5,443,700 Colorado Health Facilities Authority Revenue (Longmont United Hospital) 5.00% 12/1/19 (ACA) 1,150,000 1,183,051 (Parkview Medical Center) 5.00% 9/1/25 1,000,000 1,032,470 (Vail Valley Medical Center Project) 5.00% 1/15/17 1,000,000 1,042,470 5.80% 1/15/27 3,475,000 3,670,851 Delta County Memorial Hospital District Enterprise Revenue 5.35% 9/1/17 4,000,000 4,161,840 Denver Health & Hospital Authority Healthcare Revenue Series A 5.375% 12/1/28 (ACA) 2,770,000 2,856,119 University of Colorado Hospital Authority Revenue Series A 5.60% 11/15/31 3,650,000 3,816,951 ------------- 24,502,127 ------------- 10 - -------------------------------------------------------------------------------- Delaware Tax-Free Colorado Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Library/Museum Revenue Bonds - 0.74% Colorado Educational & Cultural Facilities Authority Revenue 5.25% 6/1/21 $ 2,000,000 $ 2,093,700 ------------- 2,093,700 ------------- Multifamily Housing Revenue Bonds - 6.23% Adams County Housing Authority Mortgage Revenue (Greenbriar Project) 6.75% 7/1/21 1,730,000 1,769,877 Colorado Housing & Finance Authority (Multifamily Housing Insured Mortgage) Series A3 6.25% 10/1/26 (FHA) 6,205,000 6,347,963 Series C3 6.15% 10/1/41 1,590,000 1,663,935 Denver City and County Multifamily Housing Revenue Federal Housing Authority (Insured Mortgage Loan - Garden Court) 5.40% 7/1/39 (FHA) 2,000,000 2,053,000 Englewood Multifamily Housing Revenue (Marks Apartments Project) 6.65% 12/1/26 5,700,000 5,864,388 ------------- 17,699,163 ------------- Municipal Lease Revenue Bonds - 3.39% Conejos & Alamosa Counties School District #11J Certificates of Participation 6.50% 4/1/11 1,085,000 1,106,125 El Paso County Certificates of Participation (Detention Facilities Project) Series B 5.00% 12/1/27 (AMBAC) 1,500,000 1,563,150 (Judicial Building Project) Series A 5.00% 12/1/27 (AMBAC) 2,000,000 2,084,200 Fremont County Certificates of Participation Series A 5.25% 12/15/24 (MBIA) 3,045,000 3,271,243 Puerto Rico Public Buildings Authority Revenue (Government Facilities) Series I 5.25% 7/1/33 1,500,000 1,596,750 ------------- 9,621,468 ------------- Political Subdivision General Obligation Bonds - 10.63% Arapahoe County Water & Wastewater Public Improvement District Series A 5.125% 12/1/32 (MBIA) 4,500,000 4,780,485 Bowles Metropolitan District 5.00% 12/1/33 (FSA) 2,500,000 2,620,125 Denver West Metropolitan District 5.00% 12/1/33 (RADIAN) 4,000,000 4,103,120 Eagle Bend Metropolitan District #2 5.00% 12/1/35 (RADIAN) 3,000,000 3,100,440 Lincoln Park Metropolitan District 7.75% 12/1/26 2,500,000 2,665,575 Meridian Metropolitan District Series A 5.00% 12/1/31 (RADIAN) 7,000,000 7,161,070 North Range Metropolitan District #1 7.25% 12/15/31 3,400,000 3,604,408 Saddle Rock Metropolitan District 5.35% 12/1/31 (RADIAN) 1,580,000 1,651,590 Sand Creek Metropolitan District 5.00% 12/1/31 (XLCA) 500,000 523,015 ------------- 30,209,828 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- - -/-Pre-Refunded Bonds - 14.52% Aurora Certificates of Participation 5.50% 12/1/30-10 (AMBAC) $ 8,000,000 $ 8,665,359 Burlingame Multifamily Housing Revenue Series A 6.00% 11/1/29-09 (MBIA) 1,250,000 1,366,550 Colorado Educational & Cultural Facilities Authority Revenue (Core Knowledge Charter School Project) 7.00% 11/1/29-09 1,000,000 1,115,340 (Lincoln Academy Charter School Project) 8.375% 3/1/26-06 2,330,000 2,374,503 (Pinnacle Charter School Project) 6.00% 12/1/21-11 1,750,000 1,958,653 (University of Denver Project) 5.375% 3/1/23-11 (AMBAC) 975,000 1,055,896 (University of Denver Project- Refunded Balance) 5.375% 3/1/23-11 (AMBAC) 1,025,000 1,106,621 Colorado Springs Revenue (Colorado College Project) 5.375% 6/1/32-09 5,570,000 5,945,140 El Paso County School District #49 (Falcon) 5.50% 12/1/21-11 (FGIC) 3,580,000 3,898,262 Greeley County Building Authority Certificates of Participation 6.10% 8/15/16-07 2,600,000 2,698,852 Pueblo County Certificates of Participation 6.50% 12/1/24-10 5,460,000 6,130,651 Silver Dollar Metropolitan District 7.05% 12/1/30-06 4,810,000 4,934,675 ------------- 41,250,502 ------------- Recreational Area Revenue Bonds - 1.20% South Suburban Park & Recreation District (Golf Course & Ice Arena Facility) 6.00% 11/1/15 2,330,000 2,375,854 Westminster Golf Course 5.55% 12/1/23 (RADIAN) 1,000,000 1,050,200 ------------- 3,426,054 ------------- School District General Obligation Bonds - 5.12% Adams & Arapahoe Counties Joint School District #28J 5.25% 12/1/25 (MBIA) 2,000,000 2,199,240 Douglas County School District #1 Building (Douglas & Elbert Counties) Series B 5.00% 12/15/30 (FSA) 2,335,000 2,468,423 5.125% 12/15/25 (FSA) 2,000,000 2,117,860 El Paso County School District #2 (Harrison) 5.00% 12/1/27 (MBIA) 2,115,000 2,210,365 Fremont County School District #1 (Canon City) 5.00% 12/1/24 (MBIA) 1,735,000 1,835,994 Garfield County School District #2 5.00% 12/1/25 (FSA) 1,000,000 1,049,880 Garfield Pitkin & Eagle County School District #1 Series A 5.00% 12/15/27 (FSA) 1,500,000 1,587,975 La Plata County School District #9-R 5.125% 11/1/24 (MBIA) 1,000,000 1,064,080 ------------- 14,533,817 ------------- 11 - -------------------------------------------------------------------------------- Delaware Tax-Free Colorado Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Tax Increment/Special Assessment Bonds - 5.03% Loveland Special Improvements District #1 7.50% 7/1/29 $ 5,540,000 $ 5,556,786 Lowry Economic Redevelopment Authority Revenue Series A 7.30% 12/1/10 790,000 824,207 7.80% 12/1/10 7,545,000 7,899,540 ------------- 14,280,533 ------------- Territorial General Obligation Bonds - 2.23% Puerto Rico Commonwealth Public Improvement Series A 5.25% 7/1/21 4,000,000 4,270,560 Virgin Islands Public Finance Authority (Gross Receipts Taxes) 5.00% 10/1/31 (ACA) 2,000,000 2,055,460 ------------- 6,326,020 ------------- Turnpike/Toll Road Revenue Bonds - 5.42% E-470 Public Highway Authority Revenue Series A 5.75% 9/1/35 (MBIA) 3,100,000 3,414,216 Northwest Parkway Public Highway Authority Series A 5.25% 6/15/41 (FSA) 11,250,000 11,997,788 ------------- 15,412,004 ------------- Water & Sewer Revenue Bonds - 1.74% Erie Water Enterprise Revenue 5.00% 12/1/23 (ACA) 1,750,000 1,769,268 Ute Utility Water Conservancy District Revenue 5.75% 6/15/20 (MBIA) 2,900,000 3,165,553 ------------- 4,934,821 ------------- Total Municipal Bonds (cost $261,923,713) 278,985,285 ------------- Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 0.52% - -------------------------------------------------------------------------------- Money Market Investments - 0.52% Dreyfus Cash Management Fund 1,489,742 1,489,742 ------------- Total Short-Term Investments (cost $1,489,742) 1,489,742 ------------- Total Market Value of Securities - 98.74% (cost $263,413,455) 280,475,027 Receivables and Other Assets Net of Liabilities - 1.26% 3,566,347 ------------- Net Assets Applicable to 25,622,802 Shares Outstanding - 100.00% $ 284,041,374 ============= Net Asset Value - Delaware Tax-Free Colorado Fund Class A ($264,378,776 / 23,851,395 Shares) $ 11.08 ------------- Net Asset Value - Delaware Tax-Free Colorado Fund Class B ($9,333,166 / 841,430 Shares) $ 11.09 ------------- Net Asset Value - Delaware Tax-Free Colorado Fund Class C ($10,329,432 / 929,977 Shares) $ 11.11 ------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Components of Net Assets at February 28, 2006: Shares of beneficial interest (unlimited authorization -- no par) $ 276,096,365 Accumulated net realized loss on investments (9,116,563) Net unrealized appreciation of investments 17,061,572 ------------- Total net assets $ 284,041,374 ============= - -/- Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in "Notes to Financial Statements." Summary of Abbreviations: ACA - Insured by American Capital Access AMBAC - Insured by the AMBAC Assurance Corporation FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration 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 XLCA - Insured by XL Capital Assurance Net Asset Value and Offering Price per Share - Delaware Tax-Free Colorado Fund Net asset value Class A (A) $ 11.08 Sales charge (4.50% of offering price) (B) 0.52 ------------- Offering price $ 11.60 ============= (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 12 - -------------------------------------------------------------------------------- Statements Six Months Ended February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF OPERATIONS
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund Investment Income: Interest $ 3,844,095 $ 2,215,661 $ 7,548,414 ------------------ ------------------ ----------------- Expenses: Management fees 394,575 252,508 775,403 Distribution expenses -- Class A 164,077 79,992 328,657 Distribution expenses -- Class B 90,246 85,510 47,578 Distribution expenses -- Class C 42,606 52,609 47,969 Dividend disbursement and transfer agent fees and expenses 40,770 20,365 78,023 Accounting and administration expenses 31,566 18,364 56,393 Legal and professional fees 16,479 11,281 20,080 Reports and statements to shareholders 11,141 7,839 11,739 Registration fees 9,350 17,785 4,450 Trustees' fees 4,500 2,634 8,051 Custodian fees 4,326 3,500 8,353 Insurance fees 1,658 1,307 4,862 Pricing fees 1,183 1,006 1,290 Taxes (other than taxes on income) 277 67 752 Other 3,638 3,333 8,175 ------------------ ------------------ ----------------- 816,392 558,100 1,401,775 Less expenses absorbed or waived (109,114) (50,877) (18,798) Less expense paid indirectly (28) (28) -- ------------------ ------------------ ----------------- Total operating expenses 707,250 507,195 1,382,977 ------------------ ------------------ ----------------- Net Investment Income 3,136,845 1,708,466 6,165,437 ------------------ ------------------ ----------------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on investments (101,029) 43,753 200,231 Net change in unrealized appreciation/depreciation of investments (2,068,076) (677,036) (3,114,128) ------------------ ------------------ ----------------- Net Realized and Unrealized Loss on Investments (2,169,105) (633,283) (2,913,897) ------------------ ------------------ ----------------- Net Increase in Net Assets Resulting from Operations $ 967,740 $ 1,075,183 $ 3,251,540 ================== ================== =================
See accompanying notes 13 - -------------------------------------------------------------------------------- Statements - -------------------------------------------------------------------------------- OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund Six Months Year Six Months Year Six Months Year Ended Ended Ended Ended Ended Ended 2/28/06 8/31/05 2/28/06 8/31/05 2/28/06 8/31/05 (Unaudited) (Unaudited) (Unaudited) Increase (Decrease) in Net Assets from Operations: Net investment income $ 3,136,845 $ 5,859,541 $ 1,708,466 $ 2,275,968 $ 6,165,437 $ 12,978,314 Net realized gain (loss) on investments (101,029) 264,284 43,753 43,276 200,231 (2,712,031) Net change in unrealized appreciation/ depreciation of investments (2,068,076) 2,239,992 (677,036) 2,245,832 (3,114,128) 5,986,463 ------------- ------------- ------------- ------------- ------------- ------------- Net increase in net assets resulting from operations 967,740 8,363,817 1,075,183 4,565,076 3,251,540 16,252,746 ------------- ------------- ------------- ------------- ------------- ------------- Dividends and Distributions to Shareholders from: Net investment income: Class A (2,692,234) (5,096,515) (1,266,937) (1,517,382) (5,811,462) (12,211,017) Class B (302,180) (510,403) (272,955) (520,743) (174,449) (421,258) Class C (142,431) (252,623) (168,574) (237,843) (175,669) (338,621) Net realized gain on investments: Class A -- (248,176) -- -- -- -- Class B -- (27,488) -- -- -- -- Class C -- (13,869) -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- (3,136,845) (6,149,074) (1,708,466) (2,275,968) (6,161,580) (12,970,896) ------------- ------------- ------------- ------------- ------------- ------------- Capital Share Transactions: Proceeds from shares sold: Class A 3,420,674 6,855,917 13,554,913 18,776,298 7,214,412 15,027,725 Class B 30,021 441,653 381,042 1,177,507 16,299 899,393 Class C 552,752 1,248,630 2,854,882 3,524,288 1,393,972 1,382,314 Net assets from reorganization*: Class A -- 18,971,166 -- 23,988,851 -- -- Class B -- 6,819,275 -- 6,171,643 -- -- Class C -- 3,097,336 -- 1,332,252 -- -- Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 1,427,886 2,678,398 597,632 631,234 3,725,382 7,395,797 Class B 144,180 263,680 166,632 235,428 108,439 262,793 Class C 95,839 181,297 111,722 134,429 121,141 234,982 ------------- ------------- ------------- ------------- ------------- ------------- 5,671,352 40,557,352 17,666,823 55,971,930 12,579,645 25,203,004 ------------- ------------- ------------- ------------- ------------- ------------- Cost of shares repurchased: Class A (5,040,402) (17,883,135) (5,008,505) (8,907,524) (13,988,843) (31,859,739) Class B (1,103,947) (2,146,762) (2,221,965) (4,436,217) (1,057,481) (3,327,004) Class C (714,920) (2,713,378) (606,832) (1,084,487) (270,459) (2,134,310) ------------- ------------- ------------- ------------- ------------- ------------- (6,859,269) (22,743,275) (7,837,302) (14,428,228) (15,316,783) (37,321,053) ------------- ------------- ------------- ------------- ------------- ------------- Increase (decrease) in net assets derived from capital share transactions (1,187,917) 17,814,077 9,829,521 41,543,702 (2,737,138) (12,118,049) ------------- ------------- ------------- ------------- ------------- ------------- Net Increase (Decrease) in Net Assets (3,357,022) 20,028,820 9,196,238 43,832,810 (5,647,178) (8,836,199) Net Assets: Beginning of period 162,470,492 142,441,672 88,754,404 44,921,594 289,688,552 298,524,751 ------------- ------------- ------------- ------------- ------------- ------------- End of period(1) $ 159,113,470 $ 162,470,492 $ 97,950,642 $ 88,754,404 $ 284,041,374 $ 289,688,552 ============= ============= ============= ============= ============= ============= (1)Including undistributed (distribution in excess of) net investment income $ (20,294) $ (20,294) $ 1,300 $ 1,300 $ -- $ -- ============= ============= ============= ============= ============= =============
* See Note 6 in "Notes to Financial Statements." See accompanying notes 14 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 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.560 $ 11.410 $ 11.160 $ 11.530 $ 11.500 $ 11.040 Income (loss) from investment operations: Net investment income 0.232 0.468 0.469 0.502 0.510 0.521 Net realized and unrealized gain (loss) on investments (0.160) 0.174 0.308 (0.253) 0.100 0.460 ------------ ---------- ----------- ---------- ---------- --------- Total from investment operations 0.072 0.642 0.777 0.249 0.610 0.981 ------------ ---------- ----------- ---------- ---------- --------- Less dividends and distributions from: Net investment income (0.232) (0.468) (0.469) (0.502) (0.510) (0.521) Net realized gain on investments -- (0.024) (0.058) (0.117) (0.070) -- ------------ ---------- ----------- ---------- ---------- --------- Total dividends and distributions (0.232) (0.492) (0.527) (0.619) (0.580) (0.521) ------------ ---------- ----------- ---------- ---------- --------- Net asset value, end of period $ 11.400 $ 11.560 $ 11.410 $ 11.160 $ 11.530 $ 11.500 ============ ========== =========== ========== ========== ========= Total return(3) 0.64% 5.74% 7.09% 2.17% 5.54% 9.12% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 132,880 $ 134,874 $ 122,436 $ 129,683 $ 141,424 $ 141,298 Ratio of expenses to average net assets 0.77% 0.80% 0.90% 0.86% 0.90% 0.95% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.91% 0.91% 0.90% 0.91% 0.90% 0.97% Ratio of net investment income to average net assets 4.10% 4.07% 4.14% 4.37% 4.50% 4.65% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.96% 3.96% 4.14% 4.32% 4.50% 4.63% Portfolio turnover 7% 3% 19% 29% 46% 45%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required 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. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 15 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 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.570 $ 11.420 $ 11.170 $ 11.540 $ 11.500 $ 11.040 Income (loss) from investment operations: Net investment income 0.189 0.382 0.384 0.416 0.426 0.437 Net realized and unrealized gain (loss) on investments (0.160) 0.174 0.308 (0.253) 0.110 0.460 ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.029 0.556 0.692 0.163 0.536 0.897 ---------- ---------- ---------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.189) (0.382) (0.384) (0.416) (0.426) (0.437) Net realized gain on investments -- (0.024) (0.058) (0.117) (0.070) -- ---------- ---------- ---------- ---------- ---------- ---------- Total dividends and distributions (0.189) (0.406) (0.442) (0.533) (0.496) (0.437) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 11.410 $ 11.570 $ 11.420 $ 11.170 $ 11.540 $ 11.500 ========== ========== ========== ========== ========== ========== Total return(3) 0.26% 4.95% 6.28% 1.41% 4.83% 8.31% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 17,822 $ 19,005 $ 13,355 $ 14,666 $ 13,678 $ 8,864 Ratio of expenses to average net assets 1.52% 1.55% 1.65% 1.61% 1.65% 1.70% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.66% 1.66% 1.65% 1.66% 1.65% 1.72% Ratio of net investment income to average net assets 3.35% 3.32% 3.39% 3.62% 3.75% 3.90% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.21% 3.21% 3.39% 3.57% 3.75% 3.88% Portfolio turnover 7% 3% 19% 29% 46% 45%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required 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. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 16 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 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.580 $ 11.430 $ 11.180 $ 11.550 $ 11.520 $ 11.040 Income (loss) from investment operations: Net investment income 0.189 0.382 0.384 0.415 0.426 0.438 Net realized and unrealized gain (loss) on investments (0.150) 0.174 0.308 (0.253) 0.100 0.480 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations 0.039 0.556 0.692 0.162 0.526 0.918 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions from: Net investment income (0.189) (0.382) (0.384) (0.415) (0.426) (0.438) Net realized gain on investments -- (0.024) (0.058) (0.117) (0.070) -- ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (0.189) (0.406) (0.442) (0.532) (0.496) (0.438) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 11.430 $ 11.580 $ 11.430 $ 11.180 $ 11.550 $ 11.520 =========== =========== =========== =========== =========== =========== Total return(3) 0.35% 4.94% 6.27% 1.40% 4.73% 8.50% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 8,411 $ 8,591 $ 6,651 $ 8,544 $ 8,115 $ 3,230 Ratio of expenses to average net assets 1.52% 1.55% 1.65% 1.61% 1.65% 1.70% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.66% 1.66% 1.65% 1.66% 1.65% 1.72% Ratio of net investment income to average net assets 3.35% 3.32% 3.39% 3.62% 3.75% 3.90% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.21% 3.21% 3.39% 3.57% 3.75% 3.88% Portfolio turnover 7% 3% 19% 29% 46% 45%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required 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. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 17 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free California Fund Class A - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.490 $ 11.110 $ 10.750 $ 11.010 $ 10.950 $ 10.430 Income (loss) from investment operations: Net investment income 0.222 0.462 0.518 0.537 0.546 0.538 Net realized and unrealized gain (loss) on investments (0.090) 0.380 0.360 (0.260) 0.060 0.520 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations 0.132 0.842 0.878 0.277 0.606 1.058 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions from: Net investment income (0.222) (0.462) (0.518) (0.537) (0.546) (0.538) ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (0.222) (0.462) (0.518) (0.537) (0.546) (0.538) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 11.400 $ 11.490 $ 11.110 $ 10.750 $ 11.010 $ 10.950 =========== =========== =========== =========== =========== =========== Total return(3) 1.18% 7.72% 8.34% 2.51% 5.77% 10.43% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 69,466 $ 60,744 $ 24,797 $ 22,169 $ 23,462 $ 24,925 Ratio of expenses to average net assets 0.88% 0.84% 0.50% 0.50% 0.50% 0.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.99% 1.06% 0.96% 0.93% 0.97% 0.99% Ratio of net investment income to average net assets 3.95% 4.03% 4.72% 4.84% 5.05% 5.07% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.84% 3.81% 4.26% 4.41% 4.58% 4.58% Portfolio turnover 8% 11% 48% 56% 93% 130%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required 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. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 18 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free California Fund Class B - ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.530 $ 11.160 $ 10.790 $ 11.050 $ 10.990 $ 10.460 Income (loss) from investment operations: Net investment income 0.180 0.377 0.436 0.453 0.465 0.459 Net realized and unrealized gain (loss) on investments (0.090) 0.370 0.370 (0.260) 0.060 0.530 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations 0.090 0.747 0.806 0.193 0.525 0.989 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions from: Net investment income (0.180) (0.377) (0.436) (0.453) (0.465) (0.459) ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (0.180) (0.377) (0.436) (0.453) (0.465) (0.459) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 11.440 $ 11.530 $ 11.160 $ 10.790 $ 11.050 $ 10.990 =========== =========== =========== =========== =========== =========== Total return(3) 0.80% 6.80% 7.60% 1.73% 4.95% 9.58% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 16,431 $ 18,254 $ 14,530 $ 16,165 $ 15,105 $ 14,792 Ratio of expenses to average net assets 1.63% 1.59% 1.25% 1.25% 1.25% 1.25% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.81% 1.71% 1.68% 1.72% 1.74% Ratio of net investment income to average net assets 3.20% 3.28% 3.97% 4.09% 4.30% 4.32% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.09% 3.06% 3.51% 3.66% 3.83% 3.83% Portfolio turnover 8% 11% 48% 56% 93% 130%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required 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. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 19 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free California Fund Class C - ------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.500 $ 11.130 $ 10.760 $ 11.020 $ 10.970 $ 10.440 Income (loss) from investment operations: Net investment income 0.180 0.377 0.436 0.454 0.465 0.459 Net realized and unrealized gain (loss) on investments (0.090) 0.370 0.370 (0.260) 0.050 0.530 ---------- -------- -------- -------- --------- -------- Total from investment operations 0.090 0.747 0.806 0.194 0.515 0.989 ---------- -------- -------- -------- --------- -------- Less dividends and distributions from: Net investment income (0.180) (0.377) (0.436) (0.454) (0.465) (0.459) ---------- -------- -------- -------- --------- -------- Total dividends and distributions (0.180) (0.377) (0.436) (0.454) (0.465) (0.459) ---------- -------- -------- -------- --------- -------- Net asset value, end of period $ 11.410 $ 11.500 $ 11.130 $ 10.760 $ 11.020 $ 10.970 ========== ======== ======== ======== ========= ======== Total return(3) 0.80% 6.81% 7.62% 1.74% 4.86% 9.70% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 12,054 $ 9,756 $ 5,595 $7,013 $ 7,357 $ 6,227 Ratio of expenses to average net assets 1.63% 1.59% 1.25% 1.25% 1.25% 1.25% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.81% 1.71% 1.68% 1.72% 1.74% Ratio of net investment income to average net assets 3.20% 3.28% 3.97% 4.09% 4.30% 4.32% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.09% 3.06% 3.51% 3.66% 3.83% 3.83% Portfolio turnover 8% 11% 48% 56% 93% 130%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required 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. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 20 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Colorado Fund Class A - ------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.200 $ 11.070 $ 10.830 $ 11.080 $ 11.120 $ 10.630 Income (loss) from investment operations: Net investment income 0.242 0.495 0.510 0.527 0.532 0.549 Net realized and unrealized gain (loss) on investments (0.120) 0.130 0.240 (0.250) (0.040) 0.490 ---------- -------- -------- -------- --------- -------- Total from investment operations 0.122 0.625 0.750 0.277 0.492 1.039 ---------- -------- -------- -------- --------- -------- Less dividends and distributions from: Net investment income (0.242) (0.495) (0.510) (0.527) (0.532) (0.549) ---------- -------- -------- -------- --------- -------- Total dividends and distributions (0.242) (0.495) (0.510) (0.527) (0.532) (0.549) ---------- -------- -------- -------- --------- -------- Net asset value, end of period $ 11.080 $ 11.200 $ 11.070 $ 10.830 $ 11.080 $ 11.120 ========== ======== ======== ======== ========= ======== Total return(3) 1.12% 5.78% 7.04% 2.52% 4.60% 10.05% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 264,379 $270,149 $276,534 $299,528 $314,695 $318,550 Ratio of expenses to average net assets 0.93% 0.94% 0.95% 0.99% 0.95% 1.00% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.94% 0.94% 0.95% 0.99% 0.95% 1.00% Ratio of net investment income to average net assets 4.42% 4.46% 4.63% 4.76% 4.86% 5.09% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.41% 4.46% 4.63% 4.76% 4.86% 5.09% Portfolio turnover 8% 8% 13% 30% 36% 64%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return for the years ended August 31, 2005 and 2001 reflect waivers and payment of fees by the manager of less than 0.01%. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 21 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Colorado Fund Class B - ------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.200 $ 11.080 $ 10.830 $ 11.090 $ 11.120 $ 10.630 Income (loss) from investment operations: Net investment income 0.201 0.412 0.427 0.444 0.450 0.468 Net realized and unrealized gain (loss) on investments (0.110) 0.120 0.250 (0.260) (0.030) 0.490 ---------- -------- -------- -------- --------- -------- Total from investment operations 0.091 0.532 0.677 0.184 0.420 0.958 ---------- -------- -------- -------- --------- -------- Less dividends and distributions from: Net investment income (0.201) (0.412) (0.427) (0.444) (0.450) (0.468) ---------- -------- -------- -------- --------- -------- Total dividends and distributions (0.201) (0.412) (0.427) (0.444) (0.450) (0.468) ---------- -------- -------- -------- --------- -------- Net asset value, end of period $ 11.090 $ 11.200 $ 11.080 $ 10.830 $ 11.090 $ 11.120 ========== ======== ======== ======== ========= ======== Total return(3) 0.83% 4.89% 6.34% 1.66% 3.92% 9.24% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 9,333 $ 10,370 $ 12,411 $ 13,108 $ 14,843 $ 14,330 Ratio of expenses to average net assets 1.68% 1.69% 1.70% 1.74% 1.70% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.69% 1.69% 1.70% 1.74% 1.70% 1.75% Ratio of net investment income to average net assets 3.67% 3.71% 3.88% 4.01% 4.11% 4.34% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.66% 3.71% 3.88% 4.01% 4.11% 4.34% Portfolio turnover 8% 8% 13% 30% 36% 64%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return for the years ended August 31, 2005 and 2001 reflect waivers and payment of fees by the manager of less than 0.01%. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 22 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Colorado Fund Class C - ------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(1) 8/31/05 8/31/04 8/31/03 8/31/02(2) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.220 $ 11.090 $ 10.850 $ 11.100 $ 11.130 $ 10.640 Income (loss) from investment operations: Net investment income 0.201 0.413 0.427 0.444 0.450 0.468 Net realized and unrealized gain (loss) on investments (0.110) 0.130 0.240 (0.250) (0.030) 0.490 ---------- -------- -------- -------- --------- -------- Total from investment operations 0.091 0.543 0.667 0.194 0.420 0.958 ---------- -------- -------- -------- --------- -------- Less dividends and distributions from: Net investment income (0.201) (0.413) (0.427) (0.444) (0.450) (0.468) ---------- -------- -------- -------- --------- -------- Total dividends and distributions (0.201) (0.413) (0.427) (0.444) (0.450) (0.468) ---------- -------- -------- -------- --------- -------- Net asset value, end of period $ 11.110 $ 11.220 $ 11.090 $ 10.850 $ 11.100 $ 11.130 ========== ======== ======== ======== ========= ======== Total return(3) 0.83% 4.99% 6.23% 1.74% 3.91% 9.23% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 10,329 $ 9,170 $ 9,579 $ 8,606 $ 8,074 $ 5,617 Ratio of expenses to average net assets 1.68% 1.69% 1.70% 1.74% 1.70% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.69% 1.69% 1.70% 1.74% 1.70% 1.75% Ratio of net investment income to average net assets 3.67% 3.71% 3.88% 4.01% 4.11% 4.34% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.66% 3.71% 3.88% 4.01% 4.11% 4.34% Portfolio turnover 8% 8% 13% 30% 36% 64%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return for the years ended August 31, 2005 and 2001 reflect waivers and payment of fees by the manager of less than 0.01%. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 23 - -------------------------------------------------------------------------------- Notes February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers five series: 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 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 notes pertain to Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California 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, and offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50%. Class 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 Insured Fund, Delaware Tax-Free California 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. Open-end investment companies are valued at their published net asset value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. 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(R) 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) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends 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 and on the Statements of Operations with the corresponding expense offset shown as "expense paid indirectly." 2. Investment Management, Administration Agreements and Other Transactions with Affiliates In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- On the first $500 million 0.500% 0.550% 0.550% On the next $500 million 0.475% 0.500% 0.500% On the next $1.5 billion 0.450% 0.450% 0.450% In excess of $2.5 billion 0.425% 0.425% 0.425%
24 - -------------------------------------------------------------------------------- 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 Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- Operating expense limitation as a percentage of average daily net assets (per annum) 0.53% 0.63% 0.68% Expiration Date 12/29/05 12/29/05 12/29/05 Effective December 30, 2005, operating expense limitation as a percentage of average daily net assets (per annum) 0.50% 0.63% 0.68% Expiration Date 12/31/06 12/31/06 12/31/06
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. Each Fund pays DSC a monthly fee computed at the annual rate of 0.04% of each Fund's average daily net assets 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, 2006, each Fund had liabilities payable to affiliates as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- Investment management fees payable to DMC $ 40,979 $ 30,260 $115,160 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 25,433 14,404 46,537 Distribution fees payable to DDLP 33,834 32,361 57,992 Other expenses payable to DMC and affiliates* 9,315 3,997 10,792
* 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, 2006, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund and Delaware Tax-Free Colorado Fund were charged $5,887, $3,421, and $10,518, respectively, for internal legal services provided by DMC. For the six months ended February 28, 2006, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- $ 9,670 -- $ 16,132 For the six months ended February 28, 2006, DDLP received gross contingent deferred sales charge commissions on redemption of each Fund's Class A, Class B and Class C shares. These commissions were entirely used to offset up-front commissions previously paid by DDLP to broker-dealers on sales of those shares. The amounts received were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- Class A $ -- $ 115 $ -- Class B 7,312 9,719 3,112 Class C 238 288 102
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. 25 - -------------------------------------------------------------------------------- Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 3. Investments For the six months ended February 28, 2006, the Funds made purchases and sales of investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- Purchases $ 5,528,545 $11,613,595 $ 10,552,215 Sales 6,926,122 3,535,395 15,020,123
At February 28, 2006, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until the fiscal year end. At February 28, 2006, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- Cost of investments $149,094,216 $93,044,160 $263,396,739 ============ =========== ============ Aggregate unrealized appreciation $ 8,492,598 $ 4,556,041 $ 17,251,688 Aggregate unrealized depreciation (40,355) (57,928) (173,400) ------------ ----------- ------------ Net unrealized appreciation $ 8,452,243 $ 4,498,113 $ 17,078,288 ============ =========== ============
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, 2006 and the year ended August 31, 2005 was as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- Six Months Ended 2/28/06* Tax-exempt income $ 3,136,845 $ 1,708,466 $ 6,161,580 Year Ended 8/31/05 Tax-exempt income $ 5,887,149 $ 2,275,968 $ 12,970,896 Long-term capital gain 261,925 -- -- ------------ ----------- ------------ Total $ 6,149,074 $ 2,275,968 $ 12,970,896 ============ =========== ============
* Tax information for the period ended February 28, 2006 is an estimate and the tax character of dividends and distributions may be redesignated at 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, 2006, the estimated components of net assets on a tax basis were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- Shares of beneficial interest $153,572,016 $94,214,351 $276,096,365 Undistributed tax-exempt income -- 1,300 -- Other temporary differences (20,294) -- -- Six month period realized gains (losses) (101,029) 43,809 (2,450,516) Capital loss carryforwards (2,789,466)* (806,875) (6,682,763) Post-October losses -- (56) -- Unrealized appreciation of investments 8,452,243 4,498,113 17,078,288 ------------ ----------- ------------ Net assets $159,113,470 $97,950,642 $284,041,374 ============ =========== ============
* The amount of this loss which can be utilized in subsequent years is subject to an annual limitation in accordance with the Internal Revenue Code due to the fund reorganization with Delaware Tax-Free Arizona Fund (see Note 6). Post-October losses represent losses realized on investment transactions from November 1, 2005 through February 28, 2006 that, in accordance with federal income tax regulations, the Fund has elected to defer and treat as having arisen in the following fiscal year. 26 - -------------------------------------------------------------------------------- Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 4. Dividend and Distribution Information (continued) For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. 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. For the six months ended February 28, 2006, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Delaware Tax-Free Colorado Fund -------------------- Undistributed net investment income $ (3,857) Accumulated net realized gain (loss) 3,857 For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at August 31, 2005 will expire as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- 2008 $ 1,029,322 $ -- $ -- 2009 -- 800,836 2,054,025 2011 78,759 6,039 -- 2012 1,681,385 -- 4,571,043 2013 -- -- 57,695 ------------ ----------- ------------ Total $ 2,789,466 $ 806,875 $ 6,682,763 ============ =========== ============
For the six months ended February 28, 2006, each Fund had capital gains (losses), which may reduce (increase) the capital loss carryforwards as follows: Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund -------------------- ----------------- ----------------- $ (101,029) $ 43,809 $ (2,450,516) 5. Capital Shares Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free Arizona Insured Fund California Fund Colorado Fund --------------------- ---------------------- ---------------------- Six Months Year Six Months Year Six Months Year Ended Ended Ended Ended Ended Ended 2/28/06 8/31/05 2/28/06 8/31/05 2/28/06 8/31/05 Shares sold: Class A 300,079 596,855 1,196,673 1,654,876 652,833 1,352,576 Class B 2,616 38,240 33,393 103,646 1,477 80,929 Class C 48,608 108,394 251,422 310,646 126,118 124,689 Shares issued in connection with reorganization*: Class A -- 1,668,528 -- 2,134,239 -- -- Class B -- 599,233 -- 547,132 -- -- Class C -- 271,696 -- 118,422 -- -- Shares issued upon reinvestment of dividends and distributions: Class A 125,288 233,045 52,687 55,362 336,574 665,732 Class B 12,645 23,191 14,634 20,826 9,789 23,640 Class C 8,393 15,658 9,838 11,984 10,922 21,109 ---------- ---------- ---------- ---------- ---------- ---------- 497,629 3,554,840 1,558,647 4,957,133 1,137,713 2,268,675 ---------- ---------- ---------- ---------- ---------- ---------- Shares repurchased: Class A (442,853) (1,559,821) (442,501) (789,011) (1,265,677) (2,870,841) Class B (96,728) (187,131) (194,943) (391,206) (95,351) (299,511) Class C (62,777) (235,801) (53,315) (95,803) (24,410) (192,223) ---------- ---------- ---------- ---------- ---------- ---------- (602,358) (1,982,753) (690,759) (1,276,020) (1,385,438) (3,362,575) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) (104,729) 1,572,087 867,888 3,681,113 (247,725) (1,093,900) ---------- ---------- ---------- ---------- ---------- ----------
* See note 6 27 - -------------------------------------------------------------------------------- Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 5. Capital Shares (continued) For the six months ended February 28, 2006 and the year ended August 31, 2005, the following shares were converted from Class B to Class A shares. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statements of Changes in Net Assets.
Six Months Ended Year Ended 2/28/06 8/31/05 ---------------------------- ----------------------------- Class B Class A Class B Class A shares shares Value shares shares Value ------- ------- ---------- ------- -------- ---------- Delaware Tax-Free Arizona Insured Fund 48,039 48,082 $ 548,352 40,161 40,197 $ 460,050 Delaware Tax-Free California Fund 87,893 88,280 1,002,344 99,446 99,804 1,132,607 Delaware Tax-Free Colorado Fund 42,477 42,494 470,301 179,542 179,584 1,993,160
6. Fund Reorganization Effective April 11, 2005, Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free California Fund acquired all of the assets and assumed all of the liabilities of Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Insured Fund, respectively, each an open-end investment company, pursuant to Plans and Agreements of Reorganization (the "Reorganizations"). The shareholders of Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Insured Fund received shares of the respective class of Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free California Fund, respectively, equal to the aggregate net asset value of their shares prior to the Reorganizations based on the net asset value per share of the respective classes of Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free California Fund. The Reorganizations were treated as non-taxable events and, accordingly, each of Delaware Tax-Free Arizona Insured Fund's and Delaware Tax-Free California Fund's basis in the securities acquired reflected the historical cost basis as of the date of transfer. The net assets, net unrealized appreciation and accumulated net realized gain (loss) of Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Insured Fund as of the close of business on April 8, 2005, were as follows:
Net Unrealized Accumulated Net Net Assets Appreciation Realized Gain/Loss ----------- -------------- ------------------ Delaware Tax-Free Arizona Fund $28,887,777 $ 1,078,069 $ (3,053,750)* Delaware Tax-Free California Insured Fund 31,492,746 1,782,779 --
* Includes prior year capital loss carryforwards The net assets of Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free California Fund prior to the Reorganizations were $134,516,468 and $46,891,287, respectively. The combined net assets of Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free California Fund after the Reorganization were $163,404,245 and $78,384,033, respectively. 7. Line of Credit Each Fund, along with certain other funds in the Delaware Investments(R) Family of Funds (the "Participants"), participates in a $225,000,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each 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, 2006, or at any time during the period. 28 - -------------------------------------------------------------------------------- Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 8. 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. Each Fund may invest in advanced refunded bonds, escrow secured bonds or defeased bonds. Under current federal tax laws and regulations, state and local government borrowers are permitted to refinance outstanding bonds by issuing new bonds. The issuer refinances the outstanding debt to either reduce interest costs or to remove or alter restrictive covenants imposed by the bonds being refinanced. A refunding transaction where the municipal securities are being refunded within 90 days or less from the issuance of the refunding issue is known as a "current refunding". Advance refunded bonds are bonds in which the refunded bond issue remains outstanding for more than 90 days following the issuance of the refunding issue. In an advance refunding, the issuer will use the proceeds of a new bond issue to purchase high grade interest bearing debt securities which are then deposited in an irrevocable escrow account held by an escrow agent to secure all future payments of principal and interest and bond premium of the advance refunded bond. Bonds are "escrowed to maturity" when the proceeds of the refunding issue are deposited in an escrow account for investment sufficient to pay all of the principal and interest on the original interest payment and maturity dates. Bonds are considered "pre-refunded" when the refunding issue's proceeds are escrowed only until a permitted call date or dates on the refunded issue with the refunded issue being redeemed at that time, including any required premium. Bonds become "defeased" when the rights and interests of the bondholders and of their lien on the pledged revenues or other security under the terms of the bond contract are substituted with an alternative source of revenues (the escrow securities) sufficient to meet payments of principal and interest to maturity or to the first call dates. Escrowed secured bonds will often receive a rating of AAA from Moody's Investors Service, Inc., Standard & Poor's Rating Group, and/or Fitch due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement. The Tax-Free Insured Funds will purchase escrow secured bonds without additional insurance only where the escrow is invested in securities of the U.S. government or agencies or instrumentalities of the U.S. government. Each Fund may invest up to 15% of its total assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, each Fund's Board of Trustees has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund's limitation on investments in illiquid assets. At February 28, 2006, there were no Rule 144A securities and no securities have been determined to be illiquid under the Funds' Liquidity Procedures. 9. Contractual Obligations The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds' existing contracts and expects the risk of loss to be remote. 29 - -------------------------------------------------------------------------------- About - -------------------------------------------------------------------------------- THE ORGANIZATION This semiannual report is for the information of Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund and Delaware Tax-Free Colorado Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund and Delaware Tax-Free Colorado Fund and the Delaware Investments(R) Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the Funds. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Board of Trustees Jude T. Driscoll Chairman Delaware Investments(R) Family of Funds Philadelphia, PA Thomas L. Bennett Private Investor Rosemont, PA John A. Fry President Franklin & Marshall College Lancaster, PA Anthony D. Knerr Founder/Managing Director Anthony Knerr & Associates New York, NY Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. Philadelphia, PA 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 and Treasurer 3M Corporation St. Paul, MN J. Richard Zecher Founder Investor Analytics Scottsdale, AZ Affiliated Officers Michael P. Bishof Senior Vice President and Chief Financial Officer Delaware Investments(R) Family of Funds Philadelphia, PA David F. Connor Vice President, Deputy General Counsel and Secretary Delaware Investments(R) Family of Funds Philadelphia, PA David P. O'Connor Senior Vice President, General Counsel and Chief Legal Officer Delaware Investments(R) Family of Funds Philadelphia, PA John J. O'Connor Senior Vice President and Treasurer Delaware Investments(R) Family of Funds Philadelphia, PA Contact Information Investment Manager Delaware Management Company, a Series of Delaware Management Business Trust Philadelphia, PA National Distributor Delaware Distributors, L.P. Philadelphia, PA Shareholder Servicing, Dividend Disbursing and Transfer Agent Delaware Service Company, Inc. 2005 Market Street Philadelphia, PA 19103-7094 For Shareholders 800 523-1918 For Securities Dealers and Financial Institutions Representatives Only 800 362-7500 Web Site www.delawareinvestments.com Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries. - -------------------------------------------------------------------------------- Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; (ii) on the Funds' 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 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 the Funds' Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. - -------------------------------------------------------------------------------- 30 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [DELAWARE INVESTMENTS(R) LOGO] - -------------------------------------------------------------------------------- Contact Information Web Site www.delawareinvestments.com E-mail service@delinvest.com Shareholder Service Center 800 523-1918 Call the Shareholder Service Center Monday to Friday, 8:00 a.m. to 7:00 p.m. Eastern Time: o For fund information, literature, price, yield, and performance figures. o For information on existing regular investment accounts and retirement plan accounts including wire investments, wire redemptions, telephone redemptions, and telephone exchanges. Delaphone Service 800 362-FUND (800 362-3863) o For convenient access to account information or current performance information on all Delaware Investments(R) Funds seven days a week, 24 hours a day, use this Touch-Tone(R) service. - -------------------------------------------------------------------------------- (330) Printed in the USA SA-WEST [2/06] CGI 4/06 SEMI-WESTERN PO10912 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FIXED INCOME [DELAWARE INVESTMENTS(R) LOGO] - -------------------------------------------------------------------------------- Semiannual Report FEBRUARY 28, 2006 - -------------------------------------------------------------------------------- DELAWARE TAX-FREE MINNESOTA FUND DELAWARE TAX-FREE MINNESOTA INSURED FUND DELAWARE TAX-FREE MINNESOTA INTERMEDIATE FUND DELAWARE MINNESOTA HIGH-YIELD MUNICIPAL BOND FUND [POWERED BY RESEARCH(R) LOGO] Table OF CONTENTS - ------------------------------------------------------------ DISCLOSURE OF FUND EXPENSES 1 - ------------------------------------------------------------ SECTOR ALLOCATIONS 3 - ------------------------------------------------------------ FINANCIAL STATEMENTS: Statements of Net Assets 5 Statements of Operations 17 Statements of Changes in Net Assets 18 Financial Highlights 20 Notes to Financial Statements 32 - ------------------------------------------------------------ ABOUT THE ORGANIZATION 38 - ------------------------------------------------------------ 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)2006 Delaware Distributors, L.P. - -------------------------------------------------------------------------------- Disclosure For the Period September 1, 2005 to February 28, 2006 - -------------------------------------------------------------------------------- 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, 2005 to February 28, 2006. Actual Expenses The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of each table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Each Fund's actual expenses shown in the tables reflect fee waivers in effect. The expenses shown in each table assume reinvestment of all dividends and distributions. "Expenses Paid During Period" are equal to the Funds' annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Delaware Tax-Free Minnesota Fund Expense Analysis of an Investment of $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/05 to 9/1/05 2/28/06 Ratio 2/28/06 - ------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $ 1,000.00 $ 1,009.20 0.94% $ 4.68 Class B 1,000.00 1,005.40 1.69% 8.40 Class C 1,000.00 1,005.40 1.69% 8.40 - ------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (5% return before expenses) Class A $ 1,000.00 $ 1,020.13 0.94% $ 4.71 Class B 1,000.00 1,016.41 1.69% 8.45 Class C 1,000.00 1,016.41 1.69% 8.45 - -------------------------------------------------------------------------------------------------------
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 9/1/05 to 9/1/05 2/28/06 Ratio 2/28/06 - ------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $ 1,000.00 $ 1,007.30 0.89% $ 4.43 Class B 1,000.00 1,003.60 1.64% 8.15 Class C 1,000.00 1,004.40 1.64% 8.15 - ------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Disclosure For the Period September 1, 2005 to February 28, 2006 - -------------------------------------------------------------------------------- OF FUND EXPENSES (CONTINUED) Delaware Tax-Free Minnesota Intermediate Fund Expense Analysis of an Investment of $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/05 to 9/1/05 2/28/06 Ratio 2/28/06 - ------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $ 1,000.00 $ 1,007.30 0.75% $ 3.73 Class B 1,000.00 1,003.10 1.60% 7.95 Class C 1,000.00 1,003.10 1.60% 7.95 - ------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (5% return before expenses) Class A $ 1,000.00 $ 1,021.08 0.75% $ 3.76 Class B 1,000.00 1,016.86 1.60% 8.00 Class C 1,000.00 1,016.86 1.60% 8.00 - -------------------------------------------------------------------------------------------------------
Delaware Minnesota High-Yield Municipal Bond Fund Expense Analysis of an Investment of $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/05 to 9/1/05 2/28/06 Ratio 2/28/06 - ------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $ 1,000.00 $ 1,011.50 0.89% $ 4.44 Class B 1,000.00 1,007.70 1.64% 8.16 Class C 1,000.00 1,007.70 1.64% 8.16 - ------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------
2 - -------------------------------------------------------------------------------- Sector Allocations As of February 28, 2006 - -------------------------------------------------------------------------------- Sector designations may be different than the sector designations presented in other Fund materials. DELAWARE TAX-FREE MINNESOTA FUND Percentage Sector of Net Assets - --------------------------------------------------------------- Municipal Bonds 94.57% - --------------------------------------------------------------- Airport Revenue Bonds 5.17% Combined Utilities 0.26% Continuing Care/Retirement Revenue Bonds 4.39% Corporate-Backed Revenue Bonds 4.16% Dedicated Tax & Fees Revenue Bonds 1.26% Electric & Gas Revenue Bonds 13.15% Escrowed to Maturity Bonds 0.33% Higher Education Revenue Bonds 4.75% Hospital Revenue Bonds 19.20% Multifamily Housing Revenue Bonds 7.46% Municipal Lease Revenue Bonds 2.56% Political Subdivision General Obligation Bonds 3.81% Pre-Refunded Bonds 9.24% School District General Obligation Bonds 10.20% Single Family Housing Revenue Bonds 1.09% State General Obligation Bonds 4.10% Tax Increment/Special Assessment Bonds 0.50% Territorial General Obligation Bonds 1.58% Water & Sewer Revenue Bonds 1.36% - --------------------------------------------------------------- Short-Term Investments 4.81% - --------------------------------------------------------------- Money Market Instruments 0.70% Variable Rate Demand Notes 4.11% - --------------------------------------------------------------- Total Market Value of Securities 99.38% - --------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 0.62% - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- DELAWARE TAX-FREE MINNESOTA INSURED FUND Percentage Sector of Net Assets - --------------------------------------------------------------- Municipal Bonds 97.41% - --------------------------------------------------------------- Airport Revenue Bonds 4.73% Combined Utilities 0.80% Corporate-Backed Revenue Bonds 0.77% Dedicated Tax & Fees Revenue Bonds 0.80% Electric & Gas Revenue Bonds 6.44% Escrowed to Maturity Bonds 17.43% Higher Education Revenue Bonds 5.90% Hospital Revenue Bonds 16.58% Multifamily Housing Revenue Bonds 5.63% Municipal Lease Revenue Bonds 5.26% Political Subdivision General Obligation Bonds 0.56% Pre-Refunded Bonds 7.90% School District General Obligation Bonds 22.03% Single Family Housing Revenue Bonds 0.14% State General Obligation Bonds 2.44% - --------------------------------------------------------------- Short-Term Investments 1.57% - --------------------------------------------------------------- Money Market Instruments 0.30% Variable Rate Demand Notes 1.27% - --------------------------------------------------------------- Total Market Value of Securities 98.98% - --------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 1.02% - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- Sector Allocations As of February 28, 2006 - -------------------------------------------------------------------------------- Sector designations may be different than the sector designations presented in other Fund materials. DELAWARE TAX-FREE MINNESOTA INTERMEDIATE FUND Percentage Sector of Net Assets - --------------------------------------------------------------- Municipal Bonds 97.89% - --------------------------------------------------------------- Airport Revenue Bonds 1.44% Continuing Care/Retirement Revenue Bonds 5.16% Electric & Gas Revenue Bonds 7.05% Escrowed to Maturity Bonds 2.06% General Corporate Bonds 1.92% Higher Education Revenue Bonds 4.79% Hospital Revenue Bonds 15.08% Library/Museum Revenue Bonds 4.19% Multifamily Housing Revenue Bonds 4.57% Municipal Lease Revenue Bonds 4.00% Political Subdivision General Obligation Bonds 8.63% Pre-Refunded Bonds 4.43% School District General Obligation Bonds 23.20% Single Family Housing Revenue Bonds 2.41% State General Obligation Bonds 7.03% Territorial General Obligation Bonds 1.93% - --------------------------------------------------------------- Short-Term Investments 1.91% - --------------------------------------------------------------- Money Market Instruments 1.91% - --------------------------------------------------------------- Total Market Value of Securities 99.80% - --------------------------------------------------------------- Receivables and Other Assets Net of Liabilities 0.20% - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- DELAWARE MINNESOTA HIGH-YIELD MUNICIPAL BOND FUND Percentage Sector of Net Assets - --------------------------------------------------------------- Municipal Bonds 95.63% - --------------------------------------------------------------- Airline Revenue Bonds 0.67% Airport Revenue Bonds 2.07% Continuing Care/Retirement Revenue Bonds 17.34% Corporate-Backed Revenue Bonds 3.50% Dedicated Tax & Fees Revenue Bonds 1.07% Electric & Gas Revenue Bonds 8.84% Higher Education Revenue Bonds 4.68% Hospital Revenue Bonds 21.38% Multifamily Housing Revenue Bonds 14.62% Municipal Lease Revenue Bonds 2.61% Political Subdivision General Obligation Bonds 4.26% Pre-Refunded Bonds 7.00% School District General Obligation Bonds 2.90% Single Family Housing Revenue Bonds 0.80% State General Obligation Bonds 1.07% Tax Increment/Special Assessment Bonds 2.31% Territorial General Obligation Bonds 0.51% - --------------------------------------------------------------- Short-Term Investments 4.92% - --------------------------------------------------------------- Money Market Instruments 1.14% Variable Rate Demand Notes 3.78% - --------------------------------------------------------------- Total Market Value of Securities 100.55% - --------------------------------------------------------------- Liabilities Net of Receivables and Other Assets (0.55%) - --------------------------------------------------------------- Total Net Assets 100.00% - --------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 94.57% - -------------------------------------------------------------------------------- Airport Revenue Bonds - 5.17% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/22 (AMBAC) $ 3,440,000 $ 3,554,002 5.00% 1/1/35 (AMBAC) 5,145,000 5,374,569 5.25% 1/1/16(MBIA) 1,460,000 1,572,289 5.25% 1/1/32 (FGIC) 5,000,000 5,285,900 Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series C 5.25% 1/1/32(FGIC) 2,250,000 2,378,655 5.50% 1/1/17 (FGIC) 2,500,000 2,685,625 ------------- 20,851,040 ------------- Combined Utilities - 0.26% Shakopee Public Utilities Commission Revenue 5.125% 2/1/26 (MBIA) 1,000,000 1,034,920 ------------- 1,034,920 ------------- Continuing Care/Retirement Revenue Bonds - 4.39% Apple Valley Economic Development Authority Health Care Revenue (Augustana Home St. Paul Project) Series A 6.00% 1/1/40 2,700,000 2,733,966 (Evercare Senior Living Projects) Series A 6.125% 6/1/35 4,000,000 3,980,680 Bloomington Housing & Redevelopment Authority Housing Revenue (Senior Summerhouse Bloomington Project, Presbyterian Homes Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,495,479 Minneapolis Health Care Facility Revenue (Jones-Harrison Residence Project) 5.60% 10/1/30 1,550,000 1,551,163 Minnesota Agriculture & Economic Development Board Revenue (Benedictine Health Systems) 5.75% 2/1/29 1,895,000 1,917,948 Rochester Multifamily Revenue (Wedum Shorewood Campus Project) 6.60% 6/1/36 3,890,000 4,020,510 ------------- 17,699,746 ------------- Corporate-Backed Revenue Bonds - 4.16% Cloquet Pollution Control Revenue (Potlatch Corp. Project) 5.90% 10/1/26 6,500,000 6,585,085 Sartell Environmental Improvement Revenue (International Paper) Series A 5.20% 6/1/27 5,465,000 5,595,559 Seaway Port Authority of Duluth Industrial Development Dock & Wharf Revenues (Cargill, Inc. Project) Series E 6.125% 11/1/14 4,500,000 4,608,045 ------------- 16,788,689 ------------- Dedicated Tax & Fees Revenue Bonds - 1.26% ^Minneapolis Community Development Agency Tax Increment Revenue 6.674% 9/1/09 (MBIA) 5,750,000 5,086,220 ------------- 5,086,220 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Electric & Gas Revenue Bonds - 13.15% Chaska Electric Revenue (Generating Facilities) Series A 5.00% 10/1/30 $ 3,000,000 $ 3,106,230 Laurentian Energy Authority I Series A 5.00% 12/1/21 8,000,000 8,104,879 Minnesota State Municipal Power Agency Series A 5.00% 10/1/34 4,250,000 4,388,550 Series A 5.125% 10/1/29 3,000,000 3,138,780 5.00% 10/1/35 3,000,000 3,106,230 Northern Minnesota Municipal Power Agency Electric System Revenue ^Series A 5.849% 1/1/09 (AMBAC) 3,815,000 3,455,818 Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,582,675 Rochester Electric Utilities Revenue 5.25% 12/1/30 4,915,000 5,127,623 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.00% 1/1/12 (AMBAC) 4,205,000 4,504,438 5.00% 1/1/13 (MBIA) 5,820,000 6,271,516 5.25% 1/1/15 (AMBAC) 3,000,000 3,320,370 **Southern Minnesota Municipal Power Agency Supply System Revenue, Inverse Floater ROLs Series II-R-189-3 7.196% 1/1/14 (AMBAC) 2,000,000 2,397,040 Series II-R-189 7.316% 1/1/15 (AMBAC) 2,950,000 3,580,061 ------------- 53,084,210 ------------- Escrowed to Maturity Bonds - 0.33% Southern Minnesota Municipal Power Agency Supply System Revenue Series B 5.50% 1/1/15 (AMBAC) 990,000 1,058,389 Western Minnesota Municipal Power Agency Supply Revenue Series A 9.75% 1/1/16 (MBIA) 185,000 269,649 ------------- 1,328,038 ------------- Higher Education Revenue Bonds - 4.75% Minnesota State Colleges & Universities Revenue Fund Series A 5.00% 10/1/29 (MBIA) 1,665,000 1,769,878 Minnesota State Higher Education Facilities Authority Revenue (Augsburg College) Series 6-C 5.00% 5/1/20 1,250,000 1,303,138 (College of St. Benedict) Series 4-G 6.20% 3/1/16 1,000,000 1,001,520 (Hamline University) Series 4-1 6.00% 10/1/12 270,000 271,909 6.00% 10/1/16 390,000 394,298 (St. Catherine College) Series 5-N1 5.25% 10/1/22 1,500,000 1,572,645 5.375% 10/1/32 1,000,000 1,052,010 University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,313,420 **University of Minnesota, Inverse Floater ROLs Series II-R-29 7.683% 7/1/21 5,250,000 6,895,349 8.19% 7/1/18 1,920,000 2,612,506 ------------- 19,186,673 ------------- 5 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Hospital Revenue Bonds - 19.20% Bemidji Hospital Facilities First Meeting Revenue (North Country Health Services) 5.00% 9/1/24 (RADIAN) $ 740,000 $ 769,985 6.05% 9/1/16 600,000 600,978 6.05% 9/1/24 1,825,000 1,827,902 Breckenridge Catholic Health Initiatives 5.00% 5/1/30 2,000,000 2,092,720 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) 5.25% 2/15/33 10,000,000 10,331,499 5.50% 2/15/23 1,000,000 1,065,950 Maple Grove Health Care Facilities Revenue (North Memorial Health Care) 5.00% 9/1/29 1,000,000 1,035,590 5.00% 9/1/35 5,850,000 6,012,689 Marshall Medical Center Gross Revenue (Weiner Memorial Medical Center Project) 6.00% 11/1/28 1,000,000 1,047,280 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 9,500,000 10,206,420 (Fairview Health Services) Series D 5.00% 11/15/30 (AMBAC) 1,500,000 1,580,130 5.00% 11/15/34 (AMBAC) 2,500,000 2,625,650 Minnesota Agricultural & Economic Development Broad Revenue (Fairview Health Care System) Series A 6.375% 11/15/29 15,000 16,293 Rochester Health Care Facilities Revenue (Mayo Foundation) Series B 5.50% 11/15/27 700,000 731,129 **Rochester Health Care Facilities Revenue (Mayo Foundation), Inverse Floater ROLs Series II-R-28 Series A 7.683% 11/15/27 2,100,000 2,286,795 Series B 7.683% 11/15/27 8,375,000 9,119,956 Shakopee Health Care Facilities Revenue (St. Francis Regional Medical Center) 5.10% 9/1/25 2,000,000 2,068,740 5.25% 9/1/34 7,000,000 7,223,790 St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.25% 7/1/30 9,420,000 9,790,018 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series A 5.70% 11/1/15 1,300,000 1,346,579 6.00% 11/15/35 4,340,000 4,703,735 Washington County Housing & Redevelopment Authority Hospital Facilities Revenue (Health East Project) 5.50% 11/15/27 1,000,000 1,021,320 ------------- 77,505,148 ------------- Multifamily Housing Revenue Bonds - 7.46% Brooklyn Center Multifamily Housing Revenue (Shingle Creek) 5.40% 5/20/43 (GNMA) (AMT) 1,000,000 1,027,530 Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Multifamily Housing Revenue Bonds (continued) Carver County Housing & Redevelopment Authority Multifamily Revenue (Lake Grace Apartments Project) Series A 6.00% 7/1/28 $ 1,435,000 $ 1,475,654 Eden Prairie Multifamily Housing Revenue (Tanager Creek Apartments) Series A 8.05% 6/20/31 (GNMA) 7,605,000 7,883,495 Hopkins Multifamily Housing Revenue (Hopkins Renaissance Project-Section 8) 6.375% 4/1/20 1,000,000 1,033,380 @Hutchinson Multifamily Housing Revenue (Evergreen Apartments Project-Section 8) 5.75% 11/1/28 910,000 849,412 Minneapolis Multifamily Housing Revenue (Grant Street Apartments Project) Series A 7.25% 11/1/29 750,000 767,865 (Seward Towers Project) 5.00% 5/20/36 (GNMA) 4,000,000 4,163,200 (Sumner Field) Series A 5.50% 11/20/26) (GNMA) (AMT) 1,000,000 1,046,490 (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 1,810,000 1,869,459 @Park Rapids Multifamily Revenue (The Court Apartments Project-Section 8) 6.30% 2/1/20 2,870,000 2,670,018 St. Cloud Housing & Redevelopment Authority Revenue (Sterling Heights Apartments Project) 7.55% 4/1/39 (AMT) 1,000,000 1,046,310 Stillwater Multifamily Housing Revenue (Stillwater Cottages Project) Series A 7.00% 11/1/27 1,000,000 1,027,260 7.25% 11/1/27 (AMT) 1,540,000 1,583,459 Wadena Housing & Redevelopment Authority Multifamily Housing Revenue (Humphrey Manor East Project) 6.00% 2/1/19 1,860,000 1,832,825 Washington County Housing & Redevelopment Authority Governmental Revenue (Briar Pond) Series C 7.25% 8/20/34 960,000 894,173 Willmar Housing & Redevelopment Authority Multifamily Housing Revenue (Highland Apartments-Section 8) 5.85% 6/1/19 960,000 960,000 ------------- 30,130,530 ------------- Municipal Lease Revenue Bonds - 2.56% Puerto Rico Public Buildings Authority Revenue (Government Facilities) Series D 5.25% 7/1/36 1,070,000 1,124,014 St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.00% 12/1/22 2,500,000 2,659,100 5.125% 12/1/27 1,000,000 1,059,890 (Robert Street Office Building Project) 4.75% 12/1/23 2,000,000 2,064,720 5.00% 12/1/27 2,500,000 2,635,325 Series 9 5.25% 12/1/27 725,000 776,163 ------------- 10,319,212 ------------- 6 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Political Subdivision General Obligation Bonds - 3.81% Dakota County Capital Improvement Series A 4.75% 2/1/26 $ 1,000,000 $ 1,025,780 Hennepin County Regional Railroad Authority 5.00% 12/1/31 4,030,000 4,203,169 Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 1,200,000 1,291,068 Minneapolis Library 5.00% 12/1/25 1,500,000 1,589,070 Ramsey County State Aid Series C 5.00% 2/1/28 1,060,000 1,116,646 St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 1,905,000 2,002,117 Todd Morrison Cass & Wadena Counties United Hospital District (Health Care Facilities-Lakewood) 5.00% 12/1/21 2,000,000 2,081,140 5.00% 12/1/34 1,000,000 1,021,260 5.125% 12/1/24 1,000,000 1,043,660 ------------- 15,373,910 ------------- - -/-Pre-Refunded Bonds - 9.24% Chaska Electric Revenue Series A 6.00% 10/1/25-10 1,000,000 1,104,040 Little Canada Multifamily Housing Revenue Alternative Development (Montreal Courts Apartments Project) Series A 6.10% 12/1/17-07 1,270,000 1,308,760 6.25% 12/1/27-07 2,900,000 3,023,453 Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32-12 11,525,000 12,851,183 Minneapolis Tax Increment Revenue Series E 5.00% 3/1/13-09 6,265,000 6,543,479 Minnesota Agricultural & Economic Development Broad Revenue (Fairview Health Care System) Series A 6.375% 11/15/29-10 485,000 545,591 Minnesota Higher Education Facilities Series 4-1 6.00% 10/1/12-06 980,000 994,739 6.00% 10/1/16-06 1,400,000 1,421,056 Minnesota Public Facilities Authority Water Pollution Control Revenue Series A 5.00% 3/1/20-10 3,000,000 3,166,710 Series B 4.75% 3/1/19-09 2,000,000 2,073,580 Puerto Rico Public Buildings Authority Guaranteed Government Facilities Revenue Series D 5.25% 7/1/36-12 2,930,000 3,180,163 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,068,730 ------------- 37,281,484 ------------- School District General Obligation Bonds - 10.20% Bloomington Independent School District #271 Series B 5.00% 2/1/17 5,300,000 5,540,143 Cambridge Independent School District #911 Series A 4.75% 2/1/30 (MBIA) 1,035,000 1,064,166 Farmington Independent School District #192 Capital Appreciation Series B 5.00% 2/1/27 (FSA) 6,705,000 7,113,401 ^5.34% 2/1/21 (FSA) 1,500,000 720,420 ^5.422% 2/1/20 (FSA) 1,650,000 836,798 Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- School District General Obligation Bonds (continued) ^Lakeville Independent School District #194 Capital Appreciation Series B 5.450% 2/1/19 (FSA) $ 8,000,000 $ 4,197,920 Lakeville Independent School District #194 Series A 4.75% 2/1/22 (FSA) 5,500,000 5,731,990 ^Mahtomedi Independent School District #832 Capital Appreciation Series B 5.898% 2/1/14 (MBIA) 1,540,000 1,130,144 Prior Lake Independent School District #719 Series B 5.00% 2/1/19 (FSA) 3,145,000 3,390,027 **Rockford Independent School District #883, Inverse Floater ROLs Series II-R-30-A 7.936% 2/1/23 (FSA) 3,510,000 4,014,352 ^Rosemont Independent School District #196 Capital Appreciation Series B 5.931% 4/1/11 (FSA) 2,600,000 2,161,588 5.96% 4/1/12 (FSA) 1,850,000 1,474,598 6.008% 4/1/13 (FSA) 1,915,000 1,461,854 ^Sartell Independent School District #748 Capital Appreciation Series B 5.976% 2/1/13 (MBIA) 540,000 412,285 6.099% 2/1/15 (MBIA) 1,075,000 753,134 6.15% 2/1/16 (MBIA) 1,750,000 1,172,500 ------------- 41,175,320 ------------- Single Family Housing Revenue Bonds - 1.09% Minnesota State Housing Finance Agency Single Family Mortgage Series A 5.30% 7/1/19 635,000 665,601 Series B 5.35% 1/1/33 (AMT) 2,970,000 3,046,091 Series J 5.90% 7/1/28 (AMT) 525,000 542,640 St. Louis Park Residential Mortgage Revenue Series A 7.25% 4/20/23 (GNMA) 128,000 128,099 ------------- 4,382,431 ------------- State General Obligation Bonds - 4.10% Minnesota State 5.00% 11/1/20 (FSA) 8,175,000 8,644,245 5.00% 8/1/21 2,400,000 2,559,648 Minnesota State Refunding Various Purposes 5.00% 6/1/13 5,175,000 5,346,189 ------------- 16,550,082 ------------- Tax Increment/Special Assessment Bonds - 0.50% Minneapolis Tax Increment Revenue (St. Anthony Falls Project) 5.75% 2/1/27 1,000,000 1,021,310 St. Paul Housing & Redevelopment Authority Tax Increment (Upper Landing Project) Series A 6.80% 3/1/29 1,000,000 1,015,440 ------------- 2,036,750 ------------- Territorial General Obligation Bonds - 1.58% Puerto Rico Commonwealth Public Improvement Series A 5.00% 7/1/34 4,500,000 4,637,430 5.50% 7/1/19 (MBIA) 1,500,000 1,738,380 ------------- 6,375,810 ------------- 7 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Water & Sewer Revenue Bonds - 1.36% **Minnesota Public Facilities Authority Water Pollution Control Revenue, Inverse Floater ROLs Series II-R-31 7.176% 3/1/18 $ 5,000,000 $ 5,509,550 ------------- 5,509,550 ------------- Total Municipal Bonds (cost $363,130,666) 381,699,763 ------------- Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 4.81% - -------------------------------------------------------------------------------- Money Market Instruments - 0.70% Federated Minnesota Municipal Cash Trust 2,823,937 2,823,937 ------------- 2,823,937 ------------- Principal Amount oVariable Rate Demand Notes - 4.11% Hennepin County Series A 3.05% 12/1/25 (SPA) $ 6,150,000 6,150,000 Midwest Consortium of Municipal Utilities Revenue Series A (LOC - U.S. Bank N.A.) 3.20% 1/1/25 2,000,000 2,000,000 Minneapolis Convention Center Series A 3.05% 12/1/14 (SPA) 1,570,000 1,570,000 3.05% 12/1/18 1,200,000 1,200,000 Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 2,895,000 2,895,000 Minneapolis Library 3.05% 12/1/32 1,035,000 1,035,000 Minneapolis Tax Increment Mill Quarter 3.05% 3/1/32 (SPA) 1,060,000 1,060,000 Minnesota State Higher Education St. Catherine 3.15% 10/1/32 700,000 700,000 ------------- 16,610,000 ------------- Total Short-Term Investments (cost $19,433,937) 19,433,937 ------------- Total Market Value of Securities - 99.38% (cost $382,564,603) 401,133,700 Receivables and Other Assets Net of Liabilities - 0.62% 2,499,106 ------------- Net Assets Applicable to 32,247,619 Shares Outstanding - 100.00% $ 403,632,806 ============= Net Asset Value - Delaware Tax-Free Minnesota Fund Class A ($376,235,697 / 30,062,381 Shares) $ 12.52 ------------- Net Asset Value - Delaware Tax-Free Minnesota Fund Class B ($12,965,091 / 1,035,103 Shares) $ 12.53 ------------- Net Asset Value - Delaware Tax-Free Minnesota Fund Class C ($14,432,018 / 1,150,135 Shares) $ 12.55 ------------- Components of Net Assets at February 28, 2006: Shares of beneficial interest (unlimited authorization - no par) $ 384,593,993 Undistributed net investment income 147,934 Accumulated net realized gain on investments 321,782 Net unrealized appreciation of investments 18,569,097 ------------- Total net assets $ 403,632,806 ============= - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Summary of Abbreviations: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association LOC - Letter of Credit MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance ROLs - Residual Options Long SPA - Stand-by Purchase Agreement - -/- Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 7 in "Notes to Financial Statements." ** 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, 2006. See Note 7 in "Notes to Financial Statements." o Variable rate security. The interest rate shown is the rate as of February 28, 2006. ^ Zero coupon security. The interest rate shown is the yield at the time of purchase. @ Illiquid security. At February 28, 2006, the aggregate amount of illiquid securities equals $3,519,430, which represented 0.87% of the Fund's net assets. See Note 7 in "Notes to Financial Statements." Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Fund Net asset value Class A (A) $ 12.52 Sales charge (4.50% of offering price) (B) 0.59 ------------- Offering price $ 13.11 ============= (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 8 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Insured Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 97.41% - -------------------------------------------------------------------------------- Airport Revenue Bonds - 4.73% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/22 (MBIA) $ 2,000,000 $ 2,100,860 Series A 5.125% 1/1/25 (FGIC) 100,000 104,293 Series C 5.125% 1/1/20 (FGIC) 2,000,000 2,113,820 Series C 5.25% 1/1/32 (FGIC) 6,595,000 6,972,102 ------------- 11,291,075 ------------- Combined Utilities - 0.80% Shakopee Public Utilities Commission Revenue 5.125% 2/1/26 (MBIA) 1,850,000 1,914,602 ------------- 1,914,602 ------------- Corporate-Backed Revenue Bonds - 0.77% Sartell Environmental Improvement Revenue (International Paper) Series A 5.20% 6/1/27 1,800,000 1,843,002 ------------- 1,843,002 ------------- Dedicated Tax & Fees Revenue Bonds - 0.80% Virgin Islands Public Finance Authority (Matching Fund Loan) Series A 5.25% 10/1/22 1,785,000 1,919,607 ------------- 1,919,607 ------------- Electric & Gas Revenue Bonds - 6.44% Minnesota State Municipal Power Agency Series A 5.00% 10/1/34 2,000,000 2,065,200 **Northern Municipal Power Agency Electric System Revenue, Inverse Floater ROLs Series II-R-32 7.176% 1/1/13 (FSA) 4,585,000 5,172,201 Puerto Rico Electric Power Authority Power Revenue Series GG 4.75% 9/1/21 (FSA) 1,000,000 1,036,980 Series OO 5.00% 7/1/13 (CIFG) 3,640,000 3,942,848 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.25% 1/1/15 (AMBAC) 1,500,000 1,660,185 Western Minnesota Municipal Power Agency Series B 5.00% 1/1/15 (MBIA) 1,365,000 1,485,366 ------------- 15,362,780 ------------- Escrowed to Maturity Bonds - 17.43% Dakota/Washington Counties Housing & Redevelopment Authority Anoka Single Family Residential Mortgage Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 12,985,200 Dakota/Washington Counties Housing & Redevelopment Authority Bloomington Mortgage Single Family Residential Mortgage Revenue 8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 546,839 8.375% 9/1/21 (GNMA) (FHA) (AMT) 14,115,000 20,769,093 Southern Minnesota Municipal Power Agency Supply Revenue Series A 5.75% 1/1/18 3,790,000 4,050,487 5.75% 1/1/18 (AMBAC) 670,000 716,049 Western Minnesota Municipal Power Agency Supply Revenue Series A 6.60% 1/1/10 1,650,000 1,766,127 9.75% 1/1/16 (MBIA) 530,000 772,507 ------------- 41,606,302 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Higher Education Revenue Bonds - 5.90% Minnesota State Colleges & Universities Revenue Fund Series A 5.00% 10/1/22 (FSA) $ 5,135,000 $ 5,455,783 Series A 5.00% 10/1/29 (MBIA) 4,000,000 4,251,960 Minnesota State Higher Education Facilities Authority Revenue (St. Catherine College) Series 5-N1 5.00% 10/1/18 2,200,000 2,284,304 St. Cloud Housing & Redevelopment Authority Revenue (State University Foundation Project) 5.00% 5/1/23 2,000,000 2,096,660 ------------- 14,088,707 ------------- Hospital Revenue Bonds - 16.58% Duluth Economic Development Authority Health Care Facilities Benedictine Health System (St. Mary's Hospital) 5.25% 2/15/28 8,500,000 8,810,250 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 7,800,000 8,380,008 (Fairview Health Services) Series D 5.00% 11/15/34 (AMBAC) 8,250,000 8,664,645 Minneapolis/St. Paul Housing & Redevelopment Authority Health Care Systems (Allina Health Systems) 5.00% 11/15/13 (AMBAC) 6,490,000 6,497,658 (Healthpartners Obligation Group Project) 5.625% 12/1/22 650,000 698,932 5.875% 12/1/29 1,000,000 1,078,600 Minnesota Agricultural & Economic Development Board Revenue (Fairview Health Care System) Series A 5.75% 11/15/26 (MBIA) 180,000 189,504 St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.50% 7/1/25 2,000,000 2,135,540 St. Paul Housing & Redevelopment Authority Hospital Revenue (St. Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,001,620 Willmar (Rice Memorial Hospital Project) 5.00% 2/1/22 (FSA) 1,000,000 1,060,250 5.00% 2/1/25 (FSA) 1,000,000 1,055,290 ------------- 39,572,297 ------------- Multifamily Housing Revenue Bonds - 5.63% Eagan Multifamily Revenue (Woodridge Apartments) Series A 5.90% 8/1/20 (GNMA) 1,000,000 1,033,180 Hopkins Multifamily Revenue (Auburn Apartments Project) Series A 8.05% 6/20/31 (GNMA) 3,790,000 3,931,708 Minneapolis Multifamily Housing Revenue (Bottineau Commons Project) 5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,571,325 (Seward Towers Project) 5.00% 5/20/36 (GNMA) 4,000,000 4,163,200 9 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Insured Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Multifamily Housing Revenue Bonds (continued) Minnesota State Housing Finance Agency Rental Housing Revenue Series C-2 5.95% 2/1/15 (AMBAC) $ 1,642,000 $ 1,660,505 White Bear Lake Multifamily Revenue (Lake Square) Series A 5.875% 2/1/15 (FHA) 1,055,000 1,088,222 ------------- 13,448,140 ------------- Municipal Lease Revenue Bonds - 5.26% Hopkins Housing & Redevelopment Authority Public Works and Fire Station Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,277,651 Minneapolis Special School District #001 Series A 5.00% 2/1/18 (FSA) 1,545,000 1,638,704 5.00% 2/1/19 (FSA) 1,535,000 1,628,098 5.00% 2/1/20 (FSA) 1,690,000 1,788,831 St. Paul Port Authority Lease Revenue (Cedar Street Office Building Project) 5.125% 12/1/27 2,000,000 2,119,780 5.25% 12/1/27 3,840,000 4,096,973 ------------- 12,550,037 ------------- Political Subdivision General Obligation Bonds - 0.56% Dakota County Community Development Agency Governmental Housing Development 5.00% 1/1/21 1,275,000 1,336,366 ------------- 1,336,366 ------------- - -/-Pre-Refunded Bonds - 7.90% Minneapolis Community Development Agency Supported Development Revenue Series G-3 5.45% 12/1/31-11 2,000,000 2,185,100 Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32-12 5,400,000 6,021,378 Minnesota Agricultural & Economic Development Board Revenue (Fairview Health Care System) Series A 5.75% 11/15/26-07 (MBIA) 10,070,000 10,653,758 ------------- 18,860,236 ------------- School District General Obligation Bonds - 22.03% Big Lake Independent School District #727 Series A 5.00% 2/1/17 (FSA) 1,040,000 1,088,672 5.00% 2/1/20 (FSA) 1,000,000 1,046,800 Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,347,026 Farmington Independent School District #192 Series B 5.00% 2/1/27 (FSA) 4,000,000 4,243,640 Lakeville Independent School District #194 Series A 4.75% 2/1/22 (FSA) 2,350,000 2,449,123 Morris Independent School District #769 5.00% 2/1/24 (MBIA) 4,875,000 5,234,873 Mounds View Independent School District #621 5.00% 2/1/20 (MBIA) 2,970,000 3,143,686 5.375% 2/1/24 (FGIC) 6,170,000 6,622,013 Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- School District General Obligation Bonds (continued) Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) $ 3,570,000 $ 3,775,489 Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 1,310,000 1,385,404 **Rockford Independent School District #883, Inverse Floater ROLs Series II-R-30-B 7.886% 2/1/21 (FSA) 1,605,000 1,831,995 ^Rosemount Independent School District #196 Series B 5.80% 4/1/09 (FSA) 1,860,000 1,669,796 5.85% 4/1/10 (FSA) 2,240,000 1,934,957 ^Sauk Rapids Independent School District #047 Series B 5.982% 2/1/15 (FSA) 2,700,000 1,750,437 6.083% 2/1/17 (FSA) 2,245,000 1,280,930 **South Washington County Independent School District #833, Inverse Floater ROLs Series II-R-34-A 7.886% 2/1/20 (MBIA) 3,440,000 3,944,992 7.886% 2/1/21 (MBIA) 3,645,000 4,180,086 St. Michael Independent School District #885 5.00% 2/1/20 (FSA) 1,970,000 2,085,206 5.00% 2/1/27 (FSA) 3,435,000 3,589,609 ------------- 52,604,734 ------------- Single Family Housing Revenue Bonds - 0.14% Dakota County Housing & Redevelopment Authority Single Family Mortgage Revenue Series B 5.85% 10/1/30 (GNMA) (FNMA) (AMT) 328,000 336,731 ------------- 336,731 ------------- State General Obligation Bonds - 2.44% Minnesota State 5.00% 11/1/20 (FSA) 5,500,000 5,815,700 ------------- 5,815,700 ------------- Total Municipal Bonds (cost $216,165,822) 232,550,316 ------------- Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 1.57% - -------------------------------------------------------------------------------- Money Market Instruments - 0.30% Federated Minnesota Municipal Cash Trust 701,005 701,005 ------------- 701,005 ------------- Principal Amount oVariable Rate Demand Notes - 1.27% Midwest Consortium of Municipal Utilities Revenue Series A (LOC - U.S. Bank N.A.) 3.20% 1/1/25 $ 1,900,000 1,900,000 Minneapolis Convention Center Series A 3.05% 12/1/14 (SPA) 1,140,000 1,140,000 ------------- 3,040,000 ------------- Total Short-Term Investments (cost $3,741,005) 3,741,005 ------------- 10 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Insured Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total Market Value of Securities - 98.98% (cost $219,906,827) $ 236,291,321 Receivables and Other Assets Net of Liabilities - 1.02% 2,435,781 ------------- Net Assets Applicable to 21,800,442 Shares Outstanding - 100.00% $ 238,727,102 ============= Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class A ($214,789,192 / 19,615,153 Shares) $ 10.95 ------------- Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class B ($11,487,928 / 1,050,054 Shares) $ 10.94 ------------- Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class C ($12,449,982 / 1,135,235 Shares) $ 10.97 ------------- Components of Net Assets at February 28, 2006: Shares of beneficial interest (unlimited authorization - no par) $ 222,056,876 Accumulated net realized gain on investments 285,732 Net unrealized appreciation of investments 16,384,494 ------------- Total net assets $ 238,727,102 ============= - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Summary of Abbreviations: AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax CIFG - CDC IXIS Financial Guaranty FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Authority FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association LOC - Letter of Credit MBIA - Insured by the Municipal Bond Insurance Association ROLs - Residual Option Longs - -/- Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 7 in "Notes to Financial Statements." ** 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, 2006. See Note 7 in "Notes to Financial Statements." o Variable rate security. The interest rate shown is the rate as of February 28, 2006. ^ Zero coupon security. The interest rate shown is the yield at the time of purchase. Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Insured Fund Net asset value Class A (A) $ 10.95 Sales charge (4.50% of offering price) (B) 0.52 ------------- Offering price $ 11.47 ============= (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 11 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Intermediate Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 97.89% - -------------------------------------------------------------------------------- Airport Revenue Bonds - 1.44% Minneapolis/St. Paul Metropolitan Airports Commission Series 14 5.50% 1/1/11 (AMT) $ 750,000 $ 812,588 ------------- 812,588 ------------- Continuing Care/Retirement Revenue Bonds - 5.16% Apple Valley Economic Development Authority Health Care Revenue (Evercare Senior Living Projects) Series A 6.00% 12/1/25 500,000 500,690 Moorhead Economic Development Authority Multifamily Revenue (Eventide Lutheran Home Project) Series B 6.00% 6/1/18 1,000,000 1,000,710 Oakdale Elderly Housing Revenue (PHM/Oakdale, Inc. Project) 5.75% 3/1/18 1,400,000 1,408,134 ------------- 2,909,534 ------------- Electric & Gas Revenue Bonds - 7.05% Chaska Electric Revenue (Generating Facilities) Series A 5.25% 10/1/25 1,000,000 1,069,930 Laurentian Energy Authority I Cogeneration Revenue Series A 5.00% 12/1/21 750,000 759,833 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.00% 1/1/12 (AMBAC) 1,000,000 1,071,210 5.00% 1/1/13 (MBIA) 1,000,000 1,077,580 ------------- 3,978,553 ------------- Escrowed to Maturity Bonds - 2.06% University of Minnesota Series A 5.75% 7/1/16 1,000,000 1,164,020 ------------- 1,164,020 ------------- General Corporate Bonds - 1.92% Minneapolis Community Development Agency Supported Revenue Common Bond Fund Series 4 6.20% 6/1/17 (AMT) 1,055,000 1,080,816 ------------- 1,080,816 ------------- Higher Education Revenue Bonds - 4.79% Minnesota State Higher Education Facilities Authority Revenue (College of Art & Design) Series 5-D 6.625% 5/1/20 1,000,000 1,080,770 (University of St. Thomas) Series 5-Y 5.25% 10/1/19 530,000 572,946 St. Cloud Housing & Redevelopment Authority Revenue (State University Foundation Project) 5.00% 5/1/23 1,000,000 1,048,330 ------------- 2,702,046 ------------- Hospital Revenue Bonds - 15.08% Bemidji Hospital Facilities First Meeting Revenue (North Country Health Services) 5.00% 9/1/24 (RADIAN) 500,000 520,260 Glencoe Health Care Facilities Revenue (Glencoe Regional Health Services Project) 5.00% 4/1/20 1,250,000 1,286,288 Maple Grove Minnesota Health Care Facilities Revenue (North Memorial Health Care) 5.00% 9/1/29 1,000,000 1,035,590 Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Hospital Revenue Bonds (continued) Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 $ 1,500,000 $ 1,611,539 Minneapolis/St. Paul Housing & Redevelopment Authority Health Care System (Health Partners Obligation Group Project) 6.00% 12/1/17 1,125,000 1,247,366 St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.50% 7/1/25 1,500,000 1,601,654 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series B 5.85% 11/1/17 1,160,000 1,202,700 ------------- 8,505,397 ------------- Library/Museum Revenue Bonds - 4.19% Minneapolis Art Center Facilities Revenue (Walker Art Center Project) 5.125% 7/1/21 2,250,000 2,361,488 ------------- 2,361,488 ------------- Multifamily Housing Revenue Bonds - 4.57% Minneapolis Multifamily Housing Revenue (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 1,885,000 1,946,923 @Park Rapids Multifamily Revenue (The Court Apartments Project-Section 8) 6.05% 8/1/12 655,000 627,922 ------------- 2,574,845 ------------- Municipal Lease Revenue Bonds - 4.00% Edina Housing & Redevelopment Authority Public Project Revenue (Appropriate Lease Obligation) 5.125% 2/1/19 1,000,000 1,055,930 Hibbing Economic Development Authority Revenue (Hibbing Lease Obligation) 6.10% 2/1/08 285,000 288,662 Virginia Housing & Redeveloping Authority Health Care Facility Lease Revenue 5.25% 10/1/25 880,000 911,830 ------------- 2,256,422 ------------- Political Subdivision General Obligation Bonds - 8.63% Dakota County Capital Improvement Series A 4.75% 2/1/17 1,000,000 1,040,680 Dakota County Community Development Agency Governmental Housing Refunding (Senior Housing Facilities) Series A 5.00% 1/1/22 1,150,000 1,225,613 Hennepin County Series B 4.75% 12/1/14 1,000,000 1,042,930 Ramsey County (Capital Improvement Plan) Series B 5.25% 2/1/11 1,445,000 1,561,163 ------------- 4,870,386 ------------- - -/-Pre-Refunded Bonds - 4.43% Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32-12 1,750,000 1,951,373 Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series D 5.25% 7/1/38-12 500,000 545,050 ------------- 2,496,423 ------------- 12 - -------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Intermediate Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- School District General Obligation Bonds - 23.20% Big Lake Independent School District #727 Series C 5.00% 2/1/16 (FSA) $ 1,180,000 $ 1,250,694 5.00% 2/1/17 (FSA) 1,000,000 1,054,100 Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,000,000 1,060,650 5.00% 2/1/20 (FSA) 750,000 795,488 Hopkins Independent School District #270 5.125% 2/1/17 (FGIC) 2,000,000 2,134,439 Moorhead Independent School District #152 5.00% 4/1/10 (FGIC) 2,585,000 2,736,092 Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 1,500,000 1,586,340 South Washington County Independent School District #833 Series B 5.00% 2/1/16 (FSA) 1,560,000 1,660,308 St. Paul Independent School District #625 Series B 5.00% 2/1/20 (FSA) 750,000 809,018 ------------- 13,087,129 ------------- Single Family Housing Revenue Bonds - 2.41% Minnesota State Housing Finance Agency Residential Housing Series I 5.10% 7/1/20 (AMT) 845,000 872,040 Minnesota State Housing Finance Agency Single Family Mortgage Series J 5.90% 7/1/28 (AMT) 470,000 485,792 ------------- 1,357,832 ------------- State General Obligation Bonds - 7.03% Minnesota State 5.00% 8/1/21 2,550,000 2,719,626 Minnesota State Refunding & Variable Purpose 5.00% 11/1/16 1,200,000 1,246,620 ------------- 3,966,246 ------------- Territorial General Obligation Bonds - 1.93% oPuerto Rico Public Finance Corporation Commonwealth Appropriation Series A (LOC - Puerto Rico Government Bank) 5.75% 8/1/27 1,000,000 1,087,510 ------------- 1,087,510 ------------- Total Municipal Bonds (cost $53,153,954) 55,211,235 ------------- Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 1.91% - -------------------------------------------------------------------------------- Money Market Instruments - 1.91% Federated Minnesota Municipal Cash Trust 1,080,553 1,080,553 ------------- Total Short-Term Investments (cost $1,080,553) 1,080,553 ------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total Market Value of Securities - 99.80% (cost $54,234,507) $ 56,291,788 Receivables and Other Assets Net of Liabilities - 0.20% 111,609 ------------- Net Assets Applicable to 5,181,055 Shares Outstanding - 100.00% $ 56,403,397 ============= Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class A ($49,293,177 / 4,529,063 Shares) $ 10.88 ------------- Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class B ($2,206,611 / 202,239 Shares) $ 10.91 ------------- Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class C ($4,903,609 / 449,753 Shares) $ 10.90 ------------- Components of Net Assets at February 28, 2006: Shares of beneficial interest (unlimited authorization - no par) $ 55,733,282 Accumulated net realized loss on investments (1,387,166) Net unrealized appreciation of investments 2,057,281 ------------- Total net assets $ 56,403,397 ============= - -/- Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 7 in "Notes to Financial Statements." o Variable rate security. The interest rate shown is the rate as of February 28, 2006. @ Illiquid security. At February 28, 2006, the aggregate amount of illiquid securities equals $627,922, which represented 1.11% of the Fund's net assets. See Note 7 in "Notes to Financial Statements." Summary of Abbreviations: AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax FGIC -Insured by the Financial Guaranty Insurance Company FSA - Insured by Financial Security Assurance LOC - Letter of Credit MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Intermediate Fund Net asset value Class A (A) $ 10.88 Sales charge (2.75% of offering price) (B) 0.31 ------------- Offering price $ 11.19 ============= (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 13 - -------------------------------------------------------------------------------- Delaware Minnesota High-Yield Municipal Bond Fund Statements February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 95.63% - -------------------------------------------------------------------------------- Airline Revenue Bonds - 0.67% ++Minneapolis/St. Paul Metropolitan Airports Commission Special Facilities Revenue (Northwest Airlines, Inc. Project) Series A 7.00% 4/1/25 (AMT) $ 1,000,000 $ 678,150 ------------- 678,150 ------------- Airport Revenue Bonds - 2.07% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/28 (MBIA) 2,000,000 2,083,920 ------------- 2,083,920 ------------- Continuing Care/Retirement Revenue Bonds - 17.34% Apple Valley Economic Development Authority Health Care Revenue (Augustanna Home St. Paul Project) Series A 5.80% 1/1/30 1,000,000 1,002,880 (Evercare Senior Living Project) Series A 6.125% 6/1/35 1,000,000 995,170 Buhl Nursing Home Revenue (Forest Health Services Project) Series A 6.75% 8/1/33 1,000,000 1,042,680 Detroit Lakes Housing & Health Facilities Revenue Refunding (Mankato Lutheran Homes) Series D 5.50% 8/1/21 500,000 506,035 Mahtomedi Senior Housing Revenue (St. Andrews Village Project) 5.75% 12/1/40 1,000,000 1,005,010 Minneapolis Health Care Facilities Revenue (Augustana Chapel View Homes) Series D 5.75% 6/1/29 1,000,000 1,021,930 (Jones-Harrison Residence Project) 5.60% 10/1/30 1,500,000 1,501,124 Minnesota Agriculture & Economic Development Board Revenue (Benedictine Health Systems) 5.75% 2/1/29 1,000,000 1,012,110 Moorhead Economic Development Authority Multifamily Revenue (Eventide Lutheran Home Project) Series B 6.00% 6/1/18 870,000 870,618 Northfield Health Care Facilities Revenue (Northfield Retirement Center Project) Series A 6.00% 5/1/28 1,000,000 1,000,330 Oakdale Elderly Housing Revenue (PHM/Oakdale, Inc. Project) 6.00% 3/1/28 1,800,000 1,810,439 Owatonna Senior Housing Revenue (Senior Living Project) Series A 5.80% 10/1/29 400,000 400,732 6.00% 4/1/41 1,250,000 1,261,688 Rochester Multifamily Revenue (Wedum Shorewood Campus Project) 6.60% 6/1/36 990,000 1,023,215 Shoreview Elderly Housing Revenue (PHM/Shoreview Inc. Project) 6.15% 12/1/33 1,250,000 1,285,700 Twin Valley Congregate Housing Revenue (Living Options, Inc. Project) 5.95% 11/1/28 1,825,000 1,688,307 ------------- 17,427,968 ------------- Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Corporate-Backed Revenue Bonds - 3.50% Cloquet Pollution Control Revenue (Potlatch Corp. Project) 5.90% 10/1/26 $ 1,700,000 $ 1,722,253 Sartell Environmental Improvement Revenue (International Paper) Series A 5.20% 6/1/27 1,750,000 1,791,808 ------------- 13,514,061 ------------- Dedicated Tax & Fees Revenue Bonds - 1.07% Virgin Islands Public Finance Authority Revenue (Matching Fund Loan) Series A 5.25% 10/1/24 1,000,000 1,072,430 ------------- 1,072,430 ------------- Electric & Gas Revenue Bonds - 8.84% Chaska Electric Revenue (Generating Facilities) Series A 5.25% 10/1/25 1,000,000 1,069,930 Laurentian Energy Authority I Cogeneration Revenue Series A 5.00% 12/1/21 1,750,000 1,772,943 Minnesota State Municipal Power Agency Electric Revenue 5.00% 10/1/35 1,000,000 1,035,410 Series A 5.00% 10/1/34 2,750,000 2,839,650 Puerto Rico Electric Power Authority Power Revenue Series II 5.25% 7/1/31 1,000,000 1,057,920 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.25% 1/1/16 (AMBAC) 1,000,000 1,112,430 ------------- 8,888,283 ------------- Higher Education Revenue Bonds - 4.68% Minnesota State Higher Education Facilities Authority Revenue (Augsburg College) Series 6-C 5.00% 5/1/23 700,000 726,341 (College of Art & Design) Series 5-D 6.75% 5/1/26 500,000 541,990 (St. Catherine College) Series 5-N1 5.375% 10/1/32 2,000,000 2,104,020 (University St. Thomas) Series 6-I 5.00% 4/1/23 1,250,000 1,328,350 ------------- 4,700,701 ------------- Hospital Revenue Bonds - 21.38% Bermidji Health Care Facilities First Meeting Revenue (North Country Health Services) 5.00% 9/1/31 (RADIAN) 2,500,000 2,586,949 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) 5.25% 2/15/33 2,250,000 2,324,588 Glencoe Health Care Facilities Revenue (Glencoe Regional Health Services Project) 5.00% 4/1/31 1,100,000 1,103,542 Maple Grove Health Care Facilities Revenue (North Memorial Health Care) 5.00% 9/1/35 3,590,000 3,689,837 Minneapolis Health Care System Revenue (Allina Health Systems) Series A 5.75% 11/15/32 2,000,000 2,148,720 (Fairview Health Services) Series D 5.00% 11/15/34 (AMBAC) 1,000,000 1,050,260 14 - -------------------------------------------------------------------------------- Delaware Minnesota High-Yield Municipal Bond Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Hospital Revenue Bonds (continued) Minneapolis/St. Paul Housing & Redevelopment Authority Health Care System (Health Partners Obligation Group Project) 6.00% 12/1/17 $ 1,125,000 $ 1,247,366 Shakopee Health Care Facilities Revenue (St. Francis Regional Medical Center) 5.25% 9/1/34 1,000,000 1,031,970 St. Louis Park Health Care Facilities Revenue (Park Nicollet Health Services) Series B 5.25% 7/1/30 1,000,000 1,039,280 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) 6.00% 11/15/25 1,000,000 1,090,180 Series A 5.70% 11/1/15 800,000 828,664 Series B 5.85% 11/1/17 250,000 259,203 Stillwater Health Care Revenue 5.00% 6/1/25 2,000,000 2,064,960 5.00% 6/1/35 1,000,000 1,020,580 ------------- 21,486,099 ------------- Multifamily Housing Revenue Bonds - 14.62% Chanhassen Multifamily Housing Revenue (Heritage Park Apartments Project-Section 8) 6.20% 7/1/30 (FHA) (AMT) 300,000 308,745 Chaska Multifamily Housing Revenue (West Suburban Housing Partners Project) 5.875% 3/1/31 (AMT) 1,000,000 911,230 @Hutchinson Multifamily Housing Revenue (Evergreen Apartments Project-Section 8) 5.75% 11/1/28 2,000,000 1,866,840 Minneapolis Multifamily Housing Revenue (Grant Street Apartments Project) Series A 7.25% 11/1/29 2,085,000 2,134,664 (Olson Townhomes Project) 6.00% 12/1/19 (AMT) 1,555,000 1,555,342 (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 690,000 712,667 Minnesota State Housing Finance Agency Rental Housing Series A 4.875% 8/1/24 (AMT) 585,000 595,185 Series A-1 5.00% 8/1/40 (AMT) 1,000,000 1,005,410 St. Anthony Multifamily Housing Revenue (Chandler Place Project) Series A 6.05% 11/20/16 (GNMA) (FHA) 135,000 138,453 St. Cloud Housing & Redevelopment Authority Revenue (Sterling Heights Apartments Project) 7.55% 4/1/39 (AMT) 530,000 554,544 St. Paul Housing & Redevelopment Authority Multifamily Housing Revenue (Selby Grotto Housing Project) 5.50% 9/20/44 (GNMA) (FHA) (AMT) 750,000 770,873 Stillwater Multifamily Revenue (Stillwater Cottages Project) Series A 6.75% 11/1/11 205,000 210,765 Series A 7.00% 11/1/27 340,000 349,268 7.00% 11/1/16 (AMT) 680,000 699,040 Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Multifamily Housing Revenue Bonds (continued) Washington County Housing & Redevelopment Authority Governmental Revenue (Briar Pond Project) Series B 7.125% 8/20/34 $ 845,000 $ 788,301 (Woodland Park Apartments Project) 4.70% 10/1/32 2,075,000 2,085,894 ------------- 14,687,221 ------------- Municipal Lease Revenue Bonds - 2.61% Andover Economic Development Authority Public Facilities Lease Revenue (Andover Community Center) 5.20% 2/1/34 1,000,000 1,041,120 Hibbing Economic Development Authority Revenue (Hibbing Lease Obligation Project) 6.40% 2/1/12 530,000 530,710 St. Paul Port Authority Lease Revenue (Robert Street Office Building Project) 5.00% 12/1/27 1,000,000 1,054,130 ------------- 2,625,960 ------------- Political Subdivision General Obligation Bonds - 4.26% Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 500,000 537,945 Moorhead Series B 5.00% 2/1/33 (MBIA) 750,000 789,293 Perham Disposal System 6.00% 5/1/22 (AMT) 1,500,000 1,593,840 Todd Morrison Cass & Wadena Counties United Hospital District (Health Care Facilities-Lakewood) 5.00% 12/1/21 610,000 634,748 5.125% 12/1/24 205,000 213,950 5.25% 12/1/26 490,000 513,613 ------------- 4,283,389 ------------- - -/-Pre-Refunded Bonds - 7.00% Little Canada Multifamily Housing Revenue Alternative Development (Montreal Courts Apartments Project) Series A 6.25% 12/1/27-07 1,250,000 1,303,213 Minneapolis Community Development Agency Supported Development Revenue Series G-3 5.45% 12/1/31-11 1,000,000 1,092,550 Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32-12 2,000,000 2,230,139 Perham Hospital District Senior Congregate Housing Facilities Revenue (Briarwood Project) 6.25% 2/1/22-07 620,000 644,403 Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series D 5.25% 7/1/38-12 1,500,000 1,635,150 Rice County Certificates of Participation Series A 6.00% 12/1/21-06 125,000 127,479 ------------- 7,032,934 ------------- School District General Obligation Bonds - 2.90% Farmington Independent School District #192 Series B 5.00% 2/1/27 (FSA) 1,000,000 1,060,910 15 - -------------------------------------------------------------------------------- Delaware Minnesota High-Yield Municipal Bond Fund Statements - -------------------------------------------------------------------------------- OF NET ASSETS (CONTINUED) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- School District General Obligation Bonds (continued) Lakeville Independent School District #194 Series A 4.75% 2/1/22 (FSA) $ 1,000,000 $ 1,042,180 St. Paul Independent School District #625 Series B 5.00% 2/1/20 (FSA) 750,000 809,018 ------------- 2,912,108 ------------- Single Family Housing Revenue Bonds - 0.80% Minnesota State Housing Finance Agency Single Family Mortgage Series E 6.25% 1/1/23 (AMT) 15,000 15,317 Series J 5.90% 7/1/28 (AMT) 730,000 754,528 Series M 5.875% 1/1/17 30,000 30,186 ------------- 800,031 ------------- State General Obligation Bonds - 1.07% **Minnesota State Inverse Floater ROLs 6.821% 11/1/17 1,000,000 1,076,080 ------------- 1,076,080 ------------- Tax Increment/Special Assessment Bonds - 2.31% Minneapolis Tax Increment Revenue (Ivory Tower Project) 5.70% 2/1/29 785,000 795,896 Minneapolis Tax Increment Revenue Refunding (St. Anthony Falls Project) 5.65% 2/1/27 500,000 507,210 St. Paul Housing & Redevelopment Authority Tax Increment (Upper Landing Project) Series A 6.80% 3/1/29 1,000,000 1,015,440 ------------- 2,318,546 ------------- Territorial General Obligation Bonds - 0.51% Puerto Rico Commonwealth Public Improvement Series A 5.00% 7/1/34 500,000 515,270 ------------- 515,270 ------------- Total Municipal Bonds (cost $93,760,379) 96,103,151 ------------- Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 4.92% - -------------------------------------------------------------------------------- Money Market Instruments - 1.14% Federated Minnesota Municipal Cash Trust 1,141,494 1,141,494 ------------- 1,141,494 ------------- Principal Amount oVariable Rate Demand Notes - 3.78% Eagan Revenue Anticipation Notes 3.23% 5/30/12 $ 800,000 800,000 Hennepin County Series A 3.05% 12/1/25 (SPA) 1,000,000 1,000,000 Minneapolis Convention Center Series A 3.05% 12/1/14 (SPA) 1,000,000 1,000,000 Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 1,000,000 1,000,000 ------------- 3,800,000 ------------- Total Short-Term Investments (cost $4,941,494) 4,941,494 ------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total Market Value of Securities - 100.55% (cost $98,701,873) $ 101,044,645 Liabilities Net of Receivables and Other Assets - (0.55%) (548,792) ------------- Net Assets Applicable to 9,556,444 Shares Outstanding - 100.00% $ 100,495,853 ============= Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class A ($71,510,735 / 6,803,558 Shares) $ 10.51 ------------- Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class B ($10,554,463 / 1,002,507 Shares) $ 10.53 ------------- Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class C ($18,430,655 / 1,750,379 Shares) $ 10.53 ------------- Components of Net Assets at February 28, 2006: Shares of beneficial interest (unlimited authorization - no par) $ 100,491,739 Undistributed net investment income 294 Accumulated net realized loss on investments (2,338,952) Net unrealized appreciation of investments 2,342,772 ------------- Total net assets $ 100,495,853 ============= - -/- Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 7 in "Notes to Financial Statements." ** 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, 2006. See Note 7 in "Notes to Financial Statements." o Variable rate security. The interest rate shown is the rate as of February 28, 2006. ++ Non-income producing security. Security is currently in default. @ Illiquid security. At February 28, 2006, the aggregate amount of illiquid securities equals $1,866,840, which represented 1.86% of the Fund's net assets. See Note 7 in "Notes to Financial Statements." Summary of Abbreviations: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FHA - Insured by the Federal Housing Administration FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance ROLs - Residual Option Longs SPA - Stand-by Purchase Agreement Net Asset Value and Offering Price per Share - Delaware Minnesota High-Yield Municipal Bond Fund Net asset value Class A (A) $ 10.51 Sales charge (4.50% of offering price) (B) 0.50 ------------- Offering price $ 11.01 ============= (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. 16 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Statements Six Months Ended February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- OF OPERATIONS
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund Investment Income: Interest $ 9,901,604 $ 5,865,041 $ 1,349,168 $ 2,380,977 ----------- ----------- ----------- ----------- Expenses: Management fees 1,079,278 598,997 146,048 255,488 Distribution expenses -- Class A 456,784 270,135 63,239 81,918 Distribution expenses -- Class B 62,643 58,156 12,630 52,080 Distribution expenses -- Class C 70,990 59,790 26,598 83,567 Dividend disbursing and transfer agent fees and expenses 102,042 68,812 19,493 29,566 Accounting and administration expenses 78,493 47,920 11,684 18,581 Legal and professional fees 30,456 22,140 9,313 11,324 Registration fees 17,000 15,425 7,970 6,750 Trustees' fees 11,274 6,822 1,654 2,675 Reports and statements to shareholders 10,876 12,265 5,366 4,977 Custodian fees 8,049 5,257 1,541 2,917 Insurance fees 5,482 2,451 538 1,472 Pricing fees 2,007 1,058 644 1,225 Taxes (other than taxes on income) 779 537 230 179 Other 9,925 6,129 2,142 1,367 ----------- ----------- ----------- ----------- 1,946,078 1,175,894 309,090 554,086 Less expenses absorbed or waived (7,560) (20,556) (30,872) (39,484) Less waived distribution expenses -- Class A -- -- (25,296) -- Less expense paid indirectly (1,685) (231) (429) (33) ----------- ----------- ----------- ----------- Total operating expenses 1,936,833 1,155,107 252,493 514,569 ----------- ----------- ----------- ----------- Net Investment Income 7,964,771 4,709,934 1,096,675 1,866,408 ----------- ----------- ----------- ----------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on investments 424,079 (108,140) (112,049) 34,629 Net change in unrealized appreciation/depreciation of investments (4,977,425) (2,971,577) (594,726) (816,753) ----------- ----------- ----------- ----------- Net Realized and Unrealized Loss on Investments (4,553,346) (3,079,717) (706,775) (782,124) ----------- ----------- ----------- ----------- Net Increase in Net Assets Resulting from Operations $ 3,411,425 $ 1,630,217 $ 389,900 $ 1,084,284 =========== =========== =========== ===========
See accompanying notes 17 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Statements - -------------------------------------------------------------------------------- OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free Minnesota Minnesota Fund Insured Fund Six Months Year Six Months Year Ended Ended Ended Ended 2/28/06 8/31/05 2/28/06 8/31/05 (Unaudited) (Unaudited) Increase (Decrease) in Net Assets from Operations: Net investment income $ 7,964,771 $ 15,842,204 $ 4,709,934 $ 10,006,289 Net realized gain (loss) on investments 424,079 521,727 (108,140) 483,566 Net change in unrealized appreciation/depreciation of investments (4,977,425) 6,325,529 (2,971,577) 2,576,840 ------------ ------------ ------------ --------------- Net increase in net assets resulting from operations 3,411,425 22,689,460 1,630,217 13,066,695 ------------ ------------ ------------ --------------- Dividends and Distributions to Shareholders from: Net investment income: Class A (7,591,083) (14,918,426) (4,304,924) (9,106,255) Class B (213,089) (468,436) (188,284) (438,591) Class C (240,881) (416,235) (193,003) (415,840) Net realized gain on investments: Class A (767,541) (4,220,929) (438,581) (1,001,479) Class B (26,047) (174,978) (23,729) (62,572) Class C (29,894) (135,698) (24,664) (55,205) ------------ ------------ ------------ --------------- (8,868,535) (20,334,702) (5,173,185) (11,079,942) ------------ ------------ ------------ --------------- Capital Share Transactions: Proceeds from shares sold: Class A 26,744,754 32,762,383 3,399,998 13,305,078 Class B 644,827 1,032,796 236,508 762,589 Class C 2,299,782 4,082,514 1,132,490 2,220,317 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 5,473,155 12,557,067 3,273,057 6,840,725 Class B 153,532 421,984 164,340 389,371 Class C 212,631 431,656 154,788 323,100 ------------ ------------ ------------ --------------- 35,528,681 51,288,400 8,361,181 23,841,180 ------------ ------------ ------------ --------------- Cost of shares repurchased: Class A (15,385,525) (31,030,615) (15,357,614) (22,291,529) Class B (467,921) (3,294,771) (1,075,329) (3,218,588) Class C (1,857,497) (1,444,705) (934,703) (2,404,134) ------------ ------------ ------------ --------------- (17,710,943) (35,770,091) (17,367,646) (27,914,251) ------------ ------------ ------------ --------------- Increase (decrease) in net assets derived from capital share transactions 17,817,738 15,518,309 (9,006,465) (4,073,071) ------------ ------------ ------------ --------------- Net Increase (Decrease) in Net Assets 12,360,628 17,873,067 (12,549,433) (2,086,318) Net Assets: Beginning of period 391,272,178 373,399,111 251,276,535 253,362,853 ------------ ------------ ------------ --------------- End of period $403,632,806 $391,272,178 $238,727,102 $ 251,276,535 ============ ============ ============ =============== Undistributed net investment income $ 147,934 $ 147,934 $ -- $ --
See accompanying notes 18 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Statements - -------------------------------------------------------------------------------- OF CHANGES IN NET ASSETS (CONTINUED)
Delaware Tax-Free Delaware Minnesota High-Yield Minnesota Intermediate Fund Municipal Bond Fund Six Months Year Six Months Year Ended Ended Ended Ended 2/28/06 8/31/05 2/28/06 8/31/05 (Unaudited) (Unaudited) Increase (Decrease) in Net Assets from Operations: Net investment income $ 1,096,675 $ 2,350,094 $ 1,866,408 $ 3,196,642 Net realized gain (loss) on investments (112,049) 799,234 34,629 26,471 Net change in unrealized appreciation/depreciation of investments (594,726) (107,313) (816,753) 2,717,449 ------------ ------------- ------------ --------------- Net increase in net assets resulting from operations 389,900 3,042,015 1,084,284 5,940,562 ------------ ------------- ------------ --------------- Dividends and Distributions to Shareholders from: Net investment income: Class A (978,723) (2,063,392) (1,386,136) (2,292,733) Class B (37,941) (85,793) (180,751) (419,856) Class C (80,029) (200,891) (290,212) (482,033) ------------ ------------- ------------ --------------- (1,096,693) (2,350,076) (1,857,099) (3,194,622) ------------ ------------- ------------ --------------- Capital Share Transactions: Proceeds from shares sold: Class A 2,049,924 8,856,040 12,589,768 22,657,439 Class B 10,970 46,423 1,110,843 1,226,522 Class C 566,681 735,412 3,715,184 5,727,603 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 727,318 1,526,786 850,359 1,387,489 Class B 28,689 62,528 116,998 256,713 Class C 60,182 157,534 201,188 291,405 ------------ ------------- ------------ --------------- 3,443,764 11,384,723 18,584,340 31,547,171 ------------ ------------- ------------ --------------- Cost of shares repurchased: Class A (5,838,734) (15,027,594) (5,188,387) (4,758,836) Class B (608,658) (550,863) (1,079,982) (3,831,970) Class C (1,650,808) (2,157,860) (1,163,753) (2,120,433) ------------ ------------- ------------ --------------- (8,098,200) (17,736,317) (7,432,122) (10,711,239) ------------ ------------- ------------ --------------- Increase (decrease) in net assets derived from capital share transactions (4,654,436) (6,351,594) 11,152,218 20,835,932 ------------ ------------- ------------ --------------- Net Increase (Decrease) in Net Assets (5,361,229) (5,659,655) 10,379,403 23,581,872 Net Assets: Beginning of period 61,764,626 67,424,281 90,116,450 66,534,578 ------------ ------------- ------------ --------------- End of period $ 56,403,397 $ 61,764,626 $100,495,853 $ 90,116,450 ============ ============= ============ =============== Undistributed net investment income $ -- $ -- $ 294 $ --
See accompanying notes 19 Financial HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
- --------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Fund Class A - --------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 12.690 $ 12.620 $ 12.450 $ 12.610 $ 12.570 $ 12.120 Income (loss) from investment operations: Net investment income 0.254 0.527 0.590 0.622 0.634 0.615 Net realized and unrealized gain (loss) on investments (0.141) 0.222 0.348 (0.148) 0.037 0.450 -------- -------- -------- -------- -------- -------- Total from investment operations 0.113 0.749 0.938 0.474 0.671 1.065 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.257) (0.526) (0.600) (0.625) (0.631) (0.615) Net realized gain on investments (0.026) (0.153) (0.168) (0.009) -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.283) (0.679) (0.768) (0.634) (0.631) (0.615) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 12.520 $ 12.690 $ 12.620 $ 12.450 $ 12.610 $ 12.570 ======== ======== ======== ======== ======== ======== Total return(3) 0.92% 6.12% 7.72% 3.80% 5.54% 9.02% Ratios and supplemental data: Net assets, end of period (000 omitted) $376,236 $364,491 $348,000 $340,029 $356,522 $363,033 Ratio of expenses to average net assets 0.94% 0.93% 0.94% 0.97% 0.98% 1.00% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.94% 0.94% 0.94% 0.97% 0.98% 1.00% Ratio of net investment income to average net assets 4.11% 4.19% 4.68% 4.90% 5.11% 5.00% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.11% 4.18% 4.68% 4.90% 5.11% 5.00% Portfolio turnover 18% 10% 25% 27% 13% 10%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 20 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- --------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Fund Class B - --------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 12.700 $ 12.630 $ 12.460 $ 12.620 $ 12.580 $ 12.120 Income (loss) from investment operations: Net investment income 0.208 0.433 0.496 0.529 0.540 0.523 Net realized and unrealized gain (loss) on investments (0.141) 0.222 0.348 (0.150) 0.037 0.460 -------- -------- -------- -------- -------- -------- Total from investment operations 0.067 0.655 0.844 0.379 0.577 0.983 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.211) (0.432) (0.506) (0.530) (0.537) (0.523) Net realized gain on investments (0.026) (0.153) (0.168) (0.009) -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.237) (0.585) (0.674) (0.539) (0.537) (0.523) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 12.530 $ 12.700 $ 12.630 $ 12.460 $ 12.620 $ 12.580 ======== ======== ======== ======== ======== ======== Total return(3) 0.54% 5.33% 6.91% 3.02% 4.75% 8.29% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 12,965 $ 12,810 $ 14,588 $ 16,394 $ 17,043 $ 15,927 Ratio of expenses to average net assets 1.69% 1.68% 1.69% 1.72% 1.73% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.69% 1.69% 1.69% 1.72% 1.73% 1.75% Ratio of net investment income to average net assets 3.36% 3.44% 3.93% 4.15% 4.36% 4.25% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.36% 3.43% 3.93% 4.15% 4.36% 4.25% Portfolio turnover 18% 10% 25% 27% 13% 10%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 21 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- --------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Fund Class C - --------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 12.720 $ 12.650 $ 12.480 $ 12.640 $ 12.590 $ 12.140 Income (loss) from investment operations: Net investment income 0.208 0.433 0.495 0.529 0.540 0.523 Net realized and unrealized gain (loss) on investments (0.141) 0.222 0.348 (0.151) 0.047 0.450 -------- -------- -------- -------- -------- -------- Total from investment operations 0.067 0.655 0.843 0.378 0.587 0.973 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.211) (0.432) (0.505) (0.529) (0.537) (0.523) Net realized gain on investments (0.026) (0.153) (0.168) (0.009) -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.237) (0.585) (0.673) (0.538) (0.537) (0.523) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 12.550 $ 12.720 $ 12.650 $ 12.480 $ 12.640 $ 12.590 ======== ======== ======== ======== ======== ======== Total return(3) 0.54% 5.32% 6.90% 3.01% 4.82% 8.20% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 14,432 $ 13,971 $ 10,811 $ 10,161 $ 7,682 $ 6,042 Ratio of expenses to average net assets 1.69% 1.68% 1.69% 1.72% 1.73% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.69% 1.69% 1.69% 1.72% 1.73% 1.75% Ratio of net investment income to average net assets 3.36% 3.44% 3.93% 4.15% 4.36% 4.25% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.36% 3.43% 3.93% 4.15% 4.36% 4.25% Portfolio turnover 18% 10% 25% 27% 13% 10%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of these changes for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 22 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ---------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Insured Fund Class A - ---------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.110 $ 11.020 $ 10.740 $ 10.940 $ 10.900 $ 10.480 Income (loss) from investment operations: Net investment income 0.217 0.446 0.479 0.498 0.514 0.514 Net realized and unrealized gain (loss) on investments (0.139) 0.138 0.282 (0.197) 0.038 0.421 ----------- --------- --------- ---------- ---------- --------- Total from investment operations 0.078 0.584 0.761 0.301 0.552 0.935 ----------- --------- --------- ---------- ---------- --------- Less dividends and distributions from: Net investment income (0.216) (0.445) (0.481) (0.501) (0.512) (0.515) Net realized gain on investments (0.022) (0.049) -- -- -- -- ----------- --------- --------- ---------- ---------- --------- Total dividends and distributions (0.238) (0.494) (0.481) (0.501) (0.512) (0.515) ----------- --------- --------- ---------- ---------- --------- Net asset value, end of period $ 10.950 $ 11.110 $ 11.020 $ 10.740 $ 10.940 $ 10.900 =========== ========= ========= ========== ========== ========= Total return(3) 0.73% 5.42% 7.20% 2.75% 5.25% 9.14% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 214,789 $ 226,671 $ 227,018 $ 231,738 $ 239,763 $ 242,716 Ratio of expenses to average net assets 0.89% 0.89% 0.89% 0.93% 0.96% 0.90% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.91% 0.90% 0.89% 0.93% 0.96% 0.90% Ratio of net investment income to average net assets 4.01% 4.05% 4.37% 4.52% 4.78% 4.82% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.99% 4.04% 4.37% 4.52% 4.78% 4.82% Portfolio turnover 9% 10% 15% 30% 15% 7%
(1) 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 reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 23 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 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.100 $ 11.010 $ 10.730 $ 10.940 $ 10.890 $ 10.470 Income (loss) from investment operations: Net investment income 0.177 0.364 0.397 0.415 0.433 0.434 Net realized and unrealized gain (loss) on investments (0.139) 0.137 0.282 (0.207) 0.048 0.422 ----------- --------- --------- ---------- ---------- --------- Total from investment operations 0.038 0.501 0.679 0.208 0.481 0.856 ----------- --------- --------- ---------- ---------- --------- Less dividends and distributions from: Net investment income (0.176) (0.362) (0.399) (0.418) (0.431) (0.436) Net realized gain on investments (0.022) (0.049) -- -- -- -- ----------- --------- --------- ---------- ---------- --------- Total dividends and distributions (0.198) (0.411) (0.399) (0.418) (0.431) (0.436) ----------- --------- --------- ---------- ---------- --------- Net asset value, end of period $ 10.940 $ 11.100 $ 11.010 $ 10.730 $ 10.940 $ 10.890 =========== ========= ========= ========== ========== ========= Total return(3) 0.36% 4.64% 6.41% 1.89% 4.56% 8.34% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 11,488 $ 12,337 $ 14,317 $ 15,647 $ 14,341 $ 12,732 Ratio of expenses to average net assets 1.64% 1.64% 1.64% 1.68% 1.71% 1.65% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.66% 1.65% 1.64% 1.68% 1.71% 1.65% Ratio of net investment income to average net assets 3.26% 3.30% 3.62% 3.77% 4.03% 4.07% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.24% 3.29% 3.62% 3.77% 4.03% 4.07% Portfolio turnover 9% 10% 15% 30% 15% 7%
(1) 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 reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 24 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 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.120 $ 11.030 $ 10.750 $ 10.950 $ 10.910 $ 10.480 Income (loss) from investment operations: Net investment income 0.177 0.364 0.396 0.414 0.433 0.434 Net realized and unrealized gain (loss) on investments (0.129) 0.137 0.282 (0.197) 0.038 0.432 -------- -------- -------- --------- ---------- -------- Total from investment operations 0.048 0.501 0.678 0.217 0.471 0.866 -------- -------- -------- --------- ---------- -------- Less dividends and distributions from: Net investment income (0.176) (0.362) (0.398) (0.417) (0.431) (0.436) Net realized gain on investments (0.022) (0.049) -- -- -- -- -------- -------- -------- --------- ---------- -------- Total dividends and distributions (0.198) (0.411) (0.398) (0.417) (0.431) (0.436) -------- -------- -------- --------- ---------- -------- Net asset value, end of period $ 10.970 $ 11.120 $ 11.030 $ 10.750 $ 10.950 $ 10.910 ======== ======== ======== ========= ========== ======== Total return(3) 0.44% 4.63% 6.39% 1.97% 4.46% 8.42% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 12,450 $ 12,269 $ 12,028 $ 11,966 $ 6,083 $ 4,265 Ratio of expenses to average net assets 1.64% 1.64% 1.64% 1.68% 1.71% 1.65% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.66% 1.65% 1.64% 1.68% 1.71% 1.65% Ratio of net investment income to average net assets 3.26% 3.30% 3.62% 3.77% 4.03% 4.07% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.24% 3.29% 3.62% 3.77% 4.03% 4.07% Portfolio turnover 9% 10% 15% 30% 15% 7%
(1) 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 reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 25 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Intermediate Fund Class A - ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.010 $ 10.890 $ 10.630 $ 10.720 $ 10.580 $ 10.350 Income (loss) from investment operations: Net investment income 0.209 0.407 0.444 0.469 0.512 0.526 Net realized and unrealized gain (loss) on investments (0.130) 0.120 0.260 (0.088) 0.138 0.230 --------- --------- -------- -------- ---------- -------- Total from investment operations 0.079 0.527 0.704 0.381 0.650 0.756 --------- --------- -------- -------- ---------- -------- Less dividends and distributions from: Net investment income (0.209) (0.407) (0.444) (0.471) (0.510) (0.526) --------- --------- -------- -------- ---------- -------- Total dividends and distributions (0.209) (0.407) (0.444) (0.471) (0.510) (0.526) --------- --------- -------- -------- ---------- -------- Net asset value, end of period $ 10.880 $ 11.010 $ 10.890 $ 10.630 $ 10.720 $ 10.580 ========= ========= ======== ======== ========== ======== Total return(3) 0.73% 4.93% 6.73% 3.59% 6.34% 7.50% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 49,293 $ 52,958 $ 57,012 $ 57,635 $ 51,034 $ 49,089 Ratio of expenses to average net assets 0.75% 0.79% 0.84% 0.86% 0.85% 0.90% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.95% 0.95% 0.95% 0.96% 0.85% 0.93% Ratio of net investment income to average net assets 3.86% 3.72% 4.10% 4.32% 4.86% 5.04% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.66% 3.56% 3.99% 4.22% 4.86% 5.01% Portfolio turnover 10% 25% 30% 23% 35% 24%
(1) 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 less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager and distributor, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 26 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- --------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Intermediate Fund Class B - --------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.040 $ 10.920 $ 10.650 $ 10.740 $ 10.600 $ 10.370 Income (loss) from investment operations: Net investment income 0.163 0.314 0.352 0.377 0.423 0.438 Net realized and unrealized gain (loss) on investments (0.130) 0.120 0.270 (0.088) 0.137 0.232 -------- -------- -------- -------- -------- -------- Total from investment operations 0.033 0.434 0.622 0.289 0.560 0.670 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.163) (0.314) (0.352) (0.379) (0.420) (0.440) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.163) (0.314) (0.352) (0.379) (0.420) (0.440) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.910 $ 11.040 $ 10.920 $ 10.650 $ 10.740 $ 10.600 ======== ======== ======== ======== ======== ======== Total return(3) 0.31% 4.03% 5.91% 2.70% 5.43% 6.59% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 2,206 $ 2,811 $ 3,224 $ 4,002 $ 2,852 $ 2,443 Ratio of expenses to average net assets 1.60% 1.64% 1.69% 1.71% 1.70% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.70% 1.70% 1.73% 1.70% 1.78% Ratio of net investment income to average net assets 3.01% 2.87% 3.25% 3.47% 4.01% 4.19% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.91% 2.81% 3.24% 3.45% 4.01% 4.16% Portfolio turnover 10% 25% 30% 23% 35% 24%
(1) 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 less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 27 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- --------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Minnesota Intermediate Fund Class C - --------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 11.030 $ 10.910 $ 10.640 $ 10.730 $ 10.590 $ 10.360 Income (loss) from investment operations: Net investment income 0.163 0.314 0.352 0.377 0.423 0.437 Net realized and unrealized gain (loss) on investments (0.130) 0.120 0.270 (0.088) 0.137 0.233 -------- -------- -------- -------- -------- -------- Total from investment operations 0.033 0.434 0.622 0.289 0.560 0.670 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.163) (0.314) (0.352) (0.379) (0.420) (0.440) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.163) (0.314) (0.352) (0.379) (0.420) (0.440) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.900 $ 11.030 $ 10.910 $ 10.640 $ 10.730 $ 10.590 ======== ======== ======== ======== ======== ======== Total return(3) 0.31% 4.04% 5.91% 2.71% 5.44% 6.59% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 4,904 $ 5,996 $ 7,188 $ 6,544 $ 4,887 $ 3,059 Ratio of expenses to average net assets 1.60% 1.64% 1.69% 1.71% 1.70% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.70% 1.70% 1.73% 1.70% 1.78% Ratio of net investment income to average net assets 3.01% 2.87% 3.25% 3.47% 4.01% 4.19% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.91% 2.81% 3.24% 3.45% 4.01% 4.16% Portfolio turnover 10% 25% 30% 23% 35% 24%
(1) 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 less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 28 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- --------------------------------------------------------------------------------------------------------------------------------- Delaware Minnesota High-Yield Municipal Bond Fund Class A - --------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 10.610 $ 10.240 $ 9.910 $ 9.950 $ 9.900 $ 9.650 Income (loss) from investment operations: Net investment income 0.220 0.469 0.512 0.550 0.586 0.581 Net realized and unrealized gain (loss) on investments (0.101) 0.372 0.328 (0.030) 0.056 0.243 -------- -------- -------- -------- -------- -------- Total from investment operations 0.119 0.841 0.840 0.520 0.642 0.824 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.219) (0.471) (0.510) (0.560) (0.592) (0.574) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.219) (0.471) (0.510) (0.560) (0.592) (0.574) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.510 $ 10.610 $ 10.240 $ 9.910 $ 9.950 $ 9.900 ======== ======== ======== ======== ======== ======== Total return(3) 1.15% 8.40% 8.65% 5.33% 6.74% 8.84% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 71,511 $ 63,802 $ 42,636 $ 36,644 $ 34,867 $ 34,615 Ratio of expenses to average net assets 0.89% 0.89% 0.75% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.97% 0.98% 1.00% 1.04% 1.01% 0.94% Ratio of net investment income to average net assets 4.23% 4.50% 5.03% 5.48% 5.98% 6.01% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.15% 4.41% 4.78% 5.19% 5.72% 5.82% Portfolio turnover 6% 3% 24% 32% 33% 13%
(1) 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 $0.001, a decrease in net realized and unrealized gain (loss) per share of $0.001, and an increase in the ratio of net investment income to average net assets of 0.01%. Per share data for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 29 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Minnesota High-Yield Municipal Bond Fund Class B - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 10.630 $ 10.250 $ 9.930 $ 9.970 $ 9.910 $ 9.650 Income (loss) from investment operations: Net investment income 0.181 0.391 0.435 0.475 0.513 0.509 Net realized and unrealized gain (loss) on investments (0.101) 0.381 0.318 (0.030) 0.063 0.248 -------- -------- -------- -------- -------- -------- Total from investment operations 0.080 0.772 0.753 0.445 0.576 0.757 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.180) (0.392) (0.433) (0.485) (0.516) (0.497) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.180) (0.392) (0.433) (0.485) (0.516) (0.497) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.530 $ 10.630 $ 10.250 $ 9.930 $ 9.970 $ 9.910 ======== ======== ======== ======== ======== ======== Total return(3) 0.77% 7.68% 7.71% 4.55% 6.03% 8.09% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 10,554 $ 10,505 $ 12,463 $ 12,513 $ 13,379 $ 12,932 Ratio of expenses to average net assets 1.64% 1.64% 1.50% 1.50% 1.50% 1.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.72% 1.73% 1.75% 1.79% 1.76% 1.69% Ratio of net investment income to average net assets 3.48% 3.75% 4.28% 4.73% 5.23% 5.26% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.40% 3.66% 4.03% 4.44% 4.97% 5.07% Portfolio turnover 6% 3% 24% 32% 33% 13%
(1) 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 $0.001, a decrease in net realized and unrealized gain (loss) per share of $0.001, and an increase in the ratio of net investment income to average net assets of 0.01%. Per share data for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 30 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Minnesota High-Yield Municipal Bond Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 2/28/06(2) 8/31/05 8/31/04 8/31/03 8/31/02(1) 8/31/01 (Unaudited) Net asset value, beginning of period $ 10.630 $ 10.250 $ 9.930 $ 9.970 $ 9.910 $ 9.650 Income (loss) from investment operations: Net investment income 0.181 0.391 0.435 0.475 0.513 0.509 Net realized and unrealized gain (loss) on investments (0.101) 0.381 0.318 (0.030) 0.063 0.248 -------- -------- -------- -------- -------- -------- Total from investment operations 0.080 0.772 0.753 0.445 0.576 0.757 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.180) (0.392) (0.433) (0.485) (0.516) (0.497) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.180) (0.392) (0.433) (0.485) (0.516) (0.497) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.530 $ 10.630 $ 10.250 $ 9.930 $ 9.970 $ 9.910 ======== ======== ======== ======== ======== ======== Total return(3) 0.77% 7.68% 7.71% 4.54% 6.03% 8.09% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 18,431 $ 15,809 $ 11,435 $ 10,754 $ 7,840 $ 6,807 Ratio of expenses to average net assets 1.64% 1.64% 1.50% 1.50% 1.50% 1.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.72% 1.73% 1.75% 1.79% 1.76% 1.69% Ratio of net investment income to average net assets 3.48% 3.75% 4.28% 4.73% 5.23% 5.26% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.40% 3.66% 4.03% 4.44% 4.97% 5.07% Portfolio turnover 6% 3% 24% 32% 33% 13%
(1) 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 $0.001, a decrease in net realized and unrealized gain (loss) per share of $0.001, and an increase in the ratio of net investment income to average net assets of 0.01%. Per share data for periods prior to September 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 31 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Notes February 28, 2006 (Unaudited) - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers five series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund and Delaware Tax-Free New York Fund. 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 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 twelve 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. Open-end investment companies are valued at their published net asset value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). Federal Income Taxes - Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. 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(R) 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) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends 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." 32 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Notes - -------------------------------------------------------------------------------- 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 Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- On the first $500 million 0.550% 0.500% 0.500% 0.550% On the next $500 million 0.500% 0.475% 0.475% 0.500% On the next $1.5 billion 0.450% 0.450% 0.450% 0.450% In excess of $2.5 billion 0.425% 0.425% 0.425% 0.425%
DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed specified percentages of average daily net assets as shown below.
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Operating expense limitation as a percentage of average daily net assets (per annum) 0.69% 0.64% 0.60% 0.64% Expiration date 10/31/06 10/31/06 10/31/06 10/31/06 Effective December 30, 2005, operating expense limitation as a percentage of average daily net assets (per annum) 0.68% 0.64% 0.60% 0.64% Expiration date 12/31/06 12/31/06 12/31/06 12/31/06
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. Each Fund pays DSC a monthly fee computed at the annual rate of 0.04% of each Fund's average daily net assets 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. DDLP has contracted to waive distribution fees through December 31, 2006 in order to prevent distribution and service fees of Class A shares from exceeding 0.15% of average daily net assets for Delaware Tax-Free Minnesota Intermediate Fund. At February 28, 2006, the Funds had liabilities payable to affiliates as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Investment management fee payable to DMC $166,311 $86,117 $16,671 $33,844 Dividend disbursing, transfer agent, accounting and administration fees and expenses payable to DSC 62,562 40,188 12,633 17,823 Distribution fee payable to DDLP 97,000 51,889 8,545 45,184 Other expenses payable to DMC and affiliates* 20,907 8,863 4,629 9,148
* 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, 2006, each Fund was charged internal legal services provided by DMC as follows: Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund - ----------------- ----------------- ----------------- ------------------- $14,674 $8,934 $2,179 $3,472 33 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued) For the six months ended February 28, 2006, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund - ----------------- ----------------- ----------------- ------------------- $38,062 $12,282 $2,625 $32,848 For the six months ended February 28, 2006, DDLP received gross contingent deferred sales charge commissions on redemption of each Fund's Class A, Class B and Class C shares, respectively. These commissions were entirely used to offset up-front commissions previously paid by DDLP to broker-dealers on sales of those shares. The amounts received were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Class A $ 637 $ 32 $1,692 $9,896 Class B 1,861 4,966 1,758 3,445 Class C 1,300 1,987 993 3,213
Certain officers of DMC, DSC, and DDLP are officers and/or trustees of the Trusts. These officers and trustees are paid no compensation by the Funds. 3. Investments For the six months ended February 28, 2006, the Funds made purchases and sales of investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Purchases $39,425,366 $10,080,534 $2,855,170 $15,240,177 Sales 34,101,825 13,179,100 6,455,541 2,460,055
At February 28, 2006, 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, 2006, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Cost of investments $ 382,382,401 $ 219,507,859 $ 54,233,764 $ 98,639,056 ============= =============== =============== =============== Aggregate unrealized appreciation $ 19,252,802 $ 16,847,279 $ 2,124,977 $ 3,115,360 Aggregate unrealized depreciation (501,503) (63,817) (66,953) (709,771) ------------- --------------- --------------- --------------- Net unrealized appreciation $ 18,751,299 $ 16,783,462 $ 2,058,024 $ 2,405,589 ============= =============== =============== ===============
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, 2006 and year ended August 31, 2005 was as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Six months ended 2/28/06* Tax-exempt income $ 8,045,053 $ 4,686,211 $1,096,693 $1,857,099 Ordinary income 31,672 -- -- -- Long-term capital gain 791,810 486,974 -- -- ----------- ----------- ---------- ---------- Total $ 8,868,535 $ 5,173,185 $1,096,693 $1,857,099 =========== =========== ========== ========== Year ended 8/31/05 Tax-exempt income $15,803,097 $ 9,960,686 $2,350,076 $3,194,622 Long-term capital gain 4,531,605 1,119,256 -- -- ----------- ----------- ---------- ---------- Total $20,334,702 $11,079,942 $2,350,076 $3,194,622 =========== =========== ========== ==========
* Tax information for the period ended February 28, 2006 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. 34 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 4. Dividend and Distribution Information (continued) The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of February 28, 2006, the estimated components of net assets on a tax basis were as follows:
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Shares of beneficial interest $384,593,993 $222,056,876 $55,733,282 $100,491,739 Undistributed tax-exempt income 147,934 -- -- 294 Undistributed long-term capital gain 139,580 (10,836) -- -- Capital loss carryforwards -- -- (1,275,535) (2,433,778) Six month period realized gains (losses) -- -- (81,340) 32,009 Post-October losses -- (102,400) (31,034) -- Unrealized appreciation of investments 18,751,299 16,783,462 2,058,024 2,405,589 ------------ ------------ ----------- ------------ Net assets $403,632,806 $238,727,102 $56,403,397 $100,495,853 ============ ============ =========== ============
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales and tax treatment of market discount and premium on debt instruments. Post-October losses represent losses realized on investment transactions from November 1, 2005 through February 28, 2006 that, in accordance with federal income tax regulations, each Fund has elected to defer and treat as having arisen in the following fiscal year. For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of market discount on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. For the six months ended February 28, 2006, the Funds recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end.
Delaware Tax-Free Delaware Tax-Free Delaware Minnesota Delaware Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ----------------- ----------------- ----------------- ------------------- Undistributed (Accumulated) net investment income (loss) $ 80,282 $ (23,723) $ 18 $ (9,015) Accumulated realized gain (loss) (80,282) 23,723 (18) 9,015
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at August 31, 2005 will expire as follows: Delaware Tax-Free Delaware Minnesota Year of Minnesota High-Yield Expiration Intermediate Fund Municipal Bond Fund - ---------- ----------------- ------------------- 2008 $ -- $ 181,123 2009 1,024,839 1,267,552 2010 4,037 57,521 2011 246,659 243,334 2012 -- 684,248 ---------- ---------- Total $1,275,535 $2,433,778 ========== ========== For the six months ended February 28, 2006, the Delaware Tax-Free Minnesota Intermediate Fund had capital losses of $81,340 which may increase the capital loss carryforwards and Delaware Minnesota High-Yield Municipal Bond Fund had capital gains $32,009 which may reduce the capital loss carryforwards. 35 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 5. Capital Shares Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Minnesota Fund Minnesota Insured Fund ------------------------- ------------------------ Six Months Year Six Months Year Ended Ended Ended Ended 2/28/06 8/31/05 2/28/06 8/31/05 Shares sold: Class A 2,140,052 2,605,601 311,445 1,206,325 Class B 51,547 82,005 21,547 68,954 Class C 183,801 323,335 103,724 200,888 Shares issued upon reinvestments of dividends and distributions: Class A 438,005 999,673 299,506 620,080 Class B 12,278 33,587 15,053 35,325 Class C 16,975 34,287 14,142 29,235 ---------- ---------- ---------- ---------- 2,842,658 4,078,488 765,417 2,160,807 ---------- ---------- ---------- ---------- Shares repurchased: Class A (1,233,675) (2,466,727) (1,407,217) (2,021,780) Class B (37,238) (262,319) (98,433) (293,001) Class C (148,622) (114,430) (85,796) (217,296) ---------- ---------- ---------- ---------- (1,419,535) (2,843,476) (1,591,446) (2,532,077) ---------- ---------- ---------- ---------- Net increase (decrease) 1,423,123 1,235,012 (826,029) (371,270) ========== ========== ========== ==========
Delaware Tax-Free Delaware Minnesota High-Yield Minnesota Intermediate Fund Municipal Bond Fund --------------------------- ----------------------------- Six Months Year Six Months Year Ended Ended Ended Ended 2/28/06 8/31/05 2/28/06 8/31/05 Shares sold: Class A 188,954 811,048 1,204,683 2,173,370 Class B 991 4,238 106,016 117,618 Class C 52,171 67,333 354,780 547,300 Shares issued upon reinvestment of dividends and distributions: Class A 66,854 139,829 81,252 133,229 Class B 2,631 5,713 11,163 24,644 Class C 5,522 14,403 19,190 27,930 ---------- ---------- ---------- ---------- 317,123 1,042,564 1,777,084 3,024,091 ---------- ---------- ---------- ---------- Shares repurchased: Class A (537,393) (1,375,055) (496,572) (458,057) Class B (56,029) (50,607) (103,253) (369,311) Class C (151,659) (196,858) (111,289) (202,901) ---------- ---------- ---------- ---------- (745,081) (1,622,520) (711,114) (1,030,269) ---------- ---------- ---------- ---------- Net increase (decrease) (427,958) (579,956) 1,065,970 1,993,822 ========== ========== ========== ==========
For the six months ended February 28, 2006 and the year ended August 31, 2005, the following shares were converted from Class B to Class A shares. The respective amounts are included in Class B redemptions and Class A subscriptions in the tables above and the Statements of Changes in Net Assets.
Six Months Ended Year Ended 2/28/06 8/31/05 ---------------------------- -------------------------------- Class B Class A Class B Class A shares shares Value shares shares Value ------- ------- -------- ------- ------- ---------- Delaware Tax-Free Minnesota Fund 13,341 13,351 $167,692 113,069 113,158 $1,420,503 Delaware Tax-Free Minnesota Insured Fund 34,632 34,599 378,170 122,887 122,776 1,352,796 Delaware Tax-Free Minnesota Intermediate Fund 5,907 5,925 64,157 21,297 21,349 231,714 Delaware Minnesota High-Yield Municipal Bond Fund 68,110 68,229 711,826 192,047 192,388 1,991,365
36 - -------------------------------------------------------------------------------- Delaware Minnesota Municipal Bond Funds Notes - -------------------------------------------------------------------------------- TO FINANCIAL STATEMENTS (CONTINUED) 6. Line of Credit Each Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $225,000,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each 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, 2006, or at any time during the period. 7. Credit and Market Risk The Funds concentrate their investments in securities issued by municipalities, mainly in Minnesota. The value of these investments may be adversely affected by new legislation within the state, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. The Funds may invest in inverse floating rate securities ("inverse floaters"), a type of derivative tax-exempt obligation with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of inverse floaters will generally be more volatile than other tax-exempt investments. Such securities are identified on the Statements of Net Assets. The Funds may invest in advanced refunded bonds, escrow secured bonds or defeased bonds. Under current federal tax laws and regulations, state and local government borrowers are permitted to refinance outstanding bonds by issuing new bonds. The issuer refinances the outstanding debt to either reduce interest costs or to remove or alter restrictive covenants imposed by the bonds being refinanced. A refunding transaction where the municipal securities are being refunded within 90 days or less from the issuance of the refunding issue is known as a "current refunding." "Advance refunded bonds" are bonds in which the refunded bond issue remains outstanding for more than 90 days following the issuance of the refunding issue. In an advance refunding, the issuer will use the proceeds of a new bond issue to purchase high grade interest bearing debt securities which are then deposited in an irrevocable escrow account held by an escrow agent to secure all future payments of principal and interest and bond premium of the advance refunded bond. Bonds are "escrowed to maturity" when the proceeds of the refunding issue are deposited in an escrow account for investment sufficient to pay all of the principal and interest on the original interest payment and maturity dates. Bonds are considered "pre-refunded" when the refunding issue's proceeds are escrowed only until a permitted call date or dates on the refunded issue with the refunded issue being redeemed at the time, including any required premium. Bonds become "defeased" when the rights and interests of the bondholders and of their lien on the pledged revenues or other security under the terms of the bond contract are substituted with an alternative source of revenues (the escrow securities) sufficient to meet payments of principal and interest to maturity or to the first call dates. Escrowed secured bonds will often receive a rating of AAA from Moody's Investors Service, Inc., Standard & Poor's Rating Group, and/or Fitch due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement. The Tax-Free Minnesota Insured Fund will purchase escrow secured bonds without additional insurance only where the escrow is invested in securities of the U.S. government or agencies or instrumentalities of the U.S. government. Each Fund may invest a portion of its total assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, each Fund's Board of Trustees has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund's limitation on investments in illiquid assets. At February 28, 2006, there were no Rule 144A securities. Illiquid securities have been identified on the Statements of Net Assets. 8. 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. 37 - -------------------------------------------------------------------------------- About - -------------------------------------------------------------------------------- THE ORGANIZATION 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(R) Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Board of Trustees Jude T. Driscoll Chairman Delaware Investments(R) Family of Funds Philadelphia, PA Thomas L. Bennett Private Investor Rosemont, PA John A. Fry President Franklin & Marshall College Lancaster, PA Anthony D. Knerr Founder/Managing Director Anthony Knerr & Associates New York, NY Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. Philadelphia, PA 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 and Treasurer 3M Corporation St. Paul, MN J. Richard Zecher Founder Investor Analytics Scottsdale, AZ Affiliated Officers Michael P. Bishof Senior Vice President and Chief Financial Officer Delaware Investments(R) Family of Funds Philadelphia, PA David F. Connor Vice President, Deputy General Counsel and Secretary Delaware Investments(R) Family of Funds Philadelphia, PA David P. O'Connor Senior Vice President, General Counsel and Chief Legal Officer Delaware Investments(R) Family of Funds Philadelphia, PA John J. O'Connor Senior Vice President and Treasurer Delaware Investments(R) Family of Funds Philadelphia, PA Contact Information Investment Manager Delaware Management Company, a Series of Delaware Management Business Trust Philadelphia, PA National Distributor Delaware Distributors, L.P. Philadelphia, PA Shareholder Servicing, Dividend Disbursing and Transfer Agent Delaware Service Company, Inc. 2005 Market Street Philadelphia, PA 19103-7094 For Shareholders 800 523-1918 For Securities Dealers and Financial Institutions Representatives Only 800 362-7500 Web Site www.delawareinvestments.com Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries. - -------------------------------------------------------------------------------- Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Funds' 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 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 the Funds' Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. - -------------------------------------------------------------------------------- 38 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [DELAWARE INVESTMENTS(R) LOGO] - -------------------------------------------------------------------------------- Contact Information Web Site www.delawareinvestments.com E-mail service@delinvest.com Shareholder Service Center 800 523-1918 Call the Shareholder Service Center Monday to Friday, 8:00 a.m. to 7:00 p.m. Eastern Time: o For fund information, literature, price, yield, and performance figures. o For information on existing regular investment accounts and retirement plan accounts including wire investments, wire redemptions, telephone redemptions, and telephone exchanges. Delaphone Service 800 362-FUND (800 362-3863) o For convenient access to account information or current performance information on all Delaware Investments(R) Funds seven days a week, 24 hours a day, use this Touch-Tone(R) service. - -------------------------------------------------------------------------------- (344) Printed in the USA SA-MNALL[2/06] CGI 4/06 SEMI-0603 MINN PO10935 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: Chief Executive Officer Date: May 8, 2006 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: Chief Executive Officer Date: May 8, 2006 Michael P. Bishof - -------------------------------- By: Michael P. Bishof Title: Chief Financial Officer Date: May 8, 2006 EX-99.906CERT 2 ex_906cert.txt EXHIBIT 99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the attached report of the registrant on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify, to the best of such officer's knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. Date: May 8, 2006 Jude T. Driscoll - -------------------------------- By: Jude T. Driscoll Title: Chief Executive Officer Michael P. Bishof - -------------------------------- By: Michael P. Bishof Title: Chief Financial Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. EX-99.CERT 3 ex_99cert.txt EXHIBIT 99.CERT CERTIFICATION ------------- I, Jude T. Driscoll certify that: 1. I have reviewed this report on Form N-CSR of Voyageur Insured Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 8, 2006 Jude T. Driscoll - -------------------------------- By: Jude T. Driscoll Title: Chief Executive Officer EXHIBIT 99.CERT CERTIFICATION ------------- I, Michael P. Bishof, certify that: 1. I have reviewed this report on Form N-CSR of Voyageur Insured Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 8, 2006 Michael P. Bishof - -------------------------------- By: Michael P. Bishof Title: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----