N-CSR 1 n-csr.txt N-CSR.TXT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-6411 Exact name of registrant as specified in charter: Voyageur Investment Trust Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: August 31 Date of reporting period: February 28, 2005
Item 1. Reports to Stockholders The Registrant's shareholder reports are combined with the shareholder reports of other investment company registrants. This Form N-CSR pertains to the Delaware Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund of the Registrant, information on which is included in the following shareholder reports. Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) FIXED INCOME SEMIANNUAL REPORT FEBRUARY 28, 2005 -------------------------------------------------------------------------------- DELAWARE TAX-FREE CALIFORNIA INSURED FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS ----------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 1 ----------------------------------------------------------------- SECTOR ALLOCATION 4 ----------------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 7 Statements of Operations 19 Statements of Changes in Net Assets 20 Financial Highlights 23 Notes to Financial Statements 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) 2005 Delaware Distributors, L.P. DISCLOSURE For the Period September 1, 2004 to February 28, 2005 OF FUND EXPENSES As a shareholder of a fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2004 to February 28, 2005. ACTUAL EXPENSES The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund's actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. In each case, "Expenses Paid During Period" are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). DELAWARE TAX-FREE CALIFORNIA INSURED FUND(1) EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ----------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,033.60 0.94% $4.74 Class B 1,000.00 1,030.70 1.69% 8.51 Class C 1,000.00 1,030.00 1.69% 8.51 ----------------------------------------------------------------------------------------------------------------- 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 -----------------------------------------------------------------------------------------------------------------
(1) Effective November 1, 2004, The Fund's manager increased contractual expense waivers in effect for the Fund, causing the expenses paid by the Fund to decrease. Had the new expense waiver been in effect during the period, the Fund's expense analysis would be as follows:
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ----------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,033.60 0.87% $4.39 Class B 1,000.00 1,030.70 1.62% 8.16 Class C 1,000.00 1,030.00 1.62% 8.15 ----------------------------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.48 0.87% $4.36 Class B 1,000.00 1,016.76 1.62% 8.10 Class C 1,000.00 1,016.76 1.62% 8.10 -----------------------------------------------------------------------------------------------------------------------
1 SECTOR ALLOCATION As of February 28, 2005 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following charts list each Fund's categories of portfolio holdings as a percentage of total net assets and is provided in compliance with such requirement. DELAWARE TAX-FREE CALIFORNIA INSURED FUND ------------------------------------------------------------------------- PERCENTAGE SECTOR OF NET ASSETS ------------------------------------------------------------------------- MUNICIPAL BONDS 97.61% ------------------------------------------------------------------------- Airport Revenue Bonds 3.19% ------------------------------------------------------------------------- Continuing Care/Retirement Revenue Bonds 3.22% ------------------------------------------------------------------------- Dedicated Tax & Fees Revenue Bonds 6.35% ------------------------------------------------------------------------- Higher Education Revenue Bonds 6.75% ------------------------------------------------------------------------- Hospital Revenue Bonds 1.60% ------------------------------------------------------------------------- Miscellaneous Revenue Bonds 3.47% ------------------------------------------------------------------------- Multifamily Housing Revenue Bonds 15.52% ------------------------------------------------------------------------- Municipal Lease Revenue Bonds 6.63% ------------------------------------------------------------------------- Ports & Harbors Revenue Bonds 3.38% ------------------------------------------------------------------------- Pre-Refunded Bonds 4.58% ------------------------------------------------------------------------- Public Power Revenue Bonds 3.36% ------------------------------------------------------------------------- School District General Obligation Bonds 9.68% ------------------------------------------------------------------------- State General Obligation Bonds 3.37% ------------------------------------------------------------------------- Tax Increment/Special Assessment Bonds 13.37% ------------------------------------------------------------------------- Territorial Revenue Bonds 3.42% ------------------------------------------------------------------------- Waste Disposal Revenue Bonds 6.50% ------------------------------------------------------------------------- Water & Sewer Revenue Bonds 3.22% ------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 97.61% ------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.39% ------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% ------------------------------------------------------------------------- 2 STATEMENTS DELAWARE TAX-FREE CALIFORNIA INSURED FUND OF NET ASSETS February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS - 97.61% Airport Revenue Bonds - 3.19% Sacramento County Airport System Revenue Series A 5.00% 7/1/32 (FSA) $1,000,000 $1,030,590 ---------- 1,030,590 ---------- Continuing Care/Retirement Revenue Bonds - 3.22% California Health Facilities Financing (The Episcopal Home) 5.30% 2/1/32 (RADIAN) 1,000,000 1,039,210 ---------- 1,039,210 ---------- Dedicated Tax & Fees Revenue Bonds - 6.35% San Bernardino County Special Tax Community Facilities 5.90% 9/1/33 1,000,000 1,011,230 San Francisco Bay Area Rapid Transit District Sales Tax Revenue 5.125% 7/1/36 (AMBAC) 1,000,000 1,037,720 ---------- 2,048,950 ---------- Higher Education Revenue Bonds - 6.75% California Educational Facilities Authority Revenue (University of The Pacific) 5.75% 11/1/30 (MBIA) 1,000,000 1,114,300 California Statewide Communities Development Authority Revenue (Bentley School) 6.75% 7/1/32 1,000,000 1,063,660 ---------- 2,177,960 ---------- Hospital Revenue Bonds - 1.60% California Health Facilities Financing Authority (Catholic Healthcare West) Series G 5.25% 7/1/23 500,000 516,365 ---------- 516,365 ---------- Miscellaneous Revenue Bonds - 3.47% San Diego County Certificates of Participation 5.75% 7/1/31 (MBIA) 1,000,000 1,119,590 ---------- 1,119,590 ---------- Multifamily Housing Revenue Bonds - 15.52% California Statewide Communities Development Authority Multifamily Housing Revenue (Citrus Gardens Apartments Project) Series D1 5.375% 7/1/32 800,000 811,968 (East Tabor Apartments) Series C 6.85% 8/20/36 (GNMA) (AMT) 1,500,000 1,594,590 Los Angeles Multifamily Housing Revenue (Park Plaza) Series B 5.50% 1/20/43 (GNMA) (AMT) 1,430,000 1,486,900 Ventura County Area Housing Authority Multifamily Housing Revenue (Glen Oaks Apartments) Series A 6.35% 7/20/34 (GNMA) 1,013,000 1,120,378 ---------- 5,013,836 ---------- Municipal Lease Revenue Bonds - 6.63% California State Public Works Board Lease Revenue 5.00% 3/1/27 (AMBAC) 1,000,000 1,036,150 Franklin-McKinley School District Certificates of Participation (Financing Project) Series B 5.00% 9/1/27 (AMBAC) 1,060,000 1,103,587 ---------- 2,139,737 ---------- Principal Market Amount Value MUNICIPAL BONDS (continued) Ports & Harbors Revenue Bonds - 3.38% Port of Oakland Series K 5.75% 11/1/29 (FGIC) (AMT) $ 1,000,000 $ 1,090,520 ----------- 1,090,520 ----------- *Pre-Refunded Bonds - 4.58% Oakland Industrial Revenue (Harrison Foundation) Series B 6.00% 1/1/29-10 (AMBAC) 1,300,000 1,479,192 ----------- 1,479,192 ----------- Public Power Revenue Bonds - 3.36% California State Department Water Reserve Power Supply Revenue Series A 5.375% 5/1/21 1,000,000 1,085,970 ----------- 1,085,970 ----------- School District General Obligation Bonds - 9.68% Lawndale Elementary School District 5.00% 8/1/32 (FSA) 1,000,000 1,034,100 San Diego Unified School District 5.00% 7/1/28 (FSA) 1,000,000 1,042,520 Sequoia Unified High School District 5.125% 7/1/31 (FSA) 1,000,000 1,047,610 ----------- 3,124,230 ----------- State General Obligation Bonds - 3.37% California State 5.50% 11/1/33 1,000,000 1,087,190 ----------- 1,087,190 ----------- Tax Increment/Special Assessment Bonds - 13.37% La Quinta Redevelopment Agency Tax Allocation (Redevelopment Project Area #1) Series A 5.10% 9/1/31 (AMBAC) 1,000,000 1,042,810 Poway Redevelopment Agency Certificates of Participation 5.75% 6/15/33 (MBIA) 1,400,000 1,582,616 Riverside County Redevelopment Agency (Jurupa Valley Project) 5.25% 10/1/35 (AMBAC) 1,590,000 1,691,029 ----------- 4,316,455 ----------- Territorial Revenue Bonds - 3.42% Puerto Rico Electric Power Authority Power Revenue Series OO 5.00% 7/1/13 (CIFG) 1,000,000 1,102,710 ----------- 1,102,710 ----------- Waste Disposal Revenue Bonds - 6.50% Salinas Valley Solid Waste Authority Revenue 5.25% 8/1/27 (AMBAC) (AMT) 2,000,000 2,096,940 ----------- 2,096,940 ----------- Water & Sewer Revenue Bonds - 3.22% California State Department of Water Resources Water Systems Revenue (Central Valley Project) Series X 5.00% 12/1/29 (FGIC) 1,000,000 1,038,010 ----------- 1,038,010 ----------- TOTAL MUNICIPAL BONDS (cost $29,476,222) 31,507,455 ----------- 3 STATEMENTS DELAWARE TAX-FREE CALIFORNIA INSURED FUND OF NET ASSETS (CONTINUED) TOTAL MARKET VALUE OF SECURITIES - 97.61% (cost $29,476,222) $31,507,455 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 2.39% 771,504 ----------- NET ASSETS APPLICABLE TO 2,899,718 SHARES OUTSTANDING - 100.00% $32,278,959 ----------- Net Asset Value - Delaware Tax-Free California Insured Fund Class A ($24,664,143 / 2,215,488 Shares) $11.13 ------ Net Asset Value - Delaware Tax-Free California Insured Fund Class B ($6,274,548 / 563,489 Shares) $11.14 ------ Net Asset Value - Delaware Tax-Free California Insured Fund Class C ($1,340,268 / 120,741 Shares) $11.10 ------ COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization -- no par) $30,215,489 Accumulated net realized gain on investments 32,237 Net unrealized appreciation of investments 2,031,233 ----------- Total net assets $32,278,959 =========== *Pre-Refunded Bonds are municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax CIFG - Insured by CDC IXIS Financial Guaranty FGIC - Insured by the Financial Guaranty Insurance Company FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE TAX-FREE CALIFORNIA INSURED FUND Net asset value Class A (A) $11.13 Sales charge (4.50% of offering price) (B) 0.52 ------ Offering price $11.65 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 4 STATEMENTS Six Months Ended February 28, 2005 (Unaudited) OF OPERATIONS Delaware Tax-Free California Insured Fund INVESTMENT INCOME: Interest $ 827,481 ---------- EXPENSES: Management fees 82,664 Distribution expenses -- Class A 31,584 Distribution expenses -- Class B 32,575 Distribution expenses -- Class C 6,839 Legal and professional fees 2,893 Reports and statements to shareholders 9,279 Registration fees 111 Dividend disbursement and transfer agent fees and expenses 7,884 Accounting and administration expenses 5,500 Custodian fees 1,600 Trustees' fees 951 Other 4,749 ---------- 186,629 Less expenses absorbed or waived (1,293) Less expenses paid indirectly (78) ---------- Total expenses 185,258 ---------- NET INVESTMENT INCOME 642,223 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments 32,953 Net change in unrealized appreciation/depreciation of investments 428,058 ---------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 461,011 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,103,234 ========== See accompanying notes 5 STATEMENTS OF CHANGES IN NET ASSETS
Delaware Tax-Free California Insured Fund Six Months Year Ended Ended 2/28/05 8/31/04 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 642,223 $ 1,562,244 Net realized gain (loss) on investments 32,953 187,797 Net change in unrealized appreciation/depreciation of investments 428,058 889,503 ----------- ----------- Net increase in net assets resulting from operations 1,103,234 2,639,544 ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (511,988) (1,208,781) Class B (107,559) (259,578) Class C (22,676) (93,885) Net realized gain on investments: Class A (55,312) (70,273) Class B (14,476) (18,623) Class C (2,996) (6,971) ----------- ----------- (715,007) (1,658,111) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 1,914,607 3,866,935 Class B -- 370,983 Class C -- 525,389 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 234,131 606,478 Class B 73,543 158,794 Class C 14,341 44,658 ----------- ----------- 2,236,622 5,573,237 ----------- ----------- Cost of shares repurchased: Class A (2,530,759) (9,237,607) Class B (768,116) (2,522,736) Class C (56,084) (2,177,814) ----------- ----------- (3,354,959) (13,938,157) ----------- ----------- Increase (decrease) in net assets derived from capital share transactions (1,118,337) (8,364,920) ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS (730,110) (7,383,487) NET ASSETS: Beginning of period 33,009,069 40,392,556 ----------- ----------- End of period(1) $32,278,959 $33,009,069 ----------- ----------- (1) Including undistributed (distributions in excess of) net investment income $ -- $ -- =========== ===========
See accompanying notes 6 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
DELAWARE TAX-FREE CALIFORNIA INSURED FUND CLASS A ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.010 $10.670 $10.930 $11.130 $10.640 $10.430 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.223 0.458 0.463 0.470 0.496 0.500 Net realized and unrealized gain (loss) on investments 0.144 0.365 (0.260) (0.027) 0.490 0.210 ------- ------- ------- ------- ------- ------- Total from investment operations 0.367 0.823 0.203 0.443 0.986 0.710 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.223) (0.458) (0.463) (0.470) (0.496) (0.500) Net realized gain on investments (0.024) (0.025) -- (0.173) -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.247) (0.483) (0.463) (0.643) (0.496) (0.500) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.130 $11.010 $10.670 $10.930 $11.130 $10.640 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 3.36% 7.85% 1.84% 4.23% 9.51% 7.10% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $24,664 $24,748 $28,822 $28,630 $28,045 $23,877 Ratio of expenses to average net assets 0.94% 0.91% 0.93% 0.92% 0.87% 1.00% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.95% 0.91% 0.93% 0.92% 0.87% 1.09% Ratio of net investment income to average net assets 4.06% 4.20% 4.21% 4.36% 4.59% 4.87% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.05% 4.20% 4.21% 4.36% 4.59% 4.78% Portfolio turnover -- 20% 44% 111% 162% 91%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 7 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
DELAWARE TAX-FREE CALIFORNIA INSURED FUND CLASS B ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.010 $10.670 $10.930 $11.130 $10.640 $10.430 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.182 0.377 0.381 0.389 0.415 0.423 Net realized and unrealized gain (loss) on investments 0.154 0.365 (0.260) (0.027) 0.490 0.210 ------- ------- ------- ------- ------- ------- Total from investment operations 0.336 0.742 0.121 0.362 0.905 0.633 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.182) (0.377) (0.381) (0.389) (0.415) (0.423) Net realized gain on investments (0.024) (0.025) -- (0.173) -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.206) (0.402) (0.381) (0.562) (0.415) (0.423) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.140 $11.010 $10.670 $10.930 $11.130 $10.640 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 3.07% 7.04% 1.07% 3.44% 8.70% 6.30% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $6,275 $6,895 $8,628 $9,714 $7,628 $6,440 Ratio of expenses to average net assets 1.69% 1.66% 1.68% 1.67% 1.62% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.66% 1.68% 1.67% 1.62% 1.84% Ratio of net investment income to average net assets 3.31% 3.45% 3.46% 3.61% 3.84% 4.12% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.30% 3.45% 3.46% 3.61% 3.84% 4.03% Portfolio turnover -- 20% 44% 111% 162% 91%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 8 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
DELAWARE TAX-FREE CALIFORNIA INSURED FUND CLASS C ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(1) 8/31/04 8/31/03 8/31/02(3) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.980 $10.640 $10.890 $11.090 $10.600 $10.390 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.183 0.377 0.380 0.392 0.417 0.423 Net realized and unrealized gain (loss) on investments 0.144 0.365 (0.250) (0.027) 0.490 0.210 ------- ------- ------- ------- ------- ------- Total from investment operations 0.327 0.742 0.130 0.365 0.907 0.633 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.183) (0.377) (0.380) (0.392) (0.417) (0.423) Net realized gain on investments (0.024) (0.025) -- (0.173) -- -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.207) (0.402) (0.380) (0.565) (0.417) (0.423) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.100 $10.980 $10.640 $10.890 $11.090 $10.600 ======= ======= ======= ======= ======= ======= TOTAL RETURN(2) 3.00% 7.07% 1.17% 3.45% 8.75% 6.32% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $1,340 $1,366 $2,942 $1,374 $200 $439 Ratio of expenses to average net assets 1.69% 1.66% 1.68% 1.67% 1.62% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.66% 1.68% 1.67% 1.62% 1.84% Ratio of net investment income to average net assets 3.31% 3.45% 3.46% 3.61% 3.84% 4.12% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.30% 3.45% 3.46% 3.61% 3.84% 4.03% Portfolio turnover -- 20% 44% 111% 162% 91%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. (3) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. This change in accounting had no impact for the year ended August 31, 2002. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 9 NOTES February 28, 2005 (Unaudited) TO FINANCIAL STATEMENTS Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund and Delaware Tax-Free New York Fund. Voyageur Insured Funds (the "Trust") is organized as a Delaware statutory trust and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur Investment Trust (the "Trust") is organized as a Massachusetts statutory trust and offers five series: Delaware Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund. Voyageur Mutual Funds II (the "Trust") is organized as a Delaware statutory trust and offers one series: Delaware Tax-Free Colorado Fund. These financial statements and related footnotes pertain to Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund and Delaware Tax-Free Colorado Fund (each a "Fund" and, collectively, the "Funds"). The above Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended. The Funds offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. The investment objective of Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Delaware Tax-Free California Insured Fund and Delaware Tax-Free Colorado Fund is to seek as high a level of current income exempt from federal income tax and personal income tax in their respective states, as is consistent with preservation of capital. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of each Fund on the basis of "settled shares" of each class in relation to the net assets of each Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of each Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Funds receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under the above arrangement is included custodian fees on the Statements of Operations with the corresponding expense offset shown as "expense paid indirectly". The amount of this expense for the six months ended February 28, 2005 was as follows: Delaware Tax-Free California Insured Fund ------------------- Earnings credits $78 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 California Insured Fund ------------------- On the first $500 million 0.500% On the next $500 million 0.475% On the next $1.5 billion 0.450% In excess of $2.5 billion 0.425% 10 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 California Insured Fund ------------------- Operating expense limitation as a percentage of average daily net assets (per annum) 0.75% Expiration date 10/31/04 Effective November 1, 2004 operating expense limitation as a percentage of average daily net assets (per annum) 0.62% Expiration date 3/31/06 Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares. At February 28, 2005, each Fund had liabilities payable to affiliates as follows: Delaware Tax-Free California Insured Fund ------------------- Investment management fees payable to (receivable from) DMC $11,962 Dividend disbursing, transfer agent, accounting, and administration fees, and other expenses payable to DSC 2,311 Other expenses payable to DMC and affiliates* 14,472 * DMC, as a part of its administrative services, pays operating expenses on behalf of the Funds and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement, the Funds bear the cost of certain legal services expenses, including internal legal services provided to the Funds by DMC employees. For the six months ended February 28, 2005, the Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Insured Fund was charged $548 and $822, respectively, for internal legal services provided by DMC. For the six months ended February 28, 2005, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free California Insured Fund ------------------- $2,221 Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trusts. These officers and/or trustees are paid no compensation by the Funds. 3. INVESTMENTS For the six months ended February 28, 2005, the Funds made purchases and sales of investment securities as follows: Delaware Tax-Free California Insured Fund ------------------- Purchases other than short-term investments $ -- Sales other than short-term investments 1,034,010 11 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS (CONTINUED) At February 28, 2005, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 28, 2005, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows: Delaware Tax-Free California Insured Fund ------------------- Cost of investments $29,476,222 =========== Aggregate unrealized appreciation $ 2,062,054 Aggregate unrealized depreciation (30,821) ----------- Net unrealized appreciation $ 2,031,233 =========== 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the six months ended February 28, 2005 and the year ended August 31, 2004 was as follows: Delaware Tax-Free California Insured Fund Six Months Year Ended Ended 2/28/05* 8/31/04 -------- ---------- Tax-exempt income $642,223 $1,562,244 Long-term capital gain 72,784 95,867 -------- ---------- Total $715,007 $1,658,111 ======== ========== *Tax information for the period ended February 28, 2005, is an estimate and the tax character of dividends and distributions may be redesignated at the fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of February 28, 2005, the estimated components of net assets on a tax basis were as follows: Delaware Tax-Free California Insured Fund ------------------- Shares of beneficial interest $30,215,489 Undistributed ordinary income -- Undistributed tax-exempt income -- Undistributed long-term capital gains (losses) 32,237 Capital loss carryforwards -- Unrealized appreciation of investments 2,031,233 ----------- Net assets $32,278,959 =========== 12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARES Delaware Tax-Free California Insured Fund ------------------------- Six Months Year Ended Ended 2/28/05 8/31/04 Shares sold: Class A 173,974 354,340 Class B -- 33,989 Class C -- 48,899 Shares issued upon reinvestments of dividends and distributions: Class A 21,096 55,519 Class B 6,629 14,541 Class C 1,295 4,096 -------- -------- 202,994 511,384 -------- -------- Shares repurchased: Class A (228,138) (862,920) Class B (69,415) (230,808) Class C (5,038) (204,997) -------- -------- (302,591) (1,298,725) -------- -------- Net increase (decrease) (99,597) (787,341) ======== ======== For the six months ended February 28, 2005 and the year ended August 31, 2004, the following shares and value were converted from Class B to Class A. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statement of Changes in Net Assets.
Six Months Ended Year Ended 2/28/05 8/31/04 -------------------------------- -------------------------------- Class B Class A Class B Class A shares shares Amount shares shares Amount Delaware Tax-Free California Insured Fund 23,562 23,584 260,773 87,591 87,607 956,483
6. PROXY RESULTS The shareholders of Voyageur Mutual Funds, Voyageur Insured Funds, Voyageur Investment Trust and Voyageur Mutual Funds II (each, a "Trust") voted on the following proposals (as applicable) at the special meeting of shareholders on March 23, 2005 or as adjourned. The description of each proposal and number of shares voted are as follows: 1. To elect a Board of Trustees for each of the Trusts. Voyageur Investment Trust ------------------------------------------- Shares Voted Shares Voted For Withheld Authority ------------------------------------------------------------------------------- Thomas L. Bennett 14,252,335.197 431,663.104 ------------------------------------------------------------------------------- Jude T. Driscoll 14,251,143.991 432,854.310 ------------------------------------------------------------------------------- John A. Fry 14,258,738.991 425,259.310 ------------------------------------------------------------------------------- Anthony D. Knerr 14,258,994.991 425,003.310 ------------------------------------------------------------------------------- Lucinda S. Landreth 14,254,091.179 429,907.104 ------------------------------------------------------------------------------- Ann R. Leven 14,252,611.991 431,386.310 ------------------------------------------------------------------------------- Thomas F. Madison 14,259,138.991 424,859.310 ------------------------------------------------------------------------------- Janet L. Yeomans 14,251,014.197 432,984.104 ------------------------------------------------------------------------------- J. Richard Zecher 14,248,580.991 432,417.310 ------------------------------------------------------------------------------- 13 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. PROXY RESULTS (CONTINUED) 2. To approve the use of a "manager of managers" structure whereby the investment manager of the funds of each Trust will be able to hire and replace subadvisers without shareholder approval.
For Against Abstain --- ------- ------- Delaware Tax-Free California Insured Fund 1,402,986.417 204,851.480 117,811.607
3. To approve the Plan of Reorganization between Voyageur Investment Trust and Voyageur Mutual Funds to merge Delaware Tax-Free California Insured Fund into Delaware Tax-Free California Fund.
For Against Abstain --- ------- ------- Delaware Tax-Free California Insured Fund 1,497,592.882 172,770.986 55,285.636
5. To approve the restructuring of Voyageur Investment Trust from a Massachusetts business trust to a Delaware statutory trust.
For Against Abstain --- ------- ------- Delaware Tax-Free California Insured Fund 1,519,110.655 149,997.986 56,540.863
7. FUND MERGERS 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 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 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 California Insured Fund $31,492,746 $1,782,779 $0
*Includes prior year capital loss carry forwards The net assets of Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free California Fund prior to the Reorganizations were $134,516,467.57 and $46,891,286.79, respectively. 14 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. LINE OF CREDIT The Funds, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participate in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Funds' allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 28, 2005, or at any time during the period. 9. CREDIT AND MARKET RISK The Funds concentrate their investments in securities issued by municipalities. The value of these investments may be adversely affected by new legislation within the states, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. 10. CONTRACTUAL OBLIGATIONS The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds' existing contracts and expects the risk of loss to be remote. 15 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund, but may be used with a prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund, Tax-Free California Insured Fund, and Delaware Tax-Free Colorado Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of each Fund. You should read carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER Chairman Senior Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR THOMAS L. BENNETT Delaware Distributors, L.P. Private Investor RICHELLE S. MAESTRO Philadelphia, PA Rosemont, PA Executive Vice President, Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT President Philadelphia, PA Delaware Service Company, Inc. Franklin & Marshall College 2005 Market Street Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094 Senior Vice President and Treasurer ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS Managing Director Philadelphia, PA 800 523-1918 Anthony Knerr & Associates New York, NY FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY LUCINDA S. LANDRETH 800 362-7500 Former Chief Investment Officer Assurant, Inc. WEB SITE Philadelphia, PA www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer -------------------------------------------------------------------------------- Each Fund files its complete schedule of portfolio holdings with the Securities National Gallery of Art and Exchange Commission for the first and third quarters of each fiscal year on Washington, DC 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) THOMAS F. MADISON relating to portfolio securities is available without charge (i) upon request, President and Chief Executive Officer by calling 800 523-1918; (ii) on each Fund's Web site at MLM Partners, Inc. http://www.delawareinvestments.com; and (iii) on the Commission's Web site at Minneapolis, MN 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 JANET L. YEOMANS operation of the Public Reference Room may be obtained by calling Vice President/Mergers & Acquisitions 1-800-SEC-0330. 3M Corporation St. Paul, MN 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 J. RICHARD ZECHER available without charge (i) through each Fund's Web site at Founder http://www.delawareinvestments.com; and (ii) on the Commission's Web site at Investor Analytics http://www.sec.gov. Scottsdale, AZ -------------------------------------------------------------------------------- (9269) Printed in the USA SA-WEST [2/05] IVES 4/05 J10087
Delaware Investments(SM) -------------------------------------- FIXED INCOME A member of Lincoln Financial Group(R) SEMIANNUAL REPORT FEBRUARY 28, 2005 -------------------------------------------------------------------------------- DELAWARE TAX-FREE FLORIDA FUND DELAWARE TAX-FREE FLORIDA INSURED FUND [Graphic Omitted:Logo] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS ----------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 1 ----------------------------------------------------------------- SECTOR ALLOCATIONS 3 ----------------------------------------------------------------- FINANCIAL STATEMENTS: Statements of Net Assets 4 Statements of Operations 10 Statements of Changes in Net Assets 11 Financial Highlights 12 Notes to Financial Statements 21 ----------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2005 Delaware Distributors, L.P. DISCLOSURE For the Period Sepember 1, 2004 - April 29, 2005 OF EXPENSE CALCULATION As a shareholder of a fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period September 1, 2004 to February 28, 2005. ACTUAL EXPENSES The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund's actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. "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 FLORIDA FUND(1) EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000 Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,022.40 0.87% $4.40 Class B 1,000.00 1,018.60 1.62% 8.17 Class C 1,000.00 1,018.50 1.62% 8.17 ------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.65 0.63% $4.39 Class B 1,000.00 1,016.90 1.38% 8.17 Class C 1,000.00 1,016.90 1.38% 8.17 ------------------------------------------------------------------------------- (1) Effective November 1, 2004, the Fund's manager decreased contractual expense waivers in effect for the Fund, causing the expense paid by the Fund to increase. Had the new expense waivers been in effect during the period the Fund's expense analysis would be as follows: Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,022.40 0.90% $5.01 Class B 1,000.00 1,018.60 1.65% 8.78 Class C 1,000.00 1,018.50 1.65% 8.78 ------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.05 0.90% $5.00 Class B 1,000.00 1,016.30 1.65% 8.77 Class C 1,000.00 1,016.30 1.65% 8.77 ------------------------------------------------------------------------------- 1 DISCLOSURE For the Period Sepember 1, 2004 - April 29, 2005 OF EXPENSE CALCULATION (continued) DELAWARE TAX-FREE FLORIDA INSURED FUND(1) EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000 Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $941.10 0.90% $ 4.33 Class B 1,000.00 937.90 1.65% 7.93 Class C 1,000.00 937.70 1.65% 7.93 ------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) A Class $1,000.00 $1,020.33 0.90% $ 7.31 B Class 1,000.00 1,016.61 1.65% 10.83 C Class 1,000.00 1,016.61 1.65% 10.83 ------------------------------------------------------------------------------- (1) Effective November 1, 2004, the Fund's manager decreased contractual expense waivers in effect for the Fund, causing the expenses paid by the Fund to increase. Had the new expenses been in effect during the period, the Fund's expense analysis would be as follows: Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 9/1/04 to 9/1/04 2/28/05 Ratio 2/28/05 ------------------------------------------------------------------------------- ACTUAL FUND RETURN A Class $1,000.00 $941.10 0.87% $4.19 B Class 1,000.00 937.90 1.62% 7.78 C Class 1,000.00 937.70 1.62% 7.78 ------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) A Class $1,000.00 $1,020.48 0.87% $4.36 B Class 1,000.00 1,016.76 1.62% 8.10 C Class 1,000.00 1,016.76 1.62% 8.10 ------------------------------------------------------------------------------- 2 SECTOR ALLOCATIONS As of February 28, 2005 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists the Fund's categories of portfolio holdings as a percentage of total net assets and is provided in compliance with such requirement. DELAWARE TAX-FREE FLORIDA FUND ------------------------------------------------------------------------ PERCENTAGE SECTOR OF NET ASSETS ------------------------------------------------------------------------ MUNICIPAL BONDS 96.50% ------------------------------------------------------------------------ Airport Revenue Bonds 5.58% Continuing Care/Retirement Revenue Bonds 1.63% Corporate-Backed Revenue Bonds 0.96% Dedicated Tax & Fees Revenue Bonds 2.21% Hospital Revenue Bonds 12.60% Miscellaneous Revenue Bonds 13.53% Multifamily Housing Revenue Bonds 11.33% Ports & Harbors Revenue Bonds 1.98% Pre-Refunded Bonds 27.38% Single Family Housing Revenue Bonds 3.10% Tax Increment/Special Assessment Bonds 6.95% Territorial Revenue Bonds 6.66% Water & Sewer Revenue Bonds 2.59% ------------------------------------------------------------------------ TOTAL MARKET VALUE OF SECURITIES 96.50% ------------------------------------------------------------------------ RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 3.50% ------------------------------------------------------------------------ TOTAL NET ASSETS 100.00% ------------------------------------------------------------------------ DELAWARE TAX-FREE FLORIDA INSURED FUND ------------------------------------------------------------------------ PERCENTAGE SECTOR OF NET ASSETS ------------------------------------------------------------------------ MUNICIPAL BONDS 97.79% ------------------------------------------------------------------------ Airport Revenue Bonds 3.55% Dedicated Tax & Fees Revenue Bonds 14.59% Higher Education Revenue Bonds 5.75% Hospital Revenue Bonds 18.31% Multifamily Housing Revenue Bonds 29.03% Municipal Lease Revenue Bonds 6.00% Public Power Revenue Bonds 2.22% Public Utility District Revenue Bonds 1.31% Tax Increment/Special Assessment Bonds 3.08% Territorial General Obligation Bonds 3.11% Territorial Revenue Bonds 9.01% Water & Sewer Revenue Bonds 1.83% ------------------------------------------------------------------------ TOTAL MARKET VALUE OF SECURITIES 97.79% ------------------------------------------------------------------------ RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.21% ------------------------------------------------------------------------ TOTAL NET ASSETS 100.00% ------------------------------------------------------------------------ 3 STATEMENTS DELAWARE TAX-FREE FLORIDA FUND OF NET ASSETS February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS - 96.50% Airport Revenue Bonds - 5.58% Capital Trust Agency Revenue (Orlando/Cargo Project) 6.75% 1/1/32 (AMT) $ 395,000 $ 390,276 Miami-Dade County Aviation Revenue Series A 5.00% 10/1/33 (FSA) (AMT) 500,000 510,265 ----------- 900,541 ----------- Continuing Care/Retirement Revenue Bonds - 1.63% Volusia County Health Facilities Authority (John Knox Village) Series A 6.00% 6/1/17 (RADIAN) 250,000 263,308 ----------- 263,308 ----------- Corporate Backed Revenue Bonds - 0.96% Jacksonville Sewer & Solid Waste Disposal Facilities Authority (Anheuser Busch Project) 5.875% 2/1/36 (AMT) 150,000 155,420 ----------- 155,420 ----------- Dedicated Tax & Fees Revenue Bonds - 2.21% Dade County Special Obligation Series B 5.00% 10/1/35 (AMBAC) 350,000 356,857 ----------- 356,857 ----------- Hospital Revenue Bonds - 12.60% Escambia County Health Facilities Authority (Florida Health Care Facilities - VHA Program) 5.95% 7/1/20 (AMBAC) 425,000 431,469 Highlands County Health Facilities Authority (Adventist Health System/Sunbelt) Series A 6.00% 11/15/31 500,000 541,755 North Miami Health Facilities Authority (Catholic Health Services) LOC Suntrust Bank-Miami 6.00% 8/15/16 500,000 522,160 South Broward Hospital District Revenue (Memorial Healthcare System) 5.625% 5/1/32 500,000 538,560 ----------- 2,033,944 ----------- Miscellaneous Revenue Bonds - 13.53% Florida State Board of Education (Lottery Revenue) Series A 6.00% 7/1/14 (FGIC) 1,000,000 1,145,140 Florida State Municipal Loan (Council Revenue) Series A 5.00% 2/1/35 (MBIA) 1,000,000 1,038,420 ----------- 2,183,560 ----------- Multifamily Housing Revenue Bonds - 11.33% Dade County Housing Finance Authority (Lincoln Fields Apartments Section 8) 6.25% 7/1/24 (MBIA) (FHA) 485,000 485,640 Duval Housing Finance Authority (St. Augustine Apartments) 6.00% 3/1/21 300,000 309,462 Florida Housing Finance Agency (The Vineyards Project) Series H 6.40% 11/1/15 500,000 518,830 Volusia County Multifamily Housing Finance Authority (San Marco Apartments) Series A 5.60% 1/1/44 (FSA) (AMT) 500,000 514,710 ----------- 1,828,642 ----------- Principal Market Amount Value MUNICIPAL BONDS (continued) Ports & Harbors Revenue Bonds - 1.98% Jacksonville Port Authority Seaport Revenue 5.70% 11/1/30 (MBIA) (AMT) $ 295,000 $ 320,110 ----------- 320,110 ----------- *Pre-Refunded Bonds - 27.38% Jacksonville Electric Authority Revenue Electric System Series 3-C 5.50% 10/1/30-05 1,000,000 1,018,940 Jacksonville Port Authority Seaport Revenue 5.70% 11/1/30-10 (MBIA) (AMT) 205,000 228,891 Northern Palm Beach County Improvement District Special Assessment (Abacoa Water Control) 7.20% 8/1/16-06 300,000 324,549 Pinellas County Educational Facilities Authority (Clearwater Christian College) Private Placement 8.00% 2/1/11-06 205,000 215,338 Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series B 6.00% 7/1/26-05 150,000 153,471 Tampa Utilities Tax Revenue Series A 6.00% 10/1/17-09 (AMBAC) 1,000,000 1,139,020 6.125% 10/1/18-09 (AMBAC) 1,000,000 1,144,349 Volusia County Industrial Development Authority Mortgage Revenue (Bishops Glen Retirement Health Facilities Project) 7.50% 11/1/16-06 180,000 195,154 ----------- 4,419,712 ----------- Single Family Housing Revenue Bonds - 3.10% Florida Housing Finance Agency Homeowner Mortgage Series 1B 6.00% 7/1/17 (FHA) (VA) 85,000 87,888 Orange County Housing Finance Authority Homeowner Revenue Series B 5.25% 3/1/33 (GNMA) (FNMA) (AMT) 405,000 411,399 ----------- 499,287 ----------- Tax Increment/Special Assessment Bonds - 6.95% Hollywood Community Redevelopment Agency 5.625% 3/1/24 300,000 318,153 Julington Creek Plantation Community Development District Special Assessment 5.00% 5/1/29 (MBIA) 200,000 207,666 Lake Bernadette Community Development District Special Assessment Series A 8.00% 5/1/17 140,000 142,043 Midtown Miami Community Development District Special Assessment Series B 6.50% 5/1/37 250,000 260,575 Tampa Palms Open Space & Transportation Community Development District (Richmond Place Project) 7.50% 5/1/18 185,000 192,572 ----------- 1,121,009 ----------- Territorial Revenue Bonds - 6.66% Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series G 5.00% 7/1/42 300,000 306,714 Series J 5.50% 7/1/22 350,000 385,976 4 STATEMENTS DELAWARE TAX-FREE FLORIDA FUND OF NET ASSETS (continued) February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS (continued) Territorial Revenue Bonds (continued) Puerto Rico Public Buildings Authority Revenue (Government Facilities) Series I 5.25% 7/1/33 $ 360,000 $ 382,360 ----------- 1,075,050 ----------- Water & Sewer Revenue Bonds - 2.59% Riviera Beach Utilities Special District Water & Sewer Revenue 5.00% 10/1/34 (FGIC) 400,000 417,168 ----------- 417,168 ----------- TOTAL MUNICIPAL BONDS (cost $14,740,603) 15,574,608 ----------- TOTAL MARKET VALUE OF SECURITIES - 96.50% (cost $14,740,603) 15,574,608 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 3.50% 565,166 ----------- NET ASSETS APPLICABLE TO 1,462,264 SHARES OUTSTANDING - 100.00% $16,139,774 =========== Net Asset Value - Delaware Tax-Free Florida Fund Class A ($10,767,588 / 976,119 Shares) $11.03 ------ Net Asset Value - Delaware Tax-Free Florida Fund Class B ($3,118,959 / 282,254 Shares) $11.05 ------ Net Asset Value - Delaware Tax-Free Florida Fund Class C ($2,253,227 / 203,891 Shares) $11.05 ------ COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization - no par) $15,896,754 Distributions in excess of net investment income (181) Accumulated net realized loss on investments (590,804) Net unrealized appreciation of investments 834,005 ----------- Total net assets $16,139,774 =========== SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FNMA - Insured by the 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 RADIAN - Insured by Radian Asset Assurance VA - Insured by the Veterans Administration *Pre-Refunded Bonds are municipals that are generally backed or secured by U.S. Treasury Bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE TAX-FREE FLORIDA FUND Net asset value Class A (A) $11.03 Sales charge (4.50% of offering price) (B) 0.52 ------ Offering price $11.55 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 5 STATEMENTS DELAWARE TAX-FREE FLORIDA INSURED FUND OF NET ASSETS (continued) February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS - 97.79% Airport Revenue Bonds - 3.55% Lee County Florida Airport Revenue Series B 5.75% 10/1/33 (FSA) $ 3,000,000 $ 3,343,350 ----------- 3,343,350 ----------- Dedicated Tax & Fees Revenue Bonds - 14.59% Florida Department of Transportation 5.00% 7/1/31 (FGIC) 1,875,000 1,948,088 Jacksonville Excise Taxes Revenue Series B 5.00% 10/1/26 (AMBAC) 1,000,000 1,041,930 5.125% 10/1/32 (FGIC) 1,000,000 1,045,530 +Palm Beach County Florida Criminal Justice Facilities Revenue Inverse Floater 9.47% 6/1/12 (FGIC) 7,500,000 9,700,725 ----------- 13,736,273 ----------- Higher Education Revenue Bonds - 5.75% Broward County Educational Facilities Authority Revenue (Nova Southeastern University) 5.25% 4/1/27 (RADIAN) 1,000,000 1,045,060 Dade County Educational Facilities Authority (University of Miami) Series A 5.75% 4/1/29 (AMBAC) 2,000,000 2,225,880 University of Central Florida Athletics Association Certificates of Participation Series A 5.25% 10/1/34 (FGIC) 2,000,000 2,140,660 ----------- 5,411,600 ----------- Hospital Revenue Bonds - 18.31% Escambia County Health Facilities Authority (Florida Health Care Facilities - VHA Program) 5.95% 7/1/20 (AMBAC) 4,500,000 4,568,490 Highlands County Health Facilities Authority (Adventist Health System/ Sunbelt) Series A 6.00% 11/15/31 1,000,000 1,083,510 Indian River County Hospital District (Indian River Memorial Hospital) 6.10% 10/1/18 (FSA) 3,000,000 3,212,100 Orange County Health Facilities Authority Revenue (Adventist Health System) 5.625%11/15/32 1,000,000 1,067,520 Palm Beach County Health Facilities Authority Revenue Refunding Hospital (Boca Raton Community Hospital) 5.625% 12/1/31 2,000,000 2,106,340 South Broward Hospital District Revenue (Memorial Healthcare System) 5.625% 5/1/32 2,500,000 2,692,800 Tallahassee Health Facilities (Tallahassee Memorial Regional Medical Center) Series B 6.00% 12/1/15 (MBIA) 2,500,000 2,507,175 ----------- 17,237,935 ----------- Multifamily Housing Revenue Bonds - 29.03% Florida Housing Finance Agency (Crossings Indian Run Apartments HUD) Series V 6.10% 12/1/26 (AMBAC) (AMT) 750,000 777,390 (Landings at Sea Forest Apartments) Series T 5.85% 12/1/18 (AMBAC) (FHA) (AMT) 410,000 426,572 6.05% 12/1/36 (AMBAC) (FHA) (AMT) 700,000 721,210 Principal Market Amount Value MUNICIPAL BONDS (continued) Multifamily Housing Revenue Bonds (continued) (Leigh Meadows Apartments HUD) Series N 6.20% 9/1/26 (AMBAC) (AMT) $ 2,765,000 $ 2,863,240 6.30% 9/1/36 (AMBAC) (AMT) 2,000,000 2,068,860 (Mariner Club Apartments) Series K-1 6.25% 9/1/26 (AMBAC) (AMT) 2,000,000 2,072,260 6.375% 9/1/36 (AMBAC) (AMT) 3,500,000 3,623,165 (Riverfront Apartments Section 8 HUD) Series A 6.25% 4/1/37 (AMBAC) (AMT) 1,000,000 1,040,990 (Spinnaker Cove Apartments) Series G 6.50% 7/1/36 (AMBAC) (FHA) (AMT) 500,000 517,345 (Sterling Palms Apartments) Series D-1 6.30% 12/1/16 (AMBAC) (AMT) 975,000 1,011,972 6.40% 12/1/26 (AMBAC) (AMT) 1,500,000 1,552,095 6.50% 6/1/36 (AMBAC) (AMT) 6,540,000 6,761,118 (Woodbridge Apartments Project) Series L 6.15% 12/1/26 (AMBAC) (AMT) 1,750,000 1,815,135 6.25% 6/1/36 (AMBAC) (AMT) 2,000,000 2,072,300 ----------- 27,323,652 ----------- Municipal Lease Revenue Bonds - 6.00% Osceola County School Board Series A 5.25% 6/1/27 (AMBAC) 4,000,000 4,293,640 Palm Beach County School Board Certificates of Participation Series D 5.00% 8/1/28 (FSA) 300,000 311,190 State Augustine Capital Improvement Revenue 5.00% 10/1/34 (AMBAC) 1,000,000 1,042,920 ----------- 5,647,750 ----------- Public Power Revenue Bonds - 2.22% Florida State Municipal Power Agency Revenue (Stanton II Project) 5.00% 10/1/26 (AMBAC) 2,000,000 2,087,800 ----------- 2,087,800 ----------- Public Utility District Revenue Bonds - 1.31% Ocala Utility System Revenue Series B 5.25% 10/1/25 (FGIC) 1,125,000 1,229,648 ----------- 1,229,648 ----------- Tax Increment/Special Assessment Bonds - 3.08% Hollywood Community Redevelopment Agency 5.625% 3/1/24 900,000 954,459 Midtown Miami Community Development District Special Assessment Series B 6.50% 5/1/37 750,000 781,725 Osceola County Celebration Community Development District Special Assessment 6.10% 5/1/16 (MBIA) 460,000 462,811 Osceola County Enterprise Community Development District Special Assessment 6.10% 5/1/16 (MBIA) 695,000 699,246 ----------- 2,898,241 ----------- Territorial General Obligation Bonds - 3.11% Puerto Rico Commonwealth Public Improvement Series A 5.50% 7/1/19 (MBIA) 2,500,000 2,931,550 ----------- 2,931,550 ----------- 6 STATEMENTS DELAWARE TAX-FREE FLORIDA INSURED FUND OF NET ASSETS (continued) February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS (continued) Territorial Revenue Bonds - 9.01% Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series D 5.25% 7/1/38 $5,000,000 $ 5,257,448 Series J 5.50% 7/1/22 1,250,000 1,378,488 Puerto Rico Electric Power Authority Power Revenue Series OO 5.00% 7/1/13 (CIFG) 750,000 827,033 Puerto Rico Public Buildings Authority Revenue (Government facilities) Series F 5.25% 7/1/25 930,000 1,018,982 ----------- 8,481,951 ----------- Water & Sewer Revenue Bonds - 1.83% Tampa Water and Sewer Revenue 6.00% 10/1/16 (FSA) 1,000,000 1,201,030 Village Center Community Development District Utility Revenue 5.00% 10/1/36 (MBIA) 500,000 519,520 ----------- 1,720,550 ----------- TOTAL MUNICIPAL BONDS (cost $86,359,498) 92,050,300 ----------- TOTAL MARKET VALUE OF SECURITIES - 97.79% (cost $86,359,498) 92,050,300 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 2.21% 2,075,616 ----------- NET ASSETS APPLICABLE TO 8,343,711 SHARES OUTSTANDING - 100.00% $94,125,916 =========== Net Asset Value - Delaware Tax-Free Florida Insured Fund Class A ($88,632,904 / 7,857,055 Shares) $11.28 ------ Net Asset Value - Delaware Tax-Free Florida Insured Fund Class B ($4,537,701 / 402,012 Shares) $11.29 ------ Net Asset Value - Delaware Tax-Free Insured Florida Fund Class C ($955,311 / 84,644 Shares) $11.29 ------ COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization - no par) $88,782,533 Accumulated net realized loss on investments (347,419) Net unrealized appreciation of investments 5,690,802 ----------- Total net assets $94,125,916 =========== +An inverse floater is a type of bond with variable or floating interest rates that move in the opposite direction of short-term rates. Interest rate disclosed is in effect as of February 28, 2005. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax CIFG - Insured by the CDC IXIS Financial Guaranty FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FSA - Insured by the Financial Security Assurance 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 FLORIDA INSURED FUND Net asset value Class A $11.28 Sales charge (4.50% of offering price) (B) 0.53 ------ Offering price $11.81 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 7 STATEMENTS Six Months Ended February 28, 2005 (Unaudited) OF OPERATIONS
Delaware Delaware Tax-Free Tax-Free Florida Fund Florida Insured Fund INVESTMENT INCOME: Interest $427,170 $2,512,220 -------- ---------- EXPENSES: Management fees 44,000 232,366 Dividend disbursing and transfer agent fees and expenses 4,757 34,361 Distribution expenses -- Class A 13,153 109,380 Distribution expenses -- Class B 16,566 23,464 Distribution expenses -- Class C 10,906 4,422 Accounting and administration expenses 2,660 15,455 Registration fees 1,617 6,000 Reports and statements to shareholders 1,829 17,226 Legal and professional fees 2,523 20,946 Custodian fees 746 2,374 Trustees' fees 408 2,521 Pricing fees 719 863 Other 273 1,161 -------- ---------- 100,157 470,539 Less expenses absorbed or waived (9,490) (31,880) Less expenses paid indirectly (622) (1,390) -------- ---------- Total expenses 90,045 437,269 -------- ---------- Net Investment Income 337,125 2,074,951 -------- ---------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain on investments 104,924 160,275 Net change in unrealized appreciation/depreciation of investments (106,473) 56,258 -------- ---------- Net Realized and Unrealized Gain (Loss) on Investments (1,549) 216,533 -------- ---------- Net Increase in Net Assets Resulting from Operations $335,576 $2,291,484 ======== ==========
See accompanying notes 8 STATEMENTS OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund Six Months Year Six Months Year Ended Ended Ended Ended 2/28/05 8/31/04 2/28/05 8/31/04 (Unaudited) (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 337,125 $ 723,935 $ 2,074,951 $ 4,650,828 Net realized gain on investments 104,924 32,818 160,275 177,786 Net change in unrealized appreciation/depreciation of investments (106,473) 127,476 56,258 1,004,732 ----------- ----------- ----------- ------------ Net increase in net assets resulting from operations 335,576 884,229 2,291,484 5,833,346 ----------- ----------- ----------- ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (235,071) (462,334) (1,970,373) (4,392,087) Class B (61,576) (187,329) (87,981) (220,713) Class C (40,478) (74,272) (16,597) (38,028) ----------- ----------- ----------- ------------ (337,125) (723,935) (2,074,951) (4,650,828) ----------- ----------- ----------- ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 1,541,537 933,040 4,435,652 4,069,521 Class B 50,560 162,847 310,832 591,446 Class C 159,003 649,420 136,911 524,409 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 106,492 197,490 708,182 1,422,253 Class B 9,958 47,821 23,475 86,919 Class C 17,975 34,530 9,914 24,843 ----------- ----------- ----------- ------------ 1,885,525 2,025,148 5,624,966 6,719,391 ----------- ----------- ----------- ------------ Cost of shares repurchased: Class A (704,083) (1,087,726) (4,305,901) (14,966,660) Class B (697,735) (1,815,553) (809,865) (1,533,316) Class C (80,411) (379,454) (280,706) (317,623) ----------- ----------- ----------- ------------ (1,482,229) (3,282,733) (5,396,472) (16,817,599) ----------- ----------- ----------- ------------ Increase (decrease) in net assets derived from capital share transactions 403,296 (1,257,585) 228,494 (10,098,208) ----------- ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS 401,747 (1,097,291) 445,027 (8,915,690) NET ASSETS: Beginning of period 15,738,027 16,835,318 93,680,889 102,596,579 ----------- ----------- ----------- ------------ End of period $16,139,774 $15,738,027 $94,125,916 $ 93,680,889 ----------- ----------- ----------- ------------ (Distributions in excess of net investment income) $ (181) $ (181) $ - $ - =========== =========== =========== ============
See accompanying notes 9 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Florida Fund Class A ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.030 $10.920 $11.030 $10.870 $10.420 $10.530 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.245 0.505 0.510 0.514 0.513 0.518 Net realized and unrealized gain (loss) on investments - 0.110 (0.110) 0.160 0.450 (0.110) ------- ------- ------- ------- ------- ------- Total from investment operations 0.245 0.615 0.400 0.674 0.963 0.408 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.245) (0.505) (0.510) (0.514) (0.513) (0.518) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.245) (0.505) (0.510) (0.514) (0.513) (0.518) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.030 $11.030 $10.920 $11.030 $10.870 $10.420 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 2.24% 5.72% 3.67% 6.42% 9.48% 4.11% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $10,768 $9,824 $9,694 $10,464 $10,747 $8,711 Ratio of expenses to average net assets(4) 0.87% 0.75% 0.75% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.99% 0.99% 0.98% 1.06% 0.97% 1.10% Ratio of net investment income to average net assets 4.45% 4.55% 4.59% 4.78% 4.84% 5.11% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.33% 4.31% 4.36% 4.47% 4.62% 4.76% Portfolio turnover 25% 13% 31% 57% 40% 64%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the AICPA Audit & Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. This change 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. (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. (4) Ratio for the year ended August 31, 2002, including fees paid indirectly in accordance with Securities and Exchange Commission rules, was 0.76%. See accompanying notes 10 FINANCIAL HIGHLIGHTS (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Florida Fund Class B ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.050 $10.940 $11.040 $10.890 $10.430 $10.540 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.204 0.422 0.426 0.433 0.434 0.443 Net realized and unrealized gain (loss) on investments - 0.110 (0.100) 0.150 0.460 (0.110) ------- ------- ------- ------- ------- ------- Total from investment operations 0.204 0.532 0.326 0.583 0.894 0.333 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.204) (0.422) (0.426) (0.433) (0.434) (0.443) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.204) (0.422) (0.426) (0.433) (0.434) (0.443) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.050 $11.050 $10.940 $11.040 $10.890 $10.430 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 1.86% 4.92% 2.98% 5.52% 8.76% 3.34% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $3,119 $3,757 $5,313 $5,110 $4,655 $4,045 Ratio of expenses to average net assets(4) 1.62% 1.50% 1.50% 1.50% 1.50% 1.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.74% 1.73% 1.81% 1.72% 1.85% Ratio of net investment income to average net assets 3.70% 3.80% 3.84% 4.03% 4.09% 4.36% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.58% 3.56% 3.61% 3.72% 3.87% 4.01% Portfolio turnover 25% 13% 31% 57% 40% 64%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the AICPA Audit & Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. This change 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. (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. (4) Ratio for the year ended August 31, 2002, including fees paid indirectly in accordance with Securities and Exchange Commission rules, was 1.51%. See accompanying notes 11 FINANCIAL HIGHLIGHTS (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Florida Fund Class C ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.050 $10.930 $11.040 $10.880 $10.420 $10.530 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.204 0.421 0.426 0.433 0.434 0.446 Net realized and unrealized gain (loss) on investments - 0.120 (0.110) 0.160 0.460 (0.110) ------- ------- ------- ------- ------- ------- Total from investment operations 0.204 0.541 0.316 0.593 0.894 0.336 ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.204) (0.421) (0.426) (0.433) (0.434) (0.446) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.204) (0.421) (0.426) (0.433) (0.434) (0.446) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.050 $11.050 $10.930 $11.040 $10.880 $10.420 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 1.85% 5.02% 2.89% 5.63% 8.79% 3.38% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $2,253 $2,157 $1,828 $732 $516 $433 Ratio of expenses to average net assets(4) 1.62% 1.50% 1.50% 1.50% 1.50% 1.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.74% 1.73% 1.81% 1.72% 1.85% Ratio of net investment income to average net assets 3.70% 3.80% 3.84% 4.03% 4.09% 4.36% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.58% 3.56% 3.61% 3.72% 3.87% 4.01% Portfolio turnover 25% 13% 31% 57% 40% 64%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the AICPA Audit & Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. This change 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. (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. (4) Ratio for the year ended August 31, 2002, including fees paid indirectly in accordance with Securities and Exchange Commission rules, was 1.51%. See accompanying notes 12 FINANCIAL HIGHLIGHTS (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Florida Insured Fund Class A ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.250 $11.110 $11.330 $11.230 $10.770 $10.750 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.252 0.533 0.523 0.532 0.527 0.525 Net realized and unrealized gain (loss) on investments 0.030 0.140 (0.220) 0.100 0.460 0.020 ------- ------- ------- ------- ------- ------- Total from investment operations 0.282 0.673 0.303 0.632 0.987 0.545 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.252) (0.533) (0.523) (0.532) (0.527) (0.525) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.252) (0.533) (0.523) (0.532) (0.527) (0.525) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.280 $11.250 $11.110 $11.330 $11.230 $10.770 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 2.52% 6.15% 2.68% 5.83% 9.39% 5.29% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $88,633 $87,591 $95,951 $105,773 $107,365 $110,708 Ratio of expenses to average net assets 0.90% 0.90% 0.90% 0.90% 0.90% 0.91% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.97% 0.94% 0.94% 0.99% 0.97% 1.01% Ratio of net investment income to average net assets 4.50% 4.72% 4.60% 4.80% 4.81% 4.98% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.43% 4.68% 4.56% 4.71% 4.74% 4.88% Portfolio turnover 15% 3% 26% 46% 12% 56%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the AICPA Audit & Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. This change 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. (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 13 FINANCIAL HIGHLIGHTS (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Florida Insured Fund Class B ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $11.260 $11.120 $11.330 $11.230 $10.770 $10.750 Income (loss) from investment operations: Net investment income 0.210 0.448 0.437 0.445 0.443 0.448 Net realized and unrealized gain (loss) on investments 0.030 0.140 (0.210) 0.100 0.460 0.016 ------- ------- ------- ------- ------- ------- Total from investment operations 0.240 0.588 0.227 0.545 0.903 0.464 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.210) (0.448) (0.437) (0.445) (0.443) (0.444) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.210) (0.448) (0.437) (0.445) (0.443) (0.444) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.290 $11.260 $11.120 $11.330 $11.230 $10.770 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 2.14% 5.36% 2.00% 5.01% 8.56% 4.50% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $4,538 $5,002 $5,800 $5,223 $5,014 $5,272 Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.65% 1.65% 1.66% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.72% 1.69% 1.69% 1.74% 1.72% 1.76% Ratio of net investment income to average net assets 3.75% 3.97% 3.85% 4.05% 4.06% 4.23% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.68% 3.93% 3.81% 3.96% 3.99% 4.13% Portfolio turnover 15% 3% 26% 46% 12% 56%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the AICPA Audit & Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. This change 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. (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 14 FINANCIAL HIGHLIGHTS (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Tax-Free Florida Insured Fund Class C ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) Net asset value, beginning of period $11.260 $11.120 $11.330 $11.240 $10.780 $10.760 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.210 0.448 0.437 0.447 0.443 0.454 Net realized and unrealized gain (loss) on investments 0.030 0.140 (0.210) 0.090 0.460 0.010 ------- ------- ------- ------- ------- ------- Total from investment operations 0.240 0.588 0.227 0.537 0.903 0.464 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.210) (0.448) (0.437) (0.447) (0.443) (0.444) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.210) (0.448) (0.437) (0.447) (0.443) (0.444) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.290 $11.260 $11.120 $11.330 $11.240 $10.780 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 2.14% 5.36% 2.00% 4.93% 8.45% 4.49% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $955 $1,088 $846 $560 $53 $51 Ratio of expenses to average net assets 1.65% 1.65% 1.65% 1.65% 1.65% 1.66% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.72% 1.69% 1.69% 1.74% 1.72% 1.76% Ratio of net investment income to average net assets 3.75% 3.97% 3.85% 4.05% 4.06% 4.23% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.68% 3.93% 3.81% 3.96% 3.99% 4.13% Portfolio turnover 15% 3% 26% 46% 12% 56%
(1) As required, effective September 1, 2001, the Fund adopted provisions of the AICPA Audit & Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. This change 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. (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 15 NOTES February 28, 2005 (Unaudited) TO FINANCIAL STATEMENTS Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers six series: Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, and Delaware Tax-Free New York Fund. Voyageur Investment Trust (the "Trust") is organized as a Massachusetts business trust and offers five series: Delaware Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund, and Delaware Tax-Free Oregon Insured Fund. These financial statements and the related notes pertain to Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, and Delaware Tax-Free New York Fund (each a"Fund" or, collectively, the "Funds"). The Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended. The Funds offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first twelve months. The investment objective of Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund is to seek as high a level of current income exempt from federal income tax and the state personal income tax in their respective states, as is consistent with preservation of capital. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Funds' Board of Trustees. Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of the Funds on the basis of "settled shares" of each class in relation to the net assets of the Funds. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. 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 may receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expenses paid under the above arrangements is included in custodian fees on the Statements of Operations with the corresponding expense offset shown as "expenses paid indirectly". The amount of these expenses for the period ended February 28, 2005 were as follows: Delaware Delaware Tax-Free Tax-Free Florida Florida Insured Fund Fund -------- --------------- Earnings credits $622 $1,390 16 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 Florida Fund Florida Insured Fund ----------------- -------------------- On the first $500 million 0.55% 0.50% On the next $500 million 0.50% 0.475% On the next $1.5 billion 0.45% 0.45% In excess of $2.5 billion 0.425% 0.425%
DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed specified percentages of average daily net assets through March 31, 2006 for the Delaware Tax-Free Florida Fund and Tax-Free Florida Insured Fund and through December 29, 2005 for the Delaware Tax-Free New York Fund, as shown below:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- The operating expense limitation as a percentage of average daily net assets (per annum) 0.50% 0.65% Expiration date 10/31/04 10/31/04 Effective November 1, 2004, operating expense limitation as a percentage of average daily net assets (per annum) 0.65% 0.62% Expiration date 3/31/06 3/31/06
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing, and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares. At February 28, 2005, the Funds had receivables from or liabilities payable to affiliates as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- Receivable from DMC under expense limitation agreement $-- $-- Investment management fee payable to DMC (6,468) (21,012) Dividend disbursing, transfer agent fees, accounting and administration fees and other expenses payable to DSC (1,313) (8,570) Other expenses payable to DMC and affiliates* (2,769) (4,355)
*DMC, as part of its administrative services, pays operating expenses on behalf of the Funds and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement, the Funds bear the cost of certain legal services expenses, including internal legal services provided to the Funds by DMC employees. For the period ended February 28, 2005, the Funds' costs were as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- $447 $2,974
For the six months ended February 28, 2005, DDLP earned commissions on sales of Class A shares for each Fund as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- $4,341 $3,130
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Funds. 17 NOTES TO FINANCIAL STATEMENTS (continued) 3. INVESTMENTS For the six months ended February 28, 2005, the Funds made purchases and sales of investment securities other than short-term investments as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- Purchases $2,137,840 $7,033,678 Sales 1,991,340 7,494,250
At February 28, 2005 the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 28, 2005, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- Cost of investments $14,740,603 $86,359,498 =========== =========== Aggregate unrealized appreciation $849,114 $5,693,985 Aggregate unrealized depreciation (15,109) (3,183) ----------- ----------- Net unrealized appreciation $834,005 $5,690,802 =========== ===========
4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the six months ended February 28, 2005 and the year ended August 31, 2004 was as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- Six Months Year Six Months Year Ended Ended Ended Ended 2/28/05* 8/31/04 2/28/05* 8/31/04 Tax-exempt income $337,125 $723,935 $2,074,951 $4,650,828
*Tax information for the six months ended February 28, 2005 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of February 28, 2005, the estimated components of net assets on a tax basis were as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- Shares of beneficial interest $15,896,754 $88,782,533 Distributions in excess of net investment income (181) -- Capital loss carryforwards (590,804) (347,419) Unrealized appreciation of investments 834,005 5,690,802 ----------- ----------- Net Assets $16,139,774 $94,125,916 =========== ===========
For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforward amounts remaining at February 28, 2005 will expire as follows:
Year of Delaware Tax-Free Delaware Tax-Free Expiration Florida Fund Florida Insured Fund ---------- ----------------- -------------------- 2008 $52,610 $507,694 2009 643,118 -- -------- -------- Total $695,728 $507,694 ======== ========
For the six months ended February 28, 2005, each Fund had net capital gains, which may be offset to the capital loss carryforwards:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- $104,924 $160,275
18 NOTES TO FINANCIAL STATEMENTS (continued) 5. CAPITAL SHARES Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Florida Fund Florida Insured Fund ----------------- -------------------- Six Months Year Six Months Year Ended Ended Ended Ended 2/28/05 8/31/04 2/28/05 8/31/04 Shares sold: Class A 139,582 84,436 392,747 361,036 Class B 4,567 14,638 27,526 52,775 Class C 14,351 58,853 12,106 46,726 Shares issued upon reinvestment of dividends and distributions: Class A 9,640 17,890 62,670 126,274 Class B 900 4,318 2,076 7,699 Class C 1,624 3,122 877 2,205 -------- -------- -------- ---------- 170,664 183,257 498,002 596,715 -------- -------- -------- ---------- Shares repurchased: Class A (63,632) (99,881) (381,482) (1,339,780) Class B (63,140) (164,848) (71,841) (137,961) Class C (7,269) (33,967) (24,971) (28,419) -------- -------- -------- ---------- (134,041) (298,696) (478,294) (1,506,160) -------- -------- -------- ---------- Net increase (decrease) 36,623 (115,439) 19,708 (909,445) -------- -------- -------- ----------
For the six months ended February 28, 2005 and the year ended August 31, 2004, the following shares and value were converted from Class B to Class A 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 2/28/05 8/31/04 ---------------------------------------- ----------------------------------------- Class B Shares Class A Shares Amount Class B Shares Class A Shares Amount Delaware Tax-Free Florida Fund 8,912 8,927 $ 98,647 3,312 3,317 $ 36,842 Delaware Tax-Free Florida Insured Fund 22,768 22,770 256,675 16,704 16,705 189,023
6. PROXY RESULTS The shareholders of Voyageur Mutual Funds and Voyageur Investment Trust (each, a "Trust") voted on the following proposals (as applicable) at the special meeting of shareholders on March 23, 2005 or as adjourned. The description of each proposal and number of shares voted are as follows: 1. To elect a Board of Trustees for each of the Trusts. Voyageur Investment Trust ------------------------------------- Shares Voted Shares Voted For Withheld Authority ---------------- ------------------ Thomas L. Bennett 14,252,335.197 431,663.104 Jude T. Driscoll 14,251,143.991 432,854.310 John A. Fry 14,258,738.991 425,259.310 Anthony D. Knerr 14,258,994.991 425,003.310 Lucinda S. Landreth 14,254,091.179 429,907.104 Ann R. Leven 14,252,611.991 431,386.310 Thomas F. Madison 14,259,138.991 424,859.310 Janet L. Yeomans 14,251,014.197 432,984.104 J. Richard Zecher 14,248,580.991 432,417.310 19 NOTES TO FINANCIAL STATEMENTS (continued) 2. To approve the use of a "manager of managers" structure whereby the investment manager of the funds of each Trust will be able to hire and replace subadvisers without shareholder approval.
For Against Abstain ------------- ----------- ----------- Delaware Tax-Free Florida Fund 736,344.037 34,697.000 98,905.272 Delaware Tax-Free Florida Insured Fund 3,582,081.061 375,237.993 199,180.980
3. To approve the Plan of Reorganization for Voyageur Investment Trust to merge Delaware Tax-Free Florida Fund into Delaware Tax-Free Florida Insured Fund.
For Against Abstain ------------- ----------- ----------- Delaware Tax-Free Florida Fund 771,340.129 13,994.000 84,609.180
4. To approve the restructuring of Voyageur Investment Trust from a Massachusetts business trust to a Delaware statutory trust.
For Against Abstain ------------- ----------- ----------- Delaware Tax-Free Florida Fund 771,340.129 8,378.000 90,225.180 Delaware Tax-Free Florida Insured Fund 3,851,059.434 150,530.005 154,910.595
7. FUND MERGER Effective April 11, 2005, Delaware Tax-Free Florida Insured Fund (the "Fund") acquired all of the assets and assumed all of the liabilities of Delaware Tax-Free Florida Fund, an open-end investment company, pursuant to a Plan and Agreement of Reorganization (the "Reorganization"). The shareholders of Delaware Tax-Free Florida Fund received shares of the respective class of the Fund equal to the aggregate net asset value of their shares prior to the Reorganization based on the net asset value per share of the respective classes of the Fund. The Reorganization was treated as a non-taxable event and, accordingly, the Fund's basis in the securities acquired reflected the historical cost basis as of the date of transfer. The net assets, net unrealized appreciation and accumulated net realized loss of Delaware Tax-Free Florida Fund as of the close of business on April 8, 2005 were as follows:
Accumulated Net Unrealized Net Realized Net Assets Appreciation Losses ----------- -------------- ------------ Delaware Tax-Free Florida Fund $15,521,298 $648,070 $515,360*
*Includes prior capital loss carry forwards. The net assets of the Fund prior to the Reorganization were $92,098,392.46. 8. LINE OF CREDIT The Funds, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participate in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each funds' allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 28, 2005, or at any time during the period. 9. CREDIT AND MARKET RISK The Funds concentrate their investments in securities issued by each corresponding state's municipalities. The value of these investments may be adversely affected by new legislation within the states, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. 10. CONTRACTUAL OBLIGATIONS The Funds enter into contracts that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds' existing contracts and expects the risk of loss to be remote. 20 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Florida, Delaware Tax-Free Florida Insured, and Delaware Tax-Free New York Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Florida, Delaware Tax-Free Florida Insured, and Delaware Tax-Free New York Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of 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 AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER Chairman Senior Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR THOMAS L. BENNETT Delaware Distributors, L.P. Private Investor RICHELLE S. MAESTRO Philadelphia, PA Rosemont, PA Executive Vice President, Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT President Philadelphia, PA Delaware Service Company, Inc. Franklin & Marshall College 2005 Market Street Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094 Senior Vice President and Treasurer ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS Managing Director Philadelphia, PA 800 523-1918 Anthony Knerr & Associates New York, NY FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY LUCINDA S. LANDRETH 800 362-7500 Former Chief Investment Officer Assurant, Inc. WEB SITE Philadelphia, PA www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN J. RICHARD ZECHER Founder Investor Analytics Scottsdale, AZ
-------------------------------------------------------------------------------- Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on each Fund's Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how each Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through each Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. -------------------------------------------------------------------------------- (9271) Printed in the USA SA-FLNY [2/05] IVES 4/05 J10083 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) FIXED INCOME SEMIANNUAL REPORT FEBRUARY 28, 2005 -------------------------------------------------------------------------------- DELAWARE TAX-FREE MISSOURI INSURED FUND DELAWARE TAX-FREE OREGON INSURED FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS ---------------------------------------------------- DISCLOSURE OF FUND EXPENSES 1 ---------------------------------------------------- SECTOR ALLOCATIONS 2 ---------------------------------------------------- FINANCIAL STATEMENTS: Statement of Net Assets 4 Statement of Operations 12 Statements of Changes in Net Assets 13 Financial Highlights 14 Notes to Financial Statements 23 ---------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2005 Delaware Distributors, L.P. DISCLOSURE For the Period September 1, 2004 to February 28, 2005 OF FUND EXPENSES As a shareholder of a fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. The following examples are intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2004 to February 28, 2005. ACTUAL EXPENSES The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund's actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. "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 MISSOURI INSURED FUND EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Beginning Ending Annualized Expense Account Account Expense Paid During Value Value Ratio Period 9/1/04 2/28/05 9/1/04 to 2/28/05 -------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,021.70 0.94% $4.71 Class B 1,000.00 1,018.90 1.69% 8.46 Class C 1,000.00 1,017.90 1.69% 8.46 -------------------------------------------------------------------------------------------------------------- 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 OREGON INSURED FUND EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Beginning Ending Annualized Expense Account Account Expense Paid During Value Value Ratio Period 9/1/04 2/28/05 9/1/04 to 2/28/05 -------------------------------------------------------------------------------------------------------------- Actual Fund Return Class A $1,000.00 $1,023.80 0.85% $4.27 Class B 1,000.00 1,020.00 1.60% 8.01 Class C 1,000.00 1,019.90 1.60% 8.01 HYPOTHETICAL 5% RETURN (5% return before expenses) -------------------------------------------------------------------------------------------------------------- Class A $1,000.00 $1,020.58 0.85% $4.26 Class B 1,000.00 1,016.86 1.60% 8.00 Class C 1,000.00 1,016.86 1.60% 8.00 --------------------------------------------------------------------------------------------------------------
1 SECTOR ALLOCATIONS As of February 28, 2005 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists the Funds' categories of portfolio holdings as a percent of total net assets and is provided in compliance with such requirement. DELAWARE TAX-FREE MISSOURI INSURED FUND ------------------------------------------------------------------------ PERCENTAGE SECTOR OF NET ASSETS ------------------------------------------------------------------------ MUNICIPAL BONDS 98.65% ------------------------------------------------------------------------ Airport Revenue Bonds 3.46% City General Obligation Bonds 2.17% Corporate-Backed Revenue Bonds 1.99% Dedicated Tax & Fees Revenue Bonds 4.03% Escrowed to Maturity Bonds 2.44% Higher Education Revenue Bonds 1.99% Hospital Revenue Bonds 11.75% Investor Owned Utilities Revenue Bonds 4.36% Miscellaneous Revenue Bonds 2.10% Multifamily Housing Revenue Bonds 5.84% Municipal Lease Revenue Bonds 13.59% Political Subdivision General Obligation Bonds 2.05% Pre-Refunded Bonds 10.77% Public Power Revenue Bonds 2.27% School District General Obligation Bonds 9.06% Single Family Housing Revenue Bonds 2.27% Tax Increment/Special Assessment Bonds 0.95% Territorial General Obligation Bonds 1.02% Territorial Revenue Bonds 8.83% Water & Sewer Revenue Bonds 7.71% ----------------------------------------------------------------------- SHORT-TERM INVESTMENTS 1.18% ----------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 99.83% ----------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.17% ----------------------------------------------------------------------- TOTAL NET ASSETS 100.00% ----------------------------------------------------------------------- 2 SECTOR ALLOCATION As of February 28, 2005 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets and is provided in compliance with such requirement. DELAWARE TAX-FREE OREGON INSURED FUND ----------------------------------------------------------------------- PERCENTAGE SECTOR OF NET ASSETS ----------------------------------------------------------------------- MUNICIPAL BONDS 96.66% ----------------------------------------------------------------------- Airport Revenue Bonds 3.48% Escrowed to Maturity Bonds 2.48% Higher Education Revenue Bonds 11.34% Hospital Revenue Bonds 4.14% Investor Owned Utilities Revenue Bonds 1.40% Miscellaneous Revenue Bonds 3.16% Multifamily Housing Revenue Bonds 2.46% Municipal Lease Revenue Bonds 2.43% Political Subdivision General Obligation Bonds 6.15% Pre-Refunded Bonds 21.23% Public Utility District Revenue Bonds 1.81% School District General Obligation Bonds 16.49% Single Family Housing Revenue Bonds 3.65% Tax Increment/Special Assessment Bonds 2.77% Territorial Revenue Bonds 12.91% Water & Sewer Revenue Bonds 0.76% ----------------------------------------------------------------------- SHORT-TERM INVESTMENTS 2.32% ----------------------------------------------------------------------- Money Market 0.10% Variable Rate Demand Notes 2.22% ----------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 98.98% ----------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.02% ----------------------------------------------------------------------- TOTAL NET ASSETS 100.00% ----------------------------------------------------------------------- 3 STATEMENT DELAWARE TAX-FREE MISSOURI INSURED FUND OF NET ASSETS February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS - 98.65% Airport Revenue Bonds - 3.46% St. Louis Airport (Capital Improvement Project) Series A 5.375% 7/1/21 (MBIA) $1,635,000 $1,789,442 ---------- 1,789,442 ---------- City General Obligation Bonds - 2.17% Des Peres Refunding 5.375% 2/1/20 (AMBAC) 1,000,000 1,120,830 ---------- 1,120,830 ---------- Corporate-Backed Revenue Bonds - 1.99% Missouri State Development Finance Board Infrastructure Facilities (Triumph Foods Project) Series A 5.25% 3/1/25 500,000 513,105 Sugar Creek Industrial Development Revenue (Lafarge North America) Series A 5.65% 6/1/37 (AMT) 500,000 514,840 ---------- 1,027,945 ---------- Dedicated Tax & Fees Revenue Bonds - 4.03% Bi-State Development Agency Illinois Metropolitan District (Metrolink Cross County Project) Series B 5.00% 10/1/32 (FSA) 1,000,000 1,039,960 Jackson County Special Obligation 5.00% 12/1/27 (MBIA) 1,000,000 1,042,010 ---------- 2,081,970 ---------- Escrowed to Maturity Bonds - 2.44 % Cape Girardeau County Industrial Development Authority Health Care Facilities Revenue (Southeast Missouri Hospital) 5.25% 6/1/16 (MBIA) 440,000 492,404 +Greene County Single Family Mortgage Revenue Municipal Multiplier (Private Mortgage Insurance) 6.10% 3/1/16 1,225,000 770,047 ---------- 1,262,451 ---------- Higher Education Revenue Bonds - 1.99% Missouri State Health & Educational Facilities Authority Educational Facilities Revenue (University of Health Sciences) 5.00% 6/1/31 (MBIA) 1,000,000 1,027,760 ---------- 1,027,760 ---------- Hospital Revenue Bonds - 11.75% Cape Girardeau County Industrial Development Authority Health Care Facilities Revenue Unrefunded Balance (Southeast Missouri Hospital) 5.25% 6/1/16 (MBIA) 560,000 615,871 (St. Francis Medical Center) Series A 5.50% 6/1/32 1,000,000 1,052,130 Hannibal Industrial Development Authority Health Facilities Revenue Refunding (Hannibal Regional Hospital) Series A 5.625% 3/1/12 (FSA) 1,000,000 1,049,040 5.75% 3/1/22 (FSA) 1,000,000 1,047,030 Principal Market Amount Value MUNICIPAL BONDS (continued) Hospital Revenue Bonds (continued) Joplin Industrial Development Authority Health Facilities Revenue (Freeman Health System Project) 5.375% 2/15/35 $ 255,000 $ 258,116 5.75% 2/15/35 405,000 427,198 Missouri State Health & Educational Facilities Authority Health Facilities Revenue Refunding (Lake Regional Health System Project) 5.70% 5/15/34 500,000 523,040 (SSM Health Care) Series AA 6.40% 6/1/10 (MBIA) 500,000 575,350 North Kansas City Hospital Revenue Series A 5.00% 11/15/28 (FSA) 500,000 522,040 ---------- 6,069,815 ---------- Investor Owned Utilities Revenue Bonds - 4.36% Missouri State Environmental Improvement & Energy Resource Authority Pollution Control Revenue Refunding (St. Joseph Light & Power Company Project) 5.85% 2/1/13 (AMBAC) 2,200,000 2,255,022 ---------- 2,255,022 ---------- Miscellaneous Revenue Bonds - 2.10% Missouri State Environmental Improvement & Energy Resource Authority Water Pollution Control Revenue Unrefunded Balance (State Revolving Fund Project) Series A 6.05% 7/1/16 (FSA) 1,060,000 1,084,348 ---------- 1,084,348 ---------- Multifamily Housing Revenue Bonds - 5.84% Missouri State Housing Development Commission Multifamily Housing Hyder Series 3 5.60% 7/1/34 (AMT) (FHA) 1,435,000 1,487,779 San Remo Series 5 5.45% 1/1/36 (AMT) (FHA) 500,000 512,505 St. Louis County Industrial Development Authority Housing Development Revenue Refunding Sub (Southfield & Oak Forest Apartment-A) 5.20% 1/20/36 (GNMA) 1,000,000 1,017,900 ---------- 3,018,184 ---------- Municipal Lease Revenue Bonds - 13.59% Chesterfield Certificates of Participation 5.00% 12/1/24 (FGIC) 1,000,000 1,064,600 Kansas City Land Clearance Redevelopment Authority Lease Revenue (Muehlebach Hotel) Series A 5.90% 12/1/18 (FSA) 1,000,000 1,043,490 Missouri State Development Finance Board Infrastructure Facilities Revenue (Branson Landing Project) Series A 5.25% 12/1/19 435,000 456,424 (Branson Landing Project) Series A 5.50% 12/1/24 500,000 525,875 (Crackerneck Creek Project) Series C 5.00% 3/1/26 500,000 495,505 (Hartman Heritage Center Phase II) 5.00% 4/1/21 (AMBAC) 335,000 356,028 4 STATEMENT DELAWARE TAX-FREE MISSOURI INSURED FUND OF NET ASSETS (CONTINUED) February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS (continued) Municipal Lease Revenue Bonds (continued) St. Charles County Public Water Supply District #2 Certificate of Participation (Missouri Project) Series A 5.25% 12/1/28 (MBIA) $1,000,000 $1,058,620 Series B 5.10% 12/1/25 (MBIA) 500,000 524,690 +St. Louis Industrial Development Authority Leasehold Revenue (Convention Center Hotel) 5.80% 7/15/20 (AMBAC) 3,035,000 1,494,373 ---------- 7,019,605 ---------- Political Subdivision General Obligation Bonds - 2.05% Taney County Reorganization School District R-V Hollister School District 5.00% 3/1/22 (FSA) 1,000,000 1,059,160 ---------- 1,059,160 ---------- *Pre-Refunded Bonds - 10.77% Kansas City Municipal Assistance Corporation Revenue Refunding Leasehold (Bartle Convention Center) Series A 5.60% 4/15/16-05 (MBIA) 940,000 953,630 Missouri State Health & Educational Facilities Authority Educational Facilities Revenue (Central Missouri State University Project) 5.75% 10/1/25-05 (AMBAC) 1,000,000 1,020,400 St. Charles School District 6.50% 2/1/14-06 (FGIC) 1,250,000 1,297,088 St. Louis Municipal Finance Corporation Leasehold Revenue Improvement (City Justice Center) Series A 5.95% 2/15/16-06 (AMBAC) 1,000,000 1,053,010 Troy Reorganization School District #3 Lincoln County 6.10% 3/1/14-05 (MBIA) 1,235,000 1,239,347 ---------- 5,563,475 ---------- Public Power Revenue Bonds - 2.27% Sikeston Electric Revenue Refunding 6.00% 6/1/13 (MBIA) 1,000,000 1,171,790 ---------- 1,171,790 ---------- School District General Obligation Bonds - 9.06% Camdenton Reorganized School District R-III Camden County Refunding & Improvement 5.25% 3/1/24 (FSA) 1,000,000 1,094,060 Greene County Reorganization School District R8 (Direct Deposit Project) 5.10% 3/1/22 (FSA) 1,500,000 1,604,415 +St. Charles County Francis Howell School District (Capital Appreciation Direct Deposit Project) Series A 5.15% 3/1/17 (FGIC) 1,500,000 885,255 St. Louis County Pattonville R-3 School District 5.25% 3/1/20 (FSA) 1,000,000 1,098,130 ---------- 4,681,860 ---------- Single Family Housing Revenue Bonds - 2.27% Missouri State Housing Development Commission Mortgage Revenue Series C 7.45% 9/1/27 (AMT) (GNMA) (FNMA) 220,000 220,365 Missouri State Housing Development Commission Mortgage Revenue Single Family Homeowner Loan A 7.20% 9/1/26 (AMT) (GNMA) (FNMA) 190,000 193,544 Principal Market Amount Value MUNICIPAL BONDS (continued) Single Family Housing Revenue Bonds (continued) Homeowner Loan B 7.55% 9/1/27 (AMT)(GNMA)(FNMA) $ 115,000 $ 115,179 Homeowner Loan C 7.25% 9/1/26 (AMT)(GNMA)(FNMA) 195,000 195,279 Mortgage Series A 5.20% 9/1/33 (AMT)(GNMA)(FNMA) 385,000 390,178 7.20% 12/1/17 (AMT)(GNMA) 15,000 15,196 7.25% 12/1/20 (AMT)(GNMA) 45,000 45,587 ---------- 1,175,328 ---------- Tax Increment/Special Assessment Bonds - 0.95% St. Joseph Industrial Development Authority Tax Increment Revenues Shoppes at North Village Project Series A 5.50% 11/1/27 500,000 492,005 ---------- 492,005 ---------- Territorial General Obligation Bonds - 1.02% University Virgin Islands Series A 5.375% 6/1/34 500,000 526,575 ---------- 526,575 ---------- Territorial Revenue Bonds - 8.83% Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series A 4.75% 7/1/38 (MBIA) 1,000,000 1,031,410 Puerto Rico Electric Power Authority Power Revenue Series N 5.125% 7/1/29 400,000 419,188 Series PP 5.00% 7/1/25 (FGIC) 1,000,000 1,064,020 ^Puerto Rico Electric Power Authority Power Revenue, Inverse Floater ROLs 6.975% 7/1/19 1,925,000 2,045,544 ---------- 4,560,162 ---------- Water & Sewer Revenue Bonds - 7.71% Liberty Sewer System Revenue 6.00% 2/1/08 (MBIA) 380,000 396,522 6.15% 2/1/15 (MBIA) 1,500,000 1,668,691 Metropolitan St. Louis Sewer District Wastewater Revenue 5.00% 5/1/34 (MBIA)) 1,250,000 1,301,725 Missouri State Development Finance Board Infrastructure Facilities Revenue (Sewer System Improvement Project) Series C 5.00% 3/1/25 605,000 614,371 ---------- 3,981,309 ---------- TOTAL MUNICIPAL BONDS (cost $48,273,538) 50,969,036 ---------- 5 STATEMENT DELAWARE TAX-FREE MISSOURI INSURED FUND OF NET ASSETS (CONTINUED) February 28, 2005 (Unaudited) Number of Market Shares Value SHORT-TERM INVESTMENTS - 1.18% Dreyfus Tax-Exempt Cash Management Fund 608,807 $ 608,807 ----------- TOTAL SHORT-TERM INVESTMENTS (cost $608,807) 608,807 ----------- TOTAL MARKET VALUE OF SECURITIES - 99.83% (cost $48,882,345) 51,577,843 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.17% 89,304 ----------- NET ASSETS APPLICABLE TO 4,824,531 SHARES OUTSTANDING - 100.00% $51,667,147 =========== Net Asset Value - Delaware Tax-Free Missouri Insured Fund Class A ($46,320,868 / 4,325,365 Shares) $10.71 ------ Net Asset Value - Delaware Tax-Free Missouri Insured Fund Class B ($3,966,805 / 370,534 Shares) $10.71 ------ Net Asset Value - Delaware Tax-Free Missouri Insured Fund Class C ($1,379,474 / 128,632 Shares) $10.72 ------ COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization - no par) $49,010,707 Accumulated net realized loss on investments (39,058) Net unrealized appreciation of investments 2,695,498 ----------- Total net assets $51,667,147 =========== *Pre-Refunded Bonds are municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. ^An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 28, 2005. +Zero coupon bond. The rate shown is the yield at time of purchase. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Administration FNMA - Insured by Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association ROLs - Residual Options Long NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE TAX-FREE MISSOURI INSURED FUND Net asset value Class A (A) $10.71 Sales charge (4.50% of offering price) (B) 0.50 ------ Offering price $11.21 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 6 STATEMENT DELAWARE TAX-FREE OREGON INSURED FUND OF NET ASSETS (CONTINUED) February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS - 96.66% Airport Revenue Bonds - 3.48% Portland Airport Revenue (Portland International Airport) Series 11 5.625% 7/1/26 (FGIC) (AMT) $1,500,000 $1,572,105 ---------- 1,572,105 ---------- Escrowed to Maturity Bonds - 2.48% Umatilla County Hospital Facility Authority Revenue (Catholic Health Initiatives) Series A 5.50% 3/1/32 1,000,000 1,116,980 ---------- 1,116,980 ---------- Higher Education Revenue Bonds - 11.34% +Oregon Health Sciences University Revenue (Capital Appreciation Insured) Series A 5.50% 7/1/21 (MBIA) 2,000,000 949,660 Series A 5.00% 7/1/32 (MBIA) 2,000,000 2,076,720 Oregon State Facilities Authority Revenue (College Housing Northwest Project) Series A 5.45% 10/1/32 1,000,000 1,044,490 (Willamette University Project) Series A 5.00% 10/1/34 (FGIC) 1,000,000 1,044,510 ---------- 5,115,380 ---------- Hospital Revenue Bonds - 4.14% Deschutes County Hospital Facilities Authority Hospital Revenue (Cascade Health Services) 5.60% 1/1/32 1,250,000 1,326,563 Multnomah County Hospital Facilities Authority Revenue (Providence Health System) 5.25% 10/1/22 500,000 540,260 ---------- 1,866,823 ---------- Investor Owned Utilities Revenue Bonds - 1.40% **Port Morrow Pollution Control Revenue (Portland General Electric Co.) Series A 5.20% 5/1/33 600,000 633,990 ---------- 633,990 ---------- Miscellaneous Revenue Bonds - 3.16% Oregon State Department Administrative Services 5.00% 9/1/13 (FSA) 800,000 882,752 Oregon State Department Administrative Services Lottery Revenue Refunding Series A 5.00% 4/1/18 (FSA) 500,000 540,750 ---------- 1,423,502 ---------- Multifamily Housing Revenue Bonds - 2.46% Oregon Health, Housing, Educational & Cultural Facilities Authority (Pier Park Project) Series A 6.05% 4/1/18 (GNMA) (AMT) 1,095,000 1,110,210 ---------- 1,110,210 ---------- Municipal Lease Revenue Bonds - 2.43% Oregon State Department Administration Services Certificate of Participation Refunding Series C 5.25% 11/1/15 (MBIA) 1,000,000 1,096,510 ---------- 1,096,510 ---------- Political Subdivision General Obligation Bonds - 6.15% Deschutes County Administrative School District #1 Series A 5.125% 6/15/21 (FSA) 1,000,000 1,074,110 Principal Market Amount Value MUNICIPAL BONDS (continued) Political Subdivision General Obligation Bonds (continued) Deschutes County Refunding 5.00% 12/1/16 (FSA) $ 500,000 $ 541,185 Southwestern Community College District 5.00% 6/1/28 (MBIA) 1,100,000 1,157,365 ---------- 2,772,660 ---------- *Pre-Refunded Bonds - 21.23% Chemeketa County Community College District 5.80% 6/1/12-06 (FGIC) 1,500,000 1,561,739 Jackson County School District #6 Central Point 5.25% 6/15/20-10 (FGIC) 1,175,000 1,297,599 Malheur County (Jail Buildings) 6.30% 12/1/12-05 (MBIA) 500,000 515,060 Multnomah County School District #3 Park Rose 5.50% 12/1/11-05 (FGIC) 500,000 511,980 North Unit Irrigation District 5.75% 6/1/16-06 (MBIA) 1,000,000 1,040,790 Oregon State Department Administrative Services Certificate of Participation Series A 5.80% 5/1/24-07 (AMBAC) 1,000,000 1,076,830 Portland Series A 5.75% 6/1/15-05 (MBIA) 500,000 504,645 Puerto Rico Commonwealth Public Improvement 5.125% 7/1/30-11 (FSA) 920,000 1,018,937 Salem Water & Sewer Revenue 5.625% 6/1/16-06 (MBIA) 1,000,000 1,039,000 Washington County Education Services District Certificate of Participation 7.10% 6/1/25-05 (MBIA) 700,000 708,953 Washington County School District #088J Sherwood 6.10% 6/1/12-05 (FSA) 65,000 65,664 6.10% 6/1/12-05 (FSA) 235,000 237,399 ---------- 9,578,596 ---------- Public Utility District Revenue Bonds - 1.81% Emerald Peoples Utilities District Series A 5.25% 11/1/22 (FSA) 750,000 816,270 ---------- 816,270 ---------- School District General Obligation Bonds - 16.49% Benton & Linn Counties School District #509J Corvallis 5.00% 6/1/21 (FSA) 1,000,000 1,064,540 Clackamas County School District #12 (North Clackamas) 5.00% 6/15/16 (FSA) 1,000,000 1,106,910 Clackamas County School District #86 5.00% 6/15/25 (FSA) 500,000 530,765 Jefferson County School District #509J 5.00% 6/15/22 (FGIC) 500,000 529,205 Lane County School District #019 Springfield Refunding 6.00% 10/15/14 (FGIC) 500,000 593,460 Lincoln County School District 5.25% 6/15/12 (FGIC) 700,000 759,262 Linn County Community School District #9 Lebanon 5.60% 6/15/30 (FGIC) 2,000,000 2,226,320 Salem-Keizer School District #24J Refunding 5.00% 6/15/19 (FSA) 500,000 537,870 +Umatilla County School District #6 R Umatilla Refunding 5.50% 12/15/22 (AMBAC) 200,000 88,254 ---------- 7,436,586 ---------- 7 STATEMENT DELAWARE TAX-FREE OREGON INSURED FUND OF NET ASSETS (CONTINUED) February 28, 2005 (Unaudited) Principal Market Amount Value MUNICIPAL BONDS (continued) Single Family Housing Revenue Bonds - 3.65% Oregon State Housing & Community Services Department Mortgage Revenue Single Family Mortgage Program Series R 5.375% 7/1/32 (AMT) $1,610,000 $ 1,644,985 ----------- 1,644,985 ----------- Tax Increment/Special Assessment Bonds - 2.77% Portland River District Urban Renewal & Redevelopment Interstate Corridor Series A 5.00% 6/15/23 (AMBAC) 250,000 264,540 Portland Urban Renewal & Redevelopment Interstate Corridor Series A 5.25% 6/15/20 (FGIC) 890,000 984,278 ----------- 1,248,818 ----------- Territorial Revenue Bonds - 12.91% Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series D 5.25% 7/1/38 500,000 525,745 Series G 5.00% 7/1/42 500,000 511,190 Series J 5.50% 7/1/22 400,000 441,116 Puerto Rico Commonwealth Public Improvement (Unrefunded Balance) 5.125% 7/1/30 (FSA) 580,000 612,474 Puerto Rico Electric Power Authority Power Revenue Series NN 5.125% 7/1/29 1,000,000 1,047,970 ^Puerto Rico Electric Power Authority Power Revenue, Inverse Floater ROLs 6.975% 7/1/19 (FSA) 1,500,000 1,593,930 **Puerto Rico Public Buildings Authority Revenue (Government Facilities) Series J 5.00% 7/1/36 (AMBAC) 1,000,000 1,091,260 ----------- 5,823,685 ----------- Water & Sewer Revenue Bonds - 0.76% Portland Sewer Systems Revenue Second Lien) Series A 5.00% 6/1/23 (FSA) 325,000 343,873 ----------- 343,873 ----------- TOTAL MUNICIPAL BONDS (cost $41,136,236) 43,600,973 =========== Number of/Principal Shares / Amount SHORT-TERM INVESTMENTS - 2.32% Money Market - 0.10% Dreyfus Tax-Exempt Cash Management Fund 45,653 45,653 ----------- 45,653 ----------- **Variable Rate Demand Notes - 2.22% Portland Multi-Family Housing South Park Block 1.85% 12/1/11 1,000,000 1,000,000 ----------- 1,000,000 ----------- TOTAL SHORT-TERM INVESTMENTS (cost $1,045,653) 1,045,653 ----------- TOTAL MARKET VALUE OF SECURITIES - 98.98% (cost $42,181,889) $44,646,626 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.02% 460,491 ----------- NET ASSETS APPLICABLE TO 4,261,011 SHARES OUTSTANDING - 100.00% $45,107,117 =========== Net Asset Value - Delaware Tax-Free Oregon Insured Fund Class A ($31,706,899 / 2,996,418 Shares) $10.58 ------ Net Asset Value - Delaware Tax-Free Oregon Insured Fund Class B ($6,785,315 / 640,920 Shares) $10.59 ------ Net Asset Value - Delaware Tax-Free Oregon Insured Fund Class C ($6,614,903 / 623,673 Shares) $10.61 ------ COMPONENTS OF NET ASSETS AT FEBRUARY 28, 2005: Shares of beneficial interest (unlimited authorization - no par) $42,873,991 Accumulated net realized loss on investments (231,611) Net unrealized appreciation of investments 2,464,737 ----------- Total net assets $45,107,117 =========== ^An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term rates. Interest rate disclosed is in effect as of February 28, 2005. *Pre-Refunded bonds are municipals that are generally backed or secured by U.S. Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. **Variable Rate Notes. The interest rate shown is the rate as of February 28, 2005. +Zero coupon bond. The interest rate shown is the yield at the time of purchase. SUMMARY OF ABBREVIATIONS: AMBAC - Insured by the AMBAC Assurance Corporation AMT - Subject to Alternative Minimum Tax FGIC - Insured by the Financial Guaranty Insurance Company FSA - Insured by the Financial Security Assurance GNMA - Insured by Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association ROLs - Residual Options Long NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE TAX-FREE OREGON INSURED FUND Net asset value Class A (A) $10.58 Sales charge (4.50% of offering price) (B) 0.50 ------ Offering price $11.08 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 8 STATEMENT Six Months Ended February 28, 2005 (Unaudited) OF OPERATIONS
Delaware Delaware Tax-Free Tax-Free Missouri Insured Fund Oregon Insured Fund INVESTMENT INCOME: Interest $1,314,648 $1,083,590 ---------- ---------- EXPENSES: Management fees 128,172 111,605 Distribution expenses -- Class A 57,296 38,799 Distribution expenses -- Class B 21,056 36,519 Distribution expenses -- Class C 6,603 31,883 Dividend disbursing and transfer agent fees and expenses 17,015 13,428 Legal and professional fees 10,132 9,273 Accounting and administration expenses 8,506 7,420 Reports and statements to shareholders 2,822 7,294 Custodian fees 1,645 1,802 Trustees' fees 1,151 1,076 Registration fees 2,375 872 Pricing fees 2,480 2,256 Other 6,284 2,052 ---------- ---------- 265,537 264,279 Less expenses absorbed or waived (1,799) (22,862) Less expenses paid indirectly (36) (41) ---------- ---------- Total expenses 263,702 241,376 ---------- ---------- NET INVESTMENT INCOME 1,050,946 842,214 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 101,495 52,520 Net change in unrealized appreciation/depreciation of investments (47,373) 112,870 ---------- ---------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 54,122 165,390 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,105,068 $1,007,604 ========== ==========
See accompanying notes 9 STATEMENTS OF CHANGES IN NET ASSETS
Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund Six Months Year Six Months Year Ended Ended Ended Ended 2/28/05 8/31/04 2/28/05 8/31/04 (Unaudited) (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONs: Net investment income $ 1,050,946 $ 2,222,786 $ 842,214 $ 1,836,635 Net realized gain on investments 101,495 303,361 52,520 115,703 Net change in unrealized appreciation/depreciation of investments (47,373) (15,128) 112,870 540,255 ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations 1,105,068 2,511,019 1,007,604 2,492,593 ----------- ----------- ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (953,171) (1,979,157) (619,171) (1,347,305) Class B (71,771) (216,405) (118,269) (292,412) Class C (22,475) (48,786) (102,966) (209,645) ----------- ----------- ----------- ----------- (1,047,417) (2,244,348) (840,406) (1,849,362) ----------- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 1,428,642 4,941,535 2,344,064 5,392,754 Class B (599) 352,151 245,258 741,742 Class C 105,295 314,340 788,959 1,644,889 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 498,196 964,654 357,457 765,710 Class B 53,492 144,771 69,498 165,234 Class C 19,516 42,892 64,219 134,610 ----------- ----------- ----------- ----------- 2,104,542 6,760,343 3,869,455 8,844,939 ----------- ----------- ----------- ----------- Cost of shares repurchased: Class A (1,400,744) (4,404,290) (1,924,959) (5,169,155) Class B (995,069) (3,044,211) (1,437,795) (1,909,275) Class C (4,248) (362,148) (605,370) (926,472) ----------- ----------- ----------- ----------- (2,400,061) (7,810,649) (3,968,124) (8,004,902) ----------- ----------- ----------- ----------- Increase (decrease) in net assets derived from capital share transactions (295,519) (1,050,306) (98,669) 840,037 ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS (237,868) (783,635) 68,529 1,483,268 NET ASSETS: Beginning of period 51,905,015 52,688,650 45,038,588 43,555,320 ----------- ----------- ----------- ----------- End of period(1) $51,667,147 $51,905,015 $45,107,117 $45,038,588 =========== =========== =========== =========== (1)Including distribution in excess of net investment income $ - $ - $ - $ - =========== =========== =========== ===========
See accompanying notes 10 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Tax-Free Missouri Insured Fund Class A Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.700 $10.640 $10.810 $10.740 $10.340 $10.340 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.221 0.464 0.469 0.489 0.497 0.494 Net realized and unrealized gain (loss) on investments 0.010 0.065 (0.172) 0.068 0.400 - ------- ------- ------- ------- ------- ------- Total from investment operations 0.231 0.529 0.297 0.557 0.897 0.494 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.221) (0.469) (0.467) (0.487) (0.497) (0.494) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.221) (0.469) (0.467) (0.487) (0.497) (0.494) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $10.710 $10.700 $10.640 $10.810 $10.740 $10.340 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 2.17% 5.06% 2.75% 5.38% 8.89% 4.99% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $46,321 $45,745 $44,026 $42,610 $40,349 $38,314 Ratio of expenses to average net assets 0.94% 0.94% 0.98% 0.97% 0.95% 1.03% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.95% 0.94% 0.98% 0.97% 0.95% 1.03% Ratio of net investment income to average net assets 4.17% 4.33% 4.31% 4.61% 4.74% 4.88% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.16% 4.33% 4.31% 4.61% 4.74% 4.88% Portfolio turnover 36% 20% 31% 23% 14% 1%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (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, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 11 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Tax-Free Missouri Insured Fund Class B Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.690 $10.640 $10.810 $10.730 $10.340 $10.340 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.181 0.385 0.387 0.410 0.418 0.418 Net realized and unrealized gain (loss) on investments 0.020 0.054 (0.172) 0.078 0.390 - ------- ------- ------- ------- ------- ------- Total from investment operations 0.201 0.439 0.215 0.488 0.808 0.418 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.181) (0.389) (0.385) (0.408) (0.418) (0.418) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.181) (0.389) (0.385) (0.408) (0.418) (0.418) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $10.710 $10.690 $10.640 $10.810 $10.730 $10.340 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 1.89% 4.19% 1.99% 4.70% 7.98% 4.21% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $3,967 $4,903 $7,406 $9,264 $9,693 $10,053 Ratio of expenses to average net assets 1.69% 1.69% 1.73% 1.72% 1.70% 1.78% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.69% 1.73% 1.72% 1.70% 1.78% Ratio of net investment income to average net assets 3.42% 3.58% 3.56% 3.86% 3.99% 4.13% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.41% 3.58% 3.56% 3.86% 3.99% 4.13% Portfolio turnover 36% 20% 31% 23% 14% 1%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (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, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 12 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Tax-Free Missouri Insured Fund Class C Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.710 $10.660 $10.820 $10.740 $10.350 $10.350 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.181 0.384 0.387 0.410 0.418 0.418 Net realized and unrealized gain (loss) on investments 0.010 0.054 (0.162) 0.078 0.390 - ------- ------- ------- ------- ------- ------- Total from investment operations 0.191 0.438 0.225 0.488 0.808 0.418 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.181) (0.388) (0.385) (0.408) (0.418) (0.418) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.181) (0.388) (0.385) (0.408) (0.418) (0.418) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $10.720 $10.710 $10.660 $10.820 $10.740 $10.350 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 1.79% 4.17% 2.08% 4.68% 7.97% 4.20% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $1,379 $1,257 $1,257 $1,241 $626 $343 Ratio of expenses to average net assets 1.69% 1.69% 1.73% 1.72% 1.70% 1.78% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.69% 1.73% 1.72% 1.70% 1.78% Ratio of net investment income to average net assets 3.42% 3.58% 3.56% 3.86% 3.99% 4.13% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.41% 3.58% 3.56% 3.86% 3.99% 4.13% Portfolio turnover 36% 20% 31% 23% 14% 1%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. (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, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 13 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Tax-Free Oregon Insured Fund Class A Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.540 $10.380 $10.530 $10.450 $ 9.910 $9.810 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.209 0.453 0.461 0.467 0.465 0.467 Net realized and unrealized gain (loss) on investments 0.040 0.163 (0.151) 0.079 0.540 0.100 ------- ------- ------- ------- ------- ------ Total from investment operations 0.249 0.616 0.310 0.546 1.005 0.567 ------- ------- ------- ------- ------- ------ LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.209) (0.456) (0.460) (0.466) (0.465) (0.467) ------- ------- ------- ------- ------- ------ Total dividends and distributions (0.209) (0.456) (0.460) (0.466) (0.465) (0.467) ------- ------- ------- ------- ------- ------ NET ASSET VALUE, END OF PERIOD $10.580 $10.540 $10.380 $10.530 $10.450 $9.910 ======= ======= ======= ======= ======= ====== TOTAL RETURN(3) 2.38% 6.04% 2.97% 5.41% 10.39% 6.04% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $31,707 $30,817 $29,410 $25,082 $22,973 $22,712 Ratio of expenses to average net assets 0.85% 0.85% 0.84% 0.85% 0.85% 0.85% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.95% 0.90% 0.96% 1.00% 0.99% 1.01% Ratio of net investment income to average net assets 3.99% 4.30% 4.35% 4.52% 4.59% 4.85% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.89% 4.25% 4.23% 4.37% 4.45% 4.69% Portfolio turnover 20% 16% 16% 20% 28% 0%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change 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 and ratios for periods prior to September 1, 2001 have not been restated to reflect this change 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, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 14 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Tax-Free Oregon Insured Fund Class B Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.550 $10.390 $10.540 $10.450 $ 9.910 $ 9.810 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.170 0.374 0.382 0.390 0.389 0.394 Net realized and unrealized gain (loss) on investments 0.040 0.163 (0.151) 0.089 0.540 0.100 ------- ------- ------- ------- ------- ------- Total from investment operations 0.210 0.537 0.231 0.479 0.929 0.494 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.170) (0.377) (0.381) (0.389) (0.389) (0.394) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.170) (0.377) (0.381) (0.389) (0.389) (0.394) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $10.590 $10.550 $10.390 $10.540 $10.450 $ 9.910 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 2.00% 5.24% 2.20% 4.73% 9.57% 5.24% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $6,785 $7,878 $8,750 $8,489 $7,928 $7,484 Ratio of expenses to average net assets 1.60% 1.60% 1.59% 1.60% 1.60% 1.60% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.65% 1.71% 1.75% 1.74% 1.76% Ratio of net investment income to average net assets 3.24% 3.55% 3.60% 3.77% 3.84% 4.10% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.14% 3.50% 3.48% 3.62% 3.70% 3.94% Portfolio turnover 20% 16% 16% 20% 28% 0%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change 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 and ratios for periods prior to September 1, 2001 have not been restated to reflect this change 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, 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 Oregon Insured Fund Class C Six Months Ended Year Ended 2/28/05(2) 8/31/04 8/31/03 8/31/02(1) 8/31/01 8/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.570 $10.400 $10.550 $10.470 $ 9.920 $9.820 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.170 0.374 0.381 0.389 0.388 0.394 Net realized and unrealized gain (loss) on investments 0.040 0.173 (0.151) 0.079 0.550 0.100 ------- ------- ------- ------- ------- ------- Total from investment operations 0.210 0.547 0.230 0.468 0.938 0.494 ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.170) (0.377) (0.380) (0.388) (0.388) (0.394) ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.170) (0.377) (0.380) (0.388) (0.388) (0.394) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $10.610 $10.570 $10.400 $10.550 $10.470 $9.920 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 1.99% 5.33% 2.19% 4.62% 9.66% 5.24% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $6,615 $6,344 $5,395 $3,253 $1,820 $1,609 Ratio of expenses to average net assets 1.60% 1.60% 1.59% 1.60% 1.60% 1.60% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.65% 1.71% 1.75% 1.74% 1.76% Ratio of net investment income to average net assets 3.24% 3.55% 3.60% 3.77% 3.84% 4.10% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.14% 3.50% 3.48% 3.62% 3.70% 3.94% Portfolio turnover 20% 16% 16% 20% 28% 0%
(1) As required, effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that require amortization of all premiums and discounts on debt securities. The effect of this change 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 and ratios for periods prior to September 1, 2001 have not been restated to reflect this change 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, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 16 NOTES February 28, 2005 (Unaudited) TO FINANCIAL STATEMENTS Voyageur Mutual Funds (the "Trust") is organized as a Delaware statutory trust and offers six series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free New York Fund. Voyageur Investment Trust (the "Trust") is organized as a Massachusetts business trust and offers five series: Delaware Tax-Free California Insured Fund, Delaware Tax-Free Florida Fund, Delaware Tax-Free Florida Insured Fund, Delaware Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund. These financial statements and the related notes pertain to the Delaware Tax-Free Idaho Fund, Delaware Tax-Free Missouri Insured Fund, and Delaware Tax-Free Oregon Insured Fund (each a "Fund" or collectively as the "Funds"). The Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended. The Funds offer Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50%. Class B shares are sold with a contingent deferred sales charge that declines from 4.00% 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 Idaho Fund, Delaware Tax-Free Missouri Insured Fund, and Delaware Tax-Free Oregon Insured Fund is to seek as high a level of current income exempt from federal income tax and personal income tax in their respective states, as is consistent with preservation of capital. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Funds' Board of Trustees. Federal Income Taxes -- Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income and common expenses are allocated to the classes of the Funds on the basis of "settled shares" of each class in relation to the net assets of the Funds. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Funds may receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under the above arrangement is included in custodian fees on the Statements of Operations with the corresponding expense offset shown as "expense paid indirectly." The amount of these expenses for the six months ended February 28, 2005 were as follows: Delaware Delaware Tax-Free Tax-Free Missouri Oregon Insured Insured Fund Fund -------- -------- Earnings credits $36 $41 17 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 Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- On the first $500 million 0.50% 0.55% On the next $500 million 0.475% 0.475% On the next $1.5 billion 0.45% 0.45% In excess of $2.5 billion 0.425% 0.425% DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse each Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs, and extraordinary expenses, do not exceed specified percentages of average daily net assets through December 29, 2005, as shown below. Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- The operating expense limitation as a percentage of average daily net assets (per annum) N/A 0.60% Expiration date 10/31/04 10/31/04 Effective November 1, 2004, operating expense limitation as a percentage of average daily net assets (per annum) 0.65% 0.60% Expiration date 12/29/05 12/29/05 Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Funds pay DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.25% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares. At February 28, 2005, the Funds had liabilities payable to affiliates as follows: Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- Investment management fee payable to DMC $19,971 $17,411 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 4,333 3,662 Other expenses payable to DMC and affiliates* 15,921 19,486 *DMC, as part of its administrative services, pays operating expenses on behalf of the Funds and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement, the Funds bear the cost of certain legal services expenses, including in-house legal services provided to the Funds by DMC employees. For the six months ended February 28, 2005, the Funds' costs were as follows: Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- $1,418 $1,238 For the six months ended February 28,2005, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- $1,177 $8,157 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. 18 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS For the six months ended February 28, 2005, the Funds made purchases and sales of investment securities other than short-term investments as follows: Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- Purchases $9,003,239 $5,354,950 Sales 9,154,783 4,224,800 At February 28, 2005, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At February 28, 2005, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows: Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- Cost of investments $48,859,515 $42,170,034 Aggregate unrealized appreciation $2,760,316 $2,514,923 Aggregate unrealized depreciation (41,988) (38,331) Net unrealized appreciation $2,718,328 $2,476,592 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the six months ended February 28, 2005 and the year ended August 31, 2004 was as follows: Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- -------------------- Six Months Year Six Months Year Ended Ended Ended Ended 2/28/05 8/31/04 2/28/05 8/31/04 Tax-exempt income $1,047,417 $2,244,348 $840,406 $1,849,362 *Tax information for the six months ended February 28, 2005 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of February 28, 2005, the estimated components of net assets on a tax basis were as follows:
Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- Shares of beneficial interest $49,010,707 $42,873,991 Distributions in excess of net investment income -- -- Capital loss carryforwards (61,888) (243,466) Net unrealized appreciation of investments 2,718,328 2,476,592 ----------- ----------- Net assets $51,667,147 $45,107,117 =========== ===========
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the six months ended February 28, 2005, the Funds recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of market discount and premium on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- Undistributed net investment income $(3,529) $(1,808) Accumulated realized gain (loss) 3,529 1,808 For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Such Capital loss carryforward amounts remaining at February 28, 2005 will expire as follows: Delaware Tax-Free Delaware Tax-Free Year of expiration Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- 2008 $163,168 $ -- 2009 -- 217,063 2010 -- 78,923 -------- -------- Total $163,168 $295,986 ======== ======== For the six months ended February 28, 2005, each Fund had net capital gains which may be offset by the capital loss carryforwards. Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- $101,280 $52,520 19 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARES Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Missouri Insured Fund Oregon Insured Fund --------------------- ------------------- Six Months Year Six Months Year Ended Ended Ended Ended 2/28/05 8/31/04 2/28/05 8/31/04 Shares sold: Class A 133,333 460,103 221,291 511,034 Class B (59) 33,006 23,218 70,440 Class C 9,862 29,155 74,371 157,187 Shares issued upon reinvestment of dividends and distributions: Class A 46,454 90,070 33,748 72,920 Class B 4,989 13,510 6,557 15,727 Class C 1,817 4,001 6,048 12,786 -------- -------- -------- -------- 196,396 629,845 365,233 840,094 -------- -------- -------- -------- Shares repurchased: Class A (130,987) (410,533) (181,759) (493,915) Class B (92,891) (284,201) (135,684) (181,823) Class C (395) (33,776) (57,117) (88,193) -------- -------- -------- -------- (526,995) (224,273) (728,510) (374,560) (763,931) -------- -------- -------- -------- Net increase (decrease) (27,877) (98,665) (9,327) 76,163 ======== ======== ======== ========
For the six months ended February 28, 2005 and the year ended August 31, 2004, the following shares and value were converted from Class B to Class A. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statements of Changes in Net Assets.
Six Months Ended Year Ended 2/28/05 8/31/04 Class B Shares Class A Shares Value Class B Shares Class A Shares Value -------------- -------------- ------- -------------- -------------- --------- Delaware Tax-Free Missouri Insured Fund 75,306 75,259 806,536 197,551 197,405 2,118,117 Delaware Tax-Free Oregon Insured Fund 53,613 53,664 567,226 63,867 63,896 676,263
20 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. PROXY RESULTS (UNAUDITED) The shareholders of Voyageur Mutual Funds and Voyageur Investment Trust (each, a "Trust") voted on the following proposals (as applicable) at the special meeting of shareholders on March 23, 2005 or as adjourned. The description of each proposal and number of shares voted are as follows: 1. To elect a Board of Trustees for each of the Trusts. VOYAGEUR INVESTMENT TRUST ------------------------------------------- SHARES VOTED SHARES VOTED FOR WITHHELD AUTHORITY ---------------------------------------------------------------------- Thomas L. Bennett 14,252,335.197 431,663.104 ---------------------------------------------------------------------- Jude T. Driscoll 14,251,143.991 432,854.310 ---------------------------------------------------------------------- John A. Fry 14,258,738.991 425,259.310 ---------------------------------------------------------------------- Anthony D. Knerr 14,258,994.991 425,003.310 ---------------------------------------------------------------------- Lucinda S. Landreth 14,254,091.179 429,907.104 ---------------------------------------------------------------------- Ann R. Leven 14,252,611.991 431,386.310 ---------------------------------------------------------------------- Thomas F. Madison 14,259,138.991 424,859.310 ---------------------------------------------------------------------- Janet L. Yeomans 14,251,014.197 432,984.104 ---------------------------------------------------------------------- J. Richard Zecher 14,248,580.991 432,417.310 ---------------------------------------------------------------------- 2. To approve the use of a "manager of managers" structure whereby the investment manager of the funds of each Trust will be able to hire and replace subadvisers without shareholder approval.
FOR AGAINST ABSTAIN ---- -------- -------- Delaware Tax-Free Missouri Insured Fund 2,547,568.583 127,364.617 50,056.412 Delaware Tax-Free Oregon Insured Fund 2,275,818.354 163,301.607 165,753.881
3. To approve the restructuring of Voyageur Investment Trust from a Massachusetts business trust to a Delaware statutory trust.
FOR AGAINST ABSTAIN ---- -------- -------- Delaware Tax-Free Missouri Insured Fund 2,604,153.347 4,240.404 56,595.861 Delaware Tax-Free Oregon Insured Fund 2,345,020.965 143,072.177 116,780.700
7. LINE OF CREDIT The Funds, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each funds' allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 28, 2005 or at any time during the period. 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. The Funds may invest in inverse floating rate securities ("inverse floaters"), a type of derivative tax-exempt obligation with floating or variable interest rates that move in the opposite direction of short-term interest rates, usually at an accelerated speed. Consequently, the market values of inverse floaters will generally be more volatile than other tax-exempt investments. Such securities are denoted on the Statements of Net Assets. 9. CONTRACTUAL OBLIGATIONS The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements are 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. 21 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Idaho Fund, Delaware Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Idaho Fund, Delaware Tax-Free Missouri Insured Fund and Delaware Tax-Free Oregon Insured Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of 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 Affiliated Officers Contact Information JUDE T. DRISCOLL MICHAEL P. BISHOF INVESTMENT MANAGER Chairman Senior Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR THOMAS L. BENNETT Delaware Distributors, L.P. Private Investor RICHELLE S. MAESTRO Philadelphia, PA Rosemont, PA Executive Vice President, Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND JOHN A. FRY Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT President Philadelphia, PA Delaware Service Company, Inc. Franklin & Marshall College 2005 Market Street Lancaster, PA JOHN J. O'CONNOR Philadelphia, PA 19103-7094 Senior Vice President and Treasurer ANTHONY D. KNERR Delaware Investments Family of Funds FOR SHAREHOLDERS Managing Director Philadelphia, PA 800 523-1918 Anthony Knerr & Associates New York, NY FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY LUCINDA S. LANDRETH 800 362-7500 Former Chief Investment Officer Assurant, Inc. WEB SITE Philadelphia, PA www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN J. RICHARD ZECHER Founder Investor Analytics Scottsdale, AZ ------------------------------------------------------------------------------------ Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on each Fund's Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. Each Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how each Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through each Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. ------------------------------------------------------------------------------------ (9276) Printed in the USA SA-CORN [2/05] IVES 4/05 J10078
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 INVESTMENT TRUST Jude T. Driscoll ----------------------------------- By: Jude T. Driscoll Title: Chairman Date: May 2, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Jude T. Driscoll ----------------------------------- By: Jude T. Driscoll Title: Chairman Date: May 2, 2005 Michael P. Bishof ----------------------------------- By: Michael P. Bishof Title: Chief Financial Officer Date: May 2, 2005