-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ns3lIjcwmUGa8ig2SaNsNksllZTfktMvzQi/Ff4RoLeGdSqbVO8ubJVFf8zff4d8 K/m0YRlE5Q4DIW4S+Xej/Q== 0001206774-07-000437.txt : 20070221 0001206774-07-000437.hdr.sgml : 20070221 20070221163252 ACCESSION NUMBER: 0001206774-07-000437 CONFORMED SUBMISSION TYPE: N-CSR/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070221 FILED AS OF DATE: 20070221 DATE AS OF CHANGE: 20070221 EFFECTIVENESS DATE: 20070221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAWARE INVESTMENTS MUNICIPAL TRUST CENTRAL INDEX KEY: 0000879342 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-06411 FILM NUMBER: 07639219 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: (215) 255-2127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR INVESTMENT TRUST DATE OF NAME CHANGE: 19921215 0000879342 S000002409 DELAWARE TAX-FREE FLORIDA INSURED FUND C000006401 DELAWARE TAX-FREE FLORIDA INSURED FUND CLASS A VFLIX C000006402 DELAWARE TAX-FREE FLORIDA INSURED FUND CLASS B DVDBX C000034367 DELAWARE TAX-FREE FLORIDA INSURED FUND CLASS C N-CSR/A 1 delinvestmentsmunicipaltrust.txt AMENDMENTS TO CERTIFIED SHAREHOLDER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR/A CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-6411 Exact name of registrant as specified in charter: Delaware Investments Municipal Trust Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: David F. Connor, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: August 31 Date of reporting period: August 31, 2006 Amended and Restated February 21, 2007 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/A pertains to the DELAWARE TAX FREE FLORIDA INSURED FUND of the Registrant, information on which is included in the following shareholder reports. Annual Report Delaware Tax-Free Florida Insured Fund Delaware Tax-Free New York Fund August 31, 2006 (1) Fixed income mutual funds (1) Certain financial statements and financial highlights in this report have been restated [DELAWARE INVESTMENTS LOGO] [LOGO] POWERED BY RESEARCH(R) Table of contents > Portfolio management review ............................................1 > Performance summaries ..................................................6 > Disclosure of Fund expenses ...........................................10 > Sector allocation and credit rating breakdown .........................12 > Statements of net assets ..............................................14 > Statements of assets and liabilities ..................................19 > Statements of operations ..............................................20 > Statements of changes in net assets ...................................21 > Financial highlights ..................................................22 > Notes to financial statements .........................................28 > Report of independent registered public accounting firm ...............35 > Other Fund information ................................................36 > Board of trustees/directors and officers addendum .....................38 > About the organization ................................................40 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) 2007 Delaware Distributors, L.P. Portfolio management review Delaware Tax-Free Florida Insured / Tax-Free New York Funds August 31, 2006 Joe Baxter Robert Collins Portfolio co-managers The managers of Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund provided the answers to the questions below as a review of the Funds' activities for the fiscal year ended August 31, 2006. Q: What was the investment environment for the Delaware Investments municipal bond mutual funds during the fiscal year ended August 31, 2006? A: Higher gasoline prices, rising short-term interest rates, and ongoing uneasiness about changes in the housing market generally caused concerns in the capital markets and weighed on many investors' outlook for the U.S. economy during our fiscal year. However, the U.S. economy continued its expansion throughout the year, recovering somewhat from a period of slower growth that occurred just after the August and September 2005 hurricanes. Property and casualty insurers held steady, providing a solid source of capital for the tax-exempt debt arena as the year progressed. To summarize, we generally viewed the national-level municipal bond market to be sound over the fiscal year, despite challenges. During most of the fiscal year, the U.S. Federal Reserve (Fed) continued to raise interest rates. After gradually moving the target for the Fed fund rates from 3.50% to 5.25%, the Fed finally paused a long string of increases at its August 2006 meeting. A key tool in the Fed's monetary policy, the Fed funds rate reflects the percentage of interest that banks charge to lend money to each other overnight. Through the rate increases, the Fed endeavored to moderate the pace of economic activity and head off inflation. Earlier in 2006, the interest rate environment was such that the Treasury yield curve began to flatten, which means that the difference between short- and long-term bond yields grew smaller across the spectrum of maturities. This "flattening" was generally present throughout the second half of the fiscal year. In this type of environment, bonds with intermediate maturities - those in the three- to seven-year range - tend to underperform. Low interest rates provided many issuers with refinancing opportunities early in the fiscal year, but new bond issuances dropped off significantly beginning in 2006 because more and more municipal bond issuers had already taken the opportunity to refinance bonds. For instance, through August, the pace of new issuances year-to-date had retreated 15% versus the same period one year earlier (source: Thomson Financial). Comparing tax-exempt and taxable holdings, municipal bond yields began the fiscal year at nearly the same level as Treasuries (98%). By period end, however, that gap had widened to 87%, which reflected the greater decline in the value of Treasury bonds versus their municipal peers (source: Thomson Financial). Q: What other market-related events influenced performance of the funds? A: Credit quality among bond issuers remained strong or improved during the fiscal year, generally contributing to demand for lower-rated securities. In the fiscal period's later stages, we saw more bonds coming to market that we believed to be of increased risk. Also of note, non-traditional buyers (those more interested in the relative valuation of the asset class than the tax-advantaged status of municipal bonds) continued to make their presence felt. These changes influenced trading patterns in the market and presented a new challenge to both mutual fund managers and individual investors. Q: How did the Funds perform relative to their benchmark indices and peer groups? A: Delaware Tax-Free Florida Insured Fund returned 2.78% at net asset value and - -1.81% at maximum offer price (both figures represent Class A shares with distributions reinvested) for the fiscal year ended August 31, 2006. The Fund's performance benchmark, the Lehman Brothers Municipal Bond Index, returned 3.03%. The Fund's peer group, as measured by the Lipper Insured 1 Portfolio management review Delaware Tax-Free Florida Insured / Tax-Free New York Funds Municipal Debt Funds Average, returned 2.14% (source: Lipper). For the complete, annualized performance of Delaware Tax-Free Florida Insured Fund, please see the table on page 6. Delaware Tax-Free New York Fund returned 2.90% at net asset value and -1.70% at maximum offer price (both figures represent Class A shares with distributions reinvested) for the fiscal year ended August 31, 2006. The Fund's performance benchmark, the Lehman Brothers Municipal Bond Index, returned 3.03%. The Fund's peer group, as measured by the Lipper New York Municipal Debt Funds Average, returned 2.65% (source: Lipper). For the complete, annualized performance of Delaware Tax-Free New York Fund, please see the table on page 8. Q: How did the market environment affect your approach to municipal bond investing at large? A: In the current interest rate environment, our approach to municipal bond markets at times dictated that we retain current holdings and ultimately our strategy resulted in limited transactions. During much of the year, we preferred to seek our objective by holding legacy bonds - securities purchased in prior fiscal periods - and depending on the attractive bond yields that already existed within our portfolio of investments. Generally speaking, it became increasingly difficult in the prevailing interest rate environment to identify bonds in the market that were more attractive than the holdings in our portfolio. Frequently during the year, we opted to focus our resources on monitoring the credit of legacy bonds. Overall, we followed our bottom-up investment style, which is based on security-by-security analysis and a free exchange of information among the various members of a deep team that includes portfolio managers, credit analysts, and traders. Q: What local factors may have influenced the municipal bond markets in Florida and New York? A: Municipal bond issuance nationally declined by -14.6% during the 12-month period ended June 30, 2006, due in large part to rising interest rates. By comparison, the rate for Florida over that period climbed 30.6% to a total of $13.7 billion. The Florida Citizens Property Insurance Corporation and Florida Hurricane Catastrophe Fund helped Florida displace New York as the nation's third-largest bond issuer during that time period. Municipal bond issuance in New York decreased 32.7% during the same period to $13.5 billion, but New York remained the fourth largest issuer of the states in 2006 (source: The Bond Buyer). Despite a crippling hurricane season in 2005 and Florida's reliance on tourism, the state's economy has continued to grow. Job growth remained robust (source: Nelson A. Rockefeller State Revenue Report #64). Through July 2006, the state's 3.3% unemployment rate remained low when compared to the national unemployment rate of 4.8% (source: U.S. Department of Labor). High population growth has given strength to the state's economy but has also put pressure on government services for education, corrections, transportation, health, and human services (source: Moody's). With the close of fiscal year 2005, Florida's General Fund totaled $6.6 billion, and its Budget Stabilization Fund was $999 million (source: Moody's). For the first eight months of fiscal year 2006, tax revenues were up 11%. Roughly 70% of that increase was a result of sales and user-tax assessments (source: Nelson A. Rockefeller State Revenue Report #64). On April 26, 2006, the state intangibles tax, a duty on stocks and bonds that affects some of Florida's wealthiest, was voted out by the state legislature. Annual tax savings are predicted to be $161 million for an estimated 300,000 taxpayers. The $74 billion fiscal 2007 budget provides for $298 million in tax cuts and sets aside $6.4 billion in reserves. The state has conservatively forecasted net general revenue growth of 1.6% in 2007 compared to a historical average of 9.8% (source: Moody's). 2 New York's economy has experienced a moderate recovery, strengthened by improving conditions in New York City, its suburbs, and the Hudson Valley region. Data collected by the U.S. Department of Labor statistics through March 2006 showed the national averages for job gains and rates of unemployment slightly outpaced those in New York. During the New York state 2005 fiscal year, net tax receipts rose 4.7%, despite a -4.9% decline in sales tax revenues. Assessments against personal income were major contributors to the growth. Revenues from personal income, constituting roughly 58% of total tax inflows, grew by 5.3% (source: Nelson A. Rockefeller State Revenue Report #64). The state's General Fund balance totaled $2.1 billion in 2006. The spending plan on an all-funds basis for the 2006-2007 budget totals $110.6 billion, an increase of approximately 6% over the previous year. Although the 2006-2007 budget is balanced, it calls for a significant increase in debt. It is also dependent on a growing level of resources that may not be available in the future (source: State of New York Comptroller 2006-2007 Budget Analysis). Q: What specific factors or decisions influenced performance in Delaware Tax-Free Florida Insured Fund during the fiscal year? A: Despite a high level of refinancing activity in the market, we believed that many of the Fund's legacy bonds would not be called, and we decided to hold them for their relatively attractive yields. This strategy did have the effect of shortening the Fund's average duration, which is a measure of a bond or a bond fund's sensitivity to changes in interest rates. Longer duration values indicate greater interest rate sensitivity, and shorter durations generally limit a bond fund's volatility and total return potential. Nonetheless, some bonds held in the portfolio were called during the fiscal year. For example, multi-family housing bonds (housing revenue bonds) made up the most heavily weighted sector of the Fund at the close of the prior fiscal year. That exposure moved lower as some bonds were called. In keeping with our long-term commitment to holding a high-quality portfolio of investments, we again generally avoided the tobacco industry bonds that have so greatly influenced performance in our markets in recent years, as we believe the sector has an elevated risk for litigation. We also remained significantly underweighted versus the benchmark index in bonds backed by airline corporation revenues. Both stances generally were not beneficial to Fund performance when compared to the benchmark and many of our peer funds, as the airline and tobacco industries performed well on a total return basis. During the 12-month span, it seemed that investors tended to seek the added yield and total return potential of lower-quality bonds, and thus securities with ratings further down the credit spectrum generally outperformed. At times, the margin of outperformance between two adjacent credit ratings was significant. At fiscal year end, approximately 83% of net assets were allocated to bonds rated AAA. While the Fund's allocation to securities with A ratings fell slightly, our exposure to bonds of BBB rating grew. The reason for this shift could be found in the Fund's 10% exposure to bonds issued by Puerto Rico, which weakened when Puerto Rico faced budgetary troubles during the period. Q: What specific factors or decisions influenced performance in Delaware Tax-Free New York Fund during the fiscal year? A: Despite a high level of refinancing activity in the market, we believed that many of the Fund's legacy bonds would not be called, and decided to hold them for their relatively attractive yields. In keeping with our long-term commitment to holding a high-quality portfolio of investments, we again generally avoided the tobacco industry bonds that have so greatly influenced performance in our markets in recent years, as we believe the sector has an elevated risk for litigation. 3 Portfolio management review Delaware Tax-Free Florida Insured / Tax-Free New York Funds We also remained significantly underweighted versus the benchmark index in bonds backed by airline corporation revenues. Both stances generally were not beneficial to Fund performance when compared to the benchmark and many of our peer funds, as those two sectors did perform well on a total return basis. During the 12-month span, it seemed that investors tended to seek the added yield and total return potential of lower-quality bonds, and thus securities with ratings further down the credit spectrum generally outperformed. At times, the margin of outperformance between two adjacent credit ratings was significant. Over the course of the fiscal year, we increased our exposure to bonds assigned BBB ratings, adding positions in water bonds and securities issued by New York City. Higher up the credit quality ladder, we slightly increased the Fund's allocation to securities rated AAA. We also added to a position in AA-rated NYC bonds just before their August 31, 2006 credit-quality upgrade. We maintained a steady exposure to insured bonds over the 12 months, at roughly 23% of Fund net assets, while the allocation to securities issued by Puerto Rico ran at approximately 10%. 4 Performance summary Delaware Tax-Free Florida Insured Fund The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than the original cost. A rise or fall in interest rates can have a significant impact on bond prices and the NAV (net asset value) of the Fund. Funds that invest in bonds can lose their value as interest rates rise, and an investor can lose principal. Current performance may be lower or higher than the performance data quoted. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting www.delawareinvestments.com/performance. You should consider the investment objectives, risks, charges, and expenses of the investment carefully before investing. Funds that invest in bonds may lose value as interest rates rise and an investor can lose principal. The Delaware Tax-Free Florida Insured Fund prospectus contains this and other important information about the Fund. Please request a prospectus through your financial advisor or by calling 800 523-1918 or visiting our Web site. Read the prospectus carefully before you invest or send money. Fund Performance Average annual total returns Through August 31, 2006 1 year 5 years 10 years Lifetime ________________________________________________________________________________ Class A (Est. 1/1/92) Excluding sales charge +2.78% +4.54% +5.49% +6.00% Including sales charge -1.81% +3.58% +5.01% +5.66% ________________________________________________________________________________ Class B (Est. 3/11/94) Excluding sales charge +2.11% +3.78% +4.87% +4.93% Including sales charge -1.82% +3.52% +4.87% +4.93% ________________________________________________________________________________ Class C (Est. 9/29/97)* Excluding sales charge +2.10% +3.76% - +4.12% Including sales charge +1.12% +3.76% - +4.12% ________________________________________________________________________________ *Class C shares were sold and outstanding from September 29, 1997 until December 18, 1997, when all of the outstanding Class C shares were redeemed. There were no outstanding Class C shares or shareholder activity from December 19, 1997 through January 7, 1999. The performance for Class C shares during the period from December 19, 1997 through January 7, 1999 is based on the performance of Class B shares. Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed. The Fund offers Class A, B, and C shares. Class A shares are sold with a front-end sales charge of up to 4.50% and have an annual distribution and service fee of 0.25%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending on 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. They are also subject to an annual distribution and service fee of 1%. Ten-year and lifetime performance figures for Class B shares reflect conversion to Class A shares after eight years. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1%. An expense limitation was in effect for all classes of Delaware Tax-Free Florida Insured Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. The performance table does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. 6 Fund basics As of August 31, 2006 ________________________________________________________________________________ Fund objective ________________________________________________________________________________ The Fund seeks as high a level of current income exempt from federal income tax and from Florida state personal income tax as is consistent with preservation of capital. ________________________________________________________________________________ Total Fund net assets ________________________________________________________________________________ $101 million ________________________________________________________________________________ Number of holdings ________________________________________________________________________________ 62 ________________________________________________________________________________ Fund start date ________________________________________________________________________________ January 1, 1992 ________________________________________________________________________________ Your Fund managers ________________________________________________________________________________ Joseph R. Baxter joined Delaware Investments in 1999. Formerly, he held investment positions with First Union. He heads the firm's municipal bond department and is responsible for setting the department's investment strategy. He is also co-portfolio manager of the firm's municipal bond funds and several client accounts. Joe Baxter received a bachelor's degree in finance and marketing from LaSalle University. Robert F. Collins, CFA, joined Delaware Investments in 2004. Formerly, he spent five years as a co-manager of the municipal portfolio management group, where he oversaw the tax-exempt investments of high net worth and institutional accounts. Before that, Robert F. Collins headed the municipal fixed income team at Wilmington Trust. He earned a bachelor's degree in economics from Ursinus College. ________________________________________________________________________________ Nasdaq symbols CUSIPs ________________________________________________________________________________ Class A VFLIX 24610R102 Class B DVDBX 24610R300 Class C DVDCX 24610R706 Performance of a $10,000 Investment August 31, 1996 through August 31, 2006 [PERFORMANCE OF A $10,000 INVESTMENT LINE GRAPH] Chart assumes $10,000 invested on August 31, 1996 and includes the effect of a 4.50% front-end sales charge and the reinvestment of all distributions. Performance for other Fund classes will vary due to differing charges and expenses. The Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks the performance of municipal bonds. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. The performance graph does not reflect the deduction of taxes the shareholder may pay on Fund distributions or redemption of Fund shares. An expense limitation was in effect for all classes of the Delaware Tax-Free Florida Insured Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. Past performance is not a guarantee of future results. (continues) 7 Performance summary Delaware Tax-Free New York Fund The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than the original cost. A rise or fall in interest rates can have a significant impact on bond prices and the NAV (net asset value) of the Fund. Funds that invest in bonds can lose their value as interest rates rise, and an investor can lose principal. Current performance may be lower or higher than the performance data quoted. Please obtain the performance data for the most recent month end by calling 800 523-1918 or by visiting www.delawareinvestments.com/performance. You should consider the investment objectives, risks, charges, and expenses of the investment carefully before investing. Funds that invest in bonds may lose value as interest rates rise and an investor can lose principal. The Delaware Tax-Free New York Fund prospectus contains this and other important information about the Fund. Please request a prospectus through your financial advisor or by calling 800 523-1918 or visiting our Web site. Read the prospectus carefully before you invest or send money. Fund Performance Average annual total returns Through August 31, 2006 1 year 5 years 10 years Lifetime ________________________________________________________________________________ Class A (Est. 11/6/87) Excluding sales charge +2.90% +5.05% +5.17% +6.30% Including sales charge -1.70% +4.08% +4.69% +6.04% ________________________________________________________________________________ Class B (Est. 11/14/94) Excluding sales charge +2.23% +4.28% +4.55% +4.96% Including sales charge -1.72% +4.02% +4.55% +4.96% ________________________________________________________________________________ Class C (Est. 4/26/95) Excluding sales charge +2.23% +4.28% +4.40% +4.30% Including sales charge +1.25% +4.28% +4.40% +4.30% ________________________________________________________________________________ Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed. The Fund offers Class A, B, and C shares. Class A shares are sold with a front-end sales charge of up to 4.50% and have an annual distribution and service fee of 0.25%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending on 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. They are also subject to an annual distribution and service fee of 1%. Ten-year and lifetime performance figures for Class B shares reflect conversion to Class A shares after eight years. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1%. An expense limitation was in effect for all classes of Delaware Tax-Free New York Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. The performance table and graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. 8 Fund basics As of August 31, 2006 ________________________________________________________________________________ Fund objective ________________________________________________________________________________ The Fund seeks as high a level of current income exempt from federal income tax and from New York state personal income tax as is consistent with preservation of capital. ________________________________________________________________________________ Total Fund net assets ________________________________________________________________________________ $18 million ________________________________________________________________________________ Number of holdings ________________________________________________________________________________ 42 ________________________________________________________________________________ Fund start date ________________________________________________________________________________ November 6, 1987 ________________________________________________________________________________ Your Fund managers ________________________________________________________________________________ Joseph R. Baxter joined Delaware Investments in 1999. Formerly, he held investment positions with First Union. He heads the firm's municipal bond department and is responsible for setting the department's investment strategy. He is also co-portfolio manager of the firm's municipal bond funds and several client accounts. Joe Baxter received a bachelor's degree in finance and marketing from LaSalle University. Robert F. Collins, CFA, joined Delaware Investments in 2004. Formerly, he spent five years as a co-manager of the municipal portfolio management group, where he oversaw the tax-exempt investments of high net worth and institutional accounts. Before that, Robert F. Collins headed the municipal fixed income team at Wilmington Trust. He earned a bachelor's degree in economics from Ursinus College. ________________________________________________________________________________ Nasdaq symbols CUSIPs ________________________________________________________________________________ Class A FTNYX 928928274 Class B DVTNX 928928266 Class C DVFNX 928928258 Performance of a $10,000 Investment August 31, 1996 through August 31, 2006 [PERFORMANCE OF A $10,000 INVESTMENT LINE GRAPH] Chart assumes $10,000 invested on August 31, 1996 and includes the effect of a 4.50% front-end sales charge and the reinvestment of all distributions. Performance for other Fund classes will vary due to differing charges and expenses. The Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks the performance of municipal bonds. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. The performance graph does not reflect the deduction of taxes the shareholder may pay on Fund distributions or redemption of Fund shares. An expense limitation was in effect for all classes of the Delaware Tax-Free New York Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. Past performance is not a guarantee of future results. 9 Disclosure of Fund expenses For the period March 1, 2006 to August 31, 2006 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 March 1, 2006 to August 31, 2006. Actual Expenses The first section of the tables shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second section of the tables shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in 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 tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of each table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Each Fund's actual expenses shown in the tables reflect fee waivers in effect. The expenses shown in each table assume reinvestment of all dividends and distributions. "Expenses Paid During Period" are equal to the Funds' annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Delaware Tax-Free Florida Insured Fund (Restated) Expense Analysis of an Investment of $1,000 Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 3/1/06 to 3/1/06 8/31/06 Ratios 8/31/06 ________________________________________________________________________________ Actual fund return Class A $1,000.00 $1,018.20 1.10% $5.60 Class B 1,000.00 1,015.20 1.85% 9.40 Class C 1,000.00 1,014.30 1.85% 9.39 ________________________________________________________________________________ Hypothetical 5% return (5% return before expenses) Class A $1,000.00 $1,019.66 1.10% $5.60 Class B 1,000.00 1,015.88 1.85% 9.40 Class C 1,000.00 1,015.88 1.85% 9.40 ________________________________________________________________________________ The expenses in the table above have been restated to include interest and related expenses associated with participation in inverse floater programs. See Note 10 in "Notes to financial statements." Previously the expense analysis for Delaware Tax-Free Florida Insured Fund was: Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 3/1/06 to 3/1/06 8/31/06 Ratios 8/31/06 ________________________________________________________________________________ Actual fund return Class A $1,000.00 $1,018.20 0.86% $4.37 Class B 1,000.00 1,015.20 1.61% 8.18 Class C 1,000.00 1,014.30 1.61% 8.17 ________________________________________________________________________________ Hypothetical 5% return (5% return before expenses) Class A $1,000.00 $1,020.87 0.86% $4.38 Class B 1,000.00 1,017.09 1.61% 8.19 Class C 1,000.00 1,017.09 1.61% 8.19 ________________________________________________________________________________ 10 Delaware Tax-Free New York Fund Expense Analysis of an Investment of $1,000 Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 3/1/06 to 3/1/06 8/31/06 Ratios 8/31/06 ________________________________________________________________________________ Actual fund return Class A $1,000.00 $1,019.00 0.65% $3.31 Class B 1,000.00 1,015.20 1.40% 7.11 Class C 1,000.00 1,015.30 1.40% 7.11 ________________________________________________________________________________ Hypothetical 5% return (5% return before expenses) Class A $1,000.00 $1,021.93 0.65% $3.31 Class B 1,000.00 1,018.15 1.40% 7.12 Class C 1,000.00 1,018.15 1.40% 7.12 ________________________________________________________________________________ There were no changes to the expense analysis for this Fund. 11 Sector allocation and credit rating breakdown Delaware Tax-Free Florida Insured Fund (Restated)* As of August 31, 2006 Sector designations may be different than the sector designations presented in other Fund materials. Percentage Sector of Net Assets ________________________________________________________________________________ Municipal Bonds 103.67% Education Revenue Bonds 5.28% Electric Revenue Bonds 3.29% Health Care Revenue Bonds 16.60% Housing Revenue Bonds 13.35% Lease Revenue Bonds 10.19% Local General Obligation Bonds 4.26% Pre-Refunded Bonds 20.47% Special Tax Bonds 20.53% State General Obligation Bonds 2.85% Transportation Revenue Bonds 3.68% Water & Sewer Revenue Bonds 3.17% ________________________________________________________________________________ Total Market Value of Securities 103.67% ________________________________________________________________________________ Liabilities Net of Receivables and Other Assets (3.67%) ________________________________________________________________________________ Total Net Assets 100.00% ________________________________________________________________________________ * See Restatement Note 10 in "Notes to Financial Statements." Credit Rating Breakdown (as a % of fixed income investments) ________________________________________________________________________________ AAA 83.63% AA 5.82% A 5.90% BBB 4.65% ________________________________________________________________________________ Total 100.00% ________________________________________________________________________________ 12 Delaware Tax-Free New York Fund Sector designations may be different than the sector designations presented in other Fund materials. Percentage Sector of Net Assets ________________________________________________________________________________ Municipal Bonds 99.37% Corporate Revenue Bonds 8.14% Education Revenue Bonds 12.22% Electric Revenue Bonds 8.51% Health Care Revenue Bonds 14.83% Lease Revenue Bonds 13.65% Local General Obligation Bonds 7.41% Pre-Refunded Bonds 11.70% Special Tax Bonds 5.80% State General Obligation Bonds 1.44% Transportation Revenue Bonds 11.41% Water & Sewer Revenue Bonds 4.26% ________________________________________________________________________________ Total Market Value of Securities 99.37% ________________________________________________________________________________ Receivables and Other Assets Net of Liabilities 0.63% ________________________________________________________________________________ Total Net Assets 100.00% ________________________________________________________________________________ Credit Rating Breakdown (as a % of fixed income investments) ________________________________________________________________________________ AAA 28.56% AA 23.05% A 20.24% BBB 25.18% BB 2.97% ________________________________________________________________________________ Total 100.00% ________________________________________________________________________________ 13 Statements of net assets Delaware Tax-Free Florida Insured Fund (Restated) August 31, 2006 Principal Market Amount Value ________________________________________________________________________________ Municipal Bonds - 103.67% ________________________________________________________________________________ Education Revenue Bonds - 5.28% Broward County Educational Facilities Authority Revenue (Nova Southeastern University) 5.25% 4/1/27 (RADIAN) $1,000,000 $1,042,890 Miami-Dade County Educational Facilities Authority (University of Miami) Series A 5.75% 4/1/29 (AMBAC) 2,000,000 2,145,520 University of Central Florida Athletics Association Certificates of Participation Series A 5.25% 10/1/34 (FGIC) 2,000,000 2,121,500 __________ 5,309,910 __________ Electric Revenue Bonds - 3.29% Florida State Municipal Power Agency Revenue (Stanton II Project) 5.00% 10/1/26 (AMBAC) 2,000,000 2,082,320 Ocala Utility System Revenue Series B 5.25% 10/1/25 (FGIC) 1,125,000 1,225,373 __________ 3,307,693 __________ Health Care Revenue Bonds - 16.60% Escambia County Health Facilities Authority (Florida Health Care Facilities - VHA Program) 5.95% 7/1/20 (AMBAC) 560,000 586,466 Highlands County Health Facilities Authority (Adventist Health System) Series C 5.25% 11/15/36 1,000,000 1,054,480 Indian River County Hospital District (Indian River Memorial Hospital) 6.10% 10/1/18 (FSA) 3,000,000 3,065,580 Jacksonville Economic Development Community Health Care Facilities Revenue (Mayo Clinic) 5.00% 11/15/36 1,000,000 1,040,100 Miami-Dade County Public Facilities Revenue (Jackson Health Systems) Series A 5.00% 6/1/35 (MBIA) 1,500,000 1,567,455 North Miami Health Facilities Authority (Catholic Health Services) (LOC Suntrust Bank Miami) 6.00% 8/15/16 500,000 510,635 Orange County Health Facilities Authority Revenue (Adventist Health System) 5.625% 11/15/32 1,000,000 1,073,170 Palm Beach County Health Facilities Authority Revenue (Boca Raton Community Hospital) 5.625% 12/1/31 2,000,000 2,094,060 South Broward Hospital District Revenue (Memorial Health Care System) 5.625% 5/1/32 3,000,000 3,206,580 Tallahassee Health Facilities (Tallahassee Memorial Regional Medical Center) Series B 6.00% 12/1/15 (MBIA) 2,500,000 2,504,350 __________ 16,702,876 __________ Housing Revenue Bonds - 13.35% Florida Housing Finance Agency (Crossings Indian Run Apartments HUD) Series V 6.10% 12/1/26 (AMBAC) (AMT) 750,000 766,898 (Landings at Sea Forest Apartments) Series T 5.85% 12/1/18 (AMBAC) (FHA) (AMT) 380,000 388,212 6.05% 12/1/36 (AMBAC) (FHA) (AMT) 700,000 715,064 (Leigh Meadows Apartments Section 8 HUD) Series N 6.20% 9/1/26 (AMBAC) (AMT) 2,765,000 2,822,732 6.30% 9/1/36 (AMBAC) (AMT) 2,000,000 2,041,680 (Riverfront Apartments Section 8 HUD) Series A 6.25% 4/1/37 (AMBAC) (AMT) 1,000,000 1,026,800 (Spinnaker Cove Apartments) Series G 6.50% 7/1/36 (AMBAC) (FHA) (AMT) 500,000 510,490 (The Vineyards Project) Series H 6.40% 11/1/15 500,000 511,105 (Woodbridge Apartments) Series L 6.15% 12/1/26 (AMBAC) (AMT) 1,750,000 1,789,603 6.25% 6/1/36 (AMBAC) (AMT) 2,000,000 2,045,040 Orange County Housing Finance Authority Homeowner Revenue Series B 5.25% 3/1/33 (GNMA) (FNMA) (AMT) 295,000 301,463 Volusia County Multifamily Housing Finance Authority (San Marco Apartments) Series A 5.60% 1/1/44 (FSA) (AMT) 500,000 514,850 __________ 13,433,937 __________ Lease Revenue Bonds - 10.19% Florida Municipal Loan Council Revenue Series B 5.00% 11/1/29 (MBIA) 1,000,000 1,051,350 Lake County School Board Series A 5.00% 6/1/30 (AMBAC) 1,750,000 1,828,698 14 Principal Market Amount Value ________________________________________________________________________________ Municipal Bonds (continued) ________________________________________________________________________________ Lease Revenue Bonds (continued) Osceola County School Board Series A 5.25% 6/1/27 (AMBAC) $4,000,000 $ 4,251,199 Pasco County School Board Series A 5.00% 8/1/30 (AMBAC) 1,000,000 1,049,470 Puerto Rico Public Buildings Authority Revenue (Government Facilities) Series F 5.25% 7/1/25 930,000 1,023,521 St. Augustine Capital Improvement Revenue 5.00% 10/1/34 (AMBAC) 1,000,000 1,045,940 ___________ 10,250,178 ___________ Local General Obligation Bonds - 4.26% Enterprise Community Development District Special Assessment 6.10% 5/1/16 (MBIA) 695,000 696,383 Hollywood Community Redevelopment Agency 5.625% 3/1/24 1,200,000 1,278,840 Julington Creek Plantation Community Development District Special Assessment 5.00% 5/1/29 (MBIA) 200,000 207,852 Port St. Lucie 5.00% 7/1/35 (MBIA) 2,000,000 2,106,260 ___________ 4,289,335 ___________ $ Pre-Refunded Bonds - 20.47% Florida Housing Finance Agency (Mariner Club Apartments) Series K-1 6.25% 9/1/26-07 (AMBAC) (AMT) 300,000 309,138 6.375% 9/1/36-07 (AMBAC) (AMT) 525,000 541,312 (Sterling Palms Apartments) Series D-1 6.30% 12/1/16-06 (AMBAC) (AMT) 895,000 917,831 6.40% 12/1/26-06 (AMBAC) (AMT) 1,500,000 1,538,625 6.50% 6/1/36-06 (AMBAC) (AMT) 6,540,000 6,710,040 Highlands County Health Facilities Authority (Adventist Health System/Sunbelt) Series A 6.00% 11/15/31-11 1,500,000 1,674,300 Jacksonville Port Authority Seaport Revenue 5.70% 11/1/30-10 (MBIA) (AMT) 205,000 219,606 Lee County Airport Revenue Series B 5.75% 10/1/33-10 (FSA) 3,000,000 3,271,710 Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series D 5.25% 7/1/38-12 3,000,000 3,250,830 Tampa Utilities Tax Revenue Series A 6.00% 10/1/17-09 (AMBAC) 1,000,000 1,079,130 6.125% 10/1/18-09 (AMBAC) 1,000,000 1,082,600 ___________ 20,595,122 ___________ Special Tax Bonds - 20.53% Florida State Board of Education (Lottery Revenue) Series A 6.00% 7/1/14 (FGIC) 1,000,000 1,091,440 Jacksonville Excise Taxes Revenue Series B 5.00% 10/1/26 (AMBAC) 1,000,000 1,039,530 5.125% 10/1/32 (FGIC) 1,000,000 1,053,560 & Palm Beach County Criminal Justice Facilities Revenue 5.75% 6/1/12 (FGIC) 15,000,000 16,617,150 ^ Puerto Rico Commonwealth Infrastructure Financing Authority Series A 4.60% 7/1/30 (FGIC) 2,500,000 846,075 ___________ 20,647,755 ___________ State General Obligation Bonds - 2.85% Puerto Rico Commonwealth Public Improvement Series A 5.50% 7/1/19 (MBIA) 2,500,000 2,872,050 ___________ 2,872,050 ___________ Transportation Revenue Bonds - 3.68% Jacksonville Port Authority Seaport Revenue 5.70% 11/1/30 (MBIA) (AMT) 295,000 313,904 Miami-Dade County Aviation Revenue (Miami International Airport) Series B 5.00% 10/1/37 (FGIC) 1,000,000 1,042,480 Miami-Dade County Aviation Revenue Series A 5.00% 10/1/33 (FSA) (AMT) 500,000 513,290 Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series G 5.00% 7/1/42 800,000 812,528 Series K 5.00% 7/1/35 1,000,000 1,023,240 ___________ 3,705,442 ___________ Water & Sewer Revenue Bonds - 3.17% Tampa Water and Sewer Revenue 6.00% 10/1/16 (FSA) 1,000,000 1,176,850 Village Center Community Development District Utility Revenue 5.00% 10/1/36 (MBIA) 500,000 519,685 Winter Haven Utilities Systems Revenue Refunding & Improvement 5.00% 10/1/30 (MBIA) 1,415,000 1,491,509 ___________ 3,188,044 ___________ Total Municipal Bonds (cost $99,557,261) 104,302,342 ___________ (continues) 15 Statements of net assets Delaware Tax-Free Florida Insured Fund ______________________________________________________________________________ ______________________________________________________________________________ Total Market Value of Securities - 103.67% (cost $99,557,261) $104,302,342 Liabilities Net of Receivables and Other Assets - (3.67%)* (3,689,148) ____________ Net Assets Applicable to 9,029,447 Shares Outstanding - 100.00% $100,613,194 ____________ Net Asset Value - Delaware Tax-Free Florida Insured Fund A Class ($92,726,424 / 8,321,991 Shares) $11.14 ______ Net Asset Value - Delaware Tax-Free Florida Insured Fund B Class ($4,323,253 / 387,828 Shares) $11.15 ______ Net Asset Value - Delaware Tax-Free Florida Insured Fund C Class ($3,563,517 / 319,628 Shares) $11.15 ______ Components of Net Assets at August 31, 2006: Shares of beneficial interest (unlimited authorization - no par) $ 96,385,804 Accumulated net realized loss on investments (517,691) Net unrealized appreciation of investments 4,745,081 ____________ Total net assets $100,613,194 ____________ $ Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in "Notes to Financial Statements." * Includes $7,500,000 in liability for Inverse Floater programs. See Note 8 and Note 10 in "Notes to Financial Statements." & Security held in a trust in connection with the Inverse Floater security $7,500,000, 7.77%, 6/1/12. For additional information on the Inverse Floater programs, see Note 8 and Note 10 in "Notes to Financial Statements." ^ Zero coupon security. 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 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 HUD - Housing and Urban Development LOC - Letter of Credit MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance VHA - Veterans Health Administration Net Asset Value and Offering Price per Share - Delaware Tax-Free Florida Insured Fund Net asset value Class A (A) $11.14 Sales charge (4.50% of offering price) (B) 0.52 ______ Offering price $11.66 ______ (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 16 Delaware Tax-Free New York Fund August 31, 2006 Principal Market Amount Value ______________________________________________________________________________ Municipal Bonds - 99.37% ______________________________________________________________________________ Corporate Revenue Bonds - 8.14% New York City Industrial Development Agency (Brooklyn Navy Yard Cogen Partners) 5.75% 10/1/36 (AMT) $ 450,000 $ 453,861 New York State Energy Research & Development Authority Pollution Control Revenue (Central Hudson Gas) Series A 5.45% 8/1/27 (AMBAC) 500,000 527,295 Suffolk County Industrial Development Agency Revenue (Keyspan-Port Jefferson Energy Center) 5.25% 6/1/27 (AMT) 500,000 519,670 ___________ 1,500,826 ___________ Education Revenue Bonds - 12.22% Amherst Industrial Development Agency Civic Facilities Revenue (UBF Faculty Student Housing) Series A 5.75% 8/1/30 (AMBAC) 200,000 217,742 Cattaraugus County Industrial Development Agency Civic Faculty Revenue (St. Bonaventure University Project) Series A 5.10% 5/1/31 250,000 253,008 Dutchess County Industrial Development Agency (Marist College) 5.00% 7/1/20 500,000 518,555 New York State Dormitory Authority Revenue (Columbia University) Series A 5.00% 7/1/23 500,000 527,010 (Pratt Institute) 6.00% 7/1/20 (RADIAN) 500,000 536,980 (State University) Series B 7.50% 5/15/11 180,000 200,354 ___________ 2,253,649 ___________ Electric Revenue Bonds - 8.51% Long Island Power Authority New York Electric Systems Revenue Series B 5.00% 12/1/35 400,000 417,060 Puerto Rico Electric Power Authority Power Revenue Series II 5.25% 7/1/31 500,000 523,465 Series NN 5.125% 7/1/29 600,000 630,090 ___________ 1,570,615 ___________ Health Care Revenue Bonds - 14.83% East Rochester Housing Authority Revenue Refunding (Senior Living -Woodland Village Project) 5.50% 8/1/33 200,000 202,872 New York State Dormitory Authority Revenue (Chapel Oaks) LOC Allied Irish Bank 5.45% 7/1/26 450,000 467,514 (Mental Health) Series D 5.90% 2/15/12 25,000 25,721 (Millard Fillmore Hospital) 5.375% 2/1/32 (AMBAC) (FHA) 450,000 464,072 (North Shore Long Island Jewish Group Project) 5.50% 5/1/33 500,000 532,785 (Winthrop South Nassau Hospital) Series B 5.50% 7/1/23 500,000 528,950 Suffolk County Industrial Development Agency Continuing Care Retirement Community Refunding (Jeffersons Ferry Project) 5.00% 11/1/28 500,000 513,000 ___________ 2,734,914 ___________ Lease Revenue Bonds - 13.65% Albany Industrial Development Agency Civic Facility Revenue (Charitable Leadership Project) Series A 5.75% 7/1/26 500,000 518,950 Battery Park City Authority Revenue Series A 5.00% 11/1/26 500,000 526,560 New York City Industrial Development Agency Civic Facility Revenue (American National Red Cross Project) 5.00% 2/1/36 (AMBAC) 500,000 525,860 New York City Industrial Development Revenue (Queens Baseball Stadium Project - Pilot) 4.75% 1/1/42 (AMBAC) 200,000 203,010 (Yankee Stadium Project - Pilot) 4.75% 3/1/46 (MBIA) 200,000 203,024 Tobacco Settlement Financing Series B-1C 5.50% 6/1/21 500,000 541,335 ___________ 2,518,739 ___________ Local General Obligation Bonds - 7.41% New York City Series C 5.375% 11/15/27 310,000 318,311 Series D 5.00% 11/1/34 500,000 518,870 Series J 5.25% 6/1/28 500,000 529,490 ___________ 1,366,671 ___________ $ Pre-Refunded Bonds - 11.70% Metropolitan Transportation Authority Dedicated Tax Series A 6.125% 4/1/17-10 (FGIC) 1,000,000 1,086,589 New York City Series C 5.375% 11/15/27-07 140,000 144,483 New York State Dormitory Authority Lease (Court Facilities) Series A 5.375% 5/15/21-13 500,000 550,865 (continues) 17 Statements of net assets Delaware Tax-Free New York Fund Principal Market Amount Value ______________________________________________________________________________ Municipal Bonds (continued) ______________________________________________________________________________ Pre-Refunded Bonds (continued) New York State Dormitory Authority Revenue (Mental Health) Series D 5.90% 2/15/12-07 $ 225,000 $ 231,874 (State University) Series B 7.50% 5/15/11-09 130,000 144,997 ___________ 2,158,808 ___________ Special Tax Bonds - 5.80% New York State Sales Tax Asset Receivables Series A 5.25% 10/15/27 (AMBAC) 500,000 540,255 Schenectady Metroplex Development Authority Revenue Series A 5.375% 12/15/21 500,000 529,170 ___________ 1,069,425 ___________ State General Obligation Bonds - 1.44% Puerto Rico Commonwealth Series B 5.25% 7/1/32 250,000 264,853 ___________ 264,853 ___________ Transportation Revenue Bonds - 11.41% Albany Parking Authority Revenue Series A 5.625% 7/15/25 500,000 532,540 New York City Industrial Development Agency (JFK Airis Project A) 5.50% 7/1/28 (AMT) 500,000 514,405 Onondaga County Industrial Development Authority Revenue Subordinated (Air Cargo Project) 7.25% 1/1/32 (AMT) 500,000 543,180 Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series Y 5.50% 7/1/36 475,000 514,539 ___________ 2,104,664 ___________ Water & Sewer Revenue Bonds - 4.26% New York City Municipal Water Finance Authority Water & Sewer System Revenue Series A 5.125% 6/15/34 500,000 524,565 Series B 5.00% 6/15/36 250,000 261,505 ___________ 786,070 ___________ Total Municipal Bonds (cost $17,422,657) 18,329,234 ___________ Total Market Value of Securities - 99.37% (cost $17,422,657) $18,329,234 ___________ Receivables and Other Assets Net of Liabilities - 0.63% 115,647 ___________ Net Assets Applicable to 1,749,052 Shares Outstanding - 100.00% $18,444,881 ___________ Net Asset Value - Delaware Tax-Free New York Fund Class A ($13,519,533 / 1,281,294 Shares) $10.55 ______ Net Asset Value - Delaware Tax-Free New York Fund Class B ($2,857,756 / 271,384 Shares) $10.53 ______ Net Asset Value - Delaware Tax-Free New York Fund Class C ($2,067,592 / 196,374 Shares) $10.53 ______ Components of Net Assets at August 31, 2006: Shares of beneficial interest (unlimited authorization - no par) $17,766,839 Distributions in excess of net investment income (655) Accumulated net realized loss on investments (227,880) Net unrealized appreciation of investments 906,577 ___________ Total net assets $18,444,881 ___________ $ Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S. Treasury bonds. For pre-refunded bonds, the stated maturity is followed by the year in which the bond is pre-refunded. See Note 8 in "Notes to Financial Statements." Summary of Abbreviations: 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 LOC - Letter of Credit MBIA - Insured by the Municipal Bond Insurance Association RADIAN - Insured by Radian Asset Assurance Net Asset Value and Offering Price Per Share - Delaware Tax-Free New York Fund Net asset value Class A (A) $10.55 Sales charge (4.50% of offering price) (B) 0.50 ______ Offering price $11.05 ______ (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 18 Statements of assets and liabilities Delaware Tax-Free Florida Insured / Tax-Free New York Funds August 31, 2006 Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund (Restated) Assets: Investments at market $104,302,342 $18,329,234 Interest receivable 1,824,306 208,751 Receivable for securities sold 4,768,500 - ____________ ___________ Total assets 110,895,148 18,537,985 ____________ ___________ Liabilities: Liability for Inverse Floater programs 7,500,000 - Cash overdraft 384,874 24,637 Payable for securities purchased 2,082,740 - Liquidations payable 23,243 23,335 Distributions payable 109,827 18,854 Due to manager and affiliates 76,803 11,113 Other accrued expenses 31,653 15,165 Interest and related expense payable for Inverse Floater programs 72,814 - ____________ ___________ Total liabilities 10,281,954 93,104 ____________ ___________ Total Net Assets $100,613,194 $18,444,881 ____________ ___________ Investments at cost $ 99,557,261 $17,422,657 ____________ ___________ See accompanying notes
19 Statements of operations Year Ended August 31, 2006 Delaware Tax-Free Delaware Florida Tax-Free Insured New York Fund Fund (Restated) Investment Income: Interest $5,742,714 $869,089 __________ ________ Expenses: Management fees 517,389 97,031 Interest and related Expense 251,788 - Distribution expenses - Class A 238,110 33,575 Distribution expenses - Class B 48,204 28,468 Distribution expenses - Class C 34,317 13,428 Dividend disbursing and transfer agent fees and expenses 69,194 14,461 Accounting and administration expenses 41,391 7,057 Legal and professional fees 32,454 13,862 Reports and statements to shareholders 18,863 3,282 Custodian fees 4,266 1,744 Trustees' fees 5,874 1,003 Pricing fees 1,943 1,134 Insurance fees 2,573 534 Taxes (other than taxes on income) 467 66 Registration fees 18,017 7,263 Other 5,381 1,723 __________ ________ 1,290,231 224,631 Less expenses absorbed or waived (78,757) (76,894) Less expenses paid indirectly (2,975) (1,514) __________ ________ Total operating expenses 1,208,499 146,223 __________ ________ Net Investment Income 4,534,215 722,866 __________ ________ Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on investments 172,566 (4,673) Net change in unrealized depreciation of investments (1,964,445) (211,649) __________ ________ Net Realized and Unrealized Loss on Investments (1,791,879) (216,322) __________ ________ Net Increase in Net Assets Resulting from Operations $2,742,336 $506,544 __________ ________ See accompanying notes
20 Statements of changes in net assets Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund Year Ended Year Ended 8/31/06 8/31/05 8/31/06 8/31/05 Increase in Net Assets from Operations: Net investment income $ 4,534,215 $ 4,400,282 $ 722,866 $ 685,440 Net realized gain (loss) on investments 172,566 332,797 (4,673) 73,048 Net change in unrealized appreciation/depreciation of investments (1,964,445) 426,912 (211,649) 267,666 ____________ ____________ ____________ ____________ Net increase in net assets resulting from operations 2,742,336 5,159,991 506,544 1,026,154 ____________ ____________ ____________ ____________ Dividends and Distributions to Shareholders from: Net investment income: Class A (4,229,857) (4,136,398) (574,553) (519,496) Class B (177,726) (195,487) (100,697) (105,732) Class C (126,632) (68,397) (47,616) (60,212) ____________ ____________ ____________ ____________ (4,534,215) (4,400,282) (722,866) (685,440) ____________ ____________ ____________ ____________ Capital Share Transactions: Proceeds from shares sold: Class A 7,210,250 8,716,486 2,071,330 1,917,681 Class B 176,391 392,192 333,088 388,800 Class C 945,183 339,297 1,263,939 449,842 Net assets from reorganization (1): Class A - 10,617,811 - - Class B - 2,665,962 - - Class C - 2,237,525 - - Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 2,113,643 1,690,235 402,764 374,723 Class B 57,358 49,113 42,018 48,934 Class C 69,024 34,037 39,921 20,784 ____________ ____________ ____________ ____________ 10,571,849 26,742,658 4,153,060 3,200,764 ____________ ____________ ____________ ____________ Cost of shares repurchased: Class A (13,278,168) (10,965,231) (1,930,227) (921,789) Class B (1,350,630) (2,629,629) (500,844) (335,650) Class C (706,793) (419,581) (122,713) (1,931,944) ____________ ____________ ____________ ____________ (15,335,591) (14,014,441) (2,553,784) (3,189,383) ____________ ____________ ____________ ____________ Increase (decrease) in net assets derived from capital share transactions (4,763,742) 12,728,217 1,599,276 11,381 ____________ ____________ ____________ ____________ Net Increase (Decrease) in Net Assets: (6,555,621) 13,487,926 1,382,954 352,095 Net Assets: Beginning of Year 107,168,815 93,680,889 17,061,927 16,709,832 ____________ ____________ ____________ ____________ End of Year $100,613,194 $107,168,815 $ 18,444,881 $ 17,061,927 ____________ ____________ ____________ ____________ (Distributions in excess of net investment income) $ - $ - $ (655) $ (655) ____________ ____________ ____________ ____________ (1) See Note 6 in "Notes to Financial Statements." See accompanying notes
21 Financial highlights Delaware Tax-Free Florida Insured Fund Class A (Restated) Selected data for each share of the Fund outstanding throughout each period were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Net asset value, beginning of period $11.330 $11.250 $11.110 $11.330 $11.230 Income (loss) from investment operations: Net investment income 0.494 0.507 0.533 0.523 0.532 Net realized and unrealized gain (loss) on investments (0.190) 0.080 0.140 (0.220) 0.100 _______ _______ _______ _______ _______ Total from investment operations 0.304 0.587 0.673 0.303 0.632 _______ _______ _______ _______ _______ Less dividends and distributions from: Net investment income (0.494) (0.507) (0.533) (0.523) (0.532) _______ _______ _______ _______ _______ Total dividends and distributions (0.494) (0.507) (0.533) (0.523) (0.532) _______ _______ _______ _______ _______ Net asset value, end of period $11.140 $11.330 $11.250 $11.110 $11.330 _______ _______ _______ _______ _______ Total Return (1) 2.78% 5.32% 6.15% 2.68% 5.83% Ratios and supplemental data: Net assets, end of period (000 omitted) $92,726 $98,326 $87,591 $95,951 $105,773 Ratio of expenses to average net assets (2) 1.10% 1.04% 1.02% 1.02% 1.04% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly (2) 1.18% 1.14% 1.06% 1.06% 1.13% Ratio of net investment income to average net assets 4.44% 4.48% 4.72% 4.60% 4.80% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.36% 4.38% 4.68% 4.56% 4.71% Portfolio turnover 7% 17% 3% 26% 46% ___________________________________________________________________________________________________________________________________ (1) 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. (2) The "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly" have been restated. The Fund participates in inverse floater programs where it has transferred its own bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust in consideration of the conveyance of the municipal bonds to the trust. Previously, the Fund treated this transaction as a sale of the bonds and a purchase of inverse floating rate securities. Under Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the transfer of the bonds is not considered a sale, but rather a form of financing for accounting purposes. The ratios in the table above have been restated to include interest and related expenses which include, but are not limited to, interest expense, remarketing fees, liquidity fees, and trustees' fees. Previously, interest and related expenses were not included in the "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly." Prior to the restatements, these ratios were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Ratio of expenses to average net assets 0.86% 0.88% 0.90% 0.90% 0.90% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.94% 0.98% 0.94% 0.94% 0.99% See accompanying notes
22 Delaware Tax-Free Florida Insured Fund Class B (Restated) Selected data for each share of the Fund outstanding throughout each period were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Net asset value, beginning of period $11.330 $11.260 $11.120 $11.330 $11.230 Income (loss) from investment operations: Net investment income 0.411 0.422 0.448 0.437 0.445 Net realized and unrealized gain (loss) on investments (0.180) 0.070 0.140 (0.210) 0.100 _______ _______ _______ _______ _______ Total from investment operations 0.231 0.492 0.588 0.227 0.545 _______ _______ _______ _______ _______ Less dividends and distributions from: Net investment income (0.411) (0.422) (0.448) (0.437) (0.445) _______ _______ _______ _______ _______ Total dividends and distributions (0.411) (0.422) (0.448) (0.437) (0.445) _______ _______ _______ _______ _______ Net asset value, end of period $11.150 $11.330 $11.260 $11.120 $11.330 _______ _______ _______ _______ _______ Total Return (1) 2.11% 4.45% 5.36% 2.00% 5.01% Ratios and supplemental data: Net assets, end of period (000 omitted) $4,323 $5,532 $5,002 $5,800 $5,223 Ratio of expenses to average net assets (2) 1.85% 1.79% 1.77% 1.77% 1.79% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly (2) 1.93% 1.89% 1.81% 1.81% 1.88% Ratio of net investment income to average net assets 3.69% 3.74% 3.97% 3.85% 4.05% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.61% 3.64% 3.93% 3.81% 3.96% Portfolio turnover 7% 17% 3% 26% 46% ___________________________________________________________________________________________________________________________________ (1) 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. (2) The "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly" have been restated. The Fund participates in inverse floater programs where it has transferred its own bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust in consideration of the conveyance of the municipal bonds to the trust. Previously, the Fund treated this transaction as a sale of the bonds and a purchase of inverse floating rate securities. Under Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the transfer of the bonds is not considered a sale, but rather a form of financing for accounting purposes. The ratios in the table above have been restated to include interest and related expenses which include, but are not limited to, interest expense, remarketing fees, liquidity fees, and trustees' fees. Previously, interest and related expenses were not included in the "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly." Prior to the restatements, these ratios were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Ratio of expenses to average net assets 1.61% 1.63% 1.65% 1.65% 1.65% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.69% 1.73% 1.69% 1.69% 1.74% See accompanying notes
(continues) 23 Financial highlights Delaware Tax-Free Florida Insured Fund Class C (Restated) Selected data for each share of the Fund outstanding throughout each period were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Net asset value, beginning of period $11.330 $11.260 $11.120 $11.330 $11.240 Income (loss) from investment operations: Net investment income 0.410 0.422 0.448 0.437 0.447 Net realized and unrealized gain (loss) on investments (0.180) 0.070 0.140 (0.210) 0.090 _______ _______ _______ _______ _______ Total from investment operations 0.230 0.492 0.588 0.227 0.537 _______ _______ _______ _______ _______ Less dividends and distributions from: Net investment income (0.410) (0.422) (0.448) (0.437) (0.447) _______ _______ _______ _______ _______ Total dividends and distributions (0.410) (0.422) (0.448) (0.437) (0.447) _______ _______ _______ _______ _______ Net asset value, end of period $11.150 $11.330 $11.260 $11.120 $11.330 _______ _______ _______ _______ _______ Total Return(1) 2.10% 4.45% 5.36% 2.00% 4.93% Ratios and supplemental data: Net assets, end of period (000 omitted) $3,564 $3,311 $1,088 $846 $560 Ratio of expenses to average net assets (2) 1.85% 1.79% 1.77% 1.77% 1.79% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly (2) 1.93% 1.89% 1.81% 1.81% 1.88% Ratio of net investment income to average net assets 3.69% 3.74% 3.97% 3.85% 4.05% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.61% 3.64% 3.93% 3.81% 3.96% Portfolio turnover 7% 17% 3% 26% 46% ___________________________________________________________________________________________________________________________________ (1) 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. (2) The "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly" have been restated. The Fund participates in inverse floater programs where it has transferred its own bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust in consideration of the conveyance of the municipal bonds to the trust. Previously, the Fund treated this transaction as a sale of the bonds and a purchase of inverse floating rate securities. Under Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the transfer of the bonds is not considered a sale, but rather a form of financing for accounting purposes. The ratios in the table above have been restated to include interest and related expenses which include, but are not limited to, interest expense, remarketing fees, liquidity fees, and trustees' fees. Previously, interest and related expenses were not included in the "Ratio of expenses to average net assets" and "Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly." Prior to the restatements, these ratios were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 __________________________________________________________________________________________________________________________________ Ratio of expenses to average net assets 1.61% 1.63% 1.65% 1.65% 1.65% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.69% 1.73% 1.69% 1.69% 1.74% See accompanying notes
24 Delaware Tax-Free New York Fund Class A Selected data for each share of the Fund outstanding throughout each period were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Net asset value, beginning of period $10.700 $10.470 $10.220 $10.340 $10.350 Income (loss) from investment operations: Net investment income 0.449 0.453 0.479 0.484 0.503 Net realized and unrealized gain (loss) on investments (0.150) 0.230 0.250 (0.120) (0.010) _______ _______ _______ _______ _______ Total from investment operations 0.299 0.683 0.729 0.364 0.493 _______ _______ _______ _______ _______ Less dividends and distributions from: Net investment income (0.449) (0.453) (0.479) (0.484) (0.503) _______ _______ _______ _______ _______ Total dividends and distributions (0.449) (0.453) (0.479) (0.484) (0.503) _______ _______ _______ _______ _______ Net asset value, end of period $10.550 $10.700 $10.470 $10.220 $10.340 _______ _______ _______ _______ _______ Total Return (1) 2.90% 6.65% 7.26% 3.56% 4.98% Ratios and supplemental data: Net assets, end of period (000 omitted) $13,519 $13,153 $11,523 $11,436 $ 9,490 Ratio of expenses to average net assets (2) 0.65% 0.66% 0.50% 0.50% 0.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.09% 1.12% 1.02% 1.05% 1.15% Ratio of net investment income to average net assets 4.28% 4.29% 4.60% 4.65% 4.98% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.84% 3.83% 4.08% 4.10% 4.33% Portfolio turnover 20% 13% 26% 64% 43% ___________________________________________________________________________________________________________________________________ (1) 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. (2) Ratios for the years ended August 31, 2003 and 2002, including fees paid indirectly in accordance with Securities and Exchange Commission rules, were 0.51%. See accompanying notes
(continues) 25 Financial highlights Delaware Tax-Free New York Fund Class B Selected data for each share of the Fund outstanding throughout each period were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Net asset value, beginning of period $10.670 $10.450 $10.200 $10.330 $10.330 Income (loss) from investment operations: Net investment income 0.370 0.374 0.401 0.406 0.426 Net realized and unrealized gain (loss) on investments (0.140) 0.220 0.250 (0.130) - _______ _______ _______ _______ _______ Total from investment operations 0.230 0.594 0.651 0.276 0.426 _______ _______ _______ _______ _______ Less dividends and distributions from: Net investment income (0.370) (0.374) (0.401) (0.406) (0.426) _______ _______ _______ _______ _______ Total dividends and distributions (0.370) (0.374) (0.401) (0.406) (0.426) _______ _______ _______ _______ _______ Net asset value, end of period $10.530 $10.670 $10.450 $10.200 $10.330 _______ _______ _______ _______ _______ Total Return (1) 2.23% 5.77% 6.47% 2.69% 4.30% Ratios and supplemental data: Net assets, end of period (000 omitted) $2,858 $3,023 $2,858 $3,238 $3,352 Ratio of expenses to average net assets (2) 1.40% 1.41% 1.25% 1.25% 1.25% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.84% 1.87% 1.77% 1.80% 1.90% Ratio of net investment income to average net assets 3.53% 3.54% 3.85% 3.90% 4.23% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.09% 3.08% 3.33% 3.35% 3.58% Portfolio turnover 20% 13% 26% 64% 43% ___________________________________________________________________________________________________________________________________ (1) 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. (2) Ratios for the years ended August 31, 2003 and 2002, including fees paid indirectly in accordance with Securities and Exchange Commission rules, were 1.26%. See accompanying notes
26 Delaware Tax-Free New York Fund Class C Selected data for each share of the Fund outstanding throughout each period were as follows: Year Ended ______________________________________________________________ 8/31/06 8/31/05 8/31/04 8/31/03 8/31/02 ___________________________________________________________________________________________________________________________________ Net asset value, beginning of period $10.670 $10.450 $10.200 $10.320 $10.330 Income (loss) from investment operations: Net investment income 0.370 0.376 0.401 0.406 0.426 Net realized and unrealized gain (loss) on investments (0.140) 0.220 0.250 (0.120) (0.010) _______ _______ _______ _______ _______ Total from investment operations 0.230 0.596 0.651 0.286 0.416 _______ _______ _______ _______ _______ Less dividends and distributions from: Net investment income (0.370) (0.376) (0.401) (0.406) (0.426) _______ _______ _______ _______ _______ Total dividends and distributions (0.370) (0.376) (0.401) (0.406) (0.426) _______ _______ _______ _______ _______ Net asset value, end of period $10.530 $10.670 $10.450 $10.200 $10.320 _______ _______ _______ _______ _______ Total Return (1) 2.23% 5.80% 6.47% 2.79% 4.20% Ratios and supplemental data: Net assets, end of period (000 omitted) $2,068 $886 $2,329 $2,828 $1,115 Ratio of expenses to average net assets (2) 1.40% 1.41% 1.25% 1.25% 1.25% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.84% 1.87% 1.77% 1.80% 1.90% Ratio of net investment income to average net assets 3.53% 3.54% 3.85% 3.90% 4.23% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.09% 3.08% 3.33% 3.35% 3.58% Portfolio turnover 20% 13% 26% 64% 43% ___________________________________________________________________________________________________________________________________ (1) 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. (2) Ratios for the years ended August 31, 2003 and 2002, including fees paid indirectly in accordance with Securities and Exchange Commission rules, were 1.26%. See accompanying notes
27 Notes to financial statements Delaware Tax-Free Florida Insured / Tax-Free New York Funds August 31, 2006 Voyageur Mutual Funds (the "Voyageur Trust") is organized as a Delaware statutory trust and offers five series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free New York Fund. Delaware Investments Municipal Trust (the "Delaware Trust", and together with the Voyageur Trust, collectively, the "Trusts") is organized as a Delaware statutory trust and offers one series: Delaware Tax-Free Florida Insured Fund. These financial statements and the related notes pertain to Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York 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 and offer Class A, Class B, and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.50%. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge of up to 1% if redeemed during the first two years, provided that, a financial advisor was paid commission on the purchase of those shares. 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 Insured Fund and Delaware Tax-Free New York Fund is to seek a high a level of current income exempt from federal income tax and the state personal income tax as is consistent with preservation of capital. Florida does not currently have a state personal income tax, and it has repealed its intangible personal property tax. 1. Significant Accounting Policies The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Funds. Security Valuation - Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). Federal Income Taxes - Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Although the Funds' tax positions are currently being evaluated, management does not expect the adoption of FIN 48 to have a material impact on the Funds' 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 gains (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. Interest and Related Expenses - Interest and related expenses include, but are not limited to interest expense, remarketing fees, liquidity fees, and trustees' fees from the Delaware Tax-Free Florida Insured Fund's participation in inverse floater programs where the Fund has transferred its own bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust in consideration of the conveyance of the municipal bonds to the trust. The cash received is treated as a liability for accounting purposes. Interest expense is recorded by the Fund based on the interest rate of the floating rate securities. Remarketing fees, liquidity fees, and trustees' fees expenses are recorded on the accrual basis. For the year ended August 31, 2006, the Delaware Tax-Free Florida Insured Fund had an average daily liability from the participation in inverse floater programs of $7,500,000 and recorded interest expense at an average rate of 3.36%. Other - Expenses directly attributable to a Fund are charged directly to that Fund. Other expenses common to various funds within the Delaware Investments(R) Family of Funds are generally allocated amongst such funds on the basis of average net assets. Management fees and some other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date) for financial reporting purposes. Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Discounts and premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends 28 1. Significant Accounting Policies (continued) daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. The Funds receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expense paid under the above arrangement is included in custodian fees on the Statements of Operations with the corresponding expense offset shown as "expense paid indirectly." 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 Insured Fund New York Fund ____________________ _________________ On the first $500 million 0.500% 0.550% On the next $500 million 0.475% 0.500% On the next $1.5 billion 0.450% 0.450% 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 as shown below: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ The operating expense limitation as a percentage of average daily net assets (per annum) 0.62% 0.40% Expiration date 12/29/05 12/29/05 Effective December 30, 2005, operating expense limitation as a percentage of average daily net assets (per annum) 0.61% 0.40% Expiration date 12/31/06 12/31/06
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. Each Fund pays DSC a monthly fee computed at the annual rate of 0.04% of such Fund's average daily net assets for accounting and administration services. Each Fund also 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 August 31, 2006, the Funds had liabilities payable to affiliates as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ Investment Management fee payable to DMC $36,560 $1,401 Dividend disbursing, transfer agent fees, accounting and administration fees and other expenses payable to DSC 8,872 1,862 Distribution fees payable to DDLP 26,397 7,042 Other expenses payable to DMC and affiliates* 4,974 808 *DMC, as part of its administrative services, pays operating expenses on behalf of each Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees.
As provided in the investment management agreement, the Fund bears the cost of certain legal services, including internal legal services provided to the Funds by DMC employees. For the year ended August 31, 2006, the Funds' were charged for internal legal services provided by DMC as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ $5,965 $1,007
(continues) 29 Notes to financial statements Delaware Tax-Free Florida Insured / Tax-Free New York Funds 2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued) For the year ended August 31, 2006, DDLP earned commissions on sales of Class A shares for each Fund as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ $18,631 $5,568
For the year ended August 31, 2006, DDLP received gross contingent deferred sales charge commissions on redemption of each Fund's Class A, Class B and Class C shares, respectively. These commissions were entirely used to offset up-front commissions previously paid by DDLP to broker-dealers on sales of Class A, Class B and Class C shares. The amounts were as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ Class A $ 46 $ - Class B 3,271 1,204 Class C 509 130
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. 3. Investments For the year ended August 31, 2006, the Funds made purchases and sales of investment securities other than short-term investments as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ Purchases $ 6,735,815 $5,169,271 Sales 13,620,088 3,467,042
At August 31, 2006 the cost of investments and unrealized appreciation (depreciation) for federal income tax purposes for each Fund were as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ Cost of investments $92,057,261 $17,422,657 ___________ ___________ Aggregate unrealized appreciation $ 4,779,316 $ 906,577 Aggregate unrealized depreciation (34,235) - ___________ ___________ Net unrealized appreciation $ 4,745,081 $ 906,577 ___________ ___________
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 years ended August 31, 2006 and 2005 was as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ________________________ ___________________ Year Ended Year Ended 8/31/06 8/31/05 8/31/06 8/31/05 _______ _______ _______ _______ Tax-exempt income $4,534,215 $4,400,282 $722,866 $685,440
As of August 31, 2006, the components of net assets on a tax basis were as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ____________________ _________________ Shares of beneficial interest $ 96,385,804 $17,766,839 Other temporary differences - (655) Capital loss carryforwards (517,691) (216,360) Post-October losses - (11,520) Unrealized appreciation of investments 4,745,081 906,577 ____________ ___________ Net assets $100,613,194 $18,444,881 ____________ ___________
30 4. Dividend and Distribution Information (continued) Post-October losses represent losses realized on investment transactions from November 1, 2005 through August 31, 2006, that, in accordance with federal income tax regulations, the Delaware Tax-Free New York Fund has elected to defer and treat as having arisen in the following fiscal year. For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund utilized $172,566 and $6,847, respectively, of capital loss carryforwards from prior years in 2006. Capital loss carryforward amounts remaining at August 31, 2006 expire as follows: Delaware Tax-Free Delaware Tax-Free Year of Expiration Florida Insured Fund New York Fund __________________ ____________________ _________________ 2008 $ 517,691 $ - 2009 - 216,360 ____________ ________ Total $ 517,691 $216,360 ____________ ________
5. Capital Shares Transactions in capital shares were as follows: Delaware Tax-Free Delaware Tax-Free Florida Insured Fund New York Fund ________________________ ___________________ Year Ended Year Ended 8/31/06 8/31/05 8/31/06 8/31/05 Shares sold: Class A 647,558 771,683 197,010 181,145 Class B 15,964 34,695 31,881 36,925 Class C 84,929 30,020 121,329 42,532 Shares issued from reorganization: Class A _ 948,019 _ _ Class B _ 238,033 _ Class C _ 199,779 _ _ Shares issued upon reinvestment of dividends and distributions: Class A 190,022 149,719 38,341 35,395 Class B 5,154 4,348 4,007 4,632 Class C 6,206 3,014 3,813 1,966 __________ __________ _______ ________ 949,833 2,379,310 396,381 302,595 __________ __________ _______ ________ Shares repurchased: Class A (1,195,082) (973,048) (183,809) (87,166) Class B (121,397) (233,220) (47,738) (31,706) Class C (63,645) (37,307) (11,772) (184,316) __________ __________ _______ ________ (1,380,124) (1,243,575) (243,319) (303,188) __________ __________ _______ ________ Net increase (decrease) (430,291) 1,135,735 153,062 (593) __________ __________ _______ ________
For the years ended August 31, 2006 and 2005, the following shares were converted from Class B to Class A shares. The respective amounts are included in Class B redemptions and Class A subscriptions in the tables above and the Statements of Changes in Net Assets. Year Ended Year Ended 8/31/06 8/31/05 Class B Class A Class B Class A shares shares Amount shares shares Amount ______ ______ ______ ______ ______ ______ Delaware Tax-Free Florida Insured Fund 48,081 48,107 $534,582 62,454 62,490 $703,111 Delaware Tax-Free New York Fund 17,055 17,007 178,750 8,994 8,977 95,273
(continues) 31 Notes to financial statements Delaware Tax-Free Florida Insured / Tax-Free New York Funds 6. Fund Reorganization 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. The combined net assets of the Funds after the reorganization were $107,619,690. 7. Line of Credit The Funds, along with certain other funds in the Delaware Investments(R) Family of Funds (the "Participants"), participate in a $225,000,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each Participant's allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of August 31, 2006, or at any time during the year then ended. 8. Credit and Market Risks 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. The Funds may participate in inverse floater programs where they transfer their own bonds to a trust that issues floating rate securities and inverse floating rate securities ("inverse floaters") with an aggregate principal amount equal to the principal of the transferred bonds. The inverse floaters received by the Funds are derivative tax-exempt obligations 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 the inverse floaters will generally be more volatile than other tax-exempt investments. A Fund typically uses inverse floaters to adjust the duration of its portfolio. Duration measures a portfolio's sensitivity to changes in interest rates. By holding inverse floaters with a different duration than the underlying bonds that the Fund transferred to the trust, the Fund seeks to adjust its portfolio's sensitivity to changes in interest rates. A Fund may also invest in inverse floaters to add additional income to the Fund or to adjust the Fund's exposure to a specific segment of the yield curve. Such securities are identified on the Statements of Net Assets. The Funds may invest in advanced refunded bonds, escrow secured bonds or defeased bonds. Under current federal tax laws and regulations, state and local government borrowers are permitted to refinance outstanding bonds by issuing new bonds. The issuer refinances the outstanding debt to either reduce interest costs or to remove or alter restrictive covenants imposed by the bonds being refinanced. A refunding transaction where the municipal securities are being refunded within 90 days from the issuance of the refunding issue is known as a "current refunding." "Advance refunded bonds" are bonds in which the refunded bond issue remains outstanding for more than 90 days following the issuance of the refunding issue. In an advance refunding, the issuer will use the proceeds of a new bond issue to purchase high grade interest bearing debt securities which are then deposited in an irrevocable escrow account held by an escrow agent to secure all future payments of principal and interest and bond premium of the advance refunded bond. Bonds are "escrowed to maturity" when the proceeds of the refunding issue are deposited in an escrow account for investment sufficient to pay all of the principal and interest on the original interest payment and maturity dates. Bonds are considered "pre-refunded" when the refunding issue's proceeds are escrowed only until a permitted call date or dates on the refunded issue with the refunded issue being redeemed at that time, including any required premium. Bonds become "defeased" when the rights and interests of the bondholders and their lien on the pledged revenues or other security under the terms of the bond contract are substituted with an alternative source of revenues (the escrow securities) sufficient to meet payments of principal and interest to maturity or to the first call dates. Escrowed secured bonds will often receive a rating of AAA from Moody's Investors Service, Inc., Standard & Poor's Ratings Group, and/or Fitch Ratings due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement. The Delaware Tax-Free Florida Insured Fund will purchase escrow secured bonds without additional insurance only where the escrow is invested in securities of the U.S. government or agencies or instrumentalities of the U.S. government. 32 8. Credit and Market Risks (continued) Each Fund may invest up to 15% of its total assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. While maintaining oversight, the Fund's Board of Trustees has delegated to DMC the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund's limitation on investments in illiquid assets. At August 31, 2006, there were no Rule 144A securities and no securities have been determined to be illiquid under the Funds' Liquidity Procedures. 9. Contractual Obligations The Funds enter into contracts in the normal course of business that contain a variety of indemnifications. The Funds' maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts. Management has reviewed the Funds' existing contracts and expects the risk of loss to be remote. 10. Restatement of Financial Statements The Delaware Tax-Free Florida Insured Fund's financial statements and related disclosures and financial highlights have been restated. The Fund participates in inverse floater programs where it has transferred its own bonds to a trust that issues floating rate securities and inverse floating rate securities with an aggregate principal amount equal to the principal of the transferred bond. The Fund receives the inverse floating rate securities and cash from the trust in consideration of the conveyance of the municipal bonds to the trust. Previously, the Fund treated this transaction as a sale of the bonds and as a purchase of the inverse floating rate securities. Under Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FAS 140), the transfer of the bonds is not considered a sale, but rather a form of financing for accounting purposes. As a result, the Fund restated its financial statements to include the original transferred bond, and the corresponding obligation, interest and related expenses associated with participating in these inverse floater programs. The result of the restatements was an increase in assets and liabilities and corresponding increases in interest income and expenses. These changes did not impact the net asset value, total return, or net investment income of the Fund. The effects of the restatement on the financial highlights are disclosed therein. The following represents the previously reported information in the financial statements and the restated information: Previously Reported Restated _____________________ _______________ Statement of Net Assets _______________________ Total market value of securities $ 96,802,342 $104,302,342 Other assets [liabilities], net 3,810,852 (3,689,148) Total net assets 100,613,194 100,613,194 Investments at cost 92,057,261 99,557,261 Statement of Assets and Liabilities ___________________________________ Investments at market $ 96,802,342 $104,302,342 Interest receivable 1,751,492 1,824,306 Total assets 103,322,334 110,895,148 Liability for Inverse Floater programs - 7,500,000 Interest and related expense payable for Inverse Floater programs - 72,814 Total liabilities 2,709,140 10,281,954 Total net assets 100,613,194 100,613,194 Investments at cost 92,057,261 99,557,261 Statement of Operations _______________________ Interest income $ 5,490,926 $ 5,742,714 Interest and related expense - 251,788 Subtotal of gross expenses 1,038,443 1,290,231 Total operating expenses 956,711 1,208,499 Net investment income 4,534,215 4,534,215 Footnotes _________ Note 1-added accounting policy disclosure for Interest and related expenses Note 8-added additional information related to Inverse Floater programs
(continues) 33 Notes to financial statements Delaware Tax-Free Florida Insured / Tax-Free New York Funds 11. Tax Information (Unaudited) The information set forth below is for each Fund's fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information. For the fiscal year ended August 31, 2006, each Fund designates distributions paid during the year as follows: (A) (B) (C) Long Term Ordinary Tax- Capital Gains Income Exempt Total Distributions Distributions Distributions Distributions (Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis) _____________ _____________ _____________ _____________ Delaware Tax-Free Florida Insured Fund - - 100% 100% Delaware Tax-Free New York Fund - - 100% 100% (A), (B), and (C) are based on a percentage of each Fund's total distributions.
34 Report of independent registered public accounting firm To the Shareholders and Board of Trustees Delaware Investments Municipal Trust - Delaware Tax-Free Florida Insured Fund Voyager Mutual Funds - Delaware Tax-Free New York Fund We have audited the accompanying statements of net assets and statements of assets and liabilities of Delaware Tax-Free Florida Insured Fund (the sole series of Delaware Investments Municipal Trust) and Delaware Tax-Free New York Fund (one of the series constituting Voyageur Mutual Funds) (the "Funds") as of August 31, 2006, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2006, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Delaware Tax-Free Florida Insured Fund of Delaware Investments Municipal Trust and the Delaware Tax-Free New York Fund of Voyageur Mutual Funds at August 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. As discussed in Note 10, the financial statements and financial highlights of the Delaware Tax-Free Florida Insured Fund have been restated to correct the accounting treatment relating to participation in inverse floater programs in accordance with Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. /s/ Ernst & Young LLP October 11, 2006 except for Note 10, as to which the date is January 2, 2007 35 Other Fund information Delaware Tax-Free Florida Insured / Tax-Free New York Funds Board Consideration of Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund Agreement At a meeting held on May 17-18, 2006 (the "Annual Meeting"), the Board of Trustees, including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreements for the Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund (each a "Fund" and collectively the "Funds"). In making its decision, the Board considered information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the Annual Meeting. Information furnished and discussed throughout the year included reports detailing Fund performance, investment strategies, expenses, compliance matters and other services provided by Delaware Management Company ("DMC"), the investment advisor. Information furnished specifically in connection with the Annual Meeting included materials provided by DMC and its affiliates ("Delaware Investments") concerning, among other things, the level of services provided to the Funds, the costs of such services to the Funds, economies of scale and the financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, the Board considered independent historical and comparative reports prepared by Lipper Inc. ("Lipper"), an independent statistical compilation organization. The Board also considered industry comparative information presented by representatives from Lipper. The Lipper reports compared each Fund's investment performance and expenses with those of other comparable mutual funds. The Board also received certain supplemental information regarding management's policy with respect to advisory fee levels and its philosophy with respect to breakpoints; the structure of portfolio manager compensation; and any constraints or limitations on the availability of securities in certain investment styles which might inhibit DMC's ability to fully invest in accordance with Fund policies. In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel and representatives from Lipper. At the meeting with representatives from Lipper, Mr. Driscoll, then Chairman of the Delaware Investments Family of Funds, and Chairman and Chief Executive Officer of the investment advisor, was present to respond to questions by Lipper and the independent Trustees. While the Board considered the Investment Advisory Agreements for all of the funds in the Delaware Investments Family of Funds at the same Board meeting, information was provided and considered by the Board for each fund individually. In approving the continuance of the Investment Advisory Agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing advisory fee structure was fair and reasonable and that the continuance of the Investment Advisory Agreement was in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses the primary factors relevant to the Board's deliberations and determination, including those relating to the selection of the investment advisor and the approval of the advisory fee. Nature, Extent and Quality of Service. Consideration was given to the services provided by Delaware Investments to the Funds and their shareholders. In reviewing the nature, extent and quality of services, the Board emphasized reports furnished to it throughout the year at regular Board meetings covering matters such as the relative performance of the Funds, compliance of portfolio managers with the investment policies, strategies and restrictions for the Funds, the compliance of management personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex, the adherence to fair value pricing procedures as established by the Board and the accuracy of net asset value calculations. The Board noted that it was pleased with the current staffing of the Funds' investment advisor and management's efforts to strengthen and deepen portfolio management teams during the past year, the emphasis on research and the compensation system for advisory personnel. Favorable consideration was given to DMC's efforts to maintain, and in some instances increase, financial and human resources committed to fund matters. Other factors taken into account by the Board were Delaware Investments' preparedness for, and response to, legal and regulatory matters. The Board also considered the transfer agent and shareholder services provided to Fund shareholders by Delaware Investments' affiliate, Delaware Service Company, Inc. ("DSC"), noting DSC's commitment to maintain a high level of service in keeping with its past receipt of the DALBAR Pyramid Award, and the continuing expenditures by Delaware Investments to improve the delivery of shareholder services. Additionally, the Board noted the extent of benefits provided to Fund shareholders for being part of the Delaware Investments Family of Funds, including the privilege to exchange investments between the same class of shares of funds without a sales charge, the ability to reinvest Fund dividends into other funds and the privilege to combine holdings in other funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments. Investment Performance. The Board considered the investment performance of DMC and the Funds. The Board was pleased with DMC's investment performance. The Board placed significant emphasis on the investment performance of the Funds in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular weight was given to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for each Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Lipper (the "Performance Universe"). A fund with the best performance is ranked first, and a fund with the poorest performance is ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25% - the second quartile; the next 25% - the third quartile; and the poorest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Funds was shown for the past one, three, five and 10 year periods ended January 31, 2006. The Board noted its objective that each Fund's performance for the periods considered be at or above the median of its Performance Universe. The following paragraphs summarize the performance results for each Fund and the Board's view of such performance. 36 Board Consideration of Delaware Tax-Free Florida Insured Fund and Delaware Tax-Free New York Fund Agreement (continued) Delaware Tax-Free Florida Insured Fund - The Performance Universe for the Fund consisted of the Fund and all retail and institutional Florida insured municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund's total return for the one, three, five and 10 year periods was in the first quartile of such Performance Universe. The Board was satisfied with such performance. Delaware Tax-Free New York Fund - The Performance Universe for the Fund consisted of the Fund and all retail and institutional New York municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund's total return for the one, three and five year periods was in the first quartile of such Performance Universe. The report further showed that the Fund's total return for the 10 year period was in the second quartile. The Board was satisfied with such performance. Comparative Expenses. The Board considered expense data for the Delaware Investments Family of Funds. Management provided the Board with information on pricing levels and fee structures for the Funds. The Board focused particularly on the comparative analysis of the management fees and total expense ratios of each Fund and the management fees and expense ratios of a group of similar funds as selected by Lipper (the "Expense Group"). In reviewing comparative costs, each Fund's contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) of other funds within the Expense Group, taking into effect any applicable breakpoints and fee waivers. Each Fund's total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and compared total expenses including 12b-1 and non-12b-1 service fees. The Board also considered fees paid to Delaware Investments for non-management services. The Board noted its objective to limit each Fund's total expense ratio to an acceptable range as compared to the median of the Expense Group. The following paragraph summarizes the expense results for each Fund and the Board's view of such expenses. Delaware Tax-Free Florida Insured Fund - The expense comparisons for the Fund showed that its actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the second lowest expenses of its Expense Group. The Board was satisfied with the management fees and total expenses of the Fund in comparison to its Expense Group as shown in the Lipper report. Delaware Tax-Free New York Fund - The expense comparisons for the Fund showed that its actual management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fees and total expenses of the Fund in comparison to its Expense Group as shown in the Lipper report. Management Profitability. The Board considered the level of profits, if any, realized by Delaware Investments in connection with the operation of the Funds. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments' business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflected operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments' expenditures to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent SEC initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds, the benefits from allocation of fund brokerage to improve trading efficiencies and the use of "soft" commission dollars to pay for proprietary and non-proprietary research. The Board did not find that the level of profits realized by Delaware Investments from the relationships with the Funds and the Delaware Investments Family of Funds required negotiation of reduction of fees. Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as each Fund's assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees took into account the standardized advisory fee pricing and structure approved by the Board and shareholders as part of a complex-wide shareholder meeting conducted in 1998/1999. At that time, Delaware Investments introduced breakpoints to account for management economies of scale. The Board noted that the fee under each Fund's management contract fell within the standard structure. Although the Funds have not reached a size at which they can take advantage of breakpoints, the Board recognized that the fees were structured so that when the Funds grow, economies of scale may be shared. 37 Board of trustees/directors and officers addendum Delaware Investments(R) Family of Funds A mutual fund is governed by a Board of Trustees/Directors ("Trustees"), which has oversight responsibility for the management of a fund's business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information. Number of Portfolios in Fund Other Name, Complex Overseen Directorships Address, Position(s) Length of Principal Occupation(s) by Trustee Held by and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer ____________________________________________________________________________________________________________________________________ Interested Trustees ____________________________________________________________________________________________________________________________________ Patrick P. Coyne (1) Chairman, Chairman and Trustee Patrick P. Coyne has served in 84 None 2005 Market Street President, since August 16, 2006 various executive capacities Philadelphia, PA Chief Executive at different times at 19103 Officer, and President and Delaware Investments. (2) Trustee Chief Executive Officer April 14, 1963 since August 1, 2006 ____________________________________________________________________________________________________________________________________ Independent Trustees ____________________________________________________________________________________________________________________________________ Thomas L. Bennett Trustee Since Private Investor - 84 None 2005 Market Street March 2005 (March 2004-Present) Philadelphia, PA 19103 Investment Manager - Morgan Stanley & Co. October 4, 1947 (January 1984-March 2004) ____________________________________________________________________________________________________________________________________ John A. Fry Trustee Since President - 84 Director - 2005 Market Street January 2001 Franklin & Marshall College Community Health Philadelphia, PA (June 2002-Present) Systems 19103 Executive Vice President - Director - May 28, 1960 University of Pennsylvania Allied Barton (April 1995-June 2002) Security Holdings ____________________________________________________________________________________________________________________________________ Anthony D. Knerr Trustee Since Founder and Managing Director - 84 None 2005 Market Street April 1990 Anthony Knerr & Associates Philadelphia, PA (Strategic Consulting) 19103 (1990-Present) December 7, 1938 ____________________________________________________________________________________________________________________________________ Lucinda S. Landreth Trustee Since Chief Investment Officer - 84 None 2005 Market Street March 2005 Assurant, Inc. Philadelphia, PA (Insurance) 19103 (2002-2004) June 24, 1947 ____________________________________________________________________________________________________________________________________ Ann R. Leven Trustee Since Consultant - 84 Director and 2005 Market Street September 1989 ARL Associates Audit Committee Philadelphia, PA (Financial Planning) Chairperson - Andy 19103 (1983-Present) Warhol Foundation November 1, 1940 Director and Audit Committee Member - Systemax, Inc. ____________________________________________________________________________________________________________________________________
38 Number of Portfolios in Fund Other Name, Complex Overseen Directorships Address, Position(s) Length of Principal Occupation(s) by Trustee Held by and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer ____________________________________________________________________________________________________________________________________ Independent Trustees (continued) ____________________________________________________________________________________________________________________________________ Thomas F. Madison Trustee Since President and Chief 84 Director - 2005 Market Street May 1997 (3) Executive Officer - Banner Health Philadelphia, PA MLM Partners, Inc. 19103 (Small Business Investing Director - and Consulting) CenterPoint Energy February 25, 1936 (January 1993-Present) Director and Audit Committee Member - Digital River, Inc. Director and Audit Committee Member - Rimage Corporation Director - Valmont Industries, Inc. ____________________________________________________________________________________________________________________________________ Janet L. Yeomans Trustee Since Vice President 84 None 2005 Market Street April 1999 (January 2003-Present) Philadelphia, PA and Treasurer 19103 (January 2006-Present) 3M Corporation July 31, 1948 Ms. Yeomans has held various management positions at 3M Corporation since 1983. ____________________________________________________________________________________________________________________________________ J. Richard Zecher Trustee Since Founder - 84 Director and Audit 2005 Market Street March 2005 Investor Analytics Committee Member - Philadelphia, PA (Risk Management) Investor Analytics 19103 (May 1999-Present) Director and Audit July 3, 1940 Founder - Committee Member - Sutton Asset Management Oxigene, Inc. (Hedge Fund) (September 1998-Present) ____________________________________________________________________________________________________________________________________ Officers ____________________________________________________________________________________________________________________________________ David F. Connor Vice President, Vice President since David F. Connor has served as 84 None (4) 2005 Market Street Deputy General September 21, 2000 Vice President and Deputy Philadelphia, PA Counsel, and Secretary General Counsel of 19103 and Secretary since Delaware Investments October 2005 since 2000. December 2, 1963 ____________________________________________________________________________________________________________________________________ David P. O'Connor Senior Vice Senior Vice President, David P. O'Connor has served in 84 None (4) 2005 Market Street President, General Counsel, and various executive and legal Philadelphia, PA General Counsel, Chief Legal Officer capacities at different times 19103 and Chief since at Delaware Investments. Legal Officer October 2005 February 21, 1966 ____________________________________________________________________________________________________________________________________ John J. O'Connor Senior Vice President Treasurer John J. O'Connor has served in 84 None (4) 2005 Market Street and Treasurer since various executive capacities Philadelphia, PA February 2005 at different times at 19103 Delaware Investments. June 16, 1957 ____________________________________________________________________________________________________________________________________ Richard Salus Senior Chief Financial Richard Salus has served in 84 None (4) 2005 Market Street Vice President Officer since various executive capacities Philadelphia, PA and November 1, 2006 at different times at 19103 Chief Financial Delaware Investments. Officer October 4, 1963 ____________________________________________________________________________________________________________________________________ (1) Patrick P. Coyne is considered to be an "Interested Trustee" because he is an executive officer of the Fund's(s') investment advisor. (2) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund's(s') investment advisor, principal underwriter, and its transfer agent. (3) In 1997, several funds managed by Voyageur Fund Managers, Inc. (the "Voyageur Funds") were incorporated into the Delaware Investments Family of Funds. Mr. Madison served as a director of the Voyageur Funds from 1993 until 1997. (4) David F. Connor, David P. O'Connor, John J. O'Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. John J. O'Connor also serves in a similar capacity for Lincoln Variable Insurance Products Trust, which has the same investment advisor as the registrant. The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
39 About the organization This annual report is for the information of Delaware Tax-Free Florida Insured Fund 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 Insured Fund and Delaware Tax-Free New York Fund and the Delaware Investments(R) Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the Funds. You should read the prospectus carefully before you invest. The figures in this report represent past results that are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Board of trustees Patrick P. Coyne Chairman, President, and Chief Executive Officer Delaware Investments Family of Funds Philadelphia, PA Thomas L. Bennett Private Investor Rosemont, PA John A. Fry President Franklin & Marshall College Lancaster, PA Anthony D. Knerr Founder and Managing Director Anthony Knerr & Associates New York, NY Lucinda S. Landreth Former Chief Investment Officer Assurant, Inc. Philadelphia, PA Ann R. Leven Consultant ARL Associates New York, NY Thomas F. Madison President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN Janet L. Yeomans Vice President and Treasurer 3M Corporation St. Paul, MN J. Richard Zecher Founder Investor Analytics Scottsdale, AZ Affiliated officers David F. Connor Vice President, Deputy General Counsel, and Secretary Delaware Investments Family of Funds Philadelphia, PA David P. O'Connor Senior Vice President, General Counsel, and Chief Legal Officer Delaware Investments Family of Funds Philadelphia, PA John J. O'Connor Senior Vice President and Treasurer Delaware Investments Family of Funds Philadelphia, PA Richard Salus Senior Vice President and Chief Financial Officer Delaware Investments Family of Funds Philadelphia, PA Contact information Investment manager Delaware Management Company, a series of Delaware Management Business Trust Philadelphia, PA National distributor Delaware Distributors, L.P. Philadelphia, PA Shareholder servicing, dividend disbursing, and transfer agent Delaware Service Company, Inc. 2005 Market Street Philadelphia, PA 19103-7094 For shareholders 800 523-1918 For securities dealers and financial institutions representatives only 800 362-7500 Web site www.delawareinvestments.com Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries. Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Each Fund's Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; (ii) on 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, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330. Information (if any) regarding how each Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through each Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. 40 Get shareholder reports and prospectuses online instead of in the mail. > Visit www.delawareinvestments.com/edelivery Simplify your life. Manage your investments online! Get Account Access, the Delaware Investments(R) secure Web site that allows you to conduct your business online. Gain 24-hour access to your account and one of the highest levels of Web security available. You also get: o Hassle-free investing - Make online purchases and redemptions at any time. o Simplified tax processing - Automatically retrieve your Delaware Investments accounts' 1099 information and import it directly into your 1040 tax return. Available only with Turbo Tax(R) Online(SM) and Desktop software - www.turbotax.com. o Less mail clutter - Get instant access to your fund materials online with Delaware eDelivery. Register for Account Access today! Please visit us at www.delawareinvestments.com, select Individual Investors, and click Account Access. Please call our Shareholder Service Center at 800 523-1918 Monday through Friday from 8:00 a.m. to 7:00 p.m., Eastern Time, for assistance with any questions. [DELAWARE INVESTMENTS LOGO] (914) Printed in the USA AR-FLNY [8/06] CGI 1/07 MF-06-09-023 PO11530 Item 2. Code of Ethics The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant's Code of Business Ethics has been posted on Delaware Investments' internet website at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this website within five business days of such amendment or waiver and will remain on the website for at least 12 months. Item 3. Audit Committee Financial Expert The registrant's Board of Trustees/Directors has determined that each member of the registrant's Audit Committee is an audit committee financial expert, as defined below. For purposes of this item, an "audit committee financial expert" is a person who has the following attributes: a. An understanding of generally accepted accounting principles and financial statements; b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves; c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant's financial statements, or experience actively supervising one or more persons engaged in such activities; d. An understanding of internal controls and procedures for financial reporting; and e. An understanding of audit committee functions. An "audit committee financial expert" shall have acquired such attributes through: a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions; b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions; c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or d. Other relevant experience. The registrant's Board of Trustees/Directors has also determined that each member of the registrant's Audit Committee is independent. In order to be "independent" for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an "interested person" of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940. The names of the audit committee financial experts on the registrant's Audit Committee are set forth below: Thomas L. Bennett (1) Thomas F. Madison Janet L. Yeomans (1) J. Richard Zecher Item 4. Principal Accountant Fees and Services (a) Audit fees. __________ The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant's annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $12,100 for the fiscal year ended August 31, 2006. ____________________ (1) The instructions to Form N-CSR/A require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on "other relevant experience." The Board of Trustees/Directors has determined that Mr. Bennett qualifies as an audit committee financial expert by virtue of his education, Chartered Financial Analyst designation, and his experience as a credit analyst, portfolio manager and the manager of other credit analysts and portfolio managers. The Board of Trustees/Directors has determined that Ms. Yeomans qualifies as an audit committee financial expert by virtue of her education and experience as the Treasurer of a large global corporation. The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant's annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $39,000 for the fiscal year ended August 31, 2005. (b) Audit-related fees. __________________ The aggregate fees billed by the registrant's independent auditors for services relating to the performance of the audit of the registrant's financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended August 31, 2006. The aggregate fees billed by the registrant's independent auditors for services relating to the performance of the audit of the financial statements of the registrant's investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $28,300 for the registrant's fiscal year ended August 31, 2006. The percentage of these fees relating to services approved by the registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of report concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act; and issuance of agreed upon procedures reports to the registrant's Board in connection with the pass-through of internal legal cost relating to the operations of the registrant; and preparation of Report on Controls Placed in Operation and Tests of Operating Effectiveness Relating to the Retirement Plan Services Division ("SAS 70 report"). The aggregate fees billed by the registrant's independent auditors for services relating to the performance of the audit of the registrant's financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended August 31, 2005. The aggregate fees billed by the registrant's independent auditors for services relating to the performance of the audit of the financial statements of the registrant's investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $33,875 for the registrant's fiscal year ended August 31, 2005. The percentage of these fees relating to services approved by the registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of report concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act; and issuance of agreed upon procedures reports to the registrant's Board in connection with the annual transfer agent and fund accounting service agent contract renewals and the pass-through of internal legal cost relating to the operations of the registrant. (c) Tax fees. ________ The aggregate fees billed by the registrant's independent auditors for tax-related services provided to the registrant were $9,200 for the fiscal year ended August 31, 2006. The percentage of these fees relating to services approved by the registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations. The aggregate fees billed by the registrant's independent auditors for tax-related services provided to the registrant's investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant's fiscal year ended August 31, 2006. The aggregate fees billed by the registrant's independent auditors for tax-related services provided to the registrant were $7,700 for the fiscal year ended August 31, 2005. The percentage of these fees relating to services approved by the registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations. The aggregate fees billed by the registrant's independent auditors for tax-related services provided to the registrant's investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant's fiscal year ended August 31, 2005. (d) All other fees. ______________ The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended August 31, 2006. The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant's independent auditors to the registrant's adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant's fiscal year ended August 31, 2006. The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended August 31, 2005. The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant's independent auditors to the registrant's adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant's fiscal year ended August 31, 2005. (e) The registrant's Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the "Pre-Approval Policy") with respect to services provided by the registrant's independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Investments Family of Funds. ______________________________________________________________________________________________________________________ Service Range of Fees ______________________________________________________________________________________________________________________ Audit Services ______________________________________________________________________________________________________________________ Statutory audits or financial audits for new Funds up to $25,000 per Fund ______________________________________________________________________________________________________________________ Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters up to $10,000 per Fund for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters ______________________________________________________________________________________________________________________ Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered "audit-related services" rather than "audit services") ______________________________________________________________________________________________________________________ Audit-Related Services ______________________________________________________________________________________________________________________ Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and /or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered "audit services" rather than "audit-related services") ______________________________________________________________________________________________________________________ Tax Services ______________________________________________________________________________________________________________________ U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation up to $25,000 in the aggregate of Funds' tax compliance function, etc.) ______________________________________________________________________________________________________________________ U.S. federal, state and local tax compliance (e.g., excise distribution reviews, up to $5,000 per Fund etc.) ______________________________________________________________________________________________________________________ Review of federal, state, local and international income, franchise and other up to $5,000 per Fund tax returns ______________________________________________________________________________________________________________________
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant's investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the "Control Affiliates") up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates. ______________________________________________________________________________________________________________________ Service Range of Fees ______________________________________________________________________________________________________________________ Non-Audit Services ______________________________________________________________________________________________________________________ Services associated with periodic reports and other documents filed with the SEC up to $10,000 in the aggregate and assistance in responding to SEC comment letters ______________________________________________________________________________________________________________________
The Pre-Approval Policy requires the registrant's independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy. (f) Not applicable. (g) The aggregate non-audit fees billed by the registrant's independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $263,020 and $212,935 for the registrant's fiscal years ended August 31, 2006 and August 31, 2005, respectively. (h) In connection with its selection of the independent auditors, the registrant's Audit Committee has considered the independent auditors' provision of non-audit services to the registrant's investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors' provision of these services is compatible with maintaining the auditors' independence. 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/A. 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 Company and Affiliated Purchasers Not applicable. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. Controls and Procedures (a) 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 fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. (b) Subsequent to the filing of the registrant's Form N-CSR for its fiscal year ended August 31, 2006, management identified a control deficiency in the registrant's internal control over financial reporting. The registrant's controls related to the review and analysis of the relevant terms and conditions of certain transfers of securities were not operating effectively to appropriately determine whether the transfers qualified for sale accounting under the provisions of Statement of Financial Accounting Standards No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." As a result of this control deficiency, the statement of net assets, the statement of operations and the statement of assets and liabilities for the year ended August 31, 2006 and certain financial highlights for certain years during the past five fiscal years were restated in order to appropriately account for such transfers of securities as secured borrowings and report the related interest income and expense. Management notes that other investment companies investing in similar investments over the same time periods had been accounting for such investments in a similar manner as the registrant. Accordingly, other investment companies investing in such investments to a material extent are also confronting the same restatement issues as the registrant. The changes in the registrant's financial statements did not impact the net asset value of the shares of any of the registrant's funds or the net investment income or total return of any of the registrant's funds for any period. To address this control deficiency, management has made changes that have materially affected, or are reasonably like to materially affect, registrant's internal controls over financial reporting. To seek to increase the controls' effectiveness, these changes provide for enhanced review of contracts relating to complex transactions and the applicability of generally accepted accounting principles to such transactions, including enhanced consultation with registrant's independent public accountants in connection with such reviews. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 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. Name of Registrant: Delaware Investments Municipal Trust PATRICK P. COYNE _________________________________ By: Patrick P. Coyne Title: Chief Executive Officer Date: February 21, 2007 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. PATRICK P. COYNE _________________________________ By: Patrick P. Coyne Title: Chief Executive Officer Date: February 21, 2007 RICHARD SALUS _________________________________ By: Richard Salus Title: Chief Financial Officer Date: February 21, 2007 EX-99 2 exhibit99-cert.txt CERTIFICATION EXHIBIT 99.CERT CERTIFICATION _____________ I, Patrick P. Coyne, certify that: 1. I have reviewed this report on Form N-CSR/A of Delaware Investments Municipal Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 21, 2007 PATRICK P. COYNE _________________________________ By: Patrick P. Coyne Title: Chief Executive Officer CERTIFICATION _____________ I, Richard Salus, certify that: 1. I have reviewed this report on Form N-CSR/A of Delaware Investments Municipal Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 21, 2007 RICHARD SALUS _________________________________ By: Richard Salus Title: Chief Financial Officer EX-99.906CERT 3 exhibit99_906-cert.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the attached report of the registrant on Form N-CSR/A to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify, to the best of such officer's knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. Date: February 21, 2007 PATRICK P. COYNE ______________________________ By: Patrick P. Coyne Title: Chief Executive Officer RICHARD SALUS ______________________________ By: Richard Salus Title: Chief Financial Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----