-----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, VqgBt9n6GFn4LjmvE8NUSahupd71ref3Mg+ugRAUbbObphVfIJNybycv3fRoMwbX p68o6aDaSQkwQYt/2u8xnw== 0000950116-02-000858.txt : 20020430 0000950116-02-000858.hdr.sgml : 20020430 ACCESSION NUMBER: 0000950116-02-000858 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020228 FILED AS OF DATE: 20020429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR TAX FREE FUNDS CENTRAL INDEX KEY: 0000733362 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03910 FILM NUMBER: 02624419 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE EXEMPT FLEX FUND INC DATE OF NAME CHANGE: 19900131 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR TAX FREE FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA TAX FREE FUNDS INC DATE OF NAME CHANGE: 19910226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR MUTUAL FUNDS CENTRAL INDEX KEY: 0000906236 IRS NUMBER: 411756458 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07742 FILM NUMBER: 02624420 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH ST STREET 2: STE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4115 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH ST STREET 2: STE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4115 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MUTUAL FUNDS INC DATE OF NAME CHANGE: 19930714 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR INTERMEDIATE TAX FREE FUNDS CENTRAL INDEX KEY: 0000773675 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04364 FILM NUMBER: 02624421 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 INTERMEDIATE TAX FREE FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE EXEMPT CAPITAL CONSERVATION FUND INC DATE OF NAME CHANGE: 19900131 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA INTERMEDIATE TAX FREE FUNDS INC DATE OF NAME CHANGE: 19920305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR INSURED FUNDS CENTRAL INDEX KEY: 0000809064 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04973 FILM NUMBER: 02624422 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: (215) 2155-2127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQUARE STREET 2: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: MINNESOTA INSURED FUND INC DATE OF NAME CHANGE: 19900131 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR INSURED FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA INSURED FUNDS INC DATE OF NAME CHANGE: 19910926 N-30D 1 n30d.txt FORM N30D Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) [GRAPHIC OMITTED] FIXED INCOME Semiannual Report 2002 DELAWARE Tax-Free Minnesota Fund DELAWARE Tax-Free Minnesota Insured Fund DELAWARE Tax-Free Minnesota Intermediate Fund DELAWARE Minnesota High-Yield Municipal Bond Fund [GRAPHIC OMITTED] POWERED BY RESEARCH.(SM) A Commitment to Our Investors Experience o Our seasoned investment professionals average 12 years experience, bringing a wealth of knowledge and expertise to our management team. o We trace our origins to 1929 and opened our first mutual fund in 1938. Over the past 73 years, we have weathered a wide range of economic and market environments. Performance o We strive to deliver consistently good performance in all asset classes. o We believe that hiring the best and the brightest in the industry, conducting fundamental research, and working in a disciplined investment process are essential to quality investment management. Service o We are committed to providing the highest standards of client service. o You can count on quick and courteous service, easy access to information about your accounts, and hassle-free transaction processing. o We make our funds available through financial advisors who can offer you individualized attention and valuable investment advice. Diversification o Our comprehensive family of funds gives you the opportunity to diversify your portfolio effectively. o We offer mutual funds in virtually every asset class from domestic equity and fixed income to international securities. Our commitments have earned us the confidence of discriminating institutional and individual investors. Delaware Management Company and its affiliates managed approximately $85 billion in assets as of March 31, 2002. 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)Delaware Distributors, L.P. Table of Contents Letter to Shareholders 1 Portfolio Management Review 3 New at Delaware 6 Performance Summary Delaware Tax-Free Minnesota Fund 7 Delaware Tax-Free Minnesota Insured Fund 8 Delaware Tax-Free Minnesota Intermediate Fund 9 Delaware Minnesota High-Yield Municipal Bond Fund 10 Financial Statements: Statements of Net Assets 11 Statement of Assets and Liabilities 26 Statements of Operations 27 Statements of Changes in Net Assets 28 Financial Highlights 30 Notes to Financial Statements 42 Letter Delaware Minnesota Municipal Bond Funds to Shareholders March 12, 2002 Recap of Events The six months ended February 28, 2002 formed a complex period for investors in fixed-income securities. Throughout the period, yield and price swings on bonds were unusually wide, as investors grappled with an extremely varied set of economic forecasts. September 11 and its aftermath also generated concerns about bond credit quality - especially among corporate issuers - leading to increased volatility throughout the fixed-income marketplace. Amid these concerns, municipal bond credit ratings generally held up well compared to those of other fixed-income investments. According to credit rating agency Standard & Poor's, 211 corporate bond issuers defaulted on a record $115.4 billion of debt during 2001. Yet aside from several city agency bonds and airport bonds in New York that were directly affected by the events of September 11, municipal bond credit remained relatively unaffected throughout much of the recent recession. Volatility was relatively muted among municipals during the period. An increase of greater than 35% in municipal supply during 2001 helped keep municipal yields from swinging as widely as those in some other fixed-income asset classes (Source: Salomon Smith Barney). The fact that demand in the municipal markets is generated largely by individual investors also may have helped keep yields relatively stable. Demand from individual investors is known to drop off as yields fall across the fixed-income markets, and vice versa. This tends to create a stabilizing force on yields in the individual investor-dominated municipal markets. "A full six months after the tragic events of September 11, we now have a clearer picture of that day's impact on the U.S. economy and our capital markets." Despite a growing consensus that the recession may now be ending, other concerns have recently stifled confidence regarding an end to the broader, global economic slowdown. With news of accounting irregularities dominating business headlines, many investors showed concern that similar problems could affect other large issuers as well. As the second half of the fiscal year begins for your fund, the strength of any U.S. economic recovery is a burning issue for the fixed-income markets in general.
Total Return For the period ended February 28, 2002 Six Months Delaware Tax-Free Minnesota Fund - Class A Shares +1.66% Delaware Tax-Free Minnesota Insured Fund - Class A Shares +1.61% Lipper Minnesota Municipal Debt Funds Average (50 funds) +1.43% Delaware Tax-Free Minnesota Intermediate Fund - Class A Shares +2.36% Lipper Other States Intermediate Municipal Debt Funds Average (91 funds) +1.60% Delaware Minnesota High-Yield Municipal Bond Fund - Class A Shares +1.99% Lipper High-Yield Municipal Debt Funds Average (76 funds) +0.34% - ----------------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index +1.99% Lehman Brothers Insured Municipal Bond Index +1.98% Lehman Brothers Five-Year Municipal Bond Index +2.59% - -----------------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales charges and assumes reinvestment of all distributions. Performance information for all Fund classes can be found on pages 7 through 10. The Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks the performance of municipal bonds. The Lehman Brothers Insured Municipal Bond Index is an unmanaged index that generally tracks the performance of insured municipal bonds. The Lehman Brothers Five-Year Municipal Bond Index is an unmanaged index that tracks municipal bonds which have an approximate maturity of five years. The Lipper categories represent the average return of a peer group of municipal bond funds with similar investment objectives tracked by Lipper (Source: Lipper Inc.). You cannot invest directly in an index. Past performance is not a guarantee of future results. Unlike U.S. Treasuries, the U.S. government does not guarantee the payment of principal and interest on municipal bonds. 1 Each of the four Delaware Investments tax-free funds for Minnesota outperformed its Lipper peer group during the six-month period ended February 28, 2002. On the pages that follow, portfolio managers Mitchell L. Conery and Patrick P. Coyne discuss performance for the individual funds, and their outlook for the remainder of the year in Minnesota's municipal bond market. Market Outlook A full six months after the tragic events of September 11, we now have a clearer picture of that day's impact on the U.S. economy and our capital markets. September 11 clearly prolonged a year-long economic slide, but also became a catalyst for recovery, as the economy obviously reached bottom sometime during the fall and winter and now appears to be rebounding somewhat more strongly than expected. Longer municipal bond yields are currently offering significant premiums, allowing investors to pick up yield as they extend their maturity. Given this fact, and the current low interest rate environment, we think Delaware Investments tax-free funds are currently an attractive fixed-income investment vehicle. The after-tax yield on cash equivalents such as taxable and tax-exempt money market funds and bank CDs continued to plummet during the six-month period covered in this report. As a result, we believe that many investors in moderate to high tax brackets would do well to consider municipals. For more information on whether one of Delaware Investments' tax-free funds is suitable for you, please contact your financial advisor. Unlike Delaware tax-free funds, money market funds seek to maintain a stable share price. Return and share value for Delaware tax-free funds will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Also unlike Delaware tax-free funds, certificates of deposit are FDIC-insured and U.S. Treasuries are backed by the full faith and credit of the U.S. government. As we look to a brighter future, Delaware Investments remains committed to growing its service-oriented approach, and meeting shareholders' ever-changing needs. As a result, we recently debuted Delaware eDelivery, which allows you to receive your fund materials, including these reports, electronically instead of via U.S. mail. At Delaware, we take pride in our award-winning service, and we hope you enjoy this new feature, which we are offering in response to shareholder requests. Sincerely, /s/ Charles E. Haldeman, Jr - -------------------------------------- Charles E. Haldeman, Jr. Chairman, Delaware Investments Family of Funds /s/ David K. Downes - -------------------------------------- David K. Downes President and Chief Executive Officer, Delaware Investments Family of Funds 2 Portfolio Management Review Fund Managers Mitchell L. Conery Senior Portfolio Manager Patrick P. Coyne Senior Portfolio Manager The Funds' Results Municipal bonds continued their recent strong performance during the past six months. It was a period characterized by a weak economy that became even weaker following the September 11 terrorist attacks. To reduce the economy's vulnerability and spur economic growth, the Fed continued its strategy of reducing interest rates. During all of 2001, the Fed lowered the federal funds rate 11 times to its lowest level in the last 40 years. Despite these low interest rates, inflation, a source of great concern for bond investors because it decreases the value of coupon payments, remained modest. "With interest rates falling steadily during 2001, older bonds offering higher rates became more valuable and increased in price" For most of the period investors generally took part in a "flight to quality," avoiding riskier securities and opting instead for higher-quality investment opportunities. Municipal bond funds benefited greatly from this sentiment. According to the Investment Company Institute, investors bought more than $11.5 billion of municipal bond funds in 2001, after having sold $14 billion worth of municipal bond funds in 2000. With interest rates falling steadily during 2001, older bonds offering higher rates became more valuable and increased in price (their yields -- which move inversely to price -- fell accordingly). Beginning late in the period, however, municipal bond prices began to retreat from their highs. The market reversal stemmed from increased optimism about the economy, suggesting the Fed would be more likely to raise than lower interest rates in the future. Delaware Minnesota Municipal Bond Funds March 12, 2002 The period was to be characterized by strong demand for municipal bonds and ample supply to meet that demand. Total municipal bond issuance in 2001 reached a record $283.6 billion in 2001, up 42 percent over the previous year's total, according to the Bond Market Association. Issuance of Minnesota municipal bonds, however, grew less rapidly - at a year-over-year pace of approximately 10%. Issuers of municipal securities continued to display surprising financial strength, despite the slowing economy. This enabled states and municipalities to obtain more favorable lending terms and find willing buyers for their bonds. At the same time, the slowing economy forced municipalities to tighten their budgets because of a decline in available revenues. This helped contribute to the overall supply of municipal bonds, since a number of projects that might once have been funded on a pay-as-you-go basis now needed to be financed by issuing debt in public markets. Delaware Tax-Free Minnesota Fund Delaware Tax-Free Minnesota Fund returned +1.66% (Class A shares at net asset value with distributions reinvested) for the six-month period that ended February 28, 2002. This performance slightly surpassed that of its peer group, the Lipper Minnesota Municipal Debt Funds Average, which returned +1.43% during the same period. The Fund's dividend payments during the last six months were exempt from Minnesota state and federal taxes.* This outperformance can be attributed, in part, to a somewhat longer-than-average duration. During the six-month period, the Fund's duration declined to 6.8 years from 7.3 years, indicating a decreased sensitivity to changes in interest rates. This reflected our belief that future interest rates were more likely to begin rising in the face of a potentially improving economy. *A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. 3 During the last six months, we made only modest changes to the Fund's portfolio, maintaining an average credit rating of A throughout the period. One way we sought to moderate risk was to reduce the Fund's weighting in tax-free bonds issued by Potlach, an Idaho-based paper company that has significant operations in Minnesota. The Potlach bond issue was a reasonably strong contributor to the Fund's income stream during the period, but the Fund's position had grown somewhat large and we reduced our weighting by reinvesting proceeds from the Potlach bonds elsewhere. One characteristic of the Minnesota municipal market is that many new issues come to market backed by an insurance guarantee. While insured bonds can add valuable stability to a portfolio, investing entirely in them does limit the amount of yield that portfolio managers can add to a mutual fund. Thus, our management approach during the period was to strike a balance between adding high-quality bond issues and lower-quality, higher-yielding securities as they became available. For any such higher-yielding bonds, we scrutinized them to make sure that we were comfortable with the amount of risk they offered relative to their potential reward. Delaware Tax-Free Minnesota Insured Fund For the six-month period ended February 28, 2002, Delaware Tax-Free Minnesota Insured Fund returned +1.61% (Class A shares at net asset value with distributions reinvested). This performance was slightly better than that of its peer group, the Lipper Minnesota Municipal Debt Funds Average, which returned +1.43% during the same period. The Fund's dividend payments during the last six months were exempt from Minnesota state and federal taxes.* We attribute the outperformance to a shorter-than-average duration relative to other Minnesota municipal bond funds. The Fund's duration rose slightly during the six-month period, increasing to 6.1 from 5.5 years. This increase indicates an increased sensitivity to changes in interest rates. Even though we believe interest rates are more likely to increase than decrease during the short term, we sought this modest duration increase to obtain a higher yield for the Fund. Nevertheless, we also sought to keep duration short enough to manage interest-rate risk. During the last six months, we managed the Fund by using a barbell approach. In other words, the Fund included a combination of higher-yielding bonds that are highly sensitive to current market conditions and lower-volatility bonds offering increased stability but lower coupon payments. In keeping with the Fund's investment objective, we sought to manage the Fund conservatively and moderate its risk. Yet we were consistently on the lookout for opportunities to enhance the Fund's yield during the period without adding significant amounts of risk. Accordingly, we added a small percentage of lower-rated investment-grade bonds (investment-grade includes bonds rated BBB or better) in which we felt particularly confident about the credit. Nevertheless, during the past six months the Fund's average credit rating remained AAA, the highest possible. Delaware Tax-Free Minnesota Intermediate Fund For the six-month period ended February 28, 2002, Delaware Tax-Free Minnesota Intermediate Fund returned +2.36% (Class A shares at net asset value with distributions reinvested). This performance surpassed that of its peer group, the Lipper Other States Intermediate Municipal Debt Funds Average, which returned +1.60% during the same period. The Fund's dividend payments during the last six months were exempt from Minnesota state and federal taxes.* One of the reasons for the Fund's relative outperformance was a shorter-than-average duration. On February 28, 2002, the duration was 5.1 years, down from 5.6 years on August 31, 2001. This decrease in duration meant that the Fund's portfolio became less sensitive to changes in interest rates. Such a positioning worked in the Fund's favor late in the reporting period, when the municipal bond market retreated in response to expected future interest rate increases. *A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. 4 The Fund was invested largely in investment-grade securities during the reporting period, maintaining an average credit rating of BBB throughout. During the past six months, we managed the Fund with a barbell strategy. This entailed investing in a combination of short-term bonds offering relatively high coupon payments along with longer bonds whose prices were more sensitive to changes in interest rates. Delaware Minnesota High-Yield Municipal Bond Fund During the six months that ended February 28, 2002, Delaware Minnesota High-Yield Municipal Bond Fund returned +1.99% (Class A shares at net asset value with distributions reinvested). This performance was better than that of its peer group, the Lipper High-Yield Municipal Debt Funds Average, which returned +0.34% during the same period. The Fund's dividend payments during the last six months were exempt from Minnesota state and federal taxes.* One of the major reasons for the Fund's outperformance of its peer group was a significant weighting in healthcare securities, which generally performed extremely well last year. Healthcare happens to be a large area of tax-free bond issuance in Minnesota. As the period progressed and the Fund's healthcare investments outperformed, we looked to cut back our weighting in the sector because we became less comfortable with the potential risk of owning bonds whose best performance might be behind them. Thus, we sold some of these strong-performing securities and reinvested the proceeds in higher-quality healthcare investments or, to increase portfolio diversification, in other areas of the market. Besides focusing on improving credit quality, we also looked to add highly liquid bonds to the Fund, enhancing our flexibility in managing the portfolio. For example, we eliminated some of our less sellable positions and added bonds that are more in demand, such as $2 million worth of a high-quality Puerto Rico highway bond issue. Bonds issued by U.S. territories are widely sought after because of their fully tax-exempt status in all 50 states. Outlook Recent economic data suggests that the economy may continue to pick up strength. The stronger the economy gets, the more likely that the Federal Reserve will increase interest rates from its current near-historic lows. Such a situation would place negative pressure on the municipal bond market -- especially with respect to short-term municipals, which move in the opposite direction of interest rates. There are some positive signs for the municipal bond market as well. First, we see no signs of inflation on the horizon. Second, we believe that any economic recovery may be somewhat muted, which would suggest that long-term interest rates may remain low. This would be favorable for longer-maturity municipal investments. To prepare the portfolio for both the short and long term, therefore, we plan to continue managing most of the funds using a barbell strategy -- combining high-yielding, shorter-maturity municipal bonds with longer-maturity bonds that we believe may offer ongoing value for investors. *A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. 5 New at Delaware Simplify your life. Sign up for Delaware's new eDelivery! No more hunting for lost documents or misplaced items in your filing cabinet. Delaware Investments helps you get organized with Delaware eDelivery. Online account access users can now receive fund documents electronically instead of via U.S. mail. When you sign up for eDelivery, you can access your account statements, shareholder reports, and other fund materials online, in a secure environment at any time, from anywhere. To sign up for Delaware eDelivery: 1. Go to www.delawareinvestments.com/edelivery 2. Follow the directions to register. Take control with Delaware eDelivery! If you have questions or need more information, call our Shareholder Service Center at 800 523-1918 from 8:00 a.m. to 8:00 p.m. Eastern Time, Monday through Friday. [GRAPHIC OMITTED] DELAWARE e:delivery ONLINE, ALL THE TIME 6 Delaware Tax-Free Minnesota Fund Fund Basics As of February 28, 2002 - -------------------------------------------------------------------------------- Fund Objective: The Fund seeks as high a level of current income exempt from federal income tax and Minnesota state personal income tax, as is consistent with preservation of capital. - -------------------------------------------------------------------------------- Total Fund Net Assets: $376.29 million - -------------------------------------------------------------------------------- Number of Holdings: 138 - -------------------------------------------------------------------------------- Fund Start Date: February 29, 1984 - -------------------------------------------------------------------------------- Your Fund Managers: Mitchell L. Conery received a bachelor's degree from Boston University and an MBA in finance from the State University of New York at Albany. Prior to joining Delaware Investments in 1997, he served as an investment officer with the Travelers Group. Before that, he held positions at CS First Boston Corporation, MBIA Corporation, Thomas McKinnon Securities, Ovest Financial Services, and Merrill Lynch. Patrick P. Coyne received a bachelor's degree from Harvard University and an MBA in finance from the University of Pennsylvania's Wharton School. He began his career with Kidder, Peabody & Co., where he managed the firm's trading desk for four years. He joined Delaware Investments' fixed-income department in 1990. - -------------------------------------------------------------------------------- Nasdaq Symbols: Class A DEFFX Class B DMOBX Class C DMOCX Fund Performance Average Annual Total Returns Through February 28, 2002 Lifetime 10 Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 2/29/84) Excluding Sales Charge +7.97% +6.02% +5.30% +5.77% Including Sales Charge +7.74% +5.62% +4.51% +1.82% - -------------------------------------------------------------------------------- Class B (Est. 3/11/95) Excluding Sales Charge +5.24% +4.54% +4.97% Including Sales Charge +5.24% +4.20% +0.97% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +5.10% +4.54% +4.97% Including Sales Charge +5.10% +4.54% +3.97% - -------------------------------------------------------------------------------- Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Returns and share values will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Class B and C share results, excluding sales charges, assume either that contingent deferred sales charges did not apply or the investment was not redeemed. Past performance is not a guarantee of future results. The Fund offers Class A, B, and C shares. Class A shares are sold with a front-end sales charge of up to 3.75% 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 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. They are also subject to an annual distribution and service fee of 1%. 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 Minnesota 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. 7 Delaware Tax-Free Minnesota Insured Fund Fund Basics As of February 28, 2002 - -------------------------------------------------------------------------------- Fund Objective: The Fund seeks as high a level of current income exempt from federal income tax and from the Minnesota state personal income tax, as is consistent with preservation of capital. - -------------------------------------------------------------------------------- Total Fund Net Assets: $253.24 million - -------------------------------------------------------------------------------- Number of Holdings: 96 - -------------------------------------------------------------------------------- Fund Start Date: May 1, 1987 - -------------------------------------------------------------------------------- Your Fund Managers: Mitchell L. Conery Patrick P. Coyne - -------------------------------------------------------------------------------- Nasdaq Symbols: Class A MNINX Class B DVMBX Class C DVMCX Fund Performance Average Annual Total Returns Through February 28, 2002 Lifetime 10 Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 5/1/87) Excluding Sales Charge 6.79% +6.12% +5.38% +5.63% Including Sales Charge +6.51% +5.72% +4.58% +1.66% - -------------------------------------------------------------------------------- Class B (Est. 3/7/95) Excluding Sales Charge +5.20% +4.60% +4.85% Including Sales Charge +5.20% +4.27% +0.85% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +5.01% +4.60% +4.84% Including Sales Charge +5.01% +4.60% +3.84% - -------------------------------------------------------------------------------- Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Returns and share values will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Class B and C share results, excluding sales charges, assume either that contingent deferred sales charges did not apply or the investment was not redeemed. Past performance is not a guarantee of future results. The Fund offers Class A, B, and C shares. Class A shares are sold with a front-end sales charge of up to 3.75% 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 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. They are also subject to an annual distribution and service fee of 1%. 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 Minnesota 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. 8 Delaware Tax-Free Minnesota Intermediate Fund Fund Basics As of February 28, 2002 - -------------------------------------------------------------------------------- Fund Objective: The Fund seeks to provide investors with preservation of capital and, secondarily, current income exempt from federal income tax and the Minnesota state personal income tax, by maintaining a weighted average portfolio maturity of 10 years or less. - -------------------------------------------------------------------------------- Total Fund Net Assets: $55.22 million - -------------------------------------------------------------------------------- Number of Holdings: 48 - -------------------------------------------------------------------------------- Fund Start Date: October 27, 1985 - -------------------------------------------------------------------------------- Your Fund Managers: Mitchell L. Conery Patrick P. Coyne - -------------------------------------------------------------------------------- Nasdaq Symbols: Class A DXCCX Class B DVSBX Class C DVSCX Fund Performance Average Annual Total Returns Through February 28, 2002 Lifetime 10 Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 10/27/85) Excluding Sales Charge +5.59% +4.80% +4.22% +6.06% Including Sales Charge +5.41% +4.51% +3.64% +3.10% - -------------------------------------------------------------------------------- Class B (Est. 8/15/95) Excluding Sales Charge +3.64% +3.34% +5.05% Including Sales Charge +3.64% +3.34% +3.05% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +3.89% +3.34% +5.15% Including Sales Charge +3.89% +3.34% +4.15% - -------------------------------------------------------------------------------- Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Returns and share values will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Class B and C share results, excluding sales charges, assume either that contingent deferred sales charges did not apply or the investment was not redeemed. Past performance is not a guarantee of future results. The Fund offers Class A, B, and C shares. Class A shares are sold with a front-end sales charge of up to 2.75% and have an annual distribution and service fee of up to 0.25%. Class B shares are sold with a contingent deferred sales charge that declines from 2% 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 five years after purchase. They are also subject to an annual distribution and service fee of 1%. 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 Minnesota Intermediate 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. 9 Delaware Minnesota High-Yield Municipal Bond Fund Fund Basics As of February 28, 2002 - -------------------------------------------------------------------------------- Fund Objective: The Fund seeks as high a level of current income exempt from federal income tax and from the Minnesota state personal income tax, primarily through investment in medium-and lower-grade municipal obligations. - -------------------------------------------------------------------------------- Total Fund Net Assets: $51.78 million - -------------------------------------------------------------------------------- Number of Holdings: 52 - -------------------------------------------------------------------------------- Fund Start Date: June 4, 1996 - -------------------------------------------------------------------------------- Your Fund Managers: Mitchell L. Conery Patrick P. Coyne - -------------------------------------------------------------------------------- Nasdaq Symbols: Class A DVMHX Class B DVMYX Class C DVMMX Fund Performance Average Annual Total Returns Through February 28, 2002 Lifetime Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 6/4/96) Excluding Sales Charge +5.67% +5.15% +7.35% Including Sales Charge +4.97% +4.35% +3.30% - -------------------------------------------------------------------------------- Class B (Est. 6/12/96) Excluding Sales Charge +5.29% +4.35% +6.50% Including Sales Charge +5.15% +4.03% +2.50% - -------------------------------------------------------------------------------- Class C (Est. 6/12/96) Excluding Sales Charge +4.90% +4.36% +6.50% Including Sales Charge +4.90% +4.36% +5.50% - -------------------------------------------------------------------------------- Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Returns and share values will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Class B and C share results, excluding sales charges, assume either that contingent deferred sales charges did not apply or the investment was not redeemed. Past performance is not a guarantee of future results. The Fund offers Class A, B, and C shares. Class A shares are sold with a front-end sales charge of up to 3.75% 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 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. They are also subject to an annual distribution and service fee of 1%. 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 Minnesota High-Yield Municipal Bond 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. 10 Statements of Net Assets Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 98.34% - -------------------------------------------------------------------------------- Airport/Airline Revenue Bonds - 1.62% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.00% 1/1/22 (AMBAC) $ 3,440,000 $ 3,447,499 5.25% 1/1/32 (FGIC) 2,600,000 2,633,748 ----------- 6,081,247 ----------- Continuing Care/Retirement Revenue Bonds - 4.43% Bloomington Housing & Redevelopment Authority (Senior Summerhouse Bloomington Project, Presbyterian Homes Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 2,961,617 Eden Prairie Health Care Facilities Revenue (Castle Ridge Care Center) 5.70% 7/1/28 1,740,000 1,402,423 Minneapolis Housing Facilities Revenue (Augustana Chapel View Project) 7.00% 4/1/18 1,000,000 990,410 Minnesota Agriculture & Economic Development Board Revenue (Benedictine Health Systems) 5.75% 2/1/29 1,195,000 968,488 Minnetonka Housing Facilities Revenue (Beacon Hill Project, Presbyterian Homes & Services) 7.70% 6/1/25 2,000,000 2,027,040 Oakdale Revenue (Oak Meadows Project, Family Resources Development Inc.) 7.00% 4/1/27 6,800,000 6,631,700 Rochester Multifamily Revenue (Wedum Shorewood Campus) 6.60% 6/1/36 1,840,000 1,684,833 ----------- 16,666,511 ----------- General Obligation Bonds - 11.15% Dakota County Capital Improvement Series A 4.75% 2/1/26 6,390,000 6,181,303 Hennepin County Regional Railroad Authority Revenue 5.00% 12/1/26 2,750,000 2,736,250 5.00% 12/1/31 4,030,000 3,989,660 Hennepin County Series A 4.50% 12/1/20 1,000,000 949,460 Hennepin County Solid Waste 5.75% 10/1/10 4,990,000 5,207,364 Minneapolis Sales Tax 6.30% 10/1/08 1,750,000 1,792,753 Minneapolis Tax Increment Series E 5.00% 3/1/13 6,265,000 6,560,707 Minnesota State 5.00% 11/1/20 (FSA) 8,175,000 8,263,289 Delaware Tax-Free Minnesota Fund February 28, 2002 (Unaudited) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- General Obligation Bonds (continued) **Minnesota State, Inverse Floaters ROLS 8.77% 11/1/16 $ 2,420,000 $ 2,549,543 8.77% 11/1/17 1,135,000 1,182,341 8.77% 11/1/18 1,145,000 1,179,316 Rochester Tax Increment 6.50% 12/1/04 1,000,000 1,012,950 St. Paul Tax Increment (Block 39 Project) Series A 4.75% 2/1/25 350,000 336,053 ----------- 41,940,989 ----------- Higher Education Revenue Bonds - 4.53% Minnesota State Higher Education Facilities Authority Revenue (Augsburg College) Series 4-F1 6.25% 5/1/23 1,000,000 1,035,820 (Hamline University) Series 4-I 6.00% 10/1/12 1,250,000 1,314,513 6.00% 10/1/16 1,790,000 1,838,545 (St. Benedict College) Series 4-G 6.20% 3/1/16 1,000,000 1,038,800 (St. Thomas University) Series 3-R2 5.60% 9/1/14 1,100,000 1,127,104 University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,171,020 **University of Minnesota, Inverse Floater ROLS Series II-R-29 9.65% 7/1/21 5,250,000 6,147,959 10.155% 7/1/18 1,920,000 2,383,104 ----------- 17,056,865 ----------- Hospital Revenue Bonds - 18.59% Bemidji Hospital Facilities Revenue (North County Health Services) 6.05% 9/1/16 600,000 611,604 6.05% 9/1/24 1,825,000 1,838,998 Brainerd Health Care Facilities Revenue (St. Joseph's Hospital) Series E 6.00% 2/15/12 (Connie Lee) 2,250,000 2,383,425 Duluth Economic Development Authority (St. Luke's Hospital) 6.40% 5/1/18 (Connie Lee) 3,295,000 3,387,194 (St. Mary's Hospital) 6.00% 2/15/20 (Connie Lee) 9,450,000 9,932,423 Maplewood Health Care Facility Revenue (Health East Project) 5.95% 11/15/06 2,200,000 2,051,522 Marshall Medical Center Gross Revenue (Weiner Memorial Medical Center Project) 6.00% 11/1/28 1,000,000 890,810 Minneapolis Hospital Revenue (Fairview Hospital & Healthcare Service) Series B 6.50% 1/1/11 (MBIA) 2,775,000 2,842,627 Northfield Hospital Revenue Series C 6.00% 11/1/31 (MBIA) 1,500,000 1,471,320 11 Statements of Net Assets (continued) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Hospital Revenue Bonds (continued) Robbinsdale Hospital Revenue (North Memorial Medical Center) 5.50% 5/15/23 (AMBAC) $10,725,000 $10,841,902 **Rochester Health Care Facilities Revenue (Mayo Clinic), Inverse Floater ROLS Series H 10.41% 11/15/15 3,500,000 3,736,250 Series II-R-28-A 9.65% 11/15/27 2,100,000 2,214,639 Series II-R-28-B 9.65% 11/15/27 8,375,000 8,832,191 Rochester Health Care Facilities Revenue (Mayo Foundation) Series B 5.50% 11/15/27 700,000 719,110 St. Louis Park Commercial Development Revenue (G & N, L P Project Methodist Hospital Guaranteed) 7.25% 6/1/13 1,120,000 1,120,885 St. Louis Park Health Care Facilities Revenue (Healthsystem Obligated) Series A 5.20% 7/1/23 (AMBAC) 10,220,000 10,228,277 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series A 5.70% 11/1/15 1,300,000 1,037,374 6.625% 11/1/17 6,000,000 5,134,140 Washington County Housing & Redevelopment Authority (Health East Project) 5.50% 11/15/27 1,000,000 674,710 ----------- 69,949,401 ----------- Housing Revenue Bonds - 13.76% Austin Housing & Redevelopment Authority Governmental Housing Gross Revenue (Courtyard Residence Project) Series A 7.25% 1/1/26 500,000 510,395 Brooklyn Center Multifamily Housing Revenue (Ponds Family Housing Project-Section 8) 5.90% 1/1/20 1,250,000 1,254,988 Burnsville Multifamily Revenue (Bridgeway Apartments Project) 7.625% 2/1/24 (FHA) 3,370,000 3,412,968 Carver County Housing & Redevelopment Authority Multifamily Revenue (Lake Grace Apartments Project) Series A 6.00% 7/1/28 1,435,000 1,455,248 Dakota County Housing & Redevelopment Authority Multifamily Revenue (Affordable Housing View Point Project) 6.125% 11/1/17 2,475,000 2,379,638 Eden Prairie Multifamily (Tanager Creek Apartments) Series A 8.05% 6/20/31 (GNMA) 7,605,000 8,392,953 (Windslope Apartments Project) 7.10% 11/1/17 1,585,000 1,618,396 Hopkins Multifamily Revenue (Hopkins Renaissance Project- Section 8) 6.375% 4/1/20 1,000,000 1,039,450 Delaware Tax-Free Minnesota Fund Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Housing Revenue Bonds (continued) Little Canada Multifamily Housing Revenue (Housing Alternatives Development Co. Project) Series A 6.10% 12/1/17 $ 1,515,000 $ 1,451,294 6.25% 12/1/27 2,900,000 2,651,325 Minneapolis Multifamily Revenue (Seward Towers Project) 7.375% 12/20/30 (GNMA) 4,000,000 4,062,680 (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 2,015,000 2,023,262 Minnesota State Housing Finance Agency (Section 8) Series A 6.95% 2/1/14 1,500,000 1,519,140 Series B 6.25% 8/1/22 600,000 600,462 Park Rapids Multifamily Revenue (The Court Apartments Project- Section 8) 6.30% 2/1/20 3,095,000 2,966,712 St. Louis Park Multifamily (Community Housing & Services) 6.25% 12/1/28 (FHA) 3,855,000 3,990,850 (Westwind Apartments Project) 5.75% 1/1/29 (GNMA) 3,865,000 3,917,062 St. Louis Park Residential Mortgage Revenue Single Family Mortgage 7.25% 4/20/23 (GNMA) 560,000 567,756 St. Paul Housing & Redevelopment Agency Authority Multifamily Housing Revenue (900 Como Lake Project) 7.50% 3/1/26 (FHA) 1,000,000 995,580 St. Paul Housing & Redevelopment Authority Single Family Mortgage Revenue 6.90% 12/1/11 (FNMA) 20,000 20,099 Series C 6.90% 12/1/21 (FNMA) 805,000 820,311 Stillwater Multifamily Revenue (Stillwater Cottages) Series A 7.00% 11/1/27 1,000,000 957,480 Wadena Housing & Redevelopment Agency (Humphrey Manor East Project) 6.00% 2/1/19 2,130,000 2,142,950 Washington County Housing & Redevelopment Authority Revenue (Briar Pond) Series C 7.25% 8/20/34 (GNMA) 1,000,000 982,700 Wells Housing & Redevelopment Agency (Broadway Apartments Project- Section 8) 7.00% 1/1/19 965,000 1,000,184 Willmar Housing & Redevelopment Authority Multifamily Revenue (Highland Apartments-Section 8) 5.85% 6/1/19 1,050,000 1,054,452 ----------- 51,788,335 ----------- 12 Statements of Net Assets (continued) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Industrial Development Revenue Bonds - 2.24% Richfield Commercial Development Revenue (Richfield Shoppes Project) 8.375% 10/1/13 $ 2,200,000 $ 2,300,452 Seaway Port Authority Duluth Industrial Development Dock & Wharf Revenues (Cargill, Inc. Project) Series E 6.125% 11/1/14 4,500,000 4,854,375 St. Paul Port Authority Commercial Development General Revenue (Fort Road Medical/Irvine Park) Series 1 7.50% 9/1/02 (Asset Gty) 1,270,000 1,270,635 ----------- 8,425,462 ----------- Leases/Certificates of Participation - 0.48% Beltrami County Housing & Redevelopment Authority Revenue 6.20% 2/1/14 1,010,000 1,046,582 West St. Paul Minnesota Lease (K-Mart Corp. Project) 7.00% 11/1/07 1,201,257 756,792 ----------- 1,803,374 ----------- Other Revenue Bonds - 2.24% Minneapolis Community Development Agency Supported Revenue Limited Tax (Common Bond Fund) Series 2A 7.125% 12/1/05 415,000 438,705 ***Minneapolis Community Development Agency Tax Increment Revenue 6.67% 9/1/09 (MBIA) 5,750,000 4,239,590 St. Cloud Commercial Development Revenue (Northwest Center Associates Project) 7.50% 8/1/12 3,753,971 3,763,356 ----------- 8,441,651 ----------- Pollution Control Revenue Bonds - 2.57% Cloquet Pollution Control Revenue (Potlatch Corp. Projects) 5.90% 10/1/26 9,200,000 8,328,300 International Falls Pollution Control Revenue (Boise Cascade Corp. Project) 5.65% 12/1/22 1,500,000 1,350,945 ----------- 9,679,245 ----------- Power Authority Revenue Bonds - 15.62% Bass Brook Pollution Control Revenue (Minnesota Power & Light Co. Project) 6.00% 7/1/22 17,000,000 17,274,210 6.00% 7/1/22 (MBIA) 750,000 772,980 Chaska Electric Revenue 6.00% 10/1/25 1,000,000 1,046,700 Delaware Tax-Free Minnesota Fund Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Power Authority Revenue Bonds (continued) Northern Minnesota Municipal Power Agency Electric System Revenue Series A 5.00% 1/1/21 $ 880,000 $ 871,992 ***Series A 5.85% 1/1/09 (AMBAC) 3,815,000 2,888,108 Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,448,300 Series B 5.50% 1/1/18 (AMBAC) 9,200,000 9,409,024 Rochester Electric Utility Revenue 5.25% 12/1/30 4,915,000 4,933,431 Shakopee Public Utilities Commission Revenue 5.125% 2/1/26 (MBIA) 1,000,000 1,004,640 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 4.75% 1/1/16 (MBIA) 3,550,000 3,551,953 ***5.663% 1/1/19 (MBIA) 8,210,000 3,544,503 5.75% 1/1/18 (MBIA) 7,770,000 8,021,126 ***6.136% 1/1/21 (MBIA) 3,000,000 1,150,920 Series B 5.50% 1/1/15 (AMBAC) 1,560,000 1,611,043 Western Minnesota Municipal Power Agency 6.125% 1/1/16 265,000 265,268 ----------- 58,794,198 ----------- *Pre-Refunded/Escrowed to Maturity Bonds - 7.44% Andover Commercial Development Revenue (Downtown Center Project) Series A 7.00% 12/1/12-03 1,000,000 1,100,160 Bloomington Tax Increment 9.75% 2/1/08-05 500,000 597,545 Faribault Independent School District #656 (School District Credit Enhanced) 6.10% 6/1/10-04 1,000,000 1,081,160 Kenyon Wanamingo Independent School District #2172 6.00% 2/1/18-05 (MBIA) 2,350,000 2,557,317 Maplewood Independent School District #622 Series A 7.10% 2/1/25-05 (FSA) 10,000,000 11,233,699 Minneapolis/St. Paul Housing & Redevelopment Authority Health Care System (Health One Obligated Group) Series A 7.40% 8/15/11-02 (MBIA) 1,360,000 1,390,804 Minnesota Public Facilities Authority Water Pollution Control Series A 6.25% 3/1/16-05 4,400,000 4,850,428 Plainview Independent School District #810 6.70% 2/1/06-03 385,000 403,226 6.75% 2/1/07-03 420,000 440,072 6.75% 2/1/08-03 445,000 466,267 13 Statements of Net Assets (continued) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- *Pre-Refunded/Escrowed to Maturity Bonds (continued) Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.75% 1/1/18 (Escrowed to Maturity) (MBIA) $ 1,000,000 $ 1,051,170 Series B 5.50% 1/1/15 (Escrowed to Maturity) (AMBAC) 990,000 1,038,609 University of Minnesota Series A 6.00% 2/1/11 (Escrowed to Maturity) 1,500,000 1,514,475 Western Minnesota Municipal Power Agency 9.75% 1/1/16 (Escrowed to Maturity) (MBIA) 185,000 280,022 ----------- 28,004,954 ----------- Recreation Area Revenue Bonds - 0.80% Minneapolis Art Center Facilities Revenue (Walker Art Center Project) 5.125% 7/1/21 3,000,000 2,999,790 ----------- 2,999,790 ----------- School District General Obligation Bonds - 5.80% Bloomington Independent School District #271 Series B 5.00% 2/1/17 5,300,000 5,412,783 ***Farmington Independent School District #192 Capital Appreciation Series B 5.34% 2/1/21 (FSA) 2,000,000 729,600 5.424% 2/1/20 (FSA) 2,650,000 1,023,563 ***Lakeville Independent School District #194 Series B 5.45% 2/1/19 (FSA) 8,000,000 3,215,760 ***Mahtomedi Independent School District #832 Series B 5.90% 2/1/14 (MBIA) 1,540,000 879,817 ***Rockford Independent School District #883, Inverse Floater ROLS Series II-R-30-A 9.91% 2/1/23 (FSA) 3,510,000 3,885,430 ***Rosemount Independent School District #196 5.961% 4/1/12 (FSA) 1,850,000 1,183,020 6.008% 4/1/13 (FSA) 1,915,000 1,152,600 Series B 5.931% 4/1/11 (FSA) 2,600,000 1,755,026 ***Sartell Independent School District #748 5.976% 2/1/13 (MBIA) 540,000 328,034 6.10% 2/1/15 (MBIA) 1,075,000 582,682 6.15% 2/1/16 (MBIA) 1,750,000 893,638 6.15% 2/1/17 (MBIA) 1,600,000 768,416 ----------- 21,810,369 ----------- Territorial General Obligation Bonds - 0.53% Puerto Rico Public Improvements Bonds Series A 5.125% 7/1/31 2,000,000 1,979,200 ----------- 1,979,200 ----------- Delaware Tax-Free Minnesota Fund Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Territorial Revenue Bonds - 4.06% Guam Power Authority Revenue Series A 5.125% 10/1/29 $ 1,000,000 $ 961,150 Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series D 5.25% 7/1/38 2,000,000 2,002,220 Puerto Rico Electric Power Authority Series EE 4.75% 7/1/24 3,700,000 3,507,008 Series X 5.50% 7/1/25 2,930,000 2,972,104 **Puerto Rico Electric Power Authority, Inverse Floater ROLS 7.80% 7/1/19 3,050,000 2,846,352 Puerto Rico Public Buildings Authority Series D 5.25% 7/2/36 3,000,000 3,005,010 ------------ 15,293,844 ------------ Water & Sewer Revenue Bonds - 2.48% **Minnesota Public Facilities Authority Water Pollution Control Revenue, Inverse Floater ROLS Series II-R-31 9.15% 3/1/14 5,000,000 5,346,250 Series II-TR-1 7.85% 3/1/16 2,000,000 2,008,300 Minnesota Public Facilities Authority Water Pollution Control Revenue Series B 4.75% 3/1/19 2,000,000 1,982,720 ------------ 9,337,270 ------------ Total Municipal Bonds (cost $352,314,775) 370,052,705 ============ Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 0.31% - -------------------------------------------------------------------------------- Federated Minnesota Municipal Cash Trust 1,167,396 1,167,396 ------------ Total Short-Term Investments (cost $1,167,396) 1,167,396 ------------ Total Market Value of Securities - 98.65% (cost $353,482,171) 371,220,101 Receivables and Other Assets Net of Liabilities - 1.35% 5,066,694 ------------ Net Assets Applicable to 30,195,707 Shares Outstanding - 100.00% $376,286,795 ============ 14 Statements Delaware Tax-Free Minnesota Fund of Net Assets (continued) - -------------------------------------------------------------------------------- Net Asset Value - Delaware Tax-Free Minnesota Fund Class A ($352,606,818 / 28,297,186 Shares) $12.46 ------ Net Asset Value - Delaware Tax-Free Minnesota Fund Class B ($16,811,953 / 1,348,335 Shares) $12.47 ------ Net Asset Value - Delaware Tax-Free Minnesota Fund Class C ($6,868,024 / 550,186 Shares) $12.48 ------ Components of Net Assets at February 28, 2002: Shares of beneficial interest (unlimited authorization -- no par) $358,565,548 Undistributed net investment income 41,761 Accumulated net realized loss on investments (58,474) Net unrealized appreciation of investments 17,737,960 ------------ Total net assets $376,286,795 ============ * For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. ** Inverse Floater Bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 28, 2002. *** Zero coupon bond. The interest rate shown is the yield at the time of purchase. Summary of Abbreviations: AMBAC - Insured by the AMBAC Indemnity Corporation Asset Gty - Insured by the Asset Guaranty Insurance Company Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Authority FNMA - Insured by Fannie Mae FSA - Insured by Financial Security Assurance GNMA - Insured by Ginnie Mae MBIA - Insured by the Municipal Bond Insurance Association Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Fund Net asset value Class A (A) $12.46 Sales charge (3.75% of offering price, or 3.93% of amount invested per share) (B) 0.49 ------ Offering price $12.95 ====== (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 15 Statements of Net Assets (continued) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds - 99.05% - -------------------------------------------------------------------------------- Airport/Airline Revenue Bonds - 2.67% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.125% 1/1/25 (FGIC) $ 100,000 $ 100,487 Series C 5.25% 1/1/32 (FGIC) 6,595,000 6,671,238 ------------ 6,771,725 ------------ General Obligation Bonds - 21.99% Becker Tax Increment Series D 6.25% 8/1/15 (AMT) (MBIA) 6,300,000 6,489,756 Big Lake Independent School District #727 Series A 5.00% 2/1/17 (FSA) 1,040,000 1,062,131 5.00% 2/1/20 (FSA) 1,000,000 1,006,140 Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,293,343 Chaska Independent School District #112 (School District Credit Enhancement Program) Series A 4.75% 2/1/21 (MBIA) 780,000 760,477 Dakota County Community Development Agency Governmental Housing Development 5.00% 1/1/21 1,275,000 1,264,928 ***Farmington Independent School District #192 Capital Appreciation Series B 5.912% 2/1/21 (FSA) 500,000 182,400 Hennepin County Series A 4.50% 12/1/21 1,000,000 944,220 Hennepin County Solid Waste 5.75% 10/1/10 1,800,000 1,878,408 Minnesota State 5.00% 11/1/20 (FSA) 5,500,000 5,559,400 Mounds View Independent School District #621 5.00% 2/1/20 (MBIA) 2,970,000 2,991,859 5.375% 2/1/24 (FGIC) 6,170,000 6,350,349 Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,587,886 **Rockford Independent School District #883, Inverse Floater ROLS Series II-R-30-B 9.86% 2/1/21 (FSA) 1,605,000 1,778,773 ***Rosemount Independent School District #196 5.80% 4/1/09 (FSA) 1,860,000 1,393,847 5.85% 4/1/10 (FSA) 2,240,000 1,595,171 ***Sauk Rapids Independent School District #047 Series B 5.983% 2/1/15 (FSA) 2,700,000 1,373,409 6.083% 2/1/17 (FSA) 2,245,000 998,419 **South Washington County Independent School District #833, Inverse Floater ROLS Series II-R-34-A 9.86% 2/1/20 (MBIA) 3,440,000 3,826,415 Series II-R-34-B 9.86% 2/1/21 (MBIA) 3,645,000 4,039,644 Delaware Tax-Free Minnesota Insured Fund February 28, 2002 (Unaudited) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- General Obligation Bonds (continued) St. Michael Independent School District #885 5.00% 2/1/20 (FSA) $1,970,000 $ 1,984,499 5.00% 2/1/27 (FSA) 3,435,000 3,422,256 Western Lake Superior Sanitation District Series A 6.00% 10/1/08 (AMT) (MBIA) 400,000 435,012 6.10% 10/1/09 (AMT) (MBIA) 425,000 463,624 6.20% 10/1/10 (AMT) (MBIA) 450,000 492,408 6.20% 10/1/11 (AMT) (MBIA) 475,000 519,764 ------------ 55,694,538 ------------ Higher Education Revenue Bonds - 2.82% Minnesota State Colleges & Universities Revenue Fund Series A 5.00% 10/1/22 (FSA) 5,135,000 5,153,640 St. Cloud Housing & Redevelopment Authority (State University Foundation Project) 5.00% 5/1/23 2,000,000 1,985,660 ------------ 7,139,300 ------------ Hospital Revenue Bonds - 14.25% Brainerd Health Care Facilities Revenue (St. Joseph's Hospital) Series E 6.00% 2/15/12 (Connie Lee) 1,500,000 1,588,950 6.00% 2/15/20 (Connie Lee) 2,000,000 2,100,140 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) Series C 6.00% 2/15/20 (Connie Lee) 1,300,000 1,366,365 Duluth Economic Development Authority Hospital Facilities Revenue (St. Luke's Hospital) Series B 6.40% 5/1/10 (Connie Lee) 3,335,000 3,429,681 6.40% 5/1/18 (Connie Lee) 500,000 513,990 Minneapolis Health Care Facility Revenue (Fairview Hospital & Healthcare Service) Series A 5.25% 11/15/19 (MBIA) 2,750,000 2,769,580 Minneapolis Hospital Revenue (Fairview Hospital & Healthcare Service) Series B 6.50% 1/1/11 (MBIA) 2,775,000 2,842,627 Minneapolis/St. Paul Housing & Redevelopment Authority Health Care Systems (Children's Health Care) Series A 5.50% 8/15/25 (FSA) 2,250,000 2,287,575 (Healthspan Health System) Series A 5.00% 11/15/13 (AMBAC) 6,490,000 6,604,937 16 Statements of Net Assets (continued) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Hospital Revenue Bonds (continued) **Minnesota Agriculture & Economic Development Board Revenue (Fairview Hospital & Healthcare Service), Inverse Floater ROLS Series II-R-33 10.16% 11/15/26 (MBIA) $ 5,125,000 $ 5,574,514 Robbinsdale Hospital Revenue (North Memorial Medical Center) 5.50% 5/15/23 (AMBAC) 5,900,000 5,964,310 St. Paul Housing & Redevelopment Authority Hospital Revenue (St. Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,031,940 ------------ 36,074,609 ------------ Housing Revenue Bonds - 8.90% Chaska Waters Edge Multifamily Revenue 7.30% 1/20/30 (GNMA) 3,257,000 3,552,214 Dakota County Housing & Redevelopment Authority Single Family Mortgage Revenue 5.85% 10/1/30 (AMT) (FNMA) (GNMA) 3,031,000 3,105,744 6.70% 10/1/17 (FNMA) 1,605,000 1,632,333 Eagan Multifamily Revenue (Woodridge Apartments) 5.90% 8/1/20 (GNMA) 1,000,000 1,035,700 Hopkins Multifamily Revenue (Auburn Apartments) 8.05% 6/20/31 (GNMA) 3,790,000 4,173,511 Minneapolis Multifamily Revenue (Bottineau Commons Project) 5.45% 4/20/43 (GNMA) 1,500,000 1,514,445 Minneapolis/St. Paul Housing Finance Board Revenue (Trinity Apartments) Series A 8.125% 12/1/14 (AMT) (FHA) (GNMA) (VA) 60,000 60,053 Minnesota State Housing Finance Agency Series C-2 5.95% 2/1/15 (AMBAC) 2,165,000 2,242,161 St. Paul Housing & Redevelopment Authority Multifamily Housing Revenue (Pointe of St. Paul Project) 6.60% 10/1/12 (FNMA) 4,000,000 4,129,560 White Bear Lake Multifamily Revenue (Lake Square) Series A 5.875% 2/1/15 (FHA) 1,055,000 1,091,271 ------------ 22,536,992 ------------ Other Revenue Bonds - 0.80% Minneapolis Community Development Agency Series G-3 5.45% 12/1/31 2,000,000 2,018,360 ------------ 2,018,360 ------------ Delaware Tax-Free Minnesota Insured Fund Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Power Authority Revenue Bonds - 5.48% Northern Minnesota Municipal Power Agency Electric System Revenue Series B 4.75% 1/1/20 (AMBAC) $ 1,100,000 $ 1,077,252 5.50% 1/1/18 (AMBAC) 4,200,000 4,295,424 **Northern Minnesota Municipal Power Agency Minnesota Electric System Revenue, Inverse Floater ROLS Series II-R-32 9.15% 1/1/13 (FSA) 4,585,000 5,244,002 Shakopee Public Utilities Commission Revenue 5.125% 2/1/26 (MBIA) 1,850,000 1,858,584 Southern Minnesota Municipal Power Agency Supply System Revenue 4.75% 1/1/16 (MBIA) 1,400,000 1,400,770 ------------ 13,876,032 ------------ *Pre-Refunded/Escrowed to Maturity Bonds - 38.06% Alexandria Independent School District #206 Series A 6.30% 2/1/13-03 (MBIA) 1,775,000 1,849,177 Becker Wastewater Treatment Facility Series A 5.95% 2/1/14-04 (MBIA) 500,000 535,290 Buffalo Independent School District #877 6.10% 2/1/15-03 (FSA) 1,030,000 1,071,159 Dakota & Washington Counties Housing & Redevelopment Authority Single Family Residential Revenue 8.15% 9/1/16 (Escrowed to Maturity) (AMT) (GNMA) (MBIA) 405,000 547,467 8.375% 9/1/21 (Escrowed to Maturity) (AMT) (GNMA) 14,115,000 19,962,279 8.45% 9/1/19 (Escrowed to Maturity) (AMT) (GNMA) 9,000,000 12,603,510 Detroit Lakes Benedictine Health Care Facilities Revenue (St. Mary's Hospital) Series G 6.00% 2/15/12-03 (Connie Lee) 1,630,000 1,730,750 6.00% 2/15/19-03 (Connie Lee) 1,000,000 1,061,810 Duluth Economic Development Authority Health Care Facilities Benedictine Health System (St. Mary's Hospital) Series B 6.00% 2/15/17-03 (Connie Lee) 10,000,000 10,618,100 Duluth Economic Development Authority Health Care Facilities Revenue (Duluth Clinic) 6.30% 11/1/22-02 (AMBAC) 2,690,000 2,831,763 6.30% 11/1/22-04 (AMBAC) 1,060,000 1,172,116 Elk River Independent School District 6.00% 2/1/09-03 (AMBAC) 3,950,000 4,104,248 17 Statements of Net Assets (continued) Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- *Pre-Refunded/Escrowed to Maturity Bonds (continued) Ellendale Independent School District #762 6.00% 2/1/10-03 (AMBAC) $ 230,000 $ 239,090 6.00% 2/1/11-03 (AMBAC) 245,000 254,682 6.00% 2/1/12-03 (AMBAC) 265,000 275,473 6.00% 2/1/13-03 (AMBAC) 280,000 291,066 6.00% 2/1/14-03 (AMBAC) 300,000 311,856 6.00% 2/1/15-03 (AMBAC) 320,000 332,646 Maplewood Independent School District #622 Series A 7.10% 2/1/19-05 (MBIA) 5,935,000 6,667,201 7.10% 2/1/25-05 (FSA) 11,525,000 12,946,839 Marshall Electric & Water Utility Revenue 6.45% 7/1/10-03 (FSA) 500,000 530,565 6.45% 7/1/11-03 (FSA) 100,000 106,113 6.50% 7/1/12-03 (FSA) 500,000 530,895 6.50% 7/1/13-03 (FSA) 500,000 530,895 Minneapolis/St. Paul Housing & Redevelopment Authority Health Care System (Health One Obligated Group) Series A 7.40% 8/15/05-02 (MBIA) 600,000 613,230 7.40% 8/15/11-02 (MBIA) 2,370,000 2,423,681 Minnesota Public Facilities Authority Water Pollution Control Revenue 6.50% 3/1/14-02 (MBIA) 1,500,000 1,530,630 Moorhead Public Utilities 6.25% 11/1/12-02 (MBIA) 735,000 757,910 Northern Minnesota Municipal Power Agency Electric System Revenue Series A 5.90% 1/1/08-03 (AMBAC) 700,000 739,564 **Richfield Independent School District #280, Inverse Floater ROLS Series C 5.34% 2/1/15-03 (FGIC) 1,365,000 1,459,868 Southern Minnesota Municipal Power Agency Supply System Revenue 5.75% 1/1/18 (Escrowed to Maturity) (AMBAC) 670,000 688,887 5.75% 1/1/18 (Escrowed to Maturity) (MBIA) 3,790,000 3,983,934 Western Minnesota Municipal Power Agency 6.60% 1/1/10 (Escrowed to Maturity) (MBIA) 2,000,000 2,288,000 9.75% 1/1/16 (Escrowed to Maturity) (MBIA) 530,000 802,224 ------------ 96,392,918 ------------ Delaware Tax-Free Minnesota Insured Fund Principal Market Amount Value - -------------------------------------------------------------------------------- Municipal Bonds (continued) - -------------------------------------------------------------------------------- Territorial Revenue Bonds - 4.08% ***Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series A 5.207% 7/1/18 (AMBAC) $ 5,000,000 $ 2,307,600 **Puerto Rico Electric Power Authority, Inverse Floater ROLS 7.80% 7/1/19 2,825,000 2,636,375 Puerto Rico Electric Power Authority Revenue Series EE 4.50% 7/1/18 (MBIA) 4,500,000 4,400,415 Series GG 4.75% 9/1/21 (FSA) 1,000,000 986,860 ------------ 10,331,250 ------------ Total Municipal Bonds (cost $234,193,893) 250,835,724 ------------ Number of Shares - -------------------------------------------------------------------------------- Short-Term Investments - 4.10% - -------------------------------------------------------------------------------- Federated Minnesota Municipal Cash Trust 10,387,186 10,387,186 ------------ Total Short-Term Investments (cost $10,387,186) 10,387,186 ------------ Total Market Value of Securities - 103.15% (cost $244,581,079) 261,222,910 Liabilities Net of Receivables and Other Assets - (3.15%) (7,984,043) ============ Net Assets Applicable to 23,415,084 Shares Outstanding - 100.00% $253,238,867 ============ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class A ($235,339,233 / 21,759,475 Shares) $10.82 ------ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class B ($13,167,508 / 1,218,360 Shares) $10.81 ------ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class C ($4,732,126 / 437,249 Shares) $10.82 ------ 18 Statements Delaware Tax-Free Minnesota Insured Fund of Net Assets (continued) - -------------------------------------------------------------------------------- Components of Net Assets at February 28, 2002: Shares of beneficial interest (unlimited authorization - no par) $242,280,152 Undistributed net investment income 381,913 Accumulated net realized loss on investments (6,065,029) Net unrealized appreciation of investments 16,641,831 ------------ Total net assets $253,238,867 ============ * For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. ** An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 28, 2002. *** Zero coupon bond. The interest rate shown is the yield at the time of purchase. Summary of Abbreviations: AMBAC - Insured by the AMBAC Indemnity Corporation AMT - Subject to Alternative Minimum Tax Connie Lee - Insured by the College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Authority FNMA - Insured by Fannie Mae FSA - Insured by Financial Security Assurance GNMA - Insured by Ginnie Mae MBIA - Insured by the Municipal Bond Insurance Association VA - Insured by the Veterans Administration Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Insured Fund Net asset value Class A (A) $10.82 Sales charge (3.75% of offering price, or 3.88% of amount invested per share) (B) 0.42 ------ Offering price $11.24 ====== (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 19 Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds - 95.98% City Agency Revenue Bonds - 1.98% Minneapolis Community Development Agency Supported Revenue Limited Tax (Common Bond Fund) Series 4 6.20% 6/1/17 (AMT) $1,055,000 $1,091,471 ---------- 1,091,471 ---------- Continuing Care/Retirement Revenue Bonds - 4.72% Minneapolis Health Care Facility Revenue (Jones-Harrison Residence Project) 5.90% 10/1/16 125,000 113,500 Oakdale Elderly Housing Revenue (PHM/Oakdale, Inc. Project) 5.75% 3/1/18 1,400,000 1,238,006 Oakdale Revenue (Oak Meadows Project, Family Resources Development, Inc.) 6.20% 4/1/07 150,000 154,386 6.30% 4/1/08 260,000 267,015 6.50% 4/1/10 295,000 302,263 Rochester Nursing Home & Multifamily Housing Revenue (Samaritan Bethany, Inc.) Series A 6.00% 5/1/04 300,000 289,923 6.10% 5/1/05 250,000 240,390 ---------- 2,605,483 ---------- General Obligation Bonds - 12.85% Dakota County Capital Improvement Series A 4.75% 2/1/17 1,000,000 1,007,570 Hennepin County Series A 4.50% 12/1/17 1,000,000 978,390 Series B 4.75% 12/1/14 1,000,000 1,026,980 Minnesota Public Facilities Authority Water Pollution Control Revenue Series B 5.40% 3/1/15 620,000 643,362 Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series 14 5.50% 1/1/11 (AMT) 750,000 812,415 **Minnesota State, Inverse Floaters ROLS 8.77% 11/1/16 2,000,000 2,107,059 8.77% 11/1/17 500,000 520,855 ---------- 7,096,631 ---------- Health Care/Hospital Revenue Bonds - 3.43% Maplewood Health Care Facility Revenue (Health East Project) 5.70% 11/15/02 1,000,000 989,750 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series B 5.85% 11/1/17 1,160,000 906,343 ---------- 1,896,093 ---------- Delaware Tax-Free Minnesota Intermediate Fund February 28, 2002 (Unaudited) Principal Market Amount Value Municipal Bonds (continued) Higher Education Revenue Bonds - 3.98% Minnesota State Higher Education Facilities Authority Revenue (College of Art & Design) Series 5-D 6.625% 5/1/20 $1,000,000 $1,070,930 University of Minnesota Series A 5.75% 7/1/16 1,000,000 1,128,150 ---------- 2,199,080 ---------- Housing Revenue Bonds - 7.00% Minneapolis Multifamily Revenue (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 2,875,000 2,886,787 Park Rapids Multifamily Revenue (The Court Apartments Project- Section 8) 6.05% 8/1/12 950,000 926,336 St. Paul Housing & Redevelopment Authority Single Family Mortgage Revenue Series C 6.90% 12/1/21 (FNMA) 50,000 50,951 ---------- 3,864,074 ---------- Industrial Development Revenue Bonds - 9.23% Eveleth Industrial Development Revenue (Minnesota Power & Light Co. Project) Series A 6.125% 1/1/04 2,500,000 2,600,475 Richfield Commercial Development Revenue (Richfield Shoppes Project) 7.50% 10/1/04 530,000 534,404 St. Paul Port Authority Commercial Development General Revenue (Fort Road Medical/Irvine Park) Series 1 7.50% 9/1/02 (Asset Gty) 1,960,000 1,960,980 ---------- 5,095,859 ---------- Leases/Certificates of Participation - 6.01% Beltrami County Housing & Redevelopment Authority Revenue 5.90% 2/1/08 355,000 372,264 6.00% 2/1/09 380,000 397,191 6.00% 2/1/10 405,000 422,192 6.10% 2/1/11 430,000 448,223 Edina Housing & Redevelopment Authority Public Project Revenue (Lease Obligation Project) 5.125% 2/1/19 1,000,000 1,008,481 Hibbing Economic Development Authority Revenue (Hibbing Lease Obligation Project) 6.10% 2/1/08 650,000 672,503 ---------- 3,320,854 ---------- Other Revenue Bonds - 3.23% Minnesota Public Facilities Authority Water Pollution Control Revenue Series A 6.55% 3/1/03 1,720,000 1,780,940 ---------- 1,780,940 ---------- 20 Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) *Pre-Refunded/Escrowed to Maturity Bonds - 21.73% Andover Commercial Development Revenue (Downtown Center Project) Series A 6.50% 12/1/06-03 $ 1,795,000 $ 1,959,745 Duluth Gross Revenue Recreational Facility (Duluth Entertainment) 7.00% 12/1/03 (Escrowed to Maturity) 860,000 915,599 7.30% 12/1/06-04 250,000 287,030 Metropolitan Council, Minneapolis/ St. Paul Area Sports Facilities Revenue (Hubert H. Humphrey Metrodome) 6.00% 10/1/09 (Escrowed to Maturity) 3,520,000 3,684,701 Minnesota State 6.25% 8/1/10-02 4,000,000 4,082,120 **Richfield Independent School District #280, Inverse Floater ROLS Series C 5.34% 2/1/15-03 (FGIC) 1,000,000 1,069,500 ----------- 11,998,695 ----------- School District General Obligation Bonds - 18.32% Big Lake Independent School District #727 Series C 5.00% 2/1/16 (FSA) 1,180,000 1,216,368 5.00% 2/1/17 (FSA) 1,000,000 1,023,460 Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,000,000 1,018,380 5.00% 2/1/20 (FSA) 750,000 755,520 Chaska Independent School District #112 (School District Credit Enhancement Program) Series A 4.75% 2/1/21 (MBIA) 1,000,000 974,970 Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 1,500,000 1,507,515 South Washington County Independent School District # 833 Series B 5.00% 2/1/16 (FSA) 1,560,000 1,612,354 St. Michael Independent School District #885 5.00% 2/1/22 (FSA) 2,000,000 2,006,919 ----------- 10,115,486 ----------- Territorial Revenue Bonds - 3.50% **Puerto Rico Electric Power Authority Power Revenue, Inverse Floater ROLS 7.80% 7/1/19 1,000,000 933,230 Puerto Rico Public Buildings Authority Revenue Series D 5.25% 7/2/36 1,000,000 1,001,670 ----------- 1,934,900 ----------- Total Municipal Bonds (cost $51,695,224) 52,999,566 =========== Delaware Tax-Free Minnesota Intermediate Fund Number Market of Shares Value Short-Term Investments - 4.53% Federated Minnesota Municipal Cash Trust 2,500,000 $ 2,500,000 ------------ Total Short-Term Investments (cost $2,500,000) 2,500,000 ------------ Total Market Value of Securities - 100.51% (cost $54,195,224) 55,499,566 Liabilities Net of Receivables and Other Assets - (0.51%) (283,062) ------------ Net Assets Applicable to 5,225,235 Shares Outstanding - 100.00% $ 55,216,504 ============ Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class A ($48,940,232/4,631,959 Shares) $10.57 ------ Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class B ($2,253,725/212,918 Shares) $10.58 ------ Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class C ($4,022,547/380,358 Shares) $10.58 ------ 21 Delaware Tax-Free Minnesota Intermediate Fund Statements of Net Assets (continued) Components of Net Assets at February 28, 2002: Shares of beneficial interest (unlimited authorization - no par) $ 56,235,561 Undistributed net investment income 13,090 Accumulated net realized loss on investments (2,336,489) Net unrealized appreciation of investments 1,304,342 ------------ Total net assets $ 55,216,504 ============ *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. **An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 28, 2002. Summary of Abbreviations: AMT - Subject to Alternative Minimum Tax Asset Gty - Insured by the Asset Guaranty Insurance Company FGIC - Insured by Financial Guaranty Insurance Company FNMA - Insured by Fannie Mae FSA - Insured by Financial Security Assurance MBIA - Insured by the Municipal Bond Insurance Association Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Intermediate Fund Net asset value Class A (A) $10.57 Sales charge (2.75% of offering price, or 2.84 % of amount invested per share) (B) 0.30 ------ Offering price $10.87 ====== (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 22 Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds - 95.76% Airport/Airline Revenue Bonds - 2.34% Minneapolis/St. Paul Metropolitan Airports Commission Special Facilities Revenue (Northwest Airlines, Inc. Project) Series A 7.00% 4/1/25 (AMT) $ 1,500,000 $ 1,211,370 ------------ 1,211,370 ------------ Continuing Care/Retirement Revenue Bonds - 34.46% Cannon Falls Nursing Home Revenue (Franciscan Health Community Project) Series B 7.25% 7/1/21 100,000 99,986 Coon Rapids Senior Housing Revenue (Epiphany Senior Citizens Project) 6.00% 11/1/28 3,455,000 2,926,628 Mankato Health Facilities Revenue (Mankato Lutheran Homes Project) Series A 6.875% 10/1/26 300,000 300,033 Minneapolis Health Care Facility Revenue (Jones-Harrison Residence Project) 6.00% 10/1/27 1,565,000 1,349,969 Minneapolis Housing & Health Care Facilities Revenue (Augustana Chapel View Homes) 6.50% 6/1/17 1,370,000 1,302,514 Minnesota Agriculture & Economic Development Board Revenue (Benedictine Health Systems) 5.75% 2/1/29 1,000,000 810,450 Minnetonka Housing Facilities Revenue (Beacon Hill Senior Housing Project, Presbyterian Homes & Services) 7.55% 6/1/19 200,000 203,812 Moorhead Economic Development Authority Multifamily Revenue (Eventide Lutheran Home) Series B 6.00% 6/1/18 870,000 813,476 Northfield Health Care Facilities Revenue (Northfield Retirement Center) Series A 6.00% 5/1/28 1,405,000 1,184,218 Oakdale Elderly Housing Revenue (PHM/Oakdale, Inc. Project) 6.00% 3/1/28 1,800,000 1,536,480 Perham Hospital District Senior Congregate Housing Facilities Gross Revenue (Briarwood Project) 6.25% 11/1/22 620,000 561,689 Rochester Multifamily Revenue (Wedum Shorewood Campus) 6.60% 6/1/36 2,945,000 2,696,648 Delaware Minnesota High-Yield Municipal Bond Fund February 28, 2002 (Unaudited) Principal Market Amount Value Municipal Bonds (continued) Continuing Care/Retirement Revenue Bonds (continued) Shoreview Elderly Housing Revenue (PHM/Shoreview, Inc. Project) 6.15% 12/1/33 $ 2,955,000 $ 2,533,617 Twin Valley Congregate Housing Revenue (Living Options Inc. Project) 5.95% 11/1/28 1,825,000 1,522,324 ------------ 17,841,844 ------------ General Obligation Bonds - 6.54% **Minnesota State, Inverse Floaters ROLS 8.77% 11/1/17 1,800,000 1,875,078 Perham Disposal Systems 6.00% 5/1/22 (AMT) 1,500,000 1,513,005 ------------ 3,388,083 ------------ Higher Education Revenue Bonds- 3.00% Minnesota State Higher Education Facilities Authority Revenue (College Art & Design) Series 5-D 6.75% 5/1/26 500,000 535,900 (St. Mary's College) Series 3-Q 6.15% 10/1/23 900,000 915,804 Minnesota State University Board Revenue (State University System) Series A 6.10% 6/30/23 100,000 100,255 ------------ 1,551,959 ------------ Hospital Revenue Bonds - 6.53% Fergus Falls Health Care Facilities Revenue (Lake Region Hospital Corp. Project) 6.50% 9/1/18 750,000 758,168 **Rochester Health Care Facilities Revenue (Mayo Clinic), Inverse Floater ROLS Series H 10.41% 11/15/15 1,500,000 1,601,250 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series A 5.70% 11/1/15 800,000 638,384 Series B 6.625% 11/1/17 445,000 380,920 ------------ 3,378,722 ------------ Housing Revenue Bonds - 27.73% Bloomington Multifamily Revenue (Hampshire Apartments) Series A 6.20% 12/1/31 2,500,000 2,259,450 Brooklyn Center Multifamily Housing Revenue (Four Courts Apartments) Series A 7.50% 6/1/25 (AMT) 370,000 370,729 Carver County Housing & Redevelopment Authority Multifamily Revenue (Lake Grace Project) Series B 6.25% 7/1/28 315,000 312,156 Series C 8.00% 7/1/28 320,000 328,314 23 Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Housing Revenue Bonds (continued) Chanhassen Multifamily Revenue (Heritage Park-Section 8) 6.20% 7/1/30 (AMT) (FHA) $ 300,000 $ 308,886 Chaska Multifamily Revenue (West Suburban Housing Partners) 5.875% 3/1/31 (AMT) 1,000,000 858,930 Eden Prairie Multifamily Revenue (Tanager Creek Apartments) Series C 8.00% 6/20/31 740,000 744,218 Hutchinson Multifamily Revenue (Evergreen Apartments Project- Section 8) 5.75% 11/1/28 3,355,000 3,171,447 Minneapolis Multifamily Revenue (Grant Street Apartments Project) Series A 7.25% 11/1/29 2,835,000 2,846,311 (Olson Townhomes Project) 6.00% 12/1/19 (AMT) 800,000 803,640 Minnesota State Housing Finance Agency Single Family Mortgage 5.875% 1/1/17 75,000 79,135 Series E 6.25% 1/1/23 (AMT) 65,000 67,930 St. Anthony Multifamily Revenue (Chandler) Series A 6.05% 11/20/16 (FHA) (GNMA) 135,000 143,816 Stillwater Multifamily Revenue (Stillwater Cottages) Series A 6.75% 11/1/11 205,000 202,261 7.00% 11/1/16 (AMT) 680,000 665,897 7.00% 11/1/27 340,000 325,543 Washington County Housing & Redevelopment Authority Governmental Revenue (Briar Pond) Series B 7.125% 8/20/34 885,000 871,769 ------------ 14,360,432 ------------ Industrial Development Revenue Bonds - 0.35% Red Wing Industrial Development Revenue (Kmart Corp. Project) 5.50% 7/1/08 300,000 180,600 ------------ 180,600 ------------ Leases/Certificates of Participation - 2.20% Beltrami County Housing & Redevelopment Authority Revenue 6.10% 2/1/12 460,000 478,345 Hibbing Economic Development Authority Revenue (Hibbing Lease Obligation Project) 6.40% 2/1/12 530,000 528,584 Rice County Certificates of Participation Series A 6.00% 12/1/21 125,000 129,609 ------------ 1,136,538 ------------ Delaware Minnesota High-Yield Municipal Bond Fund Principal Market Amount Value Municipal Bonds (continued) Other Revenue Bonds - 1.70% St. Paul Housing & Redevelopment Authority Lease Revenue (Acorn Dual Language Community Project) 6.60% 11/1/24 $ 1,000,000 $ 882,270 ------------ 882,270 ------------ Pollution Control Revenue Bonds - 1.99% International Falls Solid Waste Disposal Revenue (Boise Cascade Corp. Project) 6.85% 12/1/29 (AMT) 1,000,000 1,032,520 ------------ 1,032,520 ------------ Power Authority Revenue Bonds - 0.28% Western Minnesota Municipal Power Agency 6.125% 1/1/16 145,000 145,146 ------------ 145,146 ------------ *Pre-Refunded Bonds - 4.08% Andover Commercial Development Revenue (Downtown Center Project) Series A 7.00% 12/1/12-03 1,640,000 1,804,262 Glencoe Health Care Revenue 6.40% 12/1/15-05 275,000 309,298 ------------ 2,113,560 ------------ Recreational Area Revenue Bonds - 0.69% Woodbury Gross Revenue (Golf Course Bonds) 6.75% 2/1/22 365,000 359,791 ------------ 359,791 ------------ Territorial Revenue Bonds - 3.87% Puerto Rico Commonwealth Highway & Transportation Authority Revenue Series D 5.25% 7/1/38 2,000,000 2,002,220 ------------ 2,002,220 ------------ Total Municipal Bonds (cost $52,611,422) 49,585,055 ------------ Number of Shares Short-Term Investments - 2.28% Federated Minnesota Municipal Cash Trust 1,181,894 1,181,894 ------------ Total Short-Term Investments (cost $1,181,894) 1,181,894 ------------ Total Market Value of Securities - 98.04% (cost $53,793,316) 50,766,949 Receivables and Other Assets Net of Liabilities - 1.96% 1,013,830 ------------ Net Assets Applicable to 5,276,407 Shares Outstanding - 100.00% $ 51,780,779 ============ 24 Delaware Minnesota High-Yield Municipal Bond Fund Statements of Net Assets (continued) Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class A ($32,526,445/3,316,197 Shares) $ 9.81 ----------- Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class B ($12,400,370/1,262,366 Shares) $ 9.82 ----------- Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class C ($6,853,964/697,844 Shares) $ 9.82 ----------- Components of Net Assets at February 28, 2002: Shares of beneficial interest (unlimited authorization - no par) $56,307,930 Undistributed net investment income 171,205 Accumulated net realized loss on investments (1,671,989) Net unrealized depreciation of investments (3,026,367) ----------- Total net assets $51,780,779 =========== *For Pre-Refunded Bonds, the stated maturity is followed by the year in which the bond is pre-refunded. **An inverse floater bond is a type of bond with variable or floating interest rates that move in the opposite direction of short-term interest rates. Interest rate disclosed is in effect as of February 28, 2002. Summary of Abbreviations: AMT - Subject to Alternative Minimum Tax FHA - Insured by Federal Housing Authority GNMA - Insured by Ginnie Mae Net Asset Value and Offering Price per Share - Delaware Minnesota High-Yield Municipal Bond Fund Net asset value Class A (A) $ 9.81 Sales charge (3.75% of offering price, or 3.87 % of amount invested per share) (B) 0.38 ----------- Offering price $ 10.19 =========== (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 25 Delaware Tax-Free Minnesota Intermediate Fund February 28, 2002 (Unaudited) Statement of Assets and Liabilities Assets: Investments at market (cost $54,195,224) $55,499,566 Cash 2,577,536 Interest receivable 756,282 Subscriptions receivable 3,000 ----------- Total assets 58,836,384 ----------- Liabilities: Payables for securities purchased 3,475,141 Liquidations payable 64,295 Distributions payable 40,470 Other accounts payable and accrued expenses 39,974 ----------- Total liabilities 3,619,880 ----------- Total Net Assets $55,216,504 =========== See accompanying notes 26
Statements Delaware Minnesota Municipal Bond Funds of Operations Six Months Ended February 28, 2002 (Unaudited) Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund Investment Income: Interest $10,437,374 $ 5,242,668 $ 1,548,450 $ 1,767,424 ----------- ----------- ----------- ----------- Expenses: Management fees 1,027,857 629,284 133,526 144,651 Distribution expense - Class A 439,297 293,079 35,878 41,541 Distribution expense - Class B 79,378 63,288 11,156 62,832 Distribution expense - Class C 30,790 21,786 16,192 33,617 Dividend disbursing and transfer agent fees and expenses 147,100 103,442 26,459 21,263 Accounting and administration expenses 82,507 54,769 11,372 11,444 Reports and statements to shareholders 56,750 39,922 5,285 5,519 Professional fees 19,355 19,860 1,610 1,851 Registration fees 9,450 48,000 5,703 1,450 Trustees' fees 8,000 5,500 2,169 1,250 Custodian fees 3,082 11,364 1,497 1,724 Taxes (other than taxes on income) 1,400 72 100 25 Other 34,891 29,584 5,109 4,920 ----------- ----------- ----------- ----------- 1,939,857 1,319,950 256,056 332,087 Less expenses absorbed or waived - (29) (1,106) (62,008) Less expenses paid indirectly (4,588) (5,381) (1,142) (711) ----------- ----------- ----------- ----------- Total expenses 1,935,269 1,314,540 253,808 269,368 ----------- ----------- ----------- ----------- Net Investment Income 8,502,105 3,928,128 1,294,642 1,498,056 ----------- ----------- ----------- ----------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on investments 449,441 537,727 (428,339) (179,506) Net change in unrealized appreciation/depreciation of investments (2,915,393) (644,113) 350,708 (385,309) ----------- ----------- ----------- ----------- Net Realized and Unrealized Loss on Investments (2,465,952) (106,386) (77,631) (564,815) ----------- ----------- ----------- ----------- Net Increase in Net Assets Resulting from Operations $ 6,036,153 $ 3,821,742 $ 1,217,011 $ 933,241 =========== =========== =========== ===========
See accompanying notes 27
Delaware Minnesota Municipal Bond Funds Statements of Changes in Net Assets Delaware Tax-Free Delaware Tax-Free Minnesota Minnesota Fund Insured Fund ----------------- ---------------------------- Six Months Ended Six Months Ended 2/28/02 Year Ended 2/28/02 Year Ended (Unaudited) 8/31/01 (Unaudited) 8/31/01 Increase (Decrease) in Net Assets from Operations: Net investment income $ 8,502,105 $ 18,787,973 $ 3,928,128 $ 12,094,821 Net realized gain on investments 449,441 528,573 537,727 154,815 Net change in unrealized appreciation/depreciation of (2,915,393) 13,453,249 (644,113) 9,873,673 investments -------------- ------------- ------------ ------------ Net increase in net assets resulting from operations 6,036,153 32,769,795 3,821,742 22,123,309 -------------- ------------- ------------ ------------ Dividends and Distributions to Shareholders from: Net investment income: Class A (8,945,262) (17,905,490) (5,517,083) (11,506,724) Class B (344,520) (642,668) (250,699) (462,632) Class C (133,534) (253,954) (86,168) (150,693) -------------- ------------- ------------ ------------ (9,423,316) (18,802,112) (5,853,950) (12,120,049) -------------- ------------- ------------ ------------ Capital Share Transactions: Proceeds from shares sold: Class A 7,394,431 21,679,975 4,159,599 7,800,409 Class B 1,575,050 3,622,057 1,146,513 2,348,412 Class C 1,224,802 1,413,863 972,492 1,506,622 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 5,668,412 11,368,600 3,641,085 7,566,286 Class B 234,787 435,323 178,694 316,903 Class C 107,046 205,712 71,538 122,427 -------------- ------------- ------------ ------------ 16,204,528 38,725,530 10,169,921 19,661,059 -------------- ------------- ------------ ------------ Cost of shares repurchased: Class A (20,284,778) (38,788,316) (13,270,614) (20,549,134) Class B (678,936) (2,099,267) (792,051) (877,557) Class C (568,643) (1,943,800) (549,976) (1,115,364) -------------- ------------- ------------ ------------ (21,532,357) (42,831,383) (14,612,641) (22,542,055) -------------- ------------- ------------ ------------ Decrease in net assets derived from capital share transactions (5,327,829) (4,105,853) (4,442,720) (2,880,996) -------------- ------------- ------------ ------------ Net Increase (Decrease) in Net Assets (8,714,992) 9,861,830 (6,474,928) 7,122,264 Net Assets: Beginning of period 385,001,787 375,139,957 259,713,795 252,591,531 -------------- ------------- ------------ ------------ End of period $ 376,286,795 $ 385,001,787 $253,238,867 $259,713,795 ============== ============= ============ ============
See accompanying notes 28
Delaware Minnesota Municipal Bond Funds Statements of Changes in Net Assets (continued) Delaware Tax-Free Delaware Minnesota Minnesota Intermediate Fund High-Yield Municipal Bond Fund --------------------------- ------------------------------ Six Months Ended Six Months Ended 2/28/02 Year Ended 2/28/02 Year Ended (Unaudited) 8/31/01 (Unaudited) 8/31/01 Increase (Decrease) in Net Assets from Operations: Net investment income $ 1,294,642 $ 2,654,002 $ 1,498,056 $ 3,059,016 Net realized loss on investments (428,339) (9,345) (179,506) (4,113) Net change in unrealized appreciation/depreciation of investments 350,708 1,233,510 (385,309) 1,335,790 ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations 1,217,011 3,878,167 933,241 4,390,693 ----------- ----------- ----------- ----------- Dividends and Distributions to Shareholders from: Net investment income: Class A (1,171,093) (2,451,666) (965,668) (2,014,775) Class B (45,045) (98,148) (315,823) (660,487) Class C (65,414) (107,038) (168,992) (331,930) ----------- ----------- ----------- ----------- (1,281,552) (2,656,852) (1,450,483) (3,007,192) ----------- ----------- ----------- ----------- Capital Share Transactions: Proceeds from shares sold: Class A 3,746,612 7,120,889 1,236,950 3,532,611 Class B 119,179 328,339 556,192 1,371,579 Class C 1,113,662 1,059,454 838,625 914,201 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 902,406 1,845,703 557,849 1,150,062 Class B 25,013 54,650 179,753 398,220 Class C 62,314 98,263 97,026 205,140 ----------- ----------- ----------- ----------- 5,969,186 10,507,298 3,466,395 7,571,813 ----------- ----------- ----------- ----------- Cost of shares repurchased: Class A (4,736,757) (7,506,153) (3,553,527) (6,633,193) Class B (329,873) (376,077) (1,144,819) (2,915,824) Class C (212,449) (516,083) (824,230) (1,082,376) ----------- ----------- ----------- ----------- (5,279,079) (8,398,313) (5,522,576) (10,631,393) ----------- ----------- ----------- ----------- Increase (decrease) in net assets derived from capital share transactions 690,107 2,108,985 (2,056,181) (3,059,580) ----------- ----------- ----------- ----------- Net Increase (Decrease) in Net Assets 625,566 3,330,300 (2,573,423) (1,676,079) Net Assets: Beginning of period 54,590,938 51,260,638 54,354,202 56,030,281 ----------- ----------- ----------- ----------- End of period $55,216,504 $54,590,938 $51,780,779 $54,354,202 =========== =========== =========== ===========
See accompanying notes 29 Financial Highlights Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Fund Class A - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $12.570 $12.120 $12.230 $13.020 $12.910 $12.400 $12.630 Income (loss) from investment operations: Net investment income 0.284 0.615 0.617 0.628 0.431 0.654 0.630 Net realized and unrealized gain (loss) on investments (0.080) 0.450 (0.110) (0.752) 0.136 0.511 (0.230) -------- -------- -------- -------- -------- -------- -------- Total from investment operations 0.204 1.065 0.507 (0.124) 0.567 1.165 0.400 -------- -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.314) (0.615) (0.617) (0.626) (0.435) (0.655) (0.630) Net realized gain on investments -- -- -- (0.040) (0.022) -- -- -------- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.314) (0.615) (0.617) (0.666) (0.457) (0.655) (0.630) -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period $12.460 $12.570 $12.120 $12.230 $13.020 $12.910 $12.400 ======== ======== ======== ======== ======== ======== ======== Total return(1) 1.66% 9.02% 4.39% (1.06%) 4.46% 9.68% 3.33% Ratios and supplemental data: Net assets, end of period (000 omitted) $352,607 $363,033 $355,573 $394,144 $416,113 $417,365 $428,380 Ratio of expenses to average net assets 0.99% 1.00% 1.01% 0.94% 0.89% 0.91% 0.92% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.99% 1.00% 1.06% 0.94% 0.92% 0.95% 0.92% Ratio of net investment income to average net assets 4.60% 5.00% 5.20% 4.89% 5.00% 5.22% 5.13% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.60% 5.00% 5.15% 4.89% 4.97% 5.18% 5.13% Portfolio turnover 15% 10% 35% 17% 13% 19% 28%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.030, an increase in net realized and unrealized gain (loss) per share of $0.030, and a decrease in the ratio of net investment income to average net assets from 5.09% to 4.60%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 30 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Fund Class B - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $12.580 $12.120 $12.240 $13.020 $12.910 $12.400 $12.620 Income (loss) from investment operations: Net investment income 0.238 0.523 0.525 0.527 0.366 0.574 0.560 Net realized and unrealized gain (loss) on investments (0.080) 0.460 (0.120) (0.740) 0.136 0.508 (0.220) ------- ------- ------- ------- ------- ------- ------- Total from investment operations 0.158 0.983 0.405 (0.213) 0.502 1.082 0.340 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.268) (0.523) (0.525) (0.527) (0.370) (0.572) (0.560) Net realized gain on investments -- -- -- (0.040) (0.022) -- -- ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.268) (0.523) (0.525) (0.567) (0.392) (0.572) (0.560) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period $12.470 $12.580 $12.120 $12.240 $13.020 $12.910 $12.400 ======= ======= ======= ======= ======= ======= ======= Total return(1) 1.28% 8.29% 3.50% (1.74%) 3.94% 8.95% 2.83% Ratios and supplemental data: Net assets, end of period (000 omitted) $16,812 $15,927 $13,412 $13,312 $10,246 $8,215 $6,233 Ratio of expenses to average net assets 1.74% 1.75% 1.76% 1.69% 1.64% 1.56% 1.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.75% 1.81% 1.69% 1.67% 1.60% 1.67% Ratio of net investment income to average net assets 3.85% 4.25% 4.45% 4.14% 4.25% 4.57% 4.53% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.85% 4.25% 4.40% 4.14% 4.22% 4.53% 4.36% Portfolio turnover 15% 10% 35% 17% 13% 19% 28%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.030, an increase in net realized and unrealized gain (loss) per share of $0.030, and a decrease in the ratio of net investment income to average net assets from 4.34% to 3.85%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 31 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $12.590 $12.140 $12.250 $13.040 $12.920 $12.410 $12.630 Income (loss) from investment operations: Net investment income 0.237 0.523 0.527 0.536 0.374 0.564 0.540 Net realized and unrealized gain (loss) on investments (0.079) 0.450 (0.110) (0.756) 0.138 0.508 (0.220) ------- ------- ------- ------- ------- ------- ------- Total from investment operations 0.158 0.973 0.417 (0.220) 0.512 1.072 0.320 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.268) (0.523) (0.527) (0.530) (0.370) (0.562) (0.540) Net realized gain on investments -- -- -- (0.040) (0.022) -- -- ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.268) (0.523) (0.527) (0.570) (0.392) (0.562) (0.540) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period $12.480 $12.590 $12.140 $12.250 $13.040 $12.920 $12.410 ======= ======= ======= ======= ======= ======= ======= Total return(1) 1.28% 8.20% 3.60% (1.80%) 4.02% 8.82% 2.64% Ratios and supplemental data: Net assets, end of period (000 omitted) $6,868 $6,042 $6,156 $6,814 $4,914 $3,083 $3,083 Ratio of expenses to average net assets 1.74% 1.75% 1.76% 1.69% 1.64% 1.65% 1.67% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.75% 1.81% 1.69% 1.67% 1.69% 1.67% Ratio of net investment income to average net assets 3.85% 4.25% 4.45% 4.14% 4.25% 4.48% 4.38% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.85% 4.25% 4.40% 4.14% 4.22% 4.44% 4.38% Portfolio turnover 15% 10% 35% 17% 13% 19% 28%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.031, an increase in net realized and unrealized gain (loss) per share of $0.031, and a decrease in the ratio of net investment income to average net assets from 4.34% to 3.85%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 32 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Insured Fund Class A - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $10.900 $10.480 $10.520 $11.050 $10.940 $10.600 $10.730 Income (loss) from investment operations: Net investment income 0.170 0.514 0.507 0.518 0.349 0.533 0.520 Net realized and unrealized gain (loss) on investments 0.002 0.421 (0.041) (0.530) 0.111 0.341 (0.130) -------- -------- -------- -------- -------- -------- -------- Total from investment operations 0.172 0.935 0.466 (0.012) 0.460 0.874 0.390 -------- -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.252) (0.515) (0.506) (0.518) (0.350) (0.534) (0.520) -------- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.252) (0.515) (0.506) (0.518) (0.350) (0.534) (0.520) -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period $10.820 $10.900 $10.480 $10.520 $11.050 $10.940 $10.600 ======= ======= ======= ======= ======= ======= ======= Total return(1) 1.61% 9.14% 4.63% (0.17%) 4.28% 8.49% 3.75% Ratios and supplemental data: Net assets, end of period (000 omitted) $235,339 $242,716 $238,486 $268,507 $283,057 $288,494 $304,877 Ratio of expenses to average net assets 1.00% 0.90% 1.00% 0.94% 0.92% 0.92% 0.92% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.00% 0.90% 1.01% 0.94% 0.94% 0.94% 0.92% Ratio of net investment income to average net assets 3.17% 4.82% 4.93% 4.74% 4.79% 5.01% 4.93% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.17% 4.82% 4.92% 4.74% 4.77% 4.99% 4.93% Portfolio turnover 22% 7% 35% 4% 6% 21% 14%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.082, an increase in net realized and unrealized gain (loss) per share of $0.082, and a decrease in the ratio of net investment income to average net assets from 4.72% to 3.17%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 33 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Insured Fund Class B - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $10.890 $10.470 $10.510 $11.040 $10.930 $10.580 $10.720 Income (loss) from investment operations: Net investment income 0.130 0.434 0.431 0.436 0.294 0.454 0.450 Net realized and unrealized gain (loss) on investments 0.001 0.422 (0.042) (0.529) 0.111 0.348 (0.140) -------- -------- -------- -------- -------- -------- -------- Total from investment operations 0.131 0.856 0.389 (0.093) 0.405 0.802 0.310 -------- -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.211) (0.436) (0.429) (0.437) (0.295) (0.452) (0.450) -------- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.211) (0.436) (0.429) (0.437) (0.295) (0.452) (0.450) -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period $10.810 $10.890 $10.470 $10.510 $11.040 $10.930 $10.580 ======= ======= ======= ======= ======= ======= ======= Total return(1) 1.23% 8.34% 3.86% (0.91%) 3.76% 7.77% 3.03% Ratios and supplemental data: Net assets, end of period (000 omitted) $13,168 $12,732 $10,491 $11,827 $10,374 $8,926 $6,817 Ratio of expenses to average net assets 1.75% 1.65% 1.75% 1.69% 1.67% 1.67% 1.56% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.75% 1.65% 1.76% 1.69% 1.69% 1.69% 1.68% Ratio of net investment income to average net assets 2.42% 4.07% 4.18% 3.99% 4.04% 4.26% 4.29% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.42% 4.07% 4.17% 3.99% 4.02% 4.24% 4.17% Portfolio turnover 22% 7% 35% 4% 6% 21% 14%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.081, an increase in net realized and unrealized gain (loss) per share of $0.081, and a decrease in the ratio of net investment income to average net assets from 3.97% to 2.42%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 34 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Insured Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $10.910 $10.480 $10.520 $11.050 $10.940 $10.600 $10.730 Income (loss) from investment operations: Net investment income 0.130 0.434 0.431 0.438 0.295 0.454 0.440 Net realized and unrealized gain (loss) on investments (0.009) 0.432 (0.042) (0.531) 0.110 0.338 (0.130) -------- -------- -------- -------- -------- -------- -------- Total from investment operations 0.121 0.866 0.389 (0.093) 0.405 0.792 0.310 -------- -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.211) (0.436) (0.429) (0.437) (0.295) (0.452) (0.440) -------- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.211) (0.436) (0.429) (0.437) (0.295) (0.452) (0.440) -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period $10.820 $10.910 $10.480 $10.520 $11.050 $10.940 $10.600 ======= ======= ======= ======= ======= ======= ======= Total return(1) 1.14% 8.42% 3.85% (0.91%) 3.76% 7.66% 2.98% Ratios and supplemental data: Net assets, end of period (000 omitted) $4,372 $4,265 $3,615 $4,253 $3,207 $3,096 $3,126 Ratio of expenses to average net assets 1.75% 1.65% 1.76% 1.69% 1.69% 1.69% 1.68% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.75% 1.65% 1.76% 1.69% 1.69% 1.69% 1.68% Ratio of net investment income to average net assets 2.42% 4.07% 4.18% 3.99% 4.04% 4.26% 4.18% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.42% 4.07% 4.17% 3.99% 4.02% 4.24% 4.18% Portfolio turnover 22% 7% 35% 4% 6% 21% 14%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.081, an increase in net realized and unrealized gain (loss) per share of $0.081, and a decrease in the ratio of net investment income to average net assets from 3.97% to 2.42%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 35 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Intermediate Fund Class A - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $10.580 $10.350 $10.610 $11.160 $11.170 $10.990 $11.140 Income (loss) from investment operations: Net investment income 0.258 0.526 0.538 0.541 0.363 0.535 0.510 Net realized and unrealized gain (loss) on investments (0.012) 0.230 (0.260) (0.550) (0.009) 0.180 (0.150) ------- ------- ------- ------- ------- ------- ------ Total from investment operations 0.246 0.756 0.278 (0.009) 0.354 0.715 0.360 ------- ------- ------- ------- ------- ------- ------ Less dividends and distributions from: Net investment income (0.256) (0.526) (0.538) (0.541) (0.364) (0.535) (0.510) ------- ------- ------- ------- ------- ------- ------ Total dividends and distributions (0.256) (0.526) (0.538) (0.541) (0.364) (0.535) (0.510) ------- ------- ------- ------- ------- ------- ------ Net asset value, end of period $10.570 $10.580 $10.350 $10.610 $11.160 $11.170 $10.990 ======= ======= ======= ======= ======= ======= ======= Total return(1) 2.36% 7.50% 2.77% (0.14%) 3.22% 6.69% 3.46% Ratios and supplemental data: Net assets, end of period (000 omitted) $48,940 $49,089 $46,523 $56,222 $54,281 $57,524 $66,024 Ratio of expenses to average net assets 0.88% 0.90% 0.93% 0.79% 0.80% 0.91% 0.89% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.88% 0.93% 0.95% 0.79% 0.80% 0.95% 0.89% Ratio of net investment income to average net assets 4.93% 5.04% 5.22% 4.91% 4.90% 4.86% 4.69% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.93% 5.01% 5.20% 4.91% 4.90% 4.82% 4.69% Portfolio turnover 42% 24% 9% 13% 14% 21% 28%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. See accompanying notes 36 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Intermediate Fund Class B - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $10.600 $10.370 $10.630 $11.180 $11.170 $10.990 $11.140 Income (loss) from investment operations: Net investment income 0.214 0.438 0.451 0.450 0.301 0.437 0.440 Net realized and unrealized gain (loss) on investments (0.023) 0.232 (0.262) (0.552) (0.009) 0.190 (0.150) ------- ------- ------- ------- ------- ------- ------- Total from investment operations 0.191 0.670 0.189 (0.102) 0.310 0.627 0.290 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.211) (0.440) (0.449) (0.448) (0.300) (0.447) (0.440) ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.211) (0.440) (0.449) (0.448) (0.300) (0.447) (0.440) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period $10.580 $10.600 $10.370 $10.630 $11.180 $11.170 $10.990 ======= ======= ======= ======= ======= ======= ======= Total return(1) 1.83% 6.59% 1.89% (0.98%) 2.82% 5.84% 2.74% Ratios and supplemental data: Net assets, end of period (000 omitted) $2,254 $2,443 $2,380 $2,878 $1,375 $910 $408 Ratio of expenses to average net assets 1.73% 1.75% 1.78% 1.64% 1.65% 1.81% 1.56% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.73% 1.78% 1.80% 1.64% 1.65% 1.85% 1.62% Ratio of net investment income to average net assets 4.08% 4.19% 4.37% 4.06% 4.05% 3.96% 3.99% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.08% 4.16% 4.35% 4.06% 4.05% 3.92% 3.93% Portfolio turnover 42% 24% 9% 13% 14% 21% 28%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. See accompanying notes 37 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Intermediate Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Ended Ended Ended Ended 2/28/02(3) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) 12/31/96 (Unaudited) Net asset value, beginning of period $10.590 $10.360 $10.610 $11.170 $11.170 $10.990 $11.130 Income (loss) from investment operations: Net investment income 0.215 0.437 0.451 0.449 0.301 0.440 0.430 Net realized and unrealized gain (loss) on investments (0.014) 0.233 (0.253) (0.561) (0.001) 0.187 (0.140) ------- ------- ------- ------- ------- ------- ------- Total from investment operations 0.201 0.670 0.198 (0.112) 0.300 0.627 0.290 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.211) (0.440) (0.448) (0.448) (0.300) (0.447) (0.430) ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.211) (0.440) (0.448) (0.448) (0.300) (0.447) (0.430) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period $10.580 $10.590 $10.360 $10.610 $11.170 $11.170 $10.990 ======= ======= ======= ======= ======= ======= ======= Total return(1) 1.93% 6.59% 1.98% (1.08%) 2.73% 5.84% 2.69% Ratios and supplemental data: Net assets, end of period (000 omitted) $4,023 $3,059 $2,358 $2,293 $1,601 $1,512 $1,137 Ratio of expenses to average net assets 1.73% 1.75% 1.78% 1.64% 1.65% 1.77% 1.64% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.73% 1.78% 1.80% 1.64% 1.65% 1.81% 1.64% Ratio of net investment income to average net assets 4.08% 4.19% 4.37% 4.06% 4.05% 4.00% 3.94% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.08% 4.16% 4.35% 4.06% 4.05% 3.96% 3.94% Portfolio turnover 42% 24% 9% 13% 14% 21% 28%
(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. (2) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (3) Ratios have been annualized and total return has not been annualized. See accompanying notes 38 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Minnesota High-Yield Municipal Bond Fund Class A - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Period from Ended Ended Ended Ended 6/4/96(1) 2/28/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(4) 12/31/97(3) to 12/31/96 (Unaudited) Net asset value, beginning of period $9.900 $9.650 $10.210 $10.810 $10.650 $10.180 $10.000 Income (loss) from investment operations: Net investment income 0.291 0.581 0.576 0.583 0.392 0.643 0.350 Net realized and unrealized gain (loss) on investments (0.098) 0.243 (0.564) (0.603) 0.170 0.463 0.180 ------- ------- ------- ------- ------- ------- ------- Total from investment operations 0.193 0.824 0.012 (0.020) 0.562 1.106 0.530 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.283) (0.574) (0.572) (0.580) (0.402) (0.636) (0.350) ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.283) (0.574) (0.572) (0.580) (0.402) (0.636) (0.350) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period $9.810 $9.900 $ 9.650 $10.210 $10.810 $10.650 $10.180 ======= ======= ======= ======= ======= ======= ======= Total return(2) 1.99% 8.84% 0.32% (0.27%) 5.37% 11.26% 5.40% Ratios and supplemental data: Net assets, end of period (000 omitted) $32,526 $34,615 $35,689 $41,813 $33,296 $19,017 $6,068 Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.57% 0.40% 0.09% 0.24% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.99% 0.94% 1.14% 1.07% 1.20% 1.24% 1.25% Ratio of net investment income to average net assets 5.98% 6.01% 5.99% 5.46% 5.50% 6.16% 5.78% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 5.74% 5.82% 5.60% 4.96% 4.70% 5.01% 4.77% Portfolio turnover 21% 13% 8% 35% 7% 23% 15%
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. (3) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (4) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.002, an increase in net realized and unrealized gain (loss) per share of $0.002, and a decrease in the ratio of net investment income to average net assets from 6.02% to 5.98%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 39 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Minnesota High-Yield Municipal Bond Fund Class B - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Period from Ended Ended Ended Ended 6/12/96(1) 2/28/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(4) 12/31/97(3) to 12/31/96 (Unaudited) Net asset value, beginning of period $9.910 $9.650 $10.210 $10.810 $10.660 $10.190 $ 9.780 Income (loss) from investment operations: Net investment income 0.255 0.509 0.504 0.507 0.343 0.557 0.290 Net realized and unrealized gain (loss) on investments (0.100) 0.248 (0.570) (0.604) 0.159 0.470 0.410 ------- ------- ------- ------- ------- ------- ------- Total from investment operations 0.155 0.757 0.066 (0.097) 0.502 1.027 0.700 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.245) (0.497) (0.494) (0.503) (0.352) (0.557) (0.290) ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.245) (0.497) (0.494) (0.503) (0.352) (0.557) (0.290) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period $9.820 $9.910 $ 9.650 $10.210 $10.810 $10.660 $10.190 ======= ======= ======= ======= ======= ======= ======= Total return(2) 1.59% 8.09% (0.49%) (0.99%) 4.77% 10.41% 7.29% Ratios and supplemental data: Net assets, end of period (000 omitted) $12,400 $12,932 $13,743 $15,814 $13,351 $8,201 $2,738 Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.32% 1.15% 0.85% 0.95% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.69% 1.89% 1.82% 1.95% 2.00% 2.00% Ratio of net investment income to average net assets 5.23% 5.26% 5.24% 4.71% 4.75% 5.40% 5.14% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.99% 5.07% 4.85% 4.21% 3.95% 4.25% 4.09% Portfolio turnover 21% 13% 8% 35% 7% 23% 15%
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. (3) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (4) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.002, an increase in net realized and unrealized gain (loss) per share of $0.002, and a decrease in the ratio of net investment income to average net assets from 5.27% to 5.23%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 40 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Minnesota High-Yield Municipal Bond Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Eight Months Year Period from Ended Ended Ended Ended 6/12/96(1) 2/28/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(4) 12/31/97(3) to 12/31/96 (Unaudited) Net asset value, beginning of period $9.910 $9.650 $10.210 $10.810 $10.650 $10.180 $ 9.990 Income (loss) from investment operations: Net investment income 0.255 0.509 0.504 0.505 0.340 0.572 0.300 Net realized and unrealized gain (loss) on investments (0.100) 0.248 (0.570) (0.602) 0.170 0.455 0.190 ------- ------- ------- ------- ------- ------- ------- Total from investment operations 0.155 0.757 0.066 (0.097) 0.510 1.027 0.490 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income (0.245) (0.497) (0.494) (0.503) (0.350) (0.557) (0.300) ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions (0.245) (0.497) (0.494) (0.503) (0.350) (0.557) (0.300) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period $9.820 $9.910 $9.650 $10.210 $10.810 $10.650 $10.180 ======= ======= ======= ======= ======= ======= ======= Total return(2) 1.59% 8.09% (0.49%) (0.99%) 4.87% 10.41% 5.02% Ratios and supplemental data: Net assets, end of period (000 omitted) $6,854 $6,807 $6,599 $7,515 $5,165 $3,178 $900 Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.32% 1.15% 0.83% 0.99% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.74% 1.69% 1.89% 1.82% 1.95% 1.98% 2.00% Ratio of net investment income to average net assets 5.23% 5.26% 5.24% 4.71% 4.75% 5.42% 4.90% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.99% 5.07% 4.85% 4.21% 3.95% 4.27% 3.89% Portfolio turnover 21% 13% 8% 35% 7% 23% 15%
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. (3) Effective May 1, 1997, the Fund's shareholders approved a change of investment advisor from Voyageur Fund Managers, Inc to Delaware Management Company. (4) Ratios have been annualized and total return has not been annualized. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premium and discounts on debt securities as an adjustment to interest income. The effect of these changes for the period ended February 28, 2002 was a decrease in net investment income per share of $0.002, an increase in net realized and unrealized gain (loss) per share of $0.002, and a decrease in the ratio of net investment income to average net assets from 5.27% to 5.23%. Per share data for periods prior to September 1, 2001 have not been restated to reflected this change in accounting. See accompanying notes 41 Notes to Financial Statements Voyageur Mutual Funds is organized as a Delaware business trust and offers six series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free New York Fund. Voyageur Insured Funds is organized as a Delaware business trust and offers two series: Delaware Tax-Free Arizona Insured Fund and Delaware Tax-Free Minnesota Insured Fund. Voyageur Tax-Free Funds is organized as a Delaware business trust and offers the Delaware Tax-Free Minnesota Fund. Voyageur Intermediate Tax-Free Funds is organized as a Delaware business trust and offers the Delaware Tax-Free Minnesota Intermediate Fund. These financial statements and related notes pertain to Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond Fund (each a "Fund" or, collectively, the "Funds"). The above Trusts are open-end investment companies. The Funds are considered non-diversified under the Investment Company Act of 1940, as amended. The Funds offer Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge of up to 3.75% for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and with a front-end sales charge of up to 2.75% for Delaware Tax-Free Minnesota Intermediate Fund. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and that declines from 2% to zero for Delaware Tax-Free Minnesota Intermediate Fund, depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund and Delaware Minnesota High-Yield Municipal Bond Fund and five years after purchase for Delaware Tax-Free Minnesota Intermediate Fund. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. The investment objective of Delaware Tax-Free Minnesota Fund and Delaware Tax-Free Minnesota Insured Fund is to seek as high a level of current income exempt from federal income tax and Minnesota state personal income tax, as is consistent with preservation of capital. The investment objective of Delaware Tax-Free Minnesota Intermediate Fund is to seek to provide investors with preservation of capital and, secondarily, current income exempt from federal income tax and Minnesota state personal income tax by maintaining a weighted average portfolio maturity of 10 years or less. The investment objective of Delaware Minnesota High-Yield Municipal Bond Fund is to seek as high a level of current income exempt from federal income tax and Minnesota state personal income tax, primarily through investment in medium-and lower-grade municipal obligations. Delaware Minnesota Municipal Bond Funds February 28, 2002 (Unaudited) 1. Significant Accounting Policies The following accounting policies are in accordance with accounting principles generally accepted in the United States and are consistently followed by the Funds. Security Valuation -- Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of each Fund's Board of Trustees. Federal Income Taxes - Each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting - Investment income and common expenses are allocated to the classes of the Funds on the basis of "settled shares" of each class in relation to the net assets of the Funds. Realized and unrealized gain (loss) on investments are allocated to the various classes of the Funds on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other - Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Original issue discounts and market premiums are amortized to interest income over the lives of the respective securities. Each Fund declares dividends daily from net investment income and pays such dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. Change in Accounting Principle - As required, effective September 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies (the "Guide") and began amortizing all discount or premium on debt securities. Prior to September 1, 2001, the Funds did not amortize premium or market discount, which conformed to the Series' policy for federal income tax purposes. The cumulative effect of this accounting change had no impact on total assets of the Funds, but resulted in the following changes listed below, based on securities held by the Funds on September 1, 2001. 42 Delaware Minnesota Municipal Bond Funds Notes to Financial Statements (continued) 1. Significant Accounting Policies (continued)
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- Cost of securities $ 985,187 $2,307,736 -- $27,585 Net unrealized appreciation (depreciation) (985,187) (2,307,736) -- (27,585)
The effect of these changes for the period ended February 28, 2002, were as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- Net investment income $ 39,737 $ 365,876 -- $ 16,336 Net unrealized appreciation (depreciation) 74,885 (406,973) -- (11,550) Net realized gains (losses) (114,622) 41,097 -- (4,786)
The statements of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in accounting. Certain expenses of the Funds are paid through commission arrangements with brokers. These transactions are done subject to best execution. In addition, the Funds may receive earnings credits from their custodian when positive cash balances are maintained, which are used to offset custody fees. The expenses paid under the above arrangements are included in their respective expense captions in the Statements of Operations with the corresponding expense offset shown as "expenses paid indirectly". The amounts of these expenses for the period ended February 28, 2002 were as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- Commission reimbursements $4,506 $3,017 $645 $631 Earnings credits 82 2,364 497 80
43 Delaware Minnesota Municipal Bond Funds Notes to Financial Statements (continued) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- On the first $500 million 0.550% 0.500% 0.500% 0.550% On the next $500 million 0.500% 0.475% 0.475% 0.500% On the next $1.5 billion 0.450% 0.450% 0.450% 0.450% In excess of $2.5 billion 0.425% 0.425% 0.425% 0.425%
DMC has elected 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, and extraordinary expenses, do not exceed specified percentages of average daily net assets through October 31, 2002 as shown below:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- The operating expense limitation as a percentage of average daily net assets (per annum) 0.75% 0.75% 0.75% 0.50%
The Funds have engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC, to provide dividend disbursing, transfer agent, accounting and administration services. Each Fund pays DSC a monthly fee based on the number of shareholder accounts, shareholder transactions and average net assets, subject to certain minimums. Pursuant to a distribution agreement, each Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual fee not to exceed 0.25% of the average daily net assets of the Class A shares for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond Fund and 1.00% of the average daily net assets of the Class B and C shares for all Funds. The Board of Trustees has set the fee at an annual rate of 0.15% of the Class A shares' average daily net assets for Delaware Tax-Free Minnesota Intermediate Fund. 44 Delaware Minnesota Municipal Bond Funds Notes to Financial Statements (continued) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued) At February 28, 2002, each Fund had liabilities payable to affiliates as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- Investment management fee payable to DMC $38,787 $97,081 $11,178 $12,284 Dividend disbursing, transfer agent fees accounting and other expenses payable to DSC 31,842 21,432 4,934 4,689 Other expenses payable to DMC and affiliates 81,319 73,333 3,684 1,695
For the period ended February 28, 2002, DDLP earned commissions on sales of Class A shares for each Fund as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- $21,150 $13,068 $3,904 $2,706
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Funds. These officers and trustees are paid no compensation by the Funds. 3. Investments For the period ended February 28, 2002, the Funds made purchases and sales of investment securities other than short-term investments as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- Purchases $28,249,532 $31,931,151 $11,101,494 $5,354,976 Sales 27,481,196 27,193,671 10,902,432 8,430,348
45 Delaware Minnesota Municipal Bond Funds Notes to Financial Statements (continued) 3. Investments (continued) At February 28, 2002, the cost of investments for federal income tax purposes approximates the cost for book purposes. At February 28, 2002, the cost of investments and unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Fund Fund Fund Bond Fund --------- --------- --------- --------- Cost of investments $353,367,519 $244,174,106 $54,195,224 $53,781,766 ============ ============ =========== =========== Aggregate unrealized appreciation $ 21,810,254 $ 17,048,804 $ 1,791,939 $ 644,804 Aggregate unrealized depreciation (3,957,672) -- (487,597) (3,659,621) ------------ ------------ ----------- ----------- Net unrealized appreciation (depreciation) $ 17,852,582 $ 17,048,804 $ 1,304,342 ($3,014,817) ============ ============ =========== ===========
For federal income tax purposes, the Funds had accumulated capital losses as of February 28, 2002, which may be carried forward and applied against future capital gains. Such capital loss carryforward amounts will expire as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Year of Expiration Fund Fund Fund Bond Fund - ------------------ --------- --------- --------- --------- 2003 $ -- $5,327,280 $ -- $ -- 2004 -- 572,208 43,982 6,809 2005 -- -- -- 4,334 2006 -- -- -- 648 2007 -- -- -- 369 2008 485,497 589,183 423,683 201,822 2009 -- 114,085 1,440,485 1,267,552 -------- ---------- ---------- ---------- Total $485,497 $6,602,756 $1,908,150 $1,481,534 -------- ---------- ---------- ----------
46 Delaware Minnesota Municipal Bond Funds Notes to Financial Statements (continued) 4. Capital Shares Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Minnesota Minnesota Fund Insured Fund ----------------- ----------------- Six Months Six Months Ended Year Ended Ended Year Ended 2/28/02 8/31/01 2/28/02 8/31/01 (Unaudited) (Unaudited) Shares sold: Class A 594,935 1,770,989 386,199 731,060 Class B 126,818 294,861 106,482 219,232 Class C 98,461 113,913 90,576 140,840 Shares issued upon reinvestment of dividends and distributions: Class A 456,782 925,446 338,209 709,319 Class B 18,909 35,392 16,609 29,740 Class C 8,610 16,718 6,639 11,473 ---------- ---------- ---------- ---------- 1,304,515 3,157,319 944,714 1,841,664 ========== ========== ========== ========== Shares repurchased: Class A (1,631,296) (3,162,433) (1,230,339) (1,935,487) Class B (63,550) (170,358) (73,604) (82,102) Class C (36,667) (158,031) (51,014) (106,076) ---------- ---------- ---------- ---------- (1,731,513) (3,490,822) (1,354,957) (2,123,665) ---------- ---------- ---------- ---------- Net decrease (426,998) (333,503) (410,243) (282,001) ========== ========== ========== ==========
47 Delaware Minnesota Municipal Bond Funds Notes to Financial Statements (continued) 4. Capital Shares (continued)
Delaware Tax-Free Delaware Minnesota Minnesota High-Yield Intermediate Fund Municipal Bond Fund ----------------- ------------------- Six Months Six Months Ended Year Ended Ended Year Ended 2/28/02 8/31/01 2/28/02 8/31/01 (Unaudited) (Unaudited) Shares sold: Class A 356,368 687,482 125,756 365,212 Class B 11,332 31,419 56,748 141,565 Class C 105,737 101,324 85,467 94,018 Shares issued upon reinvestment of dividends and distributions: Class A 85,809 177,275 56,928 118,907 Class B 2,374 5,242 18,318 41,137 Class C 5,921 9,426 9,887 21,196 ---------- ---------- ---------- ---------- 567,541 1,012,168 353,104 782,035 ========== ========== ========== ========== Shares repurchased: Class A (449,388) (721,185) (362,913) (687,404) Class B (31,192) (35,849) (117,269) (301,645) Class C (20,179) (49,584) (84,304) (112,047) ---------- ---------- ---------- ---------- (500,759) (806,618) (564,486) (1,101,096) ---------- ---------- ---------- ---------- Net decrease 66,782 205,550 (211,382) (319,061) ========== ========== ========== ==========
5. Line of Credit Each Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $202,300,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Funds had no amounts outstanding as of February 28, 2002 or at any time during the period. 6. Credit and Market Risk The Funds concentrate their investments in securities issued by municipalities, mainly in Minnesota. The value of these investments may be adversely affected by new legislation within the state, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. 48 Delaware Investments Family of Funds - -------------------------------------------------------------------------------- Complete information on any fund offered by Delaware Investments can be found in each fund's current prospectus. Prospectuses for all funds offered by Delaware Investments are available from your financial advisor. Please read the prospectus carefully before you invest or send money. - -------------------------------------------------------------------------------- Growth-Equity Group Delaware American Services Fund Delaware Growth Opportunities Fund Delaware Select Growth Fund Delaware Small Cap Growth Fund Delaware Technology and Innovation Fund Delaware Trend Fund Delaware U.S. Growth Fund Value-Equity Group Delaware Decatur Equity Income Fund Delaware Growth and Income Fund Delaware REIT Fund Delaware Small Cap Value Fund International Group (DIAL-Delaware International Advisers Ltd.) Delaware Emerging Markets Fund Delaware International Small Cap Value Fund Delaware International Value Equity Fund (formerly Delaware International Equity Fund) Blend Mutual Funds Delaware Balanced Fund Delaware Core Equity Fund (formerly Delaware Growth Stock Fund) Delaware Devon Fund Delaware Social Awareness Fund Delaware Foundation Funds Balanced Portfolio Growth Portfolio Income Portfolio Fixed Income Group Corporate and Government Delaware American Government Bond Fund Delaware Corporate Bond Fund Delaware Delchester Fund Delaware Extended Duration Bond Fund Delaware High-Yield Opportunities Fund Delaware Limited-Term Government Fund Delaware Strategic Income Fund Money Market Delaware Cash Reserve Fund Delaware Tax-Free Money Fund Municipal (National Tax-Exempt) Delaware National High-Yield Municipal Bond Fund Delaware Tax-Free Insured Fund Delaware Tax-Free USA Fund Delaware Tax-Free USA Intermediate Fund Municipal (State-Specific Tax-Exempt) Delaware Tax-Free Arizona Fund Delaware Tax-Free Arizona Insured Fund Delaware Tax-Free California Fund Delaware Tax-Free California Insured Fund Delaware Tax-Free Colorado Fund Delaware Tax-Free Florida Fund Delaware Tax-Free Florida Insured Fund Delaware Tax-Free Idaho Fund Delaware Minnesota High-Yield Municipal Bond Fund Delaware Tax-Free Minnesota Fund Delaware Tax-Free Minnesota Insured Fund Delaware Tax-Free Minnesota Intermediate Fund Delaware Tax-Free Missouri Insured Fund Delaware Tax-Free New York Fund Delaware Tax-Free Oregon Insured Fund Delaware Tax-Free Pennsylvania Fund Delaware Investments(SM) - -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free USA Fund, Delaware Tax-Free insured Fund, Delaware Tax-Free USA Intermediate Fund, and Delaware National High-Yield Municipal Bond Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of each Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in each Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Board of Trustees Affiliated Officers Contact Information Charles E. Haldeman, Jr. Walter P. Babich Chairman Investment Manager Board Chairman Delaware Investments Family of Funds Delaware Management Company Citadel Constructors, Inc. Philadelphia, PA Philadelphia, PA King of Prussia, PA William E. Dodge International Affiliate David K. Downes Executive Vice President and Delaware International Advisers Ltd. President and Chief Executive Officer Chief Investment Officer, Equity London, England Delaware Investments Family of Funds Delaware Investments Family of Funds Philadelphia, PA Philadelphia, PA National Distributor Delaware Distributors, L.P. John H. Durham Jude T. Driscoll Philadelphia, PA Private Investor Executive Vice President and Gwynedd Valley, PA Head of Fixed Income Shareholder Servicing, Dividend Delaware Investments Family of Funds Disbursing and Transfer Agent Anthony D. Knerr Philadelphia, PA Delaware Service Company, Inc. Consultant 2005 Market Street Anthony Knerr & Associates New York, NY Richard J. Flannery Philadelphia, PA 19103-7094 President and Chief Executive Officer Ann R. Leven Delaware Distributors, L.P. For Shareholders Former Treasurer National Gallery of Art Philadelphia, PA 800 523-1918 Washington, DC For Securities Dealers and Financial Thomas F. Madison Institutions Representatives Only President and Chief Executive Officer 800 362-7500 MLM Partners, Inc. Minneapolis, MN Website www.delawareinvestments.com Janet L. Yeomans Vice President and Treasurer 3M Corporation St. Paul, MN
(5813) Printed in the USA SA-MNALL [2/02] BUR 4/02 (J8022/EXP: 10/02) -----END PRIVACY-ENHANCED MESSAGE-----