-----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, ABHQ/ydGVorPlBmUVSZrvWCA1Wq54afkSlgrKau/mesZhY9cXFF/hfFxwBezS2jU TwwYYyYZxmQ7pbTkCen/WA== 0000950116-02-002428.txt : 20021031 0000950116-02-002428.hdr.sgml : 20021031 20021031121559 ACCESSION NUMBER: 0000950116-02-002428 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020831 FILED AS OF DATE: 20021031 EFFECTIVENESS DATE: 20021031 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: 02804471 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 MINNESOTA TAX FREE FUNDS INC DATE OF NAME CHANGE: 19910226 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR TAX FREE FUNDS INC DATE OF NAME CHANGE: 19920703 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: 02804472 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: 02804473 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: 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 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR INTERMEDIATE TAX FREE FUNDS INC DATE OF NAME CHANGE: 19920703 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: 02804474 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 MINNESOTA INSURED FUNDS INC DATE OF NAME CHANGE: 19910926 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR INSURED FUNDS INC DATE OF NAME CHANGE: 19920703 N-30D 1 n30d.txt N-30D Delaware Investments(SM) - -------------------------------------- A member of Lincoln Financial Group(R) (Fixed Income Artwork) FIXED INCOME Annual 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) Table of Contents Letter to Shareholders 1 Portfolio Management Review 3 New at Delaware 8 Performance Summary Delaware Tax-Free Minnesota Fund 9 Delaware Tax-Free Minnesota Insured Fund 10 Delaware Tax-Free Minnesota Intermediate Fund 11 Delaware Minnesota High-Yield Municipal Bond Fund 12 Financial Statements: Statements of Net Assets 13 Statements of Operations 28 Statements of Changes in Net Assets 29 Financial Highlights 31 Notes to Financial Statements 43 Report of Independent Auditors 51 Board of Trustees/Officers 52 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. Delaware Investments Powered by Research At Delaware Investments, our long history of asset management has taught us the importance of two key principles: o Astute security selection is essential when seeking a performance advantage. o Superior fundamental research is the key to astute security selection. Based on these core principles, we have built an organization that is Powered by Research. Capabilities in all major asset classes Our proprietary research is reflected in our five distinct Centers of Expertise, each focused on a specific investment discipline. o U.S. growth equity o U.S. value equity o U.S. fixed income o International and global o U.S. structured-approach equity products The Independent Research Advantage Each Center of Expertise conducts its own research, which drives the portfolio construction process. This direct and distinct approach yields a number of key advantages. o The research is performed directly by the professionals best equipped to shape it and evaluate its implications, and who are held accountable for the investment results. o The research leads to a truly distinct managerial approach - rather than a model where all management teams follow the recommendations of the same analysts. These advantages put our managers in a strong position to uncover market inefficiencies and underappreciated securities that represent the most rewarding opportunities in their asset class. A Commitment to Our Investors Our commitment to experience, performance and service has earned us the confidence of discriminating investors. Experience Delaware Investments' 177 seasoned investment professionals -- of whom 119 (67%) are analysts -- average 12 years of experience, bringing a wealth of knowledge and expertise to the management team. Performance Delaware Investments strives to deliver consistent, reliable, and dependable performance in all asset classes. The management teams aim for solid performance over the long term, incorporating risk assessment in their processes and avoiding those strategies aimed at short-term gains or generally associated with volatility. Service With Delaware Investments, you can count on quick and courteous service, easy access to account information, and hassle-free transaction processing. Delaware Minnesota Municipal Bond Funds September 10, 2002 Letter to Shareholders Recap of Events As we head into the fall, we are impressed by the resilience of the U.S. economy. Despite the repercussions of September 11 and a series of disheartening corporate scandals over the past 12 months, the economy has continued to show signs of recovery from a recession that recent government data suggests was worse than earlier depicted. The U.S. gross domestic product (GDP), often considered a snapshot of the entire economy, has posted three consecutive quarters of growth. While it's true that the gains have been modest, we think it's important to consider how much worse the recession might have been had the economy not displayed such resiliency. Considering the collapse in capital spending that occurred when the business cycle bottomed, we think it may take some time for the economy to fully establish a base from which it can launch a more significant expansion. With prospects for a growing economy ahead of us, we would like to review areas of financial strength in the 12-month period just passed, the biggest story in our opinion being the bond market. Interest rates help to drive bond performance, and since 2001 interest rates have moved substantially lower. Short-term rates have declined significantly, no doubt due to the Federal Reserve's 11 reductions of the fed funds target rate since early 2001. Longer-term rates, which are typically higher due to added future uncertainties, also moved lower, but to a lesser degree. The net result was that investors frequently experienced a measure of capital appreciation from their bonds, while enjoying the steady income flows that bonds also offer. Not surprising, we witnessed a wave of capital flows into bond funds this past year. Driven by a variety of factors -- including unattractive money market yields, diminished expectations for stock returns, and simple risk aversion, investors re-allocated $73.9 billion into bond funds during the first half of 2002 (Source: AMG Data Services). " TO MEET RISING DEMAND, THE ISSUANCE OF NEW BONDS HAS BEEN DRAMATIC." To meet rising demand, the issuance of new bonds has been dramatic. For municipal securities, the number of such offerings reached a record setting $218.7 billion for the first eight months of 2002. This figure represents a greater than 20 percent increase over the same eight-month period in 2001. It also has served to keep municipal bond yields meaningfully high in relation to U.S. Treasury bonds (Source: Salomon Smith Barney).
Total Returns For the period ended August 31, 2002 One Year Delaware Tax-Free Minnesota Fund -- Class A Shares +5.54% Delaware Tax-Free Minnesota Insured Fund -- Class A Shares +5.25% Lipper Minnesota Municipal Debt Funds Average (50 funds) +4.97% Delaware Tax-Free Minnesota Intermediate Fund -- Class A Shares +6.34% Lipper Other States Intermediate Municipal Debt Funds Average (96 funds) +5.24% Delaware Minnesota High-Yield Municipal Bond Fund -- Class A Shares +6.74% Lipper High-Yield Municipal Debt Funds Average (72 funds) +3.24% - -------------------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index +6.24% Lehman Brothers Insured Municipal Bond Index +6.43% Lehman Brothers Five-Year Municipal Bond Index +6.69% - --------------------------------------------------------------------------------------
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 and a description of the indexes can be found on pages 9 through 12. 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 Market Outlook We believe that the U.S. economy will continue to grow for the remainder of 2002. We also believe the Federal Reserve is likely to keep the fed funds target rate low for the near term. A continuation of low rates could likely bode well for your Fund over the short run. The consumer continues to offer buoyancy to the economy, and corporate productivity gains could contribute to an increase in future earnings. Still, we encourage investors to be patient about economic renewal. The business community appears to have become more risk-averse -- a stance which may well prove useful in the long run, but which also portends a gradual recovery. At the same time, we believe current events are weighing on the economy and on investors as well. With the possibility of U.S. action against Iraq, and with tensions lingering in the Middle East, outside events continue to play a large role in the current investment setting. The past fiscal year has caused many investors to reassess their risk tolerance. There are a number of ways to prepare today for the possibility of continued market volatility. For starters, diversifying your investment portfolio is a strategy that stands out as imperative, especially with the stock market struggling to find its legs. We encourage consulting with a financial advisor to assure sufficient diversification in a portfolio targeted to meet specific goals. Given their income production and ability to moderate overall portfolio volatility, we are confident that Delaware Investments' municipal bond funds can maintain a meaningful place in a balanced portfolio structure. Thank you for your continued confidence in, and commitment to, Delaware Investments. Sincerely, /s/ David K. Downes David K. Downes President and Chief Executive Officer, Delaware Investments Family of Funds 2 Delaware Minnesota Municipal Bond Funds September 10, 2002 Portfolio Management Review Fund Managers Mitchell L. Conery Senior Portfolio Manager Patrick P. Coyne Senior Portfolio Manager The Funds' Results The past 12 months were a trying period for the economy and the financial markets. The U.S. economy, after years of strong growth, fell into recession during 2001. Although economic weakness began prior to the start of our fiscal year, some of the economic sluggishness was attributable to the after effects of September 11. Through the recession, and during the recovery to follow, strong consumer spending kept the economy aloft, even as business investment continued to lag. Thanks to the Federal Reserve's 11 interest rate cuts in 2001, consumers quickly took advantage of opportunities to buy automobiles and refinance mortgages at low rates. As the fiscal year came to a close on August 31, a somewhat tepid economic rebound seemed to be in place, with the Federal Reserve keeping short-term interest rates low and monitoring the economy for signs of any further weakness. Despite the economy's overall progress, stocks moved steadily downward during the fiscal year. Poor performance in the equity markets stood in contrast to the relatively strong results in the municipal bond market. This was especially true for bonds with shorter maturities and strong credit quality. The declining interest rate environment led to sharply falling yields and rising prices for shorter-term bonds (a bond's yield moves in the opposite direction of its price), while longer-term bonds, by comparison, continued to offer higher yields in general. Besides spurring consumer spending, low interest rates also helped generate a healthy supply of new municipal securities as 2002 progressed (Source: Moody's Investors Service). The main source of this new supply was refunding activity, as lower borrowing costs enticed issuers to refinance outstanding debt. In addition, many issuers were eager to initiate new projects while rates were low. For the first eight months of 2002, national municipal bond issuance was on a record pace of almost $220 billion, a 21 percent increase over the same period one year earlier. In Minnesota, the rate of new issuance was even greater. Year-to-date in 2002, issuance was up 46 percent over last year through August 31, placing the state 14 out of 50 in total issuance for the period (Source: Moody's Investors Service). Throughout the past year, Minnesota's economy continued to benefit from its diverse economic base and limited indebtedness. Still, the state's budget was weighed down by the same economic pressures felt nationwide, and the state legislature managed to balance the budget only through a one-time use of reserves. The State of Minnesota was able to maintain its AAA credit rating, but credit analysts began watching for any unfavorable change in the government's fiscal situation. Delaware Tax-Free Minnesota Fund Delaware Tax-Free Minnesota Fund returned +5.54% (Class A shares at net asset value with distributions reinvested) for the 12-month period ended August 31, 2002. This performance outpaced that of its peer group, the Lipper Minnesota Municipal Debt Funds Average, which returned +4.97% during the same period. The Fund's benchmark, the Lehman Brothers Municipal Bond Index, returned +6.24% for the period. The Fund's dividend payments during the last 12 months were exempt from Minnesota state and federal taxes.+ We attribute the Fund's stronger performance in part to a shorter-than-average duration, as well as to a significant allocation to high-quality municipal bonds, which were strong performers during the period. In the 12 months between August 31, 2001 and August 31, 2002, the Fund's duration declined from 7.33 years to 6.01 years, indicating the Fund's declining sensitivity to interest rate changes. The decline in duration resulted from falling interest rates, as well as from our general reluctance to invest in longer-term securities given the current interest rate environment. Because we believed that future rate increases were likely, we preferred to let the Fund's duration float downward with the market. For high-coupon bonds that were approaching their call dates (the date at which an issuer may redeem its bonds) + A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. 3 we sought to delay reinvestment to take advantage of a better rate environment down the road. Throughout the period, we also sought to improve the Fund's overall credit quality, a step we thought was particularly prudent given the slowing economy and recent market volatility. During the past 12 months, we reduced the Fund's position in non-rated municipal bonds, from 14.7% of net assets at the beginning of the period to 11.7% at its end. Reflecting our concerns about the degree of credit risk in the portfolio, we invested most of the proceeds in higher-rated bonds. ================================================================================ DELAWARE TAX-FREE MINNESOTA FUND PORTFOLIO CHARACTERISTICS As of August 31, 2002 - -------------------------------------------------------------------------------- Current SEC 30-Day Yield* 3.98% - -------------------------------------------------------------------------------- Average Duration** 6.01 years - -------------------------------------------------------------------------------- Average Maturity*** 7.26 years - -------------------------------------------------------------------------------- Average Credit Quality A - -------------------------------------------------------------------------------- * For Class A shares measured according to Securities and Exchange Commission (SEC) guidelines. Current SEC 30-day yield as of August 31, 2002 for Class B and Class C shares was 3.38%. ** Duration is a common measure of a bond or bond fund's sensitivity to interest rate changes. The longer the duration, the more sensitive the bond or bond fund is to changes in interest rates. *** Average Maturity is the average time remaining until scheduled repayment by issuers of portfolio securities. ================================================================================ Delaware Tax-Free Minnesota Insured Fund For the 12 months ended August 31, 2002, Delaware Tax-Free Minnesota Insured Fund had a total return of +5.25% (Class A shares at net asset value with distributions reinvested). This result surpassed the performance of the Fund's peer group, the Lipper Minnesota Municipal Debt Funds Average, which returned +4.97% during the same period. The Lehman Brothers Insured Municipal Bond Index returned +6.43% for the period. The Fund's dividend payments during the past 12 months were exempt from Minnesota state and federal taxes.+ Several factors explain the Fund's strong performance compared to its Lipper peer group. First, the Fund benefited from having a relatively high proportion of its assets invested in securities with shorter maturities. These were among the best performers in the municipal market during the past 12 months. Another factor helping performance was our decision to invest a modest portion of the Fund's assets in non-insured investment-grade municipal bonds. These tended to offer higher yields than their insured counterparts. As of the end of the reporting period, approximately seven percent of the Fund's assets was invested in non-insured investment-grade securities (the Fund may invest up to 20 percent of its assets in non-insured bonds). We did not extend this strategy to include non-investment-grade bonds because of our ongoing concerns about credit in general, and because the Fund has a conservative profile. Our overwhelming focus during the period continued to be on insured bonds, a strategy we believed was especially prudent given recent economic uncertainty. Going forward, we expect to continue to review select opportunities in the non-insured sector, though we plan to keep the Fund's weighting in this area at no more than 10 percent. Our goal is to invest in high-quality opportunities that provide added yield without introducing excess credit risk. Throughout the past year, our management strategy was to make relatively few trades. With interest rates declining, we opted to await a more favorable rate environment and hold onto securities that were nearing their call dates. Because we anticipate a modest increase in interest rates down the road, we believe that delaying reinvestment might allow us to pick up more attractive yields in the future. + A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. 4 ================================================================================ DELAWARE TAX-FREE MINNESOTA INSURED FUND PORTFOLIO CHARACTERISTICS As of August 31, 2002 - -------------------------------------------------------------------------------- Current SEC 30-Day Yield* 3.32% - -------------------------------------------------------------------------------- Average Duration** 5.46 years - -------------------------------------------------------------------------------- Average Maturity*** 6.27 years - -------------------------------------------------------------------------------- Average Credit Quality AAA - -------------------------------------------------------------------------------- * For Class A shares measured according to Securities and Exchange Commission (SEC) guidelines. Current SEC 30-day yield as of August 31, 2002 for Class B and Class C shares was 2.70%. ** Duration is a common measure of a bond or bond fund's sensitivity to interest rate changes. The longer the duration, the more sensitive the bond or bond fund is to changes in interest rates. *** Average Maturity is the average time remaining until scheduled repayment by issuers of portfolio securities. ================================================================================ Delaware Tax-Free Minnesota Intermediate Fund Delaware Tax-Free Minnesota Intermediate Fund returned +6.34% during the 12 months ended August 31, 2002 (Class A shares at net asset value with distributions reinvested). By comparison, the Fund's peer group, the Lipper Other States Intermediate Municipal Debt Funds Average, returned just +5.24% during the same period. The Fund's benchmark, the Lehman Brothers Five-Year Municipal Bond Index, returned +6.69% for the period. We attribute the Fund's strong relative performance to a high concentration of shorter-maturity investments, which performed especially well during the past year. The Fund's dividend payments during the past 12 months were exempt from Minnesota state and federal taxes.+ In managing the Delaware Tax-Free Minnesota Intermediate Fund, we made only modest changes to the portfolio of securities during the recent fiscal year. In our experience, most municipal bond issuance in Minnesota comes to market insured. Because of their relatively low risk, insured municipal bonds tend to offer somewhat lower yields than non-insured municipal bonds. This situation sometimes creates challenges in finding attractively yielding Minnesota securities to add to the Fund. Our approach was simply to invest in bonds offering the best available combination of yield and credit characteristics. The performance of the Fund was quite competitive for the year on both an absolute and relative basis as compared to our benchmark. Our emphasis on bonds at the shorter-end of the yield curve worked extremely well, though some performance was lost through the summer as the steep yield curve began to flatten. Because we anticipated an eventual rise in interest rates, we refrained from selling bonds that were approaching their call dates. We expected to hold onto these securities as long as possible, awaiting future investment opportunities that offer the potential for higher yields. If rates do rise, we plan to sell certain bonds offering low yields and replace them with a mix of longer- and shorter-maturity securities. Such a strategy would increase the portfolio's diversification. We believe this approach is prudent, given the general uncertainties about credit quality currently in the marketplace. +A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. ================================================================================ DELAWARE TAX-FREE MINNESOTA INTERMEDIATE FUND PORTFOLIO CHARACTERISTICS As of August 31, 2002 - -------------------------------------------------------------------------------- Current SEC 30-Day Yield* 4.15% - -------------------------------------------------------------------------------- Average Duration** 5.60 years - -------------------------------------------------------------------------------- Average Maturity*** 7.53 years - -------------------------------------------------------------------------------- Average Credit Quality BBB - -------------------------------------------------------------------------------- * For Class A shares measured according to Securities and Exchange Commission (SEC) guidelines. Current SEC 30-day yield as of August 31, 2002 for Class B and Class C shares was 3.41%. ** Duration is a common measure of a bond or bond fund's sensitivity to interest rate changes. The longer the duration, the more sensitive the bond or bond fund is to changes in interest rates. *** Average Maturity is the average time remaining until scheduled repayment by issuers of portfolio securities. ================================================================================ 5 Delaware Minnesota High-Yield Municipal Bond Fund The Fund performed well during the 12 months ended August 31, 2002, beating its average peer on a total return basis by three and a half percentage points. Delaware Minnesota High-Yield Municipal Bond Fund returned +6.74% (Class A shares at net asset value with distributions reinvested), while its peers, measured by the Lipper High-Yield Municipal Debt Funds Average, returned +3.24% during the same period. The Fund's benchmark, the Lehman Brothers Municipal Bond Index, returned +6.24% for the period. The Fund's dividend payments during the past 12 months were exempt from Minnesota state and federal taxes.+ Overall, the Fund turned in a sound performance, owing largely to our overweighted position in lower credit quality bonds. As credit spreads widened in the summer months, this strategy slightly detracted from relative performance with the Fund's benchmark. Our central management strategy during the period was to upgrade the Fund's overall credit quality. When the period began on August 31, 2001, 78 percent of the Fund's holdings were invested in non-rated securities. By the end of the period, the Fund's weighting in non-rated securities stood at 61 percent. The Fund's average credit quality was CC (S&P) as of the end of the reporting period. Another way we looked to reduce the Fund's risk was to enhance its liquidity. Many high-yield municipal bonds are infrequently traded, and we think that a creeping lack of liquidity can create vulnerabilities - especially should a bond issuer develop an unforeseen credit problem. Throughout the past 12 months, we preferred investments with ready buyers, because the ability to sell our holdings in a timely fashion would provide us with added protection against potential credit concerns. + A portion of the income from tax-exempt funds may be subject to the alternative minimum tax. ================================================================================ DELAWARE MINNESOTA HIGH-YIELD MUNICIPAL BOND FUND PORTFOLIO CHARACTERISTICS As of August 31, 2002 - -------------------------------------------------------------------------------- Current SEC 30-Day Yield* 5.10% - -------------------------------------------------------------------------------- Average Duration** 8.41 years - -------------------------------------------------------------------------------- Average Maturity*** 16.42 years - -------------------------------------------------------------------------------- Average Credit Quality CC - -------------------------------------------------------------------------------- * For Class A shares measured according to Securities and Exchange Commission (SEC) guidelines. Current SEC 30-day yield as of August 31, 2002 for Class B and Class C shares was 4.54%. ** Duration is a common measure of a bond or bond fund's sensitivity to interest rate changes. The longer the duration, the more sensitive the bond or bond fund is to changes in interest rates. *** Average Maturity is the average time remaining until scheduled repayment by issuers of portfolio securities. ================================================================================ 6 Outlook We anticipate a continued attractive environment for municipal securities going forward. One reason for our optimism is that municipal bonds attract few foreign investors, who have begun retrenching from other U.S. fixed-income markets due to recent declines in the dollar. We also note that municipal bonds have become attractively valued relative to equivalent Treasury securities. For example, as of August 30, 2001, the yield of a AAA-rated 10-year general obligation municipal bond was 83.4% of an equivalent Treasury security, and on August 31, 2002 it rose to 88.3% (Source: Bloomberg). As municipal yields approach Treasury yields, the more potential value they offer shareholders. While Minnesota's economy remains diverse and is expected to expand generally in line with the national economic recovery, we anticipate continued downward pressure on the state's "AAA" credit rating. A possible downgrade in the near future would not be out of the question, in our opinion. We generally expect longer-maturity securities to begin closing the performance gap with shorter-maturity securities. Because we believe that longer-maturity bonds may be somewhat undervalued, we may decide to expand our holdings in this area across all of our Minnesota funds. Looking ahead, we believe that the economy may continue to rebound--a situation that would likely cause the Federal Reserve Board to raise interest rates. If and when rates do rise, we plan to reinvest the Fund's assets in municipal bonds offering higher prevailing yields. 30-year Municipal Bonds Tax-Equivalent Yields As of August 31, 2002 10%----------------------------------------------------------------------------- AAA Tax-Equivalent Yield AA Tax-Equivalent Yield 5%-------------------------------------- ----------------------------------- 5.58% 6.51% 6.79% 7.31% 7.74% 5.88% 6.85% 7.14% 7.69% 8.14% 0%-------------------------------------- ----------------------------------- 15% 27% 30% 35% 38.6% 15% 27% 30% 35% 38.6% Income Tax Bracket As of August 31, 2002, the yield on 30-year AAA-rated municipal bonds nationally was 4.75% and the yield on 30-year AA-rated municipal bonds nationally was 5.00% (Source: Bloomberg). The chart shows what the equivalent yield would be on a taxable investment for investors in each tax bracket. Principal and interest of municipal bonds, unlike U.S. Treasury securities, are not guaranteed by the U.S. government. The above illustration is not intended to represent the yield of any mutual fund from Delaware Investments. 7 New at Delaware - -------------------------------------------------------------------------------- Simplify your life. [GRAPHIC OMITTED: edelivery logo] MANAGE YOUR INVESTMENTS ONLINE! Get Account Access, Delaware Investments' secure Web site that allows you to conduct your business online. Gain 24-hour access to your account and the highest level of Web security available. You also get: o Hassle-Free Investing -- Make online purchases and redemptions at any time. o Simplified Tax Processing -- Automatically retrieve your Delaware Investments accounts' 1099 information and have it entered directly into your 1040 tax return. Available only with Turbo Tax(R) software. o Less Mail Clutter -- Get instant access to your fund materials online with Delaware eDelivery. Register for Account Access today! Visit www.delawareinvestments.com, select individual investor, and click Account Access. Please call our Shareholder Service Center at 800 523-1918 8:00 AM to 8:00 PM ET, Monday through Friday to assist with any questions. - -------------------------------------------------------------------------------- 8 Delaware Tax-Free Minnesota Fund Fund Basics As of August 31, 2002 - -------------------------------------------------------------------------------- Fund Objective: The Fund seeks as high a level of current income exempt from federal income tax and the Minnesota state personal income tax, as is consistent with preservation of capital. - -------------------------------------------------------------------------------- Total Fund Net Assets: $381.25 million - -------------------------------------------------------------------------------- Number of Holdings: 137 - -------------------------------------------------------------------------------- Fund Start Date: February 29, 1984 - -------------------------------------------------------------------------------- Your Fund Managers: Mitchell L. Conery received a bachelor's degree from Boston University and a 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 August 31, 2002 Lifetime 10 Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 2/29/84) Excluding Sales Charge +7.97% +5.90% +5.26% +5.54% Including Sales Charge +7.74% +5.49% +4.47% +1.58% - -------------------------------------------------------------------------------- Class B (Est. 3/11/95) Excluding Sales Charge +5.35% +4.48% +4.75% Including Sales Charge +5.35% +4.15% +0.75% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +5.21% +4.50% +4.82% Including Sales Charge +5.21% +4.50% +3.82% - -------------------------------------------------------------------------------- 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. Performance for Class B and C shares, 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 through 8/31/01. Performance would have been lower had the expense limitation not been in effect. The performance table and graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. Performance of a $10,000 Investment August 31, 1992 through August 31, 2002 Delaware Tax-Free Lehman Brothers Minnesota Fund Municipal Bond Index 8/31/92 $ 9,623 $10,000 8/31/93 $10,748 $11,245 8/31/94 $10,709 $11,261 8/31/95 $11,455 $12,259 8/31/96 $12,085 $12,902 8/31/97 $13,201 $14,094 8/31/98 $14,358 $15,313 8/31/99 $14,204 $15,397 8/31/00 $14,828 $16,433 8/31/01 $16,166 $18,111 8/31/02 $17,062 $19,231 Chart assumes $10,000 invested on August 31, 1992 and includes the effect of a 3.75% front-end sales charge and the reinvestment of all distributions. Performance for other Fund classes will vary due to differing charges and expenses. Returns plotted on the chart were as of the last day of each month shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks the performance of municipal bonds. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. Past performance is not a guarantee of future results. 9 Delaware Tax-Free Minnesota Insured Fund Fund Basics As of August 31, 2002 - -------------------------------------------------------------------------------- Fund Objective: The Fund seeks as high a level of current income exempt from federal income tax and the Minnesota state personal income tax, as is consistent with preservation of capital. - -------------------------------------------------------------------------------- Total Fund Net Assets: $260.19 million - -------------------------------------------------------------------------------- Number of Holdings: 94 - -------------------------------------------------------------------------------- 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 August 31, 2002 Lifetime 10 Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 5/1/87) Excluding Sales Charge +6.80% +5.92% +5.35% +5.25% Including Sales Charge +6.54% +5.51% +4.54% +1.34% - -------------------------------------------------------------------------------- Class B (Est. 3/7/95) Excluding Sales Charge +5.30% +4.58% +4.56% Including Sales Charge +5.30% +4.25% +0.56% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +5.11% +4.56% +4.46% Including Sales Charge +5.11% +4.56% +3.46% - -------------------------------------------------------------------------------- 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. Performance for Class B and C shares, 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 through 8/31/00. Performance would have been lower had the expense limitation not been in effect. The performance table and graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. Performance of a $10,000 Investment August 31, 1992 through August 31, 2002 Delaware Tax-Free Lehman Brothers Lehman Brothers Minnesota Insured Municipal Insured Municipal Fund Bond Index Bond Index* 8/31/92 $9,624 $10,000 $10,000 8/31/93 $11,011 $11,245 $11,316 8/31/94 $10,921 $11,261 $11,261 8/31/95 $11,731 $12,259 $12,287 8/31/96 $12,357 $12,902 $12,954 8/31/97 $13,379 $14,094 $14,172 8/31/98 $14,468 $15,313 $15,476 8/31/99 $14,442 $15,397 $15,431 8/31/00 $15,112 $16,433 $16,575 8/31/01 $16,494 $18,111 $18,355 8/31/02 $17,358 $19,231 $19,536 Chart assumes $10,000 invested on August 31, 1992 and includes the effect of a 3.75% front-end sales charge and the reinvestment of all distributions. Performance for other Fund classes will vary due to differing charges and expenses. Returns plotted on the chart were as of the last day of each month shown. The Lehman Brothers Insured Municipal Bond Index and Lehman Brothers Municipal Bond Index are unmanaged indexes that generally track the performance of municipal bonds. The indexes are unmanaged and do not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. Past performance is not a guarantee of future results. * Currently, Delaware Tax-Free Minnesota Insured Fund's benchmark is the Lehman Brothers Insured Municipal Bond Index. In the future, the Fund will use the Lehman Brothers Municipal Bond Index as its benchmark because information concerning the Lehman Brothers Insured Municipal Bond Index no longer is generally available for use by the Fund. 10 Delaware Tax-Free Minnesota Intermediate Fund Fund Basics As of August 31, 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: $58.77 million - -------------------------------------------------------------------------------- Number of Holdings: 50 - -------------------------------------------------------------------------------- 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 August 31, 2002 Lifetime 10 Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 10/27/85) Excluding Sales Charge +5.66% +4.82% +4.46% +6.34% Including Sales Charge +5.49% +4.52% +3.88% +3.41% - -------------------------------------------------------------------------------- Class B (Est. 8/15/95) Excluding Sales Charge +3.89% +3.61% +5.43% Including Sales Charge +3.89% +3.61% +3.43% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +4.07% +3.59% +5.44% Including Sales Charge +4.07% +3.59% +4.44% - -------------------------------------------------------------------------------- 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. Performance for Class B and C shares, 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 and graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. Performance of a $10,000 Investment August 31, 1992 through August 31, 2002 Delaware Tax-Free Lehman Brothers Minnesota Five-year Municipal Intermediate Fund Bond Index 8/31/92 $9,721 $10,000 8/31/93 $10,448 $10,901 8/31/94 $10,616 $11,099 8/31/95 $11,362 $11,977 8/31/96 $11,752 $12,420 8/31/97 $12,500 $13,241 8/31/98 $13,286 $14,117 8/31/99 $13,268 $14,434 8/31/00 $13,634 $15,209 8/31/01 $14,658 $16,597 8/31/02 $15,589 $17,706 Chart assumes $10,000 invested on August 31, 1992 and includes the effect of a 2.75% front-end sales charge and the reinvestment of all distributions. Performance for other Fund classes will vary due to differing charges and expenses. Returns plotted on the chart were as of the last day of each month shown. The Lehman Brothers Five-Year Municipal Bond Index is an unmanaged index that tracks municipal bonds which have an approximate maturity of five years. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. Past performance is not a guarantee of future results. 11 Delaware Minnesota High-Yield Municipal Bond Fund Fund Basics As of August 31, 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: $56.08 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 August 31, 2002 Lifetime Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 6/4/96) Excluding Sales Charge +5.97% +5.12% +6.74% Including Sales Charge +5.32% +4.32% +2.70% - -------------------------------------------------------------------------------- Class B (Est. 6/12/96) Excluding Sales Charge +5.57% +4.34% +6.03% Including Sales Charge +5.57% +4.01% +2.03% - -------------------------------------------------------------------------------- Class C (Est. 6/12/96) Excluding Sales Charge +5.22% +4.36% +6.03% Including Sales Charge +5.22% +4.36% +5.03% - -------------------------------------------------------------------------------- Delaware Minnesota High-Yield Municipal Bond Fund invests primarily in high-yield bonds, which involve greater risk than higher quality bonds. 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. Performance for Class B and C shares, 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 and graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. Performance of a $10,000 Investment June 4, 1996 (Fund's inception) through August 31, 2002 Delaware Minnesota High- Lehman Brothers Yield Municipal Municipal Bond Bond Fund Index Jun-96 $9,716 $10,000 Aug-96 $9,730 $10,088 Aug-97 $10,754 $11,021 Aug-98 $11,876 $11,974 Aug-99 $11,844 $12,039 Aug-00 $11,882 $12,849 Aug-01 $12,933 $14,161 Aug-02 $13,803 $15,045 Chart assumes $10,000 invested on June 4, 1996 and includes the effect of a 3.75% front-end sales charge and the reinvestment of all distributions. Performance for other Fund classes will vary due to differing charges and expenses. The chart also assumes $10,000 invested in the Lehman Brothers Municipal Bond Index at that month's end, June 30, 1996. After June 30, 1996, returns plotted on the chart were as of the last day of each month shown. The Lehman Brothers Municipal Bond Index is an unmanaged index that generally tracks the performance of municipal bonds. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. Past performance is not a guarantee of future results. 12 Delaware Tax-Free Minnesota Fund August 31, 2002 Statements of Net Assets Principal Market Amount Value Municipal Bonds - 98.51% Airport Revenue Bonds - 2.25% Minneapolis/St. Paul Metropolitan Commission Airports Revenue Series A 5.00% 1/1/22 (AMBAC) $ 3,440,000 $ 3,472,370 5.25% 1/1/32 (FGIC) 5,000,000 5,109,650 ------------- 8,582,020 ------------- Continuing Care/Retirement Revenue Bonds - 4.43% Bloomington Housing & Redevelopment Authority Housing Revenue (Senior Summerhouse Bloomington Project, Presbyterian Homes, Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,009,703 Eden Prairie Health Care Facilities Revenue (Castle Ridge Care Center, Inc.) 5.70% 7/1/28 1,740,000 1,426,887 Minneapolis Housing Facilities Revenue (Augustana Chapel View Project) 7.00% 4/1/18 1,000,000 999,910 Minnesota Agriculture & Economic Development Board Revenue (Benedictine Health Systems) 5.75% 2/1/29 1,195,000 1,030,221 Minnetonka Housing Facilities Revenue (Beacon Hill Housing Project, Presbyterian Homes & Services) 7.70% 6/1/25 2,000,000 2,030,740 Oakdale Revenue (Oak Meadows Project, Family Resources Development, Inc.) 7.00% 4/1/27 6,800,000 6,709,968 Rochester Multifamily Revenue (Wedum Shorewood Campus) 6.60% 6/1/36 1,805,000 1,674,553 ------------- 16,881,982 ------------- Corporate-Backed Revenue Bonds - 4.05% Cloquet Pollution Control Revenue (Potlatch Corp. Projects) 5.90% 10/1/26 7,500,000 6,506,625 International Falls Pollution Control Revenue (Boise Cascade Corp. Project) 5.65% 12/1/22 1,930,000 1,747,499 Richfield Commercial Development Revenue (Richfield Shoppes Project) 8.375% 10/1/13 2,200,000 2,287,912 Seaway Port Authority of Duluth Industrial Development Dock & Wharf Revenues (Cargill, Inc. Project) Series E 6.125% 11/1/14 4,500,000 4,887,180 ------------- 15,429,216 ------------- Principal Market Amount Value Municipal Bonds (continued) Dedicated Tax & Fees Revenue Bonds - 1.18% ***Minneapolis Community Development Agency Tax Increment Revenue 6.67% 9/1/09 (MBIA) $ 5,750,000 $ 4,506,563 ------------- 4,506,563 ------------- Escrowed to Maturity Bonds - 0.74% Southern Minnesota Municipal Power Agency Supply System Revenue Series B 5.50% 1/1/15 (AMBAC) 990,000 1,022,373 University of Minnesota Series A 6.00% 2/1/11 1,500,000 1,506,510 Western Minnesota Municipal Power Agency Series A 9.75% 1/1/16 (MBIA) 185,000 287,727 ------------- 2,816,610 ------------- Higher Education Revenue Bonds - 5.01% Minnesota State Higher Education Facilities Authority Revenue (Augsburg College) Series 4-F1 6.25% 5/1/23 1,000,000 1,040,700 (Hamline University) Series 4-I 6.00% 10/1/12 1,250,000 1,326,150 Series 4-I 6.00% 10/1/16 1,790,000 1,861,690 (St. Benedict College) Series 4-G 6.20% 3/1/16 1,000,000 1,046,710 (St. Catherine College) Series 5-N1 5.25% 10/1/22 1,500,000 1,506,345 (St. Thomas University) Series 3-R2 5.60% 9/1/14 1,100,000 1,126,642 University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,223,680 **University of Minnesota, Inverse Floater ROLS Series II-R-29 7.85% 7/1/21 5,250,000 6,424,372 8.29% 7/1/18 1,920,000 2,547,264 ------------- 19,103,553 ------------- Hospital Revenue Bonds - 19.12% Bemidji Hospital Facilities Revenue (North County Health Services) 6.05% 9/1/16 600,000 616,776 6.05% 9/1/24 1,825,000 1,843,141 Brainerd Health Care Facilities Revenue Benedictine Health System (St. Joseph's Hospital) Series E 6.00% 2/15/12 (Connie Lee) 2,250,000 2,336,648 Duluth Economic Development Authority Health Care Facilities Revenue Benedictine Health System (St. Mary's Hospital) Series C 6.00% 2/15/20 (Connie Lee) 9,450,000 9,792,941 13 Delaware Tax-Free Minnesota Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Hospital Revenue Bonds (continued) Duluth Economic Development Authority Hospital Facilities Revenue (St. Luke's Hospital) Series B 6.40% 5/1/18 (Connie Lee) $ 3,295,000 $ 3,384,327 Maplewood Healthcare Facility Revenue (Health East Project) 5.95% 11/15/06 2,200,000 2,074,798 Marshall Medical Center Gross Revenue (Weiner Memorial Medical Center Project) 6.00% 11/1/28 1,000,000 974,170 Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32 6,375,000 6,517,163 Northfield Hospital Revenue Series C 6.00% 11/1/31 (MBIA) 1,500,000 1,499,850 Robbinsdale Hospital Revenue (North Memorial Medical Center) Series B 5.50% 5/15/23 (AMBAC) 10,725,000 10,894,990 **Rochester Health Care Facilities Revenue (Mayo Foundation), Inverse Floater ROLS Series H 10.404% 11/15/15 3,500,000 3,694,355 Series II-R-28-A 7.45% 11/15/27 2,100,000 2,264,640 Series II-R-28-B 7.45% 11/15/27 8,375,000 9,031,600 Rochester Health Care Facilities Revenue (Mayo Foundation) Series B 5.50% 11/15/27 700,000 727,440 St. Louis Park Health Care Facilities Revenue (Healthsystem of Minnesota) 5.20% 7/1/23 (AMBAC) 10,220,000 10,282,137 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series A 5.70% 11/1/15 1,300,000 1,050,023 Series A 6.625% 11/1/17 6,000,000 5,234,100 Washington County Housing & Redevelopment Authority Hospital Facilities Revenue (Health East Project) 5.50% 11/15/27 1,000,000 686,360 ------------- 72,905,459 ------------- Investor Owned Utilities Revenue Bonds - 4.74% Bass Brook Pollution Control Revenue (Minnesota Power & Light Co. Project) 6.00% 7/1/22 17,000,000 17,318,750 6.00% 7/1/22 (MBIA) 750,000 766,965 ------------- 18,085,715 ------------- Principal Market Amount Value Municipal Bonds (continued) Miscellaneous Revenue Bonds - 1.05% Minneapolis Community Development Agency Supported Development Revenue Limited Tax (Common Bond Fund) Series 2A 7.125% 12/1/05 $ 415,000 $ 428,483 St. Cloud Commercial Development Revenue (Northwest Center Association Project) 7.50% 8/1/12 3,548,971 3,557,737 ------------- 3,986,220 ------------- Multi Family Housing Revenue Bonds - 13.43% Austin Housing & Redevelopment Authority Housing Gross Revenue (Courtyard Residence Project) Series A 7.25% 1/1/26 500,000 510,085 Brooklyn Center Multifamily Housing Revenue (Ponds Family Housing Project-Section 8) 5.90% 1/1/20 1,250,000 1,254,375 Burnsville Multifamily (Bridgeway Apartments Project) 7.625% 2/1/24 3,370,000 3,411,687 Carver County Housing & Redevelopment Authority Multifamily Revenue (Lake Grace Apartments Project) 6.00% 7/1/28 1,435,000 1,454,100 Dakota County Housing & Redevelopment Authority Multifamily Housing Revenue (Affordable Housing View Pointe Project) 6.125% 11/1/17 2,475,000 2,386,049 Eden Prairie Multifamily (Tanager Creek) Series A 8.05% 6/20/31 (GNMA) 7,605,000 8,386,413 (Windslope Apartments Project) 7.10% 11/1/17 1,585,000 1,614,069 Hopkins Multifamily Revenue (Hopkins Renaissance Project-Section 8) 6.375% 4/1/20 1,000,000 1,046,620 Little Canada Multifamily Housing Revenue (Housing Alternative Development Co. Project) Series A 6.10% 12/1/17 1,490,000 1,431,294 6.25% 12/1/27 2,900,000 2,659,561 Minneapolis Multifamily Revenue (Seward Towers Project) 7.375% 12/20/30 (GNMA) 4,000,000 4,025,759 (Sumner Field) Series A 5.50% 11/20/26 (GNMA) (AMT) 1,045,000 1,079,569 (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 1,990,000 2,000,547 14 Delaware Tax-Free Minnesota Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Multi Family Housing Revenue Bonds (continued) Minnesota State Housing Finance Agency Housing Development (Section 8) Series A 6.95% 2/1/14 $ 1,500,000 $ 1,519,125 Minnesota State Housing Finance Agency Rental Housing (Section 8) Series B 6.25% 8/1/22 370,000 370,322 Park Rapids Multifamily Revenue (The Court Apartments Project-Section 8) 6.30% 2/1/20 3,070,000 2,950,731 St. Louis Park Multifamily Community Housing & Service 6.25% 12/1/28 (FHA) 3,855,000 4,025,121 St. Louis Park Multifamily (Westwind Apartments Project) 5.75% 1/1/29 3,865,000 3,934,338 St. Paul Housing & Redevelopment Authority Multifamily Housing Revenue (900 Como Lake Project) 7.50% 3/1/26 (FHA) 1,000,000 997,810 Stillwater Multifamily Revenue (Stillwater Cottages) Series A 7.00% 11/1/27 1,000,000 959,980 Wadena Housing & Redevelopment Authority Multifamily Housing Revenue (Humphrey Manor East Project) 6.00% 2/1/19 2,130,000 2,150,831 Washington County Housing & Redevelopment Authority Governmental Revenue (Briar Pond) Series C 7.25% 8/20/34 (GNMA) 995,000 980,244 Wells Housing & Redevelopment Authority Housing Revenue (Broadway Apartments Project) 7.00% 1/1/19 950,000 981,037 Willmar Housing & Redevelopment Authority Multifamily Revenue (Highland Apartments-Section 8) 5.85% 6/1/19 1,050,000 1,059,156 ------------- 51,188,823 ------------- Municipal Lease Revenue Bonds - 0.28% Beltrami County Housing & Redevelopment Authority Revenue 6.20% 2/1/14 1,010,000 1,051,036 ------------- 1,051,036 ------------- Principal Market Amount Value Municipal Bonds (continued) Political Subdivision General Obligation Bonds - 5.03% Dakota County Capital Improvement Series A 4.75% 2/1/26 $ 4,000,000 $ 3,941,480 Hennepin County Series A 4.50% 12/1/20 1,000,000 984,640 Series B 4.50% 12/1/19 1,350,000 1,347,503 Series B 4.60% 12/1/20 1,000,000 995,900 Hennepin County Solid Waste 5.75% 10/1/10 4,990,000 5,106,266 Hennepin Regional Railroad Authority 5.00% 12/1/26 2,750,000 2,767,353 5.00% 12/1/31 4,030,000 4,049,989 ------------- 19,193,131 ------------- *Pre-Refunded Bonds - 6.21% Andover Commercial Development Revenue (Downtown Center Project) Series A 7.00% 12/1/12-03 1,000,000 1,084,920 Bloomington Tax Increment Bonds 9.75% 2/1/08-05 500,000 590,370 Fairbault Independent School District #656 6.10% 6/1/10-04 1,000,000 1,074,640 Kenyon Wanamingo Independent School District #2172 6.00% 2/1/18-05 (MBIA) 2,350,000 2,560,513 Minnesota Public Facilities Authority Water Pollution Control Revenue Series A 6.25% 3/1/16-05 4,400,000 4,856,324 North St. Paul Maplewood Independent School District #622 Series A 7.10% 2/1/25-05 (FSA) 10,000,000 11,204,000 Plainview Independent School District #810 6.70% 2/1/06-03 385,000 393,720 6.75% 2/1/07-03 420,000 429,601 6.75% 2/1/08-03 445,000 455,173 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,033,530 ------------- 23,682,791 ------------- Public Power Revenue Bonds - 10.87% Chaska Electric Revenue Series A 6.00% 10/1/25 1,000,000 1,055,250 Northern Minnesota Municipal Power Agency Electric System Revenue Series A 5.00% 1/1/21 880,000 880,026 ***Series A 5.85% 1/1/09 (AMBAC) 3,815,000 3,060,164 Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,516,000 Series B 5.50% 1/1/18 (AMBAC) 9,200,000 9,458,060 Rochester Electric Utilities Revenue 5.25% 12/1/30 4,915,000 4,995,213 15 Delaware Tax-Free Minnesota Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Public Power Revenue Bonds (continued) Shakopee Public Utilities Commission Public Utilities Revenue 5.125% 2/1/26 (MBIA) $ 1,000,000 $ 1,013,210 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 4.75% 1/1/16 (MBIA) 3,550,000 3,555,183 ***Series A 5.663% 1/1/19 (MBIA) 8,210,000 3,819,292 Series A 5.75% 1/1/18 (MBIA) 7,770,000 8,002,401 ***Series A 6.136% 1/1/21 (MBIA) 3,000,000 1,226,070 Series B 5.50% 1/1/15 (AMBAC) 1,560,000 1,607,424 Western Minnesota Municipal Power Agency Series A 6.125% 1/1/16 265,000 265,339 ------------- 41,453,632 ------------- School District General Obligation Bonds - 5.63% Bloomington Independent School District #271 Series B 5.00% 2/1/17 5,300,000 5,535,054 ***Farmington Independent School District #192 Capital Appreciation Series B 5.34% 2/1/21 (FSA) 1,500,000 584,775 5.424% 2/1/20 (FSA) 1,650,000 684,717 ***Lakeville Independent School District #194 Capital Appreciation Series B 5.45% 2/1/19 (FSA) 8,000,000 3,447,760 ***Mahtomedi Independent School District #832 Capital Appreciation Series B 5.90% 2/1/14 (MBIA) 1,540,000 960,190 **Rockford Independent School District #883, Inverse Floater ROLS Series II-R-30-A 8.07% 2/1/23 (FSA) 3,510,000 3,923,794 ***Rosemont Independent School District #196 Capital Appreciation Series B 5.931% 4/1/11 (FSA) 2,600,000 1,874,028 5.961% 4/1/12 (FSA) 1,850,000 1,271,542 6.008% 4/1/13 (FSA) 1,915,000 1,250,055 ***Sartell Independent School District #748 Capital Appreciation Series B 5.976% 2/1/13 (MBIA) 540,000 350,012 6.10% 2/1/15 (MBIA) 1,075,000 623,468 6.15% 2/1/16 (MBIA) 1,750,000 953,698 ------------- 21,459,093 ------------- Single Family Housing Revenue Bonds - 1.08% Minnesota State Housing Finance Agency Residential Housing Finance Series A 5.30% 7/1/19 1,755,000 1,822,725 Minnesota State Housing Finance Agency Single Family Mortgage Series J 5.90% 7/1/28 (AMT) 1,095,000 1,137,114 St. Louis Park Residential Mortgage Revenue 7.25% 4/20/23 (GNMA) 510,000 514,616 Principal Market Amount Value Municipal Bonds (continued) Single Family Housing Revenue Bonds (continued) St. Paul Housing & Redevelopment Authority Single Family Mortgage Revenue Series C 6.90% 12/1/21 (FNMA) $ 640,000 $ 650,323 Series D 6.90% 12/1/11 (FNMA) 7,000 7,029 ------------- 4,131,807 ------------- State General Obligation Bonds - 4.20% Minnesota State 5.00% 11/1/20 (FSA) 8,175,000 8,437,254 5.00% 8/1/21 2,400,000 2,470,872 **Minnesota State, Inverse Floater ROLS 6.65% 11/1/16 2,420,000 2,643,898 6.65% 11/1/17 1,135,000 1,227,185 6.65% 11/1/18 1,145,000 1,227,669 ------------- 16,006,878 ------------- Tax Increment/Special Assessment Bonds - 2.26% Minneapolis Tax Increment Series E 5.00% 3/1/13 6,265,000 6,696,408 Rochester Tax Increment 6.50% 12/1/04 1,000,000 1,012,560 St. Paul Tax Increment (Block 39 Project) Series A 4.75% 2/1/25 900,000 888,354 ------------- 8,597,322 ------------- Territorial General Obligation Bonds - 0.53% Puerto Rico Commonwealth Public Improvement Series A 5.125% 7/1/31 2,000,000 2,022,820 ------------- 2,022,820 ------------- Territorial Revenue Bonds - 3.88% Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series D 5.25% 7/1/38 2,000,000 2,051,620 Puerto Rico Electric Power Authority Power Revenue Series EE 4.75% 7/1/24 3,700,000 3,599,248 Series X 5.50% 7/1/25 2,930,000 2,983,971 **Puerto Rico Electric Power Authority Power Revenue, Inverse Floater ROLS 5.68% 7/1/19 3,050,000 3,087,729 Puerto Rico Public Buildings Authority Revenue Guaranteed Government Facilities Series D 5.25% 7/1/36 3,000,000 3,077,430 ------------- 14,799,998 ------------- 16 Delaware Tax-Free Minnesota Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Water & Sewer Revenue Bonds - 2.54% Minnesota Public Facilities Authority Water Pollution Control Revenue Series B 4.75% 3/1/19 $ 2,000,000 $ 2,033,000 **Minnesota Public Facilities Authority Water Pollution Control Revenue, Inverse Floater ROLS Series II-R-31 4.94% 3/1/14 5,000,000 5,536,800 Series II-TR-1 3.96% 3/1/16 2,000,000 2,105,020 ------------- 9,674,820 ------------- Total Municipal Bonds (cost $353,941,876) 375,559,489 ------------- Number of Shares Short-Term Investments - 0.71% Federated Minnesota Municipal Cash Trust 2,709,622 2,709,622 ------------ Total Short-Term Investments (cost $2,709,622) 2,709,622 ------------ Total Market Value of Securities - 99.22% (cost $356,651,498) 378,269,111 Receivables and Other Assets Net of Liabilities - 0.78% 2,976,678 ------------ Net Assets Applicable to 30,219,752 Shares Outstanding - 100.00% $381,245,789 ============ Net Asset Value - Delaware Tax-Free Minnesota Fund Class A ($356,521,505 / 28,261,876 Shares) $12.61 ------ Net Asset Value - Delaware Tax-Free Minnesota Fund Class B ($17,042,553 / 1,350,091 Shares) $12.62 ------ Net Asset Value - Delaware Tax-Free Minnesota Fund Class C ($7,681,731 / 607,785 Shares) $12.64 ------ Components of Net Assets at August 31, 2002: Shares of beneficial interest (unlimited authorization -- no par) $358,883,263 Distributions in excess of net investment income (22,418) Accumulated net realized gain on investments 767,331 Net unrealized appreciation of investments 21,617,613 ------------ Total net assets $381,245,789 ============ *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 August 31, 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 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) $12.61 Sales charge (3.75% of offering price, or 3.89% of amount invested per share) (B) 0.49 ------ Offering price $13.10 ====== (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 17 Delaware Tax-Free Minnesota Insured Fund August 31, 2002 Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds - 97.46% Airport Revenue Bonds - 2.63% Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A 5.125% 1/1/25 (FGIC) $ 100,000 $ 101,224 Series C 5.25% 1/1/32 (FGIC) 6,595,000 6,739,628 ------------- 6,840,852 ------------- Escrowed to Maturity Bonds - 16.08% Dakota/Washington Counties Housing & Redevelopment Authority Bloomington Single Family Residential Mortgage Revenue 8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 569,661 8.375% 9/1/21 (GNMA) (AMT) 14,115,000 20,495,262 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 13,011,570 Southern Minnesota Municipal Power Agency Supply Revenue Series A 5.75% 1/1/18 (AMBAC) 670,000 686,415 5.75% 1/1/18 (MBIA) 3,790,000 3,917,079 Western Minnesota Municipal Power Agency Supply Revenue Series A 6.60% 1/1/10 (MBIA) 2,000,000 2,322,960 9.75% 1/1/16 (MBIA) 530,000 824,298 ------------- 41,827,245 ------------- Higher Education Revenue Bonds - 3.63% Minnesota State Colleges & Universities Revenue Series A 5.00% 10/1/22 (FSA) 5,135,000 5,226,403 Minnesota State Higher Education Facilities Authority Revenue (St. Catherine College) Series 5-N1 5.00% 10/1/18 2,200,000 2,221,604 St. Cloud Housing & Redevelopment Authority Revenue (State University Foundation Project) 5.00% 5/1/23 2,000,000 2,009,760 ------------- 9,457,767 ------------- Hospital Revenue Bonds - 14.65% Brainerd Health Care Facilities Revenue Benedictine Health (St. Joseph's Hospital) Series E 6.00% 2/15/12 (Connie Lee) 1,500,000 1,557,765 6.00% 2/15/20 (Connie Lee) 2,000,000 2,071,640 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 1,347,177 Duluth Economic Development Authority Hospital Facilities Revenue (St. Luke's Hospital) Series B 6.40% 5/1/10 (Connie Lee) 3,335,000 3,426,713 6.40% 5/1/18 (Connie Lee) 500,000 513,555 Principal Market Amount Value Municipal Bonds (continued) Hospital Revenue Bonds (continued) Minneapolis/St. Paul Housing & Redevelopment Authority Health Care Systems Series A (Children's Health Care) 5.50% 8/15/25 (FSA) $ 2,250,000 $ 2,309,243 (Healthspan Health System) 5.00% 11/15/13 (AMBAC) 6,490,000 6,668,474 Minneapolis Health Care Facility Revenue (Fairview Hospital & Healthcare Service) Series A 5.25% 11/15/19 (MBIA) 2,250,000 2,325,825 Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32 5,000,000 5,111,500 **Minnesota Agriculture & Economic Development Board Revenue (Fairview Hospital & Healthcare Service), Inverse Floater ROLS Series II-R-33 7.89% 11/15/26 (MBIA) 5,125,000 5,753,325 Robbinsdale Hospital Revenue (North Memorial Medical Center) Series B 5.50% 5/15/23 (AMBAC) 5,900,000 5,993,515 St. Paul Housing & Redevelopment Authority Hospital Revenue (St. Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,030,080 ------------- 38,108,812 ------------- Miscellaneous Revenue Bonds - 0.79% Minneapolis Community Development Agency Supported Development Revenue Series G-3 5.45% 12/1/31 2,000,000 2,052,580 ------------- 2,052,580 ------------- Multi Family Housing Revenue Bonds - 6.84% Chaska Waters Edge Multifamily Revenue Series A 7.30% 1/20/30 (GNMA) 3,257,000 3,539,805 Eagan Multifamily Revenue (Woodridge Apartments) 5.90% 8/1/20 (GNMA) 1,000,000 1,047,350 Hopkins Multifamily Revenue (Auburn Apartments Project) Series A 8.05% 6/20/31 (GNMA) 3,790,000 4,172,563 Minneapolis/St. Paul Housing Finance Board Revenue (Trinity Apartments) Series A 8.125% 12/1/14 (GNMA) (AMT) 45,000 45,045 Minneapolis Multifamily Revenue (Bottineau Commons Project) 5.45% 4/20/43 (GNMA) 1,500,000 1,540,290 18 Delaware Tax-Free Minnesota Insured Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Multi Family Housing Revenue Bonds (continued) Minnesota State Housing Finance Agency Rental Housing Revenue Series C-2 5.95% 2/1/15 (AMBAC) $ 2,165,000 $ 2,256,861 St. Paul Housing & Redevelopment Authority Multifamily Housing Revenue (Pointe of St. Paul Project) 6.60% 10/1/12 (FNMA) 4,000,000 4,087,760 White Bear Lake Multifamily Revenue (Lake Square) Series A 5.875% 2/1/15 (FHA) 1,055,000 1,104,817 ------------- 17,794,491 ------------- Political Subdivision General Obligation Bonds - 2.32% Dakota County Community Development Agency Governmental Housing Development 5.00% 1/1/21 1,275,000 1,290,568 Hennepin County Series A 4.50% 12/1/21 1,000,000 972,930 Hennepin County Solid Waste 5.75% 10/1/10 (MBIA) 1,800,000 1,841,939 Western Lake Superior Sanitation District Series A 6.00% 10/1/08 (MBIA) (AMT) 400,000 438,264 6.10% 10/1/09 (MBIA) (AMT) 425,000 466,905 6.20% 10/1/10 (MBIA) (AMT) 450,000 495,693 6.20% 10/1/11 (MBIA) (AMT) 475,000 523,232 ------------- 6,029,531 ------------- *Pre-Refunded Bonds - 19.32% Alexandria Independent School District #206 Series A 6.30% 2/1/13-03 (MBIA) 1,775,000 1,810,731 Becker Wastewater Treatment Facility Series A 5.95% 2/1/14-04 (MBIA) 500,000 530,965 Buffalo Independent School District #887 6.10% 2/1/15-03 (FSA) 1,030,000 1,049,869 Detroit Lakes Health Care Facilities Revenue Benedictine Health Systems (St. Mary's Hospital) Series G 6.00% 2/15/12-03 (Connie Lee) 1,630,000 1,697,091 6.00% 2/15/19-03 (Connie Lee) 1,000,000 1,041,160 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 10,411,600 Duluth Economic Development Authority Health Care Facilities Revenue (Duluth Clinic) 6.30% 11/1/22-02 (AMBAC) 2,690,000 2,766,611 6.30% 11/1/22-04 (AMBAC) 1,060,000 1,166,138 Principal Market Amount Value Municipal Bonds (continued) Pre-Refunded Bonds (continued) Elk River Independent School District #728 6.00% 2/1/09-03 (AMBAC) $ 3,950,000 $ 4,024,576 Ellendale Independent School District #762 6.00% 2/1/10-03 (AMBAC) 230,000 234,391 6.00% 2/1/11-03 (AMBAC) 245,000 249,677 6.00% 2/1/12-03 (AMBAC) 265,000 270,059 6.00% 2/1/13-03 (AMBAC) 280,000 285,345 6.00% 2/1/14-03 (AMBAC) 300,000 305,727 6.00% 2/1/15-03 (AMBAC) 320,000 326,109 Marshall Electric & Water Utility Revenue 6.45% 7/1/10-03 (FSA) 500,000 520,580 6.45% 7/1/11-03 (FSA) 100,000 104,116 6.50% 7/1/12-03 (FSA) 500,000 520,790 6.50% 7/1/13-03 (FSA) 500,000 520,790 Moorhead Public Utilities Revenue Series A 6.25% 11/1/12-02 (MBIA) 735,000 740,946 North St. Paul Maplewood Independent School District #622 Series A 7.10% 2/1/19-05 (MBIA) 5,935,000 6,649,574 7.10% 2/1/25-05 (FSA) 11,525,000 12,912,609 Northern Municipal Power Agency Electric System Revenue Series A 5.90% 1/1/08-03 (AMBAC) 700,000 724,773 **Richfield Independent School District #280, Inverse Floater ROLS Series C 8.95% 2/1/15-03 (FGIC) 1,365,000 1,409,144 ------------- 50,273,371 ------------- Public Power Revenue Bonds - 5.44% Northern Municipal Power Agency Electric System Revenue Series B 4.75% 1/1/20 (AMBAC) 1,100,000 1,107,040 5.50% 1/1/18 (AMBAC) 4,200,000 4,317,810 **Northern Municipal Power Agency Electric System Revenue, Inverse Floater ROLS Series II-R-32 7.02% 1/1/13 (FSA) 4,585,000 5,457,892 Shakopee Public Utilities Commission Public Utilities Revenue 5.125% 2/1/26 (MBIA) 1,850,000 1,874,439 Southern Minnesota Municipal Power Agency Supply System Revenue Series A 4.75% 1/1/16 (MBIA) 1,400,000 1,402,044 ------------- 14,159,225 ------------- School District General Obligation Bonds - 15.01% Big Lake Independent School District #727 Series A 5.00% 2/1/17 (FSA) 1,040,000 1,086,124 5.00% 2/1/20 (FSA) 1,000,000 1,025,810 19 Delaware Tax-Free Minnesota Insured Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) School District General Obligation Bonds (continued) Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) $ 1,270,000 $ 1,328,699 Mounds View Independent School District #621 5.00% 2/1/20 (MBIA) 2,970,000 3,063,317 5.375% 2/1/24 (FGIC) 6,170,000 6,415,259 Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,654,716 Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 1,310,000 1,341,086 **Rockford Independent School District #883, Inverse Floater ROLS Series II-R-30-B 8.02% 2/1/21 (FSA) 1,605,000 1,821,145 ***Rosemount Independent School District #196 Series B 5.80% 4/1/09 (FSA) 1,860,000 1,478,105 5.85% 4/1/10 (FSA) 2,240,000 1,689,834 ***Sauk Rapids Independent School District #047 Series B 5.983% 2/1/15 (FSA) 2,700,000 1,491,804 6.083% 2/1/17 (FSA) 2,245,000 1,078,094 **South Washington County Independent School District #833, Inverse Floater ROLS Series II-R-34-A 8.02% 2/1/20 (MBIA) 3,440,000 3,951,666 Series II-R-34-B 8.02% 2/1/21 (MBIA) 3,645,000 4,135,872 St. Michael Independent School District #885 5.00% 2/1/20 (FSA) 1,970,000 2,031,897 5.00% 2/1/27 (FSA) 3,435,000 3,458,976 -------------- 39,052,404 -------------- Single Family Housing Revenue Bonds - 1.53% Dakota County Housing & Redevelopment Authority Single Family Mortgage Revenue 5.85% 10/1/30 (FNMA) (GNMA) (AMT) 2,688,000 2,764,662 6.70% 10/1/17 (FNMA) 1,215,000 1,228,511 -------------- 3,993,173 -------------- State General Obligation Bonds - 2.51% Minnesota State 5.00% 11/1/20 (FSA) 5,500,000 5,676,440 **Minnesota State, Inverse Floater ROLS 6.65% 11/1/17 800,000 864,976 -------------- 6,541,416 -------------- Tax Increment/Special Assessment Bonds - 2.50% Becker Tax Increment Series D 6.25% 8/1/15 (MBIA) (AMT) 6,300,000 6,492,717 -------------- 6,492,717 -------------- Principal Market Amount Value Municipal Bonds (continued) Territorial Revenue Bonds - 4.21% ***Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series A 5.207% 7/1/18 (AMBAC) $ 5,000,000 $ 2,513,700 **Puerto Rico Electric Power Authority Revenue, Inverse Floater ROLS 5.68% 7/1/19 2,825,000 2,859,945 Puerto Rico Electric Power Authority Power Revenue Series EE 4.50% 7/1/18 (MBIA) 4,500,000 4,563,585 Series GG 4.75% 7/1/21 (FSA) 1,000,000 1,010,570 -------------- 10,947,800 -------------- Total Municipal Bonds (cost $234,097,559) 253,571,384 -------------- Number of Shares Short-Term Investments - 1.11% Federated Minnesota Municipal Cash Trust 2,880,439 2,880,439 -------------- Total Short-Term Investments (cost $2,880,439) 2,880,439 -------------- Total Market Value of Securities - 98.57% (cost $236,977,998) 256,451,823 Receivables and Other Assets Net of Liabilities - 1.43% 3,736,018 -------------- Net Assets Applicable to 23,775,591 Shares Outstanding - 100.00% $ 260,187,841 ============== Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class A ($239,763,298 / 21,908,781 Shares) $10.94 ------ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class B ($14,341,158 / 1,311,387 Shares) $10.94 ------ Net Asset Value - Delaware Tax-Free Minnesota Insured Fund Class C ($6,083,385 / 555,423 Shares) $10.95 ------ 20 Delaware Tax-Free Minnesota Insured Fund Statements of Net Assets (continued) Components of Net Assets at August 31, 2002: Shares of beneficial interest (unlimited authorization - no par) $246,188,645 Accumulated net realized loss on investments (5,474,629) Net unrealized appreciation of investments 19,473,825 ------------ Total net assets $260,187,841 ============ *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 August 31, 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 Net Asset Value and Offering Price per Share - Delaware Tax-Free Minnesota Insured Fund Net asset value Class A (A) $10.94 Sales charge (3.75% of offering price or 3.93% of amount invested per share) (B) 0.43 ------ Offering price $11.37 ====== (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 21 Delaware Tax-Free Minnesota Intermediate Fund August 31, 2002 Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds - 97.10% Continuing Care/Retirement Revenue Bonds - 4.52% Minneapolis Health Care Facilities Revenue (Jones-Harrison Residence Project) 5.90% 10/1/16 $ 125,000 $ 114,791 Oakdale Elderly Housing Revenue (PHM/Oakdale Inc. Project) 5.75% 3/1/18 1,400,000 1,283,043 Oakdale Revenue (Oak Meadows Project) 6.20% 4/1/07 150,000 154,479 6.30% 4/1/08 260,000 267,348 6.50% 4/1/10 295,000 302,641 Rochester Nursing Home & Multifamily Housing Revenue (Samaritan Bethany, Inc.) Series A 6.00% 5/1/04 300,000 292,704 6.10% 5/1/05 250,000 242,530 -------------- 2,657,536 -------------- Corporate-Backed Revenue Bonds - 0.91% Richfield Shoppes Commercial Development Revenue (Richfield Shoppes Project) 7.50% 10/1/04 530,000 533,721 -------------- 533,721 -------------- Escrowed to Maturity Bonds - 7.66% Duluth Gross Revenue (Duluth Entertainment) 7.00% 12/1/03 860,000 896,094 Metropolitan Council, Minneapolis/St. Paul Area Sports Facilities Revenue (Hubert H. Humphrey Metrodome) 6.00% 10/1/09 3,520,000 3,606,697 -------------- 4,502,791 -------------- Higher Education Revenue Bonds - 4.68% Minnesota State Higher Education Facilities Authority Revenue (College of Art & Design) Series 5-D 6.625% 5/1/20 1,000,000 1,081,340 (St. Catherine College) Series 5-N1 5.375% 10/1/32 500,000 502,680 University of Minnesota Series A 5.75% 7/1/16 1,000,000 1,168,810 -------------- 2,752,830 -------------- Hospital Revenue Bonds - 7.01% Maplewood Health Care Facility Revenue (Health East Project) 5.70% 11/15/02 1,000,000 996,990 Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32 2,150,000 2,197,945 Principal Market Amount Value Municipal Bonds (continued) Hospital Revenue Bonds (continued) St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series B 5.85% 11/1/17 $ 1,160,000 $ 925,645 -------------- 4,120,580 -------------- Investor Owned Utilities Revenue Bonds - 4.42% Eveleth Industrial Development Revenue (Minnesota Power & Light Co. Project) Series A 6.125% 1/1/04 2,500,000 2,597,100 -------------- 2,597,100 -------------- Miscellaneous Revenue Bonds - 10.06% Minneapolis Art Center Facilities Revenue (Walker Art Center Project) 5.125% 7/1/21 3,000,000 3,044,520 Minneapolis Community Development Agency Supported Revenue Common Bond Fund Series 4 6.20% 6/1/17 (AMT) 1,055,000 1,103,646 Minnesota Public Facilities Authority Water Pollution Control Revenue Series A 6.55% 3/1/03 1,720,000 1,763,430 -------------- 5,911,596 -------------- Multi Family Housing Revenue Bonds - 6.39% Minneapolis Multifamily Revenue (Trinity Apartments-Section 8) Series A 6.75% 5/1/21 2,845,000 2,860,079 Park Rapids Multifamily Revenue (The Court Apartments Project-Section 8) 6.05% 8/1/12 915,000 893,653 -------------- 3,753,732 -------------- Municipal Lease Revenue Bonds - 5.72% Beltrami County Housing & Redevelopment Authority Revenue 5.90% 2/1/08 355,000 373,939 6.00% 2/1/09 380,000 399,091 6.00% 2/1/10 405,000 424,011 6.10% 2/1/11 430,000 449,750 Edina Housing & Redevelopment Authority Public Project Revenue 5.125% 2/1/19 1,000,000 1,031,620 Hibbing Economic Development Authority Revenue (Hibbing Lease Obligation) 6.10% 2/1/08 650,000 681,759 -------------- 3,360,170 -------------- 22 Delaware Tax-Free Minnesota Intermediate Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Political Subdivision General Obligation Bonds - 6.70% Dakota County Series A 4.75% 2/1/17 $ 1,000,000 $ 1,032,540 Hennepin County Series A 4.50% 12/1/17 1,000,000 1,013,360 Series B 4.75% 12/1/14 1,000,000 1,055,460 Minneapolis/St. Paul Metropolitan Airports Commission Series 14 5.50% 1/1/11 (AMT) 750,000 838,905 -------------- 3,940,265 -------------- *Pre-Refunded Bonds - 5.53% Andover Commercial Development Revenue (Downtown Center Project) Series A 6.50% 12/1/06-03 1,795,000 1,936,374 Duluth Gross Revenue (Duluth Entertainment) 7.30% 12/1/06-04 250,000 284,943 **Richfield Independent School District #280 Series C, Inverse Floater 8.95% 2/1/15-03 (FGIC) 1,000,000 1,032,340 -------------- 3,253,657 -------------- School District General Obligation Bonds - 19.52% Big Lake Independent School District #727 Series C 5.00% 2/1/16 (FSA) 1,180,000 1,247,614 5.00% 2/1/17 (FSA) 1,000,000 1,049,340 Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,000,000 1,046,220 5.00% 2/1/20 (FSA) 750,000 773,565 Hopkins Independent School District #270 5.125% 2/1/17 (FGIC) 2,000,000 2,130,781 Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 1,500,000 1,535,595 South Washington County Independent School District #833 Series B 5.00% 2/1/16 (FSA) 1,560,000 1,658,077 St. Michael Independent School District #885 5.00% 2/1/22 (FSA) 2,000,000 2,033,740 -------------- 11,474,932 -------------- Single Family Housing Revenue Bonds - 1.84% Minnesota State Housing Finance Agency Single Family Mortgage Series J 5.90% 7/1/28 (AMT) 1,000,000 1,038,460 St. Paul Housing & Redevelopment Authority Single Mortgage Revenue Series C 6.90% 12/1/21 (FNMA) 40,000 40,645 -------------- 1,079,105 -------------- Principal Market Amount Value Municipal Bonds (continued) State General Obligation Bonds - 8.67% Minnesota State 5.00% 8/1/21 $ 2,300,000 $ 2,367,919 **Minnesota State, Inverse Floaters ROLS 6.65% 11/1/16 2,000,000 2,185,040 6.65% 11/1/17 500,000 540,610 -------------- 5,093,569 -------------- Territorial Revenue Bonds - 3.47% **Puerto Rico Electric Power Authority Revenue, Inverse Floater ROLS 5.68% 7/1/19 1,000,000 1,012,370 Puerto Rico Public Buildings Authority Revenue Series D 5.25% 7/1/36 1,000,000 1,025,810 -------------- 2,038,180 -------------- Total Municipal Bonds (cost $55,011,534) 57,069,764 -------------- Number of Shares Short-Term Investments - 1.36% Federated Minnesota Municipal Cash Trust 798,493 798,493 -------------- Total Short-Term Investments (cost $798,493) 798,493 -------------- Total Market Value of Securities - 98.46% (cost $55,810,027) 57,868,257 Receivables and Other Assets Net of Liabilities - 1.54% 904,361 -------------- Net Assets Applicable to 5,482,009 Shares Outstanding - 100.00% $ 58,772,618 ============== Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class A ($51,034,099 / 4,761,106 Shares) $10.72 ------ Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class B ($2,851,982 / 265,524 Shares) $10.74 ------ Net Asset Value - Delaware Tax-Free Minnesota Intermediate Fund Class C ($4,886,537 / 455,379 Shares) $10.73 ------ 23 Delaware Tax-Free Minnesota Intermediate Fund Statements of Net Assets (continued) Components of Net Assets at August 31, 2002: Shares of beneficial interest (unlimited authorization -- no par) $ 58,975,332 Undistributed net investment income 9,523 Accumulated net realized loss on investments (2,270,467) Net unrealized appreciation of investments 2,058,230 ------------ Total net assets $ 58,772,618 ============ *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 August 31, 2002. Summary of Abbreviations: AMT - Subject to Alternative Minimum Tax FGIC - Insured by Financial Guaranty Insurance Company FNMA - Insured by Fannie Mae FSA - Insured by Financial Security Assurance Net Asset Value and Offering Price per Share -- Delaware Tax-Free Minnesota Intermediate Fund Net asset value Class A (A) $10.72 Sales charge (2.75% of offering price, or 2.80% of amount invested per share) (B) 0.30 ------ Offering price $11.02 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 24 Delaware Minnesota High-Yield Municipal Bond Fund August 31, 2002 Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds - 96.67% Airline Revenue Bonds - 2.18% Minneapolis/St. Paul Metropolitan Airports Commission Special Facilities Revenue (Northwest Airlines, Inc. Project) Series A 7.00% 4/1/25 (AMT) $ 1,500,000 $ 1,221,945 -------------- 1,221,945 -------------- Continuing Care/Retirement Revenue Bonds - 27.79% Coon Rapids Senior Housing Revenue (Epiphany Senior Citizens Project) 6.00% 11/1/28 3,455,000 2,976,412 Mankato Health Facilities Revenue (Mankato Lutheran Homes Project) Series A 6.875% 10/1/26 300,000 301,401 Minneapolis Health Care Facility Revenue (Jones-Harrison Residence Project) 6.00% 10/1/27 1,565,000 1,367,826 Minnesota Agriculture & Economic Development Board Revenue (Benedictine Health Systems) 5.75% 2/1/29 1,000,000 862,110 Minnetonka Housing Facilities Revenue (Beacon Hill Senior Housing Project, Presbyterian Homes & Services) 7.55% 6/1/19 200,000 204,070 Moorhead Economic Development Authority Multifamily Revenue (Eventide Lutheran Home) Series B 6.00% 6/1/18 870,000 828,971 Northfield Health Care Facilities Revenue (Northfield Retirement Center) Series A 6.00% 5/1/28 1,405,000 1,236,934 Oakdale Elderly Housing Revenue (PHM/Oakdale, Inc. Project) 6.00% 3/1/28 1,800,000 1,620,702 Perham Hospital District Senior Congregate Housing Facilities Revenue (Briarwood Project) 6.25% 11/1/22 620,000 568,521 Rochester Multifamily Revenue (Wedum Shorewood Campus) 6.60% 6/1/36 2,890,000 2,681,140 Shoreview Elderly Housing Revenue (PHM/Shoreview Inc. Project) 6.15% 12/1/33 1,500,000 1,394,220 Twin Valley Congregate Housing Revenue (Living Options, Inc. Project) 5.95% 11/1/28 1,825,000 1,542,691 -------------- 15,584,998 -------------- Principal Market Amount Value Municipal Bonds (continued) Corporate-Backed Revenue Bonds - 4.80% Cloquet Pollution Control Revenue (Potlatch Corp. Projects) 5.90% 10/1/26 $ 1,700,000 $ 1,474,835 International Falls Solid Waste Disposal Revenue (Boise Cascade Corp. Project) 6.85% 12/1/29 (AMT) 1,000,000 1,033,740 Red Wing Industrial Development Revenue (Kmart Corp. Project) 5.50% 7/1/08 300,000 180,750 -------------- 2,689,325 -------------- Higher Education Revenue Bonds - 7.30% Minnesota State Higher Education Facilities Authority Revenue (College of Art & Design) Series 5-D 6.75% 5/1/26 500,000 539,930 (Gustavus Adolphus College) Series 4-X 4.80% 10/1/21 125,000 123,625 (St. Catherine College) Series 5-N1 5.375% 10/1/32 2,500,000 2,513,400 (St. Mary's College) Series 3-Q 6.15% 10/1/23 900,000 915,192 -------------- 4,092,147 -------------- Hospital Revenue Bonds - 8.04% Minneapolis Health Care System Revenue (Fairview Health Services) Series A 5.625% 5/15/32 1,850,000 1,891,255 **Rochester Health Care Facilities Revenue (Mayo Foundation), Inverse Floater ROLS Series H 10.404% 11/15/15 1,500,000 1,583,295 St. Paul Housing & Redevelopment Authority Hospital Revenue (Health East Project) Series A 5.70% 11/1/15 800,000 646,168 Series B 6.625% 11/1/17 445,000 388,196 -------------- 4,508,914 -------------- Multi Family Housing Revenue Bonds - 23.68% Bloomington Multifamily Housing Revenue (Hampshire Apartments) Series A 6.20% 12/1/31 1,250,000 1,192,250 Brooklyn Center Multifamily Housing Revenue (Four Courts Apartments Project) Series A 7.50% 6/1/25 (AMT) 370,000 370,958 Chanhassen Multifamily Revenue (Heritage Park-Section 8) 6.20% 7/1/30 (FHA) (AMT) 300,000 311,568 Chaska Multifamily Revenue (West Suburban Housing Partners) 5.875% 3/1/31 (AMT) 1,000,000 861,900 25 Delaware Minnesota High-Yield Municipal Bond Fund Statements of Net Assets (continued) Principal Market Amount Value Municipal Bonds (continued) Multi Family Housing Revenue Bonds (continued) Hutchinson Multifamily Revenue (Evergreen Apartments Project-Section 8) 5.75% 11/1/28 $ 3,305,000 $ 3,133,768 Minneapolis Multifamily Revenue (Grant Street Apartments Project) Series A 7.25% 11/1/29 2,835,000 2,849,657 (Olson Townhomes Project) 6.00% 12/1/19 (AMT) 800,000 807,656 St. Anthony Multifamily Revenue (Chandler Place Project) Series A 6.05% 11/20/16 (FHA) (GNMA) 135,000 145,161 St. Cloud Housing & Redevelopment Authority Revenue (Sterling Heights Apartments Project) 7.55% 4/1/39 (AMT) 1,530,000 1,545,132 Stillwater Multifamily Revenue (Stillwater Cottages Project) Series A 6.75% 11/1/11 205,000 202,499 7.00% 11/1/16 (AMT) 680,000 667,359 7.00% 11/1/27 340,000 326,393 Washington County Housing & Redevelopment Authority Governmental Revenue (Briar Pond) Series B 7.125% 8/20/34 880,000 869,053 -------------- 13,283,354 -------------- Municipal Lease Revenue Bonds - 3.59% Beltrami County Housing & Redevelopment Authority Revenue 6.10% 2/1/12 460,000 479,513 Hibbing Economic Development Authority Revenue (Hibbing Lease Obligation Project) 6.40% 2/1/12 530,000 529,078 Rice County Certificates of Participation Series A 6.00% 12/1/21 125,000 129,845 St. Paul Housing & Redevelopment Authority Lease Revenue (Acorn Dual Language Community Project) 6.60% 11/1/24 1,000,000 875,640 -------------- 2,014,076 -------------- Political Subdivision General Obligation Bonds - 2.76% Perham Disposal System 6.00% 5/1/22 (AMT) 1,500,000 1,547,385 -------------- 1,547,385 -------------- *Pre-Refunded Bonds - 3.73% Andover Commercial Development Revenue (Downtown Center Project) Series A 7.00% 12/1/12-03 1,640,000 1,779,269 Glencoe Health Care Revenue 6.40% 12/1/15-05 275,000 310,417 -------------- 2,089,686 -------------- Principal Market Amount Value Municipal Bonds (continued) Public Power Revenue Bonds - 4.48% Northern Municipal Power Agency Electric System Revenue Series A 5.00% 1/1/21 $ 2,370,000 $ 2,370,071 Western Minnesota Municipal Power Agency Series A 6.125% 1/1/16 145,000 145,186 -------------- 2,515,257 -------------- Recreational Area Revenue Bonds - 0.64% Woodbury Gross Revenue (Golf Course Bonds) 6.75% 2/1/22 365,000 360,313 -------------- 360,313 -------------- Single Family Housing Revenue Bonds - 3.01% Minnesota State Housing Finance Agency Single Family Mortgage Series E 6.25% 1/1/23 (AMT) 60,000 62,586 Series J 5.90% 7/1/28 (AMT) 1,495,000 1,552,498 Series M 5.875% 1/1/17 70,000 74,674 -------------- 1,689,758 -------------- State General Obligation Bonds - 1.93% **Minnesota State, Inverse Floater ROLS 6.65% 11/1/17 1,000,000 1,081,220 -------------- 1,081,220 -------------- Territorial Revenue Bonds - 2.74% Puerto Rico Commonwealth Highway & Transportation Authority Transportation Revenue Series D 5.25% 7/1/38 1,500,000 1,538,715 -------------- 1,538,715 -------------- Total Municipal Bonds (cost $56,275,260) 54,217,093 -------------- 26 Delaware Minnesota High-Yield Municipal Bond Fund Statements of Net Assets (continued) Number of Market Shares Value Short-Term Investments - 3.91% Federated Minnesota Municipal Cash Trust 2,194,606 $ 2,194,606 -------------- Total Short-Term Investments (cost $2,194,606) 2,194,606 -------------- Total Market Value of Securities - 100.58% (cost $58,469,866) 56,411,699 Liabilities Net of Receivables and Other Assets - (0.58%) (326,771) -------------- Net Assets Applicable to 5,632,545 Shares Outstanding - 100.00% $ 56,084,928 ============== Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class A ($34,866,791 / 3,503,754 Shares) $9.95 ----- Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class B ($13,378,508 / 1,342,152 Shares) $9.97 ----- Net Asset Value - Delaware Minnesota High-Yield Municipal Bond Fund Class C ($7,839,629 / 786,639 Shares) $9.97 ----- Components of Net Assets at August 31, 2002: Shares of beneficial interest (unlimited authorization - no par) $ 59,806,255 Undistributed net investment income 78,432 Accumulated net realized loss on investments (1,741,592) Net unrealized depreciation of investments (2,058,167) -------------- Total net assets $ 56,084,928 ============== *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 August 31, 2002. Summary of Abbreviations: AMT - Subject to Alternative Minimum Tax FHA - Insured by the 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) $ 9.95 Sales charge (3.75% of offering price, or 3.92% of amount invested per share) (B) 0.39 ------ Offering price $10.34 ====== (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 27
Delaware Minnesota Municipal Bond Funds Year Ended August 31, 2002 Statements of Operations Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund Investment Income: Interest $22,859,373 $14,508,772 $3,122,830 $3,579,002 ----------- ----------- ---------- ---------- Expenses: Management fees 2,065,839 1,265,260 273,431 292,241 Distribution expenses-- Class A 881,632 587,564 72,850 83,415 Distribution expenses-- Class B 163,461 130,735 22,938 127,025 Distribution expenses-- Class C 65,794 49,155 37,856 70,296 Dividend disbursing and transfer agent fees and expenses 265,800 196,978 45,834 46,163 Accounting and administration expenses 162,577 109,545 22,515 23,005 Reports and statements to shareholders 57,494 60,022 11,611 13,019 Professional fees 45,833 41,560 4,550 9,020 Registration fees 30,050 50,400 9,485 4,508 Custodian fees 17,465 14,419 1,990 4,790 Trustees' fees 13,850 10,810 4,669 2,750 Other 96,301 56,018 11,735 9,949 ----------- ----------- ---------- ---------- 3,866,096 2,572,466 519,464 686,181 Less expenses absorbed or waived -- -- (1,106) (138,020) Less expenses paid indirectly (9,586) (6,937) (2,102) (1,786) ----------- ----------- ---------- ---------- Total expenses 3,856,510 2,565,529 516,256 546,375 ----------- ----------- ---------- ---------- Net Investment Income 19,002,863 11,943,243 2,606,574 3,032,627 ----------- ----------- ---------- ---------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on investments 589,019 722,262 (371,946) (265,718) Net change in unrealized appreciation/depreciation of investments 565,559 240,814 1,111,501 565,582 ----------- ----------- ---------- ---------- Net Realized and Unrealized Gain on Investments 1,154,578 963,076 739,555 299,864 ----------- ----------- ---------- ---------- Net Increase in Net Assets Resulting from Operations $20,157,441 $12,906,319 $3,346,129 $3,332,491 =========== =========== ========== ==========
See accompanying notes 28
Delaware Minnesota Municipal Bond Funds Statements of Changes in Net Assets Delaware Tax-Free Delaware Tax-Free Minnesota Minnesota Fund Insured Fund ----------------------------- ----------------------------- Year Ended Year Ended 8/31/02 8/31/01 8/31/02 8/31/01 Increase in Net Assets from Operations: Net investment income $ 19,002,863 $ 18,787,973 $ 11,943,243 $ 12,094,821 Net realized gain on investments 589,019 528,573 722,262 154,815 Net change in unrealized appreciation/depreciation of investments 565,559 13,453,249 240,814 9,873,673 ------------- ------------- ------------- ------------- Net increase in net assets resulting from operations 20,157,441 32,769,795 12,906,319 22,123,309 ------------- ------------- ------------- ------------- Dividends and Distributions to Shareholders from: Net investment income: Class A (17,911,817) (17,905,490) (11,176,754) (11,506,724) Class B (707,294) (642,668) (524,370) (462,632) Class C (284,214) (253,954) (196,922) (150,693) ------------- ------------- ------------- ------------- (18,903,325) (18,802,112) (11,898,046) (12,120,049) ------------- ------------- ------------- ------------- Capital Share Transactions: Proceeds from shares sold: Class A 16,869,206 21,679,975 10,427,770 7,800,409 Class B 2,632,871 3,622,057 2,661,996 2,348,412 Class C 2,604,707 1,413,863 2,822,791 1,506,622 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 11,179,488 11,368,600 7,231,300 7,566,286 Class B 471,933 435,323 373,487 316,903 Class C 217,770 205,712 151,192 122,427 ------------- ------------- ------------- ------------- 33,975,975 38,725,530 23,668,536 19,661,059 ------------- ------------- ------------- ------------- Cost of shares repurchased: Class A (35,702,678) (38,788,316) (21,492,616) (20,549,134) Class B (2,059,640) (2,099,267) (1,496,479) (877,557) Class C (1,223,771) (1,943,800) (1,213,668) (1,115,364) ------------- ------------- ------------- ------------- (38,986,089) (42,831,383) (24,202,763) (22,542,055) ------------- ------------- ------------- ------------- Decrease in net assets derived from capital share transactions (5,010,114) (4,105,853) (534,227) (2,880,996) ------------- ------------- ------------- ------------- Net Increase (Decrease) in Net Assets (3,755,998) 9,861,830 474,046 7,122,264 Net Assets: Beginning of year 385,001,787 375,139,957 259,713,795 252,591,531 ------------- ------------- ------------- ------------- End of year $ 381,245,789 $ 385,001,787 $ 260,187,841 $ 259,713,795 ------------- ------------- ------------- -------------
See accompanying notes 29
Delaware Minnesota Municipal Bond Funds Statements of Changes in Net Assets (continued) Delaware Tax-Free Delaware Minnesota High-Yield Minnesota Intermediate Fund Municipal Bond Fund ----------------------------- ----------------------------- Year Ended Year Ended 8/31/02 8/31/01 8/31/02 8/31/01 Increase (Decrease) in Net Assets from Operations: Net investment income $ 2,606,574 $ 2,654,002 $ 3,032,627 $ 3,059,016 Net realized loss on investments (371,946) (9,345) (265,718) (4,113) Net change in unrealized appreciation/depreciation of investments 1,111,501 1,233,510 565,582 1,335,790 ------------ ------------ ------------ ------------- Net increase in net assets resulting from operations 3,346,129 3,878,167 3,332,491 4,390,693 ------------ ------------ ------------ ------------- Dividends and Distributions to Shareholders from: Net investment income: Class A (2,352,222) (2,451,666) (2,008,681) (2,014,775) Class B (91,385) (98,148) (665,433) (660,487) Class C (150,720) (107,038) (369,795) (331,930) ------------ ------------ ------------ ------------- (2,594,327) (2,656,852) (3,043,909) (3,007,192) ------------ ------------ ------------ ------------- Capital Share Transactions: Proceeds from shares sold: Class A 7,136,136 7,120,889 3,612,856 3,532,611 Class B 1,246,593 328,339 1,749,876 1,371,579 Class C 2,492,197 1,059,454 2,087,799 914,201 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 1,785,882 1,845,703 1,136,703 1,150,062 Class B 48,722 54,650 377,589 398,220 Class C 136,215 98,263 217,254 205,140 ------------ ------------ ------------ ------------- 12,845,745 10,507,298 9,182,077 7,571,813 ------------ ------------ ------------ ------------- Cost of shares repurchased: Class A (7,630,163) (7,506,153) (4,666,875) (6,633,193) Class B (920,238) (376,077) (1,750,937) (2,915,824) Class C (865,466) (516,083) (1,322,121) (1,082,376) ------------ ------------ ------------ ------------- (9,415,867) (8,398,313) (7,739,933) (10,631,393) ------------ ------------ ------------ ------------- Increase (decrease) in net assets derived from capital share transactions 3,429,878 2,108,985 1,442,144 (3,059,580) ------------ ------------ ------------ ------------- Net Increase (Decrease) in Net Assets 4,181,680 3,330,300 1,730,726 (1,676,079) Net Assets: Beginning of year 54,590,938 51,260,638 54,354,202 56,030,281 ------------ ------------ ------------ ------------- End of year $ 58,772,618 $ 54,590,938 $ 56,084,928 $ 54,354,202 ------------ ------------ ------------ -------------
See accompanying notes 30 Financial Highlights Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Tax-Free Minnesota Fund Class A - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 12.570 $ 12.120 $ 12.230 $ 13.020 $12.910 $ 12.400 Income (loss) from investment operations: Net investment income 0.634 0.615 0.617 0.628 0.431 0.654 Net realized and unrealized gain (loss) on investments 0.037 0.450 (0.110) (0.752) 0.136 0.511 -------- -------- -------- -------- ------- -------- Total from investment operations 0.671 1.065 0.507 (0.124) 0.567 1.165 -------- -------- -------- -------- ------- -------- Less dividends and distributions from: Net investment income (0.631) (0.615) (0.617) (0.626) (0.435) (0.655) Net realized gain on investments -- -- -- (0.040) (0.022) -- -------- -------- -------- -------- ------- -------- Total dividends and distributions (0.631) (0.615) (0.617) (0.666) (0.457) (0.655) -------- -------- -------- -------- ------- -------- Net asset value, end of period $ 12.610 $ 12.570 $ 12.120 $ 12.230 $13.020 $ 12.910 ======== ======== ======== ======== ======= ======== Total return(1) 5.54% 9.02% 4.39% (1.06%) 4.46% 9.68% Ratios and supplemental data: Net assets, end of period (000 omitted) $356,522 $363,033 $355,573 $394,144 $416,113 $417,365 Ratio of expenses to average net assets 0.98% 1.00% 1.01% 0.94% 0.89% 0.91% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.98% 1.00% 1.06% 0.94% 0.92% 0.95% Ratio of net investment income to average net assets 5.11% 5.00% 5.20% 4.89% 5.00% 5.22% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 5.11% 5.00% 5.15% 4.89% 4.97% 5.18% Portfolio turnover 13% 10% 35% 17% 13% 19%
(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. An expense limitation was in effect for all classes through August 31, 2001. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect 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 B - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 12.580 $12.120 $ 12.240 $ 13.020 $12.910 $ 12.400 Income (loss) from investment operations: Net investment income 0.540 0.523 0.525 0.527 0.366 0.574 Net realized and unrealized gain (loss) on investments 0.037 0.460 (0.120) (0.740) 0.136 0.508 -------- -------- -------- -------- ------- -------- Total from investment operations 0.577 0.983 0.405 (0.213) 0.502 1.082 -------- -------- -------- -------- ------- -------- Less dividends and distributions from: Net investment income (0.537) (0.523) (0.525) (0.527) (0.370) (0.572) Net realized gain on investments -- -- -- (0.040) (0.022) -- -------- -------- -------- -------- ------- -------- Total dividends and distributions (0.537) (0.523) (0.525) (0.567) (0.392) (0.572) -------- -------- -------- -------- ------- -------- Net asset value, end of period $ 12.620 $12.580 $ 12.120 $ 12.240 $13.020 $ 12.910 ======== ======== ======== ======== ======= ======== Total return(1) 4.75% 8.29% 3.50% (1.74%) 3.94% 8.95% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 17,043 $15,927 $ 13,412 $ 13,312 $10,246 $ 8,215 Ratio of expenses to average net assets 1.73% 1.75% 1.76% 1.69% 1.64% 1.56% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.73% 1.75% 1.81% 1.69% 1.67% 1.60% Ratio of net investment income to average net assets 4.36% 4.25% 4.45% 4.14% 4.25% 4.57% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.36% 4.25% 4.40% 4.14% 4.22% 4.53% Portfolio turnover 13% 10% 35% 17% 13% 19%
(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. An expense limitation was in effect for all classes through August 31, 2001. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect 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 Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 12.590 $12.140 $ 12.250 $ 13.040 $12.920 $ 12.410 Income (loss) from investment operations: Net investment income 0.540 0.523 0.527 0.536 0.374 0.564 Net realized and unrealized gain (loss) on investments 0.047 0.450 (0.110) (0.756) 0.138 0.508 -------- -------- -------- -------- ------- -------- Total from investment operations 0.587 0.973 0.417 (0.220) 0.512 1.072 -------- -------- -------- -------- ------- -------- Less dividends and distributions from: Net investment income (0.537) (0.523) (0.527) (0.530) (0.370) (0.562) Net realized gain on investments -- -- -- (0.040) (0.022) -- -------- -------- -------- -------- ------- -------- Total dividends and distributions (0.537) (0.523) (0.527) (0.570) (0.392) (0.562) -------- -------- -------- -------- ------- -------- Net asset value, end of period $ 12.640 $ 12.590 $ 12.140 $ 12.250 $13.040 $ 12.920 ======== ======== ======== ======== ======= ======== Total return(1) 4.82% 8.20% 3.60% (1.80%) 4.02% 8.82% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 7,682 $ 6,042 $ 6,156 $ 6,814 $ 4,914 $ 3,083 Ratio of expenses to average net assets 1.73% 1.75% 1.76% 1.69% 1.64% 1.65% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.73% 1.75% 1.81% 1.69% 1.67% 1.69% Ratio of net investment income to average net assets 4.36% 4.25% 4.45% 4.14% 4.25% 4.48% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.36% 4.25% 4.40% 4.14% 4.22% 4.44% Portfolio turnover 13% 10% 35% 17% 13% 19%
(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. An expense limitation was in effect for all classes through August 31, 2001. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.003, a decrease in net realized and unrealized gain (loss) per share of $0.003, and an increase in the ratio of net investment income to average net assets of 0.03%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect 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 A - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 10.900 $10.480 $ 10.520 $ 11.050 $10.940 $ 10.600 Income (loss) from investment operations: Net investment income 0.514 0.514 0.507 0.518 0.349 0.533 Net realized and unrealized gain (loss) on investments 0.038 0.421 (0.041) (0.530) 0.111 0.341 -------- -------- -------- -------- ------- -------- Total from investment operations 0.552 0.935 0.466 (0.012) 0.460 0.874 -------- -------- -------- -------- ------- -------- Less dividends and distributions from: Net investment income (0.512) (0.515) (0.506) (0.518) (0.350) (0.534) -------- -------- -------- -------- ------- -------- Total dividends and distributions (0.512) (0.515) (0.506) (0.518) (0.350) (0.534) -------- -------- -------- -------- ------- -------- Net asset value, end of period $ 10.940 $ 10.900 $ 10.480 $ 10.520 $11.050 $ 10.940 ======== ======== ======== ======== ======= ======== Total return(1) 5.25% 9.14% 4.63% (0.17%) 4.28% 8.49% Ratios and supplemental data: Net assets, end of period (000 omitted) 239,763 $ 242,716 $238,486 $268,507 $283,057 $288,494 Ratio of expenses to average net assets 0.96% 0.90% 1.00% 0.94% 0.92% 0.92% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.96% 0.90% 1.01% 0.94% 0.94% 0.94% Ratio of net investment income to average net assets 4.78% 4.82% 4.93% 4.74% 4.79% 5.01% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.78% 4.82% 4.92% 4.74% 4.77% 4.99% Portfolio turnover 15% 7% 35% 4% 6% 21%
(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. An expense limitation was in effect for all classes through August 31, 2000. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. 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 B - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 10.890 $10.470 $ 10.510 $ 11.040 $10.930 $ 10.580 Income (loss) from investment operations: Net investment income 0.433 0.434 0.431 0.436 0.294 0.454 Net realized and unrealized gain (loss) on investments 0.048 0.422 (0.042) (0.529) 0.111 0.348 -------- -------- -------- -------- ------- -------- Total from investment operations 0.481 0.856 0.389 (0.093) 0.405 0.802 -------- -------- -------- -------- ------- -------- Less dividends and distributions from: Net investment income (0.431) (0.436) (0.429) (0.437) (0.295) (0.452) -------- -------- -------- -------- ------- -------- Total dividends and distributions (0.431) (0.436) (0.429) (0.437) (0.295) (0.452) -------- -------- -------- -------- ------- -------- Net asset value, end of period $ 10.940 $10.890 $ 10.470 $ 10.510 $11.040 $ 10.930 ======== ======== ======== ======== ======= ======== Total return(1) 4.56% 8.34% 3.86% (0.91%) 3.76% 7.77% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 14,341 $12,732 $ 10,491 $ 11,827 $10,374 $ 8,926 Ratio of expenses to average net assets 1.71% 1.65% 1.75% 1.69% 1.67% 1.67% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.71% 1.65% 1.76% 1.69% 1.69% 1.69% Ratio of net investment income to average net assets 4.03% 4.07% 4.18% 3.99% 4.04% 4.26% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.03% 4.07% 4.17% 3.99% 4.02% 4.24% Portfolio turnover 15% 7% 35% 4% 6% 21%
(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. An expense limitation was in effect for all classes through August 31, 2000. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. 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 Insured Fund Class C - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 10.910 $10.480 $ 10.520 $ 11.050 $ 10.940 $ 10.600 Income (loss) from investment operations: Net investment income 0.433 0.434 0.431 0.438 0.295 0.454 Net realized and unrealized gain (loss) on investments 0.038 0.432 (0.042) (0.531) 0.110 0.338 -------- -------- -------- -------- -------- -------- Total from investment operations 0.471 0.866 0.389 (0.093) 0.405 0.792 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.431) (0.436) (0.429) (0.437) (0.295) (0.452) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.431) (0.436) (0.429) (0.437) (0.295) (0.452) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.950 $10.910 $ 10.480 $ 10.520 $ 11.050 $ 10.940 ======== ======== ======== ======== ======== ======== Total return(1) 4.46% 8.42% 3.85% (0.91%) 3.76% 7.66% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 6,083 $ 4,265 $ 3,615 $ 4,253 $ 3,207 $ 3,096 Ratio of expenses to average net assets 1.71% 1.65% 1.75% 1.69% 1.67% 1.67% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.71% 1.65% 1.76% 1.69% 1.69% 1.69% Ratio of net investment income to average net assets 4.03% 4.07% 4.18% 3.99% 4.04% 4.26% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.03% 4.07% 4.17% 3.99% 4.02% 4.24% Portfolio turnover 15% 7% 35% 4% 6% 21%
(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. An expense limitation was in effect for all classes through August 31, 2000. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.002, a decrease in net realized and unrealized gain (loss) per share of $0.002, and an increase in the ratio of net investment income to average net assets of 0.02%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. 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 A - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 10.580 $10.350 $ 10.610 $ 11.160 $ 11.170 $ 10.990 Income (loss) from investment operations Net investment income 0.512 0.526 0.538 0.541 0.363 0.535 Net realized and unrealized gain (loss) on investments 0.138 0.230 (0.260) (0.550) (0.009) 0.180 -------- -------- -------- -------- -------- -------- Total from investment operations 0.650 0.756 0.278 (0.009) 0.354 0.715 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.510) (0.526) (0.538) (0.541) (0.364) (0.535) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.510) (0.526) (0.538) (0.541) (0.364) (0.535) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.720 $10.580 $ 10.350 $ 10.610 $ 11.160 $ 11.170 ======== ======== ======== ======== ======== ======== Total return(1) 6.34% 7.50% 2.77% (0.14%) 3.22% 6.69% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 51,034 $49,089 $ 46,523 $ 56,222 $ 54,281 $ 57,524 Ratio of expenses to average net assets 0.85% 0.90% 0.93% 0.79% 0.80% 0.91% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.85% 0.93% 0.95% 0.79% 0.80% 0.95% Ratio of net investment income to average net assets 4.86% 5.04% 5.22% 4.91% 4.90% 4.86% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.86% 5.01% 5.20% 4.91% 4.90% 4.82% Portfolio turnover 35% 24% 9% 13% 14% 21%
(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. An expense limitation was in effect for all classes. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than $0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. 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 B - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 10.600 $10.370 $ 10.630 $ 11.180 $ 11.170 $ 10.990 Income (loss) from investment operations Net investment income 0.423 0.438 0.451 0.450 0.301 0.437 Net realized and unrealized gain (loss) on investments 0.137 0.232 (0.262) (0.552) 0.009 0.190 -------- -------- -------- -------- -------- -------- Total from investment operations 0.560 0.670 0.189 (0.102) 0.310 0.627 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.420) (0.440) (0.449) (0.448) (0.300) (0.447) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.420) (0.440) (0.449) (0.448) (0.300) (0.447) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.740 $10.600 $ 10.370 $ 10.630 $ 11.180 $ 11.170 ======== ======== ======== ======== ======== ======== Total return(1) 5.43% 6.59% 1.89% (0.98%) 2.82% 5.84% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 2,852 $ 2,443 $ 2,380 $ 2,878 $ 1,375 $ 910 Ratio of expenses to average net assets 1.70% 1.75% 1.78% 1.64% 1.65% 1.81% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.78% 1.80% 1.64% 1.65% 1.85% Ratio of net investment income to average net assets 4.01% 4.19% 4.37% 4.06% 4.05% 3.96% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.01% 4.16% 4.35% 4.06% 4.05% 3.92% Portfolio turnover 35% 24% 9% 13% 14% 21%
(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. An expense limitation was in effect for all classes. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than $0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 38 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 - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 10.590 $10.360 $ 10.610 $ 11.170 $ 11.170 $ 10.990 Income (loss) from investment operations Net investment income 0.423 0.437 0.451 0.449 0.301 0.440 Net realized and unrealized gain (loss) on investments 0.137 0.233 (0.253) (0.561) (0.001) 0.187 -------- -------- -------- -------- -------- -------- Total from investment operations 0.560 0.670 0.198 (0.112) 0.300 0.627 -------- -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.420) (0.440) (0.448) (0.448) (0.300) (0.447) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.420) (0.440) (0.448) (0.448) (0.300) (0.447) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 10.730 $10.590 $ 10.360 $ 10.610 $ 11.170 $ 11.170 ======== ======== ======== ======== ======== ======== Total return(1) 5.44% 6.59% 1.98% (1.08%) 2.73% 5.84% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 4,887 $ 3,059 $ 2,358 $ 2,293 $ 1,601 $ 1,512 Ratio of expenses to average net assets 1.70% 1.75% 1.78% 1.64% 1.65% 1.77% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.70% 1.78% 1.80% 1.64% 1.65% 1.81% Ratio of net investment income to average net assets 4.01% 4.19% 4.37% 4.06% 4.05% 4.00% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.01% 4.16% 4.35% 4.06% 4.05% 3.96% Portfolio turnover 35% 24% 9% 13% 14% 21%
(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. An expense limitation was in effect for all classes. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of less than $0.001, a decrease in net realized and unrealized gain (loss) per share of less than $0.001, and an increase in the ratio of net investment income to average net assets of less than $0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. 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 A - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 9.900 $ 9.650 $ 10.210 $ 10.810 $ 10.650 $ 10.180 Income (loss) from investment operations Net investment income 0.586 0.581 0.576 0.583 0.392 0.643 Net realized and unrealized gain (loss) on investments 0.056 0.243 (0.564) (0.603) 0.170 0.463 -------- ------- -------- -------- -------- -------- Total from investment operations 0.642 0.824 0.012 (0.020) 0.562 1.106 -------- ------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.592) (0.574) (0.572) (0.580) (0.402) (0.636) -------- ------- -------- -------- -------- -------- Total dividends and distributions (0.592) (0.574) (0.572) (0.580) (0.402) (0.636) -------- ------- -------- -------- -------- -------- Net asset value, end of period $ 9.950 $ 9.900 $ 9.650 $ 10.210 $ 10.810 $ 10.650 ======== ======= ======== ======== ======== ======== Total return(1) 6.74% 8.84% 0.32% (0.27%) 5.37% 11.26% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 34,867 $34,615 $ 35,689 $ 41,813 $ 33,296 $ 19,017 Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.57% 0.40% 0.09% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.01% 0.94% 1.14% 1.07% 1.20% 1.24% Ratio of net investment income to average net assets 5.98% 6.01% 5.99% 5.46% 5.50% 6.16% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 5.72% 5.82% 5.60% 4.96% 4.70% 5.01% Portfolio turnover 33% 13% 8% 35% 7% 23%
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of 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. An expense limitation was in effect for all classes. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) 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. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.001, a decrease in net realized and unrealized gain (loss) per share of $0.001, and an increase in the ratio of net investment income to average net assets of 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. 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 B - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 9.910 $ 9.650 $ 10.210 $ 10.810 $ 10.660 $ 10.190 Income (loss) from investment operations Net investment income 0.513 0.509 0.504 0.507 0.343 0.557 Net realized and unrealized gain (loss) on investments 0.063 0.248 (0.570) (0.604) 0.159 0.470 -------- ------- -------- -------- -------- -------- Total from investment operations 0.576 0.757 (0.066) (0.097) 0.502 1.027 -------- ------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.516) (0.497) (0.494) (0.503) (0.352) (0.557) -------- ------- -------- -------- -------- -------- Total dividends and distributions (0.516) (0.497) (0.494) (0.503) (0.352) (0.557) -------- ------- -------- -------- -------- -------- Net asset value, end of period $ 9.970 $ 9.910 $ 9.650 $ 10.210 $ 10.810 $ 10.660 ======== ======= ======== ======== ======== ======== Total return(1) 6.03% 8.09% (0.49%) (0.99%) 4.77% 10.41% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 13,379 $12,932 $ 13,743 $ 15,814 $ 13,351 $ 8,201 Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.32% 1.15% 0.85% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.76% 1.69% 1.89% 1.82% 1.95% 2.00% Ratio of net investment income to average net assets 5.23% 5.26% 5.24% 4.71% 4.75% 5.40% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.97% 5.07% 4.85% 4.21% 3.95% 4.25% Portfolio turnover 33% 13% 8% 35% 7% 23%
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of 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. An expense limitation was in effect for all classes. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) 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. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.001, a decrease in net realized and unrealized gain (loss) per share of $0.001, and an increase in the ratio of net investment income to average net assets of 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 41 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 - ------------------------------------------------------------------------------------------------------------------------------------ Eight Months Year Year Ended Ended Ended 8/31/02(4) 8/31/01 8/31/00 8/31/99 8/31/98(3) 12/31/97(2) Net asset value, beginning of period $ 9.910 $ 9.650 $ 10.210 $ 10.810 $ 10.650 $ 10.180 Income (loss) from investment operations Net investment income 0.513 0.509 0.504 0.505 0.340 0.572 Net realized and unrealized gain (loss) on investments 0.063 0.248 (0.570) (0.602) 0.170 0.455 -------- ------- -------- -------- -------- -------- Total from investment operations 0.576 0.757 (0.066) (0.097) 0.510 1.027 -------- ------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income (0.516) (0.497) (0.494) (0.503) (0.350) (0.557) -------- ------- -------- -------- -------- -------- Total dividends and distributions (0.516) (0.497) (0.494) (0.503) (0.350) (0.557) -------- ------- -------- -------- -------- -------- Net asset value, end of period $ 9.970 $ 9.910 $ 9.650 $ 10.210 $ 10.810 $ 10.650 ======== ======= ======== ======== ======== ======== Total return(1) 6.03% 8.09% (0.49%) (0.99%) 4.87% 10.41% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 7,840 $ 6,807 $ 6,599 $ 7,515 $ 5,165 $ 3,178 Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.32% 1.15% 0.83% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.76% 1.69% 1.89% 1.82% 1.95% 1.98% Ratio of net investment income to average net assets 5.23% 5.26% 5.24% 4.71% 4.75% 5.42% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 4.97% 5.07% 4.85% 4.21% 3.95% 4.27% Portfolio turnover 33% 13% 8% 35% 7% 23%
(1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of 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. An expense limitation was in effect for all classes. Performance would have been lower had the expense limitation not been in effect. (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 and portfolio turnover have been annualized and total return has not been annualized. (4) 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. The effect of this change for the year ended August 31, 2002 was an increase in net investment income per share of $0.001, a decrease in net realized and unrealized gain (loss) per share of $0.001, and an increase in the ratio of net investment income to average net assets of 0.01%. Per share data and ratios for periods prior to September 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 42 Notes Delaware Minnesota Municipal Bond Funds to Financial Statements August 31, 2002 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 (formerly Delaware 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 the Minnesota state personal income tax, as is consistent with preservation of capital. The investment objective of Delaware Tax-Free Minnesota Intermediate Fund is to seek to provide investors with preservation of capital and, secondarily, current income exempt from federal income tax and the 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 the Minnesota state personal income tax, primarily through investment in medium- and lower-grade municipal obligations. 1. Significant Accounting Policies The following accounting policies are in accordance with 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. 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") that requires amortization of all discount or premium on debt securities. Prior to September 1, 2001, the Funds recognized market discount at disposition, which conformed to the Funds' 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. 43 Notes Delaware Minnesota Municipal Bond Funds 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 $ 564,271 $ 360,668 $ 6,905 $ 10,276 Net unrealized appreciation (depreciation) (564,271) (360,668) (6,905) (10,276)
The effect of this change for the year ended August 31, 2002, was 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 $ 99,538 $45,197 $ 2,724 $ 6,333 Net unrealized appreciation (depreciation) (99,538) (45,197) (2,724) (6,333)
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 year ended August 31, 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 $ 9,014 $ 6,073 $ 1,312 $ 1,275 Earnings credits 572 864 790 511
44 Notes Delaware Minnesota Municipal Bond Funds to Financial Statements (continued) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee based on each Fund's average daily net assets as follows:
Delaware 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, 2003 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, 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. 45 Notes Delaware Minnesota Municipal Bond Funds to Financial Statements (continued) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued) At August 31, 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 $ 52,737 $ 40,035 $ 14,514 $ 13,045 Dividend disbursing, transfer agent fees accounting and other expenses payable to DSC 28,795 19,774 4,500 4,451 Other expenses payable to DMC and affiliates 13,568 9,465 1,968 1,770
For the year ended August 31, 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 - ---------- ---------- ---------- ---------- $46,253 $35,425 $9,432 $10,329 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 year ended August 31, 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 $48,225,466 $42,185,245 $22,042,542 $17,759,046 Sales 47,181,472 37,805,336 18,567,347 17,081,429 At August 31, 2002, the cost of investments and unrealized appreciation (depreciation) for federal income tax purposes 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 $355,987,689 $236,572,133 $55,800,398 $58,453,257 ============ ============ =========== =========== Aggregate unrealized appreciation $ 25,639,768 $ 19,879,690 $ 2,468,856 $ 694,256 Aggregate unrealized depreciation (3,358,346) -- (400,997) (2,735,814) ----------- ------------ ----------- ----------- Net unrealized appreciation (depreciation) $ 22,281,422 $ 19,879,690 $ 2,067,859 $(2,041,558) ============ ============ =========== ===========
46 Notes Delaware Minnesota Municipal Bond Funds to Financial Statements (continued) 4. Dividend and Distribution Information Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. The tax character of dividends and distributions paid during the years ended August 31, 2002 and 2001 was as follows:
Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Year ended 8/31/02 Fund Fund Fund Bond Fund - ------------------ ---------- ---------- ---------- ---------- Tax-exempt income $ 18,903,325 $11,898,046 $2,594,327 $3,043,909 Delaware Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Tax-Free Minnesota Minnesota High-Yield Minnesota Insured Intermediate Municipal Year ended 8/31/01 Fund Fund Fund Bond Fund - ------------------ ---------- ---------- ---------- ---------- Tax-exempt income $ 18,802,112 $12,120,049 $2,656,852 $3,007,192
As of August 31, 2002, the components of net assets on a tax basis 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 ---------- ------------ ------------ ------------ Shares of beneficial interest $358,883,263 $246,188,645 $ 58,975,332 $ 59,806,255 Undistributed tax-exempt income -- -- 9,523 78,432 Distributions in excess of tax-exempt income (22,418) -- -- -- Undistributed long-term capital gain 103,522 -- -- -- Capital loss carryforwards -- (5,880,494) (1,912,187) (1,539,055) Post-October losses -- -- (367,909) (219,146) Unrealized appreciation (depreciation) of investments 22,281,422 19,879,690 2,067,859 (2,041,558) ------------- ------------ ------------ ------------ Net assets $381,245,789 $260,187,841 $ 58,772,618 $ 56,084,928 ------------- ------------ ------------ ------------
For federal income tax purposes, the Funds had accumulated capital losses as of August 31, 2002, which may be carried forward and applied against future capital gains. Such capital loss carryforward amounts will expire as follows:
Delaware Delaware Delaware Tax-Free Tax-Free Minnesota Minnesota Minnesota High-Yield Insured Intermediate Municipal Year of Expiration Fund Fund Bond Fund - ----------------------- ---------- ---------- ---------- 2003 $ 4,605,018 $ -- $ -- 2004 572,208 43,982 6,809 2005 -- -- 4,334 2006 -- -- 648 2007 -- -- 369 2008 589,183 423,683 201,822 2009 114,085 1,440,485 1,267,552 2010 -- 4,037 57,521 ------------ ----------- ---------- Total $ 5,880,494 $ 1,912,187 $1,539,055 ============ =========== ==========
Post-October losses represent losses realized on investment transactions from November 1, 2001 through August 31, 2002 that, in accordance with federal income tax regulations, the Funds have elected to defer and treat as having arisen in the following fiscal year. 47 Notes Delaware Minnesota Municipal Bond Funds to Financial Statements (continued) 5. Capital Shares Transactions in capital shares were as follows:
Delaware Tax-Free Delaware Tax-Free Minnesota Minnesota Fund Insured Fund ---------------- ---------------- Year Ended Year Ended 8/31/02 8/31/01 8/31/02 8/31/01 Shares sold: Class A 1,357,657 1,770,989 968,339 731,060 Class B 211,626 294,861 247,346 219,232 Class C 209,053 113,913 263,348 140,840 Shares issued upon reinvestment of dividends and distributions: Class A 901,116 925,446 672,254 709,319 Class B 38,015 35,392 34,747 29,740 Class C 17,519 16,718 14,038 11,473 ----------- ---------- ---------- ----------- 2,734,986 3,157,319 2,200,072 1,841,664 =========== ========== ========== =========== Shares repurchased: Class A (2,873,662) (3,162,433) (1,997,218) (1,935,487) Class B (165,708) (170,358) (139,579) (82,102) Class C (98,569) (158,031) (113,011) (106,076) ----------- ---------- ---------- ----------- (3,137,939) (3,490,822) (2,249,808) (2,123,665) ----------- ---------- ---------- ----------- Net decrease (402,953) (333,503) (49,736) (282,001) =========== ========== ========== ===========
48 Notes Delaware Minnesota Municipal Bond Funds to Financial Statements (continued) 5. Capital Shares (continued)
Delaware Tax-Free Delaware Minnesota Minnesota High-Yield Intermediate Fund Municipal Bond Fund ---------------- ------------------- Year Ended Year Ended 8/31/02 8/31/01 8/31/02 8/31/01 Shares sold: Class A 677,876 687,482 367,765 365,212 Class B 117,966 31,419 178,170 141,565 Class C 236,241 101,324 212,604 94,018 Shares issued upon reinvestment of dividends and distributions: Class A 169,701 177,275 115,976 118,907 Class B 4,614 5,242 38,464 41,137 Class C 12,929 9,426 22,134 21,196 --------- --------- --------- ---------- 1,219,327 1,012,168 935,113 782,035 ========= ========= ========= ========== Shares repurchased: Class A (725,641) (721,185) (476,413) (687,404) Class B (87,460) (35,849) (179,051) (301,645) Class C (82,670) (49,584) (134,893) (112,047) --------- --------- --------- ---------- (895,771) (806,618) (790,357) (1,101,096) --------- --------- --------- ---------- Net increase (decrease) 323,556 205,550 144,756 (319,061) ========= ========= ========= ==========
6. 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 August 31, 2002 or at any time during the year. 7. Credit and Market Risk The Funds concentrate their investments in securities issued by municipalities, mainly in Minnesota. The value of these investments may be adversely affected by new legislation within the state, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statements of Net Assets. 49 Notes Delaware Minnesota Municipal Bond Funds to Financial Statements (continued) 8. Tax Information (Unaudited) The information set forth below is for each Fund's fiscal year as required by federal laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of a fund. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information. For the fiscal year ended August 31, 2002, each Fund designates distributions paid during the year as follows:
(A) (B) Long-Term Ordinary (C) (D) Capital Gains Income Tax-Exempt Total Distributions Distributions Distributions Distributions Funds (Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis) - ----------------- ------------ ------------- ------------ ------------- Delaware Tax-Free Minnesota Fund -- -- 100% 100% Delaware Tax-Free Minnesota Insured Fund -- -- 100% 100% Delaware Tax-Free Minnesota Intermediate Fund -- -- 100% 100% Delaware Minnesota High-Yield Municipal Bond Fund -- -- 100% 100%
(A), (B) and (C) are based on a percentage of each Fund's total distributions. 50 Report of Independent Auditors To the Shareholders and Board of Trustees Voyageur Tax Free Funds -- Delaware Tax-Free Minnesota Fund Voyageur Insured Funds -- Delaware Tax-Free Minnesota Insured Fund Voyageur Intermediate Tax Free Funds -- Delaware Tax-Free Minnesota Intermediate Fund Voyageur Mutual Funds -- Delaware Minnesota High-Yield Municipal Bond Fund We have audited the accompanying statements of net assets 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 (the "Funds") as of August 31, 2002, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2002, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the above listed Funds at August 31, 2002, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the periods presented therein, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP - --------------------------------- Ernst & Young LLP Philadelphia, Pennsylvania October 4, 2002 51 Board of Trustees/Officers Addendum A mutual fund is governed by a Board of Trustees which has oversight responsibility for the management of a fund's business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor and others that perform services for the fund. The independent fund trustees, in particular, are advocates for shareholder interests. The following is a list of the Trustees/Officers and certain background and related information.
Principal Number of Other Name, Position(s) Occupation(s) Portfolios in Fund Directorships Address Held with Length of Time During Complex Overseen Held by and Birthdate Fund(s) Served Past 5 Years by Trustee Trustee - ------------------------------------------------------------------------------------------------------------------------------------ Interested Trustees Charles E. Haldeman, Jr.(1)(5) Chairman 2 Years Since January 1, 2000, 89 None 2005 Market Street and Trustee Mr. Haldeman has served in Philadelphia, PA various capacities at different 19103 times at Delaware Investments(2) October 29, 1948 President/Chief Operating Officer/Director - United Asset Management (January 1998 - January 2000) Partner/Director - Cooke and Bieler, Inc. (Investment Management) (June 1974 - January 1998) David K. Downes(3) President, 9 Years - Mr. Downes has 107 Director/President - 2005 Market Street Chief Executive Executive Officer served in various Lincoln National Philadelphia, PA Officer, executive capacities Convertible Securities 19103 Chief Financial 3 Years - Trustee at different times Fund, Inc. Officer and Trustee at Delaware Investments January 8, 1940 Director/President - Lincoln National Income Fund, Inc. Independent Trustees Walter P. Babich Trustee 14 Years Board Chairman - 107 None 460 North Gulph Road Citadel Constructors, Inc. King of Prussia, PA (1989 - Present) 19406 October 1, 1927 John H. Durham Trustee 23 Years(4) Private Investor 107 Trustee - P.O. Box 819 Abington Memorial Gwynedd Valley, PA Hospital Foundation 19437 August 7, 1937 President/Director - 22 WR Corporation John A. Fry(5) Trustee 1 Year President - 89 Director - P.O. Box 3003 Franklin & Marshall College Sovereign Bancorp Lancaster, PA (June 2002 - Present) 17604 Executive Vice President - Director - University of Pennsylvania Sovereign Bank May 28, 1960 (April 1995 - June 2002)
52
Principal Number of Other Name, Position(s) Occupation(s) Portfolios in Fund Directorships Address Held with Length of Time During Complex Overseen Held by and Birthdate Fund(s) Served Past 5 Years by Trustee/Officer Trustee/Officer - ------------------------------------------------------------------------------------------------------------------------------------ Independent Trustees (continued) Anthony D. Knerr Trustee 12 Years Founder/Managing Director - 107 None 500 Fifth Avenue Anthony Knerr & Associates New York, NY (Strategic Consulting) 10110 (1990 - Present) December 7, 1938 Ann R. Leven Trustee 13 Years Treasurer/Chief Fiscal Officer - 107 Director - 785 Park Avenue National Gallery of Art Recoton Corporation New York, NY (1994 - 1999) 10021 Director - Systemax, Inc. November 1, 1940 Director - Andy Warhol Foundation Thomas F. Madison Trustee 8 Years President/Chief 107 Director - Valmont 200 South Fifth Street Executive Officer - Industries, Inc. Suite 2100 MLM Partners, Inc. Minneapolis, MN (Small Business Investing Director - ACI 55402 and Consulting) Telecentrics Inc. (January 1993 - Present) February 25, 1936 Director - Digital River Inc. Director - Rimage Corporation Janet L. Yeomans Trustee 3 Years Vice President Treasurer - 107 None Building 220-13W-37 3M Corporation St. Paul, MN (July 1995 - Present) 55144 Ms. Yeomans has held July 31, 1948 various management positions at 3M Corporation since 1983. Officers William E. Dodge Executive Vice 2 Years Executive Vice President and 107 None 2005 Market Street President and Chief Investment Officer - Philadelphia, PA Chief Investment Equity of Delaware 19103 Officer - Equity Investment Advisers, a series of Delaware Management June 29, 1949 Business Trust (April 1999 - Present) President, Director of Marketing and Senior Portfolio Manager - Marvin & Palmer Associates (Investment Management) (August 1996 - April 1999)
53
Principal Number of Other Name, Position(s) Occupation(s) Portfolios in Fund Directorships Address Held with Length of Time During Complex Overseen Held by and Birthdate Fund(s) Served Past 5 Years by Trustee/Officer Trustee/Officer - ------------------------------------------------------------------------------------------------------------------------------------ Officers (continued) Jude T. Driscoll(6) Executive Vice 1 Year Executive Vice President and 107 None 2005 Market Street President and Head of Fixed-Income of Philadelphia, PA Head of Delaware Investment Advisers, 19103 Fixed-Income a series of Delaware Management Business Trust March 10, 1963 (August 2000 - Present) Senior Vice President and Director of Fixed-Income Process - Conseco Capital Management (June 1998 - August 2000) Managing Director - NationsBanc Capital Markets (February 1996 - June 1998) Richard J. Flannery Executive Vice President, 4 Years Mr. Flannery has served in 107 None 2005 Market Street General Counsel and various executive capacities Philadelphia, PA Chief Administrative Officer at different times at 19103 Delaware Investments. September 30, 1957 Richelle S. Maestro Senior Vice President, 3 Years Ms. Maestro has served in 107 None 2005 Market Street Deputy General Counsel various executive capacities Philadelphia, PA and Secretary at different times at 19103 Delaware Investments. November 26, 1957 Michael P. Bishof Senior Vice President 6 Years Mr. Bishof has served in 107 None 2005 Market Street and Treasurer various executive capacities Philadelphia, PA at different times at 19103 Delaware Investments. August 18,1962
(1) Mr. Haldeman is considered to be an "Interested Trustee" because he is an executive officer of the Fund's manager, accounting service provider and transfer agent. Effective October 2002, Mr. Haldeman has resigned his position with the Fund and Delaware Investments. (2) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Registrant's investment advisor, principal underwriter and its transfer agent. (3) Mr. Downes is considered to be an "Interested Trustee" because he is an executive officer of the Fund's manager, distributor, accounting service provider and transfer agent. (4) Mr. Durham served as a Director Emeritus from 1995 through 1998. (5) Mr. Haldeman and Mr. Fry are not Trustees of the portfolios of Voyageur Insured Funds, Voyageur Intermediate Tax-Free Funds, Voyageur Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual Funds III and Voyageur Tax Free Funds. (6) Effective October 2002, Mr. Driscoll began serving as executive officer of the Fund's manager, accounting service provider and transfer agent. The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918. 54 This page intentionally left blank. 55 This page intentionally left blank. 56 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 Structured Equity Products Group Delaware Diversified Growth Fund Delaware Diversified Value Fund Delaware Group Foundation Funds Delaware Balanced Allocation Portfolio Delaware Growth Allocation Portfolio Delaware Income Allocation 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 annual report is for the information of Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Insured Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond 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 Walter P. Babich William E. Dodge Investment Manager Board Chairman Executive Vice President and Delaware Management Company Citadel Constructors, Inc. Chief Investment Officer, Equity Philadelphia, PA King of Prussia, PA Delaware Investments Family of Funds Philadelphia, PA David K. Downes International Affiliate President and Chief Executive Officer Delaware International Advisers Ltd. Delaware Investments Family of Funds Jude T. Driscoll London, England Philadelphia, PA Executive Vice President and Head of Fixed Income National Distributor Delaware Investments Family of Funds Delaware Distributors, L.P. John H. Durham Philadelphia, PA Philadelphia, PA Private Investor Gwynedd Valley, PA Richard J. Flannery Shareholder Servicing, Dividend President and Chief Executive Officer Disbursing and Transfer Agent Delaware Distributors, L.P. Delaware Service Company, Inc. Anthony D. Knerr Philadelphia, PA 2005 Market Street Consultant Philadelphia, PA 19103-7094 Anthony Knerr & Associates New York, NY Richelle S. Maestro For Shareholders Senior Vice President, Deputy General 800 523-1918 Ann R. Leven Counsel and Secretary Former Treasurer/Chief Fiscal Officer Delaware Investments Family of Funds For Securities Dealers and Financial National Gallery of Art Philadelphia, PA Institutions Representatives Only Washington, DC 800 362-7500 Web site Thomas F. Madison Michael P. Bishof www.delawareinvestments.com President and Chief Executive Officer Senior Vice President and Treasurer MLM Partners, Inc. Delaware Investments Family of Funds Minneapolis, MN Philadelphia, PA Janet L. Yeomans Vice President and Treasurer 3M Corporation St. Paul, MN
(6695) Printed in the USA AR-MNALL [8/02] VG 10/02 (J8648/EXP: 10/03) -----END PRIVACY-ENHANCED MESSAGE-----