-----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, SY/zfAdozcJQ8T+PQk/8puYq8iicE22gCPZoXZeZNPfgiAYVKcQQwFMxtDVvwLiY rUkiYvCiPchIrPu1VYe/eA== 0000950116-98-000537.txt : 19980305 0000950116-98-000537.hdr.sgml : 19980305 ACCESSION NUMBER: 0000950116-98-000537 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980304 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR TAX FREE FUNDS INC CENTRAL INDEX KEY: 0000733362 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03910 FILM NUMBER: 98557184 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123767000 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA TAX FREE FUNDS INC DATE OF NAME CHANGE: 19910226 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE EXEMPT FLEX FUND INC DATE OF NAME CHANGE: 19900131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR INTERMEDIATE TAX FREE FUNDS INC CENTRAL INDEX KEY: 0000773675 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04364 FILM NUMBER: 98557185 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123718684 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA INTERMEDIATE TAX FREE FUNDS INC DATE OF NAME CHANGE: 19920305 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE EXEMPT CAPITAL CONSERVATION FUND INC DATE OF NAME CHANGE: 19900131 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE EXEMPT INTERMEDIATE TERM FUND INC DATE OF NAME CHANGE: 19860310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR INSURED FUNDS INC CENTRAL INDEX KEY: 0000809064 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04973 FILM NUMBER: 98557186 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123718684 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH STREET STREET 2: SUITE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA INSURED FUNDS INC DATE OF NAME CHANGE: 19910926 FORMER COMPANY: FORMER CONFORMED NAME: MINNESOTA INSURED FUND INC DATE OF NAME CHANGE: 19900131 FORMER COMPANY: FORMER CONFORMED NAME: MINNESOTA ALTERNATIVE FUND INC DATE OF NAME CHANGE: 19881227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR MUTUAL FUNDS INC CENTRAL INDEX KEY: 0000906236 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411756458 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07742 FILM NUMBER: 98557187 BUSINESS ADDRESS: STREET 1: 90 SOUTH SEVENTH ST STREET 2: STE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4115 BUSINESS PHONE: 6123767129 MAIL ADDRESS: STREET 1: 90 SOUTH SEVENTH ST STREET 2: STE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4115 N-30D 1 N-30D For Tax-Exempt Income DELAWARE-voyageur Minnesota Municipal Bond Funds (various photos demonstrating service and guidance, professional management and goals) service and guidance professional management 1997 Annual Report goals Tax-Free Minnesota Fund Minnesota Insured Fund Tax-Free Minnesota Intermediate Fund Minnesota High Yield Municipal Bond Fund {logo here) A TRADITION OF SOUND INVESTING commitment A Commitment To Our Investors Delaware Investments has a tradition of money management that dates back to 1929. We have a long and distinguished history of helping individuals and institutions - including some of America's largest pension funds - reach their financial goals. Headquartered in Philadelphia, a block from the nation's oldest stock exchange, the Delaware organization established its first mutual fund in 1938. Delaware International Advisers Ltd., our international affiliate, was established in 1990 and is headquartered in London. Delaware Investments offers a full range of mutual funds. We also manage investments for variable annuity products, unit investment trusts and closed-end funds, and offer retirement plan services for individuals and businesses. Delaware manages more than $40 billion in mutual fund assets and institutional advisory accounts for more than half-a-million investors. We're part of a global financial service and investment management business owned by Lincoln National Corporation, whose subsidiaries manage more than $120 billion in assets. Minnesota Municipal Bond Funds' Objectives Tax-Free Minnesota Fund To provide a high level of current income exempt from federal and Minnesota state income taxes consistent with preservation of capital. Minnesota Insured Fund To provide a high level of current income exempt from federal and Minnesota state income taxes consistent with preservation of capital.+ Tax-Free Minnesota Intermediate Fund To provide investors with preservation of capital and, secondarily, current income exempt from federal income tax by maintaining a weighted average portfolio maturity of 10 years or less. Minnesota High Yield Municipal Bond Fund To provide a high level of current income exempt from federal and Minnesota state income taxes primarily through investment in a portfolio of medium and lower grade Minnesota municipal obligations.+ + These Funds may invest without limitation in securities whose interest is subject to the federal alternative minimum tax. (photo of keyboard) (photo of illustration from Tax-Exempt Income brochures) January 16, 1998 for tax-exempt income 1 Dear Shareholder: Delaware-Voyageur's Minnesota municipal bond funds provided strong results during fiscal 1997, a year when the municipal bond market benefited from a healthy U.S. economy and the lowest inflation in more than a decade. We are pleased to report that three of the four funds discussed in this report outperformed their respective unmanaged benchmarks for the 12 months ended December 31, 1997. Three also outpaced the average of their peers, as shown below. Since joining the Delaware family in April, Elizabeth H. Howell, the Funds' portfolio manager under Voyageur, has continued to oversee all four Minnesota portfolios from her office in Minneapolis. Together with three closed-end Minnesota funds, Ms. Howell manages more than $1 billion in Minnesota municipal bonds, some 11% of total mutual fund assets invested in the state's bonds, according to Lipper Analytical Services. That's more than any other fund manager in the country. Fiscal 1997 was a banner year for Minnesota municipal bonds. Among the favorable developments during the period were: * Passage of the Taxpayer Relief Act in July. This lifted the specter of proposed federal tax legislation that could have made municipal bonds a less attractive investment option. * Rising tax revenues. Thanks to strong job growth and corporate profits, Minnesota posted a budget surplus last year. * Strong credit quality. In 1997, Moody's Investors Services raised its credit rating on Minnesota state Fiscal 1997 was a banner year for Minnesota municipal bonds.
Average Annual Total Return - ------------------------------------------------------------------------------------------------------------------ 12 Months Ended 10 Years Ended December 31, 1997 December 31, 1997 - ------------------------------------------------------------------------------------------------------------------ Tax-Free Minnesota Fund A Class +9.68% +8.01% - ------------------------------------------------------------------------------------------------------------------ Minnesota Insured Fund A Class +8.49% +8.01% Lipper Minnesota Municipal Debt Fund Average +8.15% (45 funds) +7.84% (10 funds) Lehman Brothers Municipal Bond Index +9.19% +8.22% - ------------------------------------------------------------------------------------------------------------------ Tax-Free Minnesota Intermediate Fund A Class +6.69% +6.11% Lipper Intermediate Municipal Debt Fund Average +6.85% (74 funds) +6.38% (2 funds) Lehman Brothers Five-Year Municipal Bond Index +6.48% +7.13% - ------------------------------------------------------------------------------------------------------------------ Minnesota High Yield Municipal Bond Fund A Class +11.26% Lipper High Yield Municipal Debt Fund Average +10.11% (43 funds) - ------------------------------------------------------------------------------------------------------------------
All performance shown above is at net asset value with distributions reinvested. Past performance does not guarantee future results. Performance of other Fund classes varies due to different charges and expenses. The unmanaged Lehman Brothers and Merrill Lynch Indexes are composed of bonds with a variety of quality ratings from many states. See pages 9 to 12 for performance information for all Classes. for tax-exempt income 2 general obligation bonds to AAA, the highest rating available. * A declining supply of bonds. The amount of new bonds issued in Minnesota declined 11.6% in 1997 to $3.6 billion, according to The Bond Buyer, a trade publication. This helped boost bond prices since investor demand remained steady. Your Funds participated in the robust income and total return potential of Minnesota municipal securities in 1997. Our results reflect our effort to go an extra mile to analyze bonds issued to finance various public projects. Fiscal 1997 was the first full year of operation for the Minnesota High Yield Municipal Bond Fund. We were gratified to see that assets under management tripled during the period and much of the growth came after the Fund joined the Delaware family in May. We view the municipal bond market's long-term prospects as attractive, especially since the IRS and Minnesota still tax income at a higher rate than capital gains. While the Taxpayer Relief Act offered many potential benefits to more aggressive equity investors, it provided few breaks to income-oriented investors. Municipal bonds remain one of the few ways for investors to obtain monthly income potential without increasing their federal income tax bill. In our view, the income from municipal bonds and the tax-free compounding of such income over time has the potential to help heavily taxed investors reach their financial goals more quickly. We thank you for being among the investors who have expressed confidence in Delaware. On the pages that follow, Ms. Howell reviews each Fund's performance in 1997 and outlines her approach for the coming year. We hope you find our new annual report format informative. Sincerely, /s/ Wayne A. Stork - -------------------- Wayne A. Stork Chairman /s/ Jeffrey J. Nick - --------------------- Jeffrey J. Nick President and Chief Executive Officer discipline Your Funds' Portfolio Manager Prior to joining the Delaware-Voyageur family, Elizabeth H. Howell had managed municipal bond funds at Voyageur Asset Management for six years. She has more than 13 years experience that includes serving as a fixed-income portfolio manager at Windsor Financial Group. She also held investment management positions at Lommis Sayles & Co. and Eaton Vance Management. Ms. Howell has an MBA from Babson College. for tax-exempt income 3 Portfolio Manager's Review Delaware-Voyageur's Minnesota municipal bond funds provided attractive total returns in fiscal 1997 despite substantial interest rate volatility and renewed efforts in Washington D.C. to cut income taxes. The state's bond market benefited from an exceptionally strong regional economy, a reduced supply of new securities and steady investor demand, especially in the high-yield sector. During the year's first half, the state's general obligation bond rating was upgraded from AA+ to AAA, the highest available. This helped boost bond prices. Between June and December, the state's bonds shared in the U.S. bond market's rally. Yields on longer term securities fell by more than 40 basis points (0.40%) as shown on page 4. In 1997, Minnesota's economy was ablaze. The unemployment rate in Minneapolis dropped to 2.3%, the lowest of any major American city, according to the U.S. Bureau of Labor Statistics. Demographers estimate that about 18,000 people a year have been moving to Minnesota in the 1990s for jobs. This has been a positive development for state tax revenues, and marks a reversal of trends from the 1970s and 1980s. Minnesota expects to post a $1.3 billion budget surplus in 1998. This windfall has prompted the state to provide residents with a one-time 20% property tax rebate. Prosperity has allowed Minnesota's per capita income to grow to the highest of all Plains states. This has also fueled demand for municipal bonds, in part because the state's top income tax rate (8.5%) is actually one-half percentage point higher than in 1991. Many Minnesota employers are offering recruitment bonuses and collectively have raised hourly wages by an average of 7.5% a year since 1995, according to the Minnesota Department of Employment Security. Strong job growth can potentially reduce government social spending. In 1997, Minnesota's general obligation bond rating was upgraded from AA+ to AAA. growth Climate of Growth: Minnesota's Job Market Unemployment Rates 1992 1993 1994 1995 1996 1997 Minnesota 5.2% 5.1% 4.0% 3.7% 4.0% 3.0% U.S. 7.4% 6.8% 6.1% 5.6% 5.4% 4.7% Source: Minnesota Department of Employment Security for tax-exempt income 4 Minnesota officials estimate that 25% of the state's 50,000 welfare recipients in 1997 had found jobs as of January 1998. Strategic Positioning During fiscal 1997, we positioned the Tax-Free Minnesota Fund and Minnesota High Yield Municipal Bond Fund to benefit from what we anticipated would be a decline in long-term interest rates. Both Funds' average effective duration was kept slightly longer than that of its peers, enabling each to benefit from the rise in bond prices. Duration measures a bond's sensitivity to interest rate changes. It approximates the percentage change in a bond or bond fund's price given a 1% change in interest rates. We took a somewhat more conservative approach to interest rate risk with Tax-Free Minnesota Intermediate Fund and Minnesota Insured Fund. The difference in yield between bonds maturing in two to ten years and bonds with longer maturities narrowed in 1997. This reduced the potential reward for extending duration, in our opinion. Tax-Free Minnesota Fund: Revenue Bonds Offered Good Opportunity Tax-Free Minnesota Fund provided a +9.68% total return for the 12 months ended December 31, 1997 (for Class A shares at net asset value with distributions reinvested). We outpaced both our benchmark and the average of our peers (as shown on page 1) in part because we held a strong position in revenue bonds early in the year. These bonds benefited from the state's credit rating upgrade to AAA. Revenue bonds are primarily backed by fees such as rents, highway taxes or water/sewerage usage. In managing the Fund, we sought to achieve good structure - a prudent combination of average coupon, call date, and maturity - that represents the portfolio's mathematical underpinnings. Our modestly longer-than-average duration helped us strategic positioning As Bond Prices Have Risen, Minnesota Bond Yields Have Declined December 31, 1996 vs. December 31, 1997 Minnesota General Obligation Yields 12/31/96 Minnesota General Obligation Yields 12/31/97 Minnesota General Minnesota General Obligation Yields Obligation Yields 12/31/96 12/31/97 3 months 3.21% 3.17% 6 months 3.41% 3.35% 1 year 3.58% 3.54% 2 years 3.88% 3.76% M 3 years 4.08% 3.89% A 4 years 4.23% 3.99% T 5 years 4.33% 4.09% U 7 years 4.53% 4.23% R 10 years 4.83% 4.44% I 15 years 5.25% 4.79% T 20 years 5.41% 4.95% Y 30 years 5.47% 5.01% YIELD Source: Bloomberg Business News for tax-exempt income 5 benefit from rising bond prices when interest rates fell sharply during the second half. Generally, we focused on bonds that were selling at a discount to their face value, with good call protection features and long maturities. These securities did well during 1997's low inflation environment. As of December 31, 1997, the largest portion of your Fund's net assets were allocated to revenue bonds such as health care and housing bonds, sectors that we believe offered superior total return potential. Minnesota Insured Fund: A Conservative Approach Minnesota Insured Fund provided a total return of +8.49% for the 12 months ended December 31, 1997 (for Class A shares at net asset value with distributions reinvested). The Fund's return was less than that of our current unmanaged benchmark, the Lehman Brothers Insured Municipal Bond Index, an unmanaged composite of insured securities from many states. The Fund's duration, or sensitivity to interest rate changes, was similar to that of the index. Still, we offered a very favorable risk profile relative to the return we generated. Our results also outpaced the average return of other mutual funds investing in Minnesota securities as shown on page 1. The Insured Fund invests primarily in bonds that are rated Aaa by Moody's Investors Services or AAA by Standard & Poor's at the time of investment. During 1997, the prices of uninsured and lower quality Minnesota bonds tended to benefit more from a favorable inflation environment and strong state economic growth than insured bonds. Hence, the Insured Fund's return was lower than either Tax-Free Minnesota or Minnesota High Yield Municipal Bond Fund. For much of 1997, we felt the additional potential income obtainable by extending duration was not worth the additional interest rate risk. With bond (Photo of Keyboard) insured Tax-Free Minnesota Fund Portfolio Highlights and Asset Mix December 31, 1997 Power Authority 17.4% Higher Education 5.0% Industrial Development 9.3% General Obligation 12.8% Health Care 21.8% Housing 18.9% Other Revenue Bonds 4.7% Pre-Refunded Bonds 10.1% Average Effective Maturity 8.9 years Average Effective Duration 7.3 years Average Quality AA 30-Day Current SEC Yield* 4.39% *For Class A shares based on Securities and Exchange Commission guidelines as of 12/31/97. The 30-day SEC yield for B and C classes was 3.81%. None of the income generated by Tax-Free Minnesota Fund during fiscal 1997 was subject to the federal alternative minimum tax. for tax-exempt income 6 prices at their highest levels since the late 1970s, we have continued to position the Fund conservatively for 1998. Tax-Free Minnesota Intermediate Fund: Balancing Risk and Return For the 12 months ended December 31, 1997, Tax-Free Minnesota Intermediate Fund provided a +6.69% return (for Class A shares with distributions reinvested at net asset value). This outpaced the return of the Lehman Brothers Five-Year Municipal Bond Index, an unmanaged benchmark of the intermediate-term bonds as shown on page 1. The Fund's results were slightly less than the average of our peers because its duration (sensitivity to interest rates) was somewhat lower than comparable mutual funds. While this positioning served us well during the first half of the year - a period of interest rate volatility - it became a weakness when the bond market rallied during the latter months of 1997. We actively manage the Fund to take much less interest rate risk than Tax-Free Minnesota and Minnesota Insured Funds. As of year-end, the Fund had nearly one-third of its holdings in pre-refunded bonds, or bonds escrowed in U.S. government securities. These bonds are of the highest credit quality and rated AAA. Pre-refunded bonds are also among the most liquid of all municipal bonds. They tend to have above-average coupon rates and fluctuate less in price during periods of interest rate volatility. In our opinion, the defensive nature of these securities helps stabilize your Fund's share price and generally produces a stream of income that is about 90% of what is available from the longest term bonds. We have increased our weighting in industrial development bonds and slightly reduced our holdings of pre-refunded bonds. We believe the robust health of Minnesota's economy will enable these securities to do well in the year ahead. risk/return Minnesota Insured Fund Portfolio Highlights and Asset Mix December 31, 1997 Power Authority 7.7% General Obligation 19.9% Health Care 20.1% Housing 20.0% Other Revenue Bonds 1.8% Pre-Refunded Bonds 30.5% Approximately 18.6% of the income generated by Minnesota Insured Fund during fiscal 1997 was subject to the alternative minimum tax. Average Effective Maturity 9.2 years Average Effective Duration 6.9 years Average Quality AAA 30-Day Current SEC Yield* 4.05% *For Class A shares based on Securities and Exchange Commission guidelines. Thirty-day SEC yields for B and C classes were, respectively, 3.47% and 3.46%. for tax-exempt income 7 Minnesota High Yield Municipal Bond Fund Minnesota High Yield Municipal Bond Fund provided an exceptionally strong total return of +11.26% for the 12 months ended December 31, 1997 (for Class A shares at net asset value with distributions reinvested). This was well above the average of your Fund's peers and significantly higher than its unmanaged benchmark as shown on page 1. The Fund's strong relative performance resulted from a positioning that enabled the Fund to benefit from a sharp decline in interest rates. During the period, the yield differential between high-yield bonds and rated, investment grade bonds narrowed as prices of lower quality issues rose. That is, investors earned less yield as they moved into lower rated securities. The High Yield Fund primarily invests in medium- and low-grade bonds but may also invest in higher grade and unrated bonds. As of December 31, a majority of the Fund's net assets were invested in bonds rated BBB or higher while the balance was invested in unrated securities, mostly issued by smaller, rural communities. Our team of municipal credit analysts seeks bonds that appear likely to make timely payment of principal and interest. Bonds in the portfolio must show ongoing credit strength or they are sold. We are pleased to report that since the Fund's inception in June 1995, we haven't sold any bonds due to faltering credit fundamentals. We have increased our weighting in industrial development bonds and reduced our commitment to the health care sector. Overall, we believe the strength of Minnesota's economy will help the state's high yield bonds perform well. As of year's end, we had a strong weighting in the housing sector, which includes financing for single family homes, apartments, senior citizen complexes and low-income (Section 8) housing. This sector high yield Tax-Free Minnesota Intermediate Fund Portfolio Highlights and Asset Mix December 31, 1997 Power Authority 5.9% Higher Education 8.5% General Obligation 2.5% Health Care 16.2% Housing 5.2% Other Revenue Bonds 4.7% Certificates of Participants 2.8% Pre-Refunded Bonds 31.2% Industrial Development 23.0% None of the income generated by Tax-Free Minnesota Intermediate Fund during fiscal 1997 was subject to the alternative minimum tax. Average Effective Maturity 5.5 years Average Effective Duration 4.4 years Average Quality AA 30-Day Current SEC Yield* 3.77% *For Class A shares based on Securities and Exchange Commission guidelines. The 30-day SEC yield for B and C classes was 3.03%. for tax-exempt income 8 offers bondholders above-average income and, in our view, modest credit risks. Outlook In Minnesota and across the U.S., inflation appears to be benign despite a strong economy both regionally and nationwide. One trend that may help temper consumer prices in a state such as Minnesota is that energy costs have been falling and appear likely to remain low amid a worldwide oil glut and increased competition in the domestic utility industry. We think the long-term outlook for Minnesota's economy and bond market appears bright. The state's businesses added approximately 70,000 new jobs in 1997 as the total payroll employment grew to nearly 2.6 million. Nearly three out of every four adults has a job, one of the highest percentages in the country, according to state labor officials. Municipal bonds can be an attractive investment option for many Minnesota residents in part because the state's income tax remains among the highest in the country. For the 1997 tax year, a married Minnesota couple filing jointly with an adjusted gross income of just $95,920 ($54,250 for single taxpayers) is in the maximum state tax bracket of 8.5%. Minnesota investors in the highest federal tax bracket face a combined tax rate of 44.73%. Should interest rates remain stable or decline in 1998 - and we believe they will - Minnesota municipal bond investments could provide an attractive, tax-adjusted rate of return. (Photo of family on beach) Elizabeth H. Howell Vice President/ Senior Portfolio Manager January 16, 1998 outlook Minnesota High Yield Municipal Bond Fund Portfolio Highlights and Asset Mix December 31, 1997 Power Authority 4.1% Higher Education 7.3% Health Care 26.9% Housing 33.9% Other Revenue Bonds 18.9% Industrial Development 8.9% Approximately 18.5% of the income generated by Minnesota High-Yield Municipal Bond Fund during fiscal 1997 was subject to the alternative minimum tax. Average Effective Maturity 9.6 years Average Effective Duration 6.5 years Average Quality A 30-Day Current SEC Yield* 6.00% *For Class A shares based on Securities and Exchange Commission guidelines. The 30-Day SEC yield for B and C classes was 5.47%. for tax-exempt income 9 Performance Summary Tax-Free Minnesota Fund's Performance Growth of a $10,000 Investment December 31, 1987 to December 31, 1997 Lipper Minnesota Lehman Brothers Municipal Debt Tax-Free Municipal Fund Average Minnesota Bond Index (10 funds) Fund A Class Dec. 31 '87 $10,000 $10,000 $ 9,629 Dec. 31 '88 $11,015 $11,053 $10,621 Dec. 31 '89 $12,203 $12,100 $11,588 Dec. 31 '90 $13,094 $12,889 $12,403 Dec. 31 '91 $14,684 $14,213 $13,771 Dec. 31 '92 $15,979 $15,385 $14,868 Dec. 31 '93 $17,942 $17,228 $16,747 Dec. 31 '94 $17,014 $16,182 $15,619 Dec. 31 '95 $19,984 $18,677 $18,350 Dec. 31 '96 $20,870 $19,255 $18,977 Dec. 31 '97 $22,787 $20,830 $20,786 Chart assumes a $10,000 investment on December 31, 1987 a 3.75% front-end sales charge and reinvestment of distributions. Performance of other Fund classes differs because of different charges and expenses. Past performance does not guarantee future results. Tax-Free Minnesota Fund Average Annual Returns Through December 31, 1997 Lifetime Ten Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 2/29/84) Excluding Sales Charge +9.08% +8.01% +6.95% +9.68% Including Sales Charge +8.77% +7.60% +6.13% +5.59% - -------------------------------------------------------------------------------- Class B (Est. 3/11/95) Excluding Sales Charge +7.70% +8.95% Including Sales Charge +6.76% +4.95% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +6.79% +8.82% Including Sales Charge +6.79% +7.82% All performance includes reinvestment of distributions and applicable sales charges as described below. Return and share value will fluctuate so that shares when redeemed may be worth more or less than the original cost. Past performance does not guarantee future results. Performance for Class B and C shares excluding sales charge assumes either contingent sales charges did not apply or the investment was not redeemed. Returns reflect a voluntary expense limitation in effect at the time. Returns would have been lower without the limitation. Class A shares of each Fund have a 3.75% maximum front-end sales charge except Tax-Free Minnesota Intermediate Fund, which has a 2.75% maximum front-end sales charge. All Class A shares have a 12b-1 fee. Class B shares do not carry a front-end sales charge, but are subject to a 1% annual distribution and service fee. They are also subject to a deferred sales charge of up to 4% if redeemed before the end of the sixth year for each Fund except Tax-Free Minnesota Intermediate Fund, which is subject to a deferred sales charge of 2% if redeemed before the end of the third year. Class C shares have a 1% annual distribution and service fee. If shares are redeemed within 12 months, a 1% contingent deferred sales charge applies. for tax-exempt income 10 Tax-Free Minnesota Insured Fund's Performance Growth of a $10,000 Investment December 31, 1987 to December 31 1997
Minnesota Insured Fund A Class Lehman Brothers Municipal Bond Index Dec. 31 '87 $ 9,623 $10,000 Dec. 31 '88 $10,652 $11,015 Dec. 31 '89 $11,607 $12,203 Dec. 31 '90 $12,379 $13,094 Dec. 31 '91 $13,812 $14,584 Dec. 31 '92 $15,229 $15,979 Dec. 31 '93 $17,324 $17,942 Dec. 31 '94 $15,968 $17,014 Dec. 31 '95 $18,768 $19,984 Dec. 31 '96 $19,470 $20,870 Dec. 31 '97 $21,099 $22,787
Chart assumes a $10,000 investment on December 31, 1987 a 3.75% front-end sales charge and reinvestment of distributions. Performance of other Fund classes differs because of different charges and expenses. Past performance does not guarantee future results. MINNESOTA INSURED FUND - GROWTH OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- DECEMBER 31, 1990 TO DECEMBER 31, 1997 Lehman Brothers Insured Municipal Bond Index $19,067 Minnesota Insured Fund A Class $16,399 Minnesota Insured Fund began operating before the inception of the Lehman Brothers Insured Municipal Bond Index, an unmanaged benchmark that we believe closely reflects the Fund's investment strategy. We have included this bar chart to compare the Minnesota Insured Fund's performance with that of the index since the index began operating on December 31, 1990. Like the chart above, it assumes a $10,000 investment, a 3.75% front-end sales charge and reinvestment of distributions. Performance of other Fund classes for the time period shown differs because of different charges and expenses. Minnesota Insured Fund Average Annual Return Through December 31, 1997 Lifetime Ten Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 5/1/87) Excluding Sales Charge +7.64% +8.01% +6.76% +8.49% Including Sales Charge +7.25% +7.60% +5.94% +4.45% - -------------------------------------------------------------------------------- Class B (Est. 3/7/95) Excluding Sales Charge +7.20% +7.77% Including Sales Charge +6.26% +3.77% - -------------------------------------------------------------------------------- Class C (Est. 5/4/94) Excluding Sales Charge +6.34% +7.66% Including Sales Charge +6.34% +6.66% - -------------------------------------------------------------------------------- Please turn to page 9 for important additional information. All performance includes reinvestment of distributions. Past performance is not a guarantee of future results. for tax-exempt income 11 Tax-Free Minnesota Intermediate Fund's Performance Growth of a $10,000 Investment December 31, 1987 to December 31, 1997 Tax-Free Minnesota Merrill Lynch Intermediate Three-To-Seven Year Fund A Class Municipal Bond Index Dec. '87 $ 9,723 $10,000 Dec. '88 $10,277 $10,639 Dec. '89 $10,937 $11,604 Dec. '90 $11,660 $12,496 Dec. '91 $12,743 $13,922 Dec. '92 $13,585 $14,983 Dec. '93 $14,650 $16,292 Dec. '94 $14,370 $16,084 Dec. '95 $15,951 $17,956 Dec. '96 $16,503 $18,717 Dec. '97 $17,585 $19,911 1 - Tax-Free Minnesota Intermediate Fund 2 - Lehman Brothers Five Year Municipal Bond Index Chart assumes a $10,000 investment on December 31, 1987 a 2.75% front-end sales charge and reinvestment of distributions. Performance of other Fund classes differs because of different charges and expenses. Past performance does not guarantee future results. Tax-Free Minnesota Intermediate Fund Average Annual Return Through December 31, 1997 Lifetime Ten Years Five Years One Year - -------------------------------------------------------------------------------- Class A (Est. 10/27/85) Excluding Sales Charge +6.23% +6.11% +5.33% +6.69% Including Sales Charge +5.99% +5.81% +4.74% +3.76% - -------------------------------------------------------------------------------- Class B (Est. 8/15/95) Excluding Sales Charge +4.98% +5.84% Including Sales Charge +4.58% +3.84% - -------------------------------------------------------------------------------- Class C (Est. 4/30/94) Excluding Sales Charge +5.03% +5.84% Including Sales Charge +5.03% +4.84% - -------------------------------------------------------------------------------- Please turn to page 9 for important additional information. All performance includes reinvestment of distributions. Past performance is not a guarantee of future results. for tax-exempt income 12 Minnesota High Yield Municipal Bond Fund's Performance Growth of a $10,000 Investment June 4, 1996 to December 31, 1997 Lipper High Yield Minnesota Lehman Brothers Municipal Debt High Yield Municipal Fund Average Municipal Bond Bond Index (10 funds) Fund A Class June 3 '96 $10,000 $10,000 $ 9,625 July 31 '96 $10,090 $10,080 $ 9,724 Aug. 31 '96 $10,088 $10,101 $ 9,697 Sept. 30 '96 $10,229 $10,232 $ 9,836 Oct. 31 '96 $10,345 $10,348 $ 9,976 Nov. 30 '96 $10,534 $10,494 $10,087 Dec. 31 '96 $10,490 $10,500 $10,110 Jan. 31 '97 $10,510 $10,516 $10,113 Feb. 28 '97 $10,607 $10,607 $10,225 Mar. 31 '97 $10,466 $10,534 $10,168 Apr. 30 '97 $10,554 $10,609 $10,251 May 31 '97 $10,712 $10,728 $10,366 June 30 '97 $10,826 $10,859 $10,498 July 31 '97 $11,126 $11,136 $10,745 Aug. 31 '97 $11,021 $11,083 $10,718 Sept. 30 '97 $11,152 $11,216 $10,855 Oct. 31 '97 $11,223 $11,307 $10,948 Nov. 30 '97 $11,289 $11,372 $11,043 Dec. 31 '97 $11,454 $11,556 $11,232 Chart assumes a $10,000 investment on June 4, 1996 a 3.75% front-end sales charge and reinvestment of distributions. High yield securities involve greater risks than bonds with investment grade credit ratings. Performance of other Fund classes differs because of different charges and expenses. Past performance does not guarantee future results. Minnesota High Yield Municipal Bond Fund Average Annual Return Through December 31, 1997 Lifetime One Year - -------------------------------------------------------------------------------- Class A (Est. 6/4/96) Excluding Sales Charge +10.63% +11.26% Including Sales Charge +7.98% +7.05% - -------------------------------------------------------------------------------- Class B (Est. 6/12/96) Excluding Sales Charge +11.51% +10.41% Including Sales Charge +9.07% +6.41% - -------------------------------------------------------------------------------- Class C (Est. 6/7/96) Excluding Sales Charge +9.90% +10.41% Including Sales Charge +9.90% +9.41% - -------------------------------------------------------------------------------- Please turn to page 9 for important additional information. All performance includes reinvestment of distributions. Past performance is not a guarantee of future results. for tax-exempt income 13 Financial Statements Delaware-Voyageur Tax-Free Minnesota Fund Statement of Net Assets December 31, 1997 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds - 100.26% General Obligation Bonds - 12.80% Faribault Independent School District #656 (MN School District Credit Enhanced) 6.10% 6/1/10 ...................................... $1,000,000 $1,076,040 Hennepin County 5.75% 10/1/10 ....................... 7,990,000 8,501,839 Hutchinson Independent School District Series A (MN School District Enhanced) 5.85% 2/1/18 ...................................... 1,700,000 1,815,957 Kenyon Wanamingo Independent School District 6.00% 2/1/18 (MBIA)........................ 2,350,000 2,512,902 Lakeville Independent School District #194, Inverse Floater 6.47% 2/1/15 (MBIA) ................ 4,250,000 4,317,320 Mahtomedi Independent School District #832 Series B Zero Coupon 2/1/14 (MBIA) ................. 1,540,000 694,232 Milaca Independent School District #912 5.50% 2/1/20 (FSA) ................................ 1,015,000 1,040,172 Minneapolis Convention Center Facilities, Inverse Floater 7.07% 4/1/14 .............................. 850,000 909,823 Minneapolis Sports Arena Project, Inverse Floater 6.42% 10/1/20 ..................................... 4,220,000 4,244,687 Minneapolis Sports Arena Project, Inverse Floater 6.37% 4/1/14 ...................................... 580,000 608,994 Minneapolis Unlimited Tax Series 1992 6.30% 10/1/08 ..................................... 1,750,000 1,904,053 Minnetonka Independent School District #276 5.75% 2/1/22 (FSA) ................................ 4,550,000 4,806,165 North St. Paul, Maplewood Independent School District #622, Inverse Floater 6.42% 2/1/20 ........ 2,250,000 2,258,528 Pine Island Independent School District #255 6.625% 6/1/12 (FSA) ............................... 240,000 254,822 Pine Island Independent School District #255 6.625% 6/1/13 (FSA) ............................... 310,000 328,643 Pine Island Independent School District #255 6.625% 6/1/14 (FSA) ............................... 330,000 349,315 Pine Island Independent School District #255 6.625% 6/1/15 (FSA) ............................... 355,000 375,437 Pine Island Independent School District #255 6.625% 6/1/16 (FSA) ............................... 380,000 401,022 Plainview Independent School District #810 6.70% 2/1/06 ...................................... 385,000 425,564 Plainview Independent School District #810 6.75% 2/1/08 ...................................... 445,000 490,337 Plainview Independent School District #811 6.75% 2/1/07 ...................................... 420,000 464,192 Rochester Tax Increment 6.50% 12/1/04................ 1,000,000 1,009,480 Rosemount - Apple Valley Independent School District #196 Inverse Floater 7.92% 4/1/15 (FSA) ...................................... 4,000,000 4,483,560 Rosemount Independent School District #196 Series B Zero Coupon 4/1/11 (FSA) .................. 2,600,000 1,375,244 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) General Obligation Bonds (Continued) Rosemount Independent School District #196 Zero Coupon 4/1/12 (FSA) ......... ............. $1,850,000 $ 926,110 Rosemount Independent School District #196 Zero Coupon 4/1/13 (FSA) .......................... 1,915,000 906,408 Rosemount Independent School District #196, Inverse Floater 5.875% 4/1/15 ...................... 1,375,000 1,462,918 Sartell Independent School District #748 Zero Coupon 2/1/13 (MBIA) .............................. 540,000 257,693 Sartell Independent School District #748 Zero Coupon 2/1/15 (MBIA) .............................. 1,075,000 466,572 Sartell Independent School District #748 Zero Coupon 2/1/16 (MBIA) .............................. 1,750,000 699,370 Sartell Independent School District #748 Zero Coupon 2/1/17 (MBIA) .............................. 1,600,000 618,128 Spring Lake Park Independent School District #16, Inverse Floater 6.67% 2/1/17 (MBIA) ................ 1,000,000 1,034,070 Stillwater Independent School District #834 5.75% 2/1/15 (MBIA) ............................... 2,000,000 2,111,460 Washington County 5.90% 2/1/10 ...................... 1,680,000 1,754,491 ------------ 54,885,548 ------------ Higher Education Revenue Bonds - 5.04% Minnesota Higher Education Augsburg College Series 4F1 6.25% 5/1/23 .......................... 1,000,000 1,075,410 Minnesota Higher Education Carleton College 5.75% 11/1/12 .................................... 4,000,000 4,288,960 Minnesota Higher Education Facilities Revenue - Hamline University 6.00% 10/1/12 .................. 1,250,000 1,340,225 Minnesota Higher Education Facilities Revenue - Hamline University 6.00% 10/1/16 .................. 1,790,000 1,906,153 Minnesota Higher Education St. Benedict's College 6.20% 3/1/16 ............................. 1,000,000 1,050,090 Minnesota Higher Education St. Thomas University Series R2 5.60% 9/1/14 ........................... 1,000,000 1,042,230 Minnesota State Higher Education Facilities Authority Revenue for Macalester College - Series 4-J 5.55% 3/1/17 .................. 700,000 731,087 University Of Minnesota Series A 5.50% 7/1/21 ..................................... 9,500,000 10,193,120 ----------- 21,627,275 ----------- Hospital Revenue Bonds - 21.84% Bemidji Hospital Facilities Revenue North County Health 6.05% 9/1/16 .............................. 600,000 634,524 Bemidji Hospital Facilities Revenue North County Health 6.05% 9/1/24 .............................. 1,825,000 1,918,239 Bemidji Hospital Facilities Revenue North County Health 5.625% 9/1/21 ............................. 1,000,000 1,031,870 14 for tax-exempt income Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Hospital Revenue Bonds (Continued) Brainerd Benedictine Health Care Systems - St Joseph - E 6.00% 2/15/12 (Connie Lee) ....... $ 2,250,000 $ 2,403,045 Duluth Economic Development Authority St. Luke's Hospital 6.40% 5/1/18 (Connie Lee) ............. 3,295,000 3,572,044 Duluth Benedictine/St. Mary's Health 6.00% 2/15/20 (Connie Lee) ..................... 9,450,000 9,962,663 Little Canada Health Care 1992 (Presbyterian Homes Guaranteed) 7.25% 7/1/12 ................. 1,000,000 1,047,380 Minneapolis Fairview Hospital Series 91B 6.50% 1/1/11 (MBIA) ........................... 3,000,000 3,271,530 Minneapolis Health Care - American Baptist Homes 8.70% 11/1/09 ................................. 2,485,000 2,770,154 Minneapolis and St. Paul Minnesota HRA Health Care System for Healthspan Series A 4.75% 11/15/18 (AMBAC) ........................ 11,030,000 10,415,298 Minneapolis/St. Paul HRA Children's Hospital Health Care, Inverse Floater 7.17% 8/15/25 ................................. 6,500,000 6,848,790 Minneapolis/St. Paul HRA HealthOne 7.40% 8/15/11 (MBIA) .......................... 1,360,000 1,486,521 Robbinsdale North Memorial Medical Series B 5.50% 5/15/23 (AMBAC) ......................... 10,725,000 10,931,993 Rochester Health Care Facilities Revenue Reg IRS - Ser H for Mayo Clinic - Inverse Floater 7.874% 11/15/15 ............................... 3,500,000 3,979,458 Spring Park Twin Birch Nursing Home (Presbyterian Homes Guaranteed) 8.25% 8/1/11 .................................. 600,000 644,856 Springfield St. John's Lutheran Home Revenue 8.50% 11/1/19 ................................. 600,000 636,954 St. Cloud Hospital Facilities Revenue for St. Cloud Hospital 5.30% 10/1/20 (AMBAC)........ 10,250,000 10,307,195 St. Louis Park Commercial Development Revenue for - G & N, L P Project (Methodist Hospital Guaranteed) 7.25% 6/1/13 ....................... 1,120,000 1,208,782 St. Louis Park Methodist Hospital 5.20% 7/1/23 (AMBAC) .......................... 10,220,000 10,226,132 St. Paul Housing and Redevelopment Hospital for Healtheast Project Series A 6.625% 11/1/17 ................................ 8,900,000 9,530,921 St. Paul Minn Housing and Redevelopment Authority Hospital for Healtheast Project Series B 5.85% 11/1/17 ........................ 750,000 767,280 ---------- 93,595,629 ---------- Housing Revenue Bonds - 18.94% Austin Housing and Redevelopment Authority Courtyard Residence Series 95A 7.25% 1/1/26 .................................. 500,000 553,165 Brooklyn Center Multifamily Housing Revenue Bonds Family Housing Project - (Section 8) 5.90% 1/1/20 ....................... 2,250,000 2,333,970 Burnsville Multifamily - Bridgeway Apartments 7.625% 2/1/24 (FHA) ........................... 3,370,000 3,518,583 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Housing Revenue Bonds (Continued) Burnsville Multifamily - Coventry Court Apartments Project 7.50% 9/1/17 (FHA) ..................... $1,000,000 $1,049,520 Carver County Housing and Redevelopment Authority Multifamily Revenue Lake Grace Apartments 6.00% 7/1/28 ....................... 1,435,000 1,496,719 Dakota County Housing and Redevelopment Authority Single Family 8.10% 3/1/16 (GNMA) ................................. 140,000 144,571 Eagan Forest Ridge Apartments Project 7.50% 9/1/17 (FHA) ............................ 1,000,000 1,040,970 Eden Prairie Multifamily Revenue, Eden Investments 7.40% 8/1/25 (FHA) ................. 400,000 424,916 Eden Prairie Multifamily Windslope Apartments - (Section 8) Housing 7.10% 11/1/17 .............. 1,585,000 1,691,227 Eden Prairie Multifamily Homes, Tanager Creek 8.05% 6/20/31 (GNMA) .......................... 7,605,000 8,989,110 Edina Park Plaza Multifamily Housing 7.50% 12/1/09 (FHA) ........................... 1,530,000 1,618,893 Edina Park Plaza Multifamily Housing 7.70% 12/1/28 (FHA) ........................... 1,250,000 1,310,363 Hopkins Renaissance Multifamily Housing - (Section 8) 6.375% 4/1/20 ...................... 1,000,000 1,061,300 Little Canada Minnesota Multifamily Housing Revenue, Housing Alternative Development Company Project Series A 6.10% 12/1/17 ......... 1,720,000 1,733,089 Little Canada Minnesota Multifamily Housing Revenue, Housing Alternative Development Company Project Series A 6.25% 12/1/27 ......... 2,900,000 2,922,098 Minneapolis Housing Facility Revenue 1993 for Augustana Chapel View Project 7.00% 4/1/18 .................................. 1,000,000 1,032,740 Minneapolis Multifamily Mortgage for Seward Towers Project 7.375% 12/20/30 (GNMA)........... 4,000,000 4,238,040 Minneapolis-Nicollet Towers Multifamily Housing, (Section 8) 6.00% 12/1/19 ....................... 2,000,000 2,114,680 Minnesota Housing Finance Agency Housing Development Series A - (Section 8) 7.80% 8/1/18 ....................... 1,000,000 1,020,710 Minnesota Housing Finance Agency Multifamily Housing 6.95% 2/1/14 .......................... 1,500,000 1,600,020 Minnesota Housing Finance Agency Multifamily Housing Series 92A 6.95% 8/1/17 ................ 745,000 798,074 Minnesota Housing Finance Agency Rental Housing Series B 6.25% 8/1/22 ......................... 985,000 995,372 Minnesota Housing Finance Agency Single Family Mortgage 86 Series B 7.25% 7/1/16 .............. 900,000 908,595 Minnesota Housing Finance Agency Single Family Mortgage Series B 7.30% 7/1/10 ................. 150,000 156,414 Minnesota Housing Finance Agency Single Family Mortgage Series D 7.30% 7/1/09 ................. 325,000 339,372 Minnesota Housing Finance Agency Single Family Mortgage Series C 7.65% 7/1/08 ................. 395,000 419,202 Minnesota Housing Finance Agency Single Family Mortgage Series 91C 7.10% 7/1/11 ............... 1,010,000 1,079,761 for tax-exempt income 15 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Housing Revenue Bonds (Continued) Minnetonka Multifamily - Beacon Hill Project (Presbyterian Homes Guaranteed) 7.70% 6/1/25 ................................... $ 2,000,000 $ 2,161,360 Oakdale Minnesota Housing - Oak Meadows Project 7.00% 4/1/27 ........................... 6,800,000 7,161,012 Park Rapids Minnesota Multifamily Revenue The Court Apartments Project - (Section 8) 6.30% 2/1/20 ................................... 3,290,000 3,346,588 Red Wing Housing and Redevelopment Agency Jordan Tower - (Section 8) Series 1992 7.00% 1/1/19 ................................... 1,500,000 1,600,920 St. Cloud Germain Towers Housing Series 1993 - (Section 8) 5.90% 9/1/20 ........................ 2,000,000 2,070,700 St. Cloud Housing and Redevelopment Agency Northway A&B Project - (Section 8) 7.50% 12/1/18 .................................. 2,045,000 2,139,377 St. Louis Park Multifamily Housing Revenue Community Housing 6.25% 12/1/28 (FHA)............ 3,855,000 4,112,668 St. Louis Park Multifamily Westwind Apartments Housing 5.75% 1/1/29 (GNMA) ..................... 3,865,000 3,994,787 St. Louis Park Minn Residential Mortgage Revenue for Single Family 7.25% 4/20/23 (GNMA) .......... 1,629,000 1,733,158 St. Paul Housing and Redevelopment Agency (Executive Life G.I.C.) Como Lake Project 7.50% 3/1/26 (FHA) ............................. 1,000,000 935,000 St. Paul Housing and Redevelopment Single Family Mortgage 6.90% 12/1/21 (FNMA) ............ 1,650,000 1,774,212 St. Paul Housing and Redevelopment Single Family Mortgage 6.90% 12/1/11 (FNMA) ............ 61,000 65,212 Stillwater Multifamily Housing Stillwater Cottages 7.00% 11/1/27 .................................. 1,000,000 1,032,790 Wadena Housing and Redevelopment Agency Humphrey Manor - (Section 8) 6.00% 2/1/19 ....... 2,130,000 2,217,841 Wells Housing and Redevelopment Agency Broadway Apartment Project - (Section 8) 7.00% 1/1/19 ................................... 1,070,000 1,157,569 Willmar Housing and Redevelopment Agency Highland Apartments - (Section 8) 5.85% 6/1/19 ................................... 1,050,000 1,086,824 ----------- 81,181,492 ----------- Industrial Development Revenue Bonds - 9.28% Andover Minnesota Development Revenue - Downtown Center Project - Series A 7.00% 12/1/12 .................................. 1,000,000 1,023,000 Anoka Resource Recovery Revenue for NSP Series 85 7.15% 12/1/08 ......................... 1,000,000 1,071,060 Becker Pollution Control Revenue for NSP Series 89 A 6.80% 4/1/07 ........................ 2,000,000 2,107,540 Cloquet Pollution Control Revenue for Potlatch Corporation 5.90% 10/1/26 ....................... 15,000,000 15,816,150 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Industrial Development Revenue Bonds (Continued) Duluth Seaway Port Authority Revenue for Cargill, Inc. 6.125% 11/1/14..................... $ 4,500,000 $ 4,939,200 East Grand Forks for American Crystal Sugar Pollution Control Revenue 7.75% 4/1/18 .......... 1,230,000 1,361,266 Minnesota Public Facilities Authority Water Pollution Control 6.25% 3/1/16 .................. 4,400,000 4,790,368 Richfield CDR for Richfield Shoppes 8.375% 10/1/13 ................................. 2,200,000 2,568,808 St. Cloud CDR for Northwest Center Association 7.50% 8/1/12 ................................... 4,433,971 4,728,121 St. Paul Minnesota Port Authority CDR Fort Rd Medical 7.50% 9/1/02 (Asset Gty) ................ 1,300,000 1,355,562 ----------- 39,761,075 ----------- Lease/Certificates of Participation - 0.68% Beltrami County Housing & Redevelopment Authority Revenue 6.20% 2/1/14 ........................... 1,010,000 1,066,005 West St. Paul Commercial Mortgage K-Mart Lease 7.00% 11/1/07 ...................... 1,667,618 1,837,965 ----------- 2,903,970 ----------- Pollution Control Revenue Bonds - 1.31% International Falls Minnesota Pollution Control Reference - Boise Cascade Project 5.65% 12/1/22 .................................. 5,500,000 5,599,880 ----------- 5,599,880 ----------- Power Authority Revenue Bonds - 17.43% Bass Brook PCR for Minnesota Power and Light Revenue 6.00% 7/1/22 ........................... 17,490,000 18,261,484 Bass Brook PCR for Minnesota Power and Light Revenue 6.00% 7/1/22 (MBIA) ..................... 1,750,000 1,856,278 Northern Minnesota Municipal Power Agency 5.25% 1/1/13 ................................... 4,000,000 4,022,400 Northern Minnesota Municipal Power Agency Electric System Revenue 5.50% 1/1/18 (AMBAC) ........................... 9,200,000 9,430,184 Northern Minnesota Municipal Power Agency Series 89A 7.25% 1/1/16 ............................... 5,875,000 6,176,623 Northern Minnesota Municipal Power Agency Zero Coupon 1/1/09 (AMBAC) .......................... 3,815,000 2,287,550 Puerto Rico Electric Power Authority 5.25% 7/1/21 ................................... 1,500,000 1,497,975 Puerto Rico Electric Power Authority 5.50% 7/1/25 ................................... 2,930,000 2,973,012 Southern Minnesota Municipal Power Agency 5.75% 1/1/18 (FGIC) ............................ 2,000,000 2,098,320 Southern Minnesota Municipal Power Agency 4.75% 1/1/16 (MBIA) ............................ 9,200,000 8,792,440 Southern Minnesota Municipal Power Agency 5.75% 1/1/18 (MBIA) ............................ 7,770,000 8,151,973 16 for tax-exempt income Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Power Authority Revenue Bonds (Continued) Southern Minnesota Municipal Power Agency Series A 5.00% 1/1/12 (FGIC)..................... $ 3,880,000 $ 3,898,120 Southern Minnesota Municipal Power Agency Supply System 5.50% 1/1/15 (AMBAC) .............. 1,560,000 1,602,728 Southern Minnesota Municipal Power Agency Zero Coupon 1/1/19 (MBIA) ........................... 4,785,000 1,629,293 Southern Minnesota Municipal Power Agency Zero Coupon 1/1/21 (MBIA) ........................... 5,000,000 1,526,050 Western Municipal Power Agency Revenue 6.125% 1/1/16 .................................. 525,000 527,216 ----------- 74,731,646 ----------- *Pre-Refunded Bonds/ Escrowed To Maturity - 10.11% Albert Lea St. John's Lutheran Home Project 8.50% 11/1/19-99 (Pre-Refunded) ................. 1,000,000 1,106,030 Anoka County Capital Improvement 7.20% 2/1/08-99 (Pre-Refunded) .................. 1,000,000 1,031,110 Blaine IDR (Ball Corp.) 8.25% 12/1/00 (Escrowed to maturity) ......................... 300,000 334,161 Blaine IDR (Ball Corp.) 8.25% 12/1/99 (Escrowed to maturity) ......................... 250,000 269,265 Bloomington Tax Increment 9.75% 2/1/08 (Escrowed to maturity) ......................... 500,000 659,195 Brainerd Independent School District #181 7.00% 6/1/11-01 (Pre-Refunded) .................. 390,000 421,184 Edina Fairview Hospital Revenue 7.125% 7/1/19-99 (Pre-Refunded) ................. 2,500,000 2,648,275 Glencoe/Mcleod County Health Care 8.50% 12/1/15-00 (Pre-Refunded) ................. 500,000 560,325 Kimball Independent School District #739 7.60% 2/1/04-98 (Pre-Refunded) .................. 250,000 250,575 Kimball Independent School District #739 7.60% 2/1/05-98 (Pre-Refunded) .................. 275,000 275,633 Kimball Independent School District #739 7.70% 2/1/06-98 (Pre-Refunded) .................. 275,000 275,652 Kimball Independent School District #739 7.70% 2/1/07-98 (Pre-Refunded) .................. 300,000 300,711 Little Falls Independent School District #182 6.80% 2/1/08-99 (AMBAC) (Pre-Refunded) .......... 500,000 514,280 Maplewood Independent School District #622 7.10% 10% 2/1/25-05 (FSA) (Pre-Refunded) .............. 10,000,000 11,657,700 Minnesota Public Facilities Authority (Water Pollution Control) Series 90A 7.10% 3/1/12-00 (Pre-Refunded) ........................ 1,990,000 2,153,299 Minnesota Public Facilities Authority Water Pollution Control 6.95% 3/1/13-01 (Pre-Refunded) ................................. 5,220,000 5,755,468 Northfield College Facility Revenue - St. Olaf College 7.875% 10/1/08-98 (Pre-Refunded) ................................. 1,255,000 1,292,587 Northfield College Facility Revenue - St. Olaf College 8.00% 10/1/18-98 (Pre-Refunded) ......... 860,000 886,531 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) *Pre-Refunded Bonds/ Escrowed To Maturity (Continued) Owatanna Public Utilities 6.75% 1/1/16-01 (Pre-Refunded) .................................. $ 1,000,000 $ 1,073,760 Rockford Independent School District #883 7.20% 12/15/13-98 (Pre-Refunded) ................ 750,000 770,948 Southern Minnesota Municipal Power Agency Revenue 5.75% 1/1/18 (MBIA) (Escrowed to maturity) ......................... 1,000,000 1,067,220 Southern Minnesota Municipal Power Agency Supply System 5.50% 1/1/15 (AMBAC) (Escrowed to maturity) ......................... 990,000 1,028,412 St. Cloud Independent School District #742 7.50% 2/1/10-98 (Pre-Refunded) .................. 1,000,000 1,002,370 St. Louis Park Methodist Hospital 7.25% 7/1/18-00 (AMBAC) (Pre-Refunded) ................ 775,000 848,083 St. Paul Civic Center Revenue Sales Tax 5.55% 11/1/23 (MBIA) (Escrowed to maturity) ..... 825,000 856,160 St. Paul Sewer Revenue Series 88A 8.00% 12/1/08-98 (Pre-Refunded) ................. 2,175,000 2,272,440 University Of Minnesota Series A 6.00% 2/1/11 (Escrowed to maturity) ............. 1,500,000 1,501,920 Wayzata Independent School District #284 7.05% 2/1/06-99 (Pre-Refunded) .................. 625,000 644,138 Wayzata Independent School District #284 7.10% 2/1/08-99 (Pre-Refunded)................... 1,000,000 1,031,140 Wayzata Independent School District #284 7.10% 2/1/09-99 (Pre-Refunded)................... 560,000 577,438 Western Minnesota Municipal Power Agency Revenue 9.75% 1/1/16 (Escrowed to maturity)...... 185,000 284,027 ----------- 43,350,037 ----------- Water and Sewer Revenue Bonds - 1.15% Puerto Rico Aqueduct & Sewer Authority 5.00% 7/1/19 ................................... 3,000,000 2,938,080 Puerto Rico Aqueduct & Sewer Authority 5.00% 7/1/15 ................................... 2,000,000 1,990,740 ----------- 4,928,820 ----------- Other Revenue Bonds - 1.68% Minneapolis Community Development Agency Common Bond Fund 7.95% 12/1/11 .................. 855,000 966,843 Minneapolis Community Development Agency Common Bond Fund 7.40% 12/1/21 .................. 795,000 855,849 Minneapolis Community Development Agency Common Bond Fund 1991-4 Opportunity Workshop Project 7.125% 12/1/05 ................. 510,000 558,251 Minneapolis Community Development Agency Tax Increment Revenue Zero Coupon 9/1/09 ............ 5,750,000 3,353,918 Minneapolis Community Development Agency Common Bond Fund 7.625% 6/1/06 .................. 1,430,000 1,464,978 ----------- 7,199,839 ----------- Total Municipal Bonds (cost $395,681,075) ........ 429,765,211 ----------- for tax-exempt income 17 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Total Market Value of Securities Owned - 100.26% (cost $395,681,075) ......................................... $429,765,211 Liabilities Net of Receivables and Other Assets - (0.26%)...... (1,102,948) ------------ Net Assets Applicable to 33,208,912 Shares ($.01 Par Value) Outstanding - 100.00% ....................... $428,662,263 ============ Net Asset Value - Tax Free Minnesota Fund A Class ($417,364,664 / 32,333,909 shares) .............................. $12.91 ====== Net Asset Value - Tax Free Minnesota Fund B Class ($8,214,822 / 636,350 shares) ................................... $12.91 ====== Net Asset Value - Tax Free Minnesota Fund C Class ($3,082,777 / 238,653 shares) ................................... $12.92 ====== - ----------------- * For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. Summary of Abbreviations: AMBAC - Insured by the Ambac Indemnity Corporation Asset Gty - Insured by the Asset Guaranty Insurance Company Connie Lee - Insured by College Construction Insurance Association FGIC - Insured by the Financial Guaranty Insurance Company FHA - Insured by the Federal Housing Authority FNMA - Insured by the Federal National Mortgage Association FSA - Insured by the Financial Security Assurance GNMA - Insured by the Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association Components of Net Assets at December 31, 1997: Common stock, $.01 par value, 10,000,000,000 shares authorized to the Fund with 1,000,000,000 shares allocated to Tax-Free Minnesota Fund A Class, 1,000,000,000 shares allocated to Tax-Free Minnesota Fund B Class, and 1,000,000,000 shares allocated to Tax-Free Minnesota Fund C Class.................. $393,810,316 Undistributed net investment income .............. 55,704 Accumulated net realized gain on investments...... 712,107 Net unrealized appreciation on investments ....... 34,084,136 ------------ Total net assets.................................. $428,662,263 ============ Net Asset Value and Offering Price for Tax-Free Minnesota Fund A Class Net asset value per share (A)..................... $12.91 Sales charge (3.75% of offering price or 3.87% of amount invested per share) (B)................... 0.50 ------ Offering price.................................... $13.41 ====== - -------------- (A) Net asset value per share illustrated is the estimated amount which would be paid upon the redemption or repurchase of shares. (B) See Purchasing Shares in the current Prospectus for purchases of $100,000 or more for Tax-Free Minnesota Fund Class A. Delaware-Voyageur Minnesota Insured Fund Statement Of Net Assets December 31, 1997 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds - 99.48% General Obligation - 19.86% Anoka County, MN G.O. Capital Improvement - Series C 5.90% 2/1/11 (FGIC) $ 8,045,000 $ 8,368,247 Becker Minnesota G.O. 6.25% 8/1/15 (MBIA)(AMT) .................................... 6,300,000 6,831,341 Becker Wastewater Treatment Facility Series A 5.95% 2/1/14 Insurance (MBIA) ................... 500,000 526,985 Buffalo Independent School District #887 6.10% 2/1/15 (FSA) ............................. 1,030,000 1,093,376 Dakota County 6.40% 2/1/08 (AMBAC) ............... 1,135,000 1,184,180 Dakota County 6.45% 2/1/09 (AMBAC) ............... 1,000,000 1,044,310 Dakota County 6.45% 2/1/10 (AMBAC) ............... 2,500,000 2,608,249 Eden Prairie Independent School District #272 5.85% 2/1/13 (FGIC) ............................ 2,500,000 2,594,949 Eden Prairie Independent School District #272 Inverse Floater 6.42% 2/1/14 (FGIC) ............. 1,125,000 1,168,301 Eden Prairie Independent School District #272, 5.65% 2/1/13 (MBIA) ............................ 3,200,000 3,298,143 Eden Prairie Independent School District #272, Inverse Floater 6.42% 2/1/15 (MBIA) ............. 1,000,000 1,028,470 Elk River Independent School District #728 Series 92 B 6.00% 2/1/09 (AMBAC) ................ 3,950,000 4,210,225 Farmington Independent School District #192 6.80% 2/1/11 (MBIA) ............................ 850,000 918,323 Hennepin County 5.75% 10/1/10 (MBIA) ............. 1,800,000 1,913,688 Hopkins Independent School District #270 4.875% 2/1/14 (MBIA) ........................... 1,875,000 1,853,325 Lakeville Minnesota Independent School District #194 Capital Appreciation Series B Zero Coupon 2/1/15 ..................... 2,455,000 1,016,935 Lakeville Minnesota School District #194 Capital Appreciation Series B Zero Coupon 2/1/17 ........ 2,490,000 918,611 North Branch Independent School District #138, Inverse Floater 7.17% 2/1/11965,0001,054,398 Prior Lake Independent School District #719, Inverse Floater 6.17% 2/1/14 (FGIC) ............. 1,000,000 1,035,460 Rosemount Independent School District #196 Series B Zero Coupon 4/1/10 (FSA) ............... 2,240,000 1,259,664 Rosemount Independent School District #196 Zero Coupon 4/1/09 (FSA) ........................ 1,860,000 1,108,467 South Washington County Independent School District #883 6.125% 6/1/09 (FGIC)............... 1,430,000 1,513,112 South Washington County Independent School District #883 6.125% 6/1/11 (FGIC)............... 2,720,000 2,850,859 Spring Lake Park Independent School District #16, Inverse Floater 6.67% 2/1/14 (MBIA).............. 2,175,000 2,279,835 St. Cloud Independent School District #742 6.05% 2/1/09 (FGIC) ............................. 1,000,000 1,070,450 St. Francis Independent School District #15 5.90% 4/1/10 (FGIC) ............................. 1,845,000 1,948,302 Stillwater Independent School District #834 5.50% 2/1/10 (FGIC) ............................. 2,995,000 3,078,231 18 for tax-exempt income Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) General Obligation (Continued) Western Lake Superior Series A 6.00% 10/1/08 (MBIA)(AMT) ............................ $ 400,000 $ 437,980 Western Lake Superior Series A 6.10% 10/1/09 (MBIA)(AMT) ............................ 425,000 465,197 Western Lake Superior Series A 6.20% 10/1/10 (MBIA)(AMT) ............................ 450,000 493,929 Western Lake Superior Series A 6.20% 10/1/11 (MBIA)(AMT) ............................ 475,000 519,432 ----------- 59,692,974 ----------- Hospital Revenue Bonds - 20.13% Bloomington Masonic Home Care Center 5.90% 7/1/09 (AMBAC) ........................... 1,250,000 1,335,563 Brainerd Benedictine Health Care Systems For St Joseph's Hospital 6.00% 2/15/12 (Connie Lee) ........................... 1,500,000 1,602,030 Brainerd Benedictine Health Care Systems For St Joseph's Hospital 6.00% 2/15/20 (Connie Lee) ........................... 2,000,000 2,124,420 Detroit Lakes Benedictine Health For St Mary's Hospital 6.00% 2/15/12 (Connie Lee) ............. 1,630,000 1,740,873 Detroit Lakes Benedictine Health For St Mary's Hospital 6.00% 2/15/19 (Connie Lee) ............. 1,000,000 1,062,210 Duluth EDA Benedictine For St Luke's Hospital 6.40% 5/1/18 (Connie Lee) ....................... 500,000 542,040 Duluth EDA Health Care - Duluth Clinic 6.30% 11/1/22 (AMBAC) .......................... 2,690,000 2,917,682 Duluth EDA Health Care Revenue For St Mary's Hospital, Inverse Floater 8.22% 2/15/17 ......... 5,000,000 5,506,500 Duluth Economic Development Authority St. Luke's Hospital 6.00% 2/15/20 (Connie Lee) ............. 1,300,000 1,370,525 Duluth EDA St. Luke's Hospital 6.40% 5/1/10 (Connie Lee) ............................ 3,335,000 3,638,752 Minneapolis Fairview Hospital Series 91B 6.50% 1/1/11 (MBIA) ............................ 3,000,000 3,271,530 Minneapolis Fairview Hospital Series 93A 5.25% 11/15/19 (MBIA) .......................... 2,750,000 2,767,380 Minneapolis/Saint Paul Minnesota HRA Health Care System For Healthspan Series A 4.75% 11/15/18 (AMBAC) ................. 4,000,000 3,777,080 Minneapolis/St. Paul HRA - Childrens Hospital Inverse Floater 7.57% 8/15/16 (FSA) ............. 1,310,000 1,439,952 Minneapolis/St. Paul HRA Health Care System for Healthspan Series 93A 5.00% 11/15/13 (FSA) ................................. 6,490,000 6,426,528 Minneapolis/St. Paul HRA HealthOne 7.40% 8/15/05 (MBIA) ................................. 600,000 657,696 Minneapolis/St. Paul HRA HealthOne 7.40% 8/15/11 (MBIA) ................................. 2,370,000 2,590,481 Minnesota Agricultural & Economic Development Fairview Hospital - Series 1997 A 5.75% 11/15/26 (MBIA) .......................... 8,250,000 8,699,543 Robbinsdale North Memorial Medical 5.50% 5/15/23 (AMBAC) ................................ 5,400,000 5,504,220 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Hospital Revenue Bonds (Continued) St. Louis Park Health Care For Methodist Hospital, Inverse Floater 6.32% 7/1/23........... $ 2,500,000 $ 2,496,025 St. Paul Ramsey Medical 5.50% 5/15/13 (AMBAC) ................................ 1,000,000 1,034,130 ----------- 60,505,160 ----------- Housing Revenue Bonds - 19.96% Chaska Waters Edge Multifamily Revenue 7.30% 1/20/30 (GNMA) ........................... 3,257,000 3,670,737 Dakota County HRA Single Family Mortgage Revenue 6.70% 10/1/17 (FNMA)5,465,0005,877,662 Dakota County HRA Single Family Mortgage Revenue 5.85% 10/1/30 (GNMA/FNMA) ............... 7,000,000 7,245,840 Dakota, Washington and Stearns Counties HRA Single Family Mortgage Revenue 7.85% 12/1/30 (MBIA) ........................... 160,000 168,811 Eagan Multifamily Revenue Woodridge Apartments 5.90% 8/1/20 (GNMA) ............................ 1,000,000 1,058,300 Eden Prairie Minnesota Multifamily Revenue Preserve Place 5.60% 7/20/28 (GNMA) ............. 1,035,000 1,047,544 Hopkins Multifamily Housing - Auburn Apartments 8.05% 6/20/31 (GNMA) ........................... 3,790,000 4,371,462 Minneapolis and St. Paul Housing Finance Board Single Family Mortgage - Project Phase XI 5.80% 11/1/30 (GNMA) ........................... 2,705,000 2,788,828 Minneapolis and St. Paul Housing Finance Board Housing Project Phase V 8.875% 11/1/18 (GNMA) ................................. 70,000 72,472 Minneapolis and St. Paul Housing Finance Board Single Family Mortgage Revenue 8.30% 8/1/21 (GNMA) .................................. 120,000 123,125 Minneapolis and St. Paul Housing Finance Board Single Family Mortgage Revenue 8.125% 12/1/14 (GNMA) ................................. 150,000 156,902 Minneapolis and St. Paul Housing Finance Board Housing Project Phase IX 7.25% 8/1/21 (GNMA) .................................. 1,240,000 1,330,532 Minneapolis and St. Paul Housing Finance Board Housing Project Phase IX 7.30% 8/1/31 (GNMA) .................................. 830,000 886,432 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series B 7.25% 7/1/06 (MBIA) .................................. 140,000 141,680 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series A 7.95% 7/1/22 (MBIA) .................................. 305,000 321,998 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series 7.45% 7/1/22 (AMBAC) ................................. 1,395,000 1,478,812 Minnesota Housing Finance Agency Single Family Mortgage Revenue Series 7.05% 7/1/22 (AMBAC) ................................. 505,000 536,593 Minnesota Housing Finance Agency Single Family Housing Rental 5.95% 2/1/15 (AMBAC) ............. 2,480,000 2,614,862 for tax-exempt income 19 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Housing Revenue Bonds (Continued) Minnesota Housing Finance Agency Single Family Housing Rental 5.95% 2/1/18 (MBIA)............... $ 7,130,000 $ 7,480,867 Minnesota Housing Finance Agency Single Family Housing Rental Series A 5.875% 8/1/28 (AMT) ................................... 2,610,000 2,724,657 Minnesota State Housing Finance Agency Single Family Mortgage Series D 5.80% 7/1/21 (AMT) ................................... 5,000,000 5,218,800 Minnetonka Multifamily Housing Cedar Hills Project - Cedar Hills East 7.50% 12/1/27 (FHA) .................................. 500,000 521,495 Minnetonka Multifamily Housing Cedar Hills Project - Cedar Hills East 7.50% 12/1/17 (FHA) .................................. 400,000 420,660 Scott County,Minnesota Housing & Redevelopment Authority Facility Lease Revenue - Justice Center Project 5.50% 12/1/15 ........................................ 1,755,000 1,832,536 South St. Paul, HRA Single Family Housing Mortgage Series 1993 5.75% 9/1/20 (FNMA) .................................. 2,410,000 2,488,156 St. Paul HRA Multifamily Housing 6.60% 10/1/12 (FHA) .................................. 4,000,000 4,301,720 White Bear Lake Multifamily Housing Lake Square 5.875% 2/1/15 (FHA) ...................... 1,055,000 1,109,385 ----------- 59,990,868 ----------- Lease/Certificates of Participation - 0.69% Stearns County HRA Courthouse Project 7.00% 2/1/11 (AMBAC)............................. 2,000,000 2,074,720 ----------- 2,074,720 ----------- *Pre-Refunded/Escrowed to Maturity Bonds - 30.53% Alexandria Independent School District #206 6.30% 2/1/13 Crossover Refunded to 2-1-03 @100 (MBIA) ............................. 1,775,000 1,930,880 Brainerd Independent School District #181 7.00% 6/1/09-01 (FGIC) ......................... 515,000 557,874 Brainerd Independent School District #181 7.00% 6/1/10-01 (FGIC) ......................... 550,000 595,788 Carver County HRA Jail Facility 6.40% 2/1/11 Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 550,000 589,705 Carver County HRA Jail Facility 6.40% 2/1/10 Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 515,000 552,178 Carver County HRA Jail Facility 6.40% 2/1/12 Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 585,000 627,231 Carver County HRA Jail Facility 6.40% 2/1/13 Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 625,000 670,119 Carver County HRA Jail Facility 6.40% 2/1/14 Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 670,000 718,367 Centennial Independent School District #12 7.10% 2/1/09-00 (FSA) .......................... 200,000 212,270 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) *Pre-Refunded/Escrowed to Maturity Bonds (Continued) Centennial Independent School District #12 7.15% 2/1/11-00 (FSA) .......................... $ 450,000 $ 478,049 Centennial Independent School District #12 7.15% 2/1/12-00 (FSA) .......................... 250,000 265,583 Dakota & Washington Counties HRA Single Family Mortgage Revenue 8.375% 9/1/21 (GNMA) (Escrowed to maturity) ......................... 14,115,000 19,901,868 Dakota & Washington Counties HRA Single Family Mortgage Revenue 8.15% 9/1/16 (MBIA) (Escrowed to maturity) ......................... 405,000 540,068 Dakota, Washington & Anoka Counties HRA Single Family Housing 8.45% 9/1/19 (GNMA) (Escrowed to maturity) ......................... 9,000,000 12,536,730 Delano Independent School District #879 7.25% 2/1/10-01 (AMBAC) ........................ 500,000 541,370 Duluth EDA Health Care - Duluth Clinic 6.30% 11/1/22-04 (AMBAC) ........................ 1,060,000 1,184,073 Elk River Independent School District 7.00% 2/1/10-00 (FSA) ................................ 200,000 210,818 Elk River Independent School District #728 6.30% 2/1/14-02 (FSA) ................................ 500,000 535,215 Elk River Independent School District #728 6.30% 2/1/15-02 (FSA) ................................ 665,000 711,836 Ellendale Geneva Independent School District #762 6.00% 2/1/10-03 (AMBAC)............ 230,000 244,617 Ellendale Geneva Independent School District #762 6.00% 2/1/11-03 (AMBAC)............ 245,000 259,889 Ellendale Geneva Independent School District #762 6.00% 2/1/12-03 (AMBAC)..................... 265,000 281,104 Ellendale Geneva Independent School District #762 6.00% 2/1/13-03 (AMBAC)..................... 280,000 296,366 Ellendale Geneva Independent School District #762 6.00% 2/1/14-03 (AMBAC)..................... 300,000 316,845 Ellendale Geneva Independent School District #762 6.00% 2/1/15-03 (AMBAC)..................... 320,000 337,523 Lake Of The Woods Independent School District #390 7.35% 2/1/15-99 (AMBAC)............ 200,000 206,852 Lake Of The Woods Independent School District #390 7.35% 2/1/16-99 (AMBAC)............ 250,000 258,565 Maplewood Independent School District #622 7.10% 2/1/25-05 (FSA) .......................... 11,525,000 13,435,499 Maplewood Independent School District #622 7.10% 2/1/19-05 (MBIA) ......................... 5,935,000 6,918,845 Minnesota Public Facilities Authority Water Pollution Control Revenue 6.50% 3/1/14 Pre-Refunded 3-1-02 @102 (MBIA) ................. 1,500,000 1,655,355 Minnesota State University System 7.40% 6/30/19-99 (MBIA) .............................. 760,000 797,407 Moorhead Minnesota Independent School District 152 5.90% 2/1/10 Crossover Refunded to 2-1-01 @100 (AMBAC) ................. 475,000 496,062 20 for tax-exempt income Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) *Pre-Refunded/Escrowed to Maturity Bonds (Continued) Moorhead Minnesota Independent School District 152 5.90% 2/1/11 Crossover Refunded to 2-1-01 @100 (AMBAC) ................ $ 505,000 $ 527,392 Moorhead Minnesota Independent School District 152 5.90% 2/1/12 Crossover Refunded to 2-1-01 @100 (AMBAC) ................ 540,000 563,944 Moorhead Minnesota Independent School District 152 5.90% 2/1/13 Crossover Refunded to 2-1-01 @100 (AMBAC) ................ 575,000 602,129 Mora Series A 6.85% 2/1/10 Pre-Refunded 2-1-00 @100 (AMBAC) ........................... 245,000 258,825 Mora Series A 6.85% 2/1/11 Pre-Refunded 2-1-00 @100 (AMBAC) ........................... 265,000 279,954 Roseau Independent School District #682 7.00% 2/1/16 Crossover Refunded to 2-1-00 @100 (AMBAC) ........................... 500,000 527,045 South St. Paul Independent School District #6 6.25% 2/1/10 Crossover Refunded to 2-1-00 @100 (FGIC) ............................ 625,000 649,613 South St. Paul Independent School District #6 6.25% 2/1/11 Crossover Refunded to 2-1-00 @100 (FGIC) ............................ 500,000 521,650 South St. Paul Independent School District #6 6.25% 2/1/12 Crossover Refunded to 2-1-00 @100 (FGIC) ............................ 300,000 312,990 South Washington County Independent School District #883 6.875% 6/1/11-00 (FGIC)........... 520,000 550,961 Southern Minnesota Municipal Power Agency Revenue 5.75% 1/1/18 (MBIA) (Escrowed to maturity) ........................ 3,790,000 4,044,763 Southern Minnesota Municipal Power Agency Revenue 5.75% 1/1/18 (AMBAC) (Escrowed to maturity) ........................ 670,000 715,037 St. Cloud Hospital Facility Revenue 6.75% 7/1/11-01 (AMBAC) ............................. 400,000 441,736 St. Cloud Hospital Facility Revenue 7.00% 7/1/07-01 (AMBAC) ............................. 500,000 555,330 St. Cloud Hospital Facility Revenue 6.75% 7/1/15-01 (AMBAC) ............................. 500,000 551,310 St. Francis Independent School District #15 7.60% 2/1/09 (FGIC) (Escrowed to maturity) ........... 250,000 250,620 St. Louis Park Methodist Hospital 7.25% 7/1/18-00 (AMBAC) Prefunded to 2-1-01 @100 (AMBAC) .................................. 500,000 547,150 St. Michael Albertville Independent School District #885 7.25% 2/1/10 Pre-Refunded 2-1-98 @100 (AMBAC) ........................... 725,000 726,675 St. Michael Albertville Independent School District #885 7.25% 2/1/11 Pre-Refunded 2-1-98 @100 (AMBAC) ........................... 775,000 776,790 St. Michael Albertville Independent School District #885 7.25% 2/1/12 Pre-Refunded 2-1-98 @100 (AMBAC) ........................... 255,000 255,589 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Pre-Refunded/Escrowed to Maturity Bonds (Continued) St. Michael Albertville Independent School District #885 7.25% 2/1/13 Pre-Refunded 2-1-98 @100 (AMBAC) ............................ $ 795,000 $ 796,836 Stillwater Independent School District #834 6.75% 2/1/10-99 (FGIC) ............................... 1,000,000 1,027,509 Warroad Independent School District #690 6.85% 2/1/13-00 (AMBAC) .............................. 500,000 525,575 Washington County HRA Jail Facilities 7.00% 2/1/12-02 (MBIA) ............................... 500,000 551,845 Western Minnesota Municipal Power Agency Revenue 9.75% 1/1/16 (Escrowed to maturity) ...................................... 530,000 813,698 Western Municipal Power Agency Series A 6.60% 1/1/10 (MBIA) (Escrowed to maturity) ........... 2,000,000 2,283,939 Willmar Independent School District #347 6.25% 2/1/15 Crossover Refunded to 2-1-02 @100 (AMBAC) ............................ 2,000,000 2,151,820 Wright County 7.20% 12/1/12-99 (FSA)(AMT) ....... 1,000,000 1,056,130 ----------- 91,731,806 ----------- Power Authority Revenue Bonds - 7.66% Bass Brook Pollution Control Revenue for Minnesota Power & Light Company 6.00% 7/1/22 (MBIA) ........................... 2,000,000 2,121,460 Marshall Utility Revenue 6.45% 7/1/10 (FSA) ..... 500,000 549,985 Marshall Utility Revenue 6.45% 7/1/11 (FSA) ..... 100,000 109,640 Marshall Utility Revenue 6.50% 7/1/12 (FSA) ..... 500,000 549,660 Marshall Utility Revenue 6.50% 7/1/13 (FSA) ..... 500,000 548,385 Northern Minnesota Municipal Power Agency Electric System Revenue 5.50% 1/1/18 (AMBAC) ............ 4,200,000 4,305,084 Northern Minnesota Municipal Power Agency Series B 5.90% 1/1/08 (AMBAC) .................. 700,000 762,748 Northern Municipal Power Agency Minnesota 5.25% 1/1/13 (FSA) ............................ 4,750,000 4,776,600 Southern Minnesota Municipal Power Agency 5.75% 1/1/18 (FGIC) ........................... 4,570,000 4,794,661 Southern Minnesota Municipal Power Agency 4.75% 1/1/16 (MBIA) ........................... 2,400,000 2,293,680 Southern Minnesota Municipal Power Agency Revenue 5.75% 1/1/18 (AMBAC).................... 1,330,000 1,395,383 Southern Minnesota Municipal Power Agency, Inverse Floater 7.67% 1/1/18.................... 750,000 805,395 ----------- 23,012,681 ----------- Water And Sewer Revenue Bonds - 0.27% Moorhead Minnesota Public Utilities 6.25% 11/1/12 (MBIA)............................ 735,000 788,795 ----------- 788,795 ----------- Other Revenue Bonds - 0.38% Minneapolis Tax Increment Revenue 7.00% 3/1/03 (MBIA)............................. 1,140,000 1,145,301 ----------- 1,145,301 ----------- Total Municipal Bonds (cost $276,685,209)........ 298,942,305 ----------- for tax-exempt income 21 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Number Market of Shares Value --------------------------- Short Term Investments - 0.31% Federated Minnesota Municipal Money Market $ 928,000 $ 928,000 ------------ Total Short Term Investments (cost $928,000).................................. 928,000 ----------- Total Market Value Of Securities Owned - 99.79% (cost $277,613,209) .......................................... $299,870,305 Receivables And Other Assets Net Of Liabilities - 0.21%............................................ 645,211 ------------ Net Assets Applicable To 27,472,536 Shares ($.01 Par Value) Outstanding - 100.00% ........................ $300,515,516 ============ Net Asset Value - Minnesota Insured A Class ($288,493,895 / 26,372,906 shares) ............................. $10.94 ====== Net Asset Value - Minnesota Insured B Class ($8,925,813 / 816,685 shares) .................................. $10.93 ====== Net Asset Value - Minnesota Insured C Class ($3,095,808 / 282,945 shares) .................................. $10.94 ====== - ----------- *For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. AMBAC - Insured by the AMBAC Indemnity Corporation 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 the Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by the Government National Mortgage Association MBIA - Insured by the Municipal Bond Insurance Association Components Of Net Assets At December 31, 1997: Common Stock, $.01 par value, 10,000,000,000 shares authorized to the Fund with 1,000,000,000 shares allocated to Minnesota Insured Fund A Class, 1,000,000,000 shares allocated to Minnesota Insured Fund B Class and 1,000,000,000 shares allocated to Minnesota Insured Fund C Class................................. $284,752,748 Undistributed net investment income............................. 32,374 Accumulated net realized loss on investments.................... (6,526,702) Net unrealized appreciation on investments...................... 22,257,096 ------------ Total Net Assets................................................ $300,515,516 ============ Net Asset Value and Offering Price for Tax-Free Minnesota Insured Fund A Class Net asset value per share (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 illustrated is the estimated amount which would be paid upon the redemption or repurchase of shares. (B) See Purchasing Shares in the current Prospectus for purchases of $100,000 or more for Minnesota Insured Fund Class A. Delaware-Voyageur Tax-Free Minnesota Intermediate Fund Statement Of Net Assets December 31, 1997 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds - 98.43% General Obligation Bonds - 2.46% Olmstead County Resource Recovery Series A 5.90% 2/1/05................... $1,175,000 $1,247,203 Western Lake Superior Sanitation District 6.10% 10/1/00.................................... 225,000 228,672 ---------- 1,475,875 ---------- Higher Education Revenue Bonds - 8.52% Minnesota Higher Education Facility Authority Augsburg College Series 4F2 5.75% 5/1/16 ........ 3,700,000 3,933,395 Minnesota State Higher Educational Facilities Authority Revenue University St. Thomas Series 4P 5.40% 4/1/23 ......................... 1,160,000 1,174,454 ---------- 5,107,849 ---------- Health Care / Hospital Revenue Bonds - 16.16% Fergus Falls Health Care Facility Broen Memorial Home Project 6.20% 11/1/05 ...................... 100,000 104,261 Fergus Falls Health Care Facility Broen Memorial Home Project 6.30% 11/1/06 ...................... 200,000 209,335 Fergus Falls Health Care Facility Broen Memorial Home Project 6.40% 11/1/07 ...................... 200,000 209,296 Fergus Falls Health Care Facility Broen Memorial Home Project 6.60% 11/1/09 ...................... 240,000 251,062 Fergus Falls Health Care Facility Broen Memorial Home Project 6.70% 11/1/10 ...................... 260,000 271,931 Maplewood Healthcare Facility For Healtheast 5.70% 11/15/02 ................................. 1,000,000 1,037,200 Maplewood Healthcare Facility For Healtheast 5.95% 11/15/06 ................................. 2,200,000 2,290,112 Minneapolis Health Care Facility Jones-Harrison Residence Project 8.35% 9/1/21 .................. 905,000 964,920 Rochester Nursing Home & Multifamily Housing Revenue Samaritan Bethany, Inc. 5.60% 5/1/02 ................................... 200,000 204,470 Rochester Nursing Home & Multifamily Housing Revenue Samaritan Bethany, Inc. 5.80% 5/1/03 ................................... 250,000 255,565 Rochester Nursing Home & Multifamily Housing Revenue Samaritan Bethany, Inc. 6.00% 5/1/04 ................................... 300,000 306,654 Rochester Nursing Home & Multifamily Housing Revenue Samaritan Bethany, Inc. 6.10% 5/1/05 ................................... 250,000 255,533 St. Paul Minnesota Housing and Redevelopment for Healtheast Authority Hospital Revenue 5.70% 11/1/15 .................................. 2,100,000 2,139,606 St. Paul Minnesota Housing and Redevelopment for Healtheast Authority Hospital Revenue 5.85% 11/1/17 .................................. 1,160,000 1,186,726 ---------- 9,686,671 ---------- 22 for tax-exempt income Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Housing Revenue Bonds - 5.21% Burnsville Multifamily Housing Revenue Burnsville Apts. Project, (LOC: TCF ) 7.00% 9/1/19 Mandatory Put 9-1-99 @100 ...................... $ 580,000 $ 581,148 Minnesota HFA Single Family Mortgage Revenue Series C 6.30% 1/1/99 .......................... 70,000 70,805 Oakdale, Minnesota Housing-Oak Meadows Project 6.50% 4/1/10 ................................... 295,000 308,582 Oakdale, Minnesota Housing-Oak Meadows Project 6.20% 4/1/07 ................................... 150,000 156,987 Oakdale, Minnesota Housing-Oak Meadows Project 6.30% 4/1/08 ................................... 260,000 272,064 Park Rapids, Minnesota Multifamily Revenue The Court Apartments Project (Section 8) 6.05% 8/1/12 ................................... 1,200,000 1,224,960 St. Paul HRA Minnesota Public Radio, (LOC: First Bank) 6.40% 6/1/98 .................. 300,000 302,352 St. Paul HRA Minnesota Public Radio, (LOC: First Bank) 6.60% 6/1/99 .................. 100,000 102,353 St. Paul Housing and Redevelopment Single Family Mortgage 6.90% 12/1/21 (FNMA) ................... 95,000 102,152 ---------- 3,121,403 ---------- Industrial Development Revenue Bonds - 23.02% Andover, Minnesota Development Revenue- Downtown Center Project-Series A 6.50% 12/1/06 .................................. 1,795,000 1,837,093 Brooklyn Center CDR Brookdale Association (NWNL Guaranteed) 5.70% 12/1/07 Mandatory Put 6-1-01 @100 ...................... 1,000,000 1,052,880 Duluth Gross Revenue Bond-Duluth Entertainment Project 6.00% 12/1/98 .......................... 275,000 279,175 Duluth Gross Revenue Bond-Duluth Entertainment Project 7.00% 12/1/03 .......................... 1,250,000 1,382,387 Duluth Gross Revenue Bond-Duluth Entertainment Entertainment 7.30% 12/1/06 ..................... 250,000 283,940 Metropolitan Council HHH Metrodome Sports Facility Revenue Series 1992 6.00% 10/1/09 ............... 3,520,000 3,784,035 Minnesota Public Facilities Authority Pollution Control Revenue Series A 6.55% 3/1/03 ........... 1,720,000 1,887,029 Richfield Shoppes CDR-Richfield Shoppes Project 7.50% 10/1/04 .................................. 1,070,000 1,205,633 St. Paul Minnesota Port Authority CDR Fort Rd Medical 7.50% 9/1/02 (Asset Gty) ................ 2,000,000 2,085,480 ---------- 13,797,652 ---------- Lease/Certificates Of Participation - 2.77% Beltrami County Housing & Redevelopment Authority Revenue 5.90% 2/1/08............................. 355,000 375,980 Beltrami County Housing & Redevelopment Authority Revenue 6.00% 2/1/09............................. 380,000 402,378 Beltrami County Housing & Redevelopment Authority Revenue 6.00% 2/1/10............................. 405,000 426,388 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Lease/Certificate of Participation (Continued) Beltrami County Housing & Redevelopment Authority Revenue 6.10% 2/1/11............................ $430,000 $ 453,930 ---------- 1,658,676 ---------- *Pre-Refunded/Escrowed to Maturity Bonds - 31.21% Austin Independent School District #492 6.88% 2/1/12-01 (MBIA) .............................. 1,205,000 1,291,844 Braham Independent School District #314 6.30% 2/1/19-01 (AMBAC) ............................. 3,015,000 3,182,995 Duluth EDA St. Mary's Hospital 7.90% 2/15/98 (Escrowed to maturity) ........................ 250,000 251,130 Duluth EDA St. Mary's Hospital 7.90% 2/15/99 (Escrowed to maturity) ........................ 150,000 156,521 Eden Valley Watkins Independent School District #463 6.55% 2/1/11-02 (FSA) ..................... 250,000 269,913 Eden Valley Watkins Independent School District #463 6.60% 2/1/16-02 (FSA) ..................... 615,000 665,123 Mankato Independent School District #77 6.35% 2/1/13-02 (FSA)(MBIA) .................... 1,750,000 1,876,473 Minneapolis/St. Paul HealthOne Series B 7.55% 8/15/00 (Escrowed to maturity) ................. 325,000 353,288 Minneapolis/St. Paul HealthOne Series C 7.45% 8/15/99 - (Escrowed to maturity) ............... 400,000 421,584 Minnesota State 6.25% 8/1/10-02 ................. 4,000,000 4,337,560 Olmstead County 6.85% 2/1/02-01 ................. 800,000 864,008 Olmstead County 6.90% 2/1/03-01 ................. 900,000 973,296 Olmstead County 6.95% 2/1/04-01 ................. 950,000 1,028,727 St. Cloud Hospital Facility Revenue 7.00% 7/1/20-01 (AMBAC) ....................... 2,740,000 3,038,496 ---------- 18,710,958 ---------- Power Authority Revenue Bonds - 5.93% Eveleth IDR for Minnesota Power And Light Company 6.13% 1/1/04.................................... 2,500,000 2,669,200 Northern Minnesota Municipal Power Agency 7.20% 1/1/99.................................... 860,000 887,271 ---------- 3,556,471 ---------- Other Revenue Bonds - 3.15% Hibbing Economic Development Authority Revenue 5.40% 2/1/03.................................... 1,180,000 1,210,409 Hibbing Economic Development Authority Revenue 6.10% 2/1/08.................................... 650,000 676,579 ---------- 1,886,988 ---------- Total Municipal Bonds (cost of $56,241,720 )..... 59,002,543 ---------- Number of Shares --------- Short Term Investments - .15% Federated Minnesota Municipal Money Market....... 93,000 93,000 ---------- Total Short Term Investments (cost $93,000).................................. 93,000 ---------- for tax-exempt income 23 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Total Market Value Of Securities Owned - 98.58% (cost $56,334,720)....................................... $59,095,543 Receivables And Other Assets Net Of Liabilities - 1.42%... 850,813 ----------- Net Assets Applicable To 5,368,644 Shares ($.01 Par Value) Outstanding - 100.00%................... $59,946,356 =========== Net Asset Value - Tax-Free Minnesota Intermediate A Class ($57,524,327 / 5,151,801 shares)......................... $11.17 ====== Net Asset Value - Tax-Free Minnesota Intermediate B Class ($910,206 / 81,463 shares)................................ $11.17 ====== Net Asset Value - Tax-Free Minnesota Intermediate C Class ($1,511,823 / 135,380 shares)............................ $11.17 ====== - ------------- *For Pre-Refunded Bonds, the stated maturity is followed by the year in which each bond is pre-refunded. AMBAC - Insured by the AMBAC Indemnity Corporation Asset Gty - Insured by the Asset Guaranty Insurance Company FNMA - Insured by the Federal National Mortgage Association FSA - Insured by Financial Security Assurance MBIA - Insured by the Municipal Bond Insurance Association NWNL - Insured by the Northwestern National Life Insurance Company Components Of Net Assets At December 31, 1997: Common Stock, $.01 par value, 10,000,000,000 shares authorized to the Fund with 1,000,000,000 shares allocated to Tax-Free Minnesota Intermediate Fund A Class, 1,000,000,000 shares allocated to Tax-Free Minnesota Intermediate Fund B Class and 1,000,000,000 shares allocated to Tax-Free Minnesota Intermediate Fund C Class..................................... $57,336,516 Accumulated net realized loss on investments................... (150,983) Net unrealized appreciation on investments..................... 2,760,823 ----------- Total Net Assets............................................... $59,946,356 =========== Net Asset Value and Offering Price for Tax-Free Minnesota intermediate Fund A Class Net asset value per share (A)........................................ $11.17 Sales charge (2.75% of offering price or 2.86% of amount invested per share) (B)...................................... 0.32 ------ Offering price....................................................... $11.49 ====== - ------------- (A) Net asset value per share illustrated is the estimated amount which would be paid upon the redemption or repurchase of shares. (B) See Purchasing Shares in the current Prospectus for purchases of $100,000 or more for Minnesota Intermediate Fund A Class. Delaware - Voyageur Minnesota High Yield Municipal Bond Fund Statement of Net Assets December 31, 1997 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds - 100.44% General Obligation Bonds - 1.38% Esko Independent School District #99 5.75% 4/1/17 (FSA)..................................... $ 100,000 $ 104,658 Inver Grove Heights Series - MN School District Enhanced A 5.75% 2/1/13.......................... 100,000 105,470 Stewartville Independent School District Series - MN School District Enhanced A 5.75% 2/1/12..................................... 100,000 106,313 Waconia Independent School District Series 93A 5.45% 2/1/15 (FSA)............................... 100,000 102,642 ---------- 419,083 ---------- Higher Education Revenue Bonds - 7.30% Minnesota State Higher Education Facility Macalester College Series 4C 5.50% 3/1/12........ 100,000 104,743 Minnesota State Higher Education Facility St. Mary's College Series 3Q 6.15% 10/1/23........... 900,000 936,288 Minnesota State University System Revenue Bonds 93A 6.10% 6/30/23.......................... 100,000 105,146 University Of Minnesota Series A 5.50% 7/1/21..................................... 1,000,000 1,072,960 ---------- 2,219,137 ---------- Hospital Revenue Bonds - 26.92% Cambridge Healthcare Facility Revenue - Grandview Christian Home 7.25% 9/1/26125,000129,779 Cannon Falls Nursing Home - Franciscan Health Community Project 7.25% 7/1/21 .................. 100,000 103,150 Duluth, Minnesota Economic Development Authority Health Care Facilities - St. Francis Health Care Facility 6.75% 12/1/17 ............... 325,000 344,331 Fergus Falls Health Care Facility Revenue - Lake Region Hospital 6.50% 9/1/18 ................ 750,000 812,993 Glencoe Minn Health Care Revenue 6.40% 12/1/15 .................................. 275,000 283,195 Little Canada Senior Facility Residence 1992 - (Presbyterian Homes Guaranteed) 7.25% 7/1/12 ......................................... 250,000 261,845 Mankato Health Facilities Revenue Series A - Lutheran Homes 6.875% 10/1/26 ................... 300,000 312,027 Minneapolis Health Care - American Baptist Homes 8.70% 11/1/09 ............................ 150,000 167,213 Minneapolis, Minnesota Housing & Health Care Facility Revenue(Augustana Chapel View Homes) 6.50% 6/1/17 ............................ 1,370,000 1,411,854 Perham Minnesota Hospital District Congregate Housing Facilities Briarwood Project 6.25% 2/1/22 ................................... 620,000 628,097 Robbinsdale North Memorial Medical 5.50% 5/15/23 (AMBAC) .......................... 100,000 101,930 Rochester Health Care Facilities Revenue Reg IRS Ser H for Mayo Clinic Inverse Floater 7.875% 11/15/15 ................................ 1,500,000 1,705,485 24 for tax-exempt income Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Hospital Revenue Bonds (Continued) Springfield St. John's Lutheran Home Revenue 8.50% 11/1/19 .................................. $ 150,000 $ 159,239 St. Paul Housing and Redevelopment Hospital Rev for Health East Series B 6.625% 11/1/17 ................................. 500,000 535,445 St. Paul Housing and Redevelopment Hospital Rev for Health East Series A 6.625% 11/1/17 ................................. 250,000 267,723 Waconia Good Samaritan Housing and Redevelopment Rev for The Evangelical Lutheran - A 6.00% 6/1/14 ....................... 660,000 684,268 Wadena County Health Care Facility Gross Rev Ser B 7.75% 9/1/24 ............................. 250,000 273,245 ---------- 8,181,819 ---------- Housing Revenue Bonds - 33.91% Brooklyn Center Four Court Multifamily Housing 7.50% 6/1/25 ................................... 370,000 382,036 Carver Multifamily Housing Lake Grace 6.25% 7/1/28 ................................... 335,000 349,221 Carver Multifamily Housing Lake Grace 8.00% 7/1/28 ................................... 200,000 205,128 Chanhassen Multifamily Housing Heritage Park 6.20% 7/1/30 ................................... 300,000 318,411 Coon Rapids Minnesota Multifamily Rev Ref - Hsg - Margaret PL - A 6.50% 5/1/25 .............. 500,000 507,945 Eden Prairie Multifamily Housing Subordinated - Tanager Creek 8.00% 6/20/31 ..................... 780,000 813,610 Minneapolis Multifamily Housing - Olson Townhomes 6.00% 12/1/19 ................... 800,000 825,304 Minneapolis - Nicollet Towers Multifamily Housing 6.00% 12/1/19 .................................. 300,000 317,202 Minnesota Housing Finance Authority Single Family Mortgage Series E 6.25% 1/1/23............ 100,000 105,939 Minnesota Housing Finance Authority Single Family Housing 5.875% 1/1/17..................... 100,000 105,427 Minnesota State Housing Finance Agency - Single Family MTG - Series K 5.75% 1/1/26 ....... 1,000,000 1,026,210 Minnetonka Multifamily Housing Beacon Hill - Senior Housing Project 7.55% 6/1/19 ............. 200,000 215,676 Minnetonka,Minnesota Senior Housing Revenue - Westridge Senior Housing Project 6.30% 9/1/08 ................................... 110,000 112,048 Minnetonka,Minnesota Senior Housing Revenue - Westridge Senior Housing Project 6.50% 9/1/12 ................................... 285,000 290,270 Minnetonka,Minnesota Senior Housing Revenue - Westridge Senior Housing Project 7.00% 9/1/27 ................................... 1,275,000 1,295,107 New Brighton Multifamily Polynesian Village 7.60% 4/1/25 ................................... 300,000 320,454 Oakdale,Minnesota Housing - Oak Meadows Project 6.75% 4/1/15 ........................... 1,500,000 1,580,385 - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Housing Revenue Bonds (Continued) St. Anthony Multifamily Housing Chandler 6.05% 11/20/16 (GNMA)............................ $ 135,000 $ 143,988 St. Louis Park Multifamily Mortgage Revenue Ref Tamarind Project (FNMA) 5.50% 11/1/13.................................... 125,000 127,858 Stillwater Multifamily Housing Stillwater Cottages 6.75% 11/1/11.................................... 205,000 210,627 Stillwater Multifamily Housing Stillwater Cottages 7.00% 11/1/27.................................... 340,000 351,149 Stillwater Multifamily Housing Stillwater Cottages 7.00% 11/1/16.................................... 680,000 702,297 ------------ 10,306,292 ------------ Industrial Development Revenue Bonds - 8.86% Andover, Minnesota Development Revenue - Downtown Center Project - Series A 7.00% 12/1/12.................................... 1,640,000 1,677,720 International Falls Minnesota Pollution Control Revenue - Boise Cascade Project 5.65% 12/1/22.................................... 700,000 712,712 Red Wing IDR Kmart (First Mortgage) 5.50% 7/1/08..................................... 300,000 302,016 ------------ 2,692,448 ------------ Lease/Certificates of Participation - 3.37% Beltrami County, Minnesota Housing and Redevelopment Authority Revenue Lease 6.10% 2/1/12..................................... 460,000 484,205 Rice County, Minnesota - Certificate of Participation 6.00% 12/1/21.................................... 125,000 131,864 Saint Cloud, Minnesota Certificate of Participation 5.90% 12/1/17...................... 400,000 408,320 ------------ 1,024,389 ------------ Power Authority Revenue Bonds - 4.05% Bass Brook PCR for Minnesota Power and Light Corp 6.00% 7/1/22................................ 805,000 840,509 Southern Minnesota Municipal Power Agency 5.75% 1/1/18 (FGIC).............................. 100,000 104,916 Western Municipal Power Agency Revenue 6.125% 1/1/16.................................... 285,000 286,200 ------------ 1,231,625 ------------ Other Revenue Bonds - 14.65% Hibbing Economic Development Authority 6.40% 2/1/12..................................... 530,000 551,396 Minneapolis Minnesota Community Development Agency Revenue - Holiday Inn Metrodome Project 6.00% 12/1/01............................ 1,100,000 1,110,395 Minneapolis, Minnesota Community Development Agency (Common Bond Fund - Series 2) 6.20% 6/1/17..................................... 750,000 798,345 Minneapolis, Minnesota Community Development Agency Revenue Limited Tax - Series 4 6.20% 6/1/17..................................... 1,055,000 1,108,583 for tax-exempt income 25 Statement of Net Assets (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value --------------------------- Municipal Bonds (Continued) Other Revenue Bonds (Continued) Puerto Rico Commonwealth 5.375% 7/1/25 $500,000 $ 501,280 Woodbury Golf Course Revenue 6.75% 2/1/22..................................... 365,000 384,429 ----------- 4,454,428 ----------- Total Municipal Bonds (cost $29,274,280).......... 30,529,221 ----------- Total Market Value of Securities Owned - 100.44% (cost $29,274,280)............................................ 30,529,221 Liabilities Net of Receivables and Other Assets - (.44%)....... (133,182) ----------- Net Assets Applicable to 2,853,829 Shares ($.01 par value) Outstanding - 100.00%........................ $30,396,039 =========== Net Asset Value - Minnesota High Yield Municipal Bond Fund A Class ($19,016,521 / 1,785,851 shares)...................... $10.65 ====== Net Asset Value - Minnesota High Yield Municipal Bond Fund B Class ($8,201,463 / 769,637 shares)......................... $10.66 ====== Net Asset Value - Minnesota High Yield Municipal Bond Fund C Class ($3,178,055 / 298,341 shares)......................... $10.65 ====== - ------------- AMBAC - Insured by the Ambac Indemnity Corporation FGIC - Insured by the Financial Guaranty Insurance Company FNMA - Insured by the Federal National Mortgage Association FSA - Insured by Financial Security Assurance GNMA - Insured by the Government National Mortgage Association Common Stock, $.01 par value, 100,000,000,000 shares authorized to the Fund with 10,000,000,000 shares allocated to Minnesota High Yield Municipal Bond Fund A Class, 10,000,000,000 shares allocated to Minnesota High Yield Municipal Bond Fund B Class, 10,000,000,000 shares allocated to Minnesota High Yield Municipal Bond Fund C Class.... $29,125,847 Undistributed net investment income............................... 26,394 Accumulated net realized loss on investments...................... (11,143) Net unrealized appreciation on investments........................ 1,254,941 ----------- Total Net Assets.................................................. $30,396,039 =========== Net Asset Value and Offering Price for Minnesota High Yield Municipal Bond Fund A Class Net asset value per share (A)..................................... $10.65 Sales charge (3.75% of offering price or 3.85% of amount invested per share) (B)................................... 0.41 ------ Offering price.................................................... $11.06 ====== - ------------- (A) Net asset value per share illustrated is the estimated amount which would be paid upon the redemption or repurchase of shares. (B) See Purchasing Shares in the current Prospectus for purchases of $100,000 or more for Minnesota High Yield Municipal Bond Fund Class A. 26 for tax-exempt income The Delaware-Voyageur Funds Statements of Operations Year ended December 31, 1997 - --------------------------------------------------------------------------------
Tax-Free Minnesota Tax-Free Minnesota Minnesota Insured Minnesota High Yield Municipal Fund Fund Intermediate Fund Bond Fund -------------------------------------------------------------------- Investment income: Interest .................................................. $26,178,608 $17,846,137 $3,569,424 $1,309,044 ----------- ----------- ---------- ---------- Expenses: Management fees ........................................... 2,129,804 1,503,424 246,824 136,823 Dividend disbursing and transfer agent fees and expenses .. 329,694 245,680 64,334 25,954 Distribution expense ...................................... 1,134,058 834,942 149,485 112,967 Registration fees ......................................... 13,995 19,909 13,138 5,465 Reports and statements to shareholders .................... 102,070 55,300 16,896 17,972 Accounting and administration ............................. 160,668 103,501 23,592 9,238 Professional fees ......................................... 19,571 26,085 16,928 7,638 Custodian fees ............................................ 121,064 35,581 38,444 -- Taxes (other than taxes on income) ....................... 40,810 11,400 3,700 2,150 Directors' fees ........................................... 12,050 9,253 5,214 966 Amortization of organization expenses ..................... -- -- -- 688 Other ..................................................... 44,591 70,201 26,778 2,775 ----------- ----------- ---------- ---------- 4,108,375 2,915,276 605,333 322,636 Less expenses waived or absorbed........................... (163,751) (61,867) (24,897) (243,061) ----------- ----------- ---------- ---------- Total net expenses......................................... 3,944,624 2,853,409 580,436 79,575 ----------- ----------- ---------- ---------- Net investment income...................................... 22,233,984 14,992,728 2,988,988 1,229,469 ----------- ----------- ---------- ---------- Net realized and unrealized gain on investments: Net realized gain (loss) on investments ................... 3,216,993 1,476,574 638,280 (4,334) Net change in unrealized appreciation ..................... 13,746,414 7,964,819 321,114 1,166,080 ----------- ----------- ---------- ---------- Net realized and unrealized gain on investments............ 16,963,407 9,441,393 959,394 1,161,746 ----------- ----------- ---------- ---------- Net increase in net assets resulting from operations....... $39,197,391 $24,434,121 $3,948,382 $2,391,215 =========== =========== ========== ==========
See accompanying notes for tax-exempt income 27 Delaware-Voyageur Funds Statements of changes in net assets - --------------------------------------------------------------------------------
Tax-Free Minnesota Fund Minnesota Insured Fund --------------------------------------------------------------- Year ended Year ended Year ended Year ended 12/31/97 12/31/96 12/31/97 12/31/96 --------------------------------------------------------------- Increase in net assets from operations: Net investment income .................................. $ 22,233,984 $ 22,746,587 $ 14,992,728 $ 14,894,385 Net realized gain on investments ....................... 3,216,993 515,784 1,476,574 293,417 Net change in unrealized appreciation/depreciation ..... 13,746,414 (8,943,154) 7,964,819 (4,586,047) ------------ ------------ ------------ ------------ Net increase in net assets resulting from operations.... 39,197,391 14,319,217 24,434,121 10,601,755 ------------ ------------ ------------ ------------ Distributions to shareholders from: Net investment income: A Class .............................................. (21,801,997) (22,406,019) (14,559,667) (14,451,758) B Class .............................................. (342,308) (203,627) (326,611) (248,884) C Class .............................................. (121,569) (120,510) (135,307) (136,712) ------------ ------------ ------------ ------------ (22,265,874) (22,730,156) (15,021,585) (14,837,354) ------------ ------------ ------------ ------------ Capital share transactions: Proceeds from shares sold: A Class .............................................. 30,690,547 28,935,567 16,105,669 19,743,497 B Class .............................................. 2,901,401 3,893,971 2,803,647 2,213,483 C Class .............................................. 1,258,502 1,575,266 726,891 962,058 Net asset value of shares issued in connection with the acquisition of Great Hall Minnesota Insured Tax-Exempt Fund (note 5): A Class .............................................. N/A N/A N/A 23,310,124 Net asset value of shares issued upon reinvestment of dividends from net investment income: A Class .............................................. 14,861,153 14,510,299 10,480,178 10,183,091 B Class .............................................. 265,963 159,491 249,513 198,159 C Class .............................................. 108,591 95,792 114,902 118,019 ------------ ------------ ------------ ------------ 50,086,157 49,170,386 30,480,800 56,728,431 ------------ ------------ ------------ ------------ Cost of shares repurchased: A Class .............................................. (73,076,182) (61,934,519) (52,017,149) (51,938,099) B Class .............................................. (1,502,411) (500,598) (1,207,521) (213,150) C Class .............................................. (1,472,994) (867,298) (973,441) (1,076,363) ------------ ------------ ------------ ------------ (76,051,587) (63,302,415) (54,198,111) (53,227,612) ------------ ------------ ------------ ------------ Increase (decrease) in net assets derived from capital share transactions.................................... (25,965,430) (14,132,029) (23,717,311) 3,500,819 ------------ ------------ ------------ ------------ Net decrease in net assets.............................. (9,033,913) (22,542,968) (14,304,775) (734,780) Net assets: Beginning of year....................................... 437,696,176 460,239,144 314,820,291 315,555,071 ------------ ------------ ------------ ------------ End of year............................................. $428,662,263 $437,696,176 $300,515,516 $314,820,291 ============ ============ ============ ============
See accompanying notes 28 for tax-exempt income Statements of changes in net assets (Continued) - -------------------------------------------------------------------------
Tax-Free Minnesota Minnesota High Yield Intermediate Fund Municipal Bond Fund --------------------------------------------------------------- Period Year ended Year ended Year ended from 6/4/96* 12/31/97 12/31/96 12/31/97 12/31/96 --------------------------------------------------------------- Increase in net assets from operations: Net investment income .................................. $ 2,988,988 $ 3,281,209 $ 1,229,469 $ 145,301 Net realized gain (loss) on investments ................ 638,280 58,144 (4,334) (6,809) Net change in unrealized appreciation/ depreciation .... 321,114 (1,060,245) 1,166,080 88,861 ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations.... 3,948,382 2,279,108 2,391,215 227,353 ----------- ----------- ----------- ----------- Distribution to shareholders from: Net investment income: A Class .............................................. (2,915,016) (3,233,948) (783,576) (88,229) B Class .............................................. (26,474) (7,825) (312,756) (41,302) C Class .............................................. (52,600) (34,381) (109,945) (13,370) ----------- ----------- ----------- ----------- (2,994,090) (3,276,154) (1,206,277) (142,901) ----------- ----------- ----------- ----------- Capital share transactions: Proceeds from shares sold: A Class .............................................. 7,081,491 8,813,544 12,612,422 7,102,907 B Class .............................................. 669,318 372,719 5,453,844 2,696,693 C Class .............................................. 810,790 862,998 2,470,327 948,440 Net asset value of shares issued upon reinvestment of dividends from net investment income: A Class .............................................. 2,185,734 2,225,412 503,798 43,874 B Class............................................... 23,336 5,862 160,239 13,064 C Class............................................... 52,025 27,628 89,364 7,823 ----------- ----------- ----------- ----------- 10,822,695 12,308,163 21,289,994 10,812,801 ----------- ----------- ----------- ----------- Cost of shares repurchased: A Class .............................................. (18,684,272) (16,425,703) (903,309) (1,124,003) B Class .............................................. (205,353) -- (475,668) -- C Class .............................................. (510,897) (441,733) (405,467) (67,699) ----------- ----------- ----------- ----------- (19,400,522) (16,867,436) (1,784,444) (1,191,702) ----------- ----------- ----------- ----------- Increase (decrease) in net assets derived from capital share transactions.................................... (8,577,827) (4,559,273) 19,505,550 9,621,099 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets................... (7,623,535) (5,556,319) 20,690,488 9,705,551 Net assets: Beginning of period..................................... 67,569,891 73,126,210 9,705,551 -- ----------- ----------- ----------- ---------- End of period........................................... $59,946,356 $67,569,891 $30,396,039 $9,705,551 =========== =========== =========== ==========
- -------------- *Commencement of operations See accompanying notes for tax-exempt income 29 Delaware-Voyageur Funds Financial Highlights - -------------------------------------------------------------------------------- Selected data for each share of the Fund outstanding throughout each period were as follows:
Tax-Free Minnesota Fund - Class A -------------------------------------------------------------------- Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/97(2) 12/31/96 12/31/95 12/31/94 12/31/93 Net asset value, beginning of period ....................... $ 12.400 $ 12.630 $ 11.330 $ 12.850 $ 12.210 Income from investment operations: Net investment income .................................... 0.654 0.630 0.620 0.630 0.640 Net realized and unrealized gain (loss) from investments . 0.511 (0.230) 1.320 (1.480) 0.870 -------- -------- ---------- --------- -------- Total from investment operations.......................... 1.165 0.400 1.940 (0.850) 1.510 -------- -------- ---------- --------- -------- Less dividends and distributions: Dividends from net investment income ..................... (0.655) (0.630) (0.640) (0.610) (0.640) Distributions from net realized gain on security transactions 0.000 0.000 0.000 (0.050) (0.230) In excess of net realized gains .......................... 0.000 0.000 0.000 (0.010) 0.000 -------- -------- ---------- --------- -------- Total dividends and distributions......................... (0.655) (0.630) (0.640) (0.670) (0.870) -------- -------- ---------- --------- -------- Net asset value, end of period.............................. $ 12.910 $ 12.400 $12.630 $11.330 $ 12.850 ======== ======== ========= ========= ======== Total Return(1)............................................. 9.68% 3.33% 17.49% (6.73%) 12.70% Ratios and supplemental data: Net assets, end of period (000 omitted) .................. $417,365 $428,380 $ 455,220 $ 406,497 $458,145 Ratio of expenses to average net assets .................. 0.91% 0.92% 0.93% 0.90% 1.02% Ratio of expenses to average net assets prior to expense limitation ...................................... 0.95% 0.92% 0.93% 0.90% 1.02% Ratio of net investment income to average net assets ..... 5.22% 5.13% 5.11% 5.29% 5.02% Ratio of net investment income to average net assets prior to expense limitation ................................... 5.18% 5.13% 5.11% 5.29% 5.02% Portfolio turnover ....................................... 19% 28% 51% 24% 32%
- ---------- (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. (2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes 30 for tax-exempt income Financial Highlights (Continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
Tax-Free Minnesota Fund - Class B Tax-Free Minnesota Fund - Class C --------------------------------- --------------------------------- Year Year Period from Year Year Year Period from Ended Ended 8/15/95(1) to Ended Ended Ended 5/4/94(1) to 12/31/97(4) 12/31/96 12/31/95 12/31/97(4) 12/31/96 12/31/95 12/31/94 Net asset value, beginning of period ......... $12.400 $12.620 $11.900 $12.410 $12.630 $11.330 $11.960 Income from investment operations: Net investment income .................... 0.574 0.560 0.450 0.564 0.540 0.530 0.340 Net realized and unrealized gain (loss) from investments 0.508 (0.220) 0.710 0.508 (0.220) 1.320 (0.610) ------- ------- ------- ------- ------- ------- ------- Total from investment operations ......... 1.082 0.340 1.160 1.072 0.320 1.850 (0.270) ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions: Dividends from net investment income ..... (0.572) (0.560) (0.440) (0.562) (0.540) (0.550) (0.320) Distributions from net realized gain on security transactions .................. 0.000 0.000 0.000 0.000 0.000 0.000 (0.040) ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions ........ (0.572) (0.560) (0.440) (0.562) (0.540) (0.550) (0.360) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period ............... $12.910 $12.400 $12.620 $12.920 $12.410 $12.630 $11.330 ======= ======= ======= ======= ======= ======= ======= Total Return(2)............................... 8.95% 2.83% 9.95% 8.82% 2.64% 16.62% (2.30%) Ratios and supplemental data: Net assets, end of period (000 omitted) .. $8,215 $6,233 $2,701 $3,083 $3,083 $2,319 $1,061 Ratio of expenses to average net assets .. 1.56% 1.50% 1.38%(3) 1.65% 1.67% 1.67% 1.72%(3) Ratio of expenses to average net assets prior to expense limitation ............ 1.60% 1.67% 1.63%(3) 1.69% 1.67% 1.67% 1.72%(3) Ratio of net investment income to average net assets ..................... 4.57% 4.53% 4.43%(3) 4.48% 4.38% 4.33% 4.56%(3) Ratio of net investment income to average net assets prior to expense limitation ..................... 4.53% 4.36% 4.18%(3) 4.44% 4.38% 4.33% 4.56%(3) Portfolio turnover ....................... 19% 28% 51% 19% 28% 51% 24%
--------------------- (1) Commencement of operations. (2) 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. (3) Annualized. (4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes for tax-exempt income 31 Financial Highlights (Continued) - ------------------------------------------------------------------------------ Selected data for each share of the Fund outstanding throughout each period were as follows:
Minnesota Insured Fund - Class A ---------------------------------------------------------------- Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/97(2) 12/31/96 12/31/95 12/31/94 12/31/93 Net asset value, beginning of period ................ $10.600 $10.730 $9.610 $11.020 $10.270 Income from investment operations: Net investment income ........................... 0.533 0.520 0.510 0.540 0.540 Net realized and unrealized gain (loss) from investments ...................... 0.341 (0.130) 1.140 (1.390) 0.840 ------- ------- ------ ------- ------- Total from investment operations ................ 0.874 0.390 1.650 (0.850) 1.380 ------- ------- ------ ------- ------- Less dividends and distributions: Dividends from net investment income ............ (0.534) (0.520) (0.530) (0.520) (0.540) Distributions from net realized gain on security transactions .................... 0.000 0.000 0.000 0.040) (0.090) ------- ------- ------ ------- ------- Total dividends and distributions ............... (0.534) (0.520) (0.530) (0.560) (0.630) ------- ------- ------ ------- ------- Net asset value, end of period ...................... $10.940 $10.600 $10.730 $9.610 $11.020 ======= ======= ======= ====== ======= Total Return(1) ..................................... 8.49% 3.75% 17.52% (7.88%) 13.80% Ratios and supplemental data: Net assets, end of period (000 omitted) ........ $288,494 $304,877 $307,734 $284,132 $311,187 Ratio of expenses to average net assets ......... 0.92% 0.92% 0.87% 0.61% 0.70% Ratio of expenses to average net assets prior to expense limitation ................ 0.94% 0.92% 0.92% 0.94% 1.02% Ratio of net investment income to average net assets 5.01% 4.93% 4.92% 5.29% 4.93% Ratio of net investment income to average net assets prior to expense limitation ..... 4.99% 4.93% 4.87% 4.96% 4.61% Portfolio turnover .............................. 21% 14% 54% 25% 18%
- --------------- (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. (2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes 32 for tax-exempt income Financial Highlights (Continued) - ------------------------------------------------------------------------------ Selected data for each share of the Fund outstanding throughout each period were as follows:
Minnesota Insured Fund - Class B Minnesota Insured Fund - Class C -------------------------------- -------------------------------- Year Year Period from Year Year Year Period from Ended Ended 3/7/95(1) to Ended Ended Ended 5/4/94(1) to 12/31/97(4) 12/31/96 12/31/95 12/31/97(4) 12/31/96 12/31/95 12/31/94 Net asset value, beginning of period ..................... $10.580 $10.720 $10.140 $10.600 $10.730 $ 9.610 $10.230 Income from investment operations: Net investment income ................................ 0.454 0.450 0.380 0.454 0.440 0.430 0.300 Net realized and unrealized gain (loss) from investments .................................. 0.348 (0.140) 0.580 0.338 (0.130) 1.140 (0.620) ------- ------- ------- ------- ------- ------- ------ Total from investment operations ..................... 0.802 0.310 0.960 0.792 0.310 1.570 (0.320) ------- ------- ------- ------- ------- ------- ------ Less dividends and distributions: Dividends from net investment income ................. (0.452) (0.450) (0.380) (0.452) (0.440) (0.450) (0.280) Distributions from net realized gain on security transactions ............................. 0.000 0.000 0.000 0.000 0.000 0.000 (0.020) ------- ------- ------- ------- ------- ------- ------ Total dividends and distributions .................... (0.452) (0.450) (0.380) (0.452) (0.440) (0.450) (0.300) ------- ------- ------- ------- ------- ------- ------ Net asset value, end of period ........................... $10.930 $10.580 $10.720 $10.940 $10.600 $10.730 $9.610 ======= ======= ======= ======= ======= ======= ====== Total Return(2)........................................... 7.77% 3.03% 9.59% 7.66% 2.98% 16.63% (3.14%) Ratios and supplemental data: Net assets, end of period (000 omitted) .............. $8,926 $6,817 $4,655 $3,096 $3,126 $3,166 $1,525 Ratio of expenses to average net assets .............. 1.67% 1.56% 1.34%(3) 1.67% 1.68% 1.66% 1.36%(3) Ratio of expenses to average net assets prior to expense limitation ....................... 1.69% 1.68% 1.64%(3) 1.69% 1.68% 1.67% 1.68%(3) Ratio of net investment income to average net assets . 4.26% 4.29% 4.15%(3) 4.26% 4.18% 4.11% 4.68%(3) Ratio of net investment income to average net assets prior to expense limitation ....................... 4.24% 4.17% 3.85%(3) 4.24% 4.18% 4.10% 4.36%(3) Portfolio turnover ................................... 21% 14% 54% 21% 14% 54% 25%
- -------------------- (1) Commencement of operations. (2) 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. (3) Annualized. (4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes for tax-exempt income 33 Financial Highlights (Continued) - ------------------------------------------------------------------------------ Selected data for each share of the Fund outstanding throughout each period were as follows:
Tax-Free Minnesota Intermediate Fund - Class A ---------------------------------------------- Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/97(2) 12/31/96 12/31/95 12/31/94 12/31/93 Net asset value, beginning of period.............. $10.99 $11.140 $10.500 $11.160 $10.830 ------ ------- ------- ------- ------- Income from investment operations: Net investment income.......................... 0.535 0.510 0.510 0.450 0.470 Net realized and unrealized gain (loss) from investments.............................. 0.180 (0.150) 0.640 (0.660) 0.370 ------ ------- ------- ------- ------- Total from investment operations.................. 0.715 0.360 1.150 (0.210) 0.840 ------ ------- ------- ------- ------- Less dividends and distributions: Dividends from net investment income........... (0.535) (0.510) (0.510) (0.450) (0.470) Distributions from net realized gain on security transactions...................... 0.000 0.000 0.000 0.000 (0.040) ------ ------- ------- ------- ------- Total dividends and distributions................. (0.535) (0.510) (0.510) (0.450) (0.510) ------ ------- ------- ------- ------- Net asset value, end of period.................... $11.170 $10.990 $11.140 $10.500 $11.160 ======= ======= ======= ======= ======= Total Return(1)................................... 6.69% 3.46% 11.00% (1.91%) 7.88% Ratios and supplemental data: Net assets, end of period (000 omitted)........ $57,524 $66,024 $72,405 $84,168 $75,374 Ratio of expenses to average net assets........ 0.91% 0.89% 0.91% 0.92% 0.99% Ratio of expenses to average net assets prior to expense limitation................... 0.95% 0.89% 0.91% 0.92% 0.99% Ratio of net investment income to average net assets.................................... 4.86% 4.69% 4.61% 4.18% 4.18% Ratio of net investment income to average net assets prior to expense limitation........ 4.82% 4.69% 4.61% 4.18% 4.18% Portfolio turnover............................. 21% 28% 40% 42% 19%
- --------------------- (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. (2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes 34 for tax-exempt income Financial Highlights (Continued) - ------------------------------------------------------------------------------ Selected data for each share of the Fund outstanding throughout each period were as follows:
Tax -Free Minnesota Tax -Free Minnesota Intermediate Fund - Class B Intermediate Fund - Class C -------------------------------- --------------------------------------- Year Year Period from Year Year Year Period from Ended Ended 3/11/95(1) to Ended Ended Ended 4/30/94(1) to 12/31/97(4) 12/31/96 12/31/95 12/31/97(4) 12/31/96 12/31/95 12/31/94 Net asset value, beginning of period ............. $10.990 $11.140 10.950 $10.990 $11.130 $10.500 $10.740 Income from investment operations: Net investment income ........................ 0.437 (0.150) 0.190 0.187 (0.140) 0.630 (0.240) Net realized and unrealized gain (loss) from investments ..................... 0.190 (0.150 0.190 0.187 (0.140) 0.630 (0.240) ------- ------- ------- ------- ------- ------- ------- Total from investment operations ............. 0.627 0.290 0.360 0.627 0.290 1.050 0.000 ------- ------- ------- ------- ------- ------- ------- Less dividends and distributions: Dividends from net investment income ......... (0.447) (0.440) (0.170) (0.447) (0.430) (0.420) (0.240) Distributions from net realized gain on security transactions ............... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 ------- ------- ------- ------- ------- ------- ------- Total dividends and distributions ............ (0.447 (0.440) (0.170) (0.447) (0.430) (0.420) (0.240) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period ................... $11.170 $10.990 $11.140 $11.170 $10.990 $11.130 $10.500 ======= ======= ======= ======= ======= ======= ======= Total Return(2) .................................. 5.84% 2.74% 3.26% 5.84% 2.69% 10.18% (0.03%) Ratios and supplemental data: Net assets, end of period (000 omitted) ...... $910 $408 $27 $1,512 $1,137 $694 $341 Ratio of expenses to average net assets ...... 1.81% 1.56% 1.30%(3) 1.77% 1.64% 1.63% 1.71%(3) Ratio of expenses to average net assets prior to expense limitation ................. 1.85% 1.62% 1.55%(3) 1.81% 1.64% 1.63% 1.71%(3) Ratio of net investment income to average net assets .................................. 3.96% 3.99% 3.93%(3) 4.00% 3.94% 3.82% 3.35%(3) Ratio of net investment income to average net assets prior to expense limitation ...... 3.92% 3.93% 3.68%(3) 3.96% 3.94% 3.82% 3.35%(3) Portfolio turnover 21% 28% 40% 21% 28% 40% 42%
- --------------------- (1) Commencement of operations. (2) 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. (3) Annualized. (4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. for tax-exempt income 35 Financial Highlights (Continued) - ------------------------------------------------------------------------------ Selected data for each share of the Fund outstanding throughout each period were as follows:
Minnesota High Yield Minnesota High Yield Minnesota High Yield Municipal Bond Municipal Bond Municipal Bond Fund - Class A Fund - Class B Fund - Class C ----------------------------- ---------------------- --------------------- Period from Period from Period from Year 6/4/96(1) Year 6/12/96(1) Year 6/7/96(1) ended to ended to ended to 12/31/97(4) 12/31/96 12/31/97(4) 12/31/96 12/31/97(4) 12/31/96 Net asset value, beginning of period ............... $10.180 $10.000 $10.190 $ 9.780 $10.180 $ 9.990 Income from investment operations: Net investment income .......................... 0.643 0.350 0.557 0.290 0.572 0.300 Net realized and unrealized gain from investments ........................... 0.463 0.180 0.470 0.410 0.455 0.190 ------- ------- ------- ------- ------- ------- Total from investment operations................ 1.106 0.530 1.027 0.700 1.027 0.490 ------- ------- ------- ------- ------- ------- Less dividends and distributions: Dividends from net investment income ........... (0.636) (0.350) (0.557) (0.290) (0.557) (0.300) Distributions from net realized gain on security transactions ...................... 0.000 0.000 0.000 0.000 0.000 0.000 ------- ------- ------- ------- ------- ------- Total dividends and distributions .............. (0.636) (0.350) (0.557) (0.290) (0.557) (0.300) ------- ------- ------- ------- ------- ------- Net asset value, end of period ..................... $10.650 $10.180 $10.660 $10.190 $10.650 $10.180 ======= ======= ======= ======= ======= ======= Total Return(2)..................................... 11.26% 5.40% 10.41% 7.29% 10.41% 5.02% Ratios and supplemental data: Net assets, end of period (000 omitted) ........ $19,017 $6,068 $8,201 $2,738 $3,178 $900 Ratio of expenses to average net assets ........ 0.09% 0.24%(3) 0.85% 0.95%(3) 0.83% 0.99%(3) Ratio of expenses to average net assets prior to expense limitation ................ 1.24% 1.25%(3) 2.00% 2.00%(3) 1.98% 2.00%(3) Ratio of net investment income to average net assets ......................... 6.16% 5.78%(3) 5.40% 5.14%(3) 5.42% 4.90%(3) Ratio of net investment income to average net assets prior to expense limitation 5.01% 4.77%(3) 4.25% 4.09%(3) 4.27% 3.89%(3) Portfolio turnover ............................. 23% 15% 23% 15% 23% 15%
- --------------------- (1) Commencement of operations. (2) 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. (3) Annualized. (4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund Managers, Inc., as the Fund's investment manager. See accompanying notes 36 for tax-exempt income Delaware-Voyageur Funds Notes to Financial Statements December 31, 1997 - ------------------------------------------------------------------------------ Delaware-Voyageur Tax-Free Minnesota Fund (formerly Voyageur Minnesota Tax Free Fund) ("Tax-Free Minnesota Fund"), a series of the Voyageur Tax Free Funds, Inc.; Delaware-Voyageur Minnesota Insured Fund (formerly Voyageur Minnesota Insured Fund)("Minnesota Insured Fund"), a series of the Voyageur Insured Funds, Inc.; Delaware-Voyageur Tax-Free Minnesota Intermediate Fund (formerly Voyageur Minnesota Limited Term Tax Free Fund)("Tax-Free Minnesota Intermediate Fund"), a series of the Voyageur Intermediate Tax-Free Funds, Inc.; and Delaware-Voyageur Minnesota High Yield Municipal Bond Fund (formerly Voyageur Minnesota High Yield Municipal Bond Fund)("Minnesota High Yield Municipal Bond Fund") a series of the Delaware-Voyageur Mutual Funds, Inc., (each referred to as a "Fund" or collectively as the "Funds") are registered under the Investment Company Act of 1940 (as amended) as open-end management investment companies. The Tax-Free Minnesota Fund, Minnesota Insured Fund, and Tax-Free Minnesota Intermediate Fund are registered as diversified funds. The Minnesota High Yield Municipal Bond Fund is registered as a non-diversified fund. The Tax-Free Minnesota Fund seeks high current income free from both federal and state income taxes by investing in investment grade municipal bonds. Minnesota Insured Fund seeks high current income free from both federal and state income taxes with the added safety of an insured portfolio by investing in insured municipal bonds. The Tax-Free Minnesota Intermediate Fund seeks to preserve original investment principal while providing income free from both federal and state income taxes by investing in intermediate term investment grade municipal bonds. The Minnesota High Yield Municipal Bond Fund seeks high current income free from both federal and state income taxes by investing in medium and lower-grade municipal bonds. The Funds each offer 3 classes of shares. 1. Fund Reorganization On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur Fund Manager Inc.'s ("Voyageur") parent, Dougherty Financial Group, Inc. ("DFG") pursuant to an agreement and plan of merger dated January 15, 1997, in which LNC acquired DFG including the mutual fund investment advisory business of DFG conducted by Voyageur. Upon completion of the acquisition, Delaware Management Company, Inc. ("DMC") became the investment adviser to the Funds, Delaware Distributors, L.P. ("DDLP") became the distributor for the Funds, and Delaware Service Company, Inc. ("DSC") became the transfer, dividend-disbursing, shareholder servicing agent and accounting service agent for the Funds. 2. Significant Accounting Policies The following accounting policies are in accordance with generally accepted accounting principles and are consistently followed by the Funds. Security Valuation - Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Money market instruments 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 by or under the direction of the Funds' Board of Directors. Federal Income Taxes - Each Fund intends to continue to qualify 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. Income and capital gain distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. Class Accounting - Investment income, common expenses and 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. Other - Expenses common to all funds within the Delaware-Voyageur Funds are allocated amongst the funds on the basis of average net assets. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Interest income is recorded on the accrual basis. Original issue discounts and market premium are amortized to interest income over the lives of the respective securities. The Funds declare dividends from net investment income daily and pay them monthly. Capital gains are distributed annually. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Investment Management and Other Transactions with Affiliates Commencing May 1, 1997, and in accordance with the terms of the Investment Management Agreement, the Funds pay DMC the Investment Manager of each Fund, an annual fee, which is calculated daily based on the net assets of each Fund. The management fee rates are as follows:
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ---------------------------------------------------------------------------------- Management fee as a percentage of average daily net assets (per annum) 0.50% 0.50% 0.40% 0.65%
DMC has elected to waive their fees and reimburse each Fund to the extent that annual operating expenses exclusive of 12b-1 distribution expenses, taxes, interest, brokerage commissions and extraordinary expenses, exceed 0.66%, 0.67%, 0.71%, 0.05% of average daily net assets for the Tax-Free Minnesota Fund, Minnesota Insured Fund, Tax-Free Minnesota Intermediate Fund and Minnesota High Yield Municipal Bond Fund, respectively, through December 31, 1997. Total expenses absorbed by DMC for the eight month period ended December 31, 1997 are as follows:
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ------------------------------------------------------------------------------------ Total expenses absorbed by DMC $69,935 $32,677 $0 $217,024
for tax-exempt income 37 - ------------------------------------------------------------------------------ Notes to Financial Statements (Continued) 3. Investment Management and Other Transactions with Affiliates (Continued) Prior to May 1, 1997, the Funds had an investment advisory and management agreement with Voyageur. Voyageur received a fee for its investment advisory and management services based on the average daily net assets of the Tax Free Minnesota Fund and Minnesota Insured Fund at an annual rate of .50%, at an annual rate of .40% for the Tax-Free Minnesota Intermediate Fund and at an annual rate of .65% for the Minnesota High Yield Municipal Bond Fund. During the period January 1, 1997 to April 30, 1997, Voyageur waived $93,816, $29,190, $24,897, and $26,037 of the Tax-Free Minnesota Fund, Minnesota Insured Fund, Tax-Free Minnesota Intermediate Fund, and Minnesota High Yield Municipal Bond Fund, respectively. Commencing May 1, 1997, the Funds have engaged DSC, an affiliate of DMC, to serve as dividend disbursing, transfer agent and accounting services agent for the Fund. For the eight month period ended December 31, 1997, the amounts expensed for each Fund were as follows:
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ------------------------------------------------------------------------------ Dividend disbursing, transfer agent fees and other expenses ....................... $161,866 $120,517 $26,769 $12,629 Accounting fees............................. $108,243 $ 76,219 $15,544 $ 6,260
Prior to May 1, 1997, the Funds paid a fee to Voyageur for acting as the Fund's dividend disbursing, administrative and accounting services agent. Each Fund was also responsible for reimbursing Voyageur's out-of-pocket expense in connection with the performance of these services. On December 31, 1997, the Funds had payables to affiliates as follows:
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ------------------------------------------------------------------------------ Investment Management fee payable to DMC ............. $299,488 $243,547 $44,271 $ 0 Dividend disbursing, transfer agent fees, accounting fees and other expenses payable to DSC ......... $ 32,348 $ 24,975 $ 5,315 $2,366
Commencing May 1, 1997, and pursuant to the Distribution Agreement, the Funds pay DDLP, the Distributor and an affiliate of DMC, an annual fee not to exceed 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the B and C Class for each Fund. For the eight month period ended December 31, 1997, DDLP earned commissions on sales of the Fund A Class shares for each Fund as follows:
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ---------------------------------------------------------------------------------- $36,516 $25,364 $6,630 $10,766
Prior to May 1, 1997 each class of shares had a Distribution Agreement with Voyageur Fund Distributors, Inc. ("VFD"). Under the plan the Funds paid VFD a fee at an annual rate of 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. Certain officers of DMC, DSC and DDLP are officers, directors and/or employees of the Funds. These officers, directors and employees are paid no compensation by the Funds. 4. Investments During the period ended December 31, 1997, the Funds made purchases and sales of investment securities other than U.S. government securities and temporary cash investments for each Fund as follows:
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ------------------------------------------------------------------------------------- Purchases........................ $ 76,822,392 $61,906,330 $13,194,147 $23,840,704 Sales............................ $100,278,640 $81,631,039 $23,471,817 $ 4,775,606
38 for tax-exempt income Notes to Financial Statements (Continued) - ------------------------------------------------------------------------------ 4. Investments (Continued) At December 31, 1997, the aggregate cost of securities and unrealized appreciation (depreciation) for federal income tax purposes for each Fund were as follows:
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund ------------------------------------------------------------------------------ Cost of Investments ................ $395,681,075 $277,613,209 $56,334,720 $29,274,280 Aggregate unrealized appreciation... $ 34,149,136 $ 22,257,096 $ 2,760,823 $ 1,254,941 Aggregate unrealized depreciation... $ 65,000 $ 0 $ 0 $ 0 Net unrealized appreciation ........ $ 34,084,136 $ 22,257,096 $ 2,760,823 $ 1,254,941
For federal income tax purposes, as of December 31, Minnesota Insured Fund had a capital loss carryover of $6,053,203 that will expire in 2001 through 2003, Tax-Free Minnesota Intermediate Fund had a capital loss carryover of $11,494 that will expire in 2004, and Minnesota High Yield Municipal Bond Fund had a capital loss carryover of $11,143 that will expire in 2004 and 2005. 5. Fund Merger On November 6, 1996, Voyageur Minnesota Insured Fund acquired all of the net assets of Great Hall Minnesota Insured Tax-Exempt Fund (Great Hall Fund) pursuant to an Agreement and Plan of Reorganization approved by the Great Hall shareholders on November 6, 1996. The acquisition was accompanied by a tax-free exchange of 2,317,110 Great Hall shares for 2,205,310 Class A shares of Minnesota Insured Fund. The aggregate net assets of Minnesota Insured Fund and Great Hall Fund before the acquisition were $295,563,851 and $23,310,124 (including $396,706 of net unrealized appreciation of investments, $627,187 of accumulated net realized loss on investments and $23,540,605 of paid-in capital for Great Hall Fund), respectively, resulting in combined net assets of $318,873,975 on November 9, 1996. 6. Capital Stock Transactions in capital stock shares were as follows:
Tax-Free Minnesota Minnesota Fund Insured Fund ------------------------------------------------------------ Year ended Year ended Year ended Year ended 12/31/97 12/31/96 12/31/97 12/31/96 ------------------------------------------------------------ Shares sold: A Class.......................... 2,445,000 2,351,584 1,511,145 1,875,386 B Class.......................... 230,517 316,743 262,553 211,514 C Class.......................... 99,577 127,900 68,641 91,722 Shares issued in connection with the acquisition of Great Hall Minnesota Insured Tax-Exempt Fund A Class.......................... N/A N/A N/A 2,205,310 Shares issued upon reinvestment of dividends from net investment income: A Class.......................... 1,191,155 1,180,162 983,624 969,663 B Class.......................... 21,253 12,994 23,426 18,904 C Class.......................... 8,668 7,795 10,782 11,243 ---------- ---------- ---------- ---------- 3,996,170 3,997,178 2,860,171 5,383,742 ---------- ---------- ---------- ---------- Shares repurchased: A Class.......................... (5,840,279) (5,048,128) (4,894,549) (4,947,642) B Class.......................... (118,151) (40,979) (113,408) (20,425) C Class.......................... (118,065) (70,822) (91,495) (102,914) ---------- ---------- ---------- ---------- (6,076,495) (5,159,929) (5,099,452) (5,070,981) ---------- ---------- ---------- ---------- Net Increase (Decrease) (2,080,325) (1,162,751) (2,239,281) 312,761 ========== ========== ========== =======
Tax-Free Minnesota Minnesota High Yield Intermediate Fund Municipal Bond Fund -------------------------------------------------------------- Year ended Year ended Year ended 6/4/96* 12/31/97 12/31/96 12/31/97 12/31/96 -------------------------------------------------------------- Shares sold: A Class............................ 642,232 803,384 1,228,700 703,876 B Class............................ 60,795 34,174 531,417 267,494 C Class............................ 73,831 78,645 240,090 94,294 Shares issued in connection with the acquisition of Great Hall Minnesota Insured Tax-Exempt Fund A Class............................ N/A N/A N/A N/A Shares issued upon reinvestment of dividends from net investment income: A Class............................ 198,390 202,700 48,680 4,348 B Class............................ 2,115 536 15,493 1,293 C Class............................ 4,721 2,520 8,637 775 ---------- ---------- -------- ------- 982,084 1,121,959 2,073,017 1,072,080 ---------- ---------- -------- ------- Shares repurchased: A Class............................ (1,698,909) (1,498,234) (87,722) (112,030) B Class............................ (18,600) 0 (46,061) 0 C Class............................ (46,700) (39,981) (38,834) (6,621) ---------- ---------- -------- ------- (1,764,209) (1,538,215) (172,617) 118,651) ---------- ---------- -------- ------- Net Increase (Decrease) .................. (782,125) (416,256) 1,900,400 953,429 ======== ======== ========= =======
* Commencement of operations. for tax-exempt income 39 Notes to Financial Statements (Continued) - ------------------------------------------------------------------------------ 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 states, regional or local economic conditions, and differing levels of supply and demand for municipal bonds. Many municipalities insure repayment for their obligations. Although bond insurance reduces the risk of loss due to default by an issuer, such bonds remain subject to the risk that market value may fluctuate for other reasons and there is no assurance that the insurance company will meet its obligations. These securities have been identified in the Statement of Net Assets. Inverse floaters represent a security that pays interest at rates that increase (decrease) with a decrease (increase) in a specified index. Interest rates disclosed were in effect on December 31, 1997. - ------------------------------------------------------------------------------ Delaware-Voyageur Funds Report of Independent Auditors December 31, 1997 - ------------------------------------------------------------------------------ To the Shareholders and Board of Directors Voyageur Tax-Free Funds, Inc. - Delaware-Voyageur Tax-Free Minnesota Fund Voyageur Insured Funds, Inc. - Delaware-Voyageur Minnesota Insured Fund Voyageur Intermediate Tax-Free Funds, Inc. - Delaware-Voyageur Tax-Free Minnesota Intermediate Fund Voyageur Mutual Funds, Inc. - Delaware-Voyageur Minnesota High Yield Municipal Bond Fund We have audited the accompanying statements of net assets of Tax-Free Minnesota Fund, Minnesota Insured Fund, Tax-Free Minnesota Intermediate Fund and Minnesota High Yield Municipal Bond Fund (the "Funds") as of December 31, 1997, and the related statements of operations, the statements of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes in net assets for the year ended December 31, 1996 and the financial highlights for the periods presented through December 31, 1996 were audited by other auditors whose report dated February 14, 1997 expressed an unqualified opinion on those statements and financial highlights. We conducted our audits in accordance with generally accepted auditing standards. 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 December 31, 1997, by corres pondence with the custodian and brokers. 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 1997 financial statements and financial highlights present fairly, in all material respects, the financial position of each of the respective Funds at December 31, 1997, and the results of their operations, the changes in their net assets and their financial highlights for the year then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Philadelphia, Pennsylvania February 16, 1998 Delaware investments fund family For Growth of Capital Aggressive Growth Fund Trend Fund DelCap Fund Small Cap Value Fund U.S. Growth Fund Growth Stock Fund Tax-Efficient Equity Fund For Total Return Social Awareness Fund Blue Chip Fund Devon Fund Decatur Total Return Fund Decatur Income Fund REIT Fund Delaware Fund For International Diversification Emerging Markets Fund New Pacific Fund Overseas Equity Fund International Equity Fund Global Assets Fund Global Bond Fund For Current Income Delchester Fund High-Yield Opportunities Fund Strategic Income Fund U.S. Government Fund Delaware-Voyageur U.S. Government Securities Fund Limited-Term Government Fund For Tax-Exempt Income National High Yield Municipal Bond Fund Tax-Free USA Fund Tax-Free Insured Fund Tax-Free USA Intermediate Fund State Tax-Free Funds* Money Market Funds Delaware Cash Reserve Tax-Free Money Fund Asset Allocation Funds Growth Portfolio Balanced Portfolio Income Portfolio * Available for the following states: Arizona, California, Colorado, Florida, Idaho, Iowa, Kansas, Minnesota, Missouri, North Dakota, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Utah, Washington, Wisconsin. Insured and intermediate bond funds are available in selected states. funds (Photo of computer keyboard) 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 adviser. Please read the prospectus carefully before you invest or send money. This annual report is for the information of shareholders of Minnesota Municipal Bond Funds, but it may be used with prospective investors when preceded or accompanied by current Prospectuses for the appropriate funds, which set forth details about charges, expenses, investment objectives and operating policies of each Fund. You should read the prospectus carefully before you invest. Summary investment results are documented in each Fund's current Statement of Additional Information. 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 the Funds will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Board of Directors Wayne A. Stork Chairman Delaware Investments Family of Funds Philadelphia, PA Jeffrey J. Nick President and Chief Executive Officer Delaware Investments Family of Funds Philadelphia, PA Walter P. Babich Board Chairman, Citadel Constructors, Inc. King of Prussia, PA Anthony D. Knerr Consultant, Anthony Knerr & Associates New York, NY Ann R. Leven Treasurer, National Gallery of Art Washington, DC W. Thacher Longstreth City Councilman Philadelphia, PA Thomas F. Madison President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN Charles E. Peck Secretary/Treasurer, Enterprise Homes, Inc. Fredericksburg, VA Affiliated Officers David K. Downes Executive Vice President, Chief Financial Officer and Chief Operating Officer Delaware Investments Family of Funds Philadelphia, PA George M. Chamberlain, Jr. Senior Vice President, Secretary and General Counsel Delaware Investments Family of Funds Philadelphia, PA Bruce D. Barton President and Chief Executive Officer Delaware Distributors, L.P. Philadelphia, PA (photo of globes) directors & officers Investment Manager Delaware Management Company, Inc. Philadelphia, Pennsylvania International Affiliate Delaware International Advisers Ltd. London, England National Distributor Delaware Distributors, L.P. Philadelphia, Pennsylvania Shareholder Servicing, Dividend Disbursing and Transfer Agent Delaware Service Company, Inc. Philadelphia, Pennsylvania 1818 Market Street Philadelphia, PA 19103-3682 This report must be preceded or accompanied by current Prospectuses for the Minnesota Municipal Bond Funds and the Delaware Investments Performance Update for the most recently completed calendar quarter. For a prospectus of any other mutual fund from Delaware Investments, contact your financial adviser or Delaware. For Shareholders 1.800.523.1918 For Securities Dealers 1.800.362.7500 For Financial Institutions Representatives Only 1.800.659.2265 DELAWARE INVESTMENTS ===================== Philadelphia o London (photo of globes) Be sure to consult your financial adviser when making investments. Mutual funds can be a valuable part of your financial plan; however, shares of the Funds are not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union, and involve investment risk, including the possible loss of the principal amount invested. Shares of the Funds are not bank or credit union deposits. Copy Rights Delaware Distributors, L.P. Printed in the USA on recycled paper (504) AR-MNALL[12/97]TKO2/98 -----END PRIVACY-ENHANCED MESSAGE-----