<PAGE>
PROSPECTUS
JUNE 9, 1997
Each fund listed on this page (individually, a "Fund" and together, the
"Funds") is a series of an open end management investment company, commonly
referred to as a mutual fund. Three styles of funds are contained in this
combined Prospectus: tax-free intermediate funds (the "Tax-Free Intermediate
Funds"), longer term tax-free funds (the "Tax-Free Funds") and longer term
insured municipal funds (the "Insured Funds"). The investment objective of each
Tax-Free Intermediate Fund is to provide investors with preservation of capital
and, secondarily, current income exempt from federal income tax and the personal
income tax, if any, of the Fund's particular state, by maintaining a weighted
average portfolio maturity of 10 years or less. The investment objective of each
Tax-Free Fund and Insured Fund is to seek as high a level of current income
exempt from federal income tax and from the personal income tax, if any, of the
Fund's particular state, as is consistent with preservation of capital. The
weighted average maturity of the investment portfolio of each Tax-Free Fund and
Insured Fund is expected to be approximately 15 to 25 years. There is no
assurance that any Fund will achieve its investment objective.
<TABLE>
<CAPTION>
<S> <C>
Delaware-Voyageur Tax-Free Arizona Intermediate Fund Delaware-Voyageur Tax-Free Minnesota Intermediate Fund(1)
Delaware-Voyageur Tax-Free Arizona Insured Fund(1) Delaware-Voyageur Minnesota Insured Fund(1)
Delaware-Voyageur Tax-Free Arizona Fund Delaware-Voyageur Tax-Free Minnesota Fund(1)
Delaware-Voyageur Tax-Free California Intermediate Fund Delaware-Voyageur Tax-Free Missouri Insured Fund
Delaware-Voyageur Tax-Free California Insured Fund(1) Delaware-Voyageur Tax-Free New Mexico Fund
Delaware-Voyageur Tax-Free California Fund Delaware-Voyageur Tax-Free New York Fund
Delaware-Voyageur Tax-Free Colorado Intermediate Fund Delaware-Voyageur Tax-Free North Dakota Fund
Delaware-Voyageur Tax-Free Colorado Insured Fund Delaware-Voyageur Tax-Free Oregon Insured Fund
Delaware-Voyageur Tax-Free Colorado Fund(1) Delaware-Voyageur Tax-Free Utah Fund
Delaware-Voyageur Tax-Free Florida Intermediate Fund Delaware-Voyageur Tax-Free Washington Insured Fund
Delaware-Voyageur Tax-Free Florida Insured Fund(1) Delaware-Voyageur Tax-Free Wisconsin Fund
Delaware-Voyageur Tax-Free Florida Fund
Delaware-Voyageur Tax-Free Idaho Fund
Delaware-Voyageur Tax-Free Iowa Fund
Delaware-Voyageur Tax-Free Kansas Fund
</TABLE>
(1) Diversified Series
Each Fund's investment manager is Delaware Management Company, Inc.
("DMC" or the "Manager") as outlined below under "Management." The address of
the Manager is One Commerce Square, 2005 Market Street, Philadelphia,
Pennsylvania 19103 and the address of the Funds is 1818 Market Street,
Philadelphia, Pennsylvania 19103.
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<PAGE>
An investment in any of the Funds is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not insured or guaranteed by the
United States Government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other federal agency. An investment in any of the Funds
involves investment risk, including the possible loss of principal due to
fluctuations in the applicable Fund's net asset value.
This Prospectus sets forth certain information about the Funds that a
prospective investor ought to know before investing. Investors should read and
retain this Prospectus for future reference. The Funds have filed a Statement of
Additional Information (dated April 28, 1997) with the Securities and Exchange
Commission. The Statement of Additional Information is available free of charge
by telephone (800-523-4640) and is incorporated by reference herein in its
entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<PAGE>
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TABLE OF CONTENTS
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Fees and Expenses
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Financial Highlights
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The Funds
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Investment Objectives and Policies
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Risks and Special Investment Considerations
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Investment Restrictions
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How to Purchase Shares
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How to Sell Shares
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Reinstatement Privilege
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Exchange Privilege
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Management
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Determination of Net Asset Value
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Distributions to Shareholders and Taxes
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Investment Performance
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General Information
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<PAGE>
The Funds offer investors a choice among classes of shares which offer
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances.
Class A Shares
An investor who purchases Class A shares pays a sales charge at the time
of purchase. As a result, Class A shares are not subject to any charges when
they are redeemed (except for sales at net asset value in excess of $1 million
or sales subject to special promotions identified from time to time by the
Funds' distributor which in either case are subject to a contingent deferred
sales charge). The initial sales charge may be reduced or waived for certain
purchases. Class A shares of each Fund are subject to a Rule 12b-1 fee payable
at an annual rate of 0.25% of a Fund's average daily net assets attributable to
Class A shares for the life of the investment. See "How to Purchase
Shares--Class A Shares."
Class B Shares
Class B shares of Group 1 Funds (as defined on page 23) are sold without
an initial sales charge, but are subject to a contingent deferred sales charge
of up to 4% if redeemed within six years of purchase. Class B shares of Group 2
Funds (as defined on page 23) are also sold without an initial sales charge,
but are subject to a contingent deferred sales charge of up to 2% if redeemed
within three years of purchase. Class B shares are also subject to a higher Rule
12b-1 fee than Class A shares. The Rule 12b-1 fee for Class B shares will be
paid at an annual rate of 1% of a Fund's average daily net assets attributable
to Class B shares. Class B shares of Group 1 Funds will automatically convert to
Class A shares at net asset value approximately eight years after purchase.
Class B shares of Group 2 Funds will automatically convert to Class A shares at
net asset value approximately five years after purchase. Class B shares provide
an investor the benefit of putting all of the investor's dollars to work from
the time the investment is made but until conversion will have a higher expense
ratio and pay lower dividends than Class A shares due to the higher Rule 12b-1
fee. See "How to Purchase Shares--Class B Shares."
Class C Shares
Class C shares are sold without an initial sales charge but are subject
to a contingent deferred sales charge of 1% if redeemed within one year of
purchase. Class C shares are also subject to a higher Rule 12b-1 fee than Class
A shares. The Rule 12b-1 fee for Class C shares of each Fund will be paid at an
annual rate of 1% of the Fund's average daily net assets attributable to Class C
shares for the life of the investment. Class C shares provide an investor the
benefit of putting all of the investor's dollars to work from the time the
investment is made, but will have a higher expense ratio and pay lower dividends
than Class A shares due to the higher Rule 12b-1 fee. See "How to Purchase
Shares--Class C Shares." Class C shares do not convert to any other class of
shares.
The decision as to which class of shares provides a more suitable
investment for an investor depends on a number of factors, including the amount
and intended length of the investment. Investors making investments that qualify
for reduced sales charges might consider Class A shares. Other investors might
consider Class B or Class C shares because all of the purchase price is invested
immediately. The Funds' transfer agent will treat orders for Class B shares for
$250,000 or more as orders for Class A shares or such orders will be declined.
Sales personnel may receive different compensation depending on which class of
shares they sell.
SHARES OF THE FUNDS COVERED BY THIS PROSPECTUS ARE NOT REGISTERED IN ALL
STATES. SHARES THAT ARE NOT REGISTERED IN ONE OR MORE STATES ARE NOT BEING
OFFERED AND SOLD IN SUCH STATES.
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<PAGE>
<TABLE>
<CAPTION>
FEES AND EXPENSES
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Example of Expenses:
An investor in a Delaware-
Shareholder Transaction Annual Fund Operating Expenses Total Voyageur Fund would pay
Expenses (as a Percentage of Average Net Assets) Fund the following dollar amount
_______________________ After Fee Waivers and Operating of expenses on a $1,000
Reimbursement Arrangements Expenses investment assuming (a) 5%
Maximum ____________________________________ Without annual return and (b) redemption
Front-End Maximum Total Voluntary at the end of each period.
Sales Load CDSC Fund Waiver and ____________________________
Delaware-Voyageur Imposed on Imposed on Management 12b-1 Other Operating Reimburse-
Funds(4) Purchases Redemptions Fee(5) Fee Expenses Expenses ment(6) 1 Year 3 Years 5 Years 10 Years
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STATE LONG TERM FUNDS
Tax-Free Arizona
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 3.75% 1.00%(2) 0.00% 0.25% 0.22% 0.47% 1.08% $42 $52 $63 $94
Class B N/A(1) 4.00 0.00 1.00 0.22 1.22 1.78 52(3) 69(3) 87(3) 127(7)
Class C N/A(1) 1.00 0.00 1.00 0.22 1.22 1.78 22(3) 39 67 148
Tax-Free California
Class A 3.75 1.00(2) 0.00 0.20 0.00 0.20 1.29 39 44 48 62
Class B N/A(1) 4.00 0.00 0.95 0.00 0.95 2.04 50(3) 60(3) 73(3) 95(7)
Class C N/A(1) 1.00 0.00 0.95 0.00 0.95 2.04 20(3) 30 53 117
Tax-Free Colorado
Class A 3.75 1.00(2) 0.32 0.25 0.24 0.81 0.99 45 62 81 134
Class B N/A(1) 4.00 0.32 1.00 0.24 1.56 1.74 56(3) 79(3) 105(3) 165(7)
Class C N/A(1) 1.00 0.32 1.00 0.24 1.56 1.74 26(3) 49 85 186
Tax-Free Florida
Class A 3.75 1.00(2) 0.00 0.25 0.31 0.56 1.08 43 55 68 105
Class B N/A(1) 4.00 0.00 1.00 0.31 1.31 1.83 53(3) 72(3) 92(3) 137(7)
Class C N/A(1) 1.00 0.00 1.00 0.31 1.31 1.83 23(3) 42 72 158
Tax-Free Idaho
Class A 3.75 1.00(2) 0.38 0.25 0.24 0.87 0.99 46 64 84 141
Class B N/A(1) 4.00 0.38 1.00 0.24 1.62 1.74 56(3) 81(3) 108(3) 172(7)
Class C N/A(1) 1.00 0.38 1.00 0.24 1.62 1.74 26(3) 51 88 192
Tax-Free Iowa
Class A 3.75 1.00(2) 0.35 0.25 0.32 0.92 1.07 47 66 87 146
Class B N/A(1) 4.00 0.35 1.00 0.32 1.67 1.82 57(3) 83(3) 111(3) 178(7)
Class C N/A(1) 1.00 0.35 1.00 0.32 1.67 1.82 27(3) 53 91 198
Tax-Free Kansas
Class A 3.75 1.00(2) 0.29 0.25 0.29 0.83 1.04 46 63 82 136
Class B N/A(1) 4.00 0.29 1.00 0.29 1.58 1.79 56(3) 80(3) 106(3) 168(7)
Class C N/A(1) 1.00 0.29 1.00 0.29 1.58 1.79 26(3) 50 86 187
Tax-Free Minnesota
Class A 3.75 1.00(2) 0.44 0.25 0.22 0.91 0.97 46 65 86 145
Class B N/A(1) 4.00 0.44 1.00 0.22 1.66 1.72 57(3) 82(3) 110(3) 177(7)
Class C N/A(1) 1.00 0.44 1.00 0.22 1.66 1.72 27(3) 52 90 197
Tax-Free New Mexico
Class A 3.75 1.00(2) 0.33 0.25 0.42 1.00 1.17 47 68 91 155
Class B N/A(1) 4.00 0.33 1.00 0.42 1.75 1.92 58(3) 85(3) 115(3) 186(7)
Class C N/A(1) 1.00 0.33 1.00 0.42 1.75 1.92 28(3) 55 95 206
Tax-Free New York
Class A 3.75 1.00(2) 0.42 0.25 0.33 1.00 1.08 47 68 91 155
Class B N/A(1) 4.00 0.42 1.00 0.33 1.75 1.83 58(3) 85(3) 115(3) 186(7)
Class C N/A(1) 1.00 0.42 1.00 0.33 1.75 1.83 28(3) 55 95 206
Tax-Free North Dakota
Class A 3.75 1.00(2) 0.35 0.25 0.40 1.00 1.15 47 68 91 155
Class B N/A(1) 4.00 0.35 1.00 0.40 1.75 1.90 58(3) 85(3) 115(3) 186(7)
Class C N/A(1) 1.00 0.35 1.00 0.40 1.75 1.90 28(3) 55 95 206
Tax-Free Utah
Class A 3.75 1.00(2) 0.03 0.25 0.40 0.68 1.15 44 58 74 119
Class B N/A(1) 4.00 0.03 1.00 0.40 1.43 1.90 54(3) 75(3) 98(3) 151(7)
Class C N/A(1) 1.00 0.03 1.00 0.40 1.43 1.90 25(3) 45 78 171
Tax-Free Wisconsin
Class A 3.75 1.00(2) 0.46 0.25 0.29 1.00 1.04 47 68 91 155
Class B N/A(1) 4.00 0.46 1.00 0.29 1.75 1.79 58(3) 85(3) 115(3) 186(7)
Class C N/A(1) 1.00 0.46 1.00 0.29 1.75 1.79 28(3) 55 95 206
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</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FEES AND EXPENSES (CONTINUED)
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Example of Expenses:
An investor in a Delaware-
Shareholder Transaction Annual Fund Operating Expenses Total Voyageur Fund would pay
Expenses (as a Percentage of Average Net Assets) Fund the following dollar amount
_______________________ After Fee Waivers and Operating of expenses on a $1,000
Reimbursement Arrangements Expenses investment assuming (a) 5%
Maximum ____________________________________ Without annual return and (b) redemption
Front-End Maximum Total Voluntary at the end of each period.
Sales Load CDSC Fund Waiver and ____________________________
Delaware-Voyageur Imposed on Imposed on Management 12b-1 Other Operating Reimburse-
Funds(4) Purchases Redemptions Fee(5) Fee Expenses Expenses ment(6) 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------------
STATE INSURED FUNDS
Arizona Insured
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 3.75% 1.00%(2) 0.37% 0.25% 0.22% 0.84% 0.97% $46 $63 $82 $137
Class B N/A(1) 4.00 0.37 1.00 0.22 1.59 1.72 56(3) 80(3) 107(3) 169(7)
Class C N/A(1) 1.00 0.37 1.00 0.22 1.59 1.72 26(3) 50 87 189
California Insured
Class A 3.75 1.00(2) 0.49 0.25 0.24 0.98 0.99 47 68 90 153
Class B N/A(1) 4.00 0.49 1.00 0.24 1.73 1.74 58(3) 84(3) 114(3) 184(7)
Class C N/A(1) 1.00 0.49 1.00 0.24 1.73 1.74 28(3) 54 94 204
Colorado Insured
Class A 3.75 1.00(2) 0.18 0.25 0.57 1.00 1.32 47 68 91 155
Class B N/A(1) 4.00 0.18 1.00 0.57 1.75 2.07 68(3) 95(3) 115(3) 186(7)
Class C N/A(1) 1.00 0.18 1.00 0.57 1.75 2.07 28(3) 55 95 206
Florida Insured
Class A 3.75 1.00(2) 0.26 0.25 0.36 0.87 1.11 46 64 84 141
Class B N/A(1) 4.00 0.26 1.00 0.36 1.62 1.86 56(3) 81(3) 108(3) 172(7)
Class C N/A(1) 1.00 0.26 1.00 0.36 1.62 1.86 26(3) 51 88 192
Minnesota Insured
Class A 3.75 1.00(2) 0.46 0.25 0.21 0.92 0.96 47 66 87 146
Class B N/A(1) 4.00 0.46 1.00 0.21 1.67 1.71 57(3) 83(3) 111(3) 178(7)
Class C N/A(1) 1.00 0.46 1.00 0.21 1.67 1.71 27(3) 53 91 198
Missouri Insured
Class A 3.75 1.00(2) 0.41 0.25 0.25 0.91 1.00 46 65 86 145
Class B N/A(1) 4.00 0.41 1.00 0.25 1.66 1.75 57(3) 82(3) 110(3) 177(7)
Class C N/A(1) 1.00 0.41 1.00 0.25 1.66 1.75 27(3) 52 90 197
Oregon Insured
Class A 3.75 1.00(2) 0.18 0.25 0.28 0.71 1.03 44 59 76 122
Class B N/A(1) 4.00 0.18 1.00 0.28 1.46 1.78 55(3) 76(3) 100(3) 154(7)
Class C N/A(1) 1.00 0.18 1.00 0.28 1.46 1.78 25(3) 46 80 175
Washington Insured
Class A 3.75 1.00(2) 0.00 0.25 0.25 0.50 1.25 42 53 64 98
Class B N/A(1) 4.00 0.00 1.00 0.25 1.25 2.00 53(3) 70(3) 89(3) 130(7)
Class C N/A(1) 1.00 0.00 1.00 0.25 1.25 2.00 23(3) 40 69 151
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</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FEES AND EXPENSES (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
Example of Expenses:
An investor in a Delaware-
Shareholder Transaction Annual Fund Operating Expenses Total Voyageur Fund would pay
Expenses (as a Percentage of Average Net Assets) Fund the following dollar amount
_______________________ After Fee Waivers and Operating of expenses on a $1,000
Reimbursement Arrangements Expenses investment assuming (a) 5%
Maximum ____________________________________ Without annual return and (b) redemption
Front-End Maximum Total Voluntary at the end of each period.
Sales Load CDSC Fund Waiver and ____________________________
Delaware-Voyageur Imposed on Imposed on Management 12b-1 Other Operating Reimburse-
Funds(4) Purchases Redemptions Fee(5) Fee Expenses Expenses ment(6) 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------------
STATE INTERMEDIATE FUNDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona Intermediate
Class A 2.75% 1.00%(2) 0.17% 0.25% 0.58% 1.00% 1.23% $37 $58 $81 $147
Class B N/A(1) 2.00 0.17 1.00 0.58 1.75 1.98 58(3) 85(3) 105(3)(8) 186(8)
Class C N/A(1) 1.00 0.17 1.00 0.58 1.75 1.98 23(3) 55 95 206
California Intermediate
Class A 2.75 1.00(2) 0.17 0.25 0.58 1.00 1.23 37 58 81 147
Class B N/A(1) 2.00 0.17 1.00 0.58 1.75 1.98 58(3) 85(3) 105(3)(8) 186(8)
Class C N/A(1) 1.00 0.17 1.00 0.58 1.75 1.98 23(3) 55 95 206
Colorado Intermediate
Class A 2.75 1.00(2) 0.17 0.25 0.58 1.00 1.23 37 58 81 147
Class B N/A(1) 2.00 0.17 1.00 0.58 1.75 1.98 58(3) 85(3) 105(3)(8) 186(8)
Class C N/A(1) 1.00 0.17 1.00 0.58 1.75 1.98 23(3) 55 95 206
Florida Intermediate
Class A 2.75 1.00(2) 0.00 0.25 0.48 0.73 1.39 35 50 67 116
Class B N/A(1) 2.00 0.00 1.00 0.48 1.48 2.14 35(3) 57(3) 81(3)(8) 157(8)
Class C N/A(1) 1.00 0.00 1.00 0.48 1.48 2.14 25(3) 47 81 177
Minnesota Intermediate
Class A 2.75 1.00(2) 0.40 0.25 0.31 0.96 0.96 37 57 79 142
Class B N/A(1) 2.00 0.40 1.00 0.31 1.71 1.71 37(3) 64(3) 92(3)(8) 182(8)
Class C N/A(1) 1.00 0.40 1.00 0.31 1.71 1.71 27(3) 54 93 202
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</TABLE>
(1) Class B and Class C shares are sold without a front-end sales charge,
but their Rule 12b-1 fees may cause long term shareholders to pay more
than the economic equivalent of the maximum permitted front-end sales
charges.
(2) A contingent deferred sales charge of 1.00% is imposed on certain
redemptions of Class A shares that were purchased without an initial
sales charge as part of an investment of $1 million or more.
(3) Class B and Class C share expenses would be lower assuming no
redemption at the end of the period.
(4) Delaware Distributors, L.P. (the "Underwriter") pays broker-dealers and
financial institutions an annual fee equal to 0.25% of the average
daily net assets attributable to the Class A shares (0.15% for Class A
shares of the Tax-Free Intermediate Funds), 0.25% of the average daily
net assets attributable to the Class B shares (0.15% for Class B shares
of the Tax-Free Intermediate Funds), and 1.00% of the average daily net
assets attributable to the Class C shares held by their customers. The
fee is paid quarterly commencing when such shares are sold for Class A
and Class B shares. The fee is paid quarterly commencing in the
thirteenth month after such shares are sold for Class C shares.
(5) See "Management" for the fees payable under each Fund's Investment
Management Agreement without waivers.
(6) The expense ratios reflect the effect of gross expenses attributable to
earnings credits on uninvested cash balances received by each Fund.
(7) At the end of approximately eight years after purchase, Class B shares
of the Group 1 Funds will be automatically converted into Class A
shares of the relevant Fund. The example above assumes conversion of
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<PAGE>
Class B shares at the end of the eighth year. However, the conversion
may occur as late as three months after the eighth anniversary of
purchase, during which time the higher 12b-1 Plan fees payable by Class
B shares will continue to be assessed. Information for the ninth and
tenth years reflects expenses of the Class A shares. See Conversion
Feature under How to Purchase Shares for a description of the automatic
conversion feature.
(8) At the end of approximately five years after purchase, Class B shares
of Group 2 Funds will be automatically converted into Class A shares of
the relevant Fund. The example above assumes conversion of Class B
shares at the end of the fifth year. However, the conversion may occur
as late as three months after the fifth anniversary of purchase, during
which time the higher 12b-1 Plan fees payable by Class B shares will
continue to be assessed. Information for the sixth through tenth years
reflects expenses of the Class A shares. See Conversion Feature under
How to Purchase Shares for a description of the automatic conversion
feature.
The examples contained in the table should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown. The purpose of the above Fees and Expenses table is to
assist the investor in understanding the various costs and expenses that
investors in the Funds will bear directly or indirectly. The information set
forth in the table under the heading "Annual Fund Operating Expenses as a
Percentage of Average Net Assets After Fee Waivers and Reimbursement
Arrangements" reflects voluntary expense waivers and commitments to pay Fund
expenses to which the Manager will adhere through December 31, 1997. See
"Management - Expenses of the Funds" for a discussion of waivers that will
remain in place through April 30, 1999. Absent the voluntary waivers, total fund
operating expenses for such period would be equivalent to the corresponding
percentages disclosed under the column "Total Fund Operating Expenses Without
Voluntary Waiver and Reimbursement." The examples have been calculated based on
the "Total Fund Operating Expenses" information after voluntary fee waivers and
expense reimbursement arrangements.
-8-
<PAGE>
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FINANCIAL HIGHLIGHTS
The following table shows certain per share data and selected information for a
share outstanding during the indicated periods for each Fund. This information
has been audited by KPMG Peat Marwick LLP, independent auditors, and should be
read in conjunction with the financial statements of each Fund contained in its
annual report. An annual report of each Fund is available without charge by
contacting the Funds at 800-523-4640. In addition to financial statements, the
annual reports contain further information about the performance of the Funds.
Per share data is not presented for all Funds or all classes since not all Funds
and classes of shares were outstanding during the periods presented below.
- -------------------------------------------------------------------------------
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<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Income from
Investment
Operations Less Distributions
----------------- Net ------------------
Realized
Net and Distri- Net
Asset Net Unrealized Dividends butions Asset Total
Value Invest- Gain from Net from Value from
Delaware-Voyageur Beginning ment (Loss) on Investment Capital End of Investment
State Funds of Period Income Securities Income Gains Period Return(4)
- ---------------------------------------------------------------------------------------------------
Tax-Free Arizona
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - 12/31/96 $10.75 0.58 (0.01) (0.58) (0.04) $10.70 5.48%
Class A - 12/31/95(1) 10.00 0.46 0.84 (0.46) (0.09) 10.75 13.27
Class B - 12/31/96 10.74 0.51 (0.01) (0.51) (0.04) 10.69 4.84
Class B - 12/31/95(1 10.30 0.26 0.53 (0.26) (0.09) 10.74 7.74
Class C - 12/31/96 10.76 0.50 (0.01) (0.50) (0.04) 10.71 4.70
Class C - 12/31/95(1) 10.20 0.30 0.65 (0.30) (0.09) 10.76 9.43
Arizona Insured
Class A - 12/31/96 11.15 0.53 (0.09) (0.53) -- 11.06 4.09
Class A - 12/31/95 9.86 0.54 1.31 (0.56) -- 11.15 19.10
Class A - 12/31/94 11.31 0.55 (1.37) (0.53) (0.10)(7) 9.86 (7.41)
Class A - 12/31/93 10.71 0.58 0.74 (0.58) (0.14) 11.31 12.64
Class A - 12/31/92 10.39 0.61 0.38 (0.61) (0.06) 10.71 9.86
Class A - 12/31/91(1) 10.00 0.50 0.47 (0.50) (0.08) 10.39 9.98
Class B - 12/31/96 11.14 0.45 (0.09) (0.45) -- 11.05 3.32
Class B - 12/31/95(1) 10.44 0.38 0.69 (0.37) -- 11.14 10.36
Class C - 12/31/96 11.15 0.43 (0.09) (0.43) -- 11.06 3.18
Class C - 12/31/95 9.86 0.45 1.31 (0.47) -- 11.15 18.10
Class C - 12/31/94(1) 10.48 0.27 (0.56) (0.25) (0.08)(7) 9.86 (2.84)
Tax-Free California
Class A - 12/31/96 10.64 0.60 (0.18) (0.60) (0.03) 10.43 4.21
Class A - 12/31/95(1) 10.00 0.47 0.70 (0.47) (0.06) 10.64 11.97
Class B - 12/31/96 10.65 0.56 (0.18) (0.56) (0.03) 10.44 3.77
Class B - 12/31/95(1) 9.96 0.20 0.74 (0.19) (0.06) 10.65 9.52
Class C - 12/31/96(1) 10.07 0.37 0.38 (0.37) (0.03) 10.42 7.58
California Insured
Class A - 12/31/96 10.65 0.52 (0.15) (0.52) -- 10.50 3.63
Class A - 12/31/95 9.33 0.53 1.34 (0.55) -- 10.65 20.51
Class A - 12/31/94 9.51 0.10 (0.18) (0.09) (0.01) 9.33 (0.84)
Class A - 10/31/94 11.08 0.55 (1.52) (0.54) (0.06) 9.51 (8.97)
Class A - 10/31/93 10.02 0.60 1.11 (0.60) (0.05) 11.08 17.29
Class A - 10/31/92(1) 10.00 -- 0.02 -- -- 10.02 0.20
Class B - 12/31/96 10.65 0.48 (0.15) (0.48) -- 10.50 3.22
Class B - 12/31/95 9.33 0.50 1.33 (0.51) -- 10.65 20.01
Class B - 12/31/94 9.51 0.08 (0.17) (0.08) (0.01) 9.33 (0.92)
Class B - 10/31/94(1) 10.68 0.31 (1.16) (0.30) (0.02) 9.51 (7.93)
Class C - 12/31/96 10.65 0.44 (0.19) (0.44) -- 10.46 2.47
Class C - 12/31/95(1) 10.19 0.25 0.53 (0.32) -- 10.65 7.77
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------
Ratios/Supplemental Data
---------------------------
Ratio of
Expenses
to Average
Net Assets
Ratio of Ratio Assuming
Net Expenses of Net No Voluntary
Assets to Investment Waivers
End of Average Income Portfolio and
Period Net to Average Turnover Reimburse-
(000s) Assets(2) Net Assets Rate ments
- ------------------------------------------------------
<S> <C> <C> <C> <C>
$9,755 0.46% 5.43% 70.14% 1.25%
6,225 0.52(4) 5.19(4) 38.05 1.25(4)
3,491 1.11 4.77 70.14 2.00
1,629 0.99(4) 4.60(4) 38.05 2.00(4)
23 1.21 4.68 70.14 2.00
27 1.20(4) 4.65(4) 38.05 2.00(4)
209,258 0.82 4.89 42.76 0.95
238,114 0.69 5.07 42.96 0.95
231,736 0.72 5.20 25.18 0.92
263,312 0.59 5.00 33.80 1.03
124,120 0.35 5.60 40.29 1.16
38,322 -- (5) 6.58(4) 177.66 1.24(4)
3,110 1.59 4.11 42.76 1.70
2,048 1.33(4) 4.08(4) 42.96 1.60(4)
554 1.70 4.01 42.76 1.70
541 1.54 4.18 42.96 1.69
326 1.50(4) 4.10(4) 25.18 1.71(4)
1,218 0.27 5.71 7.87 1.25
1,012 0.46(4) 5.57(4) 39.51 1.22(4)
660 0.50 5.34 7.87 2.00
128 0.60(4) 5.33(4) 39.51 1.93(4)
94 0.78 5.13(4) 7.87 2.00(4)
30,551 0.82 5.05 54.52 1.01
33,860 0.70 5.23 107.45 1.02
27,994 0.10(4) 6.30(4) 7.28 1.24(4)
27,282 0.20 5.37 18.34 1.25
12,509 -- 5.26 24.19 1.25
2,056 -- -- 7.31 --
6,717 1.21 4.64 54.52 1.76
6,029 1.10 4.75 107.45 1.75
2,219 0.57(4) 5.54(4) 7.28 1.94(4)
1,427 0.73(4) 4.82(4) 18.34 1.95(4)
55 1.58 4.02 54.52 1.77
53 1.53(4) 4.25(4) 107.45 1.77(4)
- ------------------------------------------------------
</TABLE>
See Notes to Financial Highlights
-10-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------
Income from
Investment
Operations Less Distributions
-------------------- Net --------------------
Realized
Net and Distri- Net
Asset Net Unrealized Dividends butions Asset Total
Value Invest- Gain from Net from Value from
Delaware-Voyageur Beginning ment (Loss) on Investment Capital End of Investment
State Funds of Period Income Securities Income Gains Period Return(4)
- --------------------------------------------------------------------------------------------------
Tax-Free Colorado
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - 12/31/96 10.90 0.56 (0.13) (0.55) -- 10.78 4.08
Class A - 12/31/95 9.53 0.54 1.38 (0.55) -- 10.90 20.54
Class A - 12/31/94 11.10 0.55 (1.54) (0.54) (0.04) 9.53 (9.12)
Class A - 12/31/93 10.57 0.56 0.85 (0.56) (0.32) 11.10 13.72
Class A - 12/31/92 10.27 0.58 0.45 (0.58) (0.15) 10.57 10.42
Class A - 12/31/91 10.02 0.61 0.43 (0.61) (0.18) -- 10.80
Class A - 12/31/90 10.00 0.64 0.02 (0.64) -- 10.02 6.81
Class A - 12/31/89 9.74 0.67 0.32 (0.67) (0.06) 10.00 10.73
Class A - 12/31/88 9.43 0.69 0.34 (0.69) (0.03) 9.74 10.57
Class A - 12/31/87(1) 9.58 0.49 (0.15) (0.49) -- 9.43 3.27
Class B - 12/31/96 10.90 0.47 (0.13) (0.46) -- 10.78 3.25
Class B - 12/31/95(1) 10.25 0.35 0.65 (0.35) -- 10.90 9.96
Class C - 12/31/96 10.90 0.46 (0.13) (0.45) -- 10.78 3.17
Class C - 12/31/95 9.53 0.45 1.37 (0.45) -- 10.90 19.44
Class C - 12/31/94(1) 10.21 0.29 (0.67) (0.27) (0.03) 9.53 (3.75)
Tax-Free Florida
Class A - 12/31/96 10.73 0.59 (0.21) (0.59) -- 10.52 3.74
Class A - 12/31/95(1) 10.00 0.47 0.75 (0.47) (0.02) 10.73 12.49
Class B - 12/31/96 10.73 0.56 (0.20) (0.56) -- 10.53 3.51
Class B - 12/31/95(1) 10.37 0.15 0.38 (0.15) (0.02) 10.73 5.10
Class C - 12/31/96 10.73 0.37 (0.21) (0.37) -- 10.52 2.97
Class C - 12/31/95(1) 10.20 0.33 0.56 (0.34) (0.02) 10.73 8.88
Florida Insured
Class A - 12/31/96 10.94 0.53 (0.23) (0.53) -- 10.71 2.90
Class A - 12/31/95 9.52 0.54 1.44 (0.56) -- 10.94 21.22
Class A - 12/31/94 9.64 0.10 (0.12) (0.09) (0.01) 9.52 (0.11)
Class A - 10/31/94 11.15 0.55 (1.46) (0.54) (0.06) 9.64 (8.38)
Class A - 10/31/93 10.11 0.58 1.12 (0.58) (0.08) 11.15 17.27
Class A - 10/31/92(1) 10.00 0.51 0.15 (0.51) (0.04) 10.11 6.74
Class B - 12/31/96 10.94 0.48 (0.23) (0.48) -- 10.71 2.40
Class B - 12/31/95 9.52 0.50 1.44 (0.52) -- 10.94 20.76
Class B - 12/31/94 9.63 0.09 (0.11) (0.08) (0.01) 9.52 (0.03)
Class B - 10/31/94(1) 10.82 0.31 (1.19) (0.30) (0.01) 9.63 (8.10)
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Ratio of
Expenses
to Average
Net Assets
Ratio of Ratio Assuming
Net Expenses of Net No Voluntary
Assets to Investment Waivers
End of Average Income Portfolio and
Period Net to Average Turnover Reimburse-
(000s) Assets(2) Net Assets Rate ments
- -------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
358,328 0.78 5.27 40.35 0.91
392,815 0.76 5.18 82.83 0.93
354,138 0.66 5.35 69.32 0.72
399,218 0.75 4.97 58.61 0.75
202,165 0.80 5.59 69.72 0.80
104,863 0.82 6.15 92.42 0.82
53,987 1.00 6.38 69.64 1.00
34,625 1.00 6.37 33.06 1.00
19,767 1.00 6.77 56.31 1.00
5,546 1.00(5) 6.49(5) 92.80 1.00(5)
4,172 1.58 4.45 40.35 1.65
1,643 1.39(5) 3.96(5) 82.83 1.60(5)
1,522 1.66 4.40 40.35 1.66
1,042 1.66 4.20 82.83 1.66
465 1.80(5) 4.23(5) 69.32 1.81(5)
5,761 0.33 5.66 70.17 1.25
4,421 0.32(5) 5.26(5) 63.52 1.25(5)
1,635 0.76 5.23 70.17 2.00
101 0.44(5) 4.88(5) 63.52 2.00(5)
16 1.15 4.83 70.17 2.00
9 1.11(5) 4.57(5) 63.52 2.00(5)
192,171 0.73 5.02 57.18 0.96
242,425 0.51 5.24 101.48 0.95
240,228 0.20(5) 6.24(5) 2.51 1.06(5)
259,702 0.44 5.24 49.12 0.96
289,682 0.18 5.18 53.51 1.12
50,666 -- 5.38(5) 208.24 1.25(5)
3,222 1.24 4.51 57.18 1.72
2,814 0.89 4.80 101.48 1.68
1,477 0.59(5) 5.68(5) 2.51 1.81(5)
1,135 1.00(5) 4.63(5) 49.12 1.28(5)
- -------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------
Income from
Investment
Operations Less Distributions
-------------------------- Net ------------------------------
Realized
Net and Distri-
Asset Net Unrealized Dividends butions
Value Invest- Gain from Net from
Delaware-Voyageur Beginning ment (Loss) on Investment Capital
State Funds of Period Income Securities Income Gains
- --------------------------------------------------------------------------------------------------------
Florida Intermediate
<S> <C> <C> <C> <C> <C>
Class A - 12/31/96 10.56 0.42 (0.08) (0.47) --
Class A - 12/31/95 9.64 0.44 1.01 (0.49) (0.04)
Class A - 12/31/94(1) 10.00 0.18 (0.36) (0.18) --
Class B - 12/31/96 10.56 0.34 (0.09) (0.39) --
Class B - 12/31/95(1) 10.58 0.10 0.03 (0.11) (0.04)
Class C - 12/31/96 10.55 0.33 (0.09) (0.37) --
Class C - 12/31/95(1) 10.08 0.25 0.55 (0.29) (0.04)
Tax-Free Idaho
Class A - 12/31/96 11.02 0.58 (0.12) (0.57) --
Class A - 12/31/95(1) 10.00 0.60 1.10 (0.60) (0.08)
Class B - 12/31/96 11.01 0.52 (0.13) (0.51) --
Class B - 12/31/95(1) 10.50 0.42 0.59 (0.42) (0.08)
Class C - 12/31/96 11.02 0.50 (0.13) (0.49) --
Class C - 12/31/95(1) 10.04 0.50 1.06 (0.50) (0.08)
Tax-Free Iowa
Class A - 12/31/96 9.83 0.44 (0.21) (0.44) --
Class A - 12/31/95 8.56 0.45 1.29 (0.47) --
Class A - 12/31/94 9.26 0.17 (0.72) (0.15) --
Class A - 8/31/94(1) 10.00 0.49 (0.74) (0.49) --
Class B - 12/31/96 9.83 0.38 (0.22) (0.38) --
Class B - 12/31/95(1) 9.18 0.31 0.64 (0.30) --
Class C - 12/31/96 9.83 0.36 (0.22) (0.36) --
Class C - 12/31/95(1) 8.55 0.37 1.28 (0.37) --
Tax-Free Kansas
Class A - 12/31/96 10.73 0.52 (0.17) (0.52) --
Class A - 12/31/95 9.50 0.56 1.22 (0.55) --
Class A - 12/31/94 9.63 0.09 (0.13) (0.09) --
Class A - 10/31/94 10.85 0.57 (1.21) (0.57) (0.01)
Class A - 10/31/93(1) 10.00 0.56 0.85 (0.56) --
Class B - 12/31/96 10.74 0.45 (0.17) (0.45) --
Class B - 12/31/95(1) 10.19 0.34 0.54 (0.33) --
Class C - 12/31/96 10.72 0.43 (0.17) (0.43) --
Class C - 12/31/95(1) 10.20 0.32 0.51 (0.31) --
Tax-Free Minnesota
Class A - 12/31/96 12.63 0.63 (0.23) (0.63) --
Class A - 12/31/95 11.33 0.62 1.32 (0.64) --
Class A - 12/31/94 12.85 0.63 (1.48) (0.61) (0.06)(6)
Class A - 12/31/93 12.21 0.64 0.87 (0.64) (0.23)
Class A - 12/31/92 12.07 0.70 0.23 (0.70) (0.09)
Class A - 12/31/91 11.67 0.75 0.49 (0.75) (0.09)
Class A - 12/31/90 11.68 0.77 0.02 (0.77) (0.03)
Class A - 12/31/89 11.48 0.80 0.22 (0.80) (0.02)
Class A - 12/31/88 11.16 0.80 0.32 (0.80) --
Class A - 12/31/87 11.85 0.81 (0.66) (0.81) (0.03)
Class B - 12/31/96 12.62 0.56 (0.22) (0.56) --
Class B - 12/31/95(1) 11.90 0.45 0.71 (0.44) --
Class C - 12/31/96 12.63 0.54 (0.22) (0.54) --
Class C - 12/31/95 11.33 0.53 1.32 (0.55) --
Class C - 12/31/94(1) 11.96 0.34 (0.61) (0.32) (0.04)
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Ratio of
Expenses
to Average
Net Assets
Ratio of Ratio Assuming
Net Net Expenses of Net No Voluntary
Asset Total Assets to Investment Waivers
Value from End of Average Income Portfolio and
End of Investment Period Net to Average Turnover Reimburse-
Period Return(4) (000s) Assets(2) Net Assets Rate ments
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10.43 3.34 3,159 0.66 4.63 63.06 1.25
10.56 15.14 859 0.63 4.28 27.76 1.25
9.64 (1.55) 592 -- 4.19(5) -- 1.25(5)
10.42 2.47 1,042 1.48 3.81 63.06 2.00
10.56 1.13 41 1.52(5) 3.32(5) 27.76 2.00(5)
10.42 2.37 54 1.55 3.74 63.06 2.00
10.55 7.95 54 1.62(5) 3.10(5) 27.76 2.00(5)
10.91 4.36 27,684 0.60 5.29 34.68 1.10
11.02 17.48 13,540 0.26(5) 5.24(5) 41.97 1.25(5)
10.89 3.75 4,945 1.11 4.78 34.68 1.85
11.01 9.86 1,977 0.79(5) 4.68(5) 41.97 1.90(5)
10.90 3.48 822 1.33 4.57 34.68 1.82
11.02 15.81 789 1.05(5) 4.48(5) 41.97 2.00(5)
9.62 2.56 40,037 0.92 4.68 14.56 1.06
9.83 20.80 42,374 0.72 4.88 21.67 1.06
8.56 (5.86) 32,373 0.11(5) 5.71(5) 7.18 1.25(5)
9.26 (2.67) 38,669 0.12 4.89 119.35 1.25
9.61 1.76 1,645 1.61 3.97 14.56 1.81
9.83 10.62 819 1.28(5) 4.06(5) 21.67 1.65(5)
9.61 1.56 670 1.75 3.82 14.56 1.81
9.83 19.66 462 1.61(4) 3.74(4) 21.67 1.72(4)
10.56 3.43 10,176 0.83 4.97 56.77 1.21
10.73 19.13 10,677 0.37 5.32 19.71 1.11
9.50 (0.38) 7,355 0.01(4) 5.88(4) -- 1.25(4)
9.63 (6.10) 6,469 0.06 5.30 38.96 1.25
10.85 14.49 2,057 -- 5.26(4) 28.87 1.25(4)
10.57 2.69 2,402 1.61 4.16 56.77 2.00
10.74 8.76 677 0.94(4) 4.63(4) 19.71 1.68(4)
10.55 2.52 90 1.77 4.02 56.77 2.00
10.72 8.29 40 1.27(4) 4.21(4) 19.71 1.79(4)
12.40 3.33 428,380 0.92 5.13 27.67 0.92
12.63 17.49 455,220 0.93 5.11 50.84 0.93
11.33 (6.73) 406,497 0.90 5.29 24.26 0.90
12.85 12.70 458,145 1.02 5.02 31.77 1.02
12.21 7.97 331,314 0.96 5.73 23.60 1.04
12.07 11.04 251,594 0.83 6.44 26.40 0.98
11.67 7.03 197,629 0.82 6.68 20.54 1.02
11.68 9.11 172,476 0.77 6.85 22.84 0.77
11.48 10.31 150,031 0.77 7.01 9.56 0.77
11.16 1.38 124,082 0.78 7.10 13.84 0.78
12.40 2.83 6,233 1.50 4.53 27.67 1.67
12.62 9.95 2,701 1.38(4) 4.43(4) 50.84 1.63(4)
12.41 2.64 3,083 1.67 4.38 27.67 1.67
12.63 16.62 2,319 1.67 4.33 50.84 1.67
11.33 (2.30) 1,061 1.72(4) 4.56(4) 24.26 1.72(4)
- ------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Income from
Investment
Operations Less Distributions
---------------- Net --------------------------
Realized
Net and Distri- Net
Asset Net Unrealized Dividends butions Asset
Value Invest- Gain from Net from Value
Delaware-Voyageur Beginning ment (Loss) on Investment Capital End of
State Funds of Period Income Securities Income Gains Period
- --------------------------------------------------------------------------------
Minnesota Insured
<S> <C> <C> <C> <C> <C> <C> <C>
Class A - 12/31/96 10.73 0.52 (0.13) (0.52) -- 10.60
Class A - 12/31/95 9.61 0.51 1.14 (0.53) -- 10.73
Class A - 12/31/94 11.02 0.54 (1.39) (0.52) (0.04) 9.61
Class A - 12/31/93 10.27 0.54 0.84 (0.54) (0.09) 11.02
Class A - 12/31/92 10.07 0.59 0.25 (0.59) (0.05) 10.27
Class A - 12/31/91 9.65 0.60 0.48 (0.60) (0.06) 10.07
Class A - 12/31/90 9.64 0.61 0.02 (0.61) (0.01) 9.65
Class A - 12/31/89 9.48 0.63 0.20 (0.63) (0.04) 9.64
Class A - 12/31/88 9.19 0.67 0.29 (0.67) -- 9.48
Class A - 12/31/87(1) 9.51 0.46 (0.32) (0.46) -- 9.19
Class B - 12/31/96 10.72 0.45 (0.14) (0.45) -- 10.58
Class B - 12/31/95(1) 10.14 0.38 0.58 (0.38) -- 10.72
Class C - 12/31/96 10.73 0.44 (0.13) (0.44) -- 10.60
Class C - 12/31/95 9.61 0.43 1.14 (0.45) -- 10.73
Class C - 12/31/94(1) 10.23 0.30 (0.62) (0.28) (0.02) 9.61
Minnesota Intermediate
Class A - 12/31/96 11.14 0.51 (0.15) (0.51) -- 10.99
Class A - 12/31/95 10.50 0.51 0.64 (0.51) -- 11.14
Class A - 12/31/94 11.16 0.45 (0.66) (0.45) -- 10.50
Class A - 12/31/93 10.83 0.47 0.37 (0.47) (0.04) 11.16
Class A - 12/31/92 10.69 0.51 0.18 (0.51) (0.04) 10.83
Class A - 12/31/91 10.32 0.55 0.37 (0.55) -- 10.69
Class A - 12/31/90 10.26 0.60 0.06 (0.60) -- 10.32
Class A - 12/31/89 10.21 0.59 0.05 (0.59) -- 10.26
Class A - 12/31/88 10.17 0.53 0.04 (0.53) -- 10.21
Class A - 12/31/87 10.43 0.55 (0.25) (0.55) (0.01) 10.17
Class B - 12/31/96 11.14 0.44 (0.15) (0.44) -- 10.99
Class B - 12/31/95(1) 10.95 0.17 0.19 (0.17) -- 11.14
Class C - 12/31/96 11.13 0.43 (0.14) (0.43) -- 10.99
Class C - 12/31/95 10.50 0.42 0.63 (0.42) -- 11.13
Class C - 12/31/94(1) 10.74 0.24 (0.24) (0.24) -- 10.50
Missouri Insured
Class A - 12/31/96 10.54 0.52 (0.18) (0.51) -- 10.37
Class A - 12/31/95 9.27 0.52 1.29 (0.54) -- 10.54
Class A - 12/31/94 9.37 0.10 (0.11) (0.09) -- 9.27
Class A - 10/31/94 10.82 0.55 (1.43) (0.54) (0.03) 9.37
Class A - 10/31/93(1) 10.00 0.55 0.89 (0.55) (0.07) 10.82
Class B - 12/31/96 10.54 0.46 (0.18) (0.45) -- 10.37
Class B - 12/31/95 9.27 0.48 1.28 (0.49) -- 10.54
Class B - 12/31/94 9.37 0.08 (0.10) (0.08) -- 9.27
Class B - 10/31/94(1) 10.30 0.33 (0.94) (0.32) -- 9.37
Class C - 12/31/96 10.54 0.43 (0.18) (0.42) -- 10.37
Class C - 12/31/95(1) 10.36 0.06 0.17 (0.05) -- 10.54
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------
Ratio of
Expenses
to Average
Net Assets
Ratio of Ratio Assuming
Net Expenses of Net No Voluntary
Total Assets to Investment Waivers
from End of Average Income Portfolio and
Delaware-Voyageur Investment Period Net to Average Turnover Reimburse-
State Funds Return(4) (000s) Assets(2) Net Assets Rate ments
- ----------------------------------------------------------------------------------------
Minnesota Insured
<S> <C> <C> <C> <C> <C> <C> <C>
Class A - 12/31/96 3.75 304,877 0.92 4.93 14.04 0.92
Class A - 12/31/95 17.52 307,734 0.87 4.92 53.72 0.92
Class A - 12/31/94 (7.88) 284,132 0.61 5.29 24.75 0.94
Class A - 12/31/93 13.80 311,187 0.70 4.93 18.25 1.02
Class A - 12/31/92 8.57 162,728 0.37 5.66 14.11 1.06
Class A - 12/31/91 11.59 68,250 0.78 6.13 43.68 1.16
Class A - 12/31/90 6.63 29,394 0.74 6.30 15.12 1.25
Class A - 12/31/89 0.96 8,217 0.78 6.55 28.34 1.00
Class A - 12/31/88 10.70 4,707 0.86 7.08 68.09 1.00
Class A - 12/31/87(1) 0.48 2,759 0.76(4) 7.93(4) 20.66 1.00(4)
Class B - 12/31/96 3.03 6,817 1.56 4.29 14.04 1.68
Class B - 12/31/95(1) 9.59 4,655 1.34(4) 4.15(4) 53.72 1.64(4)
Class C - 12/31/96 2.98 3,126 1.68 4.18 14.04 1.68
Class C - 12/31/95 16.63 3,166 1.66 4.11 53.72 1.67
Class C - 12/31/94(1) (3.14) 1,525 1.36(4) 4.68(4) 24.75 1.68(4)
Minnesota Intermediate
Class A - 12/31/96 3.46 66,024 0.89 4.69 28.18 0.89
Class A - 12/31/95 11.00 72,405 0.91 4.61 40.28 0.91
Class A - 12/31/94 (1.91) 84,168 0.92 4.18 42.06 0.92
Class A - 12/31/93 7.88 75,374 0.99 4.18 19.13 0.99
Class A - 12/31/92 6.62 48,210 1.09 4.71 25.56 1.09
Class A - 12/31/91 9.24 27,268 1.23 5.35 43.39 1.23
Class A - 12/31/90 6.59 22,526 1.18 5.81 51.47 1.18
Class A - 12/31/89 6.43 21,884 0.84 5.74 68.23 0.84
Class A - 12/31/88 6.02 24,157 0.84 5.15 16.13 0.84
Class A - 12/31/87 2.97 29,063 0.84 5.14 24.79 0.84
Class B - 12/31/96 2.74 408 1.56 3.99 28.18 1.62
Class B - 12/31/95(1) 3.26 27 1.30(4) 3.93(4) 40.28 1.55(4)
Class C - 12/31/96 2.69 1,137 1.64 3.94 28.18 1.64
Class C - 12/31/95 10.18 694 1.63 3.82 40.28 1.63
Class C - 12/31/94(1) (0.03) 341 1.71(4) 3.35(4) 42.05 1.71(4)
Missouri Insured
Class A - 12/31/96 3.41 49,301 0.71 5.05 28.26 1.03
Class A - 12/31/95 19.96 50,211 0.50 5.25 31.69 1.07
Class A - 12/31/94 (0.07) 37,790 0.11(4) 6.00(4) 8.85 1.12(4)
Class A - 10/31/94 (8.28) 37,384 0.15 5.39 32.02 1.13
Class A - 10/31/93(1) 14.74 30,270 -- 4.82(4) 76.51 1.25(4)
Class B - 12/31/96 2.93 10,432 1.29 4.46 28.26 1.78
Class B - 12/31/95 19.18 6,195 0.97 4.70 31.69 1.81
Class B - 12/31/94 (0.14) 2,742 0.60(4) 5.32(4) 8.85 1.84(4)
Class B - 10/31/94(1) (6.16) 1,701 0.49(4) 4.89(4) 32.02 1.83(4)
Class C - 12/31/96 2.48 152 1.62 4.10 28.26 1.78
Class C - 12/31/95(1) 2.24 20 1.22(4) 4.09(4) 31.69 1.55(4)
- ----------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------
Income from
Investment
Operations Less Distributions
---------------- Net --------------------------
Realized
Net and Distri- Net
Asset Net Unrealized Dividends butions Asset Total
Value Invest- Gain from Net from Value from
Delaware-Voyageur Beginning ment (Loss) on Investment Capital End of Investment
State Funds of Period Income Securities Income Gains Period Return(4)
- --------------------------------------------------------------------------------------------
Tax-Free New Mexico
<S> <C> <C> <C> <C> <C> <C> <C>
Class A - 12/31/96 10.89 0.54 (0.11) (0.53) -- 10.79 4.13
Class A - 12/31/95 9.59 0.52 1.33 (0.55) -- 10.89 19.64
Class A - 12/31/94 9.77 0.11 (0.20) (0.09) -- 9.59 (0.90)
Class A - 10/31/94 10.92 0.56 (1.16) (0.55) -- 9.77 (5.56)
Class A - 10/31/93 10.00 0.57 0.98 (0.57) (0.06) 10.92 15.77
Class A - 10/31/921 10.00 -- -- -- -- 10.00 --
Class B - 12/31/96 10.89 0.46 (0.11) (0.45) -- 10.79 3.39
Class B - 12/31/95 9.59 0.46 1.32 (0.48) -- 10.89 18.84
Class B - 12/31/94 9.77 0.09 (0.19) (0.08) -- 9.59 (0.98)
Class B - 10/31/94(1) 10.69 0.31 (0.93) (0.30) -- 9.77 (5.84)
Class C - 12/31/96(1) 10.41 0.28 0.37 (0.27) -- 10.79 6.30
Tax-Free New York
Class A - 12/31/96(10) 10.72 0.12 0.01 (0.12) (0.04) 10.69 1.21
Class A - 9/30/96 10.87 0.55 (0.13) (0.55) (0.02) 10.72 3.94
Class A - 9/30/95 10.74 0.57 0.17 (0.59) (0.02) 10.87 7.31
Class A - 9/30/94 10.81 0.15 (0.06) (0.16) -- 10.74 0.79
Class A - 6/30/94 11.51 0.62 (0.54) (0.62) (0.16) 10.81 0.63
Class A - 6/30/93 11.03 0.65 0.65 (0.66)(9) (0.16) 11.51 12.19
Class A - 6/30/92 10.57 0.66 0.62 (0.66) (0.16) 11.03 12.53
Class A - 6/30/91 10.27 0.48 0.30 (0.48) -- 10.57 5.49
Class A - 9/30/90 10.50 0.67 (0.22) (0.67) (0.01) 10.27 4.44
Class A - 9/30/89 10.30 0.72 0.20 (0.72) -- 10.50 9.21
Class A - 9/30/88(1) 10.00 0.64 0.30 (0.64) -- 10.30 10.09
Class B - 12/31/96(10) 10.69 0.10 -- (0.10) (0.04) 10.65 0.95
Class B - 9/30/96 10.84 0.47 (0.13) (0.47) (0.02) 10.69 3.14
Class B - 9/30/95(1) 10.34 0.43 0.54 (0.45) (0.02) 10.84 9.46
Class C - 12/31/96(10) 10.70 0.10 -- (0.10) (0.04) 10.66 0.95
Class C - 9/30/96 10.85 0.47 (0.13) (0.47) (0.02) 10.70 3.14
Class C - 9/30/95(1) 10.79 0.21 0.06 (0.21) -- 10.85 2.54
Tax-Free North Dakota
Class A - 12/31/96 11.00 0.54 (0.13) (0.53) -- 10.88 3.89
Class A - 12/31/95 9.85 0.54 1.18 (0.57) -- 11.00 17.81
Class A - 12/31/94 11.07 0.56 (1.15) (0.53) (0.10)(8) 9.85 (5.47)
Class A - 12/31/93 10.59 0.58 0.58 (0.58) (0.10) 11.07 11.20
Class A - 12/31/92 10.34 0.62 0.34 (0.62) (0.09) 10.59 9.70
Class A - 12/31/91(1) 10.00 0.49 0.41 (0.49) (0.07) 10.34 9.23
Class B - 12/31/96 11.00 0.49 (0.13) (0.48) -- 10.88 3.39
Class B - 12/31/95 9.85 0.48 1.18 (0.51) -- 11.00 17.24
Class B - 12/31/941 10.31 0.30 (0.39) (0.27) (0.10)(8) 9.85 (0.77)
Class C - 12/31/96 11.00 0.44 (0.14) (0.43) -- 10.87 2.81
Class C - 12/31/95(1) 10.51 0.17 0.50 (0.18) -- 11.00 6.47
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------
Ratios/Supplemental Data
- --------------------------------------------------------
Ratio of
Expenses
to Average
Net Assets
Ratio of Ratio Assuming
Net Expenses of Net No Voluntary
Assets to Investment Waivers
End of Average Income Portfolio and
Period Net to Average Turnover Reimburse-
(000s) Assets(2) Net Assets Rate ments
- --------------------------------------------------------
<C> <C> <C> <C> <C>
20,133 0.88 5.06 42.12 1.07
21,402 0.87 5.07 55.72 1.09
19,706 0.06(4) 6.38(4) 2.21 1.25(4)
23,096 0.29 5.26 22.94 1.16
17,302 -- 5.10 30.76 1.25
361 -- -- -- --
794 1.61 4.31 42.12 1.82
605 1.53 4.33 55.72 1.83
272 0.75(4) 5.60(4) .21 2.00(4)
264 0.98(4) 4.57(4) 22.94 1.86(4)
341 1.74(4) 4.21(4) 42.12 1.83(4)
10,044 0.97(4) 5.31(4) 5 1.12(4)
10,548 1.34 5.14 12.00 1.55
11,931 1.31 5.66 10.00 1.82
12,797 1.09(4) 5.74(4) -- 1.09(4)
12,851 0.99 5.55 4.00 1.09
13,915 0.99 5.74 17.00 1.05
14,943 1.00 6.15 19.00 1.26
15,592 1.23(4) 6.08(4) 18.00 1.48(4)
27,065 1.09 6.35 31.00 1.49
23,069 0.60 6.75 11.00 1.70
9,260 0.45(4) 6.87(4) 18.00 2.04(4)
254 1.87(4) 4.43(4) 5.00 2.00(4)
448 2.09 4.39 12.00 2.30
266 2.09(4) 4.68(4) 10.00 2.60(4)
53 1.84(4) 4.45(5) 5.00 2.00(5)
52 2.09 4.39 12.00 2.30
51 2.09(4) 4.44(4) 10.00 2.60(5)
33,713 0.88 5.01 57.60 1.08
36,096 0.81 5.07 45.34 1.05
33,829 0.46 5.36 32.60 1.14
34,880 0.59 5.11 27.39 1.25
15,846 0.40 5.78 26.27 1.25
4,914 0.16(4) 6.43(4) 126.37 1.25(4)
700 1.36 4.52 57.60 1.83
375 1.29 4.56 45.34 1.79
144 0.99(4) 4.97(4) 32.60 1.89(4)
40 1.75 4.06 57.60 1.75
20 1.73(4) 4.00(4) 45.34 1.73(4)
- ---------------------------------------------------
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------
Income from
Investment
Operations Less Distributions
----------------- Net ---------------------------
Realized
Net and Distri- Net
Asset Net Unrealized Dividends butions Asset Total
Value Invest- Gain from Net from Value from
Delaware-Voyageur Beginning ment (Loss) on Investment Capital End of Investment
State Funds of Period Income Securities Income Gains Period Return(4)
- ----------------------------------------------------------------------------------------
Oregon Insured
<S> <C> <C> <C> <C> <C> <C> <C>
Class A - 12/31/96 10.05 0.48 (0.18) (0.48) -- 9.87 3.15
Class A - 12/31/95 8.92 0.49 1.14 (0.50) -- 10.05 18.71
Class A - 12/31/94 9.00 0.09 (0.09) (0.08) -- 8.92 0.06
Class A - 10/31/94 10.24 0.50 (1.24) (0.50) -- 9.00 (7.35)
Class A - 10/31/93(1) 10.00 0.13 0.24 (0.13) -- 10.24 3.64
Class B - 12/31/96 10.05 0.43 (0.18) (0.43) -- 9.87 2.61
Class B - 12/31/95 8.92 0.44 1.14 (0.45) -- 10.05 18.10
Class B - 12/31/94 9.00 0.08 (0.09) (0.07) -- 8.92 0.03
Class B - 10/31/94(1) 9.85 0.27 (0.85) (0.27) -- 9.00 (5.95)
Class C - 12/31/96 10.05 0.40 (0.17) (0.40) -- 9.88 2.38
Class C - 12/31/95(1) 9.63 0.19 0.41 (0.18) -- 10.05 6.35
Tax-Free Utah
Class A - 12/31/96 11.04 0.55 (0.20) (0.55) -- 10.84 3.35
Class A - 12/31/95 9.80 0.59 1.24 (0.59) -- 11.04 19.06
Class A - 12/31/94 9.94 0.10 (0.15) (0.09) -- 9.80 (0.41)
Class A - 10/31/94 11.07 0.60 (1.07) (0.60) (0.06) 9.94 (4.50)
Class A - 10/31/93 10.00 0.65 1.07 (0.65) -- 11.07 17.54
Class A - 10/31/92(1) 10.00 -- -- -- -- 10.00 --
Class B - 12/31/96 11.04 0.47 (0.21) (0.47) -- 10.83 2.47
Class B - 12/31/95(1) 10.63 0.30 0.39 (0.28) -- 11.04 6.60
Washington Insured
Class A - 12/31/96 10.44 0.54 (0.14) (0.54) -- 10.30 3.98
Class A - 12/31/95 9.21 0.59 1.21 (0.57) -- 10.44 19.94
Class A - 12/31/94 9.37 0.09 (0.16) (0.09) -- 9.21 (0.69)
Class A - 10/31/94 10.67 0.55 (1.26) (0.57) (0.02) 9.37 (6.85)
Class A - 10/31/93(1) 10.00 0.15 0.67 (0.15) -- 10.67 8.05
Class B - 12/31/96 10.44 0.47 (0.14) (0.46) -- 10.31 3.32
Class B - 12/31/95(1) 10.18 0.09 0.25 (0.08) -- 10.44 3.30
Class C - 12/31/96 10.43 0.45 (0.14) (0.44) -- 10.30 3.12
Class C - 12/31/95(1) 9.94 0.31 0.48 (0.30) -- 10.43 8.13
Tax-Free Wisconsin
Class A - 12/31/96 9.78 0.46 (0.14) (0.46) -- 9.64 3.49
Class A - 12/31/95 8.74 0.48 1.04 (0.48) -- 9.78 17.74
Class A - 12/31/94 9.28 0.16 (0.55) (0.15) -- 8.74 (4.12)
Class A - 8/31/94(1) 10.00 0.49 (0.72) (0.49) -- 9.28 (2.40)
Class B - 12/31/96 9.77 0.41 (0.14) (0.41) -- 9.63 2.84
Class B - 12/31/95(1) 9.39 0.28 0.37 (0.27) -- 9.77 7.08
Class C - 12/31/96 9.79 0.39 (0.13) (0.39) -- 9.66 2.74
Class C - 12/31/95(1) 9.34 0.30 0.44 (0.29) -- 9.79 8.06
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- ---------------------------------------------------------------
Ratios/Supplemental Data
-------------------------
Ratio of
Expenses
to Average
Net Assets
Ratio of Ratio Assuming
Net Expenses of Net No Voluntary
Assets to Investment Waivers
End of Average Income Portfolio and
Period Net to Average Turnover Reimburse-
(000s) Assets(2) Net Assets Rate ments
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
20,913 0.71 4.92 39.54 1.07
21,590 0.54 5.12 41.08 1.11
14,650 0.05(4) 5.79(4) -- 1.25(4)
14,086 0.03 5.17 48.98 1.25
4,609 -- 4.61(4) 11.08 1.25(4)
4,758 1.25 4.37 39.54 1.83
2.786 1.04 4.57 41.08 1.86
1,303 0.60(4) 5.19(4) -- 2.00(4)
1,146 0.75(4) 4.43(5) 48.98 2.00(4)
360 1.55 4.03 39.54 1.82
250 1.39(4) 4.00(4) 41.08 1.74(4)
3,861 0.68 5.14 39.58 1.25
4,142 0.38 5.51 35.28 1.25
3,728 0.11(4) 6.38(4) -- 1.14(4)
4,054 0.10 5.64 2.77 1.25
3,913 -- 5.65 44.54 1.25
19 -- -- -- --
397 1.46 4.34 39.58 2.00
363 0.92(4) 4.74(4) 35.28 2.00(4)
2,382 0.44 5.29 33.30 1.25
2,099 0.28 5.57 50.54 1.25
2,049 0.10(4) 6.18(4) -- 1.25(4)
2,118 0.14 5.44 -- 1.25
2,108 -- 5.50(4) 45.14 1.25(4)
516 1.21 4.47 33.30 2.00
15 1.04(4) 4.44(4) 50.54 2.00(4)
19 1.37 4.36 33.30 2.00
19 1.30(4) 4.45(4) 50.54 2.00(4)
28,292 0.98 4.90 38.54 1.09
26,449 0.88 5.05 12.10 1.09
20,167 0.08(4) 5.54(4) 20.52 1.25(4)
16,093 0.04 4.89 86.26 1.25
1,339 1.66 4.37 38.54 1.85
725 1.45(4) 4.31(4) 12.10 1.70(4)
555 1.75 4.12 38.54 1.83
73 1.77(4) 4.04(4) 12.10 1.77(4)
- -------------------------------------------------
See Notes to Financial Highlights
</TABLE>
-15-
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
(1) The information is for the period from each Fund's commencement of
operations to the Fund's year end. The classes of each Fund commenced
operations on the following dates:
<TABLE>
<CAPTION>
<S> <C> <C>
Tax-Free Arizona Fund Tax-Free Idaho Fund Tax-Free North Dakota Fund
Class A March 2, 1995 Class A January 4, 1995 Class A April 1, 1991
Class B June 29, 1995 Class B March 16, 1995 Class B May 10, 1994
Class C May 13, 1995 Class C January 11, 1995 Class C July 29, 1995
Tax-Free Arizona Insured Fund Tax-Free Iowa Fund Tax-Free Oregon Insured Fund
Class A April 1, 1991 Class A September 1, 1993 Class A August 1, 1993
Class B March 10, 1995 Class B March 24, 1995 Class B March 12, 1994
Class C May 26, 1994 Class C January 4, 1995 Class C July 7, 1995
Tax-Free California Fund Tax-Free Kansas Fund Tax-Free Utah Fund
Class A March 3, 1995 Class A November 30, 1992 Class A October 5, 1992
Class B August 23, 1995 Class B April 8, 1995 Class B May 27, 1995
Class C April 9, 1996 Class C April 12, 1995
Tax-Free Washington Insured Fund
Tax-Free California Insured Fund Tax-Free Minnesota Fund Class A August 1, 1993
Class A October 15, 1992 Class B March 11, 1995 Class B October 24, 1995
Class B March 1, 1994 Class C May 4, 1994 Class C April 21, 1995
Class C April 12, 1995
Minnesota Insured Fund Tax-Free Wisconsin Fund
Tax-Free Colorado Fund Class A May 1, 1987 Class A September 1, 1993
Class A April 23, 1987 Class B March 7, 1995 Class B April 22, 1995
Class B March 22, 1995 Class C May 4, 1994 Class C March 28, 1995
Class C May 6, 1994
Tax-Free Minnesota Intermediate Fund
Tax-Free Florida Fund Class B August 15, 1995
Class A March 2, 1995 Class C April 30, 1994
Class B September 15, 1995
Class C April 22, 1995 Tax-Free Missouri Insured Fund
Class A November 2, 1992
Tax-Free Florida Insured Fund Class B March 12, 1994
Class A January 1, 1992 Class C November 11, 1995
Class B March 11, 1994
Tax-Free New Mexico Fund
Tax-Free Florida Intermediate Fund Class A October 5, 1992
Class A May 1, 1994 Class B March 3, 1994
Class B September 15, 1995 Class C May 7, 1996
Class C March 23, 1995
Tax-Free New York Fund
Class A November 6, 1987
Class B November 14, 1994
Class C April 26, 1995
</TABLE>
-16-
<PAGE>
(2) Beginning in the year ended December 31, 1995, the expense ratio
reflects the effect of gross expenses attributable to earnings credits
on uninvested cash balances received by the Fund. Prior period expense
ratios have not been adjusted.
(3) 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.
(4) Adjusted to an annual basis.
(5) The Fund's adviser also paid $25,631 for Tax-Free Arizona Insured Fund
for the period ended December 31, 1991.
(6) Includes (.01) in excess of net realized gains.
(7) Includes (.06) and (.04) in excess of net realized gains for Class A
and Class C shares, respectively.
(8) Includes (.02) and (.02) in excess of net realized gains for Class A
and Class B shares, respectively.
(9) Includes (.01) in excess distributions of net investment income.
(10) Effective November 16, 1996, the Fund's shareholders approved a change
of investment adviser for Fortis Advisers, Inc. to Voyageur Fund
Managers, Inc.
THE FUNDS
Each of the Funds is a separate series of one of the parent corporate
or trust entities described herein under the heading "General Information." The
series which are diversified, as such term is defined in the Investment Company
Act of 1940, as amended (the "1940 Act") are designated as such by a footnote on
the cover page of this Prospectus. All other series are non-diversified. Each
non-diversified Fund will be able to invest, subject to certain federal tax
requirements, a relatively higher percentage of its assets in the securities of
a limited number of issuers which may result in such Fund's securities being
more susceptible to any single economic, political or regulatory occurrence than
the securities of a diversified Fund. The investment objectives and policies of
each Fund are described below. Except where noted, an investment objective or
policy description applies to all Funds.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Tax-Free Intermediate Fund is to
provide investors with preservation of capital and, secondarily, current income
exempt from federal income tax and the personal income tax, if any, of the
Fund's particular state, by maintaining a weighted average portfolio maturity of
10 years or less. The investment objective of each Tax-Free Fund and Insured
Fund is to seek as high a level of current income exempt from federal income tax
and from the personal income tax, if any, of the Fund's particular state, as is
consistent with preservation of capital. The weighted average maturity of the
investment portfolio of each Tax-Free Fund and Insured Fund is expected to be
approximately 15 to 25 years. Each of Tax-Free Florida Intermediate Fund,
Tax-Free Florida Fund and Tax-Free Florida Insured Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax.
During times of adverse market conditions when a defensive investment
posture is warranted, each Fund may temporarily select investments without
regard to the foregoing policy. There are risks in any investment program, and
there is no assurance that a Fund's investment objective will be achieved. The
value of each Fund's
-17-
<PAGE>
shares will fluctuate with changes in the market value of its investments. Each
Fund's investment objective and certain other investment policies explicitly
designated herein as such are fundamental, which means that they cannot be
changed without the vote of its respective shareholders as provided in the 1940
Act.
Each Fund anticipates that, in normal market conditions, it will invest
substantially all of its assets in Tax Exempt Obligations (as defined below),
the interest on which is exempt from federal income tax and from the personal
income tax, if any, of its respective state (and with respect to Tax-Free New
York Fund, New York City personal income tax). As a fundamental policy, Tax-Free
New York Fund will invest at least 80% of the value of its net assets in such
obligations under normal market conditions (not including obligations subject to
the alternative minimum tax). Up to 20% of the securities owned by each such
Fund may generate interest that is an item of tax preference for purposes of
federal and state alternative minimum tax ("AMT"), except that the Minnesota
Insured Fund may invest without limitation in such securities and the Tax-Free
Minnesota Fund may not invest in such AMT securities. Tax-Free New York Fund may
also invest in such securities which generate an item of tax preference for
purposes of New York City alternative minimum tax.
Tax-Free and Tax-Free Intermediate Funds
Each Tax-Free Fund and each Tax-Free Intermediate Fund may invest
without limitation in securities rated "investment grade," i.e., within the four
highest investment grades, at the time of investment by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Services ("S&P") or, if
unrated, judged by the Manager to be of comparable quality. Bonds included in
the lowest investment grade rating category involve certain speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher rated bonds. Up to 20% of the Tax Exempt
Obligations purchased by the Funds may be rated lower than investment grade;
however, all bonds must be rated "B" or better by Moody's or S&P (or, if
unrated, judged by the Manager to be of comparable quality). Such bonds are
often referred to as "junk" bonds or "high yield" bonds. Bonds rated below "BBB"
have a greater vulnerability to default than higher grade bonds. See "Risks and
Special Investment Considerations--General" for a discussion of the risks of
investing in lower grade Tax Exempt Obligations. A description of the ratings
assigned by Moody's and S&P is set forth in Appendix A to the Statement of
Additional Information.
The following table sets forth the weighted average percentage of total
investments with respect to the portfolios of certain Funds during the year
ended as of December 31, 1996.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Moody's Rating
(S&P Rating) Aaa Aa A Baa Ba B Unrated
(AAA) (AA) (A) (BBB) (BB) (B) Bonds Total
- ----------------------------------------------------------------------------------------------------------------------------
Tax-Free Funds
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Colorado 32% 21% 19% 24% -- -- 4% 100%
Florida 28% 20% 17% 17% -- -- 18% 100%
Idaho 28% 11% 28% 23% -- -- 10% 100%
Kansas 58% 18% 2% 17% -- -- 5% 100%
Minnesota 54% 12% 15% 9% -- -- 10% 100%
North Dakota 38% 27% 16% 18% -- -- 1% 100%
Utah 68% 11% 10% 2% -- -- 9% 100%
Wisconsin 23% 10% 29% 7% 8% -- 23% 100%
Tax-Free Intermediate Funds
Florida 65% 8% 6% 16% -- -- 5% 100%
Minnesota 53% 10% 9% 18% -- -- 10% 100%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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Insured Funds
The Tax Exempt Obligations in each Insured Fund's portfolio will
consist of (a) obligations that at all times are fully insured as to scheduled
payments of principal and interest ("insured securities") and (b) "escrow
secured" or "defeased" bonds. Insured securities may consist of bonds covered by
Primary Insurance, Market Insurance or Portfolio Insurance (as defined below).
All insurers must have a triple A-rated claims paying ability (as assigned by
either or both of Moody's and S&P) at the time of investment. Securities that
are covered by either Primary or Secondary Market Insurance will carry a
triple-A rating at the time of investment by the Fund. However, securities that
are not covered by either Primary or Secondary Market Insurance at the time of
investment (or that are not "escrow secured" or "defeased") must be covered by
Portfolio Insurance immediately after their acquisition. The Funds' Manager
anticipates that such securities, at the time of investment, generally will be
rated investment grade. However, all securities in each Insured Fund's
portfolio, after application of insurance, will be rated Aaa by Moody's and/or
AAA by S&P at the time of investment. Pending the investment or reinvestment of
its assets in longer-term Tax Exempt Obligations, each Insured Fund may invest
up to 35% of its net assets in short-term tax exempt instruments, without
obtaining insurance, provided such instruments carry an A-l+ or SP-l+ short-term
rating or AAA or Aaa long-term rating by S&P or Moody's, and may invest up to
10% of its net assets in securities of tax exempt money market mutual funds. The
"insured securities" in each Insured Fund's investment portfolio are insured as
to the scheduled payment of all installments of principal and interest as they
fall due. The purpose of such insurance is to minimize credit risks to such
Funds and their shareholders associated with defaults in Tax Exempt Obligations
owned by such Funds. Such insurance does not insure against market risk and
therefore does not guarantee the market value of the securities in an Insured
Fund's investment portfolio or the value of any Insured Funds' shares.
Certain insurance companies will issue policies guaranteeing the timely
payment of principal of, and interest on, particular Tax Exempt Obligations or
on a portfolio of Tax Exempt Obligations. Insurance may be purchased by the
issuer of a Tax Exempt Obligation or by a third party at the time of issuance of
the Tax Exempt Obligation ("Primary Insurance") or by the Fund or a third party
subsequent to the original issuance of a Tax Exempt Obligation ("Secondary
Market Insurance"). In each case, a single premium is paid to the insurer by the
party purchasing the insurance when the insurance is obtained. Primary Insurance
and Secondary Market Insurance policies are non-cancelable and remain in effect
for so long as the insured Tax Exempt Obligation is outstanding and the insurer
is in business.
The Insured Funds may also purchase insurance covering certain Tax
Exempt Obligations which the Insured Funds intend to purchase for their
portfolios or which the Insured Funds already own ("Portfolio Insurance").
Portfolio Insurance policies guarantee the timely payment of principal of, and
interest on, covered Tax Exempt Obligations only while they are owned by the
Insured Funds. Such policies are non-cancelable and remain in effect until the
Fund terminates, provided the Fund pays the applicable insurance premiums and
the insurer remains in business. Tax Exempt Obligations in the Insured Funds'
portfolios covered by a Portfolio Insurance policy will not be covered by such
policy after they are sold by a Fund unless the Fund elects to obtain some form
of Secondary Market Insurance for them at the time of sale. The Insured Funds
would obtain such Secondary Market Insurance only if, in the Manager's view, it
would be economically advantageous for the Funds to do so. Further information
about insurance (including its limitations) is set forth in the Statement of
Additional Information.
All Funds
The foregoing policies as to credit quality of portfolio investments
will apply only at the time of the purchase of a security, and the Funds are not
required to dispose of securities in the event that Moody's or S&P downgrades
its assessment of the credit characteristics of a particular issuer or, in the
case of unrated securities, in the event the Manager reassesses its view with
respect to the credit quality of the issuer thereof. In no event,
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however, will more than 5% of each Fund's total assets consist of securities
that have been downgraded to a rating lower than the minimum rating in which
each Fund is permitted to invest or, in the case of unrated securities, that the
Manager has determined to have a quality lower than such minimum rating. With
respect to the Insured Funds, up to 35% of each such Fund's total assets may
consist of securities that have been downgraded to AA or Aa subsequent to
initial investment in such securities by an Insured Fund.
Each Fund may invest without limitation in short term Tax Exempt
Obligations or in taxable obligations on a temporary, defensive basis due to
market conditions or, with respect to taxable obligations, for liquidity
purposes. Such taxable obligations, whether purchased for liquidity purposes or
on a temporary, defensive basis, may include: obligations of the U.S.
Government, its agencies or instrumentalities; other debt securities rated
within the three highest grades by either Moody's or S&P; commercial paper rated
in the highest grade by either of such rating services (Prime-1 or A-1,
respectively); certificates of deposit and bankers' acceptances of domestic
banks which have capital, surplus and undivided profits of over $100 million;
high-grade taxable municipal bonds; and repurchase agreements with respect to
any of the foregoing investments. Each Fund also may hold its assets in cash and
in securities of tax exempt money market mutual funds.
Tax Exempt Obligations
As used in this Prospectus, the term "Tax Exempt Obligations" refers to
debt obligations issued by or on behalf of a state or territory or its agencies,
instrumentalities, municipalities and political subdivisions, the interest
payable on which is, in the opinion of bond counsel, excludable from gross
income for purposes of federal income tax and from the personal income tax, if
any, of the state specified in the Fund's name. The term "Tax Exempt
Obligations" also includes Derivative Tax Exempt Obligations as defined below.
In certain instances the interest on Tax Exempt Obligations may be an item of
tax preference includable in alternative minimum taxable income depending upon
the shareholder's tax status. See "Distributions to Shareholders and
Taxes--Taxes."
Tax Exempt Obligations are primarily debt obligations issued to obtain
funds for various public purposes such as constructing public facilities and
making loans to public institutions. The two principal classifications of Tax
Exempt Obligations are general obligation bonds and revenue bonds. General
obligation bonds are generally secured by the full faith and credit of an issuer
possessing general taxing power and are payable from the issuer's general
unrestricted revenues and not from any particular fund or revenue source.
Revenue bonds are payable only from the revenues derived from a particular
source or facility, such as a tax on particular property or revenues derived
from, for example, a municipal water or sewer utility or an airport. Tax Exempt
Obligations that benefit private parties in a manner different than members of
the public generally (so-called private activity bonds or industrial development
bonds) are in most cases revenue bonds, payable solely from specific revenues of
the project to be financed. The credit quality of private activity bonds is
usually directly related to the creditworthiness of the user of the facilities
(or the creditworthiness of a third-party guarantor or other credit enhancement
participant, if any).
Within these principal classifications of Tax Exempt Obligations, there
is a variety of types of municipal securities. Certain Tax Exempt Obligations
may carry variable or floating rates of interest whereby the rate of interest is
not fixed but varies with changes in specified market rates or indexes, such as
a bank prime rate or a tax exempt money market index. Accordingly, the yield on
such obligations can be expected to fluctuate with changes in prevailing
interest rates. Other Tax Exempt Obligations are zero coupon securities, which
are debt obligations which do not entitle the holder to any periodic interest
payments prior to maturity and are issued and traded at a discount from their
face amounts. The market prices of zero coupon securities are generally more
volatile than the market prices of securities that pay interest periodically.
Tax Exempt Obligations also include state or municipal leases and
participation interests therein. The Funds may invest in these types of
obligation without limitation. Municipal leases are obligations issued by state
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and local governments or authorities to finance the acquisition of equipment and
facilities such as fire, sanitation or police vehicles or telecommunications
equipment, buildings or other capital assets. Municipal lease obligations,
except in certain circumstances, are considered illiquid by the staff of the
Securities and Exchange Commission. Municipal lease obligations held by a Fund
will be treated as illiquid unless they are determined to be liquid pursuant to
guidelines established by the Fund's Boards of Directors or Trustees. Under
these guidelines, the Manager will consider factors including, but not limited
to (a) whether the lease can be canceled, (b) what assurance there is that the
assets represented by the lease can be sold, (c) the municipality's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics), (d) the likelihood that the municipality will discontinue
appropriating funding for the leased property because the property is no longer
deemed essential to the operations of the municipality (e.g., the potential for
an "event of non-appropriation"), and (e) the legal recourse in the event of
failure to appropriate. Additionally, the lack of an established trading market
for municipal lease obligations may make the determination of fair market value
more difficult. See "Investment Policies and Restrictions--Tax Exempt
Obligations" in the Statement of Additional Information.
Each Fund may also acquire Derivative Tax Exempt Obligations, which are
custodial receipts or certificates underwritten by securities dealers or banks
that evidence ownership of future interest payments, principal payments or both
on certain Tax Exempt Obligations. The sponsor of these certificates or receipts
typically purchases and deposits the securities in an irrevocable trust or
custodial account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured coupon payments
and the final principal payment on the obligations. Although under the terms of
a custodial receipt, a Fund typically would be authorized to assert its rights
directly against the issuer of the underlying obligation, a Fund could be
required to assert through the custodian bank those rights as may exist against
the underlying issuer. Thus, in the event the underlying issuer fails to pay
principal and/or interest when due, a Fund may be subject to delays, expenses
and risks that are greater than those that would have been involved if a Fund
had purchased a direct obligation of the issuer.
In addition, in the event that the trust or custodial account in which
the underlying security had been deposited is determined to be an association
taxable as a corporation, instead of a non taxable entity, it would be subject
to state (and with respect to Tax-Free New York Fund, potentially New York City)
income tax (but not federal income tax) on the income it earned on the
underlying security, and the yield on the security paid to such Fund and its
shareholders would be reduced by the amount of taxes paid. Furthermore, amounts
paid by the trust or custodial account to a Fund would lose their tax exempt
character and become taxable, for federal and state purposes, in the hands of
the Fund and its shareholders. However, each Fund will only invest in custodial
receipts which are accompanied by a tax opinion stating that interest payable on
the receipts is tax exempt. If a Fund invests in custodial receipts, it is
possible that a portion of the discount at which the Fund purchases the receipts
might have to be accrued as taxable income during the period that the Fund holds
the receipts.
The principal and interest payments on the Tax-Exempt Obligations
underlying custodial receipts or trust certificates may be allocated in a number
of ways. For example, payments may be allocated such that certain custodial
receipts or trust certificates may have variable or floating interest rates and
others may be stripped securities which pay only the principal or interest due
on the underlying Tax-Exempt Obligations. The Funds may also invest in custodial
receipts or trust certificates which are "inverse floating obligations" (also
sometimes referred to as "residual interest bonds"). These securities pay
interest rates that vary inversely to changes in the interest rates of specified
short-term Tax-Exempt Obligations or an index of short-term Tax-Exempt
Obligations. Thus, as market interest rates increase, the interest rates on
inverse floating obligations decrease. Conversely, as market rates decline, the
interest rates on inverse floating obligations increase. Such securities have
the effect of providing a degree of investment leverage, since the interest
rates on such securities will generally change at a rate which is a multiple of
the change in the interest rates of the specified Tax-Exempt Obligations or
index. As a result, the market values of inverse floating obligations will
generally be more volatile than the market values of
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other Tax-Exempt Obligations and investments in these types of obligations will
increase the volatility of the net asset value of shares of the Funds.
Investments in Derivative Tax Exempt Obligations, when combined with
investments in below investment grade rated securities, will not exceed 20% of
each Fund's total assets. For a discussion of certain risks involved in
investments in Derivative Tax Exempt Obligations, see "Risks and Special
Investment Considerations--General."
MISCELLANEOUS INVESTMENT PRACTICES
Forward Commitments
New issues of Tax Exempt Obligations and other securities are often
purchased on a "when issued" or delayed delivery basis, with delivery and
payment for the securities normally taking place 15 to 45 days after the date of
the transaction. The payment obligation and the interest rate that will be
received on the securities are each fixed at the time the buyer enters into the
commitment. Each Fund may enter into such "forward commitments" if it holds and
maintains, until the settlement date in a segregated account, cash or liquid
securities in an amount sufficient to meet the purchase price. There is no
percentage limitation on each Fund's total assets which may be invested in
forward commitments. Tax Exempt Obligations purchased on a when-issued basis and
the securities held in a Fund's portfolio are subject to changes in value (both
generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Tax Exempt Obligations purchased on
a when-issued basis may expose a Fund to risk because they may experience such
fluctuations prior to their actual delivery. Purchasing Tax Exempt Obligations
on a when-issued basis can involve the additional risk that the yield available
in the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Any significant commitment by a Fund to the
purchase of securities on a when-issued basis may increase the volatility of the
Fund's net asset value. Although each Fund will generally enter into forward
commitments with the intention of acquiring securities for its portfolio, it may
dispose of a commitment prior to settlement if the Manager deems it appropriate
to do so. The Funds may realize short-term profits or losses upon the sale of
forward commitments.
Repurchase Agreements
Each Fund may enter into repurchase agreements with respect to not more
than 10% of its total assets (taken at current value), except when investing for
defensive purposes during times of adverse market conditions. Each Fund may
enter into repurchase agreements with respect to any securities which it may
acquire consistent with its investment policies and restrictions.
A repurchase agreement involves the purchase by a Fund of securities
with the condition that, after a stated period of time, the original seller (a
member bank of the Federal Reserve System or a recognized securities dealer)
will buy back the same securities ("collateral") at a predetermined price or
yield. Repurchase agreements involve certain risks not associated with direct
investments in securities. In the event the original seller defaults on its
obligation to repurchase, as a result of its bankruptcy or otherwise, the Fund
will seek to sell the collateral, which action could involve costs or delays. In
such case, the Fund's ability to dispose of the collateral to recover such
investment may be restricted or delayed. While collateral will at all times be
maintained in an amount equal to the repurchase price under the agreement
(including accrued interest due thereunder), to the extent proceeds from the
sale of collateral were less than the repurchase price, a Fund could suffer a
loss. See "Investment Policies and Restrictions--Taxable Obligations" in the
Statement of Additional Information.
Reverse Repurchase Agreements
Certain Funds (Tax-Free Arizona Intermediate Fund, Tax-Free Arizona
Fund, Tax-Free California Intermediate Fund, Tax-Free California Fund, Tax-Free
Colorado Intermediate Fund, Tax-
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Free Colorado Insured Fund, Tax-Free Florida Intermediate Fund, Tax-Free Florida
Fund, Tax-Free Idaho Fund and Tax-Free New York Fund) may engage in "reverse
repurchase agreements" with banks and securities dealers with respect to not
more than 10% of the Fund's total assets. Reverse repurchase agreements are
ordinary repurchase agreements in which the Fund is the seller of, rather than
the investor in, securities and agrees to repurchase them at an agreed upon time
and price. Use of a reverse repurchase agreement may be preferable to a regular
sale and later repurchase of the securities because it avoids certain market
risks and transaction costs. Because certain of the incidents of ownership of
the security are retained by the Fund, reverse repurchase agreements are
considered a form of borrowing by the Fund from the buyer, collateralized by the
security. At the time a Fund enters into a reverse repurchase agreement, cash or
liquid having a value sufficient to make payments for the securities to be
repurchased will be segregated, and will be marked to market daily and
maintained throughout the period of the obligation. Reverse repurchase
agreements may be used as a means of borrowing for investment purposes subject
to the 10% limitation set forth above. This speculative technique is referred to
as leveraging. Leveraging may exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money borrowed
for leveraging will be subject to interest costs which may or may not be
recovered by income from or appreciation of the securities purchased. Because
the Funds do not currently intend to utilize reverse repurchase agreements in
excess of 10% of total assets, the Funds believe the risks of leveraging due to
use of reverse repurchase agreements to principal are reduced. The Manager
believes that the limited use of leverage may facilitate the Funds' ability to
provide current income without adversely affecting the Funds' ability to
preserve capital.
Options and Futures
Each Fund may utilize put and call transactions, and certain Funds (see
"Futures Contracts and Options on Futures Contracts" below) may utilize futures
transactions to hedge against market risk and facilitate portfolio management.
See "Investment Policies and Restrictions--Options and Futures Transactions" in
the Statement of Additional Information. Options and futures may be used to
attempt to protect against possible declines in the market value of a Fund's
portfolio resulting from downward trends in the debt securities markets
(generally due to a rise in interest rates), to protect a Fund's unrealized
gains in the value of its portfolio securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of a Fund's portfolio or to establish a position in the securities markets as a
temporary substitute for purchasing particular securities. The use of options
and futures is a function of market conditions. Other transactions may be used
by the Funds in the future for hedging purposes as they are developed to the
extent deemed appropriate by the Board.
Options on Securities
Each Fund may write (i.e., sell) covered put and call options and
purchase put and call options on the securities in which it may invest and on
indices of securities in which it may invest, to the extent such put and call
options are available.
A put option gives the buyer of such option, upon payment of a premium,
the right to deliver a specified amount of a security to the writer of the
option on or before a fixed date at a predetermined price. A call option gives
the purchaser of the option, upon payment of a premium, the right to call upon
the writer to deliver a specified amount of a security on or before a fixed
date, at a predetermined price.
In purchasing a call option, a Fund would be in a position to realize a
gain if, during the option period, the price of the security increased by an
amount in excess of the premium paid. It would realize a loss if the price of
the security declined or remained the same or did not increase during the period
by more than the amount of the premium. In purchasing a put option, a Fund would
be in a position to realize a gain if, during the option period, the price of
the security declined by an amount in excess of the premium paid. It would
realize a loss if the price of the security increased or remained the same or
did not decrease during that period by more than the
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amount of the premium. If a put or call option purchased by a Fund were
permitted to expire without being sold or exercised, its premium would be lost
by the Fund.
If a put option written by a Fund were exercised, the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by a Fund were exercised, the Fund would be obligated to sell the
underlying security at the exercise price. The risk involved in writing a put
option is that there could be a decrease in the market value of the underlying
security caused by rising interest rates or other factors. If this occurred, the
option could be exercised and the underlying security would then be sold to the
Fund at a higher price than its current market value. The risk involved in
writing a call option is that there could be an increase in the market value of
the underlying security caused by declining interest rates or other factors. If
this occurred, the option could be exercised and the underlying security would
then be sold by the Fund at a lower price than its current market value. These
risks could be reduced by entering into a closing transaction as described in
Appendix B to the Statement of Additional Information. The Fund retains the
premium received from writing a put or call option whether or not the option is
exercised.
Over-the-counter options are purchased or written by a Fund in
privately negotiated transactions. Such options are illiquid, and it may not be
possible for a Fund to dispose of an option it has purchased or terminate its
obligations under an option it has written at a time when the Manager believes
it would be advantageous to do so. Over the counter options are subject to each
Fund's 15% illiquid investment limitation. See Appendix B to the Statement of
Additional Information for a further discussion of the general characteristics
and risks of options.
Participation in the options market involves investment risks and
transaction costs to which the Funds would not be subject absent the use of this
strategy. If the Manager's predictions of movements in the direction of the
securities and interest rate markets are inaccurate, the adverse consequences to
a Fund may leave the Fund in a worse position than if such strategy was not
used. Risks inherent in the use of options include (a) dependence on the
Manager's ability to predict correctly movements in the direction of interest
rates and securities prices; (b) imperfect correlation between the price of
options and movements in the prices of the securities being hedged; (c) the fact
that the skills needed to use these strategies are different from those needed
to select portfolio securities; (d) the possible absence of a liquid secondary
market for any particular instrument at any time; and (e) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences.
See "Investment Policies and Restrictions--Risks of Transactions in Futures
Contracts and Options" in the Statement of Additional Information for further
discussion and see Appendix B for a discussion of closing transactions and other
risks.
Futures Contracts and Options on Futures Contracts
Certain Funds (Tax-Free Arizona Intermediate Fund, Tax-Free Arizona
Fund, Tax-Free California Intermediate Fund, Tax-Free California Fund, Tax-Free
Colorado Intermediate Fund, Tax-Free Colorado Insured Fund, Tax-Free Florida
Intermediate Fund, Tax-Free Florida Fund, Tax-Free Idaho Fund and Tax-Free New
York Fund) may enter into contracts for the purchase or sale for future delivery
of fixed income securities or contracts based on financial indices including any
index of securities in which the Fund may invest ("futures contracts") and may
purchase and write put and call options to buy or sell futures contracts
("options on futures contracts"). A "sale" of a futures contract means the
acquisition of a contractual obligation to deliver the securities called for by
the contract at a specified price on a specified date. The purchaser of a
futures contract on an index agrees to take or make delivery of an amount of
cash equal to the difference between a specified dollar multiple of the value of
the index on the expiration date of the contract ("current contract value") and
the price at which the contract was originally struck. Options on futures
contracts to be written or purchased by the Fund will be traded on exchanges or
over the counter. The successful use of such instruments draws upon the
Manager's experience with respect to such instruments and usually depends upon
the Manager's ability to forecast interest rate movements correctly. Should
interest rates move in an
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unexpected manner, the Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize losses and would thus
be in a worse position than if such strategies had not been used. In addition,
the correlation between movements in the price of futures contracts or options
on futures contracts and movements in the prices of the securities hedged or
used for cover will not be perfect.
A Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements. To the extent required to
comply with applicable Securities and Exchange Commission releases and staff
positions, when purchasing a futures contract or writing a put option, the Fund
will maintain in a segregated account cash liquid securities equal to the value
of such contracts, less any margin on deposit. In addition, the rules and
regulations of the Commodity Futures Trading Commission currently require that,
in order to avoid "commodity pool operator" status, the Fund must use futures
and options positions (a) for "bona fide hedging purposes" (as defined in the
regulations) or (b) for other purposes so long as aggregate initial margins and
premiums required in connection with non hedging positions do not exceed 5% of
the liquidation value of the Fund's portfolio. There are no other numerical
limits on a Fund's use of futures contracts and options on futures contracts.
For a discussion of the tax treatment of futures contracts and options on
futures contracts, see "Taxes" in the Statement of Additional Information. For a
further discussion of the general characteristics and risks of futures, see
Appendix B to the Statement of Additional Information.
Concentration Policy
As a fundamental policy, no Fund will invest 25% or more of its total
assets in the securities of any industry, although for purposes of this
limitation, tax-exempt securities and U.S. government obligations are not
considered to be part of any industry. Each Fund may invest 25% or more of its
total assets in industrial development revenue bonds. In addition, it is
possible that the Funds from time to time will invest 25% or more of their total
assets in a particular segment of the municipal bond market such as in housing,
health care, and/or utility obligations. In addition, Tax-Free Arizona
Intermediate Fund, Tax-Free Arizona Fund, Tax-Free California Intermediate Fund,
Tax-Free California Fund, Tax-Free Colorado Intermediate Fund, Tax-Free Colorado
Insured Fund, Tax-Free Florida Intermediate Fund, Tax-Free Florida Fund,
Tax-Free Idaho Fund and Tax-Free New York Fund may invest in transportation,
education and/or industrial obligations. In such circumstances, economic,
business, political and other changes affecting one bond might also affect other
bonds in the same segment, thereby potentially increasing market or credit risk.
For a discussion of these segments of the municipal bond market, see "Investment
Policies and Restrictions--Concentration Policy" in the Statement of Additional
Information.
Each Fund's Board may change any of the foregoing policies that are not
specifically designated fundamental.
RISKS AND SPECIAL INVESTMENT CONSIDERATIONS
General
The yields on Tax Exempt Obligations are dependent on a variety of
factors, including the financial condition of the issuer or other obligor
thereon or the revenue source from which debt service is payable, general
economic and monetary conditions, conditions in the relevant market, the size of
a particular issue, maturity of the obligation and the rating of the issue.
Generally, the value of Tax Exempt Obligations will tend to fall as interest
rates rise and will tend to increase as interest rates decrease. In addition,
Tax Exempt Obligations of longer maturity produce higher current yields than Tax
Exempt Obligations with shorter maturities but are subject to greater price
fluctuation due to changes in interest rates, tax laws and other general market
factors. Lower-rated Tax Exempt Obligations generally produce a higher yield
than higher-rated Tax Exempt Obligations due to the perception of a greater
degree of risk as to the payment of principal and interest. Certain Tax Exempt
Obligations held by a Fund may permit the issuer at its option to "call," or
redeem, its securities. If an issuer
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were to redeem securities held by a Fund during a time of declining interest
rates, the Fund may not be able to reinvest the proceeds in securities providing
the same investment return as the securities redeemed.
In normal circumstances, each Fund (except for the Insured Funds) may
invest up to 20% of its total assets in Tax Exempt Obligations rated below
investment grade (but not rated lower than B by S&P or Moody's) or in unrated
Tax Exempt Obligations considered by the Fund's Manager to be of comparable
quality to such securities. Investment in such lower grade Tax Exempt
Obligations involves special risks as compared with investment in higher grade
Tax Exempt Obligations. The market for lower grade Tax Exempt Obligations is
considered to be less liquid than the market for investment grade Tax Exempt
Obligations, which may adversely affect the ability of a Fund to dispose of such
securities in a timely manner at a price which reflects the value of such
securities in the Manager's judgment. The market price for less liquid
securities tends to be more volatile than the market price for more liquid
securities. The lower liquidity of and the absence of readily available market
quotations for lower grade Tax Exempt Obligations may make the Manager's
valuation of such securities more difficult, and the Manager's judgment may play
a greater role in the valuation of the Fund's lower grade Tax Exempt
Obligations. Periods of economic uncertainty and changes may have a greater
impact on the market price of such bonds and, therefore, the net asset value of
any Fund investing in such obligations.
Lower grade Tax Exempt Obligations generally involve greater credit
risk than higher grade Tax Exempt Obligations and are more sensitive to adverse
economic changes, significant increases in interest rates and individual issuer
developments. Because issuers of lower grade Tax Exempt Obligations frequently
choose not to seek a rating of such securities, a Fund will rely more heavily on
the Manager's ability to determine the relative investment quality of such
securities than if such Fund invested exclusively in higher grade Tax Exempt
Obligations. A Fund may, if deemed appropriate by the Manager, retain a security
whose rating has been downgraded below B by S&P or Moody's, or whose rating has
been withdrawn. In no event, however, will more than 5% of each Fund's total
assets consist of securities that have been downgraded to a rating lower than
the minimum rating in which each Fund is permitted to invest or, in the case of
unrated securities, that have been determined by the Manager to be of a quality
lower than such minimum rating. Additional information concerning the risks
associated with instruments in lower grade Tax Exempt Obligations is included in
the Fund's Statement of Additional Information.
The principal and interest payments on the Derivative Tax Exempt
Obligations underlying custodial receipts may be allocated in a number of ways.
For example, payments may be allocated such that certain custodial receipts may
have variable or floating interest rates and others may be stripped securities
which pay only the principal or interest due on the underlying Tax Exempt
Obligations. The Funds may also invest in custodial receipts which are "inverse
floating obligations" (also sometimes referred to as "residual interest bonds").
These securities pay interest rates that vary inversely to changes in the
interest rates of specified short term Tax Exempt Obligations or an index of
short term Tax Exempt Obligations. Thus, as market interest rates increase, the
interest rates on inverse floating obligations decrease. Conversely, as market
rates decline, the interest rates on inverse floating obligations increase. Such
securities have the effect of providing a degree of investment leverage, since
the interest rates on such securities will generally change at a rate which is a
multiple of the change in the interest rates of the specified Tax Exempt
Obligations or index. As a result, the market values of inverse floating
obligations will generally be more volatile than the market values of other Tax
Exempt Obligations and investments in these types of obligations will increase
the volatility of the net asset value of shares of the Funds.
State Considerations
The value of Tax Exempt Obligations owned by the Funds may be adversely
affected by local political and economic conditions and developments within a
particular state. Adverse conditions in an industry significant to a local
economy could have a correspondingly adverse effect on the financial condition
of local issuers. Other factors that could affect Tax Exempt Obligations include
a change in the local, state or national
-26-
<PAGE>
economy, demographic factors, ecological or environmental concerns, statutory
limitations on the issuer's ability to increase taxes and other developments
generally affecting the revenues of issuers (for example, legislation or court
decisions reducing state aid to local governments or mandatory additional
services). A summary description of certain factors affecting and statistics
describing issuers of Tax Exempt Obligations of each applicable state is set
forth below. Such information has been taken from publicly available offering
documents relating to the relevant state or issuers located in such state. No
Fund or the Manager has independently verified this information and no Fund or
the Manager makes any representation regarding such information. See "Special
Factors Affecting the Funds" in the Statement of Additional Information.
Arizona's primary economic sectors include services, trade, tourism and
manufacturing. Arizona maintained a general fund surplus of $399.9 million (on
general fund revenues of approximately $4.663 billion) for its 1996 fiscal year.
Currently there are no general obligation ratings for the state. California's
primary economic sectors are agriculture, services, trade and manufacturing. In
1994, Orange County, California filed a voluntary petition under the bankruptcy
code. Moody's and Standard & Poor's suspended, reduced to below investment grade
levels, or placed on "Credit Watch" various securities of the County and the
entities participating in the pooled investment fund. California projects a
general fund surplus of $648 million for its 1996-97 fiscal year (on estimated
revenues of approximately $48.4 billion). Currently, California's general
obligation bonds are rated A1 by Moody's, A by S&P and "A+" by Fitch Investors
Service, Inc. ("Fitch"). Colorado's economy is based primarily on services.
Colorado maintained a generally balanced budget for its 1996 fiscal year (on
general fund revenues of approximately $4.269 billion). Currently there are no
general obligation ratings for Colorado. Florida's economy is based primarily on
the services sector and tourism in particular. Florida projected unencumbered
reserves of $610.1 million for its 1996-1997 fiscal year (on estimated revenues
of approximately $15.567 billion). Currently, Florida's general obligation bonds
are rated Aa by Moody's and AA by S&P. Idaho's primary economic sectors are
services, agriculture, manufacturing and mining. Idaho maintained a fiscal year
1996 general fund surplus of approximately $11.7 million (on revenues of
approximately $1.351 billion). Currently there are no general obligation ratings
for Idaho. Iowa's primary economic sectors are services, manufacturing and
agriculture. Iowa maintained an unreserved fund balance of approximately $201.6
million (on revenues of approximately $4.405 billion) for its fiscal year 1996.
Currently there are no general obligation ratings for Iowa. Kansas' economy is
based primarily on agriculture, manufacturing, and services. Kansas projected a
positive general fund balance for its 1997 fiscal year (on estimated general
fund revenues of approximately $3.527 billion). Currently there are no general
obligation ratings for Kansas. Minnesota's economy is based primarily on
agriculture, manufacturing and services. Minnesota projects a balanced general
fund at the end of its 1997 biennium of $502.4 million (based on estimated
General Fund revenues of $19.1 billion). Currently Minnesota's general
obligation bonds are rated Aaa by Moody's, AA+ by S&P and AAA by Fitch.
Missouri's primary economic sectors are services, manufacturing and agriculture.
Missouri had a general fund surplus of $335.4 million for its 1996 fiscal year
(on revenues of approximately $5.442 billion). Currently Missouri's general
obligation bonds are rated Aaa by Moody's, AAA by S&P and AAA by Fitch. New
Mexico's economy is based primarily on agriculture but also has tourism,
services and mining sectors. New Mexico projected a $144 million general fund
surplus for its 1996 fiscal year (on estimated revenues of approximately $2.757
billion). Currently New Mexico's general obligation bonds are rated Aa1 by
Moody's and AA+ by S&P. New York's economy is based primarily on services and
tourism. New York projects a general fund balance of $358 million for its 1997
fiscal year, and a projected surplus of $1.3 billion for its 1996-97 General
Fund Financial Plan (based on total estimated revenues of $32.966 billion). The
City's 1996-99 Financial Plan successfully implemented a $3.1 billion
gap-closing program for the 1996 fiscal year. Currently, New York's general
obligation bonds are rated A by Moody's and A- by S&P. The City's general
obligation bonds are rated Baa1 by Moody's and A- by S&P. North Dakota's economy
is based primarily on agriculture and services. North Dakota projects a positive
fund balance for its 1997 biennium of $63 million (on revenues of approximately
$1.37 billion). Currently North Dakota's general obligation bonds are rated Aa
by Moody's and AA- by S&P. Oregon's economy is based primarily on forestry,
agriculture, manufacturing and tourism sectors. Oregon expects to maintain a
general fund surplus of approximately $536.3
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<PAGE>
million for its 1997 biennium (on estimated revenue of approximately $7.399
billion). Currently Oregon's general obligation bonds are rated Aa by Moody's
and AA by S&P. Utah's economy is based primarily on services, agriculture and
mining sectors. Utah maintained a general and Uniform School fund surplus of
approximately $9.1 million for its 1996 fiscal year (on estimated revenues of
approximately $2.67 billion). Currently Utah's general obligation bonds are
rated Aaa by Moody's, AAA by S&P and AAA by Fitch. Washington's economy is based
primarily on manufacturing and service sectors as well as agriculture and timber
production. Washington projected a positive general fund surplus for its
1995-1997 biennium (on estimated revenues of approximately $18.3 billion).
Currently Washington's general obligation bonds are rated Aa by Moody's and AA
by S&P. Wisconsin's economy is based primarily on agriculture, services and
manufacturing. Wisconsin maintained a general fund balance of $442 million for
its 1996 fiscal year (on estimated revenues of approximately $20.686 billion).
Currently Wisconsin's general obligation bonds are rated Aa by Moody's and AA by
S&P.
Investment Restrictions
Each Fund has adopted certain investment restrictions in addition to
those set forth above, which are set forth in their entirety in the Statement of
Additional Information. Certain of these restrictions are fundamental and cannot
be changed without shareholder approval, including the restriction providing
that no Fund may borrow money, except from banks for temporary or emergency
purposes in an amount not exceeding 20% of the value of its total assets (10%
for Tax-Free Colorado Fund) (certain Funds may also borrow money in the form of
reverse repurchase agreements up to 10% of total assets). Also, certain Funds
may not, as a matter of fundamental policy invest more than 15% of their net
assets in illiquid securities and pledge, hypothecate, mortgage or otherwise
encumber their assets in excess of 10% of net assets. See "Investment Policies
and Restrictions--Investment Restrictions" in the Statement of Additional
Information. Each Fund also has a number of non-fundamental investment
restrictions which may be changed by the Fund's Board without the shareholder
approval. These include restrictions providing that no Fund may (a) invest more
than 5% of its total assets in securities of any single investment company or
(b) invest more than 10% of its total assets in securities of two or more
investment companies. To the extent that a Fund invests in the securities of
other open-end investment companies, the Manager will take appropriate action to
avoid subjecting such Fund's shareholders to duplicate management and other fees
and expenses.
Any investment restriction or limitation which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or a utilization of assets and such excess results therefrom.
HOW TO PURCHASE SHARES
Alternative Purchase Arrangements
The Funds offer investors the choice among three classes of shares
which offer different sales charges and bear different expenses. These
alternatives permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. Page 2 of the
Prospectus contains a summary of these alternative purchase arrangements.
A broker-dealer may receive different levels of compensation depending
on which class of shares is sold. In addition, the Underwriter from time to time
pays certain additional cash incentives of up to $100 and/or non cash incentives
such as vacations or merchandise to its investment executives and other
broker-dealers and financial institutions in consideration of their sales of
Fund shares. In some instances, the Underwriter pays amounts not to exceed 1.25%
of a Fund's net assets (such as payments related to retention of shares sold by
a particular broker-dealer or financial institution for a specified period of
time), to broker-dealers and financial institutions who meet certain objective
standards developed by the Underwriter.
-28-
<PAGE>
General Purchase Information
The minimum initial investment in each Fund is $1,000, and the minimum
additional investment is $100. Each Fund's shares may be purchased at the public
offering price from the Underwriter, from other broker-dealers who are members
of the National Association of Securities Dealers, Inc. and who have selling
agreements with the Underwriter, and from certain financial institutions that
have selling agreements with the Underwriter.
When orders are placed for shares of a Fund, the public offering price
used for the purchase will be the net asset value per share next determined,
plus the applicable sales charge, if any. If an order is placed with the
Underwriter or other broker-dealer, the broker-dealer is responsible for
promptly transmitting the order to the Fund. The Fund reserves the right, in its
absolute discretion, to reject any order for the purchase of shares.
Shares of the Funds may be purchased by opening an account either by
mail, by phone or wire.
An investor who may be interested in having shares redeemed shortly
after purchase should consider making unconditional payment by certified check
or other means approved in advance by the Underwriter. Payment of redemption
proceeds will be delayed as long as necessary to verify by expeditious means
that the purchase payment has been or will be collected. Such period of time
typically will not exceed 15 days.
Automatic Investment Plan
Investors may make systematic investments in fixed amounts
automatically on a monthly basis through each Fund's Automatic Investment Plan.
Additional information is available from the Underwriter by calling
800-523-1918.
Purchases by Mail
To open an account by mail, an investment application must be
completed, signed and sent with a check payable to the specific applicable Fund
and Class selected to:
Delaware Group
1818 Market Street
Philadelphia, PA 19103
Purchases by Telephone
To open an account by telephone, call 1-800-523-4640 to obtain an
account number and instructions. Information concerning the account will be
taken over the phone. The investor must then request a commercial bank with
which he or she has an account and which is a member of the Federal Reserve
System to transmit Federal Funds by wire to the appropriate Fund as follows:
CoreStates Bank, N.A.
For Credit for: (insert applicable Fund name)
ABA #031000011
Account Number #1412893401
Information on how to transmit Federal Funds by wire is available at
any national bank or any state bank that is a member of the Federal Reserve
System. The bank may charge the shareholder for the wire transfer. If the phone
order and Federal Funds are received before the close of trading on the
Exchange, the order will be deemed to become effective at that time. Otherwise,
the order will be deemed to become effective as of the close of trading on the
Exchange on the next day the Exchange is open for trading. The investor will be
required to complete the Investment Application and mail it to the Fund after
making the initial telephone purchase.
-29-
<PAGE>
Class A Shares--Front-End Sales Charge Alternative
The public offering price of Class A shares of each Fund is the net
asset value of the Fund's shares plus the applicable front-end sales charge
("FESC"), which will vary with the size of the purchase. The Fund receives
the net asset value. The FESC varies depending on the size of the purchase and
is allocated between the Underwriter and other broker-dealers. The current sales
charges are:
<TABLE>
<CAPTION>
Group 1+ Funds
- -------------------------------------------------------------------------------------------------------------------
Dealer's
Commission***
Front-End Sales Charge as % of as % of
Amount of Purchase Offering Offering
Price Amount Invested** Price
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
Less than $100,000 3.75% 0.00% 3.25%
$100,000 but less than $250,000 3.00 0.00% 2.50
$250,000 but less than $500,000 2.50 0.00% 2.00
$500,000 but less than $1,000,000* 2.00 0.00% 1.75
- -------------------------------------------------------------------------------------------------------------------
Group 2++ Funds
- -------------------------------------------------------------------------------------------------------------------
Dealer's
Commission***
Front-End Sales Charge as % of as % of
Amount of Purchase Offering Offering
Price Amount Invested** Price
- -------------------------------------------------------------------------------------------------------------------
Less than $100,000 2.75% 0.00% 2.35%
$100,000 but less than $250,000 2.00 0.00% 1.75
$250,000 but less than $500,000 1.00 0.00% 0.75
$500,000 but less than $1,000,000* 1.00 0.00% 0.75
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* There is no front-end sales charge on purchases of Class A shares of $1
million or more but, under certain limited circumstances, a 1% limited
contingent deferred sales charge may apply upon redemption of such
shares.
** The front-end sales charge as a percentage of the amount invested is
based on the net asset value per share of the respective Class A shares
as of the end of the most recent fiscal year. Those amounts are as
follows:
-30-
<PAGE>
<TABLE>
<CAPTION>
Offering Price Offering Price
3.75% 3.00% 2.50% 2.00% 2.75% 2.00% 1.00%
--------------------------------- ---------------------
Amount Invested Amount Invested
--------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Free Arizona 3.93% 3.08% 2.52% 2.06% Tax-Free Arizona Intermediate 2.80% 2.00% 1.00%
Tax-Free Arizona Insured 3.89 3.07 2.53 2.08 Tax-Free California Intermediate 2.80 2.00 1.00
Tax-Free California 3.93 3.07 2.59 2.01 Tax-Free Colorado Intermediate 2.80 2.00 1.00
Tax-Free California Insured 3.90 3.05 2.57 2.00 Tax-Free Florida Intermediate 2.78 2.01 1.05
Tax-Free Colorado 3.90 3.06 2.60 2.04 Tax-Free Minnesota Intermediate 2.82 2.00 1.00
Tax-Free Colorado Insured 3.90 3.10 2.60 2.00
Tax-Free Florida 3.90 3.14 2.57 2.00
Tax-Free Florida Insured 3.92 3.08 2.52 2.05
Tax-Free Idaho 3.94 3.12 2.57 2.02
Tax-Free Iowa 3.85 3.12 2.60 2.08
Tax-Free Kansas 3.88 3.13 2.56 2.08
Tax-Free Minnesota 3.87 3.06 2.58 2.02
Minnesota Insured 3.87 3.02 2.55 2.08
Tax-Free Missouri Insured 3.86 3.09 2.60 2.03
Tax-Free New Mexico 3.89 3.06 2.59 2.04
Tax-Free New York Fund 3.93 3.09 2.53 2.06
Tax-Free North Dakota 3.86 3.13 2.57 2.02
Tax-Free Oregon Insured 3.85 3.14 2.53 2.03
Tax-Free Washington Insured 3.88 3.11 2.52 2.04
Tax-Free Wisconsin 3.94 3.11 2.59 2.07
Tax-Free Utah 3.87 3.14 2.58 2.03
</TABLE>
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
+ Group 1 Funds: Tax-Free Arizona, Tax-Free Arizona Insured, Tax-Free
California, Tax-Free California Insured, Tax-Free Colorado, Tax-Free
Colorado Insured, Tax-Free Florida, Tax-Free Florida Insured, Tax-Free
Idaho, Tax-Free Iowa, Tax-Free Kansas, Tax-Free Minnesota, Minnesota
Insured, Tax-Free Missouri Insured, Tax-Free New Mexico, Tax-Free New York
Fund, Tax-Free North Dakota, Tax-Free Oregon Insured, Tax-Free Washington
Insured, Tax-Free Wisconsin and Tax-Free Utah.
++ Group 2 Funds: Tax-Free Arizona Intermediate, Tax-Free California
Intermediate, Tax-Free Colorado Intermediate, Tax-Free Florida Intermediate
and Tax-Free Minnesota Intermediate.
- --------------------------------------------------------------------------------
A Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by such Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Underwriter may hold special promotions for specified periods during which
the Underwriter may reallow to dealers up to the full amount of the
front-end sales charge shown above. In addition, certain dealers who enter
into an agreement to provide extra training and information on Delaware
Group products and services and who increase sales of Delaware Group funds
may receive an additional commission of up to 0.15% of the offering price.
Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the 1933 Act.
- --------------------------------------------------------------------------------
-31-
<PAGE>
In connection with the distribution of the Funds' Class A shares, the
Underwriter is deemed to receive all applicable sales charges. The Underwriter,
in turn, pays its investment executives and other broker-dealers selling such
shares a "dealer discount," as set forth above. In the event that shares are
purchased by a financial institution acting as agent for its customers, the
Underwriter or the broker-dealer with whom such order was placed may pay all or
part of its dealer discount to such financial institution in accordance with
agreements between such parties.
For initial purchases of Class A shares of Group 1 Funds of $1,000,000
or more, a dealer's commission may be paid by the Underwriter to financial
advisers through whom such purchases are made in accordance with the following
schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
For initial purchases of Class A shares of Group 2 Funds of $1,000,000
or more, a dealer's commission may be paid by the Underwriter to financial
advisers through whom such purchases are made in accordance with the following
schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
Up to $2 million 0.50%
Next $1 million up to $3 million 0.50
Next $2 million up to $5 million 0.40
Amount over $5 million 0.20
Special Purchase Plans--Reduced Sales Charges
Certain investors (or groups of investors) may qualify for reductions
in the sales charges shown above. Investors should contact their broker-dealer
or the Funds for details about the Funds' Combined Purchase Privilege,
Cumulative Quantity Discount and Letter of Intention plans. Descriptions are
also included with the general authorization form and in the Statement of
Additional Information. These special purchase plans may be amended or
eliminated at any time by the Underwriter without notice to existing Fund
shareholders.
Rule 12b-1 Fees
Class A shares are subject to a Rule 12b-1 fee payable at an annual
rate of .25% of the average daily net assets of a Fund attributable to Class A
shares. All or a portion of such fees are paid quarterly to financial
institutions and service providers with respect to the average daily net assets
attributable to shares sold or serviced by such institutions and service
providers. For additional information about this fee, see "Management--Plan of
Distribution" below.
Contingent Deferred Sales Charge
Although there is no initial sales charge on purchases of Class A
shares of $1,000,000 or more, the Underwriter pays investment dealers out of its
own assets, a fee of up to 1% (.50% for Group 2 Funds) of the offering price of
such shares. If these shares are redeemed within 12 months of purchase, the
redemption
-32-
<PAGE>
proceeds will be reduced by a contingent deferred sales charge ("CDSC") of 1%.
For additional information, see "How to Sell Shares-- Contingent Deferred Sales
Charge."
Waiver of Sales Charges
Purchases of Class A shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
Voyageur Fund Managers, Inc. or the Manager, any of their affiliates, any of the
other Delaware Group funds, certain of their agents and registered
representatives and employees of authorized investment dealers and by employee
benefit plans for such entities. Individual purchases, including those in
retirement accounts, must be for accounts in the name of the individual or a
qualifying family member.
Purchases of Class A shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of other Delaware
Group funds. Officers, directors and key employees of institutional clients of
the Manager or any of its affiliates may purchase Class A shares at net asset
value. Moreover, purchases may be effected at net asset value for the benefit of
the clients of brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Underwriter providing specifically for the
purchase of Class A shares in connection with special investment products, such
as wrap accounts or similar fee based programs.
A Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Class B Shares--Contingent Deferred Sales Charge Alternative The public
offering price of Class B shares of each Fund is the net
asset value of the Fund's shares. Class B shares are sold without an initial
sales charge so that the Fund receives the full amount of the investor's
purchase. However, a CDSC of up to 4% will be imposed if Class B shares of Group
1 Funds are redeemed within six years of purchase and a CDSC of up to 2% will be
imposed if Class B shares of Group 2 Funds are redeemed within three years of
purchase.
For additional information, see "How to Sell Shares--Contingent
Deferred Sales Charge." In addition, Class B shares are subject to higher Rule
12b-1 fees as described below. The CDSC will depend on the number of years since
the purchase was made according to the following table:
CDSC as a % of Amount Redeemed*
- --------------------------------------------------------------------------------
Group 1 Funds Group 2 Funds
CDSC Period CDSC CDSC Period CDSC
- --------------------------------------------------------------------------------
1st year after purchase 4% 1st year after purchase 2%
2nd year after purchase 4 2nd year after purchase 2
3rd year after purchase 3 3rd year after purchase 1
4th year after purchase 3 Thereafter 0
5th year after purchase 2
6th year after purchase 1
Thereafter 0
- --------------------------------------------------------------------------------
* The CDSC will be calculated on an amount equal to the lesser of the net
asset value of the shares at the time of purchase or the net asset value at
the time of redemption.
-33-
<PAGE>
Proceeds from the CDSC are paid to the Underwriter and are used to
defray expenses of the Underwriter related to providing distribution-related
services to the Funds in connection with the sale of Class B shares, such as the
payment of compensation to selected broker dealers, and for selling Class B
shares. The combination of the CDSC and the Rule 12b-1 fee enables the Funds to
sell the Class B shares without deduction of a sales charge at the time of
purchase. Although Class B shares are sold without an initial sales charge at
the time the shares are sold, the Underwriter pays to brokers who sell Class B
shares a sales commission equal to 4% (2% for Group 2) of the amount invested to
broker-dealers who sell Class B shares and pays an ongoing annual servicing fee
of 0.25% (0.15% for Group 2 Funds) (paid quarterly) calculated on the net assets
attributable to sales made by such broker-dealers.
Rule 12b-1 Fees
Class B shares are subject to a Rule 12b-1 fee payable at an annual
rate of 1% of the average daily net assets of a Fund attributable to Class B
shares. The higher 12b-1 fee will cause Class B shares to have a higher expense
ratio and to pay lower dividends than Class A shares. For additional information
about this fee, see "Fees and Expenses" above and "Management--Plan of
Distribution" below.
Conversion Feature
Shares of Group 1 Funds, other than shares acquired through
reinvestment of dividends, held for eight years after purchase are eligible for
automatic conversion into Class A shares. Shares of Group 2 Funds, other than
shares acquired through reinvestment of dividends, held for five years after
purchase are eligible for automatic conversion into Class A shares. Conversions
of Class B shares into Class A shares will occur only four times in any calendar
year, on the last business day of the second full week of March, June, September
and December (each, a "Conversion Date"). If, as the case may be, the eighth or
fifth anniversary after a purchase of Class B shares falls on a Conversion Date,
an investor's Class B shares will be converted on that date. If such anniversary
occurs between Conversion Dates, an investor's Class B shares will be converted
on the next Conversion Date after the anniversary. Consequently, if a
shareholder's anniversary falls on the day after a Conversion Date, that
shareholder will have to hold Class B shares as long as three additional months
after, as applicable, the eighth or fifth anniversary of purchase before the
shares will be automatically converted into Class A shares.
Class B shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A shares of that fund, (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B shares will constitute
tax-free exchanges for federal income tax purposes.
Class C Shares--Level Load Alternative
The public offering price of Class C shares of each Fund is the net
asset value of the Fund's shares. Class C shares are sold without an initial
sales charge so that the Fund receives the full amount of the investor's
purchase. However, a CDSC of 1% will be imposed if shares are redeemed within
one year of purchase. For additional information see "How to Sell Shares--
Contingent Deferred Sales Charge." In addition, Class C shares are subject to
higher annual Rule 12b-1 fees as described below.
Rule 12b-1 Fees
Class C shares are subject to a Rule 12b-1 fee payable at an annual
rate of 1% of the average daily net assets of a Fund attributable to Class C
shares. The higher Rule 12b-1 fee will cause Class C shares to have a
-34-
<PAGE>
higher expense ratio and to pay lower dividends than Class A shares. For
additional information about this fee, see "Fees and Expenses" and
"Management--Plan of Distribution."
Proceeds from the CDSC are paid to the Underwriter and are used to
defray expenses of the Underwriter related to providing distribution-related
services to the Funds in connection with the sale of Class C shares, such as the
payment of compensation to selected broker-dealers and for selling Class C
shares. The combination of the CDSC and the Rule 12b-1 fee enables the Funds to
sell the Class C shares without deduction of a sales charge at the time of
purchase. Although Class C shares are sold without an initial sales charge, the
Underwriter pays to brokers who sell Class C shares a sales commission equal to
1% of the amount invested and an ongoing annual fee of 1.00% (paid monthly
commencing in the thirteenth month after the sale of such shares) calculated on
the net assets attributable to sales made by such broker-dealers.
HOW TO SELL SHARES
Each Fund will redeem its shares in cash at the net asset value next
determined after receipt of a shareholder's written request for redemption in
good order (see below). If shares for which payment has been collected are
redeemed, payment must be made within seven days. Each Fund may suspend this
right of redemption and may postpone payment only when the Exchange is closed
for other than customary weekends or holidays, or if permitted by the rules of
the Securities and Exchange Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
such Fund to dispose of its securities or to determine fairly the value of its
net assets or during any other period permitted by order of the Commission for
the protection of investors.
Each Fund reserves the right and currently plans to redeem Fund shares
and mail the proceeds to the shareholder if at any time the value of Fund shares
in the account falls below a specified value, currently set at $250.
Shareholders will be notified and will have 60 days to bring the account up to
the required value before any redemption action will be taken by a Fund.
Contingent Deferred Sales Charge
The CDSC will be calculated on an amount equal to the lesser of the net
asset value of the shares at the time of purchase or their net asset value at
the time of redemption. No charge will be imposed on increases in net asset
value above the initial purchase price. In addition, no charge will be assessed
on shares derived from reinvestment of dividends or capital gains distributions.
In determining whether a CDSC is payable with respect to any
redemption, the calculation will be determined in the manner that results in the
lowest rate being charged. Therefore, it will be assumed that shares that are
not subject to the CDSC are redeemed first, shares subject to the lowest level
of CDSC are redeemed next, and so forth.
The CDSC does not apply to: (a) redemptions of Class B shares in
connection with the automatic conversion to Class A shares; (b) redemptions of
shares when a Fund exercises its right to liquidate accounts which are less than
the minimum account size; and (c) redemptions in the event of the death or
disability of the shareholder within the meaning of Section 72(m)(7) of the
Internal Revenue Code.
If a shareholder exchanges Class A, Class B or Class C shares subject
to a CDSC for Class A, Class B or Class C shares, respectively, of a different
Delaware Group Fund, the transaction will not be subject to a CDSC. However,
when shares acquired through the exchange are redeemed, the shareholder will be
treated as if no exchange took place for the purpose of determining the CDSC.
Fund shares are exchangeable for shares of any Voyageur money market funds. No
CDSC will be imposed at the time of any such exchange; however, the shares
acquired in any such exchange will remain subject to the CDSC and the period
during which such shares
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represent shares of the money market fund will not be included in determining
how long the shares have been held. Effective July 1, 1997, Class B and Class C
shares of the Funds may not be exchanged into shares of the Voyageur money
market funds. Any CDSC due upon a redemption of Fund shares will be reduced by
the amount of any Rule 12b-1 payments made by such money market fund with
respect to such shares.
Expedited Redemptions
Each Fund offers several expedited redemption procedures, described
below, which allow a shareholder to redeem Fund shares at net asset value
determined on the same day that the shareholder places the request for
redemption of those shares. Pursuant to these expedited redemption procedures,
each Fund will redeem its shares at their net asset value next determined
following the Fund's receipt of the redemption request. Each Fund reserves the
right at any time to suspend or terminate the expedited redemption procedures or
to impose a fee for this service. There is currently no additional charge to the
shareholder for use of the Funds' expedited redemption procedures.
Expedited Telephone Redemption
Shareholders redeeming at least $1,000 (for which certificates have not
been issued) may redeem by telephoning the Fund directly at 800-523-1918. The
applicable section of the Investment Application must have been completed by the
shareholder and filed with the Fund before the telephone request is received.
The proceeds of the redemption will be paid by check mailed to the shareholder's
address of record or, if requested at the time of redemption, by wire to the
bank designated on the Investment Application. Shareholders should notify their
Funds in writing if they do not wish to have such service available to their
accounts.
Neither the Fund nor its shareholder services and transfer agent is
responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption of Fund shares which are reasonably
believed to be genuine. With respect to such telephone transactions, the Fund
will follow reasonable procedures to confirm that instructions communicated by
telephone are genuine (including verification of a form of personal
identification) as, if it does not, the Fund or the shareholder services and
transfer agent may be liable for any losses due to unauthorized or fraudulent
transactions. Instructions received by telephone are generally tape recorded,
and a written confirmation will be provided for all purchase and redemption
transactions initiated by telephone. These procedures also apply to written and
telephone exchange requests. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which your shares
are being exchanged.
Expedited Redemptions Through Certain Broker Dealers
Certain broker-dealers who have sales agreements with the Underwriter
may allow their customers to effect a redemption of shares of a Fund purchased
through such broker-dealer by notifying the broker-dealer of the amount of
shares to be redeemed. The broker-dealer is then responsible for promptly
placing the redemption request with the Fund on the customer's behalf. Payment
will be made to the shareholder by check or wire sent to the broker-dealer.
Broker-dealers offering this service may impose a fee or additional requirements
for such redemptions.
Good Order
"Good order" means that stock certificates, if issued, must accompany
the written request for redemption and must be duly endorsed for transfer, or
must be accompanied by a duly executed stock power. If no stock certificates
have been issued, a written request to redeem must be made. Stock certificates
will not be issued for Class B or Class C shares. In any case, the shareholder
must execute the redemption request exactly as the shares are registered. If the
redemption proceeds are to be paid to the registered holder(s), a signature
guarantee is not normally required. A signature guarantee is required in certain
other circumstances, for example, to redeem more than $50,000 or to have a check
mailed other than to the shareholder's address of record. See "Other
Information" in the Statement of Additional Information. The Funds' transfer
agent may waive certain of these
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redemption requirements at its own risk, but also reserves the right to require
signature guarantees on all redemptions, in contexts perceived by the Funds'
transfer agent to subject the Funds to an unusual degree of risk.
Monthly Cash Withdrawal Plan
An investor who owns or buys shares of any Fund valued at $5,000 or
more at the current offering price may open a Withdrawal Plan and have monthly
withdrawals of $25 or more paid to the investor or another person. Deferred
sales charges may apply to monthly redemptions of Class B or Class C shares. See
"Monthly Cash Withdrawal Plan" in the Statement of Additional Information.
REINSTATEMENT PRIVILEGE
An investor in a Fund whose shares have been redeemed and who has not
previously exercised the Reinstatement Privilege as to such Fund may reinvest
the proceeds of such redemption in Class A shares of any Delaware Group fund
eligible for sale in the shareholder's state of residence. Reinvestment will be
at the net asset value of Fund shares next determined after the Underwriter
receives a check along with a letter requesting reinstatement. The Underwriter
must receive the letter requesting reinstatement within 365 days following the
redemption. Investors who desire to exercise the Privilege should contact their
broker-dealer or the Fund.
Exercise of the Reinstatement Privilege does not alter the income tax
treatment of any capital gains realized on a sale of shares of a Fund, but to
the extent that any shares are sold at a loss and the proceeds are reinvested
within 30 days in shares of such Fund, some or all of the loss may not be
allowed as a deduction, depending upon the number of shares reacquired.
EXCHANGE PRIVILEGE
Except as described below, shareholders may exchange some or all of
their Fund shares for shares of another Delaware Group Fund, provided that the
shares to be acquired in the exchange are eligible for sale in the shareholder's
state of residence.
Class A, Class B and Class C shares of the Funds may be exchanged into
the corresponding classes of shares of the retail funds in the Delaware Group
that have such classes. In addition, each of the three money market funds in the
Delaware Group has class A shares and a consultant class. The consultant class
of each of these funds is subject to a Rule 12b-1 Plan; however, only the
consultant class of Delaware Cash Reserve currently assesses a fee under its
12b-1 Plan. The Class A shares of the Funds may be exchanged into either class A
shares or the consultant class of these three funds. Shares of each class may
also be exchanged for shares of the Voyageur money market funds. Effective July
1, 1997, however, only Class A shares may be exchanged into such money market
funds.
The minimum amount which may be exchanged is $1,000. The exchange will
be made on the basis of the relative net asset values next determined after
receipt of the exchange request. For a discussion of issues relating to the
contingent deferred sales charge upon such exchanges, see "How to Sell
Shares--Contingent Deferred Sales Charge." There is no specific limitation on
exchange frequency; however, the Funds are intended for long term investment and
not as a trading vehicle. The Funds reserve the right to prohibit excessive
exchanges (more than four per quarter). The Funds also reserve the right, upon
60 days' prior notice, to restrict the frequency of, or otherwise modify,
condition, terminate or impose charges upon, exchanges. An exchange is
considered to be a sale of shares on which the investor may realize a capital
gain or loss for income tax purposes. Exchange requests may be placed directly
with the Fund in which the investor owns shares, through the Fund's transfer
agent or through other broker-dealers. An investor considering an exchange
should obtain a prospectus of the fund to be acquired and should read such
prospectus carefully. Contact any of the Funds, the Funds' transfer agent or any
of such other broker-dealers for further information about the exchange
privilege.
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MANAGEMENT
The Boards of Directors, or Trustees, as the case may be, of the Funds
are responsible for managing the business and affairs of the Funds. The names,
addresses, principal occupations and other affiliations of Directors or Trustees
and executive officers of the Funds are set forth in the Statement of Additional
Information.
Investment Adviser; Portfolio Management
Delaware Management Company, Inc. ("DMC") serves as the investment
manager for each of the Funds, including Funds which, prior to that date, were
managed by Voyageur Fund Managers, Inc. ("Voyageur"). Prior to May 1, 1997,
Voyageur had been retained under an investment advisory contract to act as each
Fund's investment adviser, subject to the authority of the Board of Directors or
Trustees, as appropriate for each Fund. Prior to that date, Voyageur was an
indirect, wholly-owned subsidiary of Dougherty Financial Group, Inc. ("DFG").
After the close of business on April 30, 1997, Voyageur became an indirect,
wholly owned subsidiary of Lincoln National Corporation ("LNC") as a result of
LNC's acquisition of DFG. LNC, headquartered in Fort Wayne, Indiana, owns and
operates insurance and investment management businesses, including Delaware
Management Holdings, Inc. ("DMH"). Affiliates of DMH serve as adviser,
distributor and transfer agent for the Delaware Group of Mutual Funds. DMH,
through its subsidiaries, is responsible for the management of approximately $32
billion.
Because LNC's acquisition of DFG resulted in a change of control of
Voyageur, the Funds' previous investment advisory agreements with Voyageur were
"assigned," as that term is defined by the Investment Company Act of 1940, and
the previous agreements therefore terminated upon the completion of the
acquisition. The Boards of Directors and Trustees of the Funds unanimously
approved new investment advisory agreements at a meeting held in person on
February 14, 1997, and called for a shareholders meeting to approve the new
agreements. At a meeting held on April 11, 1997, the shareholders of each Fund
approved its respective investment advisory agreements with either Voyageur or
DMC to become effective after the close of business on April 30, 1997, the date
the acquisition was completed.
Beginning May 1, 1997, DMC, an indirect, wholly-owned subsidiary of
LNC, was retained as investment manager of Tax-Free Arizona Intermediate Fund,
Tax-Free California Intermediate Fund, Tax-Free Colorado Insured Fund, Tax-Free
Colorado Intermediate Fund, the Florida Funds, and Tax-Free New York Fund.
Voyageur was retained as investment manager for the other Funds. On May 30,
1997, Voyageur was merged into DMC and DMC became the investment manager for
such other Funds.
Each Fund pays its respective investment manager a monthly investment
advisory and management fee equivalent on an annual basis to 0.50% of its
average daily net assets except each Tax-Free Intermediate Fund pays 0.40% of
its average daily net assets.
Andrew M. McCullagh, Jr. has had, since inception, day-to-day portfolio
management responsibility for the Tax-Free Arizona Insured and Tax-Free Arizona
Funds, Tax-Free California Insured and Tax-Free California Funds, Tax-Free
Colorado Fund, as well as the Tax-Free New Mexico Fund, Tax-Free North Dakota
Fund and Tax-Free Utah Fund. Mr. McCullagh serves as Vice President/Senior
Portfolio Manager for these Funds. Mr. McCullagh was a Director of Voyageur and
the Voyageur Fund Distributors, Inc. from 1993 through 1995 and a Senior Tax
Exempt Portfolio Manager for Voyageur from January 1990 through May 1997. He was
also President of Tax-Free Colorado Fund and an Executive Vice President of each
of the other Voyageur Funds. Mr. McCullagh currently has over 23 years
experience in municipal bond trading, underwriting and portfolio management.
Elizabeth H. Howell has had, since 1991, day-to-day portfolio
management responsibility for the Minnesota Funds, as well as, since inception,
the Tax-Free Idaho, Tax-Free Kansas, Tax-Free Missouri, Tax-
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Free Oregon and Tax-Free Washington Funds. In addition, on May 1, 1997, Ms.
Howell resumed day-to-day portfolio management responsibility for the Tax-Free
Iowa and Tax-Free Wisconsin Funds, which she managed from their inception to
July 1995. Ms. Howell serves as Vice President/Senior Portfolio Manager for
these Funds. Ms. Howell was a Vice President and Senior Tax Exempt Portfolio
Manager for Voyageur from 1991 to 1997 and was a Vice President of each of the
Voyageur Funds. Ms. Howell has over ten years experience as a securities analyst
and portfolio manager.
Patrick P. Coyne and Mitchell L. Conery, each a Vice President/Senior
Portfolio Manager of Tax-Free Florida Fund, Tax-Free Florida Insured Fund,
Tax-Free Florida Intermediate Fund and Tax-Free New York Fund assumed primary
responsibility for making day-to-day investment decisions for these Funds on May
1, 1997. Mr. McCullagh assists Mr. Coyne and Mr. Conery with the management of
the Florida Funds. Mr. Coyne is a graduate of Harvard University with an MBA
from the University of Pennsylvania's Wharton School. Prior to joining the
Delaware Group's fixed-income department in 1990, Mr. Coyne was as a manager of
Kidder, Peabody & Co. Inc.'s trading desk, and specialized in trading high grade
municipal bonds and municipal futures contracts. Mr. Coyne is a member of the
Municipal Bond Club of Philadelphia. Mr. Conery joined Delaware Group in January
1997. He holds a bachelor's degree from Boston University and an MBA in Finance
from the State University of New York at Albany. He has served as an investment
officer with Travelers Insurance and as a research analyst with CS First Boston
and MBIA Corporation. Mr. Coyne and Mr. Conery are also Vice Presidents/Senior
Portfolio Managers for Delaware Group Tax-Free Fund, Inc. and DMC Tax-Free
Income Trust - Pennsylvania.
In making investment decisions for the Florida Funds, Mr. Coyne and Mr.
Conery regularly consult with Paul E. Suckow and other members of Delaware
Group's fixed-income department. Mr. Suckow is Executive Vice President/Chief
Investment Officer, Fixed Income of the Funds and each of the other funds in the
Delaware Group. He is a CFA charterholder and a graduate of Bradley University
with an MBA from Western Illinois University. Mr. Suckow was a fixed-income
portfolio manager at the Delaware Group from 1981-1985. He returned to the
Delaware Group in 1993 after eight years with Oppenheimer Manager Corporation
where he served as Executive Vice President and Director of Fixed Income.
Plan of Distribution
Each Fund has adopted a Plan of Distribution under the 1940 Act (the
"Plan") and has entered into a Distribution Agreement with Delaware
Distributors, L.P. (the "Underwriter"). Pursuant to each Fund's Plan, the Fund
pays the Underwriter a Rule 12b-1 fee, at an annual rate of .25% of the Fund's
average daily net assets attributable to Class A shares and 1% of the Fund's
average daily net assets attributable to each of Class B and Class C shares for
servicing of shareholder accounts and distribution related services. Payments
made under the Plan are not tied exclusively to expenses actually incurred by
the Underwriter and may exceed or be less than expenses actually incurred by the
Underwriter. Please see the "Fees and Expenses" table at the beginning of this
Prospectus for information with respect to fee waivers, if any.
All of the Rule 12b-1 fee attributable to Class A shares, and a portion
of the fee equal to .25% of the average daily net assets of the Fund
attributable to each of Class B shares and Class C shares constitutes a
shareholder servicing fee designed to compensate the Underwriter for the
provision of certain services to the shareholders. The services provided may
include personal services provided to shareholders, such as answering
shareholder inquiries regarding the Funds and providing reports and other
information, and services related to the maintenance of shareholder accounts.
The Underwriter may use such Rule 12b-1 fee or portion thereof to make payments
to qualifying broker-dealers and financial institutions that provide such
services.
That portion of the Rule 12b-1 fee equal to .75% of the average daily
net assets of the Fund attributable to Class B shares and Class C shares,
respectively, constitutes a distribution fee designed to compensate the
Underwriter for advertising, marketing and distributing the Class B shares and
Class C shares of each Fund. In
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connection therewith, the Underwriter may provide initial and ongoing sales
compensation to its investment executives and other broker-dealers for sales of
Class B shares and Class C shares and may pay for other advertising and
promotional expenses in connection with the distribution of Class B shares and
Class C shares. The distribution fee attributable to Class B shares and Class C
shares is designed to permit an investor to purchase such shares through
investment executives of the Underwriter and other broker-dealers without the
assessment of an initial sales charge and at the same time to permit the
Underwriter to compensate its investment executives and other broker-dealers in
connection with the sale of such shares.
Custodian; Dividend Disbursing, Transfer, Administrative and Account Services
Agent
Norwest Bank Minnesota, N.A. serves as the custodian of each Fund's
portfolio securities and cash.
Delaware Service Company, Inc. ("DSC") acts as each Fund's dividend
disbursing, transfer, administrative and fund accounting agent to perform
dividend-paying functions, to calculate each Fund's daily share price, to
maintain shareholder records and to perform certain regulatory and compliance
related services for the Funds.
Certain institutions may act as sub-transfer agents for one or more of
the Funds pursuant to contracts with DSC, whereby the institutions will provide
shareholder services to their customers. DSC will pay such sub-administrators'
fees out of its own assets. The fee paid by DSC to any sub-administrator will be
a matter of negotiation between the institution and DSC based on the extent and
quality of the services provided.
Expenses of the Funds
In connection with the merger transaction described above, DMC has
agreed for a period of two years ending on April 30, 1999, to pay the operating
expenses (excluding interest expense, taxes, brokerage fees, commissions and
Rule 12b-1 fees and, with respect to the Insured Funds, premiums with respect to
Portfolio Insurance or Secondary Market Insurance) of each Fund which exceed 1%
of such Fund's average daily net assets on an annual basis up to certain limits
as set forth in detail in the Statement of Additional Information. This
agreement replaces a similar provision in the Funds' investment advisory
contracts with the Funds' predecessor investment adviser. In addition, DMC
and the Underwriter reserve the right to voluntarily waive their fees in whole
or part and to voluntarily absorb certain other of the Funds' expenses.
Each Fund's expenses include, among others, fees of directors, expenses
of directors' and shareholders' meetings, insurance premiums, expenses of
redemption of shares, expenses of the issue and sale of shares (to the extent
not otherwise borne by the Underwriter), expenses of printing and mailing stock
certificates and shareholder statements, association membership dues, charges of
such Fund's custodian, bookkeeping, auditing and legal expenses, the fees and
expenses of registering such Fund and its shares with the Securities and
Exchange Commission and registering or qualifying its shares under state
securities laws and expenses of preparing and mailing prospectuses and reports
to existing shareholders.
Portfolio Transactions
No Fund will effect any brokerage transactions in its portfolio
securities with any broker-dealer affiliated directly or indirectly with the
Manager unless such transactions, including the frequency thereof, the receipt
of commissions payable in connection therewith and the selection of the
affiliated broker-dealer effecting such transactions, are not unfair or
unreasonable to the shareholders of such Fund. It is not anticipated that any
Fund will effect any brokerage transactions with any affiliated broker-dealer,
including the Underwriter, unless such use would be to such Fund's advantage.
The Fund's investment adviser may consider sales of shares of the funds in the
Delaware Group as a factor in the selection of broker-dealers to execute the
Funds' securities transactions.
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DETERMINATION OF NET ASSET VALUE
The net asset value of Fund shares is determined once daily, Monday
through Friday, as of the close of regular trading on the New York Stock
Exchange (ordinarily 4 p.m. Eastern time) each business day the Exchange is open
for trading.
For each Fund, the net asset value per share of each class is
determined by dividing the value of the securities, cash and other assets of the
Fund attributable to such class less all liabilities attributable to such class
by the total number of shares of such class outstanding. For purposes of
determining the net assets of each Fund, tax exempt securities are stated on the
basis of valuations provided by a pricing service, approved by the Boards of
Directors or Trustees, which uses information with respect to transactions in
bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining value.
Market quotations are used when available. Non-tax exempt securities for which
market quotations are readily available are stated at market value which is
currently determined using the last reported sale price, or, if no sales are
reported, as in the case of most securities traded over-the-counter, the last
reported bid price, except that U.S. Government securities are stated at the
mean between the last reported bid and asked prices. Short-term notes having
remaining maturities of 60 days or less are stated at amortized cost which
approximates market. All other securities and other assets are valued in good
faith at fair value by the Manager in accordance with procedures adopted by the
Boards of Directors or Trustees.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
Distributions
The present policy of each Fund is to declare a distribution from net
investment income on each day that the Fund is open for business. Net investment
income consists of interest accrued on portfolio investments of a Fund, less
accrued expenses. Distributions of net investment income are paid monthly.
Short-term capital gains distributions are taxable to shareholders as ordinary
income. Net realized long term capital gains, if any, are distributed annually,
after utilization of any available capital loss carryovers. Distributions paid
by the Funds, if any, with respect to Class A, Class B and Class C shares will
be calculated in the same manner, at the same time, on the same day and will be
in the same amount, except that the higher Rule 12b-1 fees applicable to Class B
and Class C shares will be borne exclusively by such shares. The per share
distributions on Class B and Class C shares will be lower than the per share
distributions on Class A shares as a result of the higher Rule 12b-1 fees
applicable to Class B and Class C shares.
Shareholders receive distributions from investment income and capital
gains in additional shares of the Fund and class owned by such shareholders at
net asset value, without any sales charge, unless they elect otherwise. Each
Fund sends to its shareholders no less than quarterly statements with details of
any reinvested dividends.
TAXES
Federal Income Taxation
Each Fund is treated as a separate entity for federal income tax
purposes. Each Fund qualified during its last taxable year and each Fund intends
to qualify during its current taxable year as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund also
intends to take all other action required to ensure that no federal income taxes
will be payable by the Fund and that the Fund can pay exempt-interest dividends.
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Distributions of net interest income from tax exempt obligations that
are designated by a Fund as exempt-interest dividends are excludable from the
gross income of the Fund's shareholders. Distributions paid from other interest
income and from any net realized short-term capital gains are taxable to
shareholders as ordinary income, whether received in cash or in additional
shares. Distributions paid from long-term capital gains (and designated as such)
are taxable as long-term capital gains for federal income tax purposes, whether
received in cash or shares, regardless of how long a shareholder has held shares
in a Fund.
Exempt-interest dividends attributable to interest income on certain
tax exempt obligations issued after August 7, 1986 to finance private activities
are treated as an item of tax preference for purposes of computing the
alternative minimum tax for individuals, estates and trusts. Each Fund may
invest up to 20% of its total assets in securities which generate interest which
is treated as an item of tax preference and subject to federal and state AMT,
except that Minnesota Insured Fund may invest without limitation in such
securities and Tax-Free Minnesota Fund may not invest in obligations which
generate interest subject to federal and state AMT.
The following is a summary of certain information regarding state
taxation. See "Taxes" in the Statement of Additional Information.
Arizona State Taxation
The portion of exempt-interest dividends that is derived from interest
income on Arizona Tax Exempt Obligations is excluded from the Arizona taxable
income of individuals, estates, trusts, and corporations. Dividends qualifying
for federal income tax purposes as capital gain dividends are to be treated by
shareholders as long-term capital gains under Arizona law.
California State Taxation
Individual shareholders of the California Funds who are subject to
California personal income taxation will not be required to include in their
California gross income that portion of their federally tax exempt dividends
which a Fund clearly identifies as directly attributable to interest earned on
California state or municipal obligations, and dividends which a Fund clearly
identifies as directly attributable to interest earned on obligations of the
United States, the interest on which is exempt from California personal income
tax pursuant to federal law, provided that at least 50% of the value of the
Fund's total assets consists of obligations the interest on which is exempt from
California personal income taxation pursuant to federal or California law.
Distributions to individual shareholders derived from interest on state or
municipal obligations issued by governmental authorities in states other than
California, short-term capital gains and other taxable income will be taxed as
dividends for purposes of California personal income taxation. Each Fund's long
term capital gains for federal income tax purposes will be taxed as long-term
capital gains to individual shareholders of the Fund for purposes of California
personal income taxation. Gain or loss, if any, resulting from an exchange or
redemption of shares will be recognized in the year of the change or redemption.
Colorado State Taxation
To the extent that dividends are derived from interest income on
Colorado Tax Exempt Obligations, such dividends will also be exempt from
Colorado income taxes for individuals, trusts, estates, and corporations.
Dividends qualifying for federal income tax purposes as capital gain dividends
are to be treated by shareholders as long-term capital gains under Colorado law.
Florida State Taxation
Florida does not currently impose a tax on the income of individuals,
and individual shareholders of the Florida Funds will thus not be subject to
income tax in Florida on distributions from the Florida Funds or upon the sale
of shares held in such Funds. Florida does, however, impose a tax on intangible
personal property held by individuals as of the first day of each calendar year.
Under a rule promulgated by the Florida Department of Revenue, shares in the
Florida Funds will not be subject to the intangible property tax so long as, on
the last
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business day of each calendar year, all of the assets of each Fund consist of
obligations of the U. S. government and its agencies, instrumentalities and
territories, and the State of Florida and its political subdivisions and
agencies. If any Florida Fund holds any other types of assets on that date, then
the entire value of the shares in such Fund (except for the portion of the value
of the shares attributable to U. S. government obligations) will be subject to
the intangible property tax. Each Florida Fund must sell any non-exempt assets
held in its portfolio during the year and reinvest the proceeds in exempt assets
prior to December 31. Transaction costs involved in converting the portfolio's
assets to such exempt assets would likely reduce the Florida Funds' investment
return and might, in extraordinary circumstances, exceed any increased
investment return such Funds had achieved by investing in non-exempt assets
during the year. Corporate shareholders in the Florida Funds may be subject to
the Florida income tax imposed on corporations, depending upon the domicile of
the corporation and upon the extent to which income received from such Fund
constitutes "nonbusiness income" as defined by applicable Florida law.
Idaho State Taxation
The Idaho Fund has received a ruling from the Idaho Department of
Revenue that provides that dividends paid by the Idaho Fund that are
attributable to (a) interest earned on bonds issued by the State of Idaho, its
cities and political subdivisions, and (b) interest earned on obligations of the
U.S. government or its territories and possessions will not be included in the
income of Fund shareholders subject to either the Idaho personal income tax or
the Idaho corporate franchise tax. All other dividends paid by the Idaho Fund
will be subject to the Idaho personal or corporate income tax. Capital gain
dividends qualifying as long-term capital gains for federal tax purposes will be
treated as long-term capital gains for Idaho income tax purposes. Idaho taxes
long-term capital gains at the same rates as ordinary income, while imposing
limitations on the deductibility of capital losses similar to those under
federal law.
Iowa State Taxation
The Iowa Fund has received a ruling from the Iowa Department of Revenue
and Finance dated May 21, 1993 to the effect that dividends paid by the Iowa
Fund that are attributable to (a) interest earned on bonds issued by the State
of Iowa, its political subdivisions, agencies and instrumentalities, the
interest on which is exempt from taxation by Iowa statute, and (b) interest
earned on obligations of the U.S. government or its territories and possessions
will not be included in the income of the Fund shareholders subject to either
the Iowa personal or the Iowa corporate income tax, except in the case of
shareholders that are financial institutions subject to the tax imposed by Iowa
Code Section 422.60. All other dividends paid by the Iowa Fund will be subject
to the Iowa personal or corporate income tax. Capital gain dividends qualifying
as long-term capital gains for federal tax purposes will be treated as long-term
capital gains for Iowa income tax purposes.
Kansas State Taxation
Individuals, trusts, estates and corporations will not be subject to
Kansas income tax on the portion of dividends derived from interest on
obligations of Kansas and its political subdivisions issued after December 31,
1987, and interest on specified obligations of Kansas and its political
subdivisions issued before January 1, 1988. The Fund intends to invest only in
Kansas obligations the interest on which is excludable from Kansas taxable
income. All remaining dividends (except for dividends, if any, derived from
interest paid on obligations of the United States, its territories and
possessions), including dividends derived from capital gains, will be includable
in the taxable income of individuals, trusts, estates, and corporations.
Dividends qualifying for federal income tax purposes as capital gain dividends
are to be treated by shareholders as long-term capital gains. Kansas taxes
long-term capital gains at the same rates as ordinary income, while restricting
the deductibility of capital losses. Dividends received by shareholders will be
exempt from the tax on intangibles imposed by certain counties, cities and
townships.
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Minnesota State Taxation
Minnesota taxable net income is based generally on federal taxable
income. The portion of exempt-interest dividends that is derived from interest
income on Minnesota Tax Exempt Obligations is excluded from the Minnesota
taxable net income of individuals, estates and trusts, provided that the portion
of the exempt-interest dividends from such Minnesota sources paid to all
shareholders represents 95 percent or more of the exempt-interest dividends paid
by the respective Fund. Exempt-interest dividends are not excluded from the
Minnesota taxable income of corporations and financial institutions. Dividends
qualifying for federal income tax purposes as capital gain dividends are to be
treated by shareholders as long-term capital gains. Minnesota has repealed the
favorable treatment of long-term capital gains, while retaining restrictions on
the deductibility of capital losses. Exempt interest dividends subject to the
federal alternative minimum tax will also be subject to the Minnesota
alternative minimum tax imposed on individuals, estates and trusts.
The 1995 Minnesota Legislature has enacted a statement of intent that
interest on obligations of Minnesota governmental units and Indian tribes be
included in net income of individuals, estates and trusts for Minnesota income
tax purposes if a court determines that Minnesota's exemption of such interest
unlawfully discriminates against interstate commerce because interest on
obligations of governmental issuers located in other states is so included. This
provision applies to taxable years that begin during or after the calendar year
in which any such court decision becomes final, irrespective of the date on
which the obligations were issued. The Tax-Free Minnesota Intermediate Fund, the
Minnesota Insured Fund, and the Tax-Free Minnesota Fund are not aware of any
decision in which a court has held that a state's exemption of interest on its
own bonds or those of its political subdivisions or Indian tribes, but not of
interest on the bonds of other states or their political subdivisions or Indian
tribes, unlawfully discriminates against interstate commerce or otherwise
contravenes the United States Constitution. Nevertheless, the Funds cannot
predict the likelihood that interest on the Minnesota Tax Exempt Obligations
held by the Funds would become taxable under this Minnesota statutory provision.
Missouri State Taxation
The portion of exempt interest dividends that is derived from interest
on Missouri Tax Exempt Obligations is excluded from the taxable income of
individuals, trusts, and estates and of corporations subject to the Missouri
corporate income tax. All remaining dividends (except dividends attributable to
interest on obligations of the United States, its territories and possessions),
including dividends derived from capital gains, will be includable in the
taxable income of individuals, trusts, estates and corporations. Dividends
qualifying for federal income tax purposes as capital gain dividends are to be
treated by shareholders as long-term capital gains. Missouri taxes long-term
capital gains at the same rates as ordinary income, while restricting the
deductibility of capital losses.
New York State and City Taxation
The portion of exempt-interest dividends that is derived from interest
income on New York Tax-Exempt Obligations is excluded from the New York State
and New York City gross income of individuals, estates and trusts; the remaining
portion of such dividends, and dividends that are not tax-exempt interest
dividends, are included in the New York State and New York City gross income of
individuals, estates, and trusts. Exempt-interest dividends are not excluded
from the New York State and New York City gross income of corporations and
banks, and dividends from the Fund will not qualify for the New York State or
New York City dividends-received deduction for corporations and banks.
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<PAGE>
New Mexico State Taxation
The portion of exempt interest dividends that is derived from interest
on New Mexico Tax Exempt Obligations is excluded from the taxable income of
individuals, trusts, and estates, and of corporations subject to the New Mexico
corporate income tax. The Fund will provide shareholders with an annual
statement identifying income paid to shareholders by source. All remaining
dividends (except for dividends, if any, derived from interest paid on
obligations of the United States, its territories and possessions), including
dividends derived from capital gains, will be includable in the taxable income
of individuals, trusts, estates and corporations. Dividends qualifying for
federal income tax purposes as capital gain dividends are to be treated by
shareholders as long-term capital gains. New Mexico taxes long-term capital
gains at the same rates as ordinary income, while restricting the deductibility
of capital losses.
North Dakota State Taxation
North Dakota taxable income is based generally on federal taxable
income. The portion of exempt interest dividends that is derived from interest
income on North Dakota Tax Exempt Obligations is excluded from the North Dakota
taxable income of individuals, estates, trusts and corporations. Exempt interest
dividends are not excluded from the North Dakota taxable income of banks.
Dividends qualifying for federal income tax purposes as capital gain dividends
are to be treated by shareholders as long-term capital gains under North Dakota
law.
Oregon State Taxation
The portion of exempt interest dividends that is derived from interest
on Oregon Tax Exempt Obligations is excluded from the taxable income of
individuals, trusts and estates. All remaining dividends (except for dividends,
if any, derived from interest paid on obligations of the United States, its
territories and possessions), including dividends derived from capital gains,
will be includable in the taxable income of individuals, trusts and estates.
Furthermore, all dividends, including exempt interest dividends, will be
includable in the taxable income of corporations subject to the Oregon
corporation excise tax. Dividends qualifying for federal income tax purposes as
capital gain dividends are to be treated by shareholders as long-term capital
gains. Oregon taxes long-term capital gains at the same rates as ordinary
income, while restricting the deductibility of capital losses.
Utah State Taxation
All exempt interest dividends, whether derived from interest on Utah
Tax Exempt Obligations or the Tax Exempt Obligations of any other state, are
excluded from the taxable income of individuals, trusts, and estates. Any
remaining dividends (except for dividends, if any, derived from interest paid on
obligations of the United States, its territories and possessions), including
dividends derived from capital gains, will be includable in the taxable income
of individuals, trusts, and estates. Furthermore, all dividends, including
exempt interest dividends, will be includable in the taxable income of
corporations subject to the Utah corporate franchise tax. Dividends qualifying
for federal income tax purposes as capital gain dividends are to be treated by
shareholders as long-term capital gains. Utah taxes long-term capital gains at
the same rates as ordinary income, while restricting the deductibility of
capital losses.
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<PAGE>
Washington State Taxation
Washington does not currently impose an income tax on individuals or
corporations. Therefore, dividends paid to shareholders will not be subject to
tax in Washington.
Wisconsin State Taxation
The Wisconsin Fund has received a ruling from the Wisconsin Department
of Revenue dated July 7, 1993 to the effect that dividends paid by the Wisconsin
Fund that are attributable to (a) interest earned on certain higher education
bonds issued by the State of Wisconsin, certain bonds issued by the Wisconsin
Housing and Economic Development authority, Wisconsin Housing Finance Authority
bonds, and public housing authority bonds and redevelopment authority bonds
issued by Wisconsin municipalities, the interest on which is exempt from
taxation by Wisconsin statute, and (b) interest earned on obligations of the U.
S. government or its territories and possessions will not be included in the
income of the Fund shareholders subject to the Wisconsin personal income tax.
Capital gain dividends qualifying as long-term capital gains for federal tax
purposes will be treated as long-term capital gains for Wisconsin income tax
purposes.
The foregoing discussion relates to federal and state taxation as of
the date of the Prospectus. See "Taxes" in the Statement of Additional
Information. Distributions from the Funds, including exempt-interest dividends,
may be subject to tax in other states. This discussion is not intended as a
substitute for careful tax planning. You are urged to consult your tax adviser
with specific reference to your own tax situation.
INVESTMENT PERFORMANCE
Advertisements and other sales literature for the Funds may refer to
"yield," "taxable equivalent yield," "average annual total return" and
"cumulative total return" and may compare such performance quotations with
published indices and comparable quotations of other funds. Performance
quotations are computed separately for Class A, Class B and Class C shares of
the Funds. When a Fund advertises any performance information, it also will
advertise its average annual total return as required by the rules of the
Securities and Exchange Commission and will include performance data for Class
A, Class B and Class C shares. All such figures are based on historical earnings
and performance and are not intended to be indicative of future performance.
Additionally, performance information may not provide a basis for comparison
with other investments or other mutual funds using a different method of
calculating performance. The investment return on and principal value of an
investment in any of the Funds will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The advertised yield of each Fund will be based on a 30-day period
stated in the advertisement. Yield is calculated by dividing the net investment
income per share deemed earned during the period by the maximum offering price
per share on the last day of the period. The result is then annualized using a
formula that provides for semiannual compounding of income.
Taxable equivalent yield is calculated by applying the stated income
tax rate only to that portion of the yield that is exempt from taxation. The tax
exempt portion of the yield is divided by the number 1 minus the stated income
tax rate (e.g., 1-28% = 72%). The result is then added to that portion of the
yield, if any, that is not tax exempt.
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<PAGE>
Average annual total return is the average annual compounded rate of
return on a hypothetical $1,000 investment made at the beginning of the
advertised period. In calculating average annual total return, the maximum sales
charge is deducted from the hypothetical investment and all dividends and
distributions are assumed to be reinvested.
Cumulative total return is calculated by subtracting a hypothetical
$1,000 payment to the Fund from the ending redeemable value of such payment (at
the end of the relevant advertised period), dividing such difference by $1,000
and multiplying the quotient by 100. In calculating ending redeemable value, all
income and capital gain distributions are assumed to be reinvested in additional
Fund shares and the maximum sales load is deducted.
Each Fund may also present total return information that does not
reflect the deduction of the maximum sales charges. In this case, such total
return information would be more favorable than total return information that
includes the deductions of the maximum sales charges.
In addition to advertising total return and yield, comparative
performance information may be used from time to time in advertising the Funds'
shares, including data from Lipper Analytical Services, Inc. and Morningstar.
For Fund performance information and daily net asset value quotations,
investors may call 800-523-4640. For additional information regarding the
calculation of a Fund's yield, taxable equivalent yield, average annual total
return and cumulative total return, see "Calculation of Performance Data" in the
Statement of Additional Information.
GENERAL INFORMATION
Each Fund sends to its shareholders six-month unaudited and annual
audited financial statements.
The shares of the Funds constitute separate series of the parent
entities listed below. Certain of these parent entities are organized as
Minnesota corporations, and the shares of the series thereof are transferable
common stock, $.01 par value per share, of such corporations. Other parent
entities are organized as business trusts under the laws of the Commonwealth of
Massachusetts, and the shares of the series thereof represent transferable
common shares of beneficial interest. All shares of each corporation and of each
trust, are non assessable and fully transferable when issued and paid for in
accordance with the terms thereof and possess no cumulative voting, preemptive
or conversion rights. The Board of each corporation and trust is empowered to
issue other series of common stock or common shares of beneficial interest
without shareholder approval. Set forth below is a listing of the parent
entities and constituent series, form of organization and date of organization
of the parent.
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<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Parent Form of Organization Date Organized
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Voyageur Tax-Free Funds, Inc. Minnesota Corporation November 10, 1983
Tax-Free Minnesota
Tax-Free North Dakota
Voyageur Intermediate Tax-Free Funds, Inc. Minnesota Corporation January 21, 1985
Tax-Free Arizona Intermediate
Tax-Free California Intermediate
Tax-Free Colorado Intermediate
Tax-Free Minnesota Intermediate
Voyageur Insured Funds, Inc. Minnesota Corporation January 6, 1987
Tax-Free Arizona Insured
Tax-Free Colorado Insured
Minnesota Insured
Voyageur Investment Trust Massachusetts Business Trust September 16, 1991
Tax-Free California Insured
Tax-Free Florida Insured
Tax-Free Florida
Tax-Free Kansas
Tax-Free Missouri Insured
Tax-Free New Mexico
Tax-Free Oregon Insured
Tax-Free Utah
Tax-Free Washington Insured
Voyageur Investment Trust II Massachusetts Business Trust November 16, 1993
Tax-Free Florida Intermediate
Voyageur Mutual Funds, Inc. Minnesota Corporation April 14, 1993
Tax-Free Arizona
Tax-Free California
Tax-Free Idaho
Tax-Free Iowa
Tax-Free Wisconsin
Tax-Free New York
Voyageur Mutual Funds II, Inc. Minnesota Corporation January 13, 1987
Tax-Free Colorado
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Beginning June 9, 1997, the names of the Funds have changed as follows:
<S> <C>
Previous Name New Name
Voyageur Arizona Limited Term Tax Free Fund Delaware-Voyageur Tax-Free Arizona Intermediate Fund
Voyageur Arizona Insured Tax Free Fund Delaware-Voyageur Tax-Free Arizona Insured Fund
Voyageur Arizona Tax Free Fund Delaware-Voyageur Tax-Free Arizona Fund
Voyageur California Limited Term Tax Free Fund Delaware-Voyageur Tax-Free California Intermediate Fund
Voyageur California Insured Tax Free Fund Delaware-Voyageur Tax-Free California Insured Fund
Voyageur California Tax Free Fund Delaware-Voyageur Tax-Free California Fund
Voyageur Colorado Limited Term Tax Free Fund Delaware-Voyageur Tax-Free Colorado Intermediate Fund
Voyageur Colorado Insured Tax Free Fund Delaware-Voyageur Tax-Free Colorado Insured Fund
Voyageur Colorado Tax Free Fund Delaware-Voyageur Tax-Free Colorado Fund
Voyageur Florida Limited Term Tax Free Fund Delaware-Voyageur Tax-Free Florida Intermediate Fund
Voyageur Florida Insured Tax Free Fund Delaware-Voyageur Tax-Free Florida Insured Fund
Voyageur Florida Tax Free Fund Delaware-Voyageur Tax-Free Florida Fund
Voyageur Idaho Tax Free Fund Delaware-Voyageur Tax-Free Idaho Fund
Voyageur Iowa Tax Free Fund Delaware-Voyageur Tax-Free Iowa Fund
Voyageur Kansas Tax Free Fund Delaware-Voyageur Tax-Free Kansas Fund
Voyageur Minnesota Limited Term Tax Free Fund Delaware-Voyageur Tax-Free Minnesota Intermediate Fund
Voyageur Minnesota Insured Fund Delaware-Voyageur Minnesota Insured Fund
Voyageur Minnesota Tax Free Fund Delaware-Voyageur Tax-Free Minnesota Fund
Voyageur Missouri Insured Tax Free Fund Delaware-Voyageur Tax-Free Missouri Insured Fund
Voyageur New Mexico Tax Free Fund Delaware-Voyageur Tax-Free New Mexico Fund
Voyageur New York Tax Free Fund Delaware-Voyageur Tax-Free New York Fund
Voyageur North Dakota Tax Free Fund Delaware-Voyageur Tax-Free North Dakota Fund
Voyageur Oregon Insured Tax Free Fund Delaware-Voyageur Tax-Free Oregon Insured Fund
Voyageur Utah Tax Free Fund Delaware-Voyageur Tax-Free Utah Fund
Voyageur Washington Insured Tax Free Fund Delaware-Voyageur Tax-Free Washington Insured Fund
Voyageur Wisconsin Tax Free Fund Delaware-Voyageur Tax-Free Wisconsin Fund
</TABLE>
The Funds currently offer their shares in multiple classes, each with
different sales arrangements and bearing different expenses. Class A, Class B
and Class C shares each represent interests in the assets of the respective
Funds and have identical voting, dividend, liquidation and other rights on the
same terms and conditions except that expenses related to the distribution of
each class are borne solely by such class and each class of shares has exclusive
voting rights with respect to provisions of a Fund's Rule 12b-1 distribution
plan which pertain to a particular class and other matters for which separate
class voting is appropriate under applicable law.
Fund shares are freely transferable, subject to applicable securities
laws, are entitled to dividends as declared by the Board, and, in liquidation of
a Fund, are entitled to receive the net assets, if any, of such Fund. The Funds
do not generally hold annual meetings of shareholders and will do so only when
required by law.
Each share of a series has one vote irrespective of the relative net
asset value of the shares. On some issues, such as the election of Board
members, all shares of a corporation or trust vote together as one series of
such corporation or trust. On an issue affecting only a particular series or
class, the shares of the affected series or class vote as a separate series or
class. An example of such an issue would be a fundamental investment restriction
pertaining to only one series.
The assets received by a corporation or trust for the issue or sale of
shares of each series or class thereof, and all income, earnings, profits and
proceeds thereof, subject only to the rights of creditors, are allocated to such
series, and in the case of a class, allocated to such class, and constitute the
underlying assets of such series or class. The underlying assets of each series
or class thereof, are required to be segregated on the books of account,
and are to be charged with the expenses in respect to such series or class
thereof, and with a share of the general expenses of such corporation or trust.
Any general expenses of a corporation or trust not readily identifiable as
belonging to a particular series or class shall be
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<PAGE>
allocated among the series or classes thereof, based upon the relative net
assets of the series or class at the time such expenses were accrued. Each
corporation's Articles of Incorporation and trust's Declaration of Trust limit
the liability of the respective Board members to the fullest extent permitted by
law. For a further discussion of the above matters, see "Additional Information"
in the Statement of Additional Information.
In the opinion of the staff of the Securities and Exchange Commission,
the use of this combined Prospectus may possibly subject all of the Funds to a
certain amount of liability for any losses arising out of any statement or
omission in this Prospectus regarding a particular Fund. In the opinion of the
Funds' executive officers, however, the risk of such liability is not materially
increased by the use of a combined Prospectus.
No dealer, sales representative or other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus (and/or in the Statement of Additional Information referred
to on the cover page of this Prospectus), and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Funds or Delaware Distributors L.P. This Prospectus does not constitute
an offer or solicitation by anyone in the state in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
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