<PAGE>
For Tax-Exempt Income
DELAWARE-voyageur
Minnesota Municipal
Bond Funds
(various photos demonstrating service and
guidance, professional management and goals)
service and guidance
professional management
1997
Annual
Report
goals
Tax-Free Minnesota Fund
Minnesota Insured Fund
Tax-Free Minnesota Intermediate Fund
Minnesota High Yield Municipal Bond Fund
{logo here)
<PAGE>
A TRADITION OF SOUND INVESTING
commitment
A Commitment
To Our Investors
Delaware Investments has a tradition of money management that dates back to
1929. We have a long and distinguished history of helping individuals and
institutions - including some of America's largest pension funds - reach their
financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, the Delaware organization established its first mutual fund in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also
manage investments for variable annuity products, unit investment trusts and
closed-end funds, and offer retirement plan services for individuals and
businesses.
Delaware manages more than $40 billion in mutual fund assets and
institutional advisory accounts for more than half-a-million investors. We're
part of a global financial service and investment management business owned by
Lincoln National Corporation, whose subsidiaries manage more than $120 billion
in assets.
Minnesota Municipal Bond
Funds' Objectives
Tax-Free Minnesota Fund
To provide a high level of current income exempt from federal and Minnesota
state income taxes consistent with preservation of capital.
Minnesota Insured Fund
To provide a high level of current income exempt from federal and Minnesota
state income taxes consistent with preservation of capital.+
Tax-Free Minnesota Intermediate Fund
To provide investors with preservation of capital and, secondarily, current
income exempt from federal income tax by maintaining a weighted average
portfolio maturity of 10 years or less.
Minnesota High Yield Municipal Bond Fund
To provide a high level of current income exempt from federal and Minnesota
state income taxes primarily through investment in a portfolio of medium and
lower grade Minnesota municipal obligations.+
+ These Funds may invest without limitation in securities whose interest is
subject to the federal alternative minimum tax.
(photo of keyboard)
(photo of illustration from Tax-Exempt Income brochures)
<PAGE>
January 16, 1998
for tax-exempt
income
1
Dear Shareholder:
Delaware-Voyageur's Minnesota municipal bond funds provided strong results
during fiscal 1997, a year when the municipal bond market benefited from a
healthy U.S. economy and the lowest inflation in more than a decade.
We are pleased to report that three of the four funds discussed in
this report outperformed their respective unmanaged benchmarks for the 12
months ended December 31, 1997. Three also outpaced the average of their
peers, as shown below.
Since joining the Delaware family in April, Elizabeth H. Howell, the
Funds' portfolio manager under Voyageur, has continued to oversee all four
Minnesota portfolios from her office in Minneapolis. Together with three
closed-end Minnesota funds, Ms. Howell manages more than $1 billion in
Minnesota municipal bonds, some 11% of total mutual fund assets invested
in the state's bonds, according to Lipper Analytical Services. That's more
than any other fund manager in the country.
Fiscal 1997 was a banner year for Minnesota municipal bonds. Among the
favorable developments during the period were:
* Passage of the Taxpayer Relief Act in July. This lifted the specter of
proposed federal tax legislation that could have made municipal bonds a less
attractive investment option.
* Rising tax revenues. Thanks to strong job growth and corporate profits,
Minnesota posted a budget surplus last year.
* Strong credit quality. In 1997, Moody's Investors Services raised its credit
rating on Minnesota state
Fiscal 1997 was
a banner year
for Minnesota
municipal bonds.
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------------------
12 Months Ended 10 Years Ended
December 31, 1997 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax-Free Minnesota Fund A Class +9.68% +8.01%
- ------------------------------------------------------------------------------------------------------------------
Minnesota Insured Fund A Class +8.49% +8.01%
Lipper Minnesota Municipal Debt Fund Average +8.15% (45 funds) +7.84% (10 funds)
Lehman Brothers Municipal Bond Index +9.19% +8.22%
- ------------------------------------------------------------------------------------------------------------------
Tax-Free Minnesota Intermediate Fund A Class +6.69% +6.11%
Lipper Intermediate Municipal Debt Fund Average +6.85% (74 funds) +6.38% (2 funds)
Lehman Brothers Five-Year Municipal Bond Index +6.48% +7.13%
- ------------------------------------------------------------------------------------------------------------------
Minnesota High Yield Municipal Bond Fund A Class +11.26%
Lipper High Yield Municipal Debt Fund Average +10.11% (43 funds)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
All performance shown above is at net asset value with distributions
reinvested. Past performance does not guarantee future results. Performance
of other Fund classes varies due to different charges and expenses. The
unmanaged Lehman Brothers and Merrill Lynch Indexes are composed of bonds
with a variety of quality ratings from many states. See pages 9 to 12 for
performance information for all Classes.
<PAGE>
for tax-exempt
income
2
general obligation bonds to AAA, the highest rating available.
* A declining supply of bonds. The amount of new bonds issued in Minnesota
declined 11.6% in 1997 to $3.6 billion, according to The Bond Buyer, a
trade publication. This helped boost bond prices since investor demand
remained steady.
Your Funds participated in the robust income and total return
potential of Minnesota municipal securities in 1997. Our results reflect our
effort to go an extra mile to analyze bonds issued to finance various public
projects.
Fiscal 1997 was the first full year of operation for the Minnesota
High Yield Municipal Bond Fund. We were gratified to see that assets under
management tripled during the period and much of the growth came after the
Fund joined the Delaware family in May.
We view the municipal bond market's long-term prospects as
attractive, especially since the IRS and Minnesota still tax income at a
higher rate than capital gains. While the Taxpayer Relief Act offered many
potential benefits to more aggressive equity investors, it provided few
breaks to income-oriented investors. Municipal bonds remain one of the few ways
for investors to obtain monthly income potential without increasing their
federal income tax bill.
In our view, the income from municipal bonds and the tax-free
compounding of such income over time has the potential to help heavily taxed
investors reach their financial goals more quickly.
We thank you for being among the investors who have expressed
confidence in Delaware. On the pages that follow, Ms. Howell reviews each
Fund's performance in 1997 and outlines her approach for the coming year. We
hope you find our new annual report format informative.
Sincerely,
/s/ Wayne A. Stork
- --------------------
Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- ---------------------
Jeffrey J. Nick
President and Chief Executive Officer
discipline
Your Funds' Portfolio Manager
Prior to joining the Delaware-Voyageur family, Elizabeth H. Howell had
managed municipal bond funds at Voyageur Asset Management for six years. She
has more than 13 years experience that includes serving as a fixed-income
portfolio manager at Windsor Financial Group. She also held investment
management positions at Lommis Sayles & Co. and Eaton Vance Management. Ms.
Howell has an MBA from Babson College.
<PAGE>
for tax-exempt
income
3
Portfolio Manager's Review
Delaware-Voyageur's Minnesota municipal bond funds provided attractive total
returns in fiscal 1997 despite substantial interest rate volatility and
renewed efforts in Washington D.C. to cut income taxes. The state's bond
market benefited from an exceptionally strong regional economy, a reduced
supply of new securities and steady investor demand, especially in the
high-yield sector.
During the year's first half, the state's general obligation bond
rating was upgraded from AA+ to AAA, the highest available. This helped boost
bond prices. Between June and December, the state's bonds shared in the U.S.
bond market's rally. Yields on longer term securities fell by more than 40
basis points (0.40%) as shown on page 4.
In 1997, Minnesota's economy was ablaze. The unemployment rate in
Minneapolis dropped to 2.3%, the lowest of any major American city, according to
the U.S. Bureau of Labor Statistics.
Demographers estimate that about 18,000 people a year have been
moving to Minnesota in the 1990s for jobs. This has been a positive
development for state tax revenues, and marks a reversal of trends from the
1970s and 1980s. Minnesota expects to post a $1.3 billion budget surplus in
1998. This windfall has prompted the state to provide residents with a
one-time 20% property tax rebate.
Prosperity has allowed Minnesota's per capita income to grow to the
highest of all Plains states. This has also fueled demand for municipal
bonds, in part because the state's top income tax rate (8.5%) is actually
one-half percentage point higher than in 1991.
Many Minnesota employers are offering recruitment bonuses and
collectively have raised hourly wages by an average of 7.5% a year since
1995, according to the Minnesota Department of Employment Security.
Strong job growth can potentially reduce government social spending.
In 1997,
Minnesota's general
obligation bond
rating was upgraded
from AA+ to AAA.
growth
Climate of Growth:
Minnesota's Job Market
Unemployment Rates
1992 1993 1994 1995 1996 1997
Minnesota 5.2% 5.1% 4.0% 3.7% 4.0% 3.0%
U.S. 7.4% 6.8% 6.1% 5.6% 5.4% 4.7%
Source: Minnesota Department of Employment Security
<PAGE>
for tax-exempt
income
4
Minnesota officials estimate that 25% of the state's 50,000 welfare
recipients in 1997 had found jobs as of January 1998.
Strategic Positioning
During fiscal 1997, we positioned the Tax-Free Minnesota Fund and Minnesota
High Yield Municipal Bond Fund to benefit from what we anticipated would be a
decline in long-term interest rates. Both Funds' average effective duration
was kept slightly longer than that of its peers, enabling each to benefit
from the rise in bond prices.
Duration measures a bond's sensitivity to interest rate changes. It
approximates the percentage change in a bond or bond fund's price given a 1%
change in interest rates.
We took a somewhat more conservative approach to interest rate risk
with Tax-Free Minnesota Intermediate Fund and Minnesota Insured Fund. The
difference in yield between bonds maturing in two to ten years and bonds with
longer maturities narrowed in 1997.
This reduced the potential reward for extending duration, in our opinion.
Tax-Free Minnesota Fund: Revenue Bonds Offered
Good Opportunity
Tax-Free Minnesota Fund provided a +9.68% total return for the 12 months
ended December 31, 1997 (for Class A shares at net asset value with
distributions reinvested).
We outpaced both our benchmark and the average of our peers (as shown
on page 1) in part because we held a strong position in revenue bonds early
in the year. These bonds benefited from the state's credit rating upgrade to
AAA. Revenue bonds are primarily backed by fees such as rents, highway taxes
or water/sewerage usage.
In managing the Fund, we sought to achieve good structure - a prudent
combination of average coupon, call date, and maturity - that represents the
portfolio's mathematical underpinnings. Our modestly longer-than-average
duration helped us
strategic
positioning
As Bond Prices Have Risen,
Minnesota Bond Yields Have Declined
December 31, 1996 vs. December 31, 1997
Minnesota General Obligation Yields 12/31/96
Minnesota General Obligation Yields 12/31/97
Minnesota General Minnesota General
Obligation Yields Obligation Yields
12/31/96 12/31/97
3 months 3.21% 3.17%
6 months 3.41% 3.35%
1 year 3.58% 3.54%
2 years 3.88% 3.76%
M 3 years 4.08% 3.89%
A 4 years 4.23% 3.99%
T 5 years 4.33% 4.09%
U 7 years 4.53% 4.23%
R 10 years 4.83% 4.44%
I 15 years 5.25% 4.79%
T 20 years 5.41% 4.95%
Y 30 years 5.47% 5.01%
YIELD
Source: Bloomberg Business News
<PAGE>
for tax-exempt
income
5
benefit from rising bond prices when interest rates fell sharply during the
second half.
Generally, we focused on bonds that were selling at a discount to
their face value, with good call protection features and long maturities.
These securities did well during 1997's low inflation environment. As of
December 31, 1997, the largest portion of your Fund's net assets were
allocated to revenue bonds such as health care and housing bonds, sectors
that we believe offered superior total return potential.
Minnesota Insured Fund:
A Conservative Approach
Minnesota Insured Fund provided a total return of +8.49% for the 12 months
ended December 31, 1997 (for Class A shares at net asset value with
distributions reinvested).
The Fund's return was less than that of our current unmanaged
benchmark, the Lehman Brothers Insured Municipal Bond Index, an unmanaged
composite of insured securities from many states. The Fund's duration, or
sensitivity to interest rate changes, was similar to that of the index.
Still, we offered a very favorable risk profile relative to the
return we generated. Our results also outpaced the average return of other
mutual funds investing in Minnesota securities as shown on page 1. The
Insured Fund invests primarily in bonds that are rated Aaa by Moody's
Investors Services or AAA by Standard & Poor's at the time of investment.
During 1997, the prices of uninsured and lower quality Minnesota
bonds tended to benefit more from a favorable inflation environment and
strong state economic growth than insured bonds. Hence, the Insured Fund's
return was lower than either Tax-Free Minnesota or Minnesota High Yield
Municipal Bond Fund.
For much of 1997, we felt the additional potential income obtainable
by extending duration was not worth the additional interest rate risk. With
bond
(Photo of Keyboard)
insured
Tax-Free Minnesota Fund
Portfolio Highlights and Asset Mix
December 31, 1997
Power Authority 17.4%
Higher Education 5.0%
Industrial Development 9.3%
General Obligation 12.8%
Health Care 21.8%
Housing 18.9%
Other Revenue Bonds 4.7%
Pre-Refunded Bonds 10.1%
Average Effective Maturity 8.9 years
Average Effective Duration 7.3 years
Average Quality AA
30-Day Current SEC Yield* 4.39%
*For Class A shares based on Securities and Exchange Commission guidelines as
of 12/31/97. The 30-day SEC yield for B and C classes was 3.81%.
None of the income generated by Tax-Free Minnesota Fund during fiscal 1997
was subject to the federal alternative minimum tax.
<PAGE>
for tax-exempt
income
6
prices at their highest levels since the late 1970s, we have continued to
position the Fund conservatively for 1998.
Tax-Free Minnesota Intermediate Fund:
Balancing Risk and Return
For the 12 months ended December 31, 1997, Tax-Free Minnesota Intermediate
Fund provided a +6.69% return (for Class A shares with distributions
reinvested at net asset value). This outpaced the return of the Lehman
Brothers Five-Year Municipal Bond Index, an unmanaged benchmark of the
intermediate-term bonds as shown on page 1.
The Fund's results were slightly less than the average of our peers
because its duration (sensitivity to interest rates) was somewhat lower than
comparable mutual funds. While this positioning served us well during the
first half of the year - a period of interest rate volatility - it became a
weakness when the bond market rallied during the latter months of 1997.
We actively manage the Fund to take much less interest rate risk than
Tax-Free Minnesota and Minnesota Insured Funds.
As of year-end, the Fund had nearly one-third of its holdings in
pre-refunded bonds, or bonds escrowed in U.S. government securities. These
bonds are of the highest credit quality and rated AAA. Pre-refunded bonds are
also among the most liquid of all municipal bonds. They tend to have
above-average coupon rates and fluctuate less in price during periods of
interest rate volatility. In our opinion, the defensive nature of these
securities helps stabilize your Fund's share price and generally produces a
stream of income that is about 90% of what is available from the longest term
bonds.
We have increased our weighting in industrial development bonds and
slightly reduced our holdings of pre-refunded bonds. We believe the robust
health of Minnesota's economy will enable these securities to do well in the
year ahead.
risk/return
Minnesota Insured Fund
Portfolio Highlights and Asset Mix
December 31, 1997
Power Authority 7.7%
General Obligation 19.9%
Health Care 20.1%
Housing 20.0%
Other Revenue Bonds 1.8%
Pre-Refunded Bonds 30.5%
Approximately 18.6% of the income generated by Minnesota Insured Fund during
fiscal 1997 was subject to the alternative minimum tax.
Average Effective Maturity 9.2 years
Average Effective Duration 6.9 years
Average Quality AAA
30-Day Current SEC Yield* 4.05%
*For Class A shares based on Securities and Exchange Commission guidelines.
Thirty-day SEC yields for B and C classes were, respectively, 3.47% and 3.46%.
<PAGE>
for tax-exempt
income
7
Minnesota High Yield
Municipal Bond Fund
Minnesota High Yield Municipal Bond Fund provided an exceptionally strong
total return of +11.26% for the 12 months ended December 31, 1997 (for Class
A shares at net asset value with distributions reinvested). This was well
above the average of your Fund's peers and significantly higher than its
unmanaged benchmark as shown on page 1.
The Fund's strong relative performance resulted from a positioning
that enabled the Fund to benefit from a sharp decline in interest rates.
During the period, the yield differential between high-yield bonds and rated,
investment grade bonds narrowed as prices of lower quality issues rose. That
is, investors earned less yield as they moved into lower rated securities.
The High Yield Fund primarily invests in medium- and low-grade bonds
but may also invest in higher grade and unrated bonds. As of December 31, a
majority of the Fund's net assets were invested in bonds rated BBB or higher
while the balance was invested in unrated securities, mostly issued by smaller,
rural communities.
Our team of municipal credit analysts seeks bonds that appear likely
to make timely payment of principal and interest. Bonds in the portfolio must
show ongoing credit strength or they are sold. We are pleased to report that
since the Fund's inception in June 1995, we haven't sold any bonds due to
faltering credit fundamentals.
We have increased our weighting in industrial development bonds and
reduced our commitment to the health care sector. Overall, we believe the
strength of Minnesota's economy will help the state's high yield bonds
perform well.
As of year's end, we had a strong weighting in the housing sector,
which includes financing for single family homes, apartments, senior citizen
complexes and low-income (Section 8) housing. This sector
high
yield
Tax-Free Minnesota Intermediate Fund
Portfolio Highlights and Asset Mix
December 31, 1997
Power Authority 5.9%
Higher Education 8.5%
General Obligation 2.5%
Health Care 16.2%
Housing 5.2%
Other Revenue Bonds 4.7%
Certificates of Participants 2.8%
Pre-Refunded Bonds 31.2%
Industrial Development 23.0%
None of the income generated by Tax-Free Minnesota Intermediate Fund during
fiscal 1997 was subject to the alternative minimum tax.
Average Effective Maturity 5.5 years
Average Effective Duration 4.4 years
Average Quality AA
30-Day Current SEC Yield* 3.77%
*For Class A shares based on Securities and Exchange Commission guidelines.
The 30-day SEC yield for B and C classes was 3.03%.
<PAGE>
for tax-exempt
income
8
offers bondholders above-average income and, in our view, modest credit
risks.
Outlook
In Minnesota and across the U.S., inflation appears to be benign despite a
strong economy both regionally and nationwide. One trend that may help temper
consumer prices in a state such as Minnesota is that energy costs have been
falling and appear likely to remain low amid a worldwide oil glut and
increased competition in the domestic utility industry.
We think the long-term outlook for Minnesota's economy and bond
market appears bright. The state's businesses added approximately 70,000 new
jobs in 1997 as the total payroll employment grew to nearly 2.6 million.
Nearly three out of every four adults has a job, one of the highest
percentages in the country, according to state labor officials.
Municipal bonds can be an attractive investment option for many
Minnesota residents in part because the state's income tax remains among the
highest in the country. For the 1997 tax year, a married Minnesota couple
filing jointly with an adjusted gross income of just $95,920 ($54,250 for
single taxpayers) is in the maximum state tax bracket of 8.5%.
Minnesota investors in the highest federal tax bracket face a
combined tax rate of 44.73%. Should interest rates remain stable or decline
in 1998 - and we believe they will - Minnesota municipal bond investments
could provide an attractive, tax-adjusted rate of return.
(Photo of family on beach)
Elizabeth H. Howell
Vice President/
Senior Portfolio Manager
January 16, 1998
outlook
Minnesota High Yield Municipal Bond Fund
Portfolio Highlights and Asset Mix
December 31, 1997
Power Authority 4.1%
Higher Education 7.3%
Health Care 26.9%
Housing 33.9%
Other Revenue Bonds 18.9%
Industrial Development 8.9%
Approximately 18.5% of the income generated by Minnesota High-Yield Municipal
Bond Fund during fiscal 1997 was subject to the alternative minimum tax.
Average Effective Maturity 9.6 years
Average Effective Duration 6.5 years
Average Quality A
30-Day Current SEC Yield* 6.00%
*For Class A shares based on Securities and Exchange Commission guidelines.
The 30-Day SEC yield for B and C classes was 5.47%.
<PAGE>
for tax-exempt
income
9
Performance Summary
Tax-Free Minnesota Fund's Performance
Growth of a $10,000 Investment
December 31, 1987 to December 31, 1997
Lipper Minnesota
Lehman Brothers Municipal Debt Tax-Free
Municipal Fund Average Minnesota
Bond Index (10 funds) Fund A Class
Dec. 31 '87 $10,000 $10,000 $ 9,629
Dec. 31 '88 $11,015 $11,053 $10,621
Dec. 31 '89 $12,203 $12,100 $11,588
Dec. 31 '90 $13,094 $12,889 $12,403
Dec. 31 '91 $14,684 $14,213 $13,771
Dec. 31 '92 $15,979 $15,385 $14,868
Dec. 31 '93 $17,942 $17,228 $16,747
Dec. 31 '94 $17,014 $16,182 $15,619
Dec. 31 '95 $19,984 $18,677 $18,350
Dec. 31 '96 $20,870 $19,255 $18,977
Dec. 31 '97 $22,787 $20,830 $20,786
Chart assumes a $10,000 investment on December 31, 1987 a 3.75% front-end
sales charge and reinvestment of distributions. Performance of other Fund
classes differs because of different charges and expenses. Past performance
does not guarantee future results.
Tax-Free Minnesota Fund
Average Annual Returns Through December 31, 1997
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 2/29/84)
Excluding Sales Charge +9.08% +8.01% +6.95% +9.68%
Including Sales Charge +8.77% +7.60% +6.13% +5.59%
- --------------------------------------------------------------------------------
Class B (Est. 3/11/95)
Excluding Sales Charge +7.70% +8.95%
Including Sales Charge +6.76% +4.95%
- --------------------------------------------------------------------------------
Class C (Est. 5/4/94)
Excluding Sales Charge +6.79% +8.82%
Including Sales Charge +6.79% +7.82%
All performance includes reinvestment of distributions and applicable sales
charges as described below. Return and share value will fluctuate so that shares
when redeemed may be worth more or less than the original cost. Past performance
does not guarantee future results. Performance for Class B and C shares
excluding sales charge assumes either contingent sales charges did not apply or
the investment was not redeemed. Returns reflect a voluntary expense limitation
in effect at the time. Returns would have been lower without the limitation.
Class A shares of each Fund have a 3.75% maximum front-end sales charge except
Tax-Free Minnesota Intermediate Fund, which has a 2.75% maximum front-end
sales charge. All Class A shares have a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred sales
charge of up to 4% if redeemed before the end of the sixth year for each Fund
except Tax-Free Minnesota Intermediate Fund, which is subject to a deferred
sales charge of 2% if redeemed before the end of the third year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
<PAGE>
for tax-exempt
income
10
Tax-Free Minnesota Insured Fund's Performance
Growth of a $10,000 Investment
December 31, 1987 to December 31 1997
<TABLE>
<CAPTION>
Minnesota Insured Fund A Class Lehman Brothers Municipal Bond Index
<S> <C> <C>
Dec. 31 '87 $ 9,623 $10,000
Dec. 31 '88 $10,652 $11,015
Dec. 31 '89 $11,607 $12,203
Dec. 31 '90 $12,379 $13,094
Dec. 31 '91 $13,812 $14,584
Dec. 31 '92 $15,229 $15,979
Dec. 31 '93 $17,324 $17,942
Dec. 31 '94 $15,968 $17,014
Dec. 31 '95 $18,768 $19,984
Dec. 31 '96 $19,470 $20,870
Dec. 31 '97 $21,099 $22,787
</TABLE>
Chart assumes a $10,000 investment on December 31, 1987 a 3.75% front-end sales
charge and reinvestment of distributions. Performance of other Fund classes
differs because of different charges and expenses. Past performance does not
guarantee future results.
MINNESOTA INSURED FUND -
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
DECEMBER 31, 1990 TO DECEMBER 31, 1997
Lehman Brothers Insured Municipal Bond Index $19,067
Minnesota Insured Fund A Class $16,399
Minnesota Insured Fund began operating before the inception of the Lehman
Brothers Insured Municipal Bond Index, an unmanaged benchmark that we believe
closely reflects the Fund's investment strategy. We have included this bar
chart to compare the Minnesota Insured Fund's performance with that of the
index since the index began operating on December 31, 1990. Like the chart
above, it assumes a $10,000 investment, a 3.75% front-end sales charge and
reinvestment of distributions. Performance of other Fund classes for the time
period shown differs because of different charges and expenses.
Minnesota Insured Fund
Average Annual Return Through December 31, 1997
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 5/1/87)
Excluding Sales Charge +7.64% +8.01% +6.76% +8.49%
Including Sales Charge +7.25% +7.60% +5.94% +4.45%
- --------------------------------------------------------------------------------
Class B (Est. 3/7/95)
Excluding Sales Charge +7.20% +7.77%
Including Sales Charge +6.26% +3.77%
- --------------------------------------------------------------------------------
Class C (Est. 5/4/94)
Excluding Sales Charge +6.34% +7.66%
Including Sales Charge +6.34% +6.66%
- --------------------------------------------------------------------------------
Please turn to page 9 for important additional information. All performance
includes reinvestment of distributions. Past performance is not a guarantee of
future results.
<PAGE>
for tax-exempt
income
11
Tax-Free Minnesota Intermediate Fund's Performance
Growth of a $10,000 Investment
December 31, 1987 to December 31, 1997
Tax-Free Minnesota Merrill Lynch
Intermediate Three-To-Seven Year
Fund A Class Municipal Bond Index
Dec. '87 $ 9,723 $10,000
Dec. '88 $10,277 $10,639
Dec. '89 $10,937 $11,604
Dec. '90 $11,660 $12,496
Dec. '91 $12,743 $13,922
Dec. '92 $13,585 $14,983
Dec. '93 $14,650 $16,292
Dec. '94 $14,370 $16,084
Dec. '95 $15,951 $17,956
Dec. '96 $16,503 $18,717
Dec. '97 $17,585 $19,911
1 - Tax-Free Minnesota Intermediate Fund
2 - Lehman Brothers Five Year Municipal Bond Index
Chart assumes a $10,000 investment on December 31, 1987 a 2.75% front-end sales
charge and reinvestment of distributions. Performance of other Fund classes
differs because of different charges and expenses. Past performance does not
guarantee future results.
Tax-Free Minnesota Intermediate Fund
Average Annual Return Through December 31, 1997
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 10/27/85)
Excluding Sales Charge +6.23% +6.11% +5.33% +6.69%
Including Sales Charge +5.99% +5.81% +4.74% +3.76%
- --------------------------------------------------------------------------------
Class B (Est. 8/15/95)
Excluding Sales Charge +4.98% +5.84%
Including Sales Charge +4.58% +3.84%
- --------------------------------------------------------------------------------
Class C (Est. 4/30/94)
Excluding Sales Charge +5.03% +5.84%
Including Sales Charge +5.03% +4.84%
- --------------------------------------------------------------------------------
Please turn to page 9 for important additional information. All performance
includes reinvestment of distributions. Past performance is not a guarantee of
future results.
<PAGE>
for tax-exempt
income
12
Minnesota High Yield Municipal Bond Fund's Performance
Growth of a $10,000 Investment
June 4, 1996 to December 31, 1997
Lipper High Yield Minnesota
Lehman Brothers Municipal Debt High Yield
Municipal Fund Average Municipal Bond
Bond Index (10 funds) Fund A Class
June 3 '96 $10,000 $10,000 $ 9,625
July 31 '96 $10,090 $10,080 $ 9,724
Aug. 31 '96 $10,088 $10,101 $ 9,697
Sept. 30 '96 $10,229 $10,232 $ 9,836
Oct. 31 '96 $10,345 $10,348 $ 9,976
Nov. 30 '96 $10,534 $10,494 $10,087
Dec. 31 '96 $10,490 $10,500 $10,110
Jan. 31 '97 $10,510 $10,516 $10,113
Feb. 28 '97 $10,607 $10,607 $10,225
Mar. 31 '97 $10,466 $10,534 $10,168
Apr. 30 '97 $10,554 $10,609 $10,251
May 31 '97 $10,712 $10,728 $10,366
June 30 '97 $10,826 $10,859 $10,498
July 31 '97 $11,126 $11,136 $10,745
Aug. 31 '97 $11,021 $11,083 $10,718
Sept. 30 '97 $11,152 $11,216 $10,855
Oct. 31 '97 $11,223 $11,307 $10,948
Nov. 30 '97 $11,289 $11,372 $11,043
Dec. 31 '97 $11,454 $11,556 $11,232
Chart assumes a $10,000 investment on June 4, 1996 a 3.75% front-end sales
charge and reinvestment of distributions. High yield securities involve
greater risks than bonds with investment grade credit ratings. Performance of
other Fund classes differs because of different charges and expenses. Past
performance does not guarantee future results.
Minnesota High Yield Municipal Bond Fund
Average Annual Return Through December 31, 1997
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 6/4/96)
Excluding Sales Charge +10.63% +11.26%
Including Sales Charge +7.98% +7.05%
- --------------------------------------------------------------------------------
Class B (Est. 6/12/96)
Excluding Sales Charge +11.51% +10.41%
Including Sales Charge +9.07% +6.41%
- --------------------------------------------------------------------------------
Class C (Est. 6/7/96)
Excluding Sales Charge +9.90% +10.41%
Including Sales Charge +9.90% +9.41%
- --------------------------------------------------------------------------------
Please turn to page 9 for important additional information. All performance
includes reinvestment of distributions. Past performance is not a guarantee of
future results.
<PAGE>
for tax-exempt
income
13
Financial Statements
Delaware-Voyageur
Tax-Free Minnesota Fund
Statement of Net Assets
December 31, 1997
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds - 100.26%
General Obligation Bonds - 12.80%
Faribault Independent School District #656
(MN School District Credit Enhanced)
6.10% 6/1/10 ...................................... $1,000,000 $1,076,040
Hennepin County 5.75% 10/1/10 ....................... 7,990,000 8,501,839
Hutchinson Independent School District Series A
(MN School District Enhanced)
5.85% 2/1/18 ...................................... 1,700,000 1,815,957
Kenyon Wanamingo Independent School
District 6.00% 2/1/18 (MBIA)........................ 2,350,000 2,512,902
Lakeville Independent School District #194,
Inverse Floater 6.47% 2/1/15 (MBIA) ................ 4,250,000 4,317,320
Mahtomedi Independent School District #832
Series B Zero Coupon 2/1/14 (MBIA) ................. 1,540,000 694,232
Milaca Independent School District #912
5.50% 2/1/20 (FSA) ................................ 1,015,000 1,040,172
Minneapolis Convention Center Facilities, Inverse
Floater 7.07% 4/1/14 .............................. 850,000 909,823
Minneapolis Sports Arena Project, Inverse Floater
6.42% 10/1/20 ..................................... 4,220,000 4,244,687
Minneapolis Sports Arena Project, Inverse Floater
6.37% 4/1/14 ...................................... 580,000 608,994
Minneapolis Unlimited Tax Series 1992
6.30% 10/1/08 ..................................... 1,750,000 1,904,053
Minnetonka Independent School District #276
5.75% 2/1/22 (FSA) ................................ 4,550,000 4,806,165
North St. Paul, Maplewood Independent School
District #622, Inverse Floater 6.42% 2/1/20 ........ 2,250,000 2,258,528
Pine Island Independent School District #255
6.625% 6/1/12 (FSA) ............................... 240,000 254,822
Pine Island Independent School District #255
6.625% 6/1/13 (FSA) ............................... 310,000 328,643
Pine Island Independent School District #255
6.625% 6/1/14 (FSA) ............................... 330,000 349,315
Pine Island Independent School District #255
6.625% 6/1/15 (FSA) ............................... 355,000 375,437
Pine Island Independent School District #255
6.625% 6/1/16 (FSA) ............................... 380,000 401,022
Plainview Independent School District #810
6.70% 2/1/06 ...................................... 385,000 425,564
Plainview Independent School District #810
6.75% 2/1/08 ...................................... 445,000 490,337
Plainview Independent School District #811
6.75% 2/1/07 ...................................... 420,000 464,192
Rochester Tax Increment 6.50% 12/1/04................ 1,000,000 1,009,480
Rosemount - Apple Valley Independent School
District #196 Inverse Floater 7.92%
4/1/15 (FSA) ...................................... 4,000,000 4,483,560
Rosemount Independent School District #196
Series B Zero Coupon 4/1/11 (FSA) .................. 2,600,000 1,375,244
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
General Obligation Bonds (Continued)
Rosemount Independent School District #196
Zero Coupon 4/1/12 (FSA) ......... ............. $1,850,000 $ 926,110
Rosemount Independent School District #196
Zero Coupon 4/1/13 (FSA) .......................... 1,915,000 906,408
Rosemount Independent School District #196,
Inverse Floater 5.875% 4/1/15 ...................... 1,375,000 1,462,918
Sartell Independent School District #748 Zero
Coupon 2/1/13 (MBIA) .............................. 540,000 257,693
Sartell Independent School District #748 Zero
Coupon 2/1/15 (MBIA) .............................. 1,075,000 466,572
Sartell Independent School District #748 Zero
Coupon 2/1/16 (MBIA) .............................. 1,750,000 699,370
Sartell Independent School District #748 Zero
Coupon 2/1/17 (MBIA) .............................. 1,600,000 618,128
Spring Lake Park Independent School District #16,
Inverse Floater 6.67% 2/1/17 (MBIA) ................ 1,000,000 1,034,070
Stillwater Independent School District #834
5.75% 2/1/15 (MBIA) ............................... 2,000,000 2,111,460
Washington County 5.90% 2/1/10 ...................... 1,680,000 1,754,491
------------
54,885,548
------------
Higher Education Revenue
Bonds - 5.04%
Minnesota Higher Education Augsburg College
Series 4F1 6.25% 5/1/23 .......................... 1,000,000 1,075,410
Minnesota Higher Education Carleton College
5.75% 11/1/12 .................................... 4,000,000 4,288,960
Minnesota Higher Education Facilities Revenue -
Hamline University 6.00% 10/1/12 .................. 1,250,000 1,340,225
Minnesota Higher Education Facilities Revenue -
Hamline University 6.00% 10/1/16 .................. 1,790,000 1,906,153
Minnesota Higher Education St. Benedict's
College 6.20% 3/1/16 ............................. 1,000,000 1,050,090
Minnesota Higher Education St. Thomas University
Series R2 5.60% 9/1/14 ........................... 1,000,000 1,042,230
Minnesota State Higher Education Facilities
Authority Revenue for Macalester
College - Series 4-J 5.55% 3/1/17 .................. 700,000 731,087
University Of Minnesota Series A
5.50% 7/1/21 ..................................... 9,500,000 10,193,120
-----------
21,627,275
-----------
Hospital Revenue Bonds - 21.84%
Bemidji Hospital Facilities Revenue North County
Health 6.05% 9/1/16 .............................. 600,000 634,524
Bemidji Hospital Facilities Revenue North County
Health 6.05% 9/1/24 .............................. 1,825,000 1,918,239
Bemidji Hospital Facilities Revenue North County
Health 5.625% 9/1/21 ............................. 1,000,000 1,031,870
<PAGE>
14 for tax-exempt income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Hospital Revenue Bonds (Continued)
Brainerd Benedictine Health Care Systems -
St Joseph - E 6.00% 2/15/12 (Connie Lee) ....... $ 2,250,000 $ 2,403,045
Duluth Economic Development Authority St. Luke's
Hospital 6.40% 5/1/18 (Connie Lee) ............. 3,295,000 3,572,044
Duluth Benedictine/St. Mary's Health
6.00% 2/15/20 (Connie Lee) ..................... 9,450,000 9,962,663
Little Canada Health Care 1992 (Presbyterian
Homes Guaranteed) 7.25% 7/1/12 ................. 1,000,000 1,047,380
Minneapolis Fairview Hospital Series 91B
6.50% 1/1/11 (MBIA) ........................... 3,000,000 3,271,530
Minneapolis Health Care - American Baptist Homes
8.70% 11/1/09 ................................. 2,485,000 2,770,154
Minneapolis and St. Paul Minnesota HRA Health
Care System for Healthspan Series A
4.75% 11/15/18 (AMBAC) ........................ 11,030,000 10,415,298
Minneapolis/St. Paul HRA Children's Hospital
Health Care, Inverse Floater
7.17% 8/15/25 ................................. 6,500,000 6,848,790
Minneapolis/St. Paul HRA HealthOne
7.40% 8/15/11 (MBIA) .......................... 1,360,000 1,486,521
Robbinsdale North Memorial Medical Series B
5.50% 5/15/23 (AMBAC) ......................... 10,725,000 10,931,993
Rochester Health Care Facilities Revenue Reg
IRS - Ser H for Mayo Clinic - Inverse Floater
7.874% 11/15/15 ............................... 3,500,000 3,979,458
Spring Park Twin Birch Nursing Home
(Presbyterian Homes Guaranteed)
8.25% 8/1/11 .................................. 600,000 644,856
Springfield St. John's Lutheran Home Revenue
8.50% 11/1/19 ................................. 600,000 636,954
St. Cloud Hospital Facilities Revenue for
St. Cloud Hospital 5.30% 10/1/20 (AMBAC)........ 10,250,000 10,307,195
St. Louis Park Commercial Development Revenue
for - G & N, L P Project (Methodist Hospital
Guaranteed) 7.25% 6/1/13 ....................... 1,120,000 1,208,782
St. Louis Park Methodist Hospital
5.20% 7/1/23 (AMBAC) .......................... 10,220,000 10,226,132
St. Paul Housing and Redevelopment Hospital
for Healtheast Project Series A
6.625% 11/1/17 ................................ 8,900,000 9,530,921
St. Paul Minn Housing and Redevelopment
Authority Hospital for Healtheast Project
Series B 5.85% 11/1/17 ........................ 750,000 767,280
----------
93,595,629
----------
Housing Revenue Bonds - 18.94%
Austin Housing and Redevelopment Authority
Courtyard Residence Series 95A
7.25% 1/1/26 .................................. 500,000 553,165
Brooklyn Center Multifamily Housing Revenue
Bonds Family Housing Project -
(Section 8) 5.90% 1/1/20 ....................... 2,250,000 2,333,970
Burnsville Multifamily - Bridgeway Apartments
7.625% 2/1/24 (FHA) ........................... 3,370,000 3,518,583
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Housing Revenue Bonds (Continued)
Burnsville Multifamily - Coventry Court Apartments
Project 7.50% 9/1/17 (FHA) ..................... $1,000,000 $1,049,520
Carver County Housing and Redevelopment
Authority Multifamily Revenue Lake Grace
Apartments 6.00% 7/1/28 ....................... 1,435,000 1,496,719
Dakota County Housing and Redevelopment
Authority Single Family 8.10%
3/1/16 (GNMA) ................................. 140,000 144,571
Eagan Forest Ridge Apartments Project
7.50% 9/1/17 (FHA) ............................ 1,000,000 1,040,970
Eden Prairie Multifamily Revenue, Eden
Investments 7.40% 8/1/25 (FHA) ................. 400,000 424,916
Eden Prairie Multifamily Windslope Apartments -
(Section 8) Housing 7.10% 11/1/17 .............. 1,585,000 1,691,227
Eden Prairie Multifamily Homes, Tanager Creek
8.05% 6/20/31 (GNMA) .......................... 7,605,000 8,989,110
Edina Park Plaza Multifamily Housing
7.50% 12/1/09 (FHA) ........................... 1,530,000 1,618,893
Edina Park Plaza Multifamily Housing
7.70% 12/1/28 (FHA) ........................... 1,250,000 1,310,363
Hopkins Renaissance Multifamily Housing -
(Section 8) 6.375% 4/1/20 ...................... 1,000,000 1,061,300
Little Canada Minnesota Multifamily Housing
Revenue, Housing Alternative Development
Company Project Series A 6.10% 12/1/17 ......... 1,720,000 1,733,089
Little Canada Minnesota Multifamily Housing
Revenue, Housing Alternative Development
Company Project Series A 6.25% 12/1/27 ......... 2,900,000 2,922,098
Minneapolis Housing Facility Revenue 1993 for
Augustana Chapel View Project
7.00% 4/1/18 .................................. 1,000,000 1,032,740
Minneapolis Multifamily Mortgage for Seward
Towers Project 7.375% 12/20/30 (GNMA)........... 4,000,000 4,238,040
Minneapolis-Nicollet Towers Multifamily Housing,
(Section 8) 6.00% 12/1/19 ....................... 2,000,000 2,114,680
Minnesota Housing Finance Agency Housing
Development Series A -
(Section 8) 7.80% 8/1/18 ....................... 1,000,000 1,020,710
Minnesota Housing Finance Agency Multifamily
Housing 6.95% 2/1/14 .......................... 1,500,000 1,600,020
Minnesota Housing Finance Agency Multifamily
Housing Series 92A 6.95% 8/1/17 ................ 745,000 798,074
Minnesota Housing Finance Agency Rental Housing
Series B 6.25% 8/1/22 ......................... 985,000 995,372
Minnesota Housing Finance Agency Single Family
Mortgage 86 Series B 7.25% 7/1/16 .............. 900,000 908,595
Minnesota Housing Finance Agency Single Family
Mortgage Series B 7.30% 7/1/10 ................. 150,000 156,414
Minnesota Housing Finance Agency Single Family
Mortgage Series D 7.30% 7/1/09 ................. 325,000 339,372
Minnesota Housing Finance Agency Single Family
Mortgage Series C 7.65% 7/1/08 ................. 395,000 419,202
Minnesota Housing Finance Agency Single Family
Mortgage Series 91C 7.10% 7/1/11 ............... 1,010,000 1,079,761
<PAGE>
for tax-exempt income 15
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Housing Revenue Bonds (Continued)
Minnetonka Multifamily - Beacon Hill Project
(Presbyterian Homes Guaranteed)
7.70% 6/1/25 ................................... $ 2,000,000 $ 2,161,360
Oakdale Minnesota Housing - Oak Meadows
Project 7.00% 4/1/27 ........................... 6,800,000 7,161,012
Park Rapids Minnesota Multifamily Revenue
The Court Apartments Project - (Section 8)
6.30% 2/1/20 ................................... 3,290,000 3,346,588
Red Wing Housing and Redevelopment Agency
Jordan Tower - (Section 8) Series 1992
7.00% 1/1/19 ................................... 1,500,000 1,600,920
St. Cloud Germain Towers Housing Series 1993 -
(Section 8) 5.90% 9/1/20 ........................ 2,000,000 2,070,700
St. Cloud Housing and Redevelopment Agency
Northway A&B Project - (Section 8)
7.50% 12/1/18 .................................. 2,045,000 2,139,377
St. Louis Park Multifamily Housing Revenue
Community Housing 6.25% 12/1/28 (FHA)............ 3,855,000 4,112,668
St. Louis Park Multifamily Westwind Apartments
Housing 5.75% 1/1/29 (GNMA) ..................... 3,865,000 3,994,787
St. Louis Park Minn Residential Mortgage Revenue
for Single Family 7.25% 4/20/23 (GNMA) .......... 1,629,000 1,733,158
St. Paul Housing and Redevelopment Agency
(Executive Life G.I.C.) Como Lake Project
7.50% 3/1/26 (FHA) ............................. 1,000,000 935,000
St. Paul Housing and Redevelopment Single
Family Mortgage 6.90% 12/1/21 (FNMA) ............ 1,650,000 1,774,212
St. Paul Housing and Redevelopment Single
Family Mortgage 6.90% 12/1/11 (FNMA) ............ 61,000 65,212
Stillwater Multifamily Housing Stillwater Cottages
7.00% 11/1/27 .................................. 1,000,000 1,032,790
Wadena Housing and Redevelopment Agency
Humphrey Manor - (Section 8) 6.00% 2/1/19 ....... 2,130,000 2,217,841
Wells Housing and Redevelopment Agency
Broadway Apartment Project - (Section 8)
7.00% 1/1/19 ................................... 1,070,000 1,157,569
Willmar Housing and Redevelopment Agency
Highland Apartments - (Section 8)
5.85% 6/1/19 ................................... 1,050,000 1,086,824
-----------
81,181,492
-----------
Industrial Development Revenue
Bonds - 9.28%
Andover Minnesota Development Revenue -
Downtown Center Project - Series A
7.00% 12/1/12 .................................. 1,000,000 1,023,000
Anoka Resource Recovery Revenue for NSP
Series 85 7.15% 12/1/08 ......................... 1,000,000 1,071,060
Becker Pollution Control Revenue for NSP
Series 89 A 6.80% 4/1/07 ........................ 2,000,000 2,107,540
Cloquet Pollution Control Revenue for Potlatch
Corporation 5.90% 10/1/26 ....................... 15,000,000 15,816,150
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Industrial Development Revenue
Bonds (Continued)
Duluth Seaway Port Authority Revenue for
Cargill, Inc. 6.125% 11/1/14..................... $ 4,500,000 $ 4,939,200
East Grand Forks for American Crystal Sugar
Pollution Control Revenue 7.75% 4/1/18 .......... 1,230,000 1,361,266
Minnesota Public Facilities Authority Water
Pollution Control 6.25% 3/1/16 .................. 4,400,000 4,790,368
Richfield CDR for Richfield Shoppes
8.375% 10/1/13 ................................. 2,200,000 2,568,808
St. Cloud CDR for Northwest Center Association
7.50% 8/1/12 ................................... 4,433,971 4,728,121
St. Paul Minnesota Port Authority CDR Fort Rd
Medical 7.50% 9/1/02 (Asset Gty) ................ 1,300,000 1,355,562
-----------
39,761,075
-----------
Lease/Certificates of Participation - 0.68%
Beltrami County Housing & Redevelopment Authority
Revenue 6.20% 2/1/14 ........................... 1,010,000 1,066,005
West St. Paul Commercial Mortgage
K-Mart Lease 7.00% 11/1/07 ...................... 1,667,618 1,837,965
-----------
2,903,970
-----------
Pollution Control Revenue
Bonds - 1.31%
International Falls Minnesota Pollution Control
Reference - Boise Cascade Project
5.65% 12/1/22 .................................. 5,500,000 5,599,880
-----------
5,599,880
-----------
Power Authority Revenue
Bonds - 17.43%
Bass Brook PCR for Minnesota Power and Light
Revenue 6.00% 7/1/22 ........................... 17,490,000 18,261,484
Bass Brook PCR for Minnesota Power and Light
Revenue 6.00% 7/1/22 (MBIA) ..................... 1,750,000 1,856,278
Northern Minnesota Municipal Power Agency
5.25% 1/1/13 ................................... 4,000,000 4,022,400
Northern Minnesota Municipal Power Agency
Electric System Revenue
5.50% 1/1/18 (AMBAC) ........................... 9,200,000 9,430,184
Northern Minnesota Municipal Power Agency Series
89A 7.25% 1/1/16 ............................... 5,875,000 6,176,623
Northern Minnesota Municipal Power Agency Zero
Coupon 1/1/09 (AMBAC) .......................... 3,815,000 2,287,550
Puerto Rico Electric Power Authority
5.25% 7/1/21 ................................... 1,500,000 1,497,975
Puerto Rico Electric Power Authority
5.50% 7/1/25 ................................... 2,930,000 2,973,012
Southern Minnesota Municipal Power Agency
5.75% 1/1/18 (FGIC) ............................ 2,000,000 2,098,320
Southern Minnesota Municipal Power Agency
4.75% 1/1/16 (MBIA) ............................ 9,200,000 8,792,440
Southern Minnesota Municipal Power Agency
5.75% 1/1/18 (MBIA) ............................ 7,770,000 8,151,973
<PAGE>
16 for tax-exempt income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Power Authority Revenue
Bonds (Continued)
Southern Minnesota Municipal Power Agency
Series A 5.00% 1/1/12 (FGIC)..................... $ 3,880,000 $ 3,898,120
Southern Minnesota Municipal Power Agency
Supply System 5.50% 1/1/15 (AMBAC) .............. 1,560,000 1,602,728
Southern Minnesota Municipal Power Agency Zero
Coupon 1/1/19 (MBIA) ........................... 4,785,000 1,629,293
Southern Minnesota Municipal Power Agency Zero
Coupon 1/1/21 (MBIA) ........................... 5,000,000 1,526,050
Western Municipal Power Agency Revenue
6.125% 1/1/16 .................................. 525,000 527,216
-----------
74,731,646
-----------
*Pre-Refunded Bonds/ Escrowed
To Maturity - 10.11%
Albert Lea St. John's Lutheran Home Project
8.50% 11/1/19-99 (Pre-Refunded) ................. 1,000,000 1,106,030
Anoka County Capital Improvement
7.20% 2/1/08-99 (Pre-Refunded) .................. 1,000,000 1,031,110
Blaine IDR (Ball Corp.) 8.25% 12/1/00
(Escrowed to maturity) ......................... 300,000 334,161
Blaine IDR (Ball Corp.) 8.25% 12/1/99
(Escrowed to maturity) ......................... 250,000 269,265
Bloomington Tax Increment 9.75% 2/1/08
(Escrowed to maturity) ......................... 500,000 659,195
Brainerd Independent School District #181
7.00% 6/1/11-01 (Pre-Refunded) .................. 390,000 421,184
Edina Fairview Hospital Revenue
7.125% 7/1/19-99 (Pre-Refunded) ................. 2,500,000 2,648,275
Glencoe/Mcleod County Health Care
8.50% 12/1/15-00 (Pre-Refunded) ................. 500,000 560,325
Kimball Independent School District #739
7.60% 2/1/04-98 (Pre-Refunded) .................. 250,000 250,575
Kimball Independent School District #739
7.60% 2/1/05-98 (Pre-Refunded) .................. 275,000 275,633
Kimball Independent School District #739
7.70% 2/1/06-98 (Pre-Refunded) .................. 275,000 275,652
Kimball Independent School District #739
7.70% 2/1/07-98 (Pre-Refunded) .................. 300,000 300,711
Little Falls Independent School District #182
6.80% 2/1/08-99 (AMBAC) (Pre-Refunded) .......... 500,000 514,280
Maplewood Independent School District #622 7.10%
10% 2/1/25-05 (FSA) (Pre-Refunded) .............. 10,000,000 11,657,700
Minnesota Public Facilities Authority (Water
Pollution Control) Series 90A 7.10%
3/1/12-00 (Pre-Refunded) ........................ 1,990,000 2,153,299
Minnesota Public Facilities Authority Water
Pollution Control 6.95% 3/1/13-01
(Pre-Refunded) ................................. 5,220,000 5,755,468
Northfield College Facility Revenue - St. Olaf
College 7.875% 10/1/08-98
(Pre-Refunded) ................................. 1,255,000 1,292,587
Northfield College Facility Revenue - St. Olaf
College 8.00% 10/1/18-98 (Pre-Refunded) ......... 860,000 886,531
<PAGE>
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
*Pre-Refunded Bonds/ Escrowed
To Maturity (Continued)
Owatanna Public Utilities 6.75% 1/1/16-01
(Pre-Refunded) .................................. $ 1,000,000 $ 1,073,760
Rockford Independent School District #883
7.20% 12/15/13-98 (Pre-Refunded) ................ 750,000 770,948
Southern Minnesota Municipal Power Agency
Revenue 5.75% 1/1/18 (MBIA)
(Escrowed to maturity) ......................... 1,000,000 1,067,220
Southern Minnesota Municipal Power Agency
Supply System 5.50% 1/1/15 (AMBAC)
(Escrowed to maturity) ......................... 990,000 1,028,412
St. Cloud Independent School District #742
7.50% 2/1/10-98 (Pre-Refunded) .................. 1,000,000 1,002,370
St. Louis Park Methodist Hospital 7.25%
7/1/18-00 (AMBAC) (Pre-Refunded) ................ 775,000 848,083
St. Paul Civic Center Revenue Sales Tax
5.55% 11/1/23 (MBIA) (Escrowed to maturity) ..... 825,000 856,160
St. Paul Sewer Revenue Series 88A
8.00% 12/1/08-98 (Pre-Refunded) ................. 2,175,000 2,272,440
University Of Minnesota Series A
6.00% 2/1/11 (Escrowed to maturity) ............. 1,500,000 1,501,920
Wayzata Independent School District #284
7.05% 2/1/06-99 (Pre-Refunded) .................. 625,000 644,138
Wayzata Independent School District #284
7.10% 2/1/08-99 (Pre-Refunded)................... 1,000,000 1,031,140
Wayzata Independent School District #284
7.10% 2/1/09-99 (Pre-Refunded)................... 560,000 577,438
Western Minnesota Municipal Power Agency
Revenue 9.75% 1/1/16 (Escrowed to maturity)...... 185,000 284,027
-----------
43,350,037
-----------
Water and Sewer Revenue
Bonds - 1.15%
Puerto Rico Aqueduct & Sewer Authority
5.00% 7/1/19 ................................... 3,000,000 2,938,080
Puerto Rico Aqueduct & Sewer Authority
5.00% 7/1/15 ................................... 2,000,000 1,990,740
-----------
4,928,820
-----------
Other Revenue Bonds - 1.68%
Minneapolis Community Development Agency
Common Bond Fund 7.95% 12/1/11 .................. 855,000 966,843
Minneapolis Community Development Agency
Common Bond Fund 7.40% 12/1/21 .................. 795,000 855,849
Minneapolis Community Development Agency
Common Bond Fund 1991-4 Opportunity
Workshop Project 7.125% 12/1/05 ................. 510,000 558,251
Minneapolis Community Development Agency Tax
Increment Revenue Zero Coupon 9/1/09 ............ 5,750,000 3,353,918
Minneapolis Community Development Agency
Common Bond Fund 7.625% 6/1/06 .................. 1,430,000 1,464,978
-----------
7,199,839
-----------
Total Municipal Bonds (cost $395,681,075) ........ 429,765,211
-----------
<PAGE>
for tax-exempt income 17
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Total Market Value of Securities Owned - 100.26%
(cost $395,681,075) ......................................... $429,765,211
Liabilities Net of Receivables and Other Assets - (0.26%)...... (1,102,948)
------------
Net Assets Applicable to 33,208,912 Shares
($.01 Par Value) Outstanding - 100.00% ....................... $428,662,263
============
Net Asset Value - Tax Free Minnesota Fund A Class
($417,364,664 / 32,333,909 shares) .............................. $12.91
======
Net Asset Value - Tax Free Minnesota Fund B Class
($8,214,822 / 636,350 shares) ................................... $12.91
======
Net Asset Value - Tax Free Minnesota Fund C Class
($3,082,777 / 238,653 shares) ................................... $12.92
======
- -----------------
* For Pre-Refunded Bonds, the stated maturity is followed by the year
in which each bond is pre-refunded.
Summary of Abbreviations:
AMBAC - Insured by the Ambac Indemnity Corporation
Asset Gty - Insured by the Asset Guaranty Insurance Company
Connie Lee - Insured by College Construction Insurance Association
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Authority
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by the Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Components of Net Assets at December 31, 1997:
Common stock, $.01 par value, 10,000,000,000
shares authorized to the Fund with 1,000,000,000
shares allocated to Tax-Free Minnesota Fund A Class,
1,000,000,000 shares allocated to Tax-Free Minnesota
Fund B Class, and 1,000,000,000 shares allocated to
Tax-Free Minnesota Fund C Class.................. $393,810,316
Undistributed net investment income .............. 55,704
Accumulated net realized gain on investments...... 712,107
Net unrealized appreciation on investments ....... 34,084,136
------------
Total net assets.................................. $428,662,263
============
Net Asset Value and Offering Price for
Tax-Free Minnesota Fund A Class
Net asset value per share (A)..................... $12.91
Sales charge (3.75% of offering price or 3.87% of
amount invested per share) (B)................... 0.50
------
Offering price.................................... $13.41
======
- --------------
(A) Net asset value per share illustrated is the estimated amount which would be
paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000 or
more for Tax-Free Minnesota Fund Class A.
<PAGE>
Delaware-Voyageur
Minnesota Insured Fund
Statement Of Net Assets
December 31, 1997
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds - 99.48%
General Obligation - 19.86%
Anoka County, MN G.O. Capital Improvement -
Series C 5.90% 2/1/11 (FGIC) $ 8,045,000 $ 8,368,247
Becker Minnesota G.O. 6.25% 8/1/15
(MBIA)(AMT) .................................... 6,300,000 6,831,341
Becker Wastewater Treatment Facility Series A
5.95% 2/1/14 Insurance (MBIA) ................... 500,000 526,985
Buffalo Independent School District #887
6.10% 2/1/15 (FSA) ............................. 1,030,000 1,093,376
Dakota County 6.40% 2/1/08 (AMBAC) ............... 1,135,000 1,184,180
Dakota County 6.45% 2/1/09 (AMBAC) ............... 1,000,000 1,044,310
Dakota County 6.45% 2/1/10 (AMBAC) ............... 2,500,000 2,608,249
Eden Prairie Independent School District #272
5.85% 2/1/13 (FGIC) ............................ 2,500,000 2,594,949
Eden Prairie Independent School District #272
Inverse Floater 6.42% 2/1/14 (FGIC) ............. 1,125,000 1,168,301
Eden Prairie Independent School District #272,
5.65% 2/1/13 (MBIA) ............................ 3,200,000 3,298,143
Eden Prairie Independent School District #272,
Inverse Floater 6.42% 2/1/15 (MBIA) ............. 1,000,000 1,028,470
Elk River Independent School District #728
Series 92 B 6.00% 2/1/09 (AMBAC) ................ 3,950,000 4,210,225
Farmington Independent School District #192
6.80% 2/1/11 (MBIA) ............................ 850,000 918,323
Hennepin County 5.75% 10/1/10 (MBIA) ............. 1,800,000 1,913,688
Hopkins Independent School District #270
4.875% 2/1/14 (MBIA) ........................... 1,875,000 1,853,325
Lakeville Minnesota Independent School District
#194 Capital Appreciation
Series B Zero Coupon 2/1/15 ..................... 2,455,000 1,016,935
Lakeville Minnesota School District #194 Capital
Appreciation Series B Zero Coupon 2/1/17 ........ 2,490,000 918,611
North Branch Independent School District #138,
Inverse Floater 7.17% 2/1/11965,0001,054,398
Prior Lake Independent School District #719,
Inverse Floater 6.17% 2/1/14 (FGIC) ............. 1,000,000 1,035,460
Rosemount Independent School District #196
Series B Zero Coupon 4/1/10 (FSA) ............... 2,240,000 1,259,664
Rosemount Independent School District #196
Zero Coupon 4/1/09 (FSA) ........................ 1,860,000 1,108,467
South Washington County Independent School
District #883 6.125% 6/1/09 (FGIC)............... 1,430,000 1,513,112
South Washington County Independent School
District #883 6.125% 6/1/11 (FGIC)............... 2,720,000 2,850,859
Spring Lake Park Independent School District #16,
Inverse Floater 6.67% 2/1/14 (MBIA).............. 2,175,000 2,279,835
St. Cloud Independent School District #742
6.05% 2/1/09 (FGIC) ............................. 1,000,000 1,070,450
St. Francis Independent School District #15
5.90% 4/1/10 (FGIC) ............................. 1,845,000 1,948,302
Stillwater Independent School District #834
5.50% 2/1/10 (FGIC) ............................. 2,995,000 3,078,231
<PAGE>
18 for tax-exempt income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
General Obligation (Continued)
Western Lake Superior Series A 6.00%
10/1/08 (MBIA)(AMT) ............................ $ 400,000 $ 437,980
Western Lake Superior Series A 6.10%
10/1/09 (MBIA)(AMT) ............................ 425,000 465,197
Western Lake Superior Series A 6.20%
10/1/10 (MBIA)(AMT) ............................ 450,000 493,929
Western Lake Superior Series A 6.20%
10/1/11 (MBIA)(AMT) ............................ 475,000 519,432
-----------
59,692,974
-----------
Hospital Revenue Bonds - 20.13%
Bloomington Masonic Home Care Center
5.90% 7/1/09 (AMBAC) ........................... 1,250,000 1,335,563
Brainerd Benedictine Health Care Systems For
St Joseph's Hospital 6.00%
2/15/12 (Connie Lee) ........................... 1,500,000 1,602,030
Brainerd Benedictine Health Care Systems For
St Joseph's Hospital 6.00%
2/15/20 (Connie Lee) ........................... 2,000,000 2,124,420
Detroit Lakes Benedictine Health For St Mary's
Hospital 6.00% 2/15/12 (Connie Lee) ............. 1,630,000 1,740,873
Detroit Lakes Benedictine Health For St Mary's
Hospital 6.00% 2/15/19 (Connie Lee) ............. 1,000,000 1,062,210
Duluth EDA Benedictine For St Luke's Hospital
6.40% 5/1/18 (Connie Lee) ....................... 500,000 542,040
Duluth EDA Health Care - Duluth Clinic
6.30% 11/1/22 (AMBAC) .......................... 2,690,000 2,917,682
Duluth EDA Health Care Revenue For St Mary's
Hospital, Inverse Floater 8.22% 2/15/17 ......... 5,000,000 5,506,500
Duluth Economic Development Authority St. Luke's
Hospital 6.00% 2/15/20 (Connie Lee) ............. 1,300,000 1,370,525
Duluth EDA St. Luke's Hospital 6.40%
5/1/10 (Connie Lee) ............................ 3,335,000 3,638,752
Minneapolis Fairview Hospital Series 91B
6.50% 1/1/11 (MBIA) ............................ 3,000,000 3,271,530
Minneapolis Fairview Hospital Series 93A
5.25% 11/15/19 (MBIA) .......................... 2,750,000 2,767,380
Minneapolis/Saint Paul Minnesota HRA
Health Care System For Healthspan
Series A 4.75% 11/15/18 (AMBAC) ................. 4,000,000 3,777,080
Minneapolis/St. Paul HRA - Childrens Hospital
Inverse Floater 7.57% 8/15/16 (FSA) ............. 1,310,000 1,439,952
Minneapolis/St. Paul HRA Health Care System
for Healthspan Series 93A 5.00%
11/15/13 (FSA) ................................. 6,490,000 6,426,528
Minneapolis/St. Paul HRA HealthOne 7.40%
8/15/05 (MBIA) ................................. 600,000 657,696
Minneapolis/St. Paul HRA HealthOne 7.40%
8/15/11 (MBIA) ................................. 2,370,000 2,590,481
Minnesota Agricultural & Economic Development
Fairview Hospital - Series 1997 A
5.75% 11/15/26 (MBIA) .......................... 8,250,000 8,699,543
Robbinsdale North Memorial Medical 5.50%
5/15/23 (AMBAC) ................................ 5,400,000 5,504,220
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Hospital Revenue Bonds (Continued)
St. Louis Park Health Care For Methodist
Hospital, Inverse Floater 6.32% 7/1/23........... $ 2,500,000 $ 2,496,025
St. Paul Ramsey Medical 5.50%
5/15/13 (AMBAC) ................................ 1,000,000 1,034,130
-----------
60,505,160
-----------
Housing Revenue Bonds - 19.96%
Chaska Waters Edge Multifamily Revenue
7.30% 1/20/30 (GNMA) ........................... 3,257,000 3,670,737
Dakota County HRA Single Family Mortgage
Revenue 6.70% 10/1/17 (FNMA)5,465,0005,877,662
Dakota County HRA Single Family Mortgage
Revenue 5.85% 10/1/30 (GNMA/FNMA) ............... 7,000,000 7,245,840
Dakota, Washington and Stearns Counties HRA
Single Family Mortgage Revenue
7.85% 12/1/30 (MBIA) ........................... 160,000 168,811
Eagan Multifamily Revenue Woodridge Apartments
5.90% 8/1/20 (GNMA) ............................ 1,000,000 1,058,300
Eden Prairie Minnesota Multifamily Revenue
Preserve Place 5.60% 7/20/28 (GNMA) ............. 1,035,000 1,047,544
Hopkins Multifamily Housing - Auburn Apartments
8.05% 6/20/31 (GNMA) ........................... 3,790,000 4,371,462
Minneapolis and St. Paul Housing Finance Board
Single Family Mortgage - Project Phase XI
5.80% 11/1/30 (GNMA) ........................... 2,705,000 2,788,828
Minneapolis and St. Paul Housing Finance Board
Housing Project Phase V 8.875%
11/1/18 (GNMA) ................................. 70,000 72,472
Minneapolis and St. Paul Housing Finance Board
Single Family Mortgage Revenue 8.30%
8/1/21 (GNMA) .................................. 120,000 123,125
Minneapolis and St. Paul Housing Finance Board
Single Family Mortgage Revenue 8.125%
12/1/14 (GNMA) ................................. 150,000 156,902
Minneapolis and St. Paul Housing Finance Board
Housing Project Phase IX 7.25%
8/1/21 (GNMA) .................................. 1,240,000 1,330,532
Minneapolis and St. Paul Housing Finance Board
Housing Project Phase IX 7.30%
8/1/31 (GNMA) .................................. 830,000 886,432
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series B 7.25%
7/1/06 (MBIA) .................................. 140,000 141,680
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series A 7.95%
7/1/22 (MBIA) .................................. 305,000 321,998
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series 7.45%
7/1/22 (AMBAC) ................................. 1,395,000 1,478,812
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series 7.05%
7/1/22 (AMBAC) ................................. 505,000 536,593
Minnesota Housing Finance Agency Single Family
Housing Rental 5.95% 2/1/15 (AMBAC) ............. 2,480,000 2,614,862
<PAGE>
for tax-exempt income 19
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Housing Revenue Bonds (Continued)
Minnesota Housing Finance Agency Single Family
Housing Rental 5.95% 2/1/18 (MBIA)............... $ 7,130,000 $ 7,480,867
Minnesota Housing Finance Agency Single Family
Housing Rental Series A 5.875%
8/1/28 (AMT) ................................... 2,610,000 2,724,657
Minnesota State Housing Finance Agency Single
Family Mortgage Series D 5.80%
7/1/21 (AMT) ................................... 5,000,000 5,218,800
Minnetonka Multifamily Housing Cedar Hills
Project - Cedar Hills East 7.50%
12/1/27 (FHA) .................................. 500,000 521,495
Minnetonka Multifamily Housing Cedar Hills
Project - Cedar Hills East 7.50%
12/1/17 (FHA) .................................. 400,000 420,660
Scott County,Minnesota Housing &
Redevelopment Authority Facility Lease
Revenue - Justice Center Project 5.50%
12/1/15 ........................................ 1,755,000 1,832,536
South St. Paul, HRA Single Family Housing
Mortgage Series 1993 5.75%
9/1/20 (FNMA) .................................. 2,410,000 2,488,156
St. Paul HRA Multifamily Housing 6.60%
10/1/12 (FHA) .................................. 4,000,000 4,301,720
White Bear Lake Multifamily Housing Lake
Square 5.875% 2/1/15 (FHA) ...................... 1,055,000 1,109,385
-----------
59,990,868
-----------
Lease/Certificates of
Participation - 0.69%
Stearns County HRA Courthouse Project
7.00% 2/1/11 (AMBAC)............................. 2,000,000 2,074,720
-----------
2,074,720
-----------
*Pre-Refunded/Escrowed to
Maturity Bonds - 30.53%
Alexandria Independent School District #206
6.30% 2/1/13 Crossover Refunded to
2-1-03 @100 (MBIA) ............................. 1,775,000 1,930,880
Brainerd Independent School District #181
7.00% 6/1/09-01 (FGIC) ......................... 515,000 557,874
Brainerd Independent School District #181
7.00% 6/1/10-01 (FGIC) ......................... 550,000 595,788
Carver County HRA Jail Facility 6.40% 2/1/11
Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 550,000 589,705
Carver County HRA Jail Facility 6.40% 2/1/10
Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 515,000 552,178
Carver County HRA Jail Facility 6.40% 2/1/12
Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 585,000 627,231
Carver County HRA Jail Facility 6.40% 2/1/13
Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 625,000 670,119
Carver County HRA Jail Facility 6.40% 2/1/14
Crossover Refunded to 2-1-02 @ 100 (MBIA) ....... 670,000 718,367
Centennial Independent School District #12
7.10% 2/1/09-00 (FSA) .......................... 200,000 212,270
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
*Pre-Refunded/Escrowed to
Maturity Bonds (Continued)
Centennial Independent School District #12
7.15% 2/1/11-00 (FSA) .......................... $ 450,000 $ 478,049
Centennial Independent School District #12
7.15% 2/1/12-00 (FSA) .......................... 250,000 265,583
Dakota & Washington Counties HRA Single Family
Mortgage Revenue 8.375% 9/1/21 (GNMA)
(Escrowed to maturity) ......................... 14,115,000 19,901,868
Dakota & Washington Counties HRA Single Family
Mortgage Revenue 8.15% 9/1/16 (MBIA)
(Escrowed to maturity) ......................... 405,000 540,068
Dakota, Washington & Anoka Counties HRA Single
Family Housing 8.45% 9/1/19 (GNMA)
(Escrowed to maturity) ......................... 9,000,000 12,536,730
Delano Independent School District #879
7.25% 2/1/10-01 (AMBAC) ........................ 500,000 541,370
Duluth EDA Health Care - Duluth Clinic
6.30% 11/1/22-04 (AMBAC) ........................ 1,060,000 1,184,073
Elk River Independent School District 7.00%
2/1/10-00 (FSA) ................................ 200,000 210,818
Elk River Independent School District #728 6.30%
2/1/14-02 (FSA) ................................ 500,000 535,215
Elk River Independent School District #728 6.30%
2/1/15-02 (FSA) ................................ 665,000 711,836
Ellendale Geneva Independent School
District #762 6.00% 2/1/10-03 (AMBAC)............ 230,000 244,617
Ellendale Geneva Independent School
District #762 6.00% 2/1/11-03 (AMBAC)............ 245,000 259,889
Ellendale Geneva Independent School District
#762 6.00% 2/1/12-03 (AMBAC)..................... 265,000 281,104
Ellendale Geneva Independent School District
#762 6.00% 2/1/13-03 (AMBAC)..................... 280,000 296,366
Ellendale Geneva Independent School District
#762 6.00% 2/1/14-03 (AMBAC)..................... 300,000 316,845
Ellendale Geneva Independent School District
#762 6.00% 2/1/15-03 (AMBAC)..................... 320,000 337,523
Lake Of The Woods Independent School
District #390 7.35% 2/1/15-99 (AMBAC)............ 200,000 206,852
Lake Of The Woods Independent School
District #390 7.35% 2/1/16-99 (AMBAC)............ 250,000 258,565
Maplewood Independent School District #622
7.10% 2/1/25-05 (FSA) .......................... 11,525,000 13,435,499
Maplewood Independent School District #622
7.10% 2/1/19-05 (MBIA) ......................... 5,935,000 6,918,845
Minnesota Public Facilities Authority Water
Pollution Control Revenue 6.50% 3/1/14
Pre-Refunded 3-1-02 @102 (MBIA) ................. 1,500,000 1,655,355
Minnesota State University System 7.40%
6/30/19-99 (MBIA) .............................. 760,000 797,407
Moorhead Minnesota Independent School
District 152 5.90% 2/1/10 Crossover
Refunded to 2-1-01 @100 (AMBAC) ................. 475,000 496,062
<PAGE>
20 for tax-exempt income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
*Pre-Refunded/Escrowed to
Maturity Bonds (Continued)
Moorhead Minnesota Independent School
District 152 5.90% 2/1/11 Crossover
Refunded to 2-1-01 @100 (AMBAC) ................ $ 505,000 $ 527,392
Moorhead Minnesota Independent School
District 152 5.90% 2/1/12 Crossover
Refunded to 2-1-01 @100 (AMBAC) ................ 540,000 563,944
Moorhead Minnesota Independent School
District 152 5.90% 2/1/13 Crossover
Refunded to 2-1-01 @100 (AMBAC) ................ 575,000 602,129
Mora Series A 6.85% 2/1/10 Pre-Refunded
2-1-00 @100 (AMBAC) ........................... 245,000 258,825
Mora Series A 6.85% 2/1/11 Pre-Refunded
2-1-00 @100 (AMBAC) ........................... 265,000 279,954
Roseau Independent School District #682 7.00%
2/1/16 Crossover Refunded to
2-1-00 @100 (AMBAC) ........................... 500,000 527,045
South St. Paul Independent School District #6
6.25% 2/1/10 Crossover Refunded to
2-1-00 @100 (FGIC) ............................ 625,000 649,613
South St. Paul Independent School District #6
6.25% 2/1/11 Crossover Refunded to
2-1-00 @100 (FGIC) ............................ 500,000 521,650
South St. Paul Independent School District #6
6.25% 2/1/12 Crossover Refunded to
2-1-00 @100 (FGIC) ............................ 300,000 312,990
South Washington County Independent School
District #883 6.875% 6/1/11-00 (FGIC)........... 520,000 550,961
Southern Minnesota Municipal Power Agency
Revenue 5.75% 1/1/18 (MBIA)
(Escrowed to maturity) ........................ 3,790,000 4,044,763
Southern Minnesota Municipal Power Agency
Revenue 5.75% 1/1/18 (AMBAC)
(Escrowed to maturity) ........................ 670,000 715,037
St. Cloud Hospital Facility Revenue 6.75%
7/1/11-01 (AMBAC) ............................. 400,000 441,736
St. Cloud Hospital Facility Revenue 7.00%
7/1/07-01 (AMBAC) ............................. 500,000 555,330
St. Cloud Hospital Facility Revenue 6.75%
7/1/15-01 (AMBAC) ............................. 500,000 551,310
St. Francis Independent School District #15 7.60%
2/1/09 (FGIC) (Escrowed to maturity) ........... 250,000 250,620
St. Louis Park Methodist Hospital 7.25%
7/1/18-00 (AMBAC) Prefunded to 2-1-01
@100 (AMBAC) .................................. 500,000 547,150
St. Michael Albertville Independent School
District #885 7.25% 2/1/10 Pre-Refunded
2-1-98 @100 (AMBAC) ........................... 725,000 726,675
St. Michael Albertville Independent School
District #885 7.25% 2/1/11 Pre-Refunded
2-1-98 @100 (AMBAC) ........................... 775,000 776,790
St. Michael Albertville Independent School
District #885 7.25% 2/1/12 Pre-Refunded
2-1-98 @100 (AMBAC) ........................... 255,000 255,589
<PAGE>
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Pre-Refunded/Escrowed to
Maturity Bonds (Continued)
St. Michael Albertville Independent School
District #885 7.25% 2/1/13 Pre-Refunded
2-1-98 @100 (AMBAC) ............................ $ 795,000 $ 796,836
Stillwater Independent School District #834 6.75%
2/1/10-99 (FGIC) ............................... 1,000,000 1,027,509
Warroad Independent School District #690 6.85%
2/1/13-00 (AMBAC) .............................. 500,000 525,575
Washington County HRA Jail Facilities 7.00%
2/1/12-02 (MBIA) ............................... 500,000 551,845
Western Minnesota Municipal Power Agency
Revenue 9.75% 1/1/16 (Escrowed to
maturity) ...................................... 530,000 813,698
Western Municipal Power Agency Series A 6.60%
1/1/10 (MBIA) (Escrowed to maturity) ........... 2,000,000 2,283,939
Willmar Independent School District #347
6.25% 2/1/15 Crossover Refunded to
2-1-02 @100 (AMBAC) ............................ 2,000,000 2,151,820
Wright County 7.20% 12/1/12-99 (FSA)(AMT) ....... 1,000,000 1,056,130
-----------
91,731,806
-----------
Power Authority Revenue
Bonds - 7.66%
Bass Brook Pollution Control Revenue for
Minnesota Power & Light Company
6.00% 7/1/22 (MBIA) ........................... 2,000,000 2,121,460
Marshall Utility Revenue 6.45% 7/1/10 (FSA) ..... 500,000 549,985
Marshall Utility Revenue 6.45% 7/1/11 (FSA) ..... 100,000 109,640
Marshall Utility Revenue 6.50% 7/1/12 (FSA) ..... 500,000 549,660
Marshall Utility Revenue 6.50% 7/1/13 (FSA) ..... 500,000 548,385
Northern Minnesota Municipal Power Agency Electric
System Revenue 5.50% 1/1/18 (AMBAC) ............ 4,200,000 4,305,084
Northern Minnesota Municipal Power Agency
Series B 5.90% 1/1/08 (AMBAC) .................. 700,000 762,748
Northern Municipal Power Agency Minnesota
5.25% 1/1/13 (FSA) ............................ 4,750,000 4,776,600
Southern Minnesota Municipal Power Agency
5.75% 1/1/18 (FGIC) ........................... 4,570,000 4,794,661
Southern Minnesota Municipal Power Agency
4.75% 1/1/16 (MBIA) ........................... 2,400,000 2,293,680
Southern Minnesota Municipal Power Agency
Revenue 5.75% 1/1/18 (AMBAC).................... 1,330,000 1,395,383
Southern Minnesota Municipal Power Agency,
Inverse Floater 7.67% 1/1/18.................... 750,000 805,395
-----------
23,012,681
-----------
Water And Sewer Revenue Bonds - 0.27%
Moorhead Minnesota Public Utilities
6.25% 11/1/12 (MBIA)............................ 735,000 788,795
-----------
788,795
-----------
Other Revenue Bonds - 0.38%
Minneapolis Tax Increment Revenue
7.00% 3/1/03 (MBIA)............................. 1,140,000 1,145,301
-----------
1,145,301
-----------
Total Municipal Bonds (cost $276,685,209)........ 298,942,305
-----------
<PAGE>
for tax-exempt income 21
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
---------------------------
Short Term Investments - 0.31%
Federated Minnesota Municipal Money Market $ 928,000 $ 928,000
------------
Total Short Term Investments
(cost $928,000).................................. 928,000
-----------
Total Market Value Of Securities Owned - 99.79%
(cost $277,613,209) .......................................... $299,870,305
Receivables And Other Assets Net Of
Liabilities - 0.21%............................................ 645,211
------------
Net Assets Applicable To 27,472,536 Shares
($.01 Par Value) Outstanding - 100.00% ........................ $300,515,516
============
Net Asset Value - Minnesota Insured A Class
($288,493,895 / 26,372,906 shares) ............................. $10.94
======
Net Asset Value - Minnesota Insured B Class
($8,925,813 / 816,685 shares) .................................. $10.93
======
Net Asset Value - Minnesota Insured C Class
($3,095,808 / 282,945 shares) .................................. $10.94
======
- -----------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
AMBAC - Insured by the AMBAC Indemnity Corporation
Connie Lee - Insured by the College Construction Insurance Association
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Authority
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Components Of Net Assets At December 31, 1997:
Common Stock, $.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares
allocated to Minnesota Insured Fund A Class,
1,000,000,000 shares allocated to Minnesota Insured
Fund B Class and 1,000,000,000 shares allocated to
Minnesota Insured Fund C Class................................. $284,752,748
Undistributed net investment income............................. 32,374
Accumulated net realized loss on investments.................... (6,526,702)
Net unrealized appreciation on investments...................... 22,257,096
------------
Total Net Assets................................................ $300,515,516
============
Net Asset Value and Offering Price for
Tax-Free Minnesota Insured Fund A Class
Net asset value per share (A)................................... $10.94
Sales charge (3.75% of offering price or 3.93% of amount
invested per share) (B)........................................ 0.43
------
Offering price.................................................. $11.37
======
- -------------
(A) Net asset value per share illustrated is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000 or
more for Minnesota Insured Fund Class A.
<PAGE>
Delaware-Voyageur
Tax-Free Minnesota Intermediate Fund
Statement Of Net Assets
December 31, 1997
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds - 98.43%
General Obligation Bonds - 2.46%
Olmstead County Resource
Recovery Series A 5.90% 2/1/05................... $1,175,000 $1,247,203
Western Lake Superior Sanitation District
6.10% 10/1/00.................................... 225,000 228,672
----------
1,475,875
----------
Higher Education Revenue Bonds - 8.52%
Minnesota Higher Education Facility Authority
Augsburg College Series 4F2 5.75% 5/1/16 ........ 3,700,000 3,933,395
Minnesota State Higher Educational Facilities
Authority Revenue University St. Thomas
Series 4P 5.40% 4/1/23 ......................... 1,160,000 1,174,454
----------
5,107,849
----------
Health Care / Hospital Revenue Bonds - 16.16%
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.20% 11/1/05 ...................... 100,000 104,261
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.30% 11/1/06 ...................... 200,000 209,335
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.40% 11/1/07 ...................... 200,000 209,296
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.60% 11/1/09 ...................... 240,000 251,062
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.70% 11/1/10 ...................... 260,000 271,931
Maplewood Healthcare Facility For Healtheast
5.70% 11/15/02 ................................. 1,000,000 1,037,200
Maplewood Healthcare Facility For Healtheast
5.95% 11/15/06 ................................. 2,200,000 2,290,112
Minneapolis Health Care Facility Jones-Harrison
Residence Project 8.35% 9/1/21 .................. 905,000 964,920
Rochester Nursing Home & Multifamily Housing
Revenue Samaritan Bethany, Inc.
5.60% 5/1/02 ................................... 200,000 204,470
Rochester Nursing Home & Multifamily Housing
Revenue Samaritan Bethany, Inc.
5.80% 5/1/03 ................................... 250,000 255,565
Rochester Nursing Home & Multifamily Housing
Revenue Samaritan Bethany, Inc.
6.00% 5/1/04 ................................... 300,000 306,654
Rochester Nursing Home & Multifamily Housing
Revenue Samaritan Bethany, Inc.
6.10% 5/1/05 ................................... 250,000 255,533
St. Paul Minnesota Housing and Redevelopment
for Healtheast Authority Hospital Revenue
5.70% 11/1/15 .................................. 2,100,000 2,139,606
St. Paul Minnesota Housing and Redevelopment
for Healtheast Authority Hospital Revenue
5.85% 11/1/17 .................................. 1,160,000 1,186,726
----------
9,686,671
----------
<PAGE>
22 for tax-exempt income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Housing Revenue Bonds - 5.21%
Burnsville Multifamily Housing Revenue Burnsville
Apts. Project, (LOC: TCF ) 7.00% 9/1/19
Mandatory Put 9-1-99 @100 ...................... $ 580,000 $ 581,148
Minnesota HFA Single Family Mortgage Revenue
Series C 6.30% 1/1/99 .......................... 70,000 70,805
Oakdale, Minnesota Housing-Oak Meadows Project
6.50% 4/1/10 ................................... 295,000 308,582
Oakdale, Minnesota Housing-Oak Meadows Project
6.20% 4/1/07 ................................... 150,000 156,987
Oakdale, Minnesota Housing-Oak Meadows Project
6.30% 4/1/08 ................................... 260,000 272,064
Park Rapids, Minnesota Multifamily Revenue
The Court Apartments Project (Section 8)
6.05% 8/1/12 ................................... 1,200,000 1,224,960
St. Paul HRA Minnesota Public Radio,
(LOC: First Bank) 6.40% 6/1/98 .................. 300,000 302,352
St. Paul HRA Minnesota Public Radio,
(LOC: First Bank) 6.60% 6/1/99 .................. 100,000 102,353
St. Paul Housing and Redevelopment Single Family
Mortgage 6.90% 12/1/21 (FNMA) ................... 95,000 102,152
----------
3,121,403
----------
Industrial Development Revenue Bonds - 23.02%
Andover, Minnesota Development Revenue-
Downtown Center Project-Series A
6.50% 12/1/06 .................................. 1,795,000 1,837,093
Brooklyn Center CDR Brookdale Association
(NWNL Guaranteed) 5.70% 12/1/07
Mandatory Put 6-1-01 @100 ...................... 1,000,000 1,052,880
Duluth Gross Revenue Bond-Duluth Entertainment
Project 6.00% 12/1/98 .......................... 275,000 279,175
Duluth Gross Revenue Bond-Duluth Entertainment
Project 7.00% 12/1/03 .......................... 1,250,000 1,382,387
Duluth Gross Revenue Bond-Duluth Entertainment
Entertainment 7.30% 12/1/06 ..................... 250,000 283,940
Metropolitan Council HHH Metrodome Sports Facility
Revenue Series 1992 6.00% 10/1/09 ............... 3,520,000 3,784,035
Minnesota Public Facilities Authority Pollution
Control Revenue Series A 6.55% 3/1/03 ........... 1,720,000 1,887,029
Richfield Shoppes CDR-Richfield Shoppes Project
7.50% 10/1/04 .................................. 1,070,000 1,205,633
St. Paul Minnesota Port Authority CDR Fort Rd
Medical 7.50% 9/1/02 (Asset Gty) ................ 2,000,000 2,085,480
----------
13,797,652
----------
Lease/Certificates Of Participation - 2.77%
Beltrami County Housing & Redevelopment Authority
Revenue 5.90% 2/1/08............................. 355,000 375,980
Beltrami County Housing & Redevelopment Authority
Revenue 6.00% 2/1/09............................. 380,000 402,378
Beltrami County Housing & Redevelopment Authority
Revenue 6.00% 2/1/10............................. 405,000 426,388
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Lease/Certificate of Participation (Continued)
Beltrami County Housing & Redevelopment Authority
Revenue 6.10% 2/1/11............................ $430,000 $ 453,930
----------
1,658,676
----------
*Pre-Refunded/Escrowed
to Maturity Bonds - 31.21%
Austin Independent School District #492 6.88%
2/1/12-01 (MBIA) .............................. 1,205,000 1,291,844
Braham Independent School District #314 6.30%
2/1/19-01 (AMBAC) ............................. 3,015,000 3,182,995
Duluth EDA St. Mary's Hospital 7.90% 2/15/98
(Escrowed to maturity) ........................ 250,000 251,130
Duluth EDA St. Mary's Hospital 7.90% 2/15/99
(Escrowed to maturity) ........................ 150,000 156,521
Eden Valley Watkins Independent School District
#463 6.55% 2/1/11-02 (FSA) ..................... 250,000 269,913
Eden Valley Watkins Independent School District
#463 6.60% 2/1/16-02 (FSA) ..................... 615,000 665,123
Mankato Independent School District #77
6.35% 2/1/13-02 (FSA)(MBIA) .................... 1,750,000 1,876,473
Minneapolis/St. Paul HealthOne Series B 7.55%
8/15/00 (Escrowed to maturity) ................. 325,000 353,288
Minneapolis/St. Paul HealthOne Series C 7.45%
8/15/99 - (Escrowed to maturity) ............... 400,000 421,584
Minnesota State 6.25% 8/1/10-02 ................. 4,000,000 4,337,560
Olmstead County 6.85% 2/1/02-01 ................. 800,000 864,008
Olmstead County 6.90% 2/1/03-01 ................. 900,000 973,296
Olmstead County 6.95% 2/1/04-01 ................. 950,000 1,028,727
St. Cloud Hospital Facility Revenue
7.00% 7/1/20-01 (AMBAC) ....................... 2,740,000 3,038,496
----------
18,710,958
----------
Power Authority Revenue Bonds - 5.93%
Eveleth IDR for Minnesota Power And Light Company
6.13% 1/1/04.................................... 2,500,000 2,669,200
Northern Minnesota Municipal Power Agency
7.20% 1/1/99.................................... 860,000 887,271
----------
3,556,471
----------
Other Revenue Bonds - 3.15%
Hibbing Economic Development Authority Revenue
5.40% 2/1/03.................................... 1,180,000 1,210,409
Hibbing Economic Development Authority Revenue
6.10% 2/1/08.................................... 650,000 676,579
----------
1,886,988
----------
Total Municipal Bonds (cost of $56,241,720 )..... 59,002,543
----------
Number
of Shares
---------
Short Term Investments - .15%
Federated Minnesota Municipal Money Market....... 93,000 93,000
----------
Total Short Term Investments
(cost $93,000).................................. 93,000
----------
<PAGE>
for tax-exempt income 23
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Total Market Value Of Securities Owned - 98.58%
(cost $56,334,720)....................................... $59,095,543
Receivables And Other Assets Net Of Liabilities - 1.42%... 850,813
-----------
Net Assets Applicable To 5,368,644 Shares
($.01 Par Value) Outstanding - 100.00%................... $59,946,356
===========
Net Asset Value - Tax-Free Minnesota Intermediate A Class
($57,524,327 / 5,151,801 shares)......................... $11.17
======
Net Asset Value - Tax-Free Minnesota Intermediate B Class
($910,206 / 81,463 shares)................................ $11.17
======
Net Asset Value - Tax-Free Minnesota Intermediate C Class
($1,511,823 / 135,380 shares)............................ $11.17
======
- -------------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
AMBAC - Insured by the AMBAC Indemnity Corporation
Asset Gty - Insured by the Asset Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
NWNL - Insured by the Northwestern National Life Insurance Company
Components Of Net Assets At December 31, 1997:
Common Stock, $.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares allocated
to Tax-Free Minnesota Intermediate Fund A Class, 1,000,000,000
shares allocated to Tax-Free Minnesota Intermediate Fund B Class
and 1,000,000,000 shares allocated to Tax-Free Minnesota
Intermediate Fund C Class..................................... $57,336,516
Accumulated net realized loss on investments................... (150,983)
Net unrealized appreciation on investments..................... 2,760,823
-----------
Total Net Assets............................................... $59,946,356
===========
Net Asset Value and Offering Price for Tax-Free Minnesota
intermediate Fund A Class
Net asset value per share (A)........................................ $11.17
Sales charge (2.75% of offering price or 2.86% of
amount invested per share) (B)...................................... 0.32
------
Offering price....................................................... $11.49
======
- -------------
(A) Net asset value per share illustrated is the estimated amount which would be
paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000
or more for Minnesota Intermediate Fund A Class.
<PAGE>
Delaware - Voyageur
Minnesota High Yield Municipal Bond Fund
Statement of Net Assets
December 31, 1997
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds - 100.44%
General Obligation Bonds - 1.38%
Esko Independent School District #99 5.75%
4/1/17 (FSA)..................................... $ 100,000 $ 104,658
Inver Grove Heights Series - MN School District
Enhanced A 5.75% 2/1/13.......................... 100,000 105,470
Stewartville Independent School District Series -
MN School District Enhanced A
5.75% 2/1/12..................................... 100,000 106,313
Waconia Independent School District Series 93A
5.45% 2/1/15 (FSA)............................... 100,000 102,642
----------
419,083
----------
Higher Education Revenue Bonds - 7.30%
Minnesota State Higher Education Facility
Macalester College Series 4C 5.50% 3/1/12........ 100,000 104,743
Minnesota State Higher Education Facility St.
Mary's College Series 3Q 6.15% 10/1/23........... 900,000 936,288
Minnesota State University System Revenue
Bonds 93A 6.10% 6/30/23.......................... 100,000 105,146
University Of Minnesota Series A
5.50% 7/1/21..................................... 1,000,000 1,072,960
----------
2,219,137
----------
Hospital Revenue Bonds - 26.92%
Cambridge Healthcare Facility Revenue -
Grandview Christian Home 7.25% 9/1/26125,000129,779
Cannon Falls Nursing Home - Franciscan Health
Community Project 7.25% 7/1/21 .................. 100,000 103,150
Duluth, Minnesota Economic Development
Authority Health Care Facilities - St. Francis
Health Care Facility 6.75% 12/1/17 ............... 325,000 344,331
Fergus Falls Health Care Facility Revenue -
Lake Region Hospital 6.50% 9/1/18 ................ 750,000 812,993
Glencoe Minn Health Care Revenue
6.40% 12/1/15 .................................. 275,000 283,195
Little Canada Senior Facility Residence 1992 -
(Presbyterian Homes Guaranteed) 7.25%
7/1/12 ......................................... 250,000 261,845
Mankato Health Facilities Revenue Series A -
Lutheran Homes 6.875% 10/1/26 ................... 300,000 312,027
Minneapolis Health Care - American Baptist
Homes 8.70% 11/1/09 ............................ 150,000 167,213
Minneapolis, Minnesota Housing & Health Care
Facility Revenue(Augustana Chapel View
Homes) 6.50% 6/1/17 ............................ 1,370,000 1,411,854
Perham Minnesota Hospital District Congregate
Housing Facilities Briarwood Project
6.25% 2/1/22 ................................... 620,000 628,097
Robbinsdale North Memorial Medical
5.50% 5/15/23 (AMBAC) .......................... 100,000 101,930
Rochester Health Care Facilities Revenue Reg
IRS Ser H for Mayo Clinic Inverse Floater
7.875% 11/15/15 ................................ 1,500,000 1,705,485
<PAGE>
24 for tax-exempt income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Hospital Revenue Bonds (Continued)
Springfield St. John's Lutheran Home Revenue
8.50% 11/1/19 .................................. $ 150,000 $ 159,239
St. Paul Housing and Redevelopment Hospital
Rev for Health East Series B
6.625% 11/1/17 ................................. 500,000 535,445
St. Paul Housing and Redevelopment Hospital
Rev for Health East Series A
6.625% 11/1/17 ................................. 250,000 267,723
Waconia Good Samaritan Housing and
Redevelopment Rev for The Evangelical
Lutheran - A 6.00% 6/1/14 ....................... 660,000 684,268
Wadena County Health Care Facility Gross Rev
Ser B 7.75% 9/1/24 ............................. 250,000 273,245
----------
8,181,819
----------
Housing Revenue Bonds - 33.91%
Brooklyn Center Four Court Multifamily Housing
7.50% 6/1/25 ................................... 370,000 382,036
Carver Multifamily Housing Lake Grace
6.25% 7/1/28 ................................... 335,000 349,221
Carver Multifamily Housing Lake Grace
8.00% 7/1/28 ................................... 200,000 205,128
Chanhassen Multifamily Housing Heritage Park
6.20% 7/1/30 ................................... 300,000 318,411
Coon Rapids Minnesota Multifamily Rev Ref -
Hsg - Margaret PL - A 6.50% 5/1/25 .............. 500,000 507,945
Eden Prairie Multifamily Housing Subordinated -
Tanager Creek 8.00% 6/20/31 ..................... 780,000 813,610
Minneapolis Multifamily Housing -
Olson Townhomes 6.00% 12/1/19 ................... 800,000 825,304
Minneapolis - Nicollet Towers Multifamily Housing
6.00% 12/1/19 .................................. 300,000 317,202
Minnesota Housing Finance Authority Single
Family Mortgage Series E 6.25% 1/1/23............ 100,000 105,939
Minnesota Housing Finance Authority Single
Family Housing 5.875% 1/1/17..................... 100,000 105,427
Minnesota State Housing Finance Agency -
Single Family MTG - Series K 5.75% 1/1/26 ....... 1,000,000 1,026,210
Minnetonka Multifamily Housing Beacon Hill -
Senior Housing Project 7.55% 6/1/19 ............. 200,000 215,676
Minnetonka,Minnesota Senior Housing Revenue -
Westridge Senior Housing Project
6.30% 9/1/08 ................................... 110,000 112,048
Minnetonka,Minnesota Senior Housing Revenue -
Westridge Senior Housing Project
6.50% 9/1/12 ................................... 285,000 290,270
Minnetonka,Minnesota Senior Housing Revenue -
Westridge Senior Housing Project
7.00% 9/1/27 ................................... 1,275,000 1,295,107
New Brighton Multifamily Polynesian Village
7.60% 4/1/25 ................................... 300,000 320,454
Oakdale,Minnesota Housing - Oak Meadows
Project 6.75% 4/1/15 ........................... 1,500,000 1,580,385
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Housing Revenue Bonds (Continued)
St. Anthony Multifamily Housing Chandler
6.05% 11/20/16 (GNMA)............................ $ 135,000 $ 143,988
St. Louis Park Multifamily Mortgage Revenue
Ref Tamarind Project (FNMA)
5.50% 11/1/13.................................... 125,000 127,858
Stillwater Multifamily Housing Stillwater Cottages
6.75% 11/1/11.................................... 205,000 210,627
Stillwater Multifamily Housing Stillwater Cottages
7.00% 11/1/27.................................... 340,000 351,149
Stillwater Multifamily Housing Stillwater Cottages
7.00% 11/1/16.................................... 680,000 702,297
------------
10,306,292
------------
Industrial Development Revenue
Bonds - 8.86%
Andover, Minnesota Development Revenue -
Downtown Center Project - Series A
7.00% 12/1/12.................................... 1,640,000 1,677,720
International Falls Minnesota Pollution Control
Revenue - Boise Cascade Project
5.65% 12/1/22.................................... 700,000 712,712
Red Wing IDR Kmart (First Mortgage)
5.50% 7/1/08..................................... 300,000 302,016
------------
2,692,448
------------
Lease/Certificates of Participation - 3.37%
Beltrami County, Minnesota Housing and
Redevelopment Authority Revenue Lease
6.10% 2/1/12..................................... 460,000 484,205
Rice County, Minnesota - Certificate of Participation
6.00% 12/1/21.................................... 125,000 131,864
Saint Cloud, Minnesota Certificate of
Participation 5.90% 12/1/17...................... 400,000 408,320
------------
1,024,389
------------
Power Authority Revenue Bonds - 4.05%
Bass Brook PCR for Minnesota Power and Light
Corp 6.00% 7/1/22................................ 805,000 840,509
Southern Minnesota Municipal Power Agency
5.75% 1/1/18 (FGIC).............................. 100,000 104,916
Western Municipal Power Agency Revenue
6.125% 1/1/16.................................... 285,000 286,200
------------
1,231,625
------------
Other Revenue Bonds - 14.65%
Hibbing Economic Development Authority
6.40% 2/1/12..................................... 530,000 551,396
Minneapolis Minnesota Community Development
Agency Revenue - Holiday Inn Metrodome
Project 6.00% 12/1/01............................ 1,100,000 1,110,395
Minneapolis, Minnesota Community Development
Agency (Common Bond Fund - Series 2)
6.20% 6/1/17..................................... 750,000 798,345
Minneapolis, Minnesota Community Development
Agency Revenue Limited Tax - Series 4
6.20% 6/1/17..................................... 1,055,000 1,108,583
<PAGE>
for tax-exempt income 25
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
---------------------------
Municipal Bonds (Continued)
Other Revenue Bonds (Continued)
Puerto Rico Commonwealth 5.375% 7/1/25 $500,000 $ 501,280
Woodbury Golf Course Revenue
6.75% 2/1/22..................................... 365,000 384,429
-----------
4,454,428
-----------
Total Municipal Bonds (cost $29,274,280).......... 30,529,221
-----------
Total Market Value of Securities Owned - 100.44%
(cost $29,274,280)............................................ 30,529,221
Liabilities Net of Receivables and Other Assets - (.44%)....... (133,182)
-----------
Net Assets Applicable to 2,853,829 Shares
($.01 par value) Outstanding - 100.00%........................ $30,396,039
===========
Net Asset Value - Minnesota High Yield Municipal Bond
Fund A Class ($19,016,521 / 1,785,851 shares)...................... $10.65
======
Net Asset Value - Minnesota High Yield Municipal Bond
Fund B Class ($8,201,463 / 769,637 shares)......................... $10.66
======
Net Asset Value - Minnesota High Yield Municipal Bond
Fund C Class ($3,178,055 / 298,341 shares)......................... $10.65
======
- -------------
AMBAC - Insured by the Ambac Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
<PAGE>
Common Stock, $.01 par value, 100,000,000,000 shares
authorized to the Fund with 10,000,000,000 shares
allocated to Minnesota High Yield Municipal Bond Fund A
Class, 10,000,000,000 shares allocated to Minnesota High
Yield Municipal Bond Fund B Class, 10,000,000,000 shares
allocated to Minnesota High Yield Municipal Bond Fund C Class.... $29,125,847
Undistributed net investment income............................... 26,394
Accumulated net realized loss on investments...................... (11,143)
Net unrealized appreciation on investments........................ 1,254,941
-----------
Total Net Assets.................................................. $30,396,039
===========
Net Asset Value and Offering Price for Minnesota
High Yield Municipal Bond Fund A Class
Net asset value per share (A)..................................... $10.65
Sales charge (3.75% of offering price or 3.85% of
amount invested per share) (B)................................... 0.41
------
Offering price.................................................... $11.06
======
- -------------
(A) Net asset value per share illustrated is the estimated amount which would be
paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000 or
more for Minnesota High Yield Municipal Bond Fund Class A.
<PAGE>
26 for tax-exempt income
The Delaware-Voyageur Funds
Statements of Operations
Year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota
Minnesota Insured Minnesota High Yield Municipal
Fund Fund Intermediate Fund Bond Fund
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Interest .................................................. $26,178,608 $17,846,137 $3,569,424 $1,309,044
----------- ----------- ---------- ----------
Expenses:
Management fees ........................................... 2,129,804 1,503,424 246,824 136,823
Dividend disbursing and transfer agent fees and expenses .. 329,694 245,680 64,334 25,954
Distribution expense ...................................... 1,134,058 834,942 149,485 112,967
Registration fees ......................................... 13,995 19,909 13,138 5,465
Reports and statements to shareholders .................... 102,070 55,300 16,896 17,972
Accounting and administration ............................. 160,668 103,501 23,592 9,238
Professional fees ......................................... 19,571 26,085 16,928 7,638
Custodian fees ............................................ 121,064 35,581 38,444 --
Taxes (other than taxes on income) ....................... 40,810 11,400 3,700 2,150
Directors' fees ........................................... 12,050 9,253 5,214 966
Amortization of organization expenses ..................... -- -- -- 688
Other ..................................................... 44,591 70,201 26,778 2,775
----------- ----------- ---------- ----------
4,108,375 2,915,276 605,333 322,636
Less expenses waived or absorbed........................... (163,751) (61,867) (24,897) (243,061)
----------- ----------- ---------- ----------
Total net expenses......................................... 3,944,624 2,853,409 580,436 79,575
----------- ----------- ---------- ----------
Net investment income...................................... 22,233,984 14,992,728 2,988,988 1,229,469
----------- ----------- ---------- ----------
Net realized and unrealized gain on investments:
Net realized gain (loss) on investments ................... 3,216,993 1,476,574 638,280 (4,334)
Net change in unrealized appreciation ..................... 13,746,414 7,964,819 321,114 1,166,080
----------- ----------- ---------- ----------
Net realized and unrealized gain on investments............ 16,963,407 9,441,393 959,394 1,161,746
----------- ----------- ---------- ----------
Net increase in net assets resulting from operations....... $39,197,391 $24,434,121 $3,948,382 $2,391,215
=========== =========== ========== ==========
</TABLE>
See accompanying notes
<PAGE>
for tax-exempt income 27
Delaware-Voyageur Funds
Statements of changes in net assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Free Minnesota Fund Minnesota Insured Fund
---------------------------------------------------------------
Year ended Year ended Year ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income .................................. $ 22,233,984 $ 22,746,587 $ 14,992,728 $ 14,894,385
Net realized gain on investments ....................... 3,216,993 515,784 1,476,574 293,417
Net change in unrealized appreciation/depreciation ..... 13,746,414 (8,943,154) 7,964,819 (4,586,047)
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations.... 39,197,391 14,319,217 24,434,121 10,601,755
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
A Class .............................................. (21,801,997) (22,406,019) (14,559,667) (14,451,758)
B Class .............................................. (342,308) (203,627) (326,611) (248,884)
C Class .............................................. (121,569) (120,510) (135,307) (136,712)
------------ ------------ ------------ ------------
(22,265,874) (22,730,156) (15,021,585) (14,837,354)
------------ ------------ ------------ ------------
Capital share transactions:
Proceeds from shares sold:
A Class .............................................. 30,690,547 28,935,567 16,105,669 19,743,497
B Class .............................................. 2,901,401 3,893,971 2,803,647 2,213,483
C Class .............................................. 1,258,502 1,575,266 726,891 962,058
Net asset value of shares issued in connection with the
acquisition of Great Hall Minnesota Insured
Tax-Exempt Fund (note 5):
A Class .............................................. N/A N/A N/A 23,310,124
Net asset value of shares issued upon reinvestment of
dividends from net investment income:
A Class .............................................. 14,861,153 14,510,299 10,480,178 10,183,091
B Class .............................................. 265,963 159,491 249,513 198,159
C Class .............................................. 108,591 95,792 114,902 118,019
------------ ------------ ------------ ------------
50,086,157 49,170,386 30,480,800 56,728,431
------------ ------------ ------------ ------------
Cost of shares repurchased:
A Class .............................................. (73,076,182) (61,934,519) (52,017,149) (51,938,099)
B Class .............................................. (1,502,411) (500,598) (1,207,521) (213,150)
C Class .............................................. (1,472,994) (867,298) (973,441) (1,076,363)
------------ ------------ ------------ ------------
(76,051,587) (63,302,415) (54,198,111) (53,227,612)
------------ ------------ ------------ ------------
Increase (decrease) in net assets derived from capital
share transactions.................................... (25,965,430) (14,132,029) (23,717,311) 3,500,819
------------ ------------ ------------ ------------
Net decrease in net assets.............................. (9,033,913) (22,542,968) (14,304,775) (734,780)
Net assets:
Beginning of year....................................... 437,696,176 460,239,144 314,820,291 315,555,071
------------ ------------ ------------ ------------
End of year............................................. $428,662,263 $437,696,176 $300,515,516 $314,820,291
============ ============ ============ ============
</TABLE>
See accompanying notes
<PAGE>
28 for tax-exempt income
Statements of changes in net assets (Continued)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Free Minnesota Minnesota High Yield
Intermediate Fund Municipal Bond Fund
---------------------------------------------------------------
Period
Year ended Year ended Year ended from 6/4/96*
12/31/97 12/31/96 12/31/97 12/31/96
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income .................................. $ 2,988,988 $ 3,281,209 $ 1,229,469 $ 145,301
Net realized gain (loss) on investments ................ 638,280 58,144 (4,334) (6,809)
Net change in unrealized appreciation/ depreciation .... 321,114 (1,060,245) 1,166,080 88,861
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations.... 3,948,382 2,279,108 2,391,215 227,353
----------- ----------- ----------- -----------
Distribution to shareholders from:
Net investment income:
A Class .............................................. (2,915,016) (3,233,948) (783,576) (88,229)
B Class .............................................. (26,474) (7,825) (312,756) (41,302)
C Class .............................................. (52,600) (34,381) (109,945) (13,370)
----------- ----------- ----------- -----------
(2,994,090) (3,276,154) (1,206,277) (142,901)
----------- ----------- ----------- -----------
Capital share transactions:
Proceeds from shares sold:
A Class .............................................. 7,081,491 8,813,544 12,612,422 7,102,907
B Class .............................................. 669,318 372,719 5,453,844 2,696,693
C Class .............................................. 810,790 862,998 2,470,327 948,440
Net asset value of shares issued upon reinvestment of
dividends from net investment income:
A Class .............................................. 2,185,734 2,225,412 503,798 43,874
B Class............................................... 23,336 5,862 160,239 13,064
C Class............................................... 52,025 27,628 89,364 7,823
----------- ----------- ----------- -----------
10,822,695 12,308,163 21,289,994 10,812,801
----------- ----------- ----------- -----------
Cost of shares repurchased:
A Class .............................................. (18,684,272) (16,425,703) (903,309) (1,124,003)
B Class .............................................. (205,353) -- (475,668) --
C Class .............................................. (510,897) (441,733) (405,467) (67,699)
----------- ----------- ----------- -----------
(19,400,522) (16,867,436) (1,784,444) (1,191,702)
----------- ----------- ----------- -----------
Increase (decrease) in net assets derived from capital
share transactions.................................... (8,577,827) (4,559,273) 19,505,550 9,621,099
----------- ----------- ----------- -----------
Net increase (decrease) in net assets................... (7,623,535) (5,556,319) 20,690,488 9,705,551
Net assets:
Beginning of period..................................... 67,569,891 73,126,210 9,705,551 --
----------- ----------- ----------- ----------
End of period........................................... $59,946,356 $67,569,891 $30,396,039 $9,705,551
=========== =========== =========== ==========
</TABLE>
- --------------
*Commencement of operations
See accompanying notes
<PAGE>
for tax-exempt income 29
Delaware-Voyageur Funds
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Fund - Class A
--------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97(2) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $ 12.400 $ 12.630 $ 11.330 $ 12.850 $ 12.210
Income from investment operations:
Net investment income .................................... 0.654 0.630 0.620 0.630 0.640
Net realized and unrealized gain (loss) from investments . 0.511 (0.230) 1.320 (1.480) 0.870
-------- -------- ---------- --------- --------
Total from investment operations.......................... 1.165 0.400 1.940 (0.850) 1.510
-------- -------- ---------- --------- --------
Less dividends and distributions:
Dividends from net investment income ..................... (0.655) (0.630) (0.640) (0.610) (0.640)
Distributions from net realized gain on security transactions 0.000 0.000 0.000 (0.050) (0.230)
In excess of net realized gains .......................... 0.000 0.000 0.000 (0.010) 0.000
-------- -------- ---------- --------- --------
Total dividends and distributions......................... (0.655) (0.630) (0.640) (0.670) (0.870)
-------- -------- ---------- --------- --------
Net asset value, end of period.............................. $ 12.910 $ 12.400 $12.630 $11.330 $ 12.850
======== ======== ========= ========= ========
Total Return(1)............................................. 9.68% 3.33% 17.49% (6.73%) 12.70%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $417,365 $428,380 $ 455,220 $ 406,497 $458,145
Ratio of expenses to average net assets .................. 0.91% 0.92% 0.93% 0.90% 1.02%
Ratio of expenses to average net assets prior to
expense limitation ...................................... 0.95% 0.92% 0.93% 0.90% 1.02%
Ratio of net investment income to average net assets ..... 5.22% 5.13% 5.11% 5.29% 5.02%
Ratio of net investment income to average net assets prior
to expense limitation ................................... 5.18% 5.13% 5.11% 5.29% 5.02%
Portfolio turnover ....................................... 19% 28% 51% 24% 32%
</TABLE>
- ----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur
Fund Managers, Inc., as the Fund's investment manager.
See accompanying notes
<PAGE>
30 for tax-exempt income
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Fund - Class B Tax-Free Minnesota Fund - Class C
--------------------------------- ---------------------------------
Year Year Period from Year Year Year Period from
Ended Ended 8/15/95(1) to Ended Ended Ended 5/4/94(1) to
12/31/97(4) 12/31/96 12/31/95 12/31/97(4) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $12.400 $12.620 $11.900 $12.410 $12.630 $11.330 $11.960
Income from investment operations:
Net investment income .................... 0.574 0.560 0.450 0.564 0.540 0.530 0.340
Net realized and unrealized gain (loss)
from investments 0.508 (0.220) 0.710 0.508 (0.220) 1.320 (0.610)
------- ------- ------- ------- ------- ------- -------
Total from investment operations ......... 1.082 0.340 1.160 1.072 0.320 1.850 (0.270)
------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..... (0.572) (0.560) (0.440) (0.562) (0.540) (0.550) (0.320)
Distributions from net realized gain on
security transactions .................. 0.000 0.000 0.000 0.000 0.000 0.000 (0.040)
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions ........ (0.572) (0.560) (0.440) (0.562) (0.540) (0.550) (0.360)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $12.910 $12.400 $12.620 $12.920 $12.410 $12.630 $11.330
======= ======= ======= ======= ======= ======= =======
Total Return(2)............................... 8.95% 2.83% 9.95% 8.82% 2.64% 16.62% (2.30%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .. $8,215 $6,233 $2,701 $3,083 $3,083 $2,319 $1,061
Ratio of expenses to average net assets .. 1.56% 1.50% 1.38%(3) 1.65% 1.67% 1.67% 1.72%(3)
Ratio of expenses to average net assets
prior to expense limitation ............ 1.60% 1.67% 1.63%(3) 1.69% 1.67% 1.67% 1.72%(3)
Ratio of net investment income to
average net assets ..................... 4.57% 4.53% 4.43%(3) 4.48% 4.38% 4.33% 4.56%(3)
Ratio of net investment income to
average net assets prior to
expense limitation ..................... 4.53% 4.36% 4.18%(3) 4.44% 4.38% 4.33% 4.56%(3)
Portfolio turnover ....................... 19% 28% 51% 19% 28% 51% 24%
</TABLE>
---------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur
Fund Managers, Inc., as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 31
Financial Highlights (Continued)
- ------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Minnesota Insured Fund - Class A
----------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97(2) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $10.600 $10.730 $9.610 $11.020 $10.270
Income from investment operations:
Net investment income ........................... 0.533 0.520 0.510 0.540 0.540
Net realized and unrealized gain
(loss) from investments ...................... 0.341 (0.130) 1.140 (1.390) 0.840
------- ------- ------ ------- -------
Total from investment operations ................ 0.874 0.390 1.650 (0.850) 1.380
------- ------- ------ ------- -------
Less dividends and distributions:
Dividends from net investment income ............ (0.534) (0.520) (0.530) (0.520) (0.540)
Distributions from net realized gain
on security transactions .................... 0.000 0.000 0.000 0.040) (0.090)
------- ------- ------ ------- -------
Total dividends and distributions ............... (0.534) (0.520) (0.530) (0.560) (0.630)
------- ------- ------ ------- -------
Net asset value, end of period ...................... $10.940 $10.600 $10.730 $9.610 $11.020
======= ======= ======= ====== =======
Total Return(1) ..................................... 8.49% 3.75% 17.52% (7.88%) 13.80%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........ $288,494 $304,877 $307,734 $284,132 $311,187
Ratio of expenses to average net assets ......... 0.92% 0.92% 0.87% 0.61% 0.70%
Ratio of expenses to average net assets
prior to expense limitation ................ 0.94% 0.92% 0.92% 0.94% 1.02%
Ratio of net investment income to average
net assets 5.01% 4.93% 4.92% 5.29% 4.93%
Ratio of net investment income to average
net assets prior to expense limitation ..... 4.99% 4.93% 4.87% 4.96% 4.61%
Portfolio turnover .............................. 21% 14% 54% 25% 18%
</TABLE>
- ---------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur
Fund Managers, Inc., as the Fund's investment manager.
See accompanying notes
<PAGE>
32 for tax-exempt income
Financial Highlights (Continued)
- ------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Minnesota Insured Fund - Class B Minnesota Insured Fund - Class C
-------------------------------- --------------------------------
Year Year Period from Year Year Year Period from
Ended Ended 3/7/95(1) to Ended Ended Ended 5/4/94(1) to
12/31/97(4) 12/31/96 12/31/95 12/31/97(4) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.580 $10.720 $10.140 $10.600 $10.730 $ 9.610 $10.230
Income from investment operations:
Net investment income ................................ 0.454 0.450 0.380 0.454 0.440 0.430 0.300
Net realized and unrealized gain (loss)
from investments .................................. 0.348 (0.140) 0.580 0.338 (0.130) 1.140 (0.620)
------- ------- ------- ------- ------- ------- ------
Total from investment operations ..................... 0.802 0.310 0.960 0.792 0.310 1.570 (0.320)
------- ------- ------- ------- ------- ------- ------
Less dividends and distributions:
Dividends from net investment income ................. (0.452) (0.450) (0.380) (0.452) (0.440) (0.450) (0.280)
Distributions from net realized gain on
security transactions ............................. 0.000 0.000 0.000 0.000 0.000 0.000 (0.020)
------- ------- ------- ------- ------- ------- ------
Total dividends and distributions .................... (0.452) (0.450) (0.380) (0.452) (0.440) (0.450) (0.300)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of period ........................... $10.930 $10.580 $10.720 $10.940 $10.600 $10.730 $9.610
======= ======= ======= ======= ======= ======= ======
Total Return(2)........................................... 7.77% 3.03% 9.59% 7.66% 2.98% 16.63% (3.14%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $8,926 $6,817 $4,655 $3,096 $3,126 $3,166 $1,525
Ratio of expenses to average net assets .............. 1.67% 1.56% 1.34%(3) 1.67% 1.68% 1.66% 1.36%(3)
Ratio of expenses to average net assets
prior to expense limitation ....................... 1.69% 1.68% 1.64%(3) 1.69% 1.68% 1.67% 1.68%(3)
Ratio of net investment income to average net assets . 4.26% 4.29% 4.15%(3) 4.26% 4.18% 4.11% 4.68%(3)
Ratio of net investment income to average net assets
prior to expense limitation ....................... 4.24% 4.17% 3.85%(3) 4.24% 4.18% 4.10% 4.36%(3)
Portfolio turnover ................................... 21% 14% 54% 21% 14% 54% 25%
</TABLE>
- --------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur
Fund Managers, Inc., as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 33
Financial Highlights (Continued)
- ------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Intermediate Fund - Class A
----------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97(2) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $10.99 $11.140 $10.500 $11.160 $10.830
------ ------- ------- ------- -------
Income from investment operations:
Net investment income.......................... 0.535 0.510 0.510 0.450 0.470
Net realized and unrealized gain (loss)
from investments.............................. 0.180 (0.150) 0.640 (0.660) 0.370
------ ------- ------- ------- -------
Total from investment operations.................. 0.715 0.360 1.150 (0.210) 0.840
------ ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income........... (0.535) (0.510) (0.510) (0.450) (0.470)
Distributions from net realized gain
on security transactions...................... 0.000 0.000 0.000 0.000 (0.040)
------ ------- ------- ------- -------
Total dividends and distributions................. (0.535) (0.510) (0.510) (0.450) (0.510)
------ ------- ------- ------- -------
Net asset value, end of period.................... $11.170 $10.990 $11.140 $10.500 $11.160
======= ======= ======= ======= =======
Total Return(1)................................... 6.69% 3.46% 11.00% (1.91%) 7.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted)........ $57,524 $66,024 $72,405 $84,168 $75,374
Ratio of expenses to average net assets........ 0.91% 0.89% 0.91% 0.92% 0.99%
Ratio of expenses to average net assets
prior to expense limitation................... 0.95% 0.89% 0.91% 0.92% 0.99%
Ratio of net investment income to average
net assets.................................... 4.86% 4.69% 4.61% 4.18% 4.18%
Ratio of net investment income to average
net assets prior to expense limitation........ 4.82% 4.69% 4.61% 4.18% 4.18%
Portfolio turnover............................. 21% 28% 40% 42% 19%
</TABLE>
- ---------------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur
Fund Managers, Inc., as the Fund's investment manager.
See accompanying notes
<PAGE>
34 for tax-exempt income
Financial Highlights (Continued)
- ------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Tax -Free Minnesota Tax -Free Minnesota
Intermediate Fund - Class B Intermediate Fund - Class C
-------------------------------- ---------------------------------------
Year Year Period from Year Year Year Period from
Ended Ended 3/11/95(1) to Ended Ended Ended 4/30/94(1) to
12/31/97(4) 12/31/96 12/31/95 12/31/97(4) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $10.990 $11.140 10.950 $10.990 $11.130 $10.500 $10.740
Income from investment operations:
Net investment income ........................ 0.437 (0.150) 0.190 0.187 (0.140) 0.630 (0.240)
Net realized and unrealized gain
(loss) from investments ..................... 0.190 (0.150 0.190 0.187 (0.140) 0.630 (0.240)
------- ------- ------- ------- ------- ------- -------
Total from investment operations ............. 0.627 0.290 0.360 0.627 0.290 1.050 0.000
------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ......... (0.447) (0.440) (0.170) (0.447) (0.430) (0.420) (0.240)
Distributions from net realized
gain on security transactions ............... 0.000 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions ............ (0.447 (0.440) (0.170) (0.447) (0.430) (0.420) (0.240)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ................... $11.170 $10.990 $11.140 $11.170 $10.990 $11.130 $10.500
======= ======= ======= ======= ======= ======= =======
Total Return(2) .................................. 5.84% 2.74% 3.26% 5.84% 2.69% 10.18% (0.03%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ...... $910 $408 $27 $1,512 $1,137 $694 $341
Ratio of expenses to average net assets ...... 1.81% 1.56% 1.30%(3) 1.77% 1.64% 1.63% 1.71%(3)
Ratio of expenses to average net assets
prior to expense limitation ................. 1.85% 1.62% 1.55%(3) 1.81% 1.64% 1.63% 1.71%(3)
Ratio of net investment income to average
net assets .................................. 3.96% 3.99% 3.93%(3) 4.00% 3.94% 3.82% 3.35%(3)
Ratio of net investment income to average
net assets prior to expense limitation ...... 3.92% 3.93% 3.68%(3) 3.96% 3.94% 3.82% 3.35%(3)
Portfolio turnover 21% 28% 40% 21% 28% 40% 42%
</TABLE>
- ---------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur
Fund Managers, Inc., as the Fund's investment manager.
<PAGE>
for tax-exempt income 35
Financial Highlights (Continued)
- ------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each
period were as follows:
<TABLE>
<CAPTION>
Minnesota High Yield Minnesota High Yield Minnesota High Yield
Municipal Bond Municipal Bond Municipal Bond
Fund - Class A Fund - Class B Fund - Class C
----------------------------- ---------------------- ---------------------
Period from Period from Period from
Year 6/4/96(1) Year 6/12/96(1) Year 6/7/96(1)
ended to ended to ended to
12/31/97(4) 12/31/96 12/31/97(4) 12/31/96 12/31/97(4) 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $10.180 $10.000 $10.190 $ 9.780 $10.180 $ 9.990
Income from investment operations:
Net investment income .......................... 0.643 0.350 0.557 0.290 0.572 0.300
Net realized and unrealized gain
from investments ........................... 0.463 0.180 0.470 0.410 0.455 0.190
------- ------- ------- ------- ------- -------
Total from investment operations................ 1.106 0.530 1.027 0.700 1.027 0.490
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ........... (0.636) (0.350) (0.557) (0.290) (0.557) (0.300)
Distributions from net realized gain on
security transactions ...................... 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Total dividends and distributions .............. (0.636) (0.350) (0.557) (0.290) (0.557) (0.300)
------- ------- ------- ------- ------- -------
Net asset value, end of period ..................... $10.650 $10.180 $10.660 $10.190 $10.650 $10.180
======= ======= ======= ======= ======= =======
Total Return(2)..................................... 11.26% 5.40% 10.41% 7.29% 10.41% 5.02%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........ $19,017 $6,068 $8,201 $2,738 $3,178 $900
Ratio of expenses to average net assets ........ 0.09% 0.24%(3) 0.85% 0.95%(3) 0.83% 0.99%(3)
Ratio of expenses to average net assets
prior to expense limitation ................ 1.24% 1.25%(3) 2.00% 2.00%(3) 1.98% 2.00%(3)
Ratio of net investment income to
average net assets ......................... 6.16% 5.78%(3) 5.40% 5.14%(3) 5.42% 4.90%(3)
Ratio of net investment income to
average net assets prior
to expense limitation 5.01% 4.77%(3) 4.25% 4.09%(3) 4.27% 3.89%(3)
Portfolio turnover ............................. 23% 15% 23% 15% 23% 15%
</TABLE>
- ---------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur
Fund Managers, Inc., as the Fund's investment manager.
See accompanying notes
<PAGE>
36 for tax-exempt income
Delaware-Voyageur Funds
Notes to Financial Statements
December 31, 1997
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Delaware-Voyageur Tax-Free Minnesota Fund (formerly Voyageur Minnesota Tax
Free Fund) ("Tax-Free Minnesota Fund"), a series of the Voyageur Tax Free
Funds, Inc.; Delaware-Voyageur Minnesota Insured Fund (formerly Voyageur
Minnesota Insured Fund)("Minnesota Insured Fund"), a series of the Voyageur
Insured Funds, Inc.; Delaware-Voyageur Tax-Free Minnesota Intermediate Fund
(formerly Voyageur Minnesota Limited Term Tax Free Fund)("Tax-Free Minnesota
Intermediate Fund"), a series of the Voyageur Intermediate Tax-Free Funds,
Inc.; and Delaware-Voyageur Minnesota High Yield Municipal Bond Fund (formerly
Voyageur Minnesota High Yield Municipal Bond Fund)("Minnesota High Yield
Municipal Bond Fund") a series of the Delaware-Voyageur Mutual Funds, Inc.,
(each referred to as a "Fund" or collectively as the "Funds") are registered
under the Investment Company Act of 1940 (as amended) as open-end management
investment companies. The Tax-Free Minnesota Fund, Minnesota Insured Fund, and
Tax-Free Minnesota Intermediate Fund are registered as diversified funds. The
Minnesota High Yield Municipal Bond Fund is registered as a non-diversified
fund. The Tax-Free Minnesota Fund seeks high current income free from both
federal and state income taxes by investing in investment grade municipal
bonds. Minnesota Insured Fund seeks high current income free from both federal
and state income taxes with the added safety of an insured portfolio by
investing in insured municipal bonds. The Tax-Free Minnesota Intermediate Fund
seeks to preserve original investment principal while providing income free
from both federal and state income taxes by investing in intermediate term
investment grade municipal bonds. The Minnesota High Yield Municipal Bond Fund
seeks high current income free from both federal and state income taxes by
investing in medium and lower-grade municipal bonds. The Funds each offer 3
classes of shares.
1. Fund Reorganization
On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur Fund
Manager Inc.'s ("Voyageur") parent, Dougherty Financial Group, Inc. ("DFG")
pursuant to an agreement and plan of merger dated January 15, 1997, in which
LNC acquired DFG including the mutual fund investment advisory business of DFG
conducted by Voyageur. Upon completion of the acquisition, Delaware Management
Company, Inc. ("DMC") became the investment adviser to the Funds, Delaware
Distributors, L.P. ("DDLP") became the distributor for the Funds, and Delaware
Service Company, Inc. ("DSC") became the transfer, dividend-disbursing,
shareholder servicing agent and accounting service agent for the Funds.
2. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Money market instruments having less than 60 days to maturity are
valued at amortized cost which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Funds'
Board of Directors.
Federal Income Taxes - Each Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Funds on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.
Other - Expenses common to all funds within the Delaware-Voyageur Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale
of investment securities are those of the specific securities sold. Interest
income is recorded on the accrual basis. Original issue discounts and market
premium are amortized to interest income over the lives of the respective
securities. The Funds declare dividends from net investment income daily and
pay them monthly. Capital gains are distributed annually.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
3. Investment Management and Other Transactions with Affiliates
Commencing May 1, 1997, and in accordance with the terms of the Investment
Management Agreement, the Funds pay DMC the Investment Manager of each Fund,
an annual fee, which is calculated daily based on the net assets of each Fund.
The management fee rates are as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fee as a percentage of average
daily net assets (per annum) 0.50% 0.50% 0.40% 0.65%
</TABLE>
DMC has elected to waive their fees and reimburse each Fund to the extent that
annual operating expenses exclusive of 12b-1 distribution expenses, taxes,
interest, brokerage commissions and extraordinary expenses, exceed 0.66%,
0.67%, 0.71%, 0.05% of average daily net assets for the Tax-Free Minnesota
Fund, Minnesota Insured Fund, Tax-Free Minnesota Intermediate Fund and
Minnesota High Yield Municipal Bond Fund, respectively, through December 31,
1997. Total expenses absorbed by DMC for the eight month period ended December
31, 1997 are as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total expenses absorbed by DMC $69,935 $32,677 $0 $217,024
</TABLE>
<PAGE>
for tax-exempt income 37
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Notes to Financial Statements (Continued)
3. Investment Management and Other Transactions with Affiliates
(Continued)
Prior to May 1, 1997, the Funds had an investment advisory and management
agreement with Voyageur. Voyageur received a fee for its investment advisory
and management services based on the average daily net assets of the Tax Free
Minnesota Fund and Minnesota Insured Fund at an annual rate of .50%, at an
annual rate of .40% for the Tax-Free Minnesota Intermediate Fund and at an
annual rate of .65% for the Minnesota High Yield Municipal Bond Fund. During
the period January 1, 1997 to April 30, 1997, Voyageur waived $93,816,
$29,190, $24,897, and $26,037 of the Tax-Free Minnesota Fund, Minnesota
Insured Fund, Tax-Free Minnesota Intermediate Fund, and Minnesota High Yield
Municipal Bond Fund, respectively.
Commencing May 1, 1997, the Funds have engaged DSC, an affiliate of DMC, to
serve as dividend disbursing, transfer agent and accounting services agent for
the Fund. For the eight month period ended December 31, 1997, the amounts
expensed for each Fund were as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend disbursing, transfer agent fees and
other expenses ....................... $161,866 $120,517 $26,769 $12,629
Accounting fees............................. $108,243 $ 76,219 $15,544 $ 6,260
</TABLE>
Prior to May 1, 1997, the Funds paid a fee to Voyageur for acting as the
Fund's dividend disbursing, administrative and accounting services agent. Each
Fund was also responsible for reimbursing Voyageur's out-of-pocket expense in
connection with the performance of these services.
On December 31, 1997, the Funds had payables to affiliates as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Management fee payable to DMC ............. $299,488 $243,547 $44,271 $ 0
Dividend disbursing, transfer agent fees, accounting
fees and other expenses payable to DSC ......... $ 32,348 $ 24,975 $ 5,315 $2,366
</TABLE>
Commencing May 1, 1997, and pursuant to the Distribution Agreement, the Funds
pay DDLP, the Distributor and an affiliate of DMC, an annual fee not to exceed
0.25% of the average daily net assets of the A Class and 1.00% of the average
daily net assets of the B and C Class for each Fund. For the eight month
period ended December 31, 1997, DDLP earned commissions on sales of the Fund A
Class shares for each Fund as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$36,516 $25,364 $6,630 $10,766
</TABLE>
Prior to May 1, 1997 each class of shares had a Distribution Agreement with
Voyageur Fund Distributors, Inc. ("VFD"). Under the plan the Funds paid VFD a
fee at an annual rate of 0.25% of the average daily net assets of the Class A
Shares and 1.00% of the average daily net assets of the Class B and C Shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Funds. These officers, directors and employees are paid no compensation
by the Funds.
4. Investments
During the period ended December 31, 1997, the Funds made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments for each Fund as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases........................ $ 76,822,392 $61,906,330 $13,194,147 $23,840,704
Sales............................ $100,278,640 $81,631,039 $23,471,817 $ 4,775,606
</TABLE>
<PAGE>
38 for tax-exempt income
Notes to Financial Statements (Continued)
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4. Investments (Continued)
At December 31, 1997, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each Fund were
as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota Tax-Free Minnesota Minnesota High Yield
Minnesota Fund Insured Fund Intermediate Fund Municipal Bond Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cost of Investments ................ $395,681,075 $277,613,209 $56,334,720 $29,274,280
Aggregate unrealized appreciation... $ 34,149,136 $ 22,257,096 $ 2,760,823 $ 1,254,941
Aggregate unrealized depreciation... $ 65,000 $ 0 $ 0 $ 0
Net unrealized appreciation ........ $ 34,084,136 $ 22,257,096 $ 2,760,823 $ 1,254,941
</TABLE>
For federal income tax purposes, as of December 31, Minnesota Insured Fund had
a capital loss carryover of $6,053,203 that will expire in 2001 through 2003,
Tax-Free Minnesota Intermediate Fund had a capital loss carryover of $11,494
that will expire in 2004, and Minnesota High Yield Municipal Bond Fund had a
capital loss carryover of $11,143 that will expire in 2004 and 2005.
5. Fund Merger
On November 6, 1996, Voyageur Minnesota Insured Fund acquired all of the net
assets of Great Hall Minnesota Insured Tax-Exempt Fund (Great Hall Fund)
pursuant to an Agreement and Plan of Reorganization approved by the Great Hall
shareholders on November 6, 1996. The acquisition was accompanied by a
tax-free exchange of 2,317,110 Great Hall shares for 2,205,310 Class A shares
of Minnesota Insured Fund. The aggregate net assets of Minnesota Insured Fund
and Great Hall Fund before the acquisition were $295,563,851 and $23,310,124
(including $396,706 of net unrealized appreciation of investments, $627,187 of
accumulated net realized loss on investments and $23,540,605 of paid-in
capital for Great Hall Fund), respectively, resulting in combined net assets
of $318,873,975 on November 9, 1996.
6. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Tax-Free Minnesota
Minnesota Fund Insured Fund
------------------------------------------------------------
Year ended Year ended Year ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
A Class.......................... 2,445,000 2,351,584 1,511,145 1,875,386
B Class.......................... 230,517 316,743 262,553 211,514
C Class.......................... 99,577 127,900 68,641 91,722
Shares issued in connection with the
acquisition of Great Hall Minnesota
Insured Tax-Exempt Fund
A Class.......................... N/A N/A N/A 2,205,310
Shares issued upon reinvestment
of dividends from net
investment income:
A Class.......................... 1,191,155 1,180,162 983,624 969,663
B Class.......................... 21,253 12,994 23,426 18,904
C Class.......................... 8,668 7,795 10,782 11,243
---------- ---------- ---------- ----------
3,996,170 3,997,178 2,860,171 5,383,742
---------- ---------- ---------- ----------
Shares repurchased:
A Class.......................... (5,840,279) (5,048,128) (4,894,549) (4,947,642)
B Class.......................... (118,151) (40,979) (113,408) (20,425)
C Class.......................... (118,065) (70,822) (91,495) (102,914)
---------- ---------- ---------- ----------
(6,076,495) (5,159,929) (5,099,452) (5,070,981)
---------- ---------- ---------- ----------
Net Increase (Decrease) (2,080,325) (1,162,751) (2,239,281) 312,761
========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Minnesota Minnesota High Yield
Intermediate Fund Municipal Bond Fund
--------------------------------------------------------------
Year ended Year ended Year ended 6/4/96*
12/31/97 12/31/96 12/31/97 12/31/96
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
A Class............................ 642,232 803,384 1,228,700 703,876
B Class............................ 60,795 34,174 531,417 267,494
C Class............................ 73,831 78,645 240,090 94,294
Shares issued in connection with the
acquisition of Great Hall Minnesota
Insured Tax-Exempt Fund
A Class............................ N/A N/A N/A N/A
Shares issued upon reinvestment
of dividends from net
investment income:
A Class............................ 198,390 202,700 48,680 4,348
B Class............................ 2,115 536 15,493 1,293
C Class............................ 4,721 2,520 8,637 775
---------- ---------- -------- -------
982,084 1,121,959 2,073,017 1,072,080
---------- ---------- -------- -------
Shares repurchased:
A Class............................ (1,698,909) (1,498,234) (87,722) (112,030)
B Class............................ (18,600) 0 (46,061) 0
C Class............................ (46,700) (39,981) (38,834) (6,621)
---------- ---------- -------- -------
(1,764,209) (1,538,215) (172,617) 118,651)
---------- ---------- -------- -------
Net Increase (Decrease) .................. (782,125) (416,256) 1,900,400 953,429
======== ======== ========= =======
</TABLE>
* Commencement of operations.
<PAGE>
for tax-exempt income 39
Notes to Financial Statements (Continued)
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7. Credit and Market Risk
The Funds concentrate their investments in securities issued by
municipalities, mainly in Minnesota. The value of these investments may be
adversely affected by new legislation within the states, regional or local
economic conditions, and differing levels of supply and demand for municipal
bonds. Many municipalities insure repayment for their obligations. Although
bond insurance reduces the risk of loss due to default by an issuer, such
bonds remain subject to the risk that market value may fluctuate for other
reasons and there is no assurance that the insurance company will meet its
obligations. These securities have been identified in the Statement of Net
Assets.
Inverse floaters represent a security that pays interest at rates that
increase (decrease) with a decrease (increase) in a specified index. Interest
rates disclosed were in effect on December 31, 1997.
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Delaware-Voyageur Funds
Report of Independent Auditors
December 31, 1997
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To the Shareholders and Board of Directors
Voyageur Tax-Free Funds, Inc. - Delaware-Voyageur Tax-Free Minnesota Fund
Voyageur Insured Funds, Inc. - Delaware-Voyageur Minnesota Insured Fund
Voyageur Intermediate Tax-Free Funds, Inc. - Delaware-Voyageur Tax-Free
Minnesota Intermediate Fund
Voyageur Mutual Funds, Inc. - Delaware-Voyageur Minnesota High Yield
Municipal Bond Fund
We have audited the accompanying statements of net assets of Tax-Free
Minnesota Fund, Minnesota Insured Fund, Tax-Free Minnesota Intermediate Fund
and Minnesota High Yield Municipal Bond Fund (the "Funds") as of December 31,
1997, and the related statements of operations, the statements of changes in
net assets and the financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets for the year ended December 31, 1996 and
the financial highlights for the periods presented through December 31, 1996
were audited by other auditors whose report dated February 14, 1997 expressed
an unqualified opinion on those statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1997, by corres pondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the 1997 financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective Funds at December 31, 1997, and the results of their operations,
the changes in their net assets and their financial highlights for the year
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 16, 1998
<PAGE>
Delaware investments fund family
For Growth of Capital
Aggressive Growth Fund
Trend Fund
DelCap Fund
Small Cap Value Fund
U.S. Growth Fund
Growth Stock Fund
Tax-Efficient Equity Fund
For Total Return
Social Awareness Fund
Blue Chip Fund
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
REIT Fund
Delaware Fund
For International Diversification
Emerging Markets Fund
New Pacific Fund
Overseas Equity Fund
International Equity Fund
Global Assets Fund
Global Bond Fund
For Current Income
Delchester Fund
High-Yield Opportunities Fund
Strategic Income Fund
U.S. Government Fund
Delaware-Voyageur
U.S. Government Securities Fund
Limited-Term Government Fund
For Tax-Exempt Income
National High Yield Municipal Bond Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
State Tax-Free Funds*
Money Market Funds
Delaware Cash Reserve
Tax-Free Money Fund
Asset Allocation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, North Dakota, New Jersey, New
Mexico, New York, Ohio, Oregon, Pennsylvania, Utah, Washington, Wisconsin.
Insured and intermediate bond funds are available in selected states.
funds
(Photo of computer keyboard)
Complete information on any fund offered by Delaware Investments can be found
in each fund's current prospectus. Prospectuses for all funds offered by
Delaware Investments are available from your financial adviser. Please read
the prospectus carefully before you invest or send money.
<PAGE>
This annual report is for the information of shareholders of Minnesota
Municipal Bond Funds, but it may be used with prospective investors when
preceded or accompanied by current Prospectuses for the appropriate funds,
which set forth details about charges, expenses, investment objectives and
operating policies of each Fund. You should read the prospectus carefully
before you invest. Summary investment results are documented in each Fund's
current Statement of Additional Information. The figures in this report
represent past results which are not a guarantee of future results. The return
and principal value of an investment in the Funds will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Board of Directors
Wayne A. Stork Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Jeffrey J. Nick
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC W.
Thacher Longstreth
City Councilman
Philadelphia, PA
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc. Minneapolis, MN
Charles E. Peck
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
Affiliated Officers
David K. Downes
Executive Vice President, Chief Financial Officer and
Chief Operating Officer
Delaware Investments Family of Funds
Philadelphia, PA
George M. Chamberlain, Jr.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
(photo of globes)
directors
& officers
Investment Manager
Delaware Management Company, Inc.
Philadelphia, Pennsylvania
International Affiliate
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
This report must be preceded or accompanied by current Prospectuses for
the Minnesota Municipal Bond Funds and the Delaware Investments
Performance Update for the most recently completed calendar quarter. For a
prospectus of any other mutual fund from Delaware Investments, contact your
financial adviser or Delaware.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
DELAWARE
INVESTMENTS
=====================
Philadelphia o London
(photo of globes)
Be sure to consult your financial adviser when making investments. Mutual
funds can be a valuable part of your financial plan; however, shares of the
Funds are not FDIC or NCUSIF insured, are not guaranteed by any bank or any
credit union, and involve investment risk, including the possible loss of the
principal amount invested. Shares of the Funds are not bank or credit union
deposits.
Copy Rights Delaware Distributors, L.P.
Printed in the USA
on recycled paper
(504)
AR-MNALL[12/97]TKO2/98
