VOYAGEUR TAX FREE FUNDS INC, N-30D, 1998-10-30

VOYAGEUR TAX FREE FUNDS INC
N-30D, 1998-10-30

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<PAGE>

FOR TAX-EXEMPT INCOME

Minnesota Municipal
Bond Funds

(various photos demonstrating service and guidance,
professional management and goals)

service and guidance

professional management

goals

1998
Annual
Report

Tax-Free Minnesota Fund
Minnesota Insured Fund
Tax-Free Minnesota Intermediate Fund
Minnesota High Yield Municipal Bond Fund

DELAWARE
INVESTMENTS
- ---------------------
Philadelphia - London

<PAGE>

A TRADITION OF SOUND INVESTING

commitment

A Commitment
To Our Investors

(photo of keyboard)

(photo of illustration from Tax-Exempt Income Brochure)

Delaware Investments has a money management tradition that dates back to 1929.
We have a long and distinguished history of helping individuals reach their
financial goals through a full range of investment opportunities that includes
municipal bond mutual funds.
Headquartered in Philadelphia with an international affiliate in London, the
Delaware organization is one of the nation's leading municipal bond fund
managers.
Delaware Investments manages more than $40 billion in mutual fund assets and
institutional advisory accounts. We offer a wide variety of tax-advantaged
equity and fixed-income investments, retirement plan accounts, IRAs, investment
accounts for single and multi-manager variable annuities and closed-end funds.

Delaware's Tax-Advantaged
Investment Lineup
o Tax-Efficient Equity Fund
o Municipal bond funds in 19 states
o Four national tax-exempt
bond funds
o Tax-Free Money Fund

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.

Fund Objectives

TAX-FREE MINNESOTA FUND AND MINNESOTA INSURED FUND
To seek as high a level of current income exempt from federal income tax and
Minnesota state taxes as is consistent with preservation of capital.

TAX-FREE MINNESOTA INTERMEDIATE FUND
To provide investors with preservation of capital and, as a secondary
objective, current income exempt from federal income tax and Minnesota state
taxes.

MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
To seek a high level of current income exempt from federal income tax and
Minnesota state taxes by investing primarily in a portfolio of medium and
lower grade municipal bonds.

Table of Contents

LETTER TO SHAREHOLDERS Page 1
PORTFOLIO MANAGER'S REVIEW Page 3
TAX-FREE MINNESOTA FUND Page 3
MINNESOTA INSURED FUND Page 4
TAX-FREE MINNESOTA INTERMEDIATE FUND Page 5
MINNESOTA HIGH YIELD MUNICIPAL BOND FUND Page 6
OUTLOOK Page 7
STATEMENTS OF NET ASSETS Page 12
FINANCIAL HIGHLIGHTS Page 29

tradition

tax-exempt
income

<PAGE>

September 29, 1998

for tax-exempt
income
1

Dear Shareholder:

WE ARE PLEASED TO REPORT THAT EACH OF Delaware Investments' Minnesota Municipal
Bond Funds provided attractive total returns for the periods shown below.
The state's municipal bonds offered exceptional opportunities in fiscal
1998. Minnesota High Yield Municipal Bond Fund provided a total return (Class A
shares at net asset value with distributions reinvested) of +10.42%, a full 180
basis points (1.80%) higher than the average of the Fund's peers.
A greater supply of Minnesota bonds allowed us to be more selective in
picking bonds for each Fund's portfolio. We focused on municipalities whose
bonds appeared to offer superior income and credit characteristics.
Minnesota municipalities issued more than $3.4 billion in bonds during the
first eight months of 1998, as much as was issued during all of calendar 1997,
according to The Bond Buyer, a trade publication.
We changed each Minnesota Fund's fiscal year from December 31 to August 31
to match the fiscal year of Delaware Investments' other municipal bond funds. We
believe this change may yield long-run operational efficiencies. From now on,
you will receive an annual report by early November and a semi-annual report by
early May.
Increased overseas investor demand for Treasuries, caused by a "flight to
quality" from battered Asian and Russian markets, drove up bond prices this past

A GREATER SUPPLY OF MINNESOTA BONDS ALLOWED US TO BE MORE SELECTIVE IN PICKING
BONDS FOR EACH FUND'S PORTFOLIO.

CUMULATIVE TOTAL RETURN
- --------------------------------------------------------------------------------------------------------
January 1, 1998 12 Months Ended
to August 31, 1998 August 31, 1998
-------------------- -----------------
<S> <C> <C>
Tax-Free Minnesota Fund A Class +4.46% +8.76%
Minnesota Insured Fund A Class +4.28% +8.13%
Lipper Minnesota Municipal Debt Fund Average (47 funds) +4.03% +7.75%
- --------------------------------------------------------------------------------------------------------
Tax-Free Minnesota Intermediate Fund A Class +3.22% +6.01%
Lehman Brothers Five-Year Municipal Bond Index +3.91% +6.61%
Lipper Other States Intermediate Municipal Debt
Fund Average (76 funds) +3.57% +6.76%
- --------------------------------------------------------------------------------------------------------
Minnesota High Yield Municipal Bond Fund A Class +5.37% +10.42%
Lipper High-Yield Municipal Debt Fund Average (50 funds) +4.23% +8.62%
- --------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +4.54% +8.65%
Lehman Brothers Insured Municipal Bond Index +4.70% +9.19%
- --------------------------------------------------------------------------------------------------------
</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 Indexes are composed of bonds with a variety of quality ratings from
many states. Complete performance information for all funds can be found on
pages 8 through 11.
<PAGE>

for tax-exempt
income
2

summer. Municipal bonds participated in the rally to a lesser extent because:
o Municipal bond prices typically lag Treasury prices during a strong bond
market rally;
o A large amount of new municipal bonds were issued; and,
o Demand from individual retail investors was lackluster.
As of August 31, municipal bonds were trading at their most attractive
ratios since the flat-tax debate four years ago. Long-term municipal bonds
offered more than 93.8% of the income offered by 30-year Treasury bonds as of
August 31. That's up from an average of 88% for the 12 months ended August 31.
Economic problems and political instability in Asia and Latin America, and
debt defaults in Russia, rocked global equity markets including the U.S. stock
market. This fueled further demand for U.S. Treasury bonds.
In addition to providing an attractive level of current income exempt from
both federal and Minnesota income taxes, we believe municipal bonds can help
diversify an investment portfolio heavily weighted in equities.
On the following pages, your Fund's portfolio manager, Elizabeth H. Howell,
provides a detailed explanation regarding the performance of each Minnesota
municipal bond fund. Ms. Howell, who is based in Minneapolis, has nearly 14
years of investment experience.
On behalf of Delaware Investments, we thank you for your continued
confidence and we look forward to reporting to you again next spring.

Sincerely,

/s/ Wayne A. Stork
- ------------------
WAYNE A. STORK
Chairman

/s/ Jeffrey J. Nick
- -------------------
JEFFREY J. NICK
President and Chief Executive Officer

discipline

FIVE YEARS OF GROWTH -
A LOOK AT MINNESOTA'S JOB MARKET VS. THE U.S.
- ----------------------------------------------------------------------
UNEMPLOYMENT RATES
U.S. Minnesota
----- -----------
Aug. '93 6.8% 5.0%
Aug. '94 6.1% 3.9%
Aug. '95 5.7% 2.9%
Aug. '96 5.2% 3.8%
Aug. '97 4.9% 3.2%
Aug. '98 4.5% 2.3%

Source: Bloomberg Business News.

<PAGE>

for tax-exempt
income
3

Portfolio Manager's Review
BY ELIZABETH H. HOWELL
Vice President/Senior Portfolio Manager
September 29, 1998

U.S. INDUSTRIAL EXPANSION AND LOW interest rates provided a fertile environment
for the issuance of municipal bonds in fiscal 1998. Municipalities refinanced
old issues and rushed to obtain funding for new projects.
As of August 31, robust job growth in Minnesota led to an unemployment rate
of just 2.3% - the ninth consecutive monthly decline. Still, we believe growth
in the state could slow for the balance of calendar 1998 as a result of a
two-week strike by Northwest Airlines pilots in early September.
Northwest, based in Minneapolis accounts for 80% of the air traffic in and
out of the Twin Cities, and the disruption of business is expected to
negatively affect the third quarter results of many Minnesota businesses. The
strike was the longest against a major U.S. airline in this decade, idled 31,000
workers and cost Northwest $400 million in lost ticket sales and increased
costs.
Minnesota's municipalities remain in excellent fiscal shape despite the
strike, thanks to the consistent application of conservative fiscal policies. As
of August 31, Minnesota was one of only eight states to have a AAA general
obligation bond rating, the highest rating available for Standard & Poor's.

TAX-FREE MINNESOTA FUND
Tax-Free Minnesota Fund provided a total return of +8.76% (Class A shares at net
asset value with distributions reinvested) for the 12 months ended August 31,
1998.

AS OF AUGUST 31, MINNESOTA WAS ONE OF ONLY EIGHT STATES TO HAVE A AAA GENERAL
OBLIGATION BOND RATING, THE HIGHEST RATING AVAILABLE.

MINNESOTA FUNDS OFFER HIGHER
INCOME POTENTIAL THAN TREASURIES
- --------------------------------------------------------------------
CURRENT 30-DAY SEC YIELD AUGUST 31, 1998

Tax-Free Minnesota Fund A Class 4.16%
Minnesota Insured Fund A Class 3.91%
Tax-Free Minnesota Intermediate Fund A Class 3.98%
Minnesota High Yield A Class Municipal Bond Fund A Class 4.90%
30-Year U.S. Treasury Bonds After Taxes 3.13%

For A Class shares based on Securities and Exchange Commission guidelines.
Current 30-day SEC yields for B and C Class as of 8/31/98 were: Tax-Free
Minnesota Fund Class B 3.58%, Class C 3.57%, Minnesota Insured Fund Class B and
C 3.32%, Tax-Free Minnesota Intermediate Fund Class B 3.24%, Class C 3.25%,
Minnesota High Yield Municipal Bond Fund Class B and C 4.35%. Treasury yield
assumes the highest federal tax bracket of 39.6%. Unlike Treasury securities,
municipal bonds and municipal bond funds, including those offered through
Delaware Investments, are not guaranteed by the U.S. government. Yields
fluctuate and are not guaranteed.

<PAGE>

for tax-exempt
income
4

The Fund's fiscal 1998 performance surpassed its Lipper peer group average
by more than 100 basis points (1%) and, for the one-year period ended August 31,
provided a total return that ranked among the top 15% of funds specializing in
Minnesota bonds.* Minnesota Fund's robust fiscal 1998 total return also slightly
outpaced its benchmark - the Lehman Brothers Municipal Bond Index.
A low interest rate environment since mid-1997 unleashed a blizzard of
municipal bond refinancing in Minnesota. New issuance in the state has risen
more than 40% in calendar 1998, according to The Bond Buyer. We focused on bonds
selling at a discount to face value, and with good call protection features and
strong credit characteristics.
The Fund participated in the municipal bond market's strong total return
potential and maintained a relatively high income stream. We positioned the
Fund's average duration between 7.0 and 7.2 years for most of fiscal 1998. We
were comfortable with this range of sensitivity to interest rates because we
believed the nation's economic fundamentals - namely low inflation - would favor
lower interest rates.

MINNESOTA INSURED FUND
Minnesota Insured Fund provided a total return of +8.13% (Class A shares at net
asset value with distributions reinvested) for the 12 months ended August 31,
1998.
The Fund's results outpaced the average of its peers (see page 1) but
underperformed its benchmark, the unmanaged Lehman Brothers Insured Municipal
Bond Index, for the year ended August 31. The index is composed of insured bonds
from many states.
We manage the Fund with both dividend yield and price in mind. We focus on
bonds that offer a balance between attractive tax-exempt income and total
return. As of August 31, all bonds in the Fund's portfolio were rated AAA or
Aaa. These are the highest credit quality ratings

A LOW INTEREST RATE ENVIRONMENT DURING FISCAL 1998 UNLEASHED A BLIZZARD OF
MUNICIPAL BOND REFINANCING IN MINNESOTA.

minnesota insured

PORTFOLIO HIGHLIGHTS
- ----------------------------------------------------------------------------------------------
AUGUST 31, 1998
Tax-Free Minnesota Tax-Free Minnesota Minnesota High
Minnesota Insured Intermediate Yield Municipal
Fund Fund Fund Bond Fund
--------- --------- ------------------ ---------------
<S> <C> <C> <C> <C>
Average Maturity 8.8 years 9.1 years 5.3 years 10.6 years
Average Duration 7.1 years 6.7 years 4.3 years 7.3 years
AMT Income+ None 21.9% None none
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Percentage of income generated for the eight months ended August 31, 1998
that was subject to the federal alternative minimum tax.

* Tax-Free Minnesota Fund A Class shares ranked 6th out of 47 funds, 5th out
of 25 funds and 4th out of 12 funds for the one-year, five-year and
ten-year periods ended 8/31/98, according to Lipper Analytical Services.
Rankings are based on total return at net asset value. An expense
limitation was in effect for the periods shown. Returns and rankings would
have been lower without the limitation.
<PAGE>

for tax-exempt
income
5

[PHOTO OF FAMILY ON BEACH]

available as rated by Standard & Poor's and Moody's Investors Services, two of
the best known independent bond rating agencies.
The low interest rate environment of 1998 benefited the Fund. Minnesota
Insured Fund's share price rose as the value of its holdings increased. In fact,
many of the Fund's holdings appreciated substantially as bond issues were
refunded in advance and secured by U.S. Treasuries. Pre-refunded bonds
represented 31% of the Fund's net assets as of August 31.
The insured aspect of the Fund's bonds offers a degree of safety in the
event of default of one of its holdings. Most bonds in the Fund's portfolio are
protected by private insurance guaranteeing interest and principal payments.
Pre-refunded bonds have high credit quality and excellent liquidity. These
bonds are, by nature, defensive and can potentially provide shareholders with
better principal protection over time. In our view, it makes sense to hold these
bonds for a long period and collect an attractive level of income.

TAX-FREE MINNESOTA INTERMEDIATE FUND
Tax-Free Minnesota Intermediate Fund provided a total return of +6.01% (Class A
shares at net asset value with distributions reinvested) for the 12 months ended
August 31, 1998.
The Fund's results were modestly lower than its benchmark - the Lehman
Brothers Five-Year Municipal Bond Index - and its peer group average, as shown
on page 1.
We believe Minnesota's intermediate-term bond issues offer an attractive
opportunity to strike a balance between income risk and total return.
Intermediate-term bonds offer much of the income generated by longer term bonds,
but with much less price volatility.
The Fund performed well in the declining interest rate environment. The
bonds held in the portfolio are primarily non-callable, giving the Fund an
opportunity to maintain an attractive dividend. By having a minimal exposure to
callable bonds, we

WE BELIEVE MINNESOTA'S AGGRESSIVE PURSUIT OF FOREIGN TRADE BODES WELL FOR THE
STATE'S INDUSTRIAL DEVELOPMENT BONDS.

ASSET MIX
- -----------------------------------------------------------------------------------------------------
AUGUST 31, 1998
Tax-Free Minnesota Tax-Free Minnesota Minnesota High
Minnesota Insured Intermediate Yield Municipal
Fund Fund Fund Bond Fund
--------- --------- ------------------ ---------------
<S> <C> <C> <C> <C>
Housing 19.1% 19.3% 7.3% 29.8%
Health Care 21.3% 20.7% 14.8% 34.8%
General Obligation 13.0% 19.1% 5.6% 7.6%
Power Authority 17.9% 9.0% 4.7% 3.6%
Pre-Refunded 12.2% 31.2% 38.7% 0.4%
Education 4.9% -- 6.8% 4.3%
Industrial 8.5% -- 16.8% 9.9%
Cash & Other Revenue Bonds 3.1% 0.7% 5.3% 9.6%
</TABLE>

<PAGE>

for tax-exempt
income
6

believe the Fund has substantially reduced the risk associated with reinvesting
assets at lower interest rates.
We slightly increased the Fund's weighting in industrial development bonds
during the fiscal period. We believe Minnesota's strong industrial base and
relatively healthy regional economy bode well for industrial development bonds
held by the Fund.

MINNESOTA HIGH YIELD
MUNICIPAL BOND FUND
Minnesota High Yield Municipal Bond Fund provided a total return of +10.42% (for
A Class shares at net asset value with distributions reinvested) for the 12
months ended August 31, 1998. The Fund's performance for fiscal 1998 ranked in
the top 10% of its peer group, as explained below*.
Minnesota's strong economy led to selected credit upgrades in fiscal 1998.
The strong economy and low inflation boosted bond prices across the credit
quality spectrum, with lower quality higher risk bonds benefiting the most. For
this reason, Minnesota High Yield Municipal Bond Fund's return outpaced the
results of Delaware's three other Minnesota funds, which focus on higher quality
bonds.
As of August 31, approximately half of your Fund's net assets were invested
in investment grade bonds rated BBB or higher. The balance was invested in
smaller unrated securities.
Being unrated does not necessarily imply a bond is of low quality. Unrated
bonds may be issued by rural towns that have a limited history in selling
municipal bonds. Also, many smaller towns would rather forego the expensive
process of obtaining a rating from agencies such as Standard & Poor's or
Moody's.
Housing bonds remained one of the largest components of your Fund's
portfolio as of August 31. This sector includes financing for single family
homes, apartments, and senior citizen assisted living complexes. Housing bonds
increased the income potential of your Fund in calendar 1998 and, in our view,
are likely to make a positive contribution to the Fund's results in the coming
months.

MINNESOTA'S STRONG ECONOMY LED TO SELECTED CREDIT UPGRADES IN FISCAL 1998.

high-yield

<TABLE>
<CAPTION>
CREDIT QUALITY
- -----------------------------------------------------------------------------------------------------
AUGUST 31, 1998
Tax-Free Minnesota Tax-Free Minnesota Minnesota High
Minnesota Insured Intermediate Yield Municipal
Fund Fund Fund Bond Fund
--------- --------- ------------------ ---------------
<S> <C> <C> <C> <C>
AAA 47.6% 100% 38.7% 9.0%
AA 10.2% 0.0% 8.8% 15.8%
A 18.8% 0.0% 8.4% 15.1%
BBB 6.3% 0.0% 24.2% 15.2%
BB 0.0% 0.0% 0.0% 0.6%
B 0.0% 0.0% 0.0% 0.0%
Unrated 17.1% 0.0% 19.9% 44.3%
- -----------------------------------------------------------------------------------------------------
Average Quality AA AAA AA BBB
</TABLE>

* Minnesota High Yield Municipal Bond Fund A Class shares ranked 3rd out of 50
funds and 8th out of 42 funds for the one-year and lifetime periods ended
8/31/98, according to Lipper Analytical Services. Rankings are based on total
return at net asset value. An expense limitation was in effect for the periods
shown. Returns and rankings would have been lower without the limitation.

<PAGE>

for tax-exempt
income
7

OUTLOOK

Strong U.S. economic growth fueled investor concern regarding inflation and
higher interest rates at the beginning of fiscal 1998. Remarkably, the U.S.
economic engine is still firing on all cylinders and inflation is negligible.
Current investor concerns are quite different, however. Prolonged declines
in the prices of many commodities and financial problems in Asia, Russia and
more recently, Latin America, have sparked investor concern about falling prices
for goods and services. We believe this deflation is a distinct likelihood.
Some economists believe falling commodity prices are an indication that
interest rates may be too high. As of August 31, Treasury bonds at all points of
the maturity spectrum yielded less than the 5.5% federal funds rate - the first
time that has happened since 1990.
During a speech in early September, Federal Reserve Board Chairman Alan
Greenspan said he no longer saw inflation as a threat to the U.S. economy. On
September 29 and again in early October, the Fed reduced its short-term interest
rate target to 5%.
In our view, municipal bond yields may slightly decline in the months
ahead, while total return potential may remain attractive. We plan to seek bond
issues that allow each of Delaware's four Minnesota Municipal Bond Funds to
strike a balance between tax-exempt income and total return potential.
We believe Minnesota's municipal bond market can continue to present
compelling opportunities for investors seeking tax-exempt income. The personal
income tax in Minnesota ranges from 6% to 8.5%, one of the highest in the
nation. Over the coming months, we will pay close attention to global economic
developments and their effects on interest rates and your state's economy.

OVER THE COMING MONTHS, WE PLAN TO SEEK BONDS THAT ALLOW EACH OF DELAWARE'S FOUR
MINNESOTA MUNICIPAL BOND FUNDS TO STRIKE A BALANCE BETWEEN TAX-EXEMPT INCOME AND
TOTAL RETURN POTENTIAL.

[PHOTO OF PEOPLE TALKING]

outlook

MINNESOTA AT A GLANCE
- -------------------------------------------------------------------------------
AUGUST 31, 1998
- -------------------------------------------------------------------------------
Per Capita Income $25,580
Unemployment Rate 2.3%
Minneapolis Office Vacancy Rate+ 3.4%
Existing Single-Family Home Sales (2nd Quarter vs. 1st Quarter) +11.7%
- -------------------------------------------------------------------------------
+ Percentage of high quality office space available for lease

Source: Bloomberg Business News.
<PAGE>

for tax-exempt
income
8

Performance Summary

TAX-FREE MINNESOTA FUND'S PERFORMANCE
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
SEPTEMBER 1, 1988 TO AUGUST 31, 1998

Tax-Free Minnesota Lehman Brothers
Fund A Class Municipal Bond Index
------------ --------------------
Period End
Aug. '88 $ 9,628 $10,000
Aug. '89 $10,582 $11,098
Aug. '90 $11,138 $11,812
Aug. '91 $12,298 $13,205
Aug. '92 $13,594 $14,679
Aug. '93 $15,183 $16,470
Aug. '94 $15,128 $16,493
Aug. '95 $16,183 $17,955
Aug. '96 $17,073 $18,896
Aug. '97 $18,649 $20,642
Aug. '98 $20,283 $22,427

Chart assumes a $10,000 investment on September 1, 1988, 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 AUGUST 31, 1998
- -------------------------------------------------------------------------------
Lifetime Ten Years Five Years One Year
-------- --------- ---------- --------
Class A (Est. 2/27/84)
Excluding Sales Charge +8.97% +7.74% +5.97% +8.76%
Including Sales Charge +8.68% +7.33% +5.16% +4.69%
- -------------------------------------------------------------------------------
Class B (Est. 8/11/95)
Excluding Sales Charge +7.37% +7.95%
Including Sales Charge +6.64% +3.95%
- -------------------------------------------------------------------------------
Class C (Est. 5/4/94)
Excluding Sales Charge +6.69% +8.03%
Including Sales Charge +6.69% +7.03%

All performance includes reinvestment of distributions and applicable sales
charge 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
is not a guarantee of future results. Performance for Class B and C shares
excluding sales charge assumes either the investment was not redeemed or that
contingent sales charges did not apply. 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 Funds have a 12b-1 fee.
Class B shares do not have 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 up to 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
9

MINNESOTA INSURED FUND'S PERFORMANCE
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
SEPTEMBER 1, 1988 TO AUGUST 31, 1998

Minnesota Insured Lehman Brothers
Fund A Class Municipal Bond Index
------------ --------------------

Period End
Aug. '88 $ 9,621 $10,000
Aug. '89 $10,642 $11,098
Aug. '90 $11,186 $11,812
Aug. '91 $12,266 $13,205
Aug. '92 $13,671 $14,679
Aug. '93 $15,642 $16,470
Aug. '94 $15,513 $16,493
Aug. '95 $16,665 $17,955
Aug. '96 $17,553 $18,896
Aug. '97 $19,006 $20,642
Aug. '98 $20,552 $22,427

MINNESOTA INSURED FUND -
GROWTH OF A $10,000 INVESTMENT
- ---------------------------------------------------------
December 31, 1990 to December 31, 1998

Lehman Brothers Insured Municipal Bond Index: $19,894
Minnesota Insured Fund A Class: $17,026

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 RETURNS THROUGH AUGUST 31, 1998

Lifetime Ten Years Five Years One Year
-------- --------- ---------- --------
Class A (Est. 5/1/87)
Excluding Sales Charge +7.57% +7.73% +5.62% +8.13%
Including Sales Charge +7.21% +7.32% +4.82% +4.06%
- -------------------------------------------------------------------------------
Class B (Est. 3/7/95)
Excluding Sales Charge +6.91% +7.33%
Including Sales Charge +6.18% +3.33%
- -------------------------------------------------------------------------------
Class C (Est. 5/4/94)
Excluding Sales Charge +6.24% +7.23%
Including Sales Charge +6.24% +6.23%

Please turn to page 8 for important additional information. All performance
includes reinvestment of distributions and sales charges as described on page 8.
Past performance is not a guarantee of future results.

<PAGE>

for tax-exempt
income
10

TAX-FREE MINNESOTA INTERMEDIATE FUND'S PERFORMANCE
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
SEPTEMBER 1, 1988 TO AUGUST 31, 1998

Tax-Free Minnesota Lehman Brothers Five-Year
Intermediate Fund A Class Municipal Bond Index
------------------------- -------------------
Period End
Aug. '88 $ 9,724 $10,000
Aug. '89 $10,305 $10,781
Aug. '90 $10,925 $11,569
Aug. '91 $11,805 $12,765
Aug. '92 $12,809 $14,057
Aug. '93 $13,766 $15,324
Aug. '94 $13,988 $15,603
Aug. '95 $14,971 $16,838
Aug. '96 $15,484 $17,461
Aug. '97 $16,470 $18,615
Aug. '98 $17,459 $19,848

Chart assumes a $10,000 investment on September 1, 1988, 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 RETURNS THROUGH AUGUST 31, 1998

Lifetime Ten Years Five Years One Year
-------- --------- ---------- --------
Class A (Est. 10/27/85)
Excluding Sales Charge +6.16% +6.04% +4.89% +6.01%
Including Sales Charge +5.93% +5.74% +4.31% +3.12%
- -------------------------------------------------------------------------------
Class B (Est. 8/15/95)
Excluding Sales Charge +4.82% +5.30%
Including Sales Charge +4.82% +3.30%
- -------------------------------------------------------------------------------
Class C (Est. 4/30/94)
Excluding Sales Charge +4.89% +5.21%
Including Sales Charge +4.89% +4.21%

for tax-exempt
income
11

MINNESOTA HIGH YIELD MUNICIPAL BOND FUND'S PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
- -------------------------------------------------------------------------------
June 4, 1996 To August 31, 1998

Minnesota High Yield Lehman Brothers
Municipal Bond Fund A Class Municipal Bond Index
--------------------------- --------------------
Period End
Jun '96 $ 9,627 $10,000
Sept. '96 $ 9,780 $10,229
Dec. '96 $10,052 $10,490
Mar. '97 $10,109 $10,466
Jun. '97 $10,438 $10,826
Sep. '97 $10,792 $11,152
Dec. '97 $11,168 $11,454
Mar. '98 $11,323 $11,586
Jun. '98 $11,561 $11,762
Aug. '98 $11,876 $11,974

Chart assumes a $10,000 investment on June 4, 1996, 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 HIGH YIELD MUNICIPAL BOND FUND
AVERAGE ANNUAL RETURNS THROUGH AUGUST 31, 1998
- -------------------------------------------------------------------------------

Lifetime One Year
-------- --------
Class A (Est. 6/4/96)
Excluding Sales Charge +9.89% +10.42%
Including Sales Charge +8.03% +6.31%
- -------------------------------------------------------------------------------
Class B (Est. 6/12/96)
Excluding Sales Charge +10.21% +9.51%
Including Sales Charge +9.00% +5.51%
- -------------------------------------------------------------------------------
Class C (Est. 6/7/96)
Excluding Sales Charge +9.14% +9.62%
Including Sales Charge +9.14% +8.62%

<PAGE>

12 for tax-exempt income

Financial Statements

VOYAGEUR TAX-FREE FUNDS, INC.
DELAWARE-VOYAGEUR TAX-FREE MINNESOTA FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 99.93%
GENERAL OBLIGATION BONDS - 12.99%
Farmington Independent School District
Number 192 Capital Appreciation Series B
Zero Coupon 2/1/20 ............................ $2,650,000 $ 877,203
Farmington Independent School District
Number 192 Capital Appreciation Series B
Zero Coupon 2/1/21 ............................ 2,500,000 783,575
Hennepin County 5.75% 10/1/10 .................... 7,990,000 8,568,716
Hutchinson Independent School District Series A
(MN School District Enhanced)
5.85% 2/1/18 .................................. 1,700,000 1,839,162
Lakeville School District #194,
Inverse Floater (MBIA) 6.47% 2/1/15 ........... 4,250,000 4,406,018
Lakeville Independent School District
#194 Capital Appreciation Series B
Zero Coupon 2/1/19 ............................ 8,000,000 2,754,160
Mahtomedi Independent School District #832
Series B Zero Coupon (MBIA) 2/1/14 ............ 1,540,000 745,884
Minneapolis Convention Center Facilities,
Inverse Floater 7.07% 4/1/14 .................. 850,000 923,517
Minneapolis Sports Arena Project, Inverse Floater
6.42% 10/1/20 ................................. 4,220,000 4,403,654
Minneapolis Sports Arena Project, Inverse Floater
6.37% 4/1/14 .................................. 580,000 625,756
Minneapolis Unlimited Tax Series 1992
6.30% 10/1/08 ................................. 1,750,000 1,907,115
Minnetonka Independent School District #276
(FSA) 5.75% 2/1/22 ............................ 4,550,000 4,859,810
North St. Paul Maplewood Independent School
District #622, Inverse Floater
6.42% 2/1/20 .................................. 2,250,000 2,312,505
Pine Island Independent School District #255
(FSA) 6.625% 6/1/12 ........................... 240,000 255,367
Pine Island Independent School District #255
(FSA) 6.625% 6/1/13 ........................... 310,000 330,677
Pine Island Independent School District #255
(FSA) 6.625% 6/1/14 ........................... 330,000 352,011
Pine Island Independent School District #255
(FSA) 6.625% 6/1/15 ........................... 355,000 378,299
Pine Island Independent School District #255
(FSA) 6.625% 6/1/16 ........................... 380,000 404,533
Puerto Rico Commonwealth Public Improvement
4.50% 7/1/23 .................................. 500,000 461,965
Richfield Independent School District
#280 Series C, Inverse Floater
5.34% 2/1/15 .................................. 1,365,000 1,433,114

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
GENERAL OBLIGATION BONDS (CONTINUED)
Rochester Tax Increment 6.50% 12/1/04 ............ $ 1,000,000 $ 1,006,980
Rosemount - Apple Valley Independent School
District #196 Inverse Floater (FSA)
7.92% 4/1/15 .................................. 4,000,000 4,588,960
Rosemount Independent School District #196
Series B Zero Coupon (FSA) 4/1/11 ............. 2,600,000 1,474,616
Rosemount Independent School District #196
Zero Coupon (FSA) 4/1/12 ...................... 1,850,000 989,769
Rosemount Independent School District #196
Zero Coupon (FSA) 4/1/13 ...................... 1,915,000 971,480
Rosemount Independent School District #196,
Inverse Floater 5.875% 4/1/15 ................. 1,375,000 1,488,781
Sartell Independent School District #748
Zero Coupon (MBIA) 2/1/13 ..................... 540,000 276,075
Sartell Independent School District #748
Zero Coupon (MBIA) 2/1/15 ..................... 1,075,000 493,565
Sartell Independent School District #748
Zero Coupon (MBIA) 2/1/16 ..................... 1,750,000 745,693
Sartell Independent School District #748
Zero Coupon (MBIA) 2/1/17 ..................... 1,600,000 657,392
Spring Lake Park Independent School District #16,
Inverse Floater (MBIA) 6.67% 2/1/17 ........... 1,000,000 1,059,710
St. Paul Tax Increment - Block 39
Project A 4.75% 2/1/25 ........................ 2,000,000 1,896,180
Washington County 5.90% 2/1/10 ................... 1,680,000 1,763,278
-----------
56,035,520
-----------
HIGHER EDUCATION REVENUE BONDS - 4.88%
Minnesota Higher Education Augsburg College Series
4F1 6.25% 5/1/23 .............................. 1,000,000 1,074,150
Minnesota Higher Education Carleton College
5.75% 11/1/12 ................................. 4,000,000 4,304,600
Minnesota Higher Education Facilities Revenue
Hamline University 6.00% 10/1/12 .............. 1,250,000 1,339,900
Minnesota Higher Education Facilities Revenue
Hamline University 6.00% 10/1/16 .............. 1,790,000 1,894,268
Minnesota Higher Education St. Benedicts College
6.20% 3/1/16 .................................. 1,000,000 1,076,830
Minnesota Higher Education St. Thomas University
Series R2 5.60% 9/1/14 ........................ 1,000,000 1,038,080
University of Minnesota Series A 5.50% 7/1/21 .... 9,500,000 10,304,745
-----------
21,032,573
-----------
HOSPITAL REVENUE BONDS - 21.25%
Bemidji Hospital Facilities Revenue North County
Health 6.05% 9/1/16 ........................... 600,000 638,982

<PAGE>
for tax-exempt income 13

Bemidji Hospital Facilities Revenue North County
Health 6.05% 9/1/24 ............................. $ 1,825,000 $ 1,931,416
Brainerd Benedictine Health Care Systems for
St. Joseph's Hospital (Connie Lee)
6.00% 2/15/12 ................................... 2,250,000 2,423,475
Duluth Economic Development Authority
Benedictine for St. Luke's Hospital (Connie Lee)
6.40% 5/1/18 .................................... 3,295,000 3,569,210
Duluth Economic Development Authority St. Luke's
Hospital (Connie Lee) 6.00% 2/15/20 ............. 9,450,000 10,138,905
Little Canada Health Care 1992 (Presbyterian
Homes Guaranteed) 7.25% 7/1/12 .................. 1,000,000 1,042,170
Minneapolis Fairview Hospital Series 91B (MBIA)
6.50% 1/1/11 .................................... 3,000,000 3,267,180
Minneapolis Health Care American Baptist Homes
8.70% 11/1/09 ................................... 2,485,000 2,793,786
Minneapolis/St. Paul Housing & Redevelopment
Authority Children's Hospital Health Care,
Inverse Floater 7.17% 8/15/25 ................... 6,500,000 7,037,615
Minneapolis/St. Paul Housing & Redevelopment
Authority Health Care System for Healthspan
Series A (AMBAC) 4.75% 11/15/18 ................. 11,030,000 10,860,248
Minneapolis/St. Paul Housing & Redevelopment
Authority HealthOne (MBIA) 7.40% 8/15/11 ........ 1,360,000 1,470,514
Robbinsdale North Memorial Medical (AMBAC)
5.50% 5/15/23 ................................... 10,725,000 11,075,600
Rochester Health Care Facilities Revenue Reg IRS
for Mayo Clinic, Series H Inverse Floater
8.077% 11/15/15 ................................. 3,500,000 4,094,160
Rochester Health Care Facilities Revenue
Mayo Foundation Series B 5.50% 11/15/27 ......... 2,000,000 2,093,020
Springfield St. John's Lutheran Home Revenue
8.50% 11/1/19 ................................... 600,000 630,942
St. Cloud Hospital Facilities Revenue for
St. Cloud Hospital (AMBAC) 5.30% 10/1/20 ........ 7,250,000 7,408,340
St. Louis Park Commercial Development Revenue for
G&N LP Project (Methodist Hospital Guaranteed)
7.25% 6/1/13 .................................... 1,120,000 1,201,021
St. Louis Park Methodist Hospital (AMBAC)
5.20% 7/1/23 .................................... 10,220,000 10,324,448
St. Paul Housing and Redevelopment Hospital
Revenue for Health East Series A
6.625% 11/1/17 .................................. 8,900,000 9,620,277
-----------
91,621,309
-----------
HOUSING REVENUE BONDS - 19.08%
Austin Housing and Redevelopment Authority
Courtyard Residence Series 95A
7.25% 1/1/26 .................................... 500,000 553,420
Bloomington Housing and Redevelopment
Authority Senior Summerhouse Bloomington
Project 6.125% 5/1/35 ........................... 3,420,000 3,475,712

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
Brooklyn Center Multifamily Housing Revenue Bonds
Family Housing Project Section 8
5.90% 1/1/20 ...................................... $2,250,000 $2,350,350
Burnsville Multifamily Bridgeway Apartments
(FHA) 7.625% 2/1/24 ............................... 3,370,000 3,621,503
Burnsville Multifamily Coventry Court Apartments
Project (FHA) 7.50% 9/1/17 ........................ 1,000,000 1,039,030
Carver County Housing and Redevelopment
Authority Multifamily Revenue Lake Grace
Apartments 6.00% 7/1/28 ........................... 1,435,000 1,511,988
Dakota County Housing and Redevelopment Authority
Single Family (GNMA) 8.10% 3/1/16 ................. 100,000 103,125
Eagan Forest Ridge Apartments Project
(FHA) 7.50% 9/1/17 ................................ 1,000,000 1,033,810
Eden Prairie Multifamily Revenue Eden Investments
(FHA) 7.40% 8/1/25 ................................ 400,000 421,464
Eden Prairie Multifamily Windslope Apartments
Section 8 Housing 7.10% 11/1/17 ................... 1,585,000 1,687,534
Eden Prairie Multifamily Homes Tanager Creek
(GNMA) 8.05% 6/20/31 .............................. 7,605,000 8,953,747
Edina Park Plaza Multifamily Housing (FHA)
7.50% 12/1/09 ..................................... 1,490,000 1,559,121
Edina Park Plaza Multifamily Housing (FHA)
7.70% 12/1/28 ..................................... 1,250,000 1,299,850
Hopkins Renaissance Multifamily Housing Section 8
6.375% 4/1/20 ..................................... 1,000,000 1,071,900
Little Canada Multifamily Housing Revenue
Housing Alternative Development Company
Project Series A 6.10% 12/1/17 .................... 1,700,000 1,758,038
Little Canada Multifamily Housing Revenue
Housing Alternative Development Company
Project Series A 6.25% 12/1/27 .................... 2,900,000 3,008,866
Minneapolis Housing Facility Revenue for
Augustana Chapel View Project Series 1993
7.00% 4/1/18 ...................................... 1,000,000 1,027,280
Minneapolis Multifamily Mortgage for Seward Towers
Project (GNMA) 7.375% 12/20/30 .................... 4,000,000 4,212,720
Minneapolis-Nicollet Towers Multifamily Housing
Section 8 6.00% 12/1/19 ........................... 2,000,000 2,135,480
Minnesota Housing Finance Agency Multifamily
Housing 6.95% 2/1/14 .............................. 1,500,000 1,601,400
Minnesota Housing Finance Agency Multifamily
Housing Series 92A 6.95% 8/1/17 ................... 745,000 797,977
Minnesota Housing Finance Agency Rental Housing
Series B 6.25% 8/1/22 ............................. 985,000 998,091
Minnesota Housing Finance Agency Single Family
Mortgage 86 Series B 7.25% 7/1/16 ................. 815,000 816,247
Minnesota Housing Finance Agency Single Family
Mortgage Series B 7.30% 7/1/10 .................... 150,000 155,033
Minnesota Housing Finance Agency Single Family
Mortgage Series D 7.30% 7/1/09 .................... 325,000 336,170
Minnesota Housing Finance Agency Single Family
Mortgage Series C 7.65% 7/1/08 .................... 395,000 415,698

<PAGE>
14 for tax-exempt income

TAX-FREE MINNESOTA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
Minnesota Housing Finance Agency Single Family
Mortgage Series 91C 7.10% 7/1/11 ................ $ 1,010,000 $ 1,073,287
Minnetonka Multifamily Beacon Hill Project
(Presbyterian Homes Guaranteed)
7.70% 6/1/25 .................................... 2,000,000 2,167,980
Oakdale Housing Oak Meadows Project
7.00% 4/1/27 .................................... 6,800,000 7,311,700
Park Rapids Multifamily Revenue
The Court Apartments Project Section 8
6.30% 2/1/20 .................................... 3,255,000 3,334,748
Red Wing Housing and Redevelopment Agency
Jordan Tower Section 8 Series 92
7.00% 1/1/19 .................................... 1,500,000 1,638,585
St. Cloud Germain Towers Housing Series 1993
Section 8 5.90% 9/1/20 .......................... 2,000,000 2,084,780
St. Louis Park Residential Mortgage
Revenue for Single Family (GNMA)
7.25% 4/20/23 ................................... 1,523,000 1,613,725
St. Louis Park Multifamily Housing Revenue
Community Housing (FHA) 6.25% 12/1/28 ........... 3,855,000 4,145,821
St. Louis Park Multifamily Westwind Apartments
Housing (GNMA) 5.75% 1/1/29 ..................... 3,865,000 4,023,890
St. Paul Housing and Redevelopment Agency
(Executive Life Guaranteed Investment
Contract) Como Lake Project (FHA)
7.50% 3/1/26 .................................... 1,000,000 980,000
St. Paul Housing and Redevelopment Single Family
Mortgage (FNMA) 6.90% 12/1/11 ................... 59,000 61,164
St. Paul Housing and Redevelopment Single Family
Mortgage (FNMA) 6.90% 12/1/21 ................... 1,650,000 1,757,448
Spring Park Twin Birch Health Care
Center (Guarantor: Presbyterian Homes of
Minnesota) 8.25% 8/1/11 ......................... 600,000 640,974
Stillwater Multifamily Housing Stillwater Cottages
7.00% 11/1/27 ................................... 1,000,000 1,038,900
Wadena Housing and Redevelopment Agency Humphrey
Manor Section 8 6.00% 2/1/19 .................... 2,130,000 2,231,537
Wells Housing and Redevelopment Agency Broadway
Apartment Project Section 8 7.00% 1/1/19 ........ 1,060,000 1,134,772
Willmar Housing and Redevelopment Agency Highland
Apartments Section 8 5.85% 6/1/19 ............... 1,050,000 1,094,520
-----------
82,279,385
-----------
INDUSTRIAL DEVELOPMENT REVENUE
BONDS - 8.47%
Andover Development Revenue
Downtown Center Project Series A
7.00% 12/1/12 ................................... 1,000,000 1,071,580
Anoka Resource Recovery Revenue for
Northern States Power Co
Series 85 7.15% 12/1/08 ......................... 1,000,000 1,056,190
Becker Pollution Control Revenue for
Northern States Power Co
Series 89A 6.80% 4/1/07 ......................... 2,000,000 2,074,560

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
INDUSTRIAL DEVELOPMENT REVENUE BONDS (CONTINUED)
Cloquet Pollution Control Revenue for Potlatch
Corporation 5.90% 10/1/26 ....................... $15,000,000 $15,996,750
East Grand Forks for American Crystal Sugar
Pollution Control Revenue 7.75% 4/1/18 .......... 1,230,000 1,346,567
International Falls Pollution Control
Revenue Boise Cascade Project
5.65% 12/1/22 ................................... 1,500,000 1,531,155
Richfield Commercial Development Revenue
for Richfield Shoppes 8.375% 10/1/13 ............ 2,200,000 2,540,692
Seaway Port Authority Duluth Industrial
Development Dock & Wharf Revenue Cargill
Project Series E 6.125% 11/1/14 ................. 4,500,000 4,974,345
St. Cloud Commercial Development Revenue
for Northwest Center Association
7.50% 8/1/12 .................................... 4,283,971 4,585,391
St. Paul Minnesota Port Authority Commercial
Development Revenue Fort Rd Medical
(Asset Gty) 7.50% 9/1/02 ........................ 1,300,000 1,350,492
-----------
36,527,722
-----------
LEASE/CERTIFICATES OF PARTICIPATION - 0.66%
Beltrami County Housing & Redevelopment Authority
Revenue 6.20% 2/1/14 ............................ 1,010,000 1,071,186
West St. Paul Commercial Mortgage K-Mart Lease
7.00% 11/1/07 ................................... 1,599,589 1,766,666
-----------
2,837,852
-----------
POWER AUTHORITY REVENUE BONDS - 17.85%
Bass Brook Pollution Control Revenue for Minnesota
Power and Light 6.00% 7/1/22 .................... 17,490,000 18,474,862
Bass Brook Pollution Control Revenue for Minnesota
Power & Light Company (MBIA)
6.00% 7/1/22 .................................... 1,750,000 1,871,398
Northern Minnesota Municipal Power Agency (FSA)
5.25% 1/1/13 .................................... 4,000,000 4,165,760
Northern Minnesota Municipal Power Agency Electric
System Revenue (AMBAC) 5.50% 1/1/18 ............. 9,200,000 9,451,252
Northern Minnesota Municipal Power Agency Zero
Coupon (AMBAC) 1/1/09 ........................... 3,815,000 2,438,701
Northern Municipal Power Agency Minnesota
Electric Systems Revenue 5.40% 1/1/15 ........... 2,000,000 2,082,160
Puerto Rico Electric Power Authority
5.25% 7/1/21 .................................... 1,500,000 1,518,765
Puerto Rico Electric Power Authority Power Revenue
Series DD (FSA) 4.50% 7/1/19 .................... 6,100,000 5,790,974
Puerto Rico Electric Power Authority Series EE
4.75% 7/1/24 .................................... 3,900,000 3,731,949
Puerto Rico Electric Power Authority Series X
5.50% 7/1/25 .................................... 2,930,000 3,003,426
Southern Minnesota Municipal Power Agency (FGIC)
5.75% 1/1/18 .................................... 2,000,000 2,118,800
Southern Minnesota Municipal Power Agency (MBIA)
4.75% 1/1/16 .................................... 7,200,000 7,074,360

<PAGE>
for tax-exempt income 15

TAX-FREE MINNESOTA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
POWER AUTHORITY REVENUE BONDS (CONTINUED)
Southern Minnesota Municipal Power Agency (MBIA)
5.75% 1/1/18 .................................... $ 7,770,000 $ 8,231,538
Southern Minnesota Municipal Power Agency Supply
System (AMBAC) 5.50% 1/1/15 ..................... 1,560,000 1,618,874
Southern Minnesota Municipal Power Agency Zero
Coupon (MBIA) 1/1/19 ............................ 4,785,000 1,719,059
Southern Minnesota Municipal Power Agency Zero
Coupon (MBIA) 1/1/21 ............................ 5,000,000 1,659,950
Virgin Islands Water and Power Authority Electric
System Revenue 5.30% 7/1/18 ..................... 500,000 505,660
Virgin Islands Water and Power Authority Electric
Systems Revenue 5.30% 7/1/21 .................... 1,000,000 1,009,560
Western Municipal Power Agency Revenue
6.125% 1/1/16 ................................... 525,000 526,696
-----------
76,993,744
-----------
*PRE-REFUNDED BONDS/ESCROWED TO
MATURITY - 12.21%
Albert Lea St. John's Luthern Home Project
8.50% 11/1/19-99 ................................ 1,000,000 1,084,900
Anoka County Capital Improvement
7.20% 2/1/08-99 ................................. 1,000,000 1,012,840
Blaine Industrial Development Revenue (Ball Corp.)
(Escrowed to Maturity) 8.25% 12/1/00 ............ 300,000 303,534
Blaine Industrial Development Revenue (Ball Corp.)
(Escrowed to Maturity) 8.25% 12/1/99 ............ 250,000 252,945
Bloomington Tax Increment (Escrowed to Maturity)
9.75% 2/1/08 .................................... 500,000 654,520
Brainerd Independent School District #181
7.00% 6/1/11-01 ................................. 390,000 417,160
Edina Fairview Hospital Revenue
7.125% 7/1/19-99 ................................ 2,500,000 2,609,075
Faribault Independent School District #656
(MN School District Credit Enhanced)
6.10% 6/1/10-04 ................................. 1,000,000 1,085,910
Glencoe/McLeod County Health Care
8.50% 12/1/15-00 ................................ 500,000 550,960
Kenyon Wanamingo Independent School District
(MBIA) 6.00% 2/11/18-05 ......................... 2,350,000 2,568,926
Maplewood Independent School District #622
(FSA) 7.10% 2/1/25-05 ........................... 10,000,000 11,675,800
Minnesota Public Facilities Authority Water
Pollution Control Series 90A
7.10% 3/1/12-00 ................................. 1,990,000 2,127,589
Minnesota Public Facilities Authority Water
Pollution Control 6.95% 3/1/13-01 ............... 5,220,000 5,713,342
Minnesota Public Facilities Authority Water
Pollution Control 6.25% 3/1/16-05 ............... 4,400,000 4,934,600
Northern Minnesota Municipal Power Agency
Series 89A 7.25% 1/1/16-99 ...................... 5,875,000 6,062,354
Owatanna Public Utilities 6.75% 1/1/16-01 .......... 1,000,000 1,065,750

<PAGE>

PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
*PRE-REFUNDED BONDS/ESCROWED TO MATURITY (CONTINUED)
Plainview Independent School District #810
6.70% 2/1/06-03 ............................... $ 385,000 $ 422,233
Plainview Independent School District #810
6.75% 2/1/08-03 ............................... 445,000 488,922
Plainview Independent School District #811
6.75% 2/1/07-03 ............................... 420,000 461,454
Southern Minnesota Municipal Power Agency Revenue
(MBIA) (Escrowed to Maturity)
5.75% 1/1/18 .................................. 1,000,000 1,080,840
Southern Minnesota Municipal Power Agency Supply
System (AMBAC) (Escrowed to Maturity)
5.50% 1/1/15 .................................. 990,000 1,035,223
St. Cloud Housing and Redevelopment Agency
Northway A&B Project Section 8
7.50% 12/1/18-00 .............................. 2,045,000 2,247,455
St. Louis Park Methodist Hospital (AMBAC)
7.25% 7/1/18-00 ............................... 775,000 838,062
Stillwater Independent School District #834
(MBIA) 5.75% 2/1/15-05 ........................ 2,000,000 2,151,640
University of Minnesota Series A (Escrowed to
Maturity) 6.00% 2/1/11 ........................ 1,500,000 1,513,170
Western Minnesota Municipal Power Agency Revenue
(Escrowed to Maturity) 9.75% 1/1/16 ........... 185,000 285,461
------------
52,644,665
------------
WATER & SEWER REVENUE BONDS - 1.16%
Puerto Rico Aqueduct & Sewer Authority
5.00% 7/1/19 .................................. 3,000,000 3,004,410
Puerto Rico Aqueduct & Sewer Authority
5.00% 7/1/15 .................................. 2,000,000 2,010,660
------------
5,015,070
------------
OTHER REVENUE BONDS - 1.38%
Minneapolis Community Development Agency Common
Bond Fund 7.95% 12/1/11 ....................... 855,000 961,978
Minneapolis Community Development Agency Common
Bond Fund 7.40% 12/1/21 ....................... 795,000 871,470
Minneapolis Community Development Agency Common
Bond Fund Opportunity Workshop Project
Series 2A 7.125% 12/1/05 ...................... 510,000 558,154
Minneapolis Community Development Agency Tax
Increment Revenue Zero Coupon 9/1/09 .......... 5,750,000 3,570,980
------------
5,962,582
------------
Total Municipal Bonds (cost $393,270,537) ........ 430,950,422
------------

NUMBER OF
SHARES
----------
SHORT-TERM INVESTMENTS - 0.34%
Federated Minnesota Municipal Money Market ......... 1,465,102 1,465,102
---------
Total Short-Term Investments
(cost $1,465,102) ............................... 1,465,102
---------

<PAGE>
16 for tax-exempt income

NET ASSET VALUE - TAX-FREE MINNESOTA FUND A CLASS
($416,112,575 / 31,954,316 SHARES) ...................... $13.02
======
NET ASSET VALUE - TAX-FREE MINNESOTA FUND B CLASS
($10,246,255 / 786,680 SHARES) .......................... $13.02
======
NET ASSET VALUE - TAX-FREE MINNESOTA FUND C CLASS
($4,913,634 / 376,914 SHARES) ........................... $13.04
======

- ------------
* 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 Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association

COMPONENTS OF NET ASSETS AT AUGUST 31, 1998:
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 ............... $ 392,677,184
Distributions in excess of net investment income .............. (69,357)
Accumulated net realized gain on investments .................. 984,752
Net unrealized appreciation of investments .................... 37,679,885
-------------
Total net assets .............................................. $ 431,272,464
=============

NET ASSET VALUE AND OFFERING PRICE FOR
TAX-FREE MINNESOTA FUND A CLASS
Net asset value per share (A) ...................................... $13.02
Sales charge (3.75% of offering price or 3.92% of amount
invested per share) (B) ......................................... 0.51
------
Offering price ..................................................... $13.53
======
- ------------
(A) Net asset value per share illustrated is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free Minnesota Fund A Class.

See accompanying notes

<PAGE>

VOYAGEUR INSURED FUNDS, INC.
DELAWARE-VOYAGEUR MINNESOTA INSURED FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 100.68%
GENERAL OBLIGATION BONDS - 19.11%
Anoka County Capital Improvement Series C
(FGIC) 5.90% 2/1/11 ............................... $8,045,000 $8,415,231
Becker Refunding tax Increment Series D
(MBIA) (AMT) 6.25% 8/1/15 ......................... 6,300,000 6,825,609
Becker Wastewater Treatment Facility Series A
(MBIA) 5.95% 2/1/14 ............................... 500,000 533,710
Buffalo Independent School District #887
(FSA) 6.10% 2/1/15 ................................ 1,030,000 1,098,619
Dakota County Refunding Series B (AMBAC)
6.40% 2/1/08 ...................................... 1,135,000 1,173,862
Dakota County Refunding Series B (AMBAC)
6.45% 2/1/09 ...................................... 1,000,000 1,034,220
Dakota County Refunding Series B (AMBAC)
6.45% 2/1/10 ...................................... 2,500,000 2,585,550
Eden Prairie Independent School District #272
(MBIA) 5.65% 2/1/13 ............................... 3,200,000 3,317,088
Eden Prairie Independent School
District #272, Inverse Floater (FGIC)
6.42% 2/1/14 ...................................... 1,125,000 1,200,611
Eden Prairie Independent School District #272,
Inverse Floater (MBIA) 6.42% 2/1/15 ............... 1,000,000 1,056,880
Elk River Independent School District #728
Series 92 B (AMBAC) 6.00% 2/1/09 .................. 3,950,000 4,212,122
Hennepin County Ref Solid Waste IBC (MBIA)
5.75% 10/1/10 ..................................... 1,800,000 1,917,792
Hopkins Independent School District #270 (MBIA)
4.875% 2/1/14 ..................................... 1,875,000 1,890,094
Lakeville Independent School District
#194 Capital Appreciation Series B Zero Coupon
(FSA) 2/1/15 ...................................... 2,455,000 1,072,909
Lakeville Independent School District #194 Capital
Appreciation Series B Zero Coupon (FSA)
2/1/17 ............................................ 2,490,000 968,411
North Branch Independent School District #138,
Inverse Floater (FGIC) 7.17% 2/1/11 ............... 965,000 1,076,043
Prior Lake Independent School District #719,
Inverse Floater (FGIC) 6.17% 2/1/14 ............... 1,000,000 1,067,230
Rosemount Independent School District #196
Zero Coupon (FSA) 4/1/09 .......................... 1,860,000 1,178,608
Rosemount Independent School District #196
Series B Zero Coupon (FSA) 4/1/10 ................. 2,240,000 1,344,179
South Washington County Independent School
District #883 (FGIC) 6.125% 6/1/09 ................ 1,430,000 1,501,300
South Washington County Independent School
District #883 (FGIC) 6.125% 6/1/11 ................ 2,720,000 2,852,029
Spring Lake Park Independent School District #16,
Inverse Floater (MBIA) 6.67% 2/1/14 ............... 2,175,000 2,334,515
St. Cloud Independent School District #742 (FGIC)
6.05% 2/1/09 ...................................... 1,000,000 1,068,350

<PAGE>
for tax-exempt income 17

MINNESOTA INSURED FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
GENERAL OBLIGATION BONDS (CONTINUED)
St. Francis Independent School District #15 (FGIC)
5.90% 4/1/10 .................................... $ 1,845,000 $ 1,960,110
Stillwater Independent School District #834 (FGIC)
5.50% 2/1/10 .................................... 2,995,000 3,095,303
Western Lake Superior Series A (MBIA) (AMT)
6.00% 10/1/08 ................................... 400,000 439,056
Western Lake Superior Series A (MBIA) (AMT)
6.10% 10/1/09 ................................... 425,000 466,348
Western Lake Superior Series A (MBIA) (AMT)
6.20% 10/1/10 ................................... 450,000 496,485
Western Lake Superior Series A (MBIA) (AMT)
6.20% 10/1/11 ................................... 475,000 519,550
-----------
56,701,814
-----------
HOSPITAL REVENUE BONDS - 20.74%
Bloomington Masonic Home Care Center
(AMBAC) 5.90% 7/1/09 ............................ 1,250,000 1,344,738
Brainerd Benedictine Health Care Systems for
St. Joseph's Hospital (Connie Lee)
6.00% 2/15/12 ................................... 1,500,000 1,615,650
Brainerd Benedictine Health Care Systems for
St. Joseph's Hospital (Connie Lee)
6.00% 2/15/20 ................................... 2,000,000 2,141,620
Detroit Lakes Benedictine Health for St. Mary's
Hospital (Connie Lee) 6.00% 2/15/12 ............. 1,630,000 1,755,673
Detroit Lakes Benedictine Health for St. Mary's
Hospital (Connie Lee) 6.00% 2/15/19 ............. 1,000,000 1,070,810
Duluth Economic Development Authority Benedictine
for St. Luke's Hospital (Connie Lee)
6.40% 5/1/18 .................................... 500,000 541,610
Duluth Economic Development Authority Health Care
Duluth Clinic (AMBAC) 6.30% 11/1/22 ............. 2,690,000 2,938,960
Duluth Economic Development Authority Health Care
Revenue for St. Mary's Hospital, Inverse Floater
(Connie Lee) 8.22% 2/15/17 ...................... 5,000,000 5,692,650
Duluth Economic Development Authority St. Luke's
Hospital (Connie Lee) 6.40% 5/1/10 .............. 3,335,000 3,636,251
Duluth Economic Development Authority St. Luke's
Hospital (Connie Lee) 6.00% 2/15/20 ............. 1,300,000 1,394,770
Minneapolis Fairview Hospital Series 91B (MBIA)
6.50% 1/1/11 .................................... 3,000,000 3,267,180
Minneapolis Health Care Facility Revenue
Fairview Hospital & Healthcare Series A (MBIA)
5.25% 11/15/19 .................................. 2,750,000 2,802,580
Minneapolis/St. Paul Housing & Redevelopment
Authority - Childrens Hospital,
Inverse Floater (FSA) 7.57% 8/15/16 ............. 1,310,000 1,479,619
Minneapolis/St. Paul Housing & Redevelopment
Authority Health Care System for Healthspan
Series 93A (FSA) 5.00% 11/15/13 ................. 6,490,000 6,567,750
Minneapolis/St. Paul Housing & Redevelopment
Authority Health Care System for Healthspan
Series A (AMBAC) 4.75% 11/15/18 ................. 4,000,000 3,938,440

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
HOSPITAL REVENUE BONDS (CONTINUED)
Minneapolis/St. Paul Housing & Redevelopment
Authority HealthOne (MBIA) 7.40% 8/15/05 ........ $ 600,000 $ 649,584
Minneapolis/St. Paul Housing & Redevelopment
Authority HealthOne (MBIA) 7.40% 8/15/11 ........ 2,370,000 2,562,586
Minnesota Agricultural & Economic Development
Fairview Hospital Series 97A (MBIA)
5.75% 11/15/26 .................................. 8,250,000 8,929,718
Robbinsdale North Memorial Medical (AMBAC)
5.50% 5/15/23 ................................... 5,400,000 5,576,526
St. Louis Park Health Care for Methodist Hospital,
Inverse Floater (AMBAC) 6.32% 7/1/23 ............ 2,500,000 2,566,725
St. Paul Ramsey Medical (AMBAC)
5.50% 5/15/13 ................................... 1,000,000 1,045,450
-----------
61,518,890
-----------
HOUSING REVENUE BONDS - 19.27%
Chaska Waters Edge Multifamily Revenue
(GNMA) 7.30% 1/20/30 ............................ 3,257,000 3,664,288
Dakota County Housing & Redevelopment Authority
Single Family Mortgage Revenue
(FNMA) 6.70% 10/1/17 ............................ 4,780,000 5,153,079
Dakota County Housing & Redevelopment Authority
Single Family Mortgage Revenue
(GNMA/FNMA) 5.85% 10/1/30 ....................... 7,000,000 7,325,080
Dakota, Washington and Stearns Counties
Housing & Redevelopment Authority Single
Family Mortgage Revenue (MBIA)
7.85% 12/1/30 ................................... 150,000 157,112
Eagan Multifamily Revenue Woodridge Apartments
(GNMA) 5.90% 8/1/20 ............................. 1,000,000 1,068,950
Hopkins Multifamily Housing Auburn Apartments
(GNMA) 8.05% 6/20/31 ............................ 3,790,000 4,360,509
Minneapolis/St. Paul Housing Finance Board Housing
Project Phase V (GNMA) 8.875% 11/1/18 ........... 65,000 66,483
Minneapolis/St. Paul Housing Finance Board
Housing Project Phase IX (GNMA)
7.25% 8/1/21 .................................... 1,115,000 1,190,987
Minneapolis/St. Paul Housing Finance Board
Housing Project Phase IX (GNMA)
7.30% 8/1/31 .................................... 745,000 791,428
Minneapolis/St. Paul Housing Finance Board
Single Family Mortgage Revenue (GNMA)
8.125% 12/1/14 .................................. 135,000 139,678
Minneapolis /St. Paul Housing Finance Board Single
Family Mortgage Revenue (GNMA)
8.30% 8/1/21 .................................... 95,000 97,151
Minneapolis/St. Paul Housing Finance
Board Single Family Mortgage-Project Phase XI
(GNMA) 5.80% 11/1/30 ............................ 2,705,000 2,819,935
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series A (AMBAC)
7.05% 7/1/22 .................................... 505,000 533,805

<PAGE>
18 for tax-exempt income

MINNESOTA INSURED FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series A (AMBAC)
7.45% 7/1/22 .................................... $ 1,395,000 $ 1,469,953
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series A (MBIA)
7.95% 7/1/22 .................................... 305,000 319,722
Minnesota Housing Finance Agency Single Family
Mortgage Revenue Series B (MBIA)
7.25% 7/1/06 .................................... 125,000 125,191
Minnesota Housing Finance Agency Single Family
Housing Rental (AMBAC)
5.95% 2/1/15 .................................... 2,480,000 2,636,538
Minnesota Housing Finance Agency Single Family
Housing Rental (MBIA)
5.95% 2/1/18 .................................... 6,950,000 7,354,490
Minnesota Housing Finance Agency Single Family
Housing Rental Series A (AMBAC) (AMT)
5.875% 8/1/28 ................................... 2,610,000 2,755,142
Minnesota State Housing Finance Agency Single
Family Mortgage Series D (AMBAC) (AMT)
5.80% 7/1/21 .................................... 4,185,000 4,410,739
Minnetonka Multifamily Housing Cedar Hills Project
Cedar Hills East (FHA) 7.50% 12/1/17 ............ 400,000 418,188
Minnetonka Multifamily Housing Cedar Hills Project
Cedar Hills East (FHA) 7.50% 12/1/27 ............ 500,000 519,845
Scott County Housing & Redevelopment
Authority Facility Lease Revenue Justice Center
Project (AMBAC) 5.50% 12/1/15 ................... 1,755,000 1,855,105
South St. Paul Housing & Redevelopment Authority
Single Family Housing Mortgage
Series 93 (FNMA) 5.75% 9/1/20 ................... 2,410,000 2,504,207
St. Paul Housing & Redevelopment Authority
Multifamily Housing (FHA) 6.60% 10/1/12 ......... 4,000,000 4,300,200
White Bear Lake Multifamily Housing Lake Square
(FHA) 5.875% 2/1/15 ............................. 1,055,000 1,120,315
-----------
57,158,120
-----------
LEASE/CERTIFICATES OF PARTICIPATION - 0.69%
Stearns County Housing & Redevelopment Authority
Courthouse Project (AMBAC) 7.00% 2/1/11 ......... 2,000,000 2,055,300
-----------
2,055,300
-----------
POWER AUTHORITY REVENUE BONDS - 8.99%
Bass Brook Pollution Control Revenue for Minnesota
Power & Light Company (MBIA)
6.00% 7/1/22 .................................... 2,000,000 2,138,740
Marshall Utility Revenue (FSA) 6.45% 7/1/10 ........ 500,000 550,495
Marshall Utility Revenue (FSA) 6.45% 7/1/11 ........ 100,000 109,870
Marshall Utility Revenue (FSA) 6.50% 7/1/12 ........ 500,000 549,060
Marshall Utility Revenue (FSA) 6.50% 7/1/13 ........ 500,000 550,435
Northern Minnesota Municipal Power Agency (FSA)
5.25% 1/1/13 .................................... 4,750,000 4,946,840
Northern Minnesota Municipal Power Agency Electric
System Revenue (AMBAC) 5.50% 1/1/18 ............. 4,200,000 4,314,702

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
POWER AUTHORITY REVENUE BONDS (CONTINUED)
Puerto Rico Electric Power Authority Power Revenue
Series DD (FSA) 4.50% 7/1/19 $4,300,000 $4,082,152
Southern Minnesota Municipal Power Agency (MBIA)
4.75% 1/1/16 2,400,000 2,358,120
Southern Minnesota Municipal Power Agency
(AMBAC) 5.75% 1/1/18 1,330,000 1,409,002
Southern Minnesota Municipal Power Agency (FGIC)
5.75% 1/1/18 4,570,000 4,841,458
Southern Minnesota Municipal Power Agency, Inverse
Floater (FGIC) 7.67% 1/1/18 750,000 820,155
------------
26,671,029
------------
*PRE-REFUNDED/ESCROWED TO MATURITY
BONDS - 31.23%
Alexandria Independent School District #206
(MBIA) 6.30% 2/1/13 Crossover Refunded
to 2/1/03 ....................................... 1,775,000 1,924,331
Brainerd Independent School District #181
(FGIC) 7.00% 6/1/09-01 .......................... 515,000 552,245
Brainerd Independent School District #181
(FGIC) 7.00% 6/1/10-01 .......................... 550,000 589,776
Carver County Housing & Redevelopment Authority
Jail Facility (MBIA) 6.40% 2/1/10
Crossover Refunded to 2/1/02 .................... 515,000 550,128
Carver County Housing & Redevelopment Authority
Jail Facility (MBIA) 6.40% 2/1/11
Crossover Refunded to 2/1/02 .................... 550,000 587,516
Carver County Housing & Redevelopment Authority
Jail Facility (MBIA) 6.40% 2/1/12
Crossover Refunded to 2/1/02 .................... 585,000 624,903
Carver County Housing & Redevelopment Authority
Jail Facility (MBIA) 6.40% 2/1/13
Crossover Refunded to 2/1/02 .................... 625,000 667,631
Carver County Housing & Redevelopment Authority
Jail Facility (MBIA) 6.40% 2/1/14
Crossover Refunded to 2/1/02 .................... 670,000 715,701
Centennial Independent School District #12
(FSA) 7.10% 2/1/09-00 ........................... 200,000 209,482
Centennial Independent School District #12
(FSA) 7.15% 2/1/11-00 ........................... 450,000 471,641
Centennial Independent School District #12
(FSA) 7.15% 2/1/12-00 ........................... 250,000 262,023
Dakota & Washington Counties Housing &
Redevelopment Authority Single Family
Mortgage Revenue (Escrowed to Maturity)
(GNMA) 8.375% 09/1/21 ........................... 14,115,000 20,433,862
Dakota & Washington Counties Housing &
Redevelopment Authority Single Family
Mortgage Revenue (Escrowed to Maturity)
(MBIA) 8.15% 9/1/16 ............................. 405,000 544,693
Dakota, Washington & Anoka Counties Housing &
Redevelopment Authority Single
Family Housing (Escrowed to Maturity)
(GNMA) 8.45% 9/1/19 ............................. 9,000,000 12,810,510

<PAGE>
for tax-exempt income 19

MINNESOTA INSURED FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
*PRE-REFUNDED/ESCROWED TO MATURITY BONDS (CONTINUED)
Delano Independent School District #879
(AMBAC) 7.25% 2/1/10-01 ......................... $ 500,000 $ 535,425
Duluth Economic Development Authority Health
Care - Duluth Clinic (AMBAC)
6.30% 11/1/22-04 ................................ 1,060,000 1,188,822
Eden Prairie Independent School District #272
(FGIC) 5.85% 2/1/13 Crossover Refunded
to 2/1/02 ....................................... 2,500,000 2,631,350
Elk River Independent School District #728
(FSA) 7.00% 2/1/10-00 ........................... 200,000 208,060
Elk River Independent School District #728
(FSA) 6.30% 2/1/14-02 ........................... 500,000 533,350
Elk River Independent School District #728
(FSA) 6.30% 2/1/15-02 ........................... 665,000 709,356
Ellendale Geneva Independent School District #762
(AMBAC) 6.00% 2/1/10-03 ......................... 230,000 246,406
Ellendale Geneva Independent School District #762
(AMBAC) 6.00% 2/1/11-03 ......................... 245,000 262,476
Ellendale Geneva Independent School District #762
(AMBAC) 6.00% 2/1/12-03 ......................... 265,000 283,902
Ellendale Geneva Independent School District #762
(AMBAC) 6.00% 2/1/13-03 ......................... 280,000 299,972
Ellendale Geneva Independent School District #762
(AMBAC) 6.00% 2/1/14-03 ......................... 300,000 321,399
Ellendale Geneva Independent School District #762
(AMBAC) 6.00% 2/1/15-03 ......................... 320,000 342,826
Farmington Independent School District #192
(MBIA) 6.80% 2/1/11 Crossover Refunded
to 2/1/01 ....................................... 850,000 905,361
Lake of the Woods Independent School District #390
(AMBAC) 7.35% 2/1/15-99 ......................... 200,000 202,788
Lake of the Woods Independent School District #390
(AMBAC) 7.35% 2/1/16-99 ......................... 250,000 253,485
Maplewood Independent School District #622
(MBIA) 7.10% 2/1/19-05 .......................... 5,935,000 6,929,587
Maplewood Independent School District #622
(FSA) 7.10% 2/1/25-05 ........................... 11,525,000 13,456,360
Minnesota Public Facilities Authority Water
Pollution Control Revenue (MBIA)
6.50% 3/1/14-02 ................................. 1,500,000 1,656,630
Minnesota State University System (MBIA)
7.40% 6/30/19-99 ................................ 760,000 784,343
Moorhead Independent School District #152
(AMBAC) 5.90% 2/1/10 Crossover Refunded
to 2/1/01 ....................................... 475,000 494,086
Moorhead Independent School District
#152 (AMBAC) 5.90% 2/1/11 Crossover
Refunded to 2/1/01 .............................. 505,000 525,291
Moorhead Independent School District
#152 (AMBAC) 5.90% 2/1/12 Crossover
Refunded to 2/1/01 .............................. 540,000 561,697

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
*PRE-REFUNDED/ESCROWED TO MATURITY BONDS (CONTINUED)
Moorhead Independent School District
#152 (AMBAC) 6.00% 2/1/13 Crossover
Refunded to 2/1/01 .................................. $ 575,000 $ 599,409
Moorhead Minnesota Public Utilities (AMBAC)
6.25% 11/1/12 Crossover Refunded
to 11/1/02 .......................................... 735,000 793,087
Mora Series A (AMBAC) 6.85% 2/1/10-00 ................ 245,000 255,780
Mora Series A (AMBAC) 6.85% 2/1/11-00 ................ 265,000 276,660
Northern Minnesota Municipal Power Agency Series B
(AMBAC) 5.90% 1/1/08-03 ............................. 700,000 765,590
Roseau Independent School District #682 (AMBAC)
7.00% 2/1/16 Crossover
Refunded to 2/1/00 .................................. 500,000 520,150
South St. Paul Independent School District #6 (FGIC)
6.25% 2/1/10 Crossover Refunded
to 2/1/00 ........................................... 625,000 643,819
South St. Paul Independent School District #6
(FGIC) 6.45% 2/1/11 Crossover Refunded
to 2/1/00 ........................................... 500,000 516,415
South St. Paul Independent School District #6
(FGIC) 6.45% 2/1/12 Crossover Refunded
to 2/1/00 ........................................... 300,000 309,849
South Washington County Independent School
District #883 (FGIC) 6.875% 6/1/11-00 ............... 520,000 544,638
Southern Minnesota Municipal Power Agency
Revenue (Escrowed to Maturity) (MBIA)
5.75% 1/1/18 ........................................ 3,790,000 4,096,384
Southern Minnesota Municipal Power Agency
Revenue (Escrowed to Maturity)(AMBAC)
5.75% 1/1/18 ........................................ 670,000 724,163
St. Cloud Hospital Facility Revenue (AMBAC)
7.00% 7/1/07-01 ..................................... 500,000 551,895
St. Cloud Hospital Facility Revenue (AMBAC)
6.75% 7/1/11-01 ..................................... 400,000 439,428
St. Cloud Hospital Facility Revenue (AMBAC)
6.75% 7/1/15-01 ..................................... 500,000 548,575
St. Louis Park Methodist Hospital (AMBAC)
7.25% 7/1/18-00 ..................................... 500,000 540,685
Stillwater Independent School District #834 (FGIC)
6.75% 2/1/10-99 ..................................... 1,000,000 1,011,310
Warroad Independent School District #690 (AMBAC)
6.85% 2/1/13-00 ..................................... 500,000 519,130
Washington County Housing & Redevelopment
Authority Jail Facilities (MBIA)
7.00% 2/1/12-02 ..................................... 500,000 550,380
Western Minnesota Municipal Power Agency Revenue
(Escrowed to Maturity) (MBIA)
6.60% 1/1/10 ........................................ 2,000,000 2,296,480
Western Minnesota Municipal Power Agency Revenue
(Escrowed to Maturity)(MBIA)
9.75% 1/1/16 ........................................ 530,000 817,807

<PAGE>
20 for tax-exempt income

TOTAL MARKET VALUE OF SECURITIES OWNED - 100.68%
(COST $273,493,288) ...................................... $ 298,662,051
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.68%) .. (2,023,975)
-------------
NET ASSETS APPLICABLE TO 26,850,884 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ................... $ 296,638,076
=============

NET ASSET VALUE - MINNESOTA INSURED FUND A CLASS
($283,056,827 / 25,620,881 SHARES) ....................... $11.05
======
NET ASSET VALUE - MINNESOTA INSURED FUND B CLASS
($10,373,924 / 939,764 SHARES) ........................... $11.04
======
NET ASSET VALUE - MINNESOTA INSURED FUND C CLASS
($3,207,325 / 290,239 SHARES) ............................ $11.05
======

- -----------
* For Pre-Refunded Bonds, the stated maturity is followed by the year in
which each bond is pre-refunded.

<PAGE>

- ------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Alternative Minimum Tax
Connie Lee - Insured by the College Construction Insurance Company
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 AUGUST 31, 1998:
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 ........................... $ 277,963,579
Accumulated net realized loss on investments ................ (6,494,266)
Net unrealized appreciation of investments .................. 25,168,763
-------------
Total Net Assets ............................................ $ 296,638,076
=============

NET ASSET VALUE AND OFFERING PRICE FOR MINNESOTA
INSURED FUND A CLASS
Net asset value per share (A) ............................... $11.05
Sales charge (3.75% of offering price or 3.89% of
amount invested per share)(B) ............................ 0.43
------
Offering price .............................................. $11.48
======

- ------------
(A) Net asset value per share illustrated is the estimate amount which would be
paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchase of $100,000 or
more for Minnesota Insured Fund A Class.

See accompanying notes

<PAGE>
for tax-exempt income 21

VOYAGEUR INTERMEDIATE TAX-FREE FUNDS, INC.
DELAWARE-VOYAGEUR TAX-FREE MINNESOTA INTERMEDIATE FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 98.79%
GENERAL OBLIGATION BONDS - 5.62%
Olmstead County Resource Recovery Series A
5.90% 2/1/05 ...................................... $1,175,000 $1,246,640
Puerto Rico Commonwealth Public Improvement
4.50% 7/1/23 ...................................... 1,000,000 923,930
Richfield Independent School District
#280 Series C, Inverse Floater
5.34% 2/1/15 ...................................... 1,000,000 1,049,900
----------
3,220,470
----------
HEALTH CARE/HOSPITAL REVENUE
BONDS - 14.76%
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.20% 11/1/05 ........................ 100,000 104,570
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.30% 11/1/06 ........................ 200,000 210,120
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.40% 11/1/07 ........................ 200,000 210,080
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.60% 11/1/09 ........................ 240,000 252,000
Fergus Falls Health Care Facility Broen Memorial
Home Project 6.70% 11/1/10 ........................ 260,000 272,948
Maplewood Healthcare Facility for Health East
5.70% 11/15/02 .................................... 1,000,000 1,050,460
Maplewood Healthcare Facility for Health East
5.95% 11/15/06 .................................... 2,200,000 2,320,582
Minneapolis Health Care Facilities
Jones-Harrison Residence Project
5.90% 10/1/16 ..................................... 125,000 127,233
Rochester Nursing Home & Multifamily Housing
Revenue Samaritan Bethany, Inc. ...................
6.00% 5/1/04 ...................................... 300,000 306,093
Rochester Nursing Home & Multifamily Housing
Revenue Samaritan Bethany, Inc. ...................
6.10% 5/1/05 ...................................... 250,000 255,068
St. Paul Housing and Redevelopment Authority for
Health East Authority Hospital Revenue
5.70% 11/1/15 ..................................... 2,100,000 2,150,358
St. Paul Housing and Redevelopment Authority for
Health East Authority Hospital Revenue
5.85% 11/1/17 ..................................... 1,160,000 1,192,457
----------
8,451,969
----------
HIGHER EDUCATION REVENUE BONDS - 6.77%
Minnesota Higher Education Facility Authority
Augsburg College Series 4F2 5.75% 5/1/16 .......... 3,700,000 3,876,379
----------
3,876,379
----------
HOUSING REVENUE BONDS - 7.32%
Burnsville Multifamily Housing Revenue Burnsville
Apts. Project (LOC Twin City Federal) Mandatory
Put 7.00% 9/1/99 .................................. 580,000 582,175

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
Minnesota Housing Finance Authority Single Family
Mortgage Revenue Series C 6.30% 1/1/99 ............ $ 70,000 $ 70,300
Oakdale Elderly Housing Revenue
PHM/Oakdale Project 5.75% 3/1/18 .................. 1,400,000 1,415,918
Oakdale Housing Oak Meadows Project
6.20% 4/1/07 ...................................... 150,000 158,939
Oakdale Housing Oak Meadows Project
6.30% 4/1/08 ...................................... 260,000 275,441
Oakdale Housing Oak Meadows Project
6.50% 4/1/10 ...................................... 295,000 313,868
Park Rapids Multifamily Revenue
The Court Apartments Project Section 8
6.05% 8/1/12 ...................................... 1,150,000 1,171,068
St. Paul Housing & Redevelopment Authority
Minnesota Public Radio (LOC First Bank)
6.60% 6/1/99 ...................................... 100,000 101,401
St. Paul Housing and Redevelopment Single Family
Mortgage 6.90% (FNMA) 12/1/21 ..................... 95,000 101,186
----------
4,190,296
----------
INDUSTRIAL DEVELOPMENT REVENUE
BONDS - 16.83%
Andover Development Revenue
Downtown Center Project Series A
6.50% 12/1/06 ..................................... 1,795,000 1,886,653
Brooklyn Center Commercial Development
Revenue Brookdale Association (NWNL)
5.70% Mandatory Put 6/1/01 ........................ 1,000,000 1,049,280
Duluth Gross Revenue Bond Duluth Entertainment
Project 7.00% 12/1/03 ............................. 1,250,000 1,385,813
Duluth Gross Revenue Bond Duluth Entertainment
Project 7.30% 12/1/06 ............................. 250,000 285,190
Minnesota Public Facilities Authority Pollution
Control Revenue Series A 6.55% 3/1/03 ............. 1,720,000 1,856,448
Richfield Shoppes Commercial Development
Revenue Richfield Shoppes Project
7.50% 10/1/04 ..................................... 1,070,000 1,094,963
St. Paul Port Authority Commercial Development
Revenue Fort Rd Medical 7.50%
(Asset Gty) 9/1/02 ................................ 2,000,000 2,077,680
----------
9,636,027
----------
LEASE/CERTIFICATES OF PARTICIPATION - 2.91%
Beltrami County Housing & Redevelopment Authority
Revenue 5.90% 2/1/08 .............................. 355,000 377,724
Beltrami County Housing & Redevelopment Authority
Revenue 6.00% 2/1/09 .............................. 380,000 404,244
Beltrami County Housing & Redevelopment Authority
Revenue 6.00% 2/1/10 .............................. 405,000 428,551

<PAGE>
22 for tax-exempt income

TAX-FREE MINNESOTA INTERMEDIATE FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
LEASE/CERTIFICATES OF PARTICIPATION (Continued)
Beltrami County Housing & Redevelopment Authority
Revenue 6.10% 2/1/11 .............................. $ 430,000 $ 456,135
----------
1,666,654
----------
POWER AUTHORITY - 4.68%
Eveleth Industrial Development Revenue for
Minnesota Power & Light Company
6.125% 1/1/04 ..................................... 2,500,000 2,679,375
----------
2,679,375
----------
*PRE-REFUNDED/ESCROWED TO MATURITY
BONDS - 38.71%
Austin Independent School District #492
6.875% (MBIA) 2/1/12-01 ........................... 1,205,000 1,280,108
Braham Independent School District #314
6.30% (AMBAC) 2/1/19-01 ........................... 3,015,000 3,163,548
Duluth Economic Development Authority
St. Mary's Hospital (Escrowed to Maturity)
7.90% 2/15/99 ..................................... 150,000 152,969
Eden Valley Watkins Independent School District
#463 6.55% (FSA) 2/1/11-02 ........................ 250,000 268,643
Eden Valley Watkins Independent School District
#463 6.60% (FSA) 2/1/16-02 ........................ 615,000 661,832
Mankato Independent School District #77 6.35%
(FSA) 2/1/13-02 ................................... 1,750,000 1,869,489
Metropolitan Council Hubert H Humphery Metrodome
Sports Facility Revenue Series 92
(Escrowed to Maturity) 6.00% 10/1/09 .............. 3,520,000 3,797,939
Minneapolis/St. Paul HealthOne Series B
(Escrowed to Maturity) 7.55% 8/15/00 .............. 325,000 348,514
Minneapolis/St. Paul HealthOne Series C
(Escrowed to Maturity) 7.45% 8/15/99 .............. 400,000 414,740
Minnesota State 6.25% 8/1/10-02 ..................... 4,000,000 4,342,279
Olmstead County 6.85% 2/1/02-01 ..................... 800,000 857,200
Olmstead County 6.90% 2/1/03-01 ..................... 900,000 965,376
Olmstead County 6.95% 2/1/04-01 ..................... 950,000 1,020,101
St. Cloud Hospital Facility Revenue 7.00%
(AMBAC) 7/1/20-01 ................................. 2,740,000 3,020,493
----------
22,163,231
----------
OTHER REVENUE BONDS - 1.19%
Hibbing Economic Development Authority Revenue
6.10% 2/1/08 ...................................... 650,000 679,952
----------
679,952
----------
Total Municipal Bonds (cost $53,924,894) ....................... 56,564,353
-----------

TOTAL MARKET VALUE OF SECURITIES OWNED - 98.79%
(COST $53,924,894) ........................................... $56,564,353
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.21% ........ 692,081
-----------
NET ASSETS APPLICABLE TO 5,128,805 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ....................... $57,256,434
===========

<PAGE>

NET ASSET VALUE - TAX-FREE MINNESOTA INTERMEDIATE FUND
A Class ($54,280,587 / 4,862,408 Shares) .................... $11.16
======
NET ASSET VALUE - TAX-FREE MINNESOTA INTERMEDIATE FUND
B CLASS ($1,375,314 / 123,068 Shares) ....................... $11.18
======
NET ASSET VALUE - TAX-FREE MINNESOTA INTERMEDIATE FUND
C CLASS ($1,600,533 / 143,329 Shares) ....................... $11.17
======
- ------------
*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
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
NWNL - Insured by the Northwestern National Life Insurance Company

COMPONENTS OF NET ASSETS AT AUGUST 31, 1998:
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 ................................... $54,666,264
Distributions in excess of net investment income ............... (1,907)
Accumulated net realized loss on investments ................... (47,382)
Net unrealized appreciation of investments ..................... 2,639,459
------------
Total Net Assets $57,256,434
===========

NET ASSET VALUE AND OFFERING PRICE FOR TAX-FREE MINNESOTA
INTERMEDIATE FUND A CLASS
Net asset value per share (A) .................................. $11.16
Sales charge (2.75% of offering price or 2.87% of amount
invested per share) (B) ..................................... 0.32
------------
Offering price ................................................. $11.48
===========
__________
(A)Net asset value per share illustrated is the estimated amount which would be
paid upon the redemption or repurchase of shares.
(B)See How to Buy Shares in the current Prospectus for purchases of $100,000 or
more for Tax-Free Minnesota Intermediate Fund A Class.

See accompanying notes

<PAGE>

FOR TAX-EXEMPT INCOME 23

VOYAGEUR MUTUAL FUNDS, INC.
DELAWARE-VOYAGEUR MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 100.34%
CITY AGENCIES REVENUE BONDS - 3.72%
Minneapolis Community Development
Agency Common Bond Fund Series 2
6.20% 6/1/17 ...................................... $ 750,000 $808,703
Minneapolis Community Development Agency
Revenue Limited Tax Series 4 6.20% 6/1/17 ......... 1,055,000 1,118,384
----------
1,927,087
----------
GENERAL OBLIGATION BONDS - 7.62%
Beltrami County Housing and Redevelopment
Authority Revenue Lease 6.10% 2/1/12 .............. 460,000 486,666
Inner Grove Heights (MN School District Enhanced)
Series A 5.75% 2/1/13 ............................. 100,000 108,192
Puerto Rico Commonwealth 5.375% 7/1/25 ............... 500,000 511,420
Puerto Rico Commonwealth Public Improvement
4.50% 7/1/23 ...................................... 2,370,000 2,189,714
Rice County Certificate of Participation
6.00% 12/1/21 ..................................... 125,000 133,524
Saint Cloud Certificate of Participation
5.90% 12/1/17 ..................................... 400,000 413,516
Waconia Independent School District Series 93A
(FSA) 5.45% 2/1/15 ................................ 100,000 103,687
------------
3,946,719
------------
HIGHER EDUCATION REVENUE BONDS - 4.30%
Minnesota State Higher Education Facility
Macalester College 4C 5.50% 3/1/12 ................ 100,000 104,376
Minnesota State Higher Education Facility
St. Mary's College Series 3Q 6.15% 10/1/23 ........ 900,000 936,045
Minnesota State University System Revenue
Bonds Series 93A 6.10% 6/30/23 .................... 100,000 104,806
University of Minnesota Series A 5.50% 7/1/21 ........ 1,000,000 1,084,710
------------
2,229,937
------------
HOSPITAL REVENUE BONDS - 34.76%
Cambridge Healthcare Facility Revenue Grandview
Christian Home 7.25% 9/1/26 ....................... 125,000 131,530
Cannon Falls Nursing Home Franciscan Health
Community Project 7.25% 7/1/21 .................... 100,000 105,158
Duluth Economic Development Authority
for BSM Properties Nursing Home
5.875% 12/1/28 .................................... 500,000 502,525
Duluth Economic Development Authority
Health Care Facilities St. Francis Health Care
Facility 6.75% 12/1/17 ............................ 325,000 343,233
Fergus Falls Health Care Facility Revenue
Lake Region Hospital 6.50% 9/1/18 ................. 750,000 824,895
Glencoe Health Care Revenue 6.40% 12/1/15 ............ 275,000 284,446
Little Canada Senior Facility Residence Series 92
(Presbyterian Homes Guaranteed)
7.25% 7/1/12 ...................................... 250,000 260,543

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
HOSPITAL REVENUE BONDS (CONTINUED)
Mankato Health Facilities Revenue Mankato
Lutheran Homes Series A 6.875% 10/1/26 ............ $ 300,000 $ 313,275
Minneapolis Health Care American Baptist Homes
8.70% 11/1/09 ..................................... 150,000 168,639
Minneapolis Health Care Facility Revenue
Jones-Harrison Residence Project
6.00% 10/1/27 ..................................... 1,565,000 1,592,857
Minneapolis Housing & Health Care
Facility Revenue Augustana Chapel View Homes
6.50% 6/1/17 ...................................... 1,370,000 1,416,909
Northfield Health Care Facilities
Revenue Refunding and Improvement
Retirement Center Series A 6.00% 5/1/28 ........... 1,405,000 1,425,625
Perham Hospital District Congregate Housing Facilities
Briarwood Project 6.25% 11/1/22 ................... 620,000 632,053
Robbinsdale North Memorial Medical (AMBAC)
5.50% 5/15/23 ..................................... 100,000 103,269
Rochester Health Care Facilities Revenue Reg IRS
for Mayo Clinic, Series H Inverse Floater
8.077% 11/15/15 ................................... 1,500,000 1,754,640
Rochester Health Care Facilities
Revenue Mayo Foundation Series B
5.50% 11/15/27 .................................... 5,000,000 5,232,550
Springfield St. John's Lutheran Home Revenue
8.50% 11/1/19 ..................................... 150,000 157,736
St. Paul Housing and Redevelopment Hospital
Revenue for Health East Series B
6.625% 11/1/17 .................................... 500,000 540,465
St. Paul Housing and Redevelopment Hospital
Revenue for Health East Series A
6.625% 11/1/17 .................................... 250,000 270,233
Waconia Good Samaritan Housing and Redevelopment
Revenue for The Evangelical Lutheran Series A
6.00% 6/1/14 ...................................... 660,000 688,888
Wadena County Health Care Facility Gross Revenue
Series B 7.75% 9/1/24 ............................. 250,000 278,745
Washington County Housing and
Redevelopment Authority for Health East
5.50% 11/15/27 .................................... 1,000,000 980,680
-----------
18,008,894
-----------
HOUSING REVENUE BONDS - 29.78%
Brooklyn Center Four Court Multifamily Housing
7.50% 6/1/25 ...................................... 370,000 391,301
Carver Multifamily Housing Lake Grace
6.25% 7/1/28 ...................................... 330,000 347,483
Carver Multifamily Housing Lake Grace
8.00% 7/1/28 ...................................... 200,000 222,302
Chanhassen Multifamily Housing Heritage Park
6.20% 7/1/30 ...................................... 300,000 321,483

<PAGE>

24 for tax-exempt income

MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
Coon Rapids Multifamily Revenue
Margaret Place Series A 6.50% 5/1/25 .............. $ 500,000 $ 511,520
Eden Prairie Health Care Facilities
Revenue Refunding Castle Ridge Care Center
5.70% 7/1/28 ...................................... 1,740,000 1,706,575
Eden Prairie Multifamily Housing Subordinated
Tanager Creek 8.00% 6/20/31 ....................... 775,000 812,371
Hibbing Economic Development Authority
6.40% 2/1/12 ...................................... 530,000 554,126
Minneapolis Multifamily Housing Olson Townhomes
6.00% 12/1/19 ..................................... 800,000 831,296
Minneapolis-Nicollet Towers Multifamily Housing
6.00% 12/1/19 ..................................... 300,000 320,322
Minnesota Housing Finance Authority Single Family
Mortgage Series E 6.25% 1/1/23 .................... 90,000 96,084
Minnesota Housing Finance Authority Single Family
Housing 5.875% 1/1/17 ............................. 100,000 106,636
Minnesota State Housing Finance Agency Single
Family Mortgage Series K 5.75% 1/1/26 ............. 1,000,000 1,037,470
Minnetonka Multifamily Housing Beacon Hill
Senior Housing Project 7.55% 6/1/19 ............... 200,000 216,378
Minnetonka Senior Housing Revenue
Westridge Senior Housing Project
6.30% 9/1/08 ...................................... 110,000 115,356
Minnetonka Senior Housing Revenue
Westridge Senior Housing Project
6.50% 9/1/12 ...................................... 285,000 298,794
Minnetonka Westridge Housing Revenue
Westridge Senior Housing Project
7.00% 9/1/27 ...................................... 1,275,000 1,351,959
Moorhead Economic Development Authority
Multifamily Revenue Refunding and
Improvement Housing Development for Eventide
Series B 6.00% 6/1/18 ............................. 870,000 876,760
New Brighton Multifamily Polynesian Village
7.60% 4/1/25 ...................................... 300,000 324,369
Oakdale Elderly Housing Revenue PHM/
Oakdale Project 6.00% 3/1/28 ...................... 1,800,000 1,832,328
Oakdale Housing Oak Meadows Project
6.75% 4/1/15 ...................................... 1,500,000 1,606,305
St. Anthony Multifamily Housing Chandler (GNMA)
6.05% 11/20/16 .................................... 135,000 145,360
St. Louis Park Multifamily Mortgage Revenue
Tamarind Project (FNMA) 5.50% 11/1/13 ............. 125,000 128,943
Stillwater Multifamily Housing Stillwater Cottages
6.75% 11/1/11 ..................................... 205,000 211,931
Stillwater Multifamily Housing Stillwater Cottages
7.00% 11/1/27 ..................................... 340,000 353,226

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
Stillwater Multifamily Housing Stillwater Cottages
7.00% 11/1/16 ..................................... $ 680,000 $ 706,452
-----------
15,427,130
-----------
INDUSTRIAL DEVELOPMENT REVENUE
BONDS - 9.89%
Andover Development Revenue
Downtown Center Project Series A
7.00% 12/1/12 ..................................... 1,640,000 1,757,391
International Falls Pollution Control
Revenue Boise Cascade Project
5.65% 12/1/22 ..................................... 3,000,000 3,062,310
Red Wing Industrial Development for Revenue
Kmart (First Mortgage) 5.50% 7/1/08 ............... 300,000 303,780
----------
5,123,481
----------
POWER AUTHORITY REVENUE BONDS - 3.59%
Bass Brook Pollution Control Revenue for Minnesota
Power and Light 6.00% 7/1/22 ...................... 805,000 850,330
Puerto Rico Electric Power Authority Power Revenue
Series DD (FSA) 4.50% 7/1/19 ...................... 650,000 617,071
Southern Minnesota Municipal Power Agency (FGIC)
5.75% 1/1/18 ...................................... 100,000 105,940
Western Municipal Power Agency Revenue
6.125% 1/1/16 ..................................... 285,000 285,921
----------
1,859,262
----------
*PRE-REFUNDED - 0.41%
Esko Independent School District #99 (FSA)
5.75% 4/1/17-05 ................................... 100,000 107,752
Stewartville Independent School District (MN School
District Enhanced) Series A 5.75% 2/1/12-05 ....... 100,000 107,639
----------
215,391
----------
OTHER REVENUE BONDS - 6.27%
Stearns County Housing and
Redevelopment Authority Lease Revenue
Administration Building Project Series A
5.15% 2/1/11 ...................................... 1,705,000 1,752,292
Minneapolis Community Development Agency
Revenue Holiday Inn Metrodome Project
6.00% 12/1/01 ..................................... 1,100,000 1,110,659
Woodbury Golf Course Revenue 6.75% 2/1/22 ............ 365,000 385,174
------------
3,248,125
------------
TOTAL MUNICIPAL BONDS (cost $50,071,433) 51,986,026
------------

NUMBER OF
SHARES
---------
SHORT-TERM INVESTMENTS - 3.71%
Norwest Federated Municipal Money Market Fund ........ 1,922,415 1,922,415
------------
Total Short-Term Investments (cost $1,922,415) ....... 1,922,415
------------

<PAGE>

for tax-exempt income 25

MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 104.05%
(COST $51,993,848) .......................................... $53,908,441
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (4.05)%....... (2,096,671)
-----------
NET ASSETS APPLICABLE TO 4,793,398 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ...................... $51,811,770
===========
NET ASSET VALUE - MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
A CLASS ($33,295,812 / 3,080,873 SHARES) .................... $10.81
======

NET ASSET VALUE - MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
B CLASS ($13,350,659 / 1,234,683 SHARES) .................... $10.81
======
NET ASSET VALUE - MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
C CLASS ($5,165,299 / 477,842 SHARES) $10.81
======
- ------------
*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
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
FNMA - Insured by the Federal National Mortgage Association

COMPONENTS OF NET ASSETS AT AUGUST 31, 1998:
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,
and 10,000,000,000 shares allocated to Minnesota High Yield
Municipal Fund C Class ...................................... $49,907,970
Undistributed net investment income ............................ 998
Accumulated net realized loss on investments ................... (11,791)
Net unrealized appreciation of investments ..................... 1,914,593
------------
Total Net Assets $51,811,770
===========

NET ASSET VALUE AND OFFERING PRICE FOR
MINNESOTA HIGH YIELD MUNICIPAL BOND FUND A CLASS
Net asset value per share (A) .................................. $10.81
Sales charge (3.75% of offering price or 3.89% of
amount invested per share) (B) .............................. 0.42
------
Offering price $11.23
======

- ------------
(A) Net asset value per share illustrated is the estimated amount which would be
paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Minnesota High Yield Municipal Bond Fund A Class.

See accompanying notes

<PAGE>
VOYAGEUR MUTUAL FUNDS, INC.
DELAWARE-VOYAGEUR MINNESOTA HIGH YIELD
MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998

- --------------------------------------------------------------------------------
ASSETS:
Investments at market .......................................... $53,908,441
Interest receivable ............................................ 845,965
Subscriptions receivable ....................................... 4,077,500
Other assets ................................................... 378,258
------------
Total assets ................................................ 59,210,164
------------

LIABILITIES:
Liquidations payable ........................................... 41,727
Payable for securities purchased ............................... 7,007,852
Other accounts payable and accrued expenses .................... 348,815
------------
Total liabilities ........................................... 7,398,394
------------

TOTAL NET ASSETS ............................................... $51,811,770
===========

Investments at cost ............................................ $51,993,848
===========

See accompanying notes

<PAGE>
26 for tax-exempt income

STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VOYAGEUR TAX-FREE VOYAGEUR INSURED
FUNDS, INC. FUNDS, INC.
TAX-FREE MINNESOTA
MINNESOTA FUND INSURED FUND
--------------------------------------------------------
EIGHT EIGHT
MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED
8/31/98 12/31/97 8/31/98 12/31/97
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest .......................................... $16,714,047 $26,178,608 $11,303,008 $17,846,137
----------- ----------- ----------- -----------
EXPENSES:
Management fees ................................... 1,427,564 2,129,804 990,662 1,503,424
Distribution expense .............................. 773,055 1,134,058 557,701 834,942
Dividend disbursing and transfer agent fees
and expenses ................................... 217,074 329,694 132,000 245,680
Registration fees ................................. 3,738 13,995 8,200 19,909
Reports and statements to shareholders ............ 16,270 102,070 49,960 55,300
Accounting and administration ..................... 111,476 160,668 78,100 103,501
Professional fees ................................. 35,000 19,571 20,455 26,085
Custodian fees .................................... 13,246 121,064 5,305 35,581
Taxes (other than taxes on income) ................ 20,750 40,810 19,400 11,400
Directors' fees ................................... 5,895 12,050 4,720 9,253
Other ............................................. 55,025 44,591 50,713 70,201
----------- ----------- ----------- -----------
2,679,093 4,108,375 1,917,216 2,915,276
Less expenses waived or absorbed .................. (86,757) (163,751) (39,455) (61,867)
----------- ----------- ----------- -----------
Total operating expenses .......................... 2,592,336 3,944,624 1,877,761 2,853,409
Interest expense .................................. -- -- 3,474 --
----------- ----------- ----------- -----------
Net investment income ............................. 14,121,711 22,233,984 9,421,773 14,992,728
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments ........... 998,916 3,216,993 32,436 1,476,574
Net change in unrealized appreciation/
depreciation of investments .................... 3,595,749 13,746,414 2,911,667 7,964,819
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ................................. 4,594,665 16,963,407 2,944,103 9,441,393
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $18,716,376 $39,197,391 $12,365,876 $24,434,121
=========== =========== =========== ===========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
VOYAGEUR INTERMEDIATE VOYAGEUR MUTUAL
TAX-FREE FUNDS, INC. FUNDS, INC.
TAX-FREE MINNESOTA MINNESOTA HIGH YIELD
INTERMEDIATE FUND MUNICIPAL BOND FUND
------------------------------------------------------
EIGHT EIGHT
MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED
8/31/98 12/31/97 8/31/98 12/31/97
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest .......................................... $2,239,850 $3,569,424 $1,519,574 $1,309,044
---------- ---------- ---------- ----------
EXPENSES:
Management fees ................................... 157,232 246,824 168,083 136,823
Distribution expense .............................. 74,101 149,485 140,595 112,967
Dividend disbursing and transfer agent fees
and expenses ................................... 30,720 64,334 25,454 25,954
Registration fees ................................. 6,680 13,138 13,589 5,465
Reports and statements to shareholders ............ 17,000 16,896 9,868 17,972
Accounting and administration ..................... 15,600 23,592 10,080 9,238
Professional fees ................................. 13,365 16,928 4,949 7,638
Custodian fees .................................... 2,310 38,444 3,100 --
Taxes (other than taxes on income) ................ 6,630 3,700 2,280 2,150
Directors' fees ................................... 3,800 5,214 647 966
Other ............................................. 3,446 26,778 3,816 3,463
---------- ---------- ---------- ----------
330,884 605,333 382,461 322,636
Less expenses waived or absorbed .................. -- (24,897) (204,795) (243,061)
---------- ---------- ---------- ----------
Total operating expenses .......................... 330,884 580,436 177,666 79,575
Interest expense .................................. -- -- -- --
---------- ---------- ---------- ----------
Net investment income ............................. 1,908,966 2,988,988 1,341,908 1,229,469
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments ........... 103,601 638,280 (648) (4,334)
Net change in unrealized appreciation/
depreciation of investments .................... (121,364) 321,114 659,652 1,166,080
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ................................. (17,763) 959,394 659,004 1,161,746
---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $1,891,203 $3,948,382 $2,000,912 $2,391,215
========== ========== ========== ==========

</TABLE>

See accompanying notes

<PAGE>

for tax-exempt income 27

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VOYAGEUR TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA FUND
---------------------------------------------
EIGHT
MONTHS YEAR YEAR
ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ............................. $ 14,121,711 $ 22,233,984 $ 22,746,587
Net realized gain (loss) on investments ........... 998,916 3,216,993 515,784
Net change in unrealized
appreciation/depreciation of investments ....... 3,595,749 13,746,414 (8,943,154)
------------ ------------ ------------
Net increase in net assets resulting
from operations ................................ 18,716,376 39,197,391 14,319,217
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ........................................ (13,881,351) (21,801,997) (22,406,019)
B Class ........................................ (254,452) (342,308) (203,627)
C Class ........................................ (110,969) (121,569) (120,510)
------------ ------------ ------------
(14,246,772) (22,265,874) (22,730,156)
------------ ------------ ------------
Net realized gain from investment transactions:
A Class ........................................ (701,597) -- --
B Class ........................................ (16,734) -- --
C Class ........................................ (7,940) -- --
------------ ------------ ------------
(726,271) -- --
------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ........................................ 16,789,907 30,690,547 28,935,567
B Class ........................................ 2,144,150 2,901,401 3,893,971
C Class ........................................ 2,221,006 1,258,502 1,575,266
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
Net asset value of shares issued upon reinvestment
of dividends from net investment income and net
realized gains on investment transactions:
A Class ........................................ 9,615,052 14,861,153 14,510,299
B Class ........................................ 203,099 265,963 159,491
C Class ........................................ 101,927 108,591 95,792
------------ ------------ ------------
31,075,141 50,086,157 49,170,386
------------ ------------ ------------
Cost of shares repurchased:
A Class ........................................ (31,266,997) (73,076,182) (61,934,519)
B Class ........................................ (403,632) (1,502,411) (500,598)
C Class ........................................ (537,644) (1,472,994) (867,298)
------------ ------------ ------------
(32,208,273) (76,051,587) (63,302,415)
------------ ------------ ------------
Increase (decrease) in net assets derived from
capital share transactions ..................... (1,133,132) (25,965,430) (14,132,029)
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ............. 2,610,201 (9,033,913) (22,542,968)

NET ASSETS:
Beginning of period ............................... 428,662,263 437,696,176 460,239,144
------------ ------------ ------------
End of period ..................................... $431,272,464 $428,662,263 $437,696,176
============ ============ ============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
VOYAGEUR INSURED FUNDS, INC.
MINNESOTA INSURED FUND
--------------------------------------------
EIGHT
MONTHS YEAR YEAR
ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ............................. $ 9,421,773 $ 14,992,728 $ 14,894,385
Net realized gain (loss) on investments ........... 32,436 1,476,574 293,417
Net change in unrealized
appreciation/depreciation of investments ....... 2,911,667 7,964,819 (4,586,047)
------------ ------------ ------------
Net increase in net assets resulting
from operations ................................ 12,365,876 24,434,121 10,601,755
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ........................................ (9,116,602) (14,559,667) (14,451,758)
B Class ........................................ (253,079) (326,611) (248,884)
C Class ........................................ (84,466) (135,307) (136,712)
------------ ------------ ------------
(9,454,147) (15,021,585) (14,837,354)
------------ ------------ ------------
Net realized gain from investment transactions:
A Class ........................................ -- -- --
B Class ........................................ -- -- --
C Class ........................................ -- -- --
------------ ------------ ------------
-- -- --
------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ........................................ 8,614,988 16,105,669 19,743,497
B Class ........................................ 1,720,072 2,803,647 2,213,483
C Class ........................................ 302,962 726,891 962,058
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 23,310,124
Net asset value of shares issued upon reinvestment
of dividends from net investment income and net
realized gains on investment transactions:
A Class ........................................ 6,103,879 10,480,178 10,183,091
B Class ........................................ 175,169 249,513 198,159
C Class ........................................ 65,047 114,902 118,019
------------ ------------ ------------
16,982,117 30,480,800 56,728,431
------------ ------------ ------------
Cost of shares repurchased:
A Class ........................................ (22,936,162) (52,017,149) (51,938,099)
B Class ........................................ (547,658) (1,207,521) (213,150)
C Class ........................................ (287,466) (973,441) (1,076,363)
------------ ------------ ------------
(23,771,286) (54,198,111) (53,227,612)
------------ ------------ ------------
Increase (decrease) in net assets derived from
capital share transactions ..................... (6,789,169 (23,717,311) 3,500,819
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ............. (3,877,440) (14,304,775) (734,780)

NET ASSETS:
Beginning of period ............................... 300,515,516 314,820,291 315,555,071
------------ ------------ ------------
End of period ..................................... $296,638,076 $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>
VOYAGEUR INTERMEDIATE TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA INTERMEDIATE FUND
---------------------------------------------
EIGHT
MONTHS YEAR YEAR
ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ................................... $ 1,908,966 $ 2,988,988 $ 3,281,209
Net realized gain (loss) on investments ................. 103,601 638,280 58,144
Net change in unrealized appreciation/depreciation
of investments ....................................... (121,364) 321,114 (1,060,245)
----------- ----------- -----------
Net increase in net assets resulting from operations .... 1,891,203 3,948,382 2,279,108
----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class .............................................. (1,838,819) (2,915,016) (3,233,948)
B Class .............................................. (29,833) (26,474) (7,825)
C Class .............................................. (42,221) (52,600) (34,381)
----------- ----------- -----------
(1,910,873) (2,994,090) (3,276,154)
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .............................................. 3,869,637 7,081,491 8,813,544
B Class .............................................. 702,708 669,318 372,719
C Class .............................................. 644,898 810,790 862,998
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
net realized gains on investment transactions:
A Class .............................................. 1,378,025 2,185,735 2,225,412
B Class .............................................. 24,782 23,336 5,862
C Class .............................................. 38,393 52,025 27,628
----------- ----------- -----------
6,658,443 10,822,695 12,308,163
----------- ----------- -----------
Cost of shares repurchased:
A Class .............................................. (8,471,167) (18,684,272) (16,425,703)
B Class .............................................. (263,216) (205,353) --
C Class .............................................. (594,312) (510,897) (441,733)
----------- ----------- -----------
(9,328,695) (19,400,522) (16,867,436)
----------- ----------- -----------
Increase (decrease) in net assets derived from
capital share transactions ........................... (2,670,252) (8,577,827) (4,559,273)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ................... (2,689,922) (7,623,535) (5,556,319)

NET ASSETS:
Beginning of period ..................................... 59,946,356 67,569,891 73,126,210
----------- ----------- -----------
End of period ........................................... $57,256,434 $59,946,356 $67,569,891
=========== =========== ===========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
----------------------------------------
EIGHT PERIOD
MONTHS YEAR FROM
ENDED ENDED 6/4/96* TO
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ................................... $ 1,341,908 $ 1,229,469 $ 145,301
Net realized gain (loss) on investments ................. (648) (4,334) (6,809)
Net change in unrealized appreciation/depreciation
of investments ....................................... 659,652 1,166,080 88,861
----------- ----------- ----------
Net increase in net assets resulting from operations .... 2,000,912 2,391,215 227,353
----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class .............................................. (873,324) (783,576) (88,229)
B Class .............................................. (359,748) (312,756) (41,302)
C Class .............................................. (134,232) (109,945) (13,370)
----------- ----------- ----------
(1,367,304) (1,206,277) (142,901)
----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .............................................. 15,804,815 12,612,422 7,102,907
B Class .............................................. 5,379,096 5,453,844 2,696,693
C Class .............................................. 2,319,609 2,470,327 948,440
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
net realized gains on investment transactions:
A Class .............................................. 580,383 503,798 43,874
B Class .............................................. 202,199 160,239 13,064
C Class .............................................. 99,018 89,364 7,823
----------- ----------- ----------
24,385,120 21,289,994 10,812,801
----------- ----------- ----------
Cost of shares repurchased:
A Class .............................................. (2,500,965) (903,309) (1,124,003)
B Class .............................................. (603,878) (475,668) --
C Class .............................................. (498,154) (405,467) (67,699)
----------- ----------- ----------
(3,602,997) (1,784,444) (1,191,702)
----------- ----------- ----------
Increase (decrease) in net assets derived from
capital share transactions ........................... 20,782,123 19,505,550 9,621,099
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS ................... 21,415,731 20,690,488 9,705,551

NET ASSETS:
Beginning of period ..................................... 30,396,039 9,705,551 --
----------- ----------- ----------
End of period ........................................... $51,811,770 $30,396,039 $9,705,551
=========== =========== ==========

______________________
* Commencement of operations
</TABLE>

See accompanying notes

<PAGE>

for tax-exempt income 29

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:

<TABLE>
<CAPTION>
VOYAGEUR TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA FUND - A CLASS
--------------------------------------------------------------------
EIGHT
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $12.910 $12.400 $12.630 $11.330 $12.850 $12.210

Income from investment operations:
Net investment income .................................. 0.431 0.654 0.630 0.620 0.630 0.640
Net realized and unrealized gain
(loss) on investments ............................... 0.136 0.511 (0.230) 1.320 (1.480) 0.870
------- ------- ------- ------- ------- -------
Total from investment operations ....................... 0.567 1.165 0.400 1.940 (0.850) 1.510
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.435) (0.655) (0.630) (0.640) (0.610) (0.640)
Distributions from net realized gain
on investments ...................................... (0.022) -- -- -- (0.050) (0.230)
In excess of net realized gains ........................ -- -- -- -- (0.010) --
------- ------- ------- ------- ------- -------
Total dividends and distributions ...................... (0.457) (0.655) (0.630) (0.640) (0.670) (0.870)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............................ $13.020 $12.910 $12.400 $12.630 $11.330 $12.850
======= ======= ======= ======= ======= =======
Total Return(2) ........................................... 4.46% 9.68% 3.33% 17.49% (6.73%) 12.70%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $416,113 $417,365 $428,380 $455,220 $406,497 $458,145
Ratio of expenses to average net assets ................ 0.89% 0.91% 0.92% 0.93% 0.90% 1.02%
Ratio of expenses to average net assets
prior to expense limitation ......................... 0.92% 0.95% 0.92% 0.93% 0.90% 1.02%
Ratio of net investment income to average net assets ... 5.00% 5.22% 5.13% 5.11% 5.29% 5.02%
Ratio of net investment income to average net assets
prior to expense limitation ......................... 4.97% 5.18% 5.13% 5.11% 5.29% 5.02%
Portfolio turnover ..................................... 13% 19% 28% 51% 24% 32%
</TABLE>
______________________
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) 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>
VOYAGEUR TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA FUND - B CLASS
---------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 8/11/95(4) TO
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $12.910 $12.400 $12.620 $11.900

Income from investment operations:
Net investment income .................................... 0.366 0.574 0.560 0.450
Net realized and unrealized gain (loss)
on investments ......................................... 0.136 0.508 (0.220) 0.710
------- ------- ------- -------
Total from investment operations ......................... 0.502 1.082 0.340 1.160
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ..................... (0.370) (0.572) (0.560) (0.440)
Distributions from net realized gain on
investments ............................................ (0.022) -- -- --
------- ------- ------- -------
Total dividends and distributions ........................ (0.392) (0.572) (0.560) (0.440)
------- ------- ------- -------
Net asset value, end of period .............................. $13.020 $12.910 $12.400 $12.620
======= ======= ======= =======
Total Return(2) ............................................. 3.94% 8.95% 2.83% 9.95%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $10,246 $8,215 $6,233 $2,701
Ratio of expenses to average net assets .................. 1.64% 1.56% 1.50% 1.38%(5)
Ratio of expenses to average net assets prior to
expense limitation ..................................... 1.67% 1.60% 1.67% 1.63%(5)
Ratio of net investment income to average net assets ..... 4.25% 4.57% 4.53% 4.43%(5)
Ratio of net investment income to average net
assets prior to expense limitation ..................... 4.22% 4.53% 4.36% 4.18%(5)
Portfolio turnover ....................................... 13% 19% 28% 51%

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
VOYAGEUR TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA FUND - C CLASS
----------------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR YEAR FROM
ENDED ENDED ENDED ENDED 5/4/94(4) TO
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $12.920 $12.410 $12.630 $11.330 $11.960

Income from investment operations:
Net investment income .................................. 0.374 0.564 0.540 0.530 0.340
Net realized and unrealized gain (loss)
on investments ......................................... 0.138 0.508 (0.220) 1.320 (0.610)
------- ------- ------- ------- -------
Total from investment operations ....................... 0.512 1.072 0.320 1.850 (0.270)
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.370) (0.562) (0.540) (0.550) (0.320)
Distributions from net realized gain on
investments ............................................ (0.022) -- -- -- (0.040)
------- ------- ------- ------- -------
Total dividends and distributions ...................... (0.392) (0.562) (0.540) (0.550) (0.360)
------- ------- ------- ------- -------
Net asset value, end of period ............................ $13.040 $12.920 $12.410 $12.630 $11.330
======= ======= ======= ======= =======
Total Return(2) ........................................... 4.02% 8.82% 2.64% 16.62% (2.30%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $4,914 $3,083 $3,083 $2,319 $1,061
Ratio of expenses to average net assets ................ 1.64% 1.65% 1.67% 1.67% 1.72%(5)
Ratio of expenses to average net assets prior to
expense limitation ..................................... 1.67% 1.69% 1.67% 1.67% 1.72%(5)
Ratio of net investment income to average net assets ... 4.25% 4.48% 4.38% 4.33% 4.56%(5)
Ratio of net investment income to average net
assets prior to expense limitation ..................... 4.22% 4.44% 4.38% 4.33% 4.56%(5)
Portfolio turnover ..................................... 13% 19% 28% 51% 24%

</TABLE>
______________________

(1) Ratios have been annualized and total return has not been annualized.

(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.

(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.

(4) Commencement of operations.

(5) Annualized.

See accompanying notes

<PAGE>

for tax-exempt income 31

VOYAGEUR INSURED FUNDS, INC.
MINNESOTA INSURED FUND - A CLASS
--------------------------------------------------------------------
EIGHT
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.940 $10.600 $10.730 $9.610 $11.020 $10.270

Income from investment operations:
Net investment income 0.349 0.533 0.520 0.510 0.540 0.540
Net realized and unrealized gain (loss) on investments 0.111 0.341 (0.130) 1.140 (1.390) 0.840
------- ------- ------- ------- ------- -------
Total from investment operations 0.460 0.874 0.390 1.650 (0.850) 1.380
------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income (0.350) (0.534) (0.520) (0.530) (0.520) (0.540)
Distributions from net realized gain on investments -- -- -- -- (0.040) (0.090)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.350) (0.534) (0.520) (0.530) (0.560) (0.630)
------- ------- ------- ------- ------- -------
Net asset value, end of period $11.050 $10.940 $10.600 $10.730 $9.610 $11.020
======= ======= ======= ======= ======= =======

Total Return(2) 4.28% 8.49% 3.75% 17.52% (7.88%) 13.80%

Ratios and supplemental data:
Net assets, end of period (000 omitted) $283,057 $288,494 $304,877 $307,734 $284,132 $311,187
Ratio of expenses to average net assets 0.92% 0.92% 0.92% 0.87% 0.61% 0.70%
Ratio of expenses to average net assets prior
to expense limitation 0.94% 0.94% 0.92% 0.92% 0.94% 1.02%
Ratio of net investment income to average net assets 4.79% 5.01% 4.93% 4.92% 5.29% 4.93%
Ratio of net investment income to average net assets
prior to expense limitation 4.77% 4.99% 4.93% 4.87% 4.96% 4.61%
Portfolio turnover 6% 21% 14% 54% 25% 18%

</TABLE>
______________________

(1) Ratios have been annualized and total return has not been annualized.

(3) 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

<TABLE>
<CAPTION>
VOYAGEUR INSURED FUNDS, INC.
MINNESOTA INSURED FUND - B CLASS
----------------------------------------------
Eight Period
months Year Year from
ended Ended Ended 3/7/95(4) to
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.930 $10.580 $10.720 $10.140

Income from investment operations:
Net investment income .................................. 0.294 0.454 0.450 0.380
Net realized and unrealized gain (loss)
on investments ....................................... 0.111 0.348 (0.140) 0.580
------- ------- ------- -------
Total from investment operations ....................... 0.405 0.802 0.310 0.960
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.295) (0.452) (0.450) (0.380)
Distributions from net realized gain on
investments .......................................... -- -- -- --
------- ------- ------- -------
Total dividends and distributions ...................... (0.295) (0.452) (0.450) (0.380)
------- ------- ------- -------
Net asset value, end of period ............................ $11.040 $10.930 $10.580 $10.720
======= ======= ======= =======
Total Return(2) ........................................... 3.76% 7.77% 3.03% 9.59%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $10,374 $8,926 $6,817 $4,655
Ratio of expenses to average net assets ................ 1.67% 1.67% 1.56% 1.34%(5)
Ratio of expenses to average net assets prior to
expense limitation ................................... 1.69% 1.69% 1.68% 1.64%(5)
Ratio of net investment income to average
net assets ........................................... 4.04% 4.26% 4.29% 4.15%(5)
Ratio of net investment income to average net
assets prior to expense limitation ................... 4.02% 4.24% 4.17% 3.85%(5)
Portfolio turnover ..................................... 6% 21% 14% 54%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
VOYAGEUR INSURED FUNDS, INC.
MINNESOTA INSURED FUND - C CLASS
---------------------------------------------------------
Eight Period
months Year Year Year from
ended Ended Ended Ended 5/4/94(4) to
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.940 $10.600 $10.730 $ 9.610 $10.230

Income from investment operations:
Net investment income .................................. 0.295 0.454 0.440 0.430 0.300
Net realized and unrealized gain (loss)
on investments ....................................... 0.110 0.338 (0.130) 1.140 (0.620)
------- ------- ------- ------- -------
Total from investment operations ....................... 0.405 0.792 0.310 1.570 (0.320)
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.295) (0.452) (0.440) (0.450) (0.280)
Distributions from net realized gain on
investments .......................................... -- -- -- -- (0.020)
------- ------- ------- ------- -------
Total dividends and distributions ...................... (0.295) (0.452) (0.440) (0.450) (0.300)
------- ------- ------- ------- -------
Net asset value, end of period ............................ $11.050 $10.940 $10.600 $10.730 $ 9.610
======= ======= ======= ======= =======
Total Return(2) ........................................... 3.76% 7.66% 2.98% 16.63% (3.14%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $3,207 $3,096 $3,126 $3,166 $ 1,525
Ratio of expenses to average net assets ................ 1.67% 1.67% 1.68% 1.66% 1.36%(5)
Ratio of expenses to average net assets prior to
expense limitation ................................... 1.69% 1.69% 1.68% 1.67% 1.68%(5)
Ratio of net investment income to average
net assets ........................................... 4.04% 4.26% 4.18% 4.11% 4.68%(5)
Ratio of net investment income to average net
assets prior to expense limitation ................... 4.02% 4.24% 4.18% 4.10% 4.36%(5)
Portfolio turnover ..................................... 6% 21% 14% 54% 25%
</TABLE>
______________________
(1) Ratios have been annualized and total return has not been annualized.

(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.

(4) Commencement of operations.

(5) Annualized.

See accompanying notes

<PAGE>

for tax-exempt income 33

VOYAGEUR INTERMEDIATE TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA INTERMEDIATE FUND - A CLASS
-------------------------------------------------------------------
Eight
months Year Year Year Year Year
ended Ended Ended Ended Ended Ended
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $11.170 $10.990 $11.140 $10.500 $11.160 $10.830

Income from investment operations:
Net investment income .................................. 0.363 0.535 0.510 0.510 0.450 0.470
Net realized and unrealized gain (loss)
on investments ...................................... (0.009) 0.180 (0.150) 0.640 (0.660) 0.370
------- ------- ------- ------- ------- -------
Total from investment operations ....................... 0.354 0.715 0.360 1.150 (0.210) 0.840
------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income ................... (0.364) (0.535) (0.510) (0.510) (0.450) (0.470)
Distributions from net realized gain on investments .... -- -- -- -- -- (0.040)
------- ------- ------- ------- ------- -------
Total dividends and distributions ...................... (0.364) (0.535) (0.510) (0.510) (0.450) (0.510)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............................ $11.160 $11.170 $10.990 $11.140 $10.500 $11.160
======= ======= ======= ======= ======= =======
Total Return(2) ........................................... 3.22% 6.69% 3.46% 11.00% (1.91%) 7.88%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $54,281 $57,524 $66,024 $72,405 $84,168 $75,374
Ratio of expenses to average net assets ................ 0.80% 0.91% 0.89% 0.91% 0.92% 0.99%
Ratio of expenses to average net assets
prior to expense limitation ......................... 0.80% 0.95% 0.89% 0.91% 0.92% 0.99%
Ratio of net investment income to average net assets ... 4.90% 4.86% 4.69% 4.61% 4.18% 4.18%
Ratio of net investment income to average net assets
prior to expense limitation ......................... 4.90% 4.82% 4.69% 4.61% 4.18% 4.18%
Portfolio turnover ..................................... 14% 21% 28% 40% 42% 19%
</TABLE>
______________________
(1) Ratios have been annualized and total return has not been annualized.

(3) 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

<TABLE>
<CAPTION>
VOYAGEUR INTERMEDIATE TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA INTERMEDIATE FUND - B CLASS
-----------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 8/15/95(4) TO
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $11.170 $10.990 $11.140 $10.950
Income from investment operations:
Net investment income .................................. 0.301 0.437 0.440 0.170
Net realized and unrealized gain (loss)
on investments ....................................... 0.009 0.190 (0.150) 0.190
------- ------- ------- -------
Total from investment operations ....................... 0.310 0.627 0.290 0.360
------- ------- ------- -------
Less dividends:
Dividends from net investment income ................... (0.300) (0.447) (0.440) (0.170)
------- ------- ------- -------
Total dividends ........................................ (0.300) (0.447) (0.440) (0.170)
------- ------- ------- -------
Net asset value, end of period ............................ $11.180 $11.170 $10.990 $11.140
======= ======= ======= =======
Total Return(2) ........................................... 2.82% 5.84% 2.74% 3.26%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $1,375 $910 $408 $27
Ratio of expenses to average net assets ................ 1.65% 1.81% 1.56% 1.30%(5)
Ratio of expenses to average net assets prior to
expense limitation ................................... 1.65% 1.85% 1.62% 1.55%(5)
Ratio of net investment income to average
net assets ........................................... 4.05% 3.96% 3.99% 3.93%(5)
Ratio of net investment income to average net
assets prior to expense limitation ................... 4.05% 3.92% 3.93% 3.68%(5)
Portfolio turnover ..................................... 14% 21% 28% 40%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
VOYAGEUR INTERMEDIATE TAX-FREE FUNDS, INC.
TAX-FREE MINNESOTA INTERMEDIATE FUND - C CLASS
------------------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR YEAR FROM
ENDED ENDED ENDED ENDED 4/30/94(4) TO
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $11.170 $10.990 $11.130 $10.500 $10.740
Income from investment operations:
Net investment income .................................. 0.301 0.440 0.430 0.420 0.240
Net realized and unrealized gain (loss)
on investments ....................................... (0.001) 0.187 (0.140) 0.630 (0.240)
------- ------- ------- ------- -------
Total from investment operations ....................... 0.300 0.627 0.290 1.050 --
------- ------- ------- ------- -------
Less dividends:
Dividends from net investment income ................... (0.300) (0.447) (0.430) (0.420) (0.240)
------- ------- ------- ------- -------
Total dividends ........................................ (0.300) (0.447) (0.430) (0.420) (0.240)
------- ------- ------- ------- -------
Net asset value, end of period ............................ $11.170 $11.170 $10.990 $11.130 $10.500
======= ======= ======= ======= =======
Total Return(2) ........................................... 2.73% 5.84% 2.69% 10.18% (0.03%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $1,601 $1,512 $1,137 $694 $341
Ratio of expenses to average net assets ................ 1.65% 1.77% 1.64% 1.63% 1.71%(5)
Ratio of expenses to average net assets prior to
expense limitation ................................... 1.65% 1.81% 1.64% 1.63% 1.71%(5)
Ratio of net investment income to average
net assets ........................................... 4.05% 4.00% 3.94% 3.82% 3.35%(5)
Ratio of net investment income to average net
assets prior to expense limitation ................... 4.05% 3.96% 3.94% 3.82% 3.35%(5)
Portfolio turnover ..................................... 14% 21% 28% 40% 42%
</TABLE>
______________________

(1) Ratios have been annualized and total return has not been annualized.

(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.

(4) Commencement of operations.

(5) Annualized.

See accompanying notes

<PAGE>

for tax-exempt income 35

<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
MINNESOTA HIGH YIELD
MUNICIPAL BOND FUND - A CLASS
--------------------------------------
EIGHT PERIOD
MONTHS YEAR FROM
ENDED ENDED 6/4/96(4) TO
8/31/98(1) 12/31/97(3) 12/31/96
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $10.650 $10.180 $10.000

Income from investment operations:
Net investment income .................................. 0.392 0.643 0.350
Net realized and unrealized gain on investments ........ 0.170 0.463 0.180
------- ------- -------
Total from investment operations ....................... 0.562 1.106 0.530
------- ------- -------
Less dividends:
Dividends from net investment income ................... (0.402) (0.636) (0.350)
------- ------- -------
Total dividends ........................................ (0.402) (0.636) (0.350)
------- ------- -------
Net asset value, end of period ............................ $10.810 $10.650 $10.180
======= ======= =======
Total Return(2) ........................................... 5.37% 11.26% 5.40%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $33,296 $19,017 $6,068
Ratio of expenses to average net assets ................ 0.40% 0.09% 0.24%(5)
Ratio of expenses to average net assets
prior to expense limitation ........................... 1.20% 1.24% 1.25%(5)
Ratio of net investment income to average net assets ... 5.50% 6.16% 5.78%(5)
Ratio of net investment income to average net assets
prior to expense limitation ........................... 4.70% 5.01% 4.77%(5)
Portfolio turnover ..................................... 7% 23% 15%

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC. VOYAGEUR MUTUAL FUNDS, INC.
MINNESOTA HIGH YIELD MINNESOTA HIGH YIELD
MUNICIPAL BOND FUND - B CLASS MUNICIPAL BOND FUND - C CLASS
------------------------------------- -------------------------------------
EIGHT PERIOD EIGHT PERIOD
MONTHS YEAR FROM MONTHS YEAR FROM
ENDED ENDED 6/12/96(4) TO ENDED ENDED 6/7/96(4) TO
8/31/98(1) 12/31/97(3) 12/31/96 8/31/98(1) 12/31/97(3) 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $10.660 $10.190 $ 9.780 $10.650 $10.180 $ 9.990

Income from investment operations:
Net investment income ............................. 0.343 0.557 0.290 0.340 0.572 0.300
Net realized and unrealized gain
on investments ................................... 0.159 0.470 0.410 0.170 0.455 0.190
------- ------- ------ ------- ------- ------
Total from investment operations .................. 0.502 1.027 0.700 0.510 1.027 0.490
------- ------- ------ ------- ------- ------
Less dividends:
Dividends from net investment income .............. (0.352) (0.557) (0.290) (0.350) (0.557) (0.300)
------- ------- ------ ------- ------- ------
Total dividends ................................... (0.352) (0.557) (0.290) (0.350) (0.557) (0.300)
------- ------- ------ ------- ------- ------
Net asset value, end of period ....................... $10.810 $10.660 $10.190 $10.810 $10.650 $10.180
======= ======= ======= ======= ======= =======
Total Return(2) ...................................... 4.77% 10.41% 7.29% 4.87% 10.41% 5.02%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ........... $13,351 $8,201 $2,738 $5,165 $3,178 $900
Ratio of expenses to average net assets ........... 1.15% 0.85% 0.95%(5) 1.15% 0.83% 0.99%(5)
Ratio of expenses to average net assets
prior to expense limitation ...................... 1.95% 2.00% 2.00%(5) 1.95% 1.98% 2.00%(5)
Ratio of net investment income to average
net assets ....................................... 4.75% 5.40% 5.14%(5) 4.75% 5.42% 4.90%(5)
Ratio of net investment income to average
net assets prior to expense limitation ........... 3.95% 4.25% 4.09%(5) 3.95% 4.27% 3.89%5
Portfolio turnover ................................ 7% 23% 15% 7% 23% 15%
</TABLE>
- ---------------
(1) Ratios have been annualized and total return has not been annualized.

(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.

(4) Commencement of operations.

(5) Annualized.

See accompanying notes

<PAGE>

36 for tax-exempt income

NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998
- --------------------------------------------------------------------------------

Delaware-Voyageur Tax-Free Minnesota Fund ("Tax-Free Minnesota Fund"), a series
of the Voyageur Tax-Free Funds, Inc.; Delaware-Voyageur Minnesota Insured Fund
("Minnesota Insured Fund"), a series of the Voyageur Insured Funds, Inc.;
Delaware-Voyageur Tax-Free Minnesota Intermediate 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 ("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.

The Funds have changed their fiscal year ends from December 31 to August 31 to
match the fiscal year of Delaware Investment's National Municipal Bond Funds.

1. Fund Reorganization
On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur Fund
Managers 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 ("DMC") became the investment adviser to the Funds, Delaware
Distributors, L.P. ("DDLP") became the distributor for the Funds, Delaware
Service Company, Inc. ("DSC") became the transfer, dividend-disbursing,
shareholder servicing and accounting and administration agent for the Funds.
DMC, DDLP and DSC assumed these services under substantially similar fee
structures that were in effect prior to the acquisition.

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.

<PAGE>

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 Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts and
market 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, if any, are distributed annually.

Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

3. Investment Management and Other Transactions with Affiliates
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 on the net assets of each Fund.

DMC has elected to waive its fees and reimburse each Fund to the extent that
annual operating expenses exclusive of taxes, interest, brokerage commissions,
distribution expenses and extraordinary expenses do not exceed the following
percentages of average daily net assets through August 31, 1998.

OPERATING EXPENSE
MANAGEMENT LIMITATION AS A
FEE AS PERCENTAGE OF
A PERCENTAGE OF AVERAGE DAILY
AVERAGE DAILY NET NET ASSETS
ASSETS (PER ANNUM) (PER ANNUM)
------------------ ----------------
Tax-Free Minnesota Fund ......... 0.50% 0.69%*
Minnesota Insured Fund .......... 0.50% 0.71%*
Tax-Free Minnesota
Intermediate Fund ............ 0.40% 0.75%
Minnesota High Yield
Municipal Bond Fund .......... 0.65% 0.25%*

- ----------
* Prior to May 1, 1998, such expenses were limited to 0.66%, 0.67% and 0.05% for
Tax-Free Minnesota Fund, Minnesota Insured Fund and Minnesota High Yield
Municipal Bond Fund, respectively.

The Funds have engaged DSC, an affiliate of DMC, to provide dividend disbursing,
transfer agent and accounting services. Each Fund pays DSC a monthly fee based
on number of shareholder accounts, shareholder transactions and average net
assets, subject to certain minimums.

<PAGE>
for tax-exempt income 37

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

3. Investment Management and Other Transactions with Affiliates (Continued)
On August 31, 1998, the Funds had payables to affiliates as follows:

DIVIDEND
DISBURSING,
TRANSFER AGENT OTHER
INVESTMENT FEES, ACCOUNTING EXPENSES
MANAGEMENT FEES AND OTHER PAYABLE TO
FEES PAYABLE EXPENSES DMC AND
TO DMC PAYABLE TO DSC AFFILIATES
------------ ---------------- ----------
Tax-Free Minnesota Fund ......... $39,901 $39,091 $110,559
Minnesota Insured Fund .......... 135,417 24,995 79,113
Tax-Free Minnesota Intermediate
Fund .......................... 19,837 5,522 12,542
Minnesota High Yield Municipal
Bond Fund ..................... -- 4,404 21,485

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 for the Tax-Free Minnesota Fund, the Minnesota Insured
Fund and the Minnesota High Yield Municipal Bond Fund and 0.15% of the average
daily net assets of the Tax-Free Minnesota Intermediate Fund A Class and 1.00%
of the average daily net assets of the B and C Class for each Fund.

DDLP earned commissions on sales of the Fund A Class shares for each Fund as
follows:

EIGHT MONTHS EIGHT MONTHS
ENDED 8/31/98 ENDED 12/31/97
------------- --------------
Tax-Free Minnesota Fund ..................... $45,681 $36,516
Minnesota Insured Fund ...................... 31,523 25,364
Tax-Free Minnesota Intermediate Fund ........ 4,484 6,630
Minnesota High Yield Municipal Bond Fund .... 23,189 10,766

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 eight months ended August 31, 1998 the Funds made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments for each Fund as follows:

PURCHASES SALES
--------- -----
Tax-Free Minnesota Fund ........................ $35,728,512 $38,898,488
Minnesota Insured Fund ......................... 12,474,860 15,738,937
Tax-Free Minnesota Intermediate Fund ........... 5,581,700 7,910,858
Minnesota High Yield Municipal Bond Fund ....... 22,643,721 1,844,616

At August 31, 1998, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE NET
COST OF UNREALIZED UNREALIZED UNREALIZED
INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Tax-Free Minnesota Fund ..................... $394,735,639 $37,699,885 $20,000 $37,679,885
Minnesota Insured Fund ...................... 273,493,288 25,168,763 -- 25,168,763
Tax-Free Minnesota Intermediate Fund ........ 53,924,894 2,667,645 28,186 2,639,459
Minnesota High Yield Municipal Bond Fund .... 51,993,848 1,914,593 -- 1,914,593
</TABLE>

For federal income tax purposes, as of August 31, 1998, Minnesota Insured Fund
had a capital loss carryover of $6,050,123 that will expire from 2003 through
2004, Tax Free Minnesota Intermediate Fund had had a capital loss carryover of
$47,382 that will expire in 2004, and Minnesota High Yield Municipal Bond Fund
had a capital loss carryover of $11,143 that will expire from 2004 through 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 A Class 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.
<PAGE>

38 for tax-exempt income

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

6. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
VOYAGEUR TAX-FREE FUNDS, INC. VOYAGEUR INSURED FUNDS, INC.
TAX-FREE MINNESOTA FUND MINNESOTA INSURED FUND
-------------------------------- ---------------------------------
EIGHT EIGHT
MONTHS YEAR YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96 8/31/98 12/31/97 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
A Class ....................................... 1,291,014 2,445,000 2,351,584 787,164 1,511,145 1,875,386
B Class ....................................... 165,933 230,517 316,743 157,408 262,553 211,514
C Class ....................................... 171,958 99,577 127,900 27,674 68,641 91,722

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 N/A N/A 2,205,310

Shares issued upon reinvestment of dividends
from net investment income and net realized
gains on investment transactions:
A Class ....................................... 742,960 1,191,155 1,180,162 557,163 983,624 969,663
B Class ....................................... 15,705 21,253 12,994 16,002 23,426 18,904
C Class ....................................... 7,877 8,668 7,795 5,937 10,782 11,243
--------- --------- --------- --------- --------- ---------
2,395,447 3,996,170 3,997,178 1,551,348 2,860,171 5,383,742
--------- --------- --------- --------- --------- ---------

Shares repurchased:
A Class ....................................... (2,413,567) (5,840,279) (5,048,128) (2,096,352) (4,894,549) (4,947,642)
B Class ....................................... (31,308) (118,151) (40,979) (50,332) (113,408) 20,425)
C Class ....................................... (41,574) (118,065) (70,822) (26,316) (91,495) (102,914)

--------- --------- --------- --------- --------- ---------
(2,486,449) (6,076,495) (5,159,929) (2,173,000) (5,099,452) (5,070,981)
--------- --------- --------- --------- --------- ---------

Net Increase (Decrease) .......................... (91,002) (2,080,325) (1,162,751) (621,652) (2,239,281) (312,761)
========= ========= ========= ========= ========= =========
</TABLE>

<PAGE>

for tax-exempt income 39

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

6. Capital Stock (Continued)
Transactions in capital stock shares were as follows:

<TABLE>
<CAPTION>
VOYAGEUR INTERMEDIATE VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE FUNDS, INC. MINNESOTA HIGH YIELD
TAX-FREE MINNESOTA INTERMEDIATE FUND MUNICIPAL BOND FUND
------------------------------------ ---------------------------------
EIGHT EIGHT PERIOD
MONTHS YEAR YEAR MONTHS YEAR FROM
ENDED ENDED ENDED ENDED ENDED 6/4/96* TO
8/31/98 12/31/97 12/31/96 8/31/98 12/31/97 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
A Class 347,131 642,232 803,384 1,474,592 1,228,700 703,876
B Class 63,007 60,795 34,174 502,630 531,417 267,494
C Class 57,860 73,831 78,645 216,871 240,090 94,294

Shares issued upon reinvestment of dividends
from net investment income
and net realized gains on
investment transactions:
A Class 123,589 198,390 202,700 54,225 48,680 4,348
B Class 2,221 2,115 536 18,875 15,493 1,293
C Class 3,443 4,721 2,520 9,250 8,637 775
-------- --------- --------- --------- --------- ---------
597,251 982,084 1,121,959 2,276,443 2,073,017 1,072,080
-------- --------- --------- --------- --------- ---------
Shares repurchased:
A Class (760,113) (1,698,909) (1,498,234) (233,795) (87,722) (112,030)
B Class (23,623) (18,600) -- (56,459) (46,061) --
C Class (53,354) (46,700) (39,981) (46,620) (38,834) (6,621)
-------- --------- --------- --------- --------- ---------
(837,090) (1,764,209) (1,538,215) (336,874) (172,617) (118,651)
-------- --------- --------- --------- --------- ---------

Net Increase (Decrease) (239,839) (782,125) (416,256) 1,939,569 1,900,400 953,429
======== ========= ========= ========= ========= =========

</TABLE>
- --------------
* Commencement of operations

7. Lines of Credit
Committed lines of credit were $21,600,000 for Tax-Free Minnesota Fund,
$14,900,000 for Minnesota Insured Fund, $3,100,000 for Tax-Free Minnesota
Intermediate Fund and $1,600,000 for Minnesota High Yield Municipal Bond Fund.
No amounts were outstanding at August 31, 1998, or at any time during the fiscal
year.

8. Credit and Market Risk
The Funds concentrate their investments in securities issued by municipalities,
mainly in Minnesota. The value of these investments may be adversely affected by
new legislation within the state, regional or local economic conditions, and
differing levels of supply and demand for municipal bonds. Many municipalities
insure repayment for their obligations. Although bond insurance reduces the risk
of loss due to default by an issuer, such bonds remain subject to the risk that
market value may fluctuate for other reasons and there is no assurance that the
insurance company will meet its obligations. These securities have been
identified in the 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 are in effect on August 31, 1998.

<PAGE>

DELAWARE-VOYAGEUR FUNDS
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

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") and the statement of assets and
liabilities of Minnesota High Yield Municipal Bond Fund as of August 31, 1998,
and the related statements of operations, statements of changes in net assets
and financial highlights for the period January 1, 1998 through August 31, 1998
and for the year ended December 31, 1997. 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 thereon 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 August 31, 1998, by correspondence 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at August 31, 1998, and the results of their operations,
the changes in their net assets and their financial highlights for the period
January 1, 1998 through August 31, 1998 and for the year ended December 31,
1997, in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP
-------------------------
ERNST & YOUNG LLP

Philadelphia, Pennsylvania
October 5, 1998

<PAGE>

THIS ANNUAL REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF THE MINNESOTA
MUNICIPAL BOND Funds, but it may be used with prospective investors when
preceded or accompanied by current Prospectuses for Minnesota Municipal Bond
Funds, which set forth details about charges, expenses, investment objectives
and operating policies of each Fund. You should read the prospectuses carefully
before you invest. Summary investment results are documented in the Funds'
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 each Fund 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

JOHN H. DURHAM
Partner, Complete Care Services
Horsham, 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
<PAGE>
directors
& officers

INVESTMENT MANAGER
Delaware Management Company
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>

(photo of world globes)

When used with prospective investors, this report must be preceded or
accompanied by a current Minnesota Municipal Bond Funds Prospectus 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

www.delawarefunds.com

DELAWARE
INVESTMENTS
- ---------------------
Philadelphia - London

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.

Printed in the USA
on recycled paper

(1113)
AR-MNALL[8/98]TKO10/98