U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/ Pre-Effective Amendment No. 2
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/ / Post-Effective Amendment No. ------
(Check appropriate box or boxes)
VOYAGEUR TAX FREE FUNDS
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(Exact Name of Registrant as Specified in Charter)
(800) 523-1918
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(Area Code and Telephone Number)
2005 Market Street, Philadelphia, PA 19103-7094
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Address of Principal Executive Offices: (Number, Street, City, State, Zip Code)
David F. Connor, Esq., 2005 Market Street, Philadelphia, PA 19103-7094
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Name and Address of Agent for Service: (Number, Street, City, State, Zip Code)
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective
under the Securities Act of 1933, as amended.
Title of the securities being registered:
Class A, Class B and Class C Shares of beneficial interest, no par value,
of Delaware Tax-Free Minnesota Fund, one series of Registrant. No filing fee
is due because Registrant is relying on Section 24(f) of the Investment Company
Act of 1940, as amended.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to such Section
8(a), shall determine.
--- C O N T E N T S ---
This Registration Statement includes the following:
1. Facing Page
2. Contents Page
3. Part A - Proxy Statement/Prospectus
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
7. Exhibits
Delaware Investments (R)
A member of Lincoln Financial Group (R)
PROXY MATERIALS
Delaware Tax-Free Minnesota Insured Fund
Dear Shareholder:
I am writing to let you know that a meeting of shareholders of the Delaware
Tax-Free Minnesota Insured Fund (the "Fund") will be held on March 30, 2007. The
purpose of the meeting is to vote on an important proposal that affects the Fund
and your investment in it. As a shareholder, you have the opportunity to voice
your opinion on the matters that affect your Fund. This package contains
information about the proposal and the materials to use when voting by mail, by
telephone or through the Internet.
Please read the enclosed materials and cast your vote. PLEASE VOTE YOUR SHARES
PROMPTLY. YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
The proposal has been carefully reviewed by the Fund's Board of Trustees. The
Trustees, most of whom are not affiliated with Delaware Investments, are
responsible for protecting your interests as a shareholder. The Trustees believe
the proposal is in the best interests of shareholders. They recommend that you
vote FOR the proposal.
The enclosed Q&A is provided to assist you in understanding the proposal. The
proposal is described in greater detail in the enclosed Proxy
Statement/Prospectus.
VOTING IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED. To cast your vote,
simply complete the proxy card enclosed in this package. Be sure to sign the
card before mailing it in the postage-paid envelope. You may also vote your
shares by touch-tone telephone or through the Internet. Simply call the
toll-free number or visit the web site indicated on your proxy card, and follow
the recorded or online instructions.
If you have any questions before you vote, please call Computershare Fund
Services, Inc. ("Computershare"), the Fund's proxy solicitor, at 1-866-905-8151.
Computershare will be glad to help you get your vote in quickly. You may also
receive a telephone call from Computershare reminding you to vote your shares.
Thank you for your participation in this important initiative.
Sincerely,
/s/ Patrick P. Coyne
Patrick P. Coyne
Chairman, President and Chief Executive Officer
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND
AND VOTE ON THE PROPOSAL
Below is a brief overview of the proposal to be voted upon. Your vote is
important. Please read the full text of the Proxy Statement/Prospectus, which
you should retain for future reference. If you need another copy of the Proxy
Statement/Prospectus, please call Delaware Investments at 1-800-523-1918.
We appreciate you placing your trust in Delaware Investments and we look forward
to helping you achieve your financial goals.
What proposal am I being asked to vote on?
You are being asked to vote to approve an Agreement and Plan of Reorganization
between Delaware Tax-Free Minnesota Insured Fund (the "Minnesota Insured Fund")
and Delaware Tax-Free Minnesota Fund (the "Minnesota Fund").
Proposal: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
What reorganization is the Board proposing?
Shareholders of the Minnesota Insured Fund are being asked to consider and
approve a reorganization ("Transaction") that will have the effect of
reorganizing the Minnesota Insured Fund with and into the Minnesota Fund.
How will the Transaction benefit shareholders?
The Funds' Boards considered a number of factors before approving the
Transaction. After considering these factors, the Boards concluded that
shareholders will potentially benefit from the Transaction in the following
ways:
o Based upon current market conditions, including the limited demand for
insured municipal securities in the current lower yield environment,
the Transaction potentially would enhance asset growth for the benefit
of shareholders of the Minnesota Insured Fund, as shareholders of the
Minnesota Fund.
o The investment strategies and policies of the Minnesota Insured Fund
are substantially the same as, but not identical to, the investment
strategies and policies of the Minnesota Fund. However, the investment
objectives of both Funds are identical and both Funds are required to
invest at least 80% of their net assets in Minnesota municipal
securities and other obligations that offer similar tax benefits.
o The Minnesota Fund offers a stronger track record as compared to the
Minnesota Insured Fund over the past 1-, 3-, 5- and 10-year periods.
(Of course, past performance is no guarantee of future results.)
o Shareholders of the Minnesota Insured Fund, which is required to
invest substantially in insured municipal securities, could benefit
from being investors in the Minnesota Fund, which does not have a
policy requiring it to invest substantially in insured municipal
securities, because of the decreased price volatility associated with
non-insured municipal securities in the current rising interest rate
environment.
How will the Transaction work?
The Minnesota Fund will acquire substantially all of the assets of the Minnesota
Insured Fund in exchange for shares of the Minnesota Fund. The Minnesota Insured
Fund will then distribute the Minnesota Fund shares on a pro rata basis to its
shareholders. At the time of the Transaction, any shares you own of the
Minnesota Insured Fund will be cancelled and you will receive new shares in the
same class of the Minnesota Fund that will have an aggregate value equal to the
value of your shares in the Minnesota Insured Fund. More detailed information
about the transfer of assets by the Minnesota Insured Fund and the issuance of
shares by the Minnesota Fund can be found in the Proxy Statement/Prospectus.
What is the anticipated timetable for the Transaction?
The shareholder meeting is scheduled for March 30, 2007. It is currently
anticipated that the Transaction, if approved by shareholders, will take place
during the second quarter of 2007. Whether or not you plan to attend the
Meeting, please vote your shares by mail, by telephone or through the Internet.
If you determine at a later date that you wish to attend this Meeting, you may
revoke your proxy and vote in person, as provided in the attached Proxy
Statement/Prospectus.
COMMON QUESTIONS AND GENERAL INFORMATION
Has the Board of Trustees approved the proposal?
Yes. The Minnesota Insured Fund's Board of Trustees has unanimously approved the
proposal and recommends that you vote to approve it.
How many votes am I entitled to cast?
As a shareholder, you are entitled to one vote for each full share and a
fractional vote for each fractional share of the Minnesota Insured Fund that you
own on the record date. The record date is January 8, 2007.
How do I vote my shares?
You can vote your shares by completing and signing the enclosed proxy card(s)
and mailing it in the enclosed postage-paid envelope. You may also vote by
touch-tone telephone by calling the toll-free number printed on your proxy
card(s) and following the recorded instructions. In addition, you may also vote
through the Internet by visiting www.delawareinvestments.com and following the
on-line instructions. If you need any assistance, or have any questions
regarding the proposal or how to vote your shares, please call Computershare
Fund Services, Inc., the Minnesota Insured Fund's proxy solicitor, at
1-866-905-8151.
How do I sign the proxy card?
Individual Accounts: Shareholders should sign exactly as their names appear
on the account registration shown on the card.
Joint Accounts: Either owner may sign, but the name of the person signing
should conform exactly to a name shown in the registration.
All Other Accounts: The person signing must indicate his or her capacity. For
example, if Ms. Ann B. Collins serves as a trustee for a
trust account or other type of entity, she should sign,
"Ann B. Collins, Trustee."
How can I find more information on the Proposal?
You should read the Proxy Statement/Prospectus that provides details regarding
the proposal. If you have any questions, please call Computershare Fund
Services, Inc., the Minnesota Insured Fund's proxy solicitor at 1-866-905-8151.
DELAWARE TAX-FREE MINNESOTA INSURED FUND
(a series of Voyageur Insured Funds)
2005 Market Street
Philadelphia, Pennsylvania 19103
NOTICE OF MEETING OF SHAREHOLDERS
To be held on March 30, 2007
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Meeting (the "Meeting") of Shareholders of
Delaware Tax-Free Minnesota Insured Fund (the "Minnesota Insured Fund" or
"Acquired Fund"), a series of Voyageur Insured Funds, has been called by the
Board of Trustees of Voyageur Insured Funds and will be held at the offices of
Delaware Investments located at 2001 Market Street, 2nd Floor Auditorium,
Philadelphia, PA 19103, on March 30, 2007 at 3:00 p.m., Eastern Time. The
Meeting is being called for the following reasons:
1. To approve an Agreement and Plan of Reorganization between Voyageur
Insured Funds, on behalf of the Minnesota Insured Fund, and Voyageur
Tax Free Funds, on behalf of the Delaware Tax-Free Minnesota Fund (the
"Minnesota Fund" or "Acquiring Fund"), which provides for: (i) the
acquisition by the Acquiring Fund of substantially all of the assets
of the Acquired Fund, in exchange for shares of the Acquiring Fund;
(ii) the pro rata distribution of shares of the Acquiring Fund to the
shareholders of the Acquired Fund; and (iii) the liquidation and
dissolution of the Acquired Fund.
2. To vote upon any other business as may properly come before the
Meeting or any adjournment thereof.
Shareholders of record of the Acquired Fund as of the close of business on
January 8, 2007 are entitled to notice of, and to vote at, the Meeting or any
adjournment thereof. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE
YOUR SHARES BY RETURNING THE PROXY CARD BY MAIL IN THE ENCLOSED POSTAGE-PAID
ENVELOPE PROVIDED, OR BY VOTING BY TELEPHONE OR OVER THE INTERNET. YOUR VOTE IS
IMPORTANT.
By Order of the Board of Trustees,
/s/ David F. Connor
David F. Connor
Secretary
[February 1,] 2007
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TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF FURTHER
MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
PREFER, YOU MAY INSTEAD VOTE BY TELEPHONE OR THE INTERNET. YOU MAY REVOKE YOUR
PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN PERSON IF YOU ATTEND THE
MEETING, AS PROVIDED IN THE ATTACHED PROXY STATEMENT/PROSPECTUS.
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PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
Page
Proposal: To Approve an Agreement and Plan of Reorganization .................2
Summary........................................................................2
What is the purpose of the Proposal?.......................................2
How do the investment objectives, strategies and policies of the
Acquired Fund and the Acquiring Fund compare?..............................3
What are the principal risks associated with investments in the Funds?.....4
What are the general tax consequences of the Transaction?..................4
Who manages the Funds?.....................................................5
What are the fees and expenses of each Fund and what might they
be after the Transaction?..................................................5
How do the performance records of the Funds compare?.......................9
Where can I find more financial information about the Funds?..............10
What are other key features of the Funds?.................................10
Reasons for the Transaction...................................................12
Information About the Transaction and the Plan................................15
How will the Transaction be carried out? .................................15
Who will pay the expenses of the Transaction? ............................15
What are the tax consequences of the Transaction? ........................16
What should I know about shares of the Acquiring Fund? ...................16
What are the capitalizations of the Funds and what might the
capitalizations be after the Transaction? ................................17
Comparison of Investment Objectives, Strategies, Policies and Risks...........18
Are there any significant differences between the investment
objectives of the Acquired Fund and the Acquiring Fund? ..................18
Are there any significant differences between the investment
strategies and policies of the Acquired Fund and the Acquiring Fund? .....18
How do the fundamental investment restrictions of the
Funds differ? ............................................................21
What are the risk factors associated with investments in
the Funds? ...............................................................21
What vote is necessary to approve the Plan? ..............................23
More Information About the Funds..............................................24
Voting Information............................................................25
Principal Holders of Shares...................................................27
EXHIBITS
Exhibit A - Form of Agreement and Plan of Reorganization
Exhibit B - Principal Holders of Shares as of January 8, 2007
PROXY STATEMENT/PROSPECTUS
Dated [February 1,] 2007
Acquisition of Substantially All of the Assets of:
DELAWARE TAX-FREE MINNESOTA INSURED FUND
(a series of Voyageur Insured Funds)
By and in exchange for shares of
DELAWARE TAX-FREE MINNESOTA FUND
(a series of Voyageur Tax Free Funds)
This Proxy Statement/Prospectus solicits proxies to be voted at a meeting
(the "Meeting") of shareholders of Delaware Tax-Free Minnesota Insured Fund (the
"Minnesota Insured Fund" or "Acquired Fund"), a series of Voyageur Insured
Funds. The Meeting has been called by the Board of Trustees of Voyageur Insured
Funds (the "Board") to vote on the approval of the Plan (as more fully described
below).
The principal offices of Voyageur Insured Funds and Voyageur Tax Free Funds
(each a "Trust" and collectively, the "Trusts") are located at 2005 Market
Street, Philadelphia, PA 19103. You can reach the offices of the Trusts by
telephone by calling 1-800-523-1918.
The Meeting will be held at the offices of Delaware Investments located at
2001 Market Street, 2nd Floor Auditorium, Philadelphia, PA 19103, on March 30,
2007 at 3:00 p.m., Eastern Time. The Board, on behalf of the Minnesota Insured
Fund, is soliciting these proxies. This Proxy Statement/Prospectus will first be
sent to shareholders on or about [February 12, 2007].
This Proxy Statement/Prospectus gives you the information about an
investment in the Delaware Tax-Free Minnesota Fund (the "Minnesota Fund" or
"Acquiring Fund") and about other matters that you should know before voting and
investing. You should retain it for future reference. A Statement of Additional
Information dated [February 1,] 2007 (the "Statement of Additional
Information"), relating to this Proxy Statement/Prospectus contains more
information about the Acquiring Fund, the Acquired Fund (each, a "Fund" and,
collectively, the "Funds") and the proposed transaction, and has been filed with
the U.S. Securities and Exchange Commission (the "SEC") and is incorporated
herein by reference.
The Prospectus of the Acquiring Fund dated December 29, 2006, as amended to
date (the "Fund Prospectus"), is included with and is considered a part of this
Proxy Statement/Prospectus, and is intended to provide you with information
about the Acquiring Fund.
You can request a free copy of the Statement of Additional Information and
the Fund Prospectus by calling 1-800-523-1918, or by writing to the Trusts at
Attention: Account Services, 2005 Market Street, Philadelphia, PA 19103.
LIKE ALL MUTUAL FUNDS, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER U.S. GOVERNMENT AGENCY.
MUTUAL FUND SHARES INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
PROPOSAL: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
Shareholders of the Acquired Fund are being asked to consider and approve
an Agreement and Plan of Reorganization (the "Plan") that will have the effect
of reorganizing the Acquired Fund with and into the Acquiring Fund as summarized
below.
The Plan provides for: (i) the acquisition by the Acquiring Fund of
substantially all of the assets of the Acquired Fund in exchange for shares of
the Acquiring Fund; (ii) the pro rata distribution of shares of the Acquiring
Fund to the shareholders of the Acquired Fund; and (iii) the liquidation and
dissolution of the Acquired Fund. If the shareholders of the Acquired Fund vote
to approve the Plan, as a shareholder of the Acquired Fund you will receive
Acquiring Fund shares equal in total value to, and of the same class as, your
investment in the Acquired Fund. The Acquired Fund will then be liquidated.
SUMMARY
This is only a summary of certain information contained in the Proxy
Statement/Prospectus. You should read the more complete information in the rest
of this Proxy Statement/Prospectus, including the Plan (attached as Exhibit A)
and the Fund Prospectus included with this Proxy Statement/Prospectus.
What is the purpose of the Proposal?
The Board approved the Plan for the Acquired Fund and recommends that
shareholders of the Acquired Fund approve the Plan. If shareholders of the
Acquired Fund approve the Plan, substantially all of the Acquired Fund's assets
will be transferred to the Acquiring Fund in exchange for the Acquiring Fund's
shares equal in value to the assets of the Acquired Fund that are transferred to
the Acquiring Fund. The Acquiring Fund shares will then be distributed pro rata
to the Acquired Fund's shareholders and the Acquired Fund will be liquidated and
dissolved. The proposed transaction for the Acquired Fund is referred to in this
Proxy Statement/Prospectus as the "Transaction."
The Transaction, if approved for the Acquired Fund, will result in your
shares of the Acquired Fund being exchanged for Acquiring Fund shares of the
same class equal in value (but having a different price per share) to your
shares of the Acquired Fund. This means that you will cease to be a shareholder
of the Acquired Fund and will become a shareholder of the Acquiring Fund. This
exchange will occur on a date agreed to by the parties to the Plan (hereafter,
the "Closing Date"), which is currently expected to be in the second quarter of
2007.
For the reasons set forth below under "Reasons for the Transaction," the
Boards of the Trusts have concluded that the Transaction is in the best
interests of the Acquired Fund and the Acquiring Fund. The Boards have also
concluded that no dilution in value would result to the shareholders of the
Acquired Fund and the Acquiring Fund as a result of the Transaction.
How do the investment objectives, strategies and policies of the Acquired Fund
and the Acquiring Fund compare?
Like the Acquired Fund, the Acquiring Fund is a mutual fund within the
Delaware Investments(R) Family of Funds (the "Delaware Companies") that is
managed by Delaware Management Company ("DMC"), a series of Delaware Management
Business Trust. The investment objective of the Acquired Fund is identical to
the investment objective of the Acquiring Fund. Both the Acquired Fund and the
Acquiring Fund seek as high a level of current income exempt from federal income
tax and from the Minnesota state personal income tax as is consistent with
preservation of capital. Each Fund's investment objective is fundamental and may
not be changed by the Board without prior shareholder approval.
In addition, the investment strategies and policies of the Acquired Fund
are substantially similar, but not identical, to the investment strategies and
policies of the Acquiring Fund. Both Funds have adopted a fundamental investment
policy to seek to achieve their investment objectives by investing at least 80%
of their net assets in municipal securities that are exempt from federal income
taxes, including the federal alternative minimum tax, and the Minnesota state
personal income tax. As described below, a Fund may not change its fundamental
investment policies and restrictions without prior shareholder approval. The
most significant difference between the Acquired Fund and the Acquiring Fund is
that the Acquiring Fund does not have a mandate regarding "insured municipal
securities." Insured municipal securities are debt securities issued by or on
behalf of a state or territory, its agencies, instrumentalities, municipalities
or other political sub-divisions, for which such issuers have obtained insurance
for the payment of interest and principal (when due) to the bondholders. This
insurance is designed to protect against certain risks (as described below) -
the insurance, however, does not guarantee the market value of the insured
municipal securities held in a Fund's portfolio and it does not guarantee the
value of an investment in a Fund.
The Acquired Fund has adopted a non-fundamental investment policy, which
may be changed with prior notice to shareholders (no shareholder approval is
required), to invest at least 80% of its net assets in insured municipal
securities. The Acquiring Fund has not adopted such an investment policy. The
Acquiring Fund may invest without limitation in insured municipal securities;
however, as of December 31, 2006, only 26% of the Acquiring Fund's assets were
invested in insured municipal securities, which has generally been typical with
respect to the Acquiring Fund in the past.
For further information about the investment objectives and policies of the
Funds, see "Comparison of Investment Objectives, Strategies, Policies and Risks"
below.
What are the principal risks associated with investments in the Funds?
As with most investments, investments in the Funds involve certain risks.
There can be no guarantee against losses resulting from an investment in either
Fund, nor can there be any assurance that either Fund will achieve its
investment objective. Investments in the Funds involve risks associated with
changes in interest rates, market conditions, industry conditions and the
financial strength of issuers of the portfolio securities held by a Fund. The
risks associated with an investment in the Acquired Fund are substantially
identical to the risks associated with an investment in the Acquiring Fund.
However, to the extent that the Acquired Fund invests more of its assets in
insured municipal securities as compared to the Acquiring Fund, the Acquired
Fund may be subject to less credit risk because the payment of interest and
principal with respect to such insured municipal securities is insured by an
insurance company. There is no assurance, however, that an insurance company
will meet its obligations with respect to the insured municipal securities.
Also, both Funds are considered to be "non-diversified," meaning that they
may invest more of their assets in a fewer number of issuers than diversified
funds. Accordingly, to the extent that a Fund invests its assets in fewer
issuers as compared to a diversified fund, the Fund may be more susceptible than
a fully diversified fund to adverse economic, political, business, or regulatory
developments affecting a single issuer, industry, or economic sector. This, in
turn, can affect the Fund's net asset value.
For further information about the risks of investing in the Funds, see
"Comparison of Investment Objectives, Strategies, Policies and Risks" below.
What are the general tax consequences of the Transaction?
It is expected that shareholders of the Acquired Fund will not recognize
any gain or loss for federal income tax purposes as a result of the exchange of
their shares for shares of the Acquiring Fund pursuant to the Transaction. You
should, however, consult your tax adviser regarding the effect, if any, of the
Transaction in light of your individual circumstances. You should also consult
your tax adviser about other state and local tax consequences of the
Transaction, if any, because the information about tax consequences in this
document relates to the federal income tax consequences of the Transaction only.
For further information about the federal income tax consequences of the
Transaction, see "Information About the Transaction and the Plan - What are the
tax consequences of the Transaction?"
Who manages the Funds?
The management of the business and affairs of each Fund is the
responsibility of the Board of the applicable Trust. The Boards select officers
who are responsible for the day-to-day operations of the Funds.
DMC manages the assets of each of the Funds and makes each Fund's
investment decisions. DMC is a series of Delaware Management Business Trust,
which is an indirect subsidiary of Delaware Management Holdings, Inc., and is
located at 2005 Market Street, Philadelphia, Pennsylvania 19103. DMC and its
predecessors have been managing the assets of the Delaware Companies since 1938.
As of September 30, 2006, DMC and its affiliates within Delaware Investments
were managing in the aggregate more than $150 billion in assets in various
institutional or separately managed, investment company and insurance accounts.
In addition, the portfolio managers for the Acquired Fund and the Acquiring
Fund are the same. There will be no management changes involved with the
proposed Transaction. As a result, the following individuals will continue to
manage the Acquiring Fund after completion of the Transaction:
Joseph R. Baxter and Robert F. Collins have primary responsibility for
making the day-to-day investment decisions for the Acquired Fund and the
Acquiring Fund. Mr. Baxter assumed responsibility for both Funds on May 22, 2003
and Mr. Collins assumed responsibility for both Funds on June 25, 2004.
Joseph R. Baxter, Senior Vice President, Head of Municipal Bond Department
and Senior Portfolio Manager, joined Delaware Investments in 1999. He heads the
firm's municipal bond department and is responsible for setting the department's
investment strategy. He is also a co-portfolio manager of the firm's municipal
bond fund clients and several other client accounts. Before joining Delaware
Investments, he held investment positions with First Union, most recently as a
municipal portfolio manager with the Evergreen Funds.
Robert F. Collins, Senior Vice President/Senior Portfolio Manager, joined
Delaware Investments in 2004 and is a co-portfolio manager of several of the
firm's municipal bond fund clients and other client accounts. Prior to joining
Delaware Investments, he spent five years as a co-manager of the municipal
portfolio management group within PNC Advisors, where he oversaw the tax-exempt
investments of high net worth and institutional accounts. Before that, he headed
the municipal fixed income team at Wilmington Trust, where he managed funds and
high net worth accounts. Mr. Collins earned a bachelor's degree in economics
from Ursinus College, and he is also a former president of the Financial
Analysts of Wilmington, Delaware.
What are the fees and expenses of each Fund and what might they be after the
Transaction?
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Funds. The sales charge structure for each Fund is
identical and the operating expenses shown are based on expenses incurred during
each Fund's fiscal year ended August 31, 2006.
You will notice that unlike in the fee tables shown in each Fund's
prospectus in previous years, the fee tables below contain an additional expense
line item entitled "Interest and Related Expenses." This new line item has been
added for the following reasons and now also appears in the prospectus for each
Fund. The new line item is a result of an accounting restatement to treat
inverse floater programs as financings for accounting purposes where a fund has
transferred its own municipal bonds to a trust that issues the inverse floating
rate security. Previously, the Funds had treated these transactions as a sale of
the municipal bond and a purchase of the inverse floating rate security.
Consequently, certain expenses of an inverse floater program will be deemed to
be Fund expenses. As a result of this change in accounting treatment, the
expense ratios in the tables below now include "Interest and Related Expenses"
which include, but are not limited to, interest expense, remarketing fees,
liquidity fees, and trustees' fees that are associated with inverse floater
programs. The expense examples following the fee tables also reflect these fees
associated with inverse floater programs. While this requires revisions to
expense tables and certain historical expense ratios for the Funds, this change
did not affect the current or historical net asset value, total return or net
investment income for the Funds.
FEE TABLES FOR
THE MINNESOTA INSURED FUND AND THE MINNESOTA FUND
A. Class A Shares
Actual Pro forma
--------------------------------- ---------------
Minnesota Minnesota Minnesota Fund
Insured Fund - Fund - Class - Class A After
Class A A Transaction
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price)............................... 4.50% 4.50% 4.50%
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a percentage
of original purchase price or redemption
price, whichever is lower)................... None(1) None(1) None(1)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees............................ 0.50% 0.55% 0.54%
Distribution and Service (12b-1) Fees...... 0.25% 0.25% 0.25%
Interest and Related Expenses(2)....... 0.19% 0.26% 0.24%
Other Expenses......................... 0.15% 0.14% 0.15%
Total Other Expenses....................... 0.34% 0.40% 0.39%(6)
Total Annual Fund Operating Expenses....... 1.09% 1.20% 1.18%
Fee Waiver/Expense Reimbursement........... (0.01%)(3) (0.01%)(3) (0.04%)(7)
Net Expenses............................... 1.08% 1.19% 1.14%
B. Class B Shares
Actual Pro forma
--------------------------------- ---------------
Minnesota Minnesota Minnesota Fund
Insured Fund - Fund - Class - Class B After
Class B B Transaction
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price)............................... None None None
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a percentage
of original purchase price or redemption
price, whichever is lower)................... 4.00%(4) 4.00%(4) 4.00%(4)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees............................ 0.50% 0.55% 0.54%
Distribution and Service (12b-1) Fees...... 1.00% 1.00% 1.00%
Interest and Related Expenses(2)....... 0.19% 0.26% 0.24%
Other Expenses......................... 0.15% 0.14% 0.15%
Total Other Expenses....................... 0.34% 0.40% 0.39%(6)
Total Annual Fund Operating Expenses....... 1.84% 1.95% 1.93%
Fee Waiver/Expense Reimbursement........... (0.01%)(3) (0.01%)(3) (0.04%)(7)
Net Expenses............................... 1.83% 1.94% 1.89%
C. Class C Shares
Actual Pro forma
--------------------------------- ---------------
Minnesota Minnesota Minnesota Fund
Insured Fund - Fund - Class - Class C After
Class C C Transaction
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price)............................... None None None
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a percentage
of original purchase price or redemption
price, whichever is lower)................... 1.00%(5) 1.00%(5) 1.00%(5)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees............................ 0.50% 0.55% 0.54%
Distribution and Service (12b-1) Fees...... 1.00% 1.00% 1.00%
Interest and Related Expenses(2)....... 0.19% 0.26% 0.24%
Other Expenses......................... 0.15% 0.14% 0.15%
Total Other Expenses....................... 0.34% 0.40% 0.39%(6)
Total Annual Fund Operating Expenses....... 1.84% 1.95% 1.93%
Fee Waiver/Expense Reimbursement........... (0.01%)(3) (0.01%)(3) (0.04%)(7)
Net Expenses............................... 1.83% 1.94% 1.89%
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial advisor who is paid a
commission, a contingent deferred sales charge will apply to redemptions made
within two years of purchase. Additional Class A purchase options that involve a
contingent deferred sales charge may be permitted from time to time and will be
disclosed in the applicable Fund's Prospectus if they are available.
(2) Interest and Related Expenses include, but are not limited to, interest
expense, remarketing fees, liquidity fees and trustees' fees from the Fund's
participation in inverse floater programs where the Fund has transferred its own
bonds to a trust that issues the inverse floaters.
(3) DMC has contracted to waive all or a portion of its investment advisory fees
and/or reimburse expenses of each Fund through December 31, 2007, in order to
prevent total annual fund operating expenses (excluding any 12b-1 plan expenses,
taxes, interest, inverse floater program expenses (as described above in
footnote 2), brokerage fees, certain insurance costs and non-routine expenses or
costs, including, but not limited to, those relating to reorganizations,
litigation, certain Trustee retirement plan expenses, conducting shareholder
meetings and liquidations (collectively, "non-routine expenses")) from exceeding
0.68% of average daily net assets of the Minnesota Fund and 0.64% of average
daily net assets of the Minnesota Insured Fund. For purposes of these waivers
and reimbursements, non-routine expenses may also include such additional costs
and expenses as may be agreed upon from time to time by the Funds' Board and
DMC.
(4) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 4.00%, which declines to 3.00%
during the second year, 2.25% during the third year, 1.50% during the fourth and
fifth years, 1.00% during the sixth year and 0% thereafter.
(5) Class C shares redeemed within one year of purchase are subject to a 1.00%
contingent deferred sales charge.
(6) Included in "Other Expenses" are the one-time estimated costs of the
Transaction, which are anticipated to total approximately $110,000, of which
$36,667 is applicable to the Minnesota Fund. The costs of the Transaction are
not subject to the fee waiver currently in place or to the expense cap described
in footnote 7 below. If the one-time costs of the Transaction were not included,
"Total Annual Fund Operating Expenses" and "Net Expenses" would be 1.17% and
1.13%, 1.92% and 1.88% and 1.92% and 1.88%, for Class A, Class B and Class C
shares, respectively.
(7) In addition to the fee waiver/fee reimbursement described in footnote 3, DMC
has contractually agreed to cap (the "Expense Cap") the total expenses of the
Minnesota Fund for at least one year after the Closing Date of the Transaction
in order to ensure that the Minnesota Fund's total expenses (excluding inverse
floater program expenses (as described above in footnote 2) and the expenses
related to the Transaction) do not exceed the Minnesota Insured Fund's total
expenses (excluding inverse floater program expenses and the expenses related to
the Transaction). This means that the Minnesota Fund's total expenses (exclusive
of certain expenses) for at least one year after the Closing of the Transaction
will not exceed 0.89%, 1.64% and 1.64% for Class A, Class B and Class C shares,
respectively. Using Class A shares as an example, the net expense ratio for the
Minnesota Insured Fund (excluding inverse floater program expenses and
Transaction expenses) is currently 0.89% (i.e., 1.08% less inverse program
floater expenses of 0.19%). The pro forma expense ratio of the Minnesota Fund
after the Transaction (excluding inverse floater program expenses and
Transaction expenses) is expected to be 0.93% (i.e., 1.18% less inverse program
floater expenses of 0.24% and Transaction expenses of 0.01%). Therefore, based
upon the estimated pro forma expenses, the Expense Cap and DMC's current waiver,
DMC would waive or otherwise reimburse the Minnesota Fund for 0.04% of its
expenses. The Expense Cap also excludes taxes, interest, brokerage fees, certain
insurance costs and non-routine expenses (as defined above in footnote 3).
Examples
These examples are intended to help you compare the costs of investing in
Minnesota Insured Fund shares with the cost of investing in Minnesota Fund
shares of the comparable class, both before and after the Transaction. You can
also use these examples to compare the costs of these Funds with the costs of
other mutual funds. We show the cumulative amount of Fund expenses on a
hypothetical investment of $10,000 in the Minnesota Insured Fund and the
Minnesota Fund for the time periods indicated and then sell all of your shares
at the end of those periods. The examples assume a 5% return each year.(1) These
are examples only and do not represent future expenses, which may be greater or
less than those shown below. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
Class A Shares 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $555 $780 $1,023 $1,718
Minnesota Fund $566 $813 $1,079 $1,838
Pro forma Minnesota Fund (after the Transaction) $561 $804 $1,066 $1,814
Class B Shares(2) 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $586 $803 $1,145 $1,961
Minnesota Fund $597 $836 $1,201 $2,080
Pro forma Minnesota Fund (after the Transaction) $592 $827 $1,188 $2,056
Class C Shares 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $286 $578 $995 $2,158
Minnesota Fund $297 $611 $1,051 $2,274
Pro forma Minnesota Fund (after the Transaction) $292 $602 $1,038 $2,251
You would pay the following expenses on the same investment if you did not sell
your shares:
Class B Shares(2) 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $186 $578 $995 $1,961
Minnesota Fund $197 $611 $1,051 $2,080
Pro forma Minnesota Fund (after the Transaction) $192 $602 $1,038 $2,056
Class C Shares 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $186 $578 $995 $2,158
Minnesota Fund $197 $611 $1,051 $2,274
Pro forma Minnesota Fund (after the Transaction) $192 $602 $1,038 $2,251
(1) Each Fund's actual rate of return may be greater or less than the
hypothetical 5% return we used here. This example reflects the net operating
expenses with expense waivers for the one-year contractual period and the total
operating expenses without expense waivers for years two through ten.
(2) The Class B example reflects the conversion of Class B shares to Class A
shares after eight years. Information for the ninth and tenth years reflects
expenses of the Class A shares.
THESE ARE JUST EXAMPLES. THEY DO NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. Each of the Funds pays its own operating expenses. The effects of these
expenses are reflected in the net asset value and are not directly charged to
your account. The expenses of each of the Funds are comprised of expenses
attributable to each Fund, respectively, as well as expenses not attributable to
any particular series of that Trust that are allocated among the various series
of the Trust.
How do the performance records of the Funds compare?
As described under the section "Reasons for the Transaction," the Board of
each Trust considered a number of factors when reviewing the Plan and
considering the proposed Transaction. The performance history of the Funds was
among the factors that the Boards considered. The performance history of the
Funds (without sales charges) as of December 31, 2006 is shown below:
Average Annual Total Returns
as of December 31, 2006
Fund and Class 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund--Class A 4.06% 3.88% 5.07% 5.05%
Minnesota Fund--Class A 4.65% 4.50% 5.72% 5.38%
Minnesota Insured Fund--Class B 3.29% 3.11% 4.28% 4.28%
Minnesota Fund--Class B 3.87% 3.72% 4.94% 4.61%
Minnesota Insured Fund--Class C 3.28% 3.13% 4.30% 4.28%
Minnesota Fund--Class C 3.94% 3.74% 4.95% 4.61%
Where can I find more financial information about the Funds?
The Acquiring Fund's and Acquired Fund's prospectus contains additional
financial information about each Fund, including performance for the past five
years. Please see the sections entitled "Financial Highlights" and "How has the
Fund Performed?" in the prospectus. In addition, each Fund's statement of
additional information, which is included with the Statement of Additional
Information related to this Proxy Statement/Prospectus, contains additional
financial information about each Fund. These documents are available upon
request. (See "More Information About the Funds.") The Fund Prospectus also
contains further financial information about the Acquiring Fund.
What are other key features of the Funds?
Investment Management Fees. DMC is the investment manager of each Fund. DMC
has entered into separate investment management agreements relating to each Fund
that provide for reductions in fee rates for a Fund as the assets of the Fund
increase. The investment management fees for the Funds are:
------------------------------- ---------------------------------------------
Fund Investment Management Fee
------------------------------- ---------------------------------------------
Acquired Fund 0.50% on first $500 million
0.475% on next $500 million
0.45% on next $1.5 billion
0.425% on assets in excess of $2.5 billion
------------------------------- ---------------------------------------------
Acquiring Fund 0.55% on first $500 million
0.50% on next $500 million
0.45% on next $1.5 billion
0.425% on assets in excess of $2.5 billion
------------------------------- ---------------------------------------------
DMC has contracted to waive that portion, if any, of the annual management
fees payable by each Fund and to reimburse certain expenses of each Fund for the
period through December 31, 2007 to the extent necessary to limit the total
operating expenses of each Fund to the levels described in the Fee Tables
beginning on page __. Moreover, once the Transaction is complete, DMC has
contractually agreed to cap the total expenses of the Minnesota Fund for at
least one year after the Closing Date of the Transaction in order to ensure that
the Minnesota Fund's total expenses (excluding inverse floater program expenses,
the expenses related to the Transaction, taxes, interest, brokerage fees,
certain insurance costs and non-routine expenses (as defined in footnote 3 in
the fee tables above)) do not exceed the Minnesota Insured Fund's total expenses
as of August 31, 2006 (excluding inverse floater program expenses, the expenses
related to the Transaction, taxes, interest, brokerage fees, certain insurance
costs and non-routine expenses). DMC's fee waiver after the Closing Date also is
reflected in the pro forma Fee Tables beginning on page __.
Distribution Services. Pursuant to underwriting agreements relating to each
Fund, Delaware Distributors, L.P. ("DDLP"), 2005 Market Street, Philadelphia,
Pennsylvania 19103, serves as the national distributor for the shares of the
Funds. DDLP pays the expenses of the promotion and distribution of the Funds'
shares, except for payments by the Funds on behalf of Class A shares, Class B
shares and Class C shares under their respective 12b-1 Plans. DDLP is an
indirect subsidiary of Delaware Management Holdings, Inc. and an affiliate of
DMC.
Pursuant to a contractual arrangement with DDLP, Lincoln Financial
Distributors, Inc. ("LFD"), 2001 Market Street, Philadelphia, Pennsylvania
19103-7055, is primarily responsible for promoting the sale of Fund shares
through broker/dealers, financial advisors and other financial intermediaries.
LFD is also an affiliate of DDLP and DMC.
Rule 12b-1 Plans. Each Fund has adopted a separate distribution plan or
"Rule 12b-1 Plan" for each of its Class A shares, Class B shares and Class C
shares (collectively, the "Rule 12b-1 Plans" and, each individually, a "Rule
12b-1 Plan").
Each Rule 12b-1 Plan permits the relevant Fund to pay out of the assets of
the Class A shares, Class B shares and Class C shares, as applicable, monthly
fees to DDLP for its services and expenses in distributing and promoting shares
of such classes. These expenses may include, among others, preparing and
distributing advertisements, sales literature and prospectuses and reports used
for sales purposes, compensating sales and marketing personnel, and paying
distribution and maintenance fees to securities brokers and dealers who enter
into dealer agreements with DDLP. The Rule 12b-1 Plan expenses relating to Class
B shares and Class C shares are also used to pay DDLP for advancing the
commission costs to dealers with respect to the initial sale of such Class B and
Class C shares. In addition, each Fund's Rule 12b-1 Plan permits the relevant
Fund to make payments out of the assets of the Class A shares, Class B shares
and Class C shares to other unaffiliated parties, such as banks, who either aid
in the distribution of shares of, or provide services to, such Classes.
The maximum aggregate annual fee payable by each Fund under its Rule 12b-1
Plans and each Fund's Distribution Agreement is, on an annual basis: up to 0.25%
of the average daily net assets of Class A shares; and up to 1.00% (0.25% of
which are service fees to be paid to DDLP, dealers and others for providing
personal service and/or maintaining shareholder accounts) of Class B shares' and
Class C shares' average daily net assets. The Boards for the Trusts may reduce
these amounts at any time. DDLP may contractually waive these amounts or a
portion of the amount at any time. All of the distribution expenses incurred by
DDLP and others, such as broker/dealers, in excess of the amount paid on behalf
of Class A shares, Class B shares and Class C shares are borne by such persons
without any reimbursement on behalf of such Classes.
Purchase, Exchange and Redemption Procedures. Procedures for the purchase,
exchange and redemption of each Fund's shares are identical. You may refer to
the Fund Prospectus under the section entitled "About Your Account" for the
purchase, exchange, and redemption procedures applicable to the purchases,
exchanges and redemptions of the Acquiring Fund's shares.
Dividends, Distributions and Taxes. For each Fund, dividends are declared
daily and paid monthly, while capital gains, if any, are distributed annually.
For more information about dividends, distributions and the tax implications of
investing in the Acquiring Fund, please see the Fund Prospectus under the
section entitled "About Your Account--Dividends, distributions and taxes."
REASONS FOR THE TRANSACTION
Based on the considerations described below, the Boards, including the
trustees who are deemed to be independent trustees (each, an "Independent
Trustee" and, collectively, the "Independent Trustees") under the Investment
Company Act of 1940, as amended (the "1940 Act"), on behalf of the Acquired Fund
and the Acquiring Fund, have determined that the Transaction would be in the
best interest of the Acquired Fund and the Acquiring Fund and that the interests
of the Acquired Fund's and the Acquiring Fund's existing shareholders would not
be diluted as a result of the Transaction.
At meetings of the Boards for the Trusts held on August 16-17, 2006 and
January 11, 2007, DMC presented the Plan to the Trustees and provided the
Trustees with data and analysis regarding the proposed Transaction. At the
meeting, the Boards considered a number of factors, including the following:
o The compatibility of the Acquired Fund's investment objective,
policies and restrictions with the investment objective, policies and
restrictions of the Acquiring Fund;
o The relative investment performance and yields of the Acquired Fund
and the Acquiring Fund;
o The relative size of the Acquired Fund as compared to the Acquiring
Fund both before and after the Transaction;
o The relative expense ratios of the Funds and the anticipated impact of
the proposed Transaction on the expense ratios of the Acquiring Fund
both before and after expense caps and fee waivers;
o The proposal of DMC to cap the Acquiring Fund's total expenses once
the Transaction is completed for a one-year period so that the
Acquiring Fund's total expenses, as a percentage of average net
assets, are the same as the Acquired Fund's total expenses, as a
percentage of average net assets, before the Transaction (exclusive of
the inverse floater program expenses (defined above) and the expenses
of the Transaction, as well as certain other expenses);
o The anticipated federal income tax consequences of the Transaction
with respect to each Fund and its shareholders;
o The estimated costs of the Transaction and the extent to which the
Funds would bear a portion of such costs; and
o The potential benefits of the proposed Transaction for the
shareholders of the Acquired Fund and the Acquiring Fund.
At the January 11, 2007 meeting, the Boards also considered the impact of a
further delay of the Transaction and the impact of a further delay on an already
closed Acquired Fund and its shareholders.
At the meeting of the Boards for the Trusts held on January 11, 2007, the
Boards were apprised of the restatement of the Funds' expenses in connection
with the Funds' investments in inverse floater programs. As a result of the
information presented, the Boards considered DMC's revised proposal to cap the
Acquiring Fund's total expenses once the Transaction is completed for a one-year
period so that the Acquiring Fund's total expenses (excluding inverse floater
program expenses and expenses related to the Transaction), as a percentage of
average net assets, are the same as the Acquired Fund's total expenses
(excluding inverse floater program expenses and expenses related to the
Transaction), as a percentage of average net assets, before the Transaction. The
Boards also considered DMC's explanation that the inverse floater program
expenses did not affect either Fund's net asset value, total return or net
investment income.
The Boards noted that the investment objective for the Acquired Fund is
identical to the investment objective of the Acquiring Fund and that both Funds
are required to invest 80% of their net assets in Minnesota municipal securities
and other obligations that offer similar tax benefits. The Boards also noted
that the portfolio of the Acquired Fund has historically been managed in
substantially the same manner as the portfolio of the Acquiring Fund. The Boards
considered the differences with respect to the Funds' investments in insured
municipal securities and the relative differences in the credit quality of the
portfolios' investments. The materials provided to the Boards also explained
that the investment strategies and policies of the Acquired Fund are
substantially similar to the investment strategies and policies of the Acquiring
Fund, except that the Acquiring Fund is not required to invest 80% of its net
assets in "insured securities," and the Acquiring Fund may invest up to 20% of
its total assets in non-investment grade securities whereas the Acquired Fund
may invest up to 20% of its total assets in non-insured municipal securities
that are investment grade.
DMC informed the Boards that, in its view, shareholders of the Acquired
Fund, which is required to invest substantially all of its net assets in insured
municipal securities, could benefit from investing in the Acquiring Fund, which
does not have a policy requiring it to invest in insured municipal securities,
due to the decreased price volatility associated with non-insured municipal
securities in the current rising interest rate environment. Additionally, DMC
informed the Boards that the demand for insured municipal bond funds is limited,
especially in the current lower yield environment.
With respect to performance, the materials provided to the Boards showed
that the Acquiring Fund's Class A shares had a stronger performance record for
the trailing 1-year, 3-year, 5-year and 10-year periods (through June 30, 2006).
In addition, over the trailing 1-year, 3-year, 5-year and 10-year periods, the
Acquiring Fund had a stronger performance rank relative to its Lipper category
(Minnesota Municipal Debt Funds) than does the Acquired Fund which is in the
same Lipper category. The materials also demonstrated that the 30-day SEC yield
of the Acquiring Fund is higher than the Acquired Fund's yield (as of June 30,
2006). As a result, DMC advised the Boards that shareholders of the Acquired
Fund also may benefit from a higher income stream.
The Boards also considered sales and redemption data as well as the
respective asset levels of each Fund as presented by DDLP. The information
provided to the Boards indicated that the Acquiring Fund had positive net cash
flow while the Acquired Fund had negative net cash flow during the one-year
period ended December 31, 2005 and the six-month period ended June 30, 2006.
DDLP also reported that the Acquiring Fund is significantly larger in terms of
total asset level than the Acquired Fund and that shareholders of both Funds
could benefit from the growth in assets realized by combining the Funds, as
explained more fully below.
In deciding whether to recommend approval of the Transaction to
shareholders, the Boards also considered the fees and expense ratios of the
Acquiring Fund and the Acquired Fund and the impact of existing and proposed
contractual fee waivers on such expense ratios. The Boards considered the
potential benefits afforded by a larger fund through economies of scale from the
spreading of fixed costs over a larger asset base and by reaching or utilizing,
to a greater extent, breakpoints in investment management fees, although there
can be no assurance that operational savings will be realized. At the Board
meetings, DMC informed the Boards that, with the contractual fee waivers and
expense limitations in place at that time, the total expenses for the Acquiring
Fund (excluding the one-time costs of the Transaction and inverse floater
program expenses) are slightly higher than the total expenses of the Acquired
Fund (excluding the one-time costs of the Transaction and inverse floater
program expenses) on Class A, Class B and Class C shares. The Board considered
the proposal of DMC to cap the Acquiring Fund's total expenses once the
Transaction is completed for a one-year period following the Closing Date so
that the Acquiring Fund's total expenses (excluding inverse floater program
expenses, expenses of the Transaction, taxes, interest, brokerage fees, certain
insurance costs and non-routine expenses), as a percentage of average net
assets, are the same as the Acquired Fund's total expenses (excluding inverse
floater program expenses, expenses of the Transaction, taxes, interest,
brokerage fees, certain insurance costs and non-routine expenses), as a
percentage of average net assets, before the Transaction. Finally, DMC also
reported that Acquiring Fund shareholders could benefit from: (i) the savings
the Acquiring Fund would realize in acquiring municipal securities and other
assets in the Transaction as opposed to purchasing them in the open market; (ii)
the fact that the Acquiring Fund would receive securities from the Acquired Fund
at substantially higher embedded yields than are available on similar securities
in the current marketplace; and (iii) the fact that the Acquiring Fund would
maintain its high overall credit quality after the Transaction with a less
significant decrease in yield than would be possible were DMC to purchase
similar securities in the open market.
DMC informed the Boards that the Transaction will be structured as a
tax-free reorganization. DMC also informed the Boards as to the cost of the
Transaction, including the costs associated with the solicitation of proxies.
The Boards considered that the expenses of the Transaction would be shared
one-third by the Acquiring Fund, one-third by the Acquired Fund and one-third by
DMC.
The Boards of the Trusts approved the Plan, concluding that the Transaction
is in the best interests of the Acquired Fund and the Acquiring Fund and that no
dilution of value would result to the shareholders of either Fund from the
Transaction. The Board of Voyageur Insured Funds then decided to recommend that
shareholders of the Acquired Fund vote to approve the Transaction. The Trustees
approving the Plan and making the foregoing determinations included all of the
Independent Trustees.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES OF VOYAGEUR INSURED
FUNDS, ON BEHALF OF THE ACQUIRED FUND, UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE PROPOSAL.
If the shareholders of the Acquired Fund do not approve the Plan, the Board
of Voyageur Insured Funds may consider other possible courses of action for the
Acquired Fund, including liquidation and dissolution.
INFORMATION ABOUT THE TRANSACTION AND THE PLAN
This is only a summary of the Plan. You should read the actual Plan
relating to the Transaction, which is attached as Exhibit A to this Proxy
Statement/Prospectus and is incorporated herein by reference.
How will the Transaction be carried out?
If the shareholders of the Acquired Fund approve the Plan, the Transaction
will take place after the parties to the Plan satisfy various conditions.
If the shareholders of the Acquired Fund approve the Plan, the Acquired
Fund will deliver to the Acquiring Fund substantially all of its assets on the
Closing Date. In exchange, Voyageur Insured Funds, on behalf of the Acquired
Fund, will receive the Acquiring Fund's shares to be distributed pro rata to the
Acquired Fund's shareholders. The value of the assets to be delivered to the
Acquiring Fund shall be the value of such assets computed as of the close of
business of the New York Stock Exchange, Inc. ("NYSE") (normally 4:00 p.m.,
Eastern Time) on the last business day prior to the Closing Date.
If the Transaction is approved, the stock transfer books of the Acquired
Fund will be permanently closed as of the close of business of the NYSE on the
business day before the Closing Date. The Acquired Fund will accept requests for
redemption only if received in proper form before that time. Requests received
after that time will be considered requests to redeem shares of the Acquiring
Fund.
To the extent permitted by law, the Plan may be amended without shareholder
approval at the direction of the Boards of the Trusts. The respective Boards may
also agree to terminate and abandon the Transaction at any time before or after
the approval of shareholders of the Acquired Fund or may terminate and abandon
the Transaction if certain conditions required under the Plan have not been
satisfied.
Who will pay the expenses of the Transaction?
The expenses resulting from the Acquired Fund's participation in the
Transaction, including solicitation of proxies, will be shared by the following
parties in the percentages indicated: 33.33% by the Acquired Fund, 33.33% by the
Acquiring Fund, and 33.34% by DMC. The Funds will bear these transaction costs
without regard to any of the expense limits noted above.
What are the tax consequences of the Transaction?
The Transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). Based on certain assumptions made and
representations to be received from each Trust on behalf of the Acquired Fund
and the Acquiring Fund, it is expected that Stradley, Ronon, Stevens & Young,
LLP will provide a legal opinion that, for federal income tax purposes, (i)
shareholders of the Acquired Fund will not recognize any gain or loss as a
result of the exchange of their shares of the Acquired Fund for shares of the
Acquiring Fund, and (ii) the Acquiring Fund and its shareholders will not
recognize any gain or loss upon receipt of the Acquired Fund's assets.
Capital losses can generally be carried forward to each of the eight (8)
taxable years succeeding the loss year to offset future capital gains. Following
the Transaction, any capital loss carryovers (together with any post-October
loss, current year loss and net unrealized depreciation in the value of the
assets, collectively referred to as "capital loss carryovers") of the Acquired
Fund will be subject to an annual limitation for federal income tax purposes.
This limitation may result in a portion of the capital loss carryovers of the
Acquired Fund, which might otherwise have been utilized to offset future capital
gains, to expire unutilized. As of August 31, 2006, the Acquired Fund on a
tax-basis had a post-October loss of $185,821 realized on investment
transactions from November 1, 2005 through August 31, 2006 that, in accordance
with federal income tax regulations, is treated as having arisen on September 1,
2006. In addition, at August 31, 2006, the Acquired Fund had net unrealized
appreciation of investments of $15,459,316. Thus, any annual limitation on the
pre-reorganization capital loss carryovers, if any, of the Acquired Fund are not
likely to be meaningful.
After the Transaction, you will continue to be responsible for tracking the
adjusted tax basis and holding period for your shares for federal income tax
purposes. You should consult your tax adviser regarding the effect, if any, of
the Transaction in light of your individual circumstances. You should also
consult your tax adviser about the state and local tax consequences, if any, of
the Transaction because this discussion only relates to the federal income tax
consequences.
What should I know about shares of the Acquiring Fund?
If the Transaction is approved by the Acquired Fund's shareholders, full
and fractional shares of the Acquiring Fund will be distributed to shareholders
of the Acquired Fund in accordance with the procedures described above. When
issued, each share will be validly issued and fully paid and non-assessable. The
shares of the Acquiring Fund will be recorded electronically in each
shareholder's account. The Acquiring Fund will then send a confirmation to each
shareholder. As of the Closing Date, any outstanding certificates, if any,
representing shares of the Acquired Fund will be cancelled.
The Acquiring Fund shares to be issued in the Transaction have the same
rights and privileges as the shares of the Acquired Fund. For example, all
shares have non-cumulative voting rights. This gives holders of more than 50% of
the shares voting the ability to elect all of the members of its Board of
Trustees. If this happens, holders of the remaining shares voting will not be
able to elect any trustees.
Like the Acquired Fund, the Acquiring Fund does not routinely hold annual
meetings of shareholders. The Acquiring Fund may hold special meetings for
matters requiring shareholder approval. A meeting of the Acquiring Fund's
shareholders may also be called at any time by the Board or by the chairperson
of the Board or by the president.
For purposes of calculating any applicable contingent deferred sales
charges, the period you have held your shares in the Acquired Fund will be
counted toward, and carried over as, the holding period of the shares you
receive in the Acquiring Fund.
What are the capitalizations of the Funds and what might the capitalizations be
after the Transaction?
The following table sets forth, as of August 31, 2006, the separate
capitalizations of the Acquired Fund and the Acquiring Fund, and the estimated
capitalization of the Acquiring Fund as adjusted to give effect to the proposed
Transaction. The capitalization of the Acquiring Fund is likely to be different
if and when the Transaction is actually consummated.
Pro Forma
Adjustments to Acquiring Fund
Acquired Fund Acquiring Fund Capitalization(1) after Transaction
(audited) (audited) (estimated)
(unaudited)
Net assets (all classes) $235,595,051 $408,198,735 ($73,334) $643,720,452
Total shares outstanding 21,640,206 32,667,613 51,523,511
Class A net assets $212,859,134 $381,719,633 ($67,416) $594,511,351
Class A shares outstanding 19,552,653 30,552,280 47,591,992
Class A net asset value per share
$10.89 $12.49 $12.49
Class B net assets $10,182,240 $11,353,799 ($2,605) $21,533,434
Class B shares outstanding 936,209 908,021 1,722,473
Class B net asset value per share
$10.88 $12.50 $12.50
Class C net assets $12,553,677 $15,125,303 ($3,313) $27,675,667
Class C shares outstanding 1,151,344 1,207,312 2,209,046
Class C net asset value per share
$10.90 $12.53 $12.53
(1)The adjustments reflect the costs of the Transaction incurred by each Fund.
COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES,
POLICIES AND RISKS
This section describes the investment objectives, principal investment
strategies and the key investment policies of the Funds, and certain noteworthy
differences between such objectives, strategies and policies, as well as the
risks associated with such objectives, strategies and policies. For a complete
description of the Acquiring Fund's investment strategies, policies and risks,
you should read the Fund Prospectus, which accompanies this Proxy
Statement/Prospectus.
Are there any significant differences between the investment objectives of the
Acquired Fund and the Acquiring Fund?
The investment objective of the Acquired Fund is identical to the
investment objective of the Acquiring Fund. Each Fund seeks as high a level of
current income exempt from federal income tax and from the Minnesota state
personal income tax as is consistent with preservation of capital. Each Fund's
investment objective is fundamental and may not be changed without prior
shareholder approval. As a result, these fundamental investment objectives for a
Fund may not be changed without the approval of the lesser of (i) a majority of
the outstanding shares of the Fund, or (ii) 67% or more of the shares present at
a meeting of shareholders at which the holders of more than 50% of the
outstanding shares are present or represented by proxy at the meeting ("Majority
Vote").
Are there any significant differences between the investment strategies and
policies of the Acquired Fund and the Acquiring Fund?
The investment strategies and policies of the Acquired Fund are
substantially similar, but not identical, to the investment strategies and
policies of the Acquiring Fund. Both Funds have adopted a fundamental investment
policy to seek to achieve their investment objectives by investing at least 80%
of their net assets in municipal securities that are exempt from federal income
taxes, including the federal alternative minimum tax, and the Minnesota state
personal income tax. A Fund may not change its fundamental investment policies
and restrictions without a prior Majority Vote of its shareholders.
The most significant difference between the Acquired Fund and the Acquiring
Fund is that the Acquiring Fund does not have a mandate regarding "insured
municipal securities." Insured municipal securities are debt securities issued
by or on behalf of a state or territory, its agencies, instrumentalities,
municipalities or other political sub-divisions, for which such issuers have
obtained insurance for the payment of interest and principal (when due) to the
bondholders. This insurance is designed to protect against certain risks (as
described below) - the insurance, however, does not guarantee the market value
of the insured municipal securities held in a Fund's portfolio and it does not
guarantee the value of a shareholder's investment in a Fund. The Acquired Fund
has adopted a non-fundamental investment policy, which may be changed with prior
notice to shareholders (no shareholder approval is required), to invest at least
80% of its net assets in insured municipal securities. The Acquiring Fund has
not adopted such an investment policy. The Acquiring Fund may invest without
limitation in insured municipal securities; however, as of December 31, 2006,
only 26% of the Acquiring Fund's assets were invested in insured municipal
securities, which has generally been typical with respect to the Acquiring Fund
in the past.
Each Fund invests primarily in tax-exempt obligations, commonly known as
municipal bonds, which are debt obligations issued by or on behalf of a state or
territory, its agencies, instrumentalities, municipalities or other political
sub-divisions. There are several different types of municipal bonds, including
general obligation bonds and revenue bonds. Each Fund is required to derive at
least 95% of its income from Minnesota obligations. The Acquired Fund may invest
in general obligation and revenue bonds, provided that, under normal market
conditions and after the application of insurance, at least 80% of the Acquired
Fund's net assets are invested in insured municipal securities that are rated at
least AAA by Standard & Poor's Ratings Services ("S&P") or an equivalent rating
by another nationally recognized statistical rating organization ("NRSRO"). The
Acquired Fund may not invest in non-investment grade municipal securities,
commonly referred to as high-yield securities. In addition, the Acquired Fund
may invest up to 20% of its total assets in non-insured municipal securities
that are investment grade - i.e., are rated within one of the top four quality
grades by an NRSRO or of equivalent quality, as determined by DMC.
The Acquiring Fund does not have such limitations with respect to insured
municipal securities; however, the Acquiring Fund does have limitations with
respect to the credit quality of its portfolio securities. As a matter of
non-fundamental policy, the Acquiring Fund will primarily invest in bonds rated
in the top four rating categories by an NRSRO or bonds that are unrated, but
which DMC, as the investment manager, determines to be of comparable quality.
The Acquiring Fund may invest up to 20% of its net assets in high-yield,
lower-rated fixed income securities that are not investment grade, but will not
invest in any securities that are rated lower than B by S&P or an equivalent
rating by another NRSRO. The quality limitation applies at the time of purchase.
As a result of the Transaction, shareholders in the Acquired Fund, which
invests primarily in insured municipal securities, would become shareholders in
the Acquiring Fund, which does not invest primarily in insured municipal
securities. The Acquiring Fund may invest without limitation in insured
municipal securities; however, as described above, historically only a limited
portion of the Acquiring Fund's assets have been invested in insured municipal
securities. The average weighted credit quality of the portfolio of the Acquired
Fund and the Acquiring Fund was AA and A, respectively (as rated by S&P), as of
December 31, 2006 and the average weighted credit quality of the portfolio of
the Acquiring Fund after the Transaction is currently expected to be AA.
Each Fund may invest up to 20% of its assets in private activity or private
placement bonds. Such securities are used to finance certain non-government
activities, and the interest income from these securities, although exempt from
federal income tax, is subject to the federal alternative minimum tax.
Depending on market conditions and other factors, each of the Funds invests
in securities with maturities of varying lengths. In general, each Fund
maintains an average effective portfolio maturity of between 5 and 30 years.
However, as of December 31, 2006, the Acquired Fund's and the Acquiring Fund's
average effective portfolio maturity was approximately 6.5 years and 6.2 years,
respectively.
Each Fund may invest without limit in municipal lease obligations primarily
through certificates of participation. Certificates of participation are widely
used by state and local governments to finance the purchase of property and
facilities.
Each Fund has adopted a non-fundamental policy that prohibits the Fund from
concentrating its investments in the securities of issuers primarily engaged in
the same industry. Generally, this investment restriction prohibits a Fund from
investing 25% or more of the value of the Fund's assets in securities of issuers
in any one industry. Certain types of bonds and obligations are excluded from
this restriction. In particular, the Funds' restrictions on industry
concentration do not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. In addition, each Fund may invest
more than 25% of its total assets in certain sectors of the municipal bond
market in circumstances in which other appropriate investments may be limited
(e.g., housing, health care and utilities). In addition, each Fund may invest
more than 25% of its total assets in industrial development bonds and education
bonds.
The Funds are "non-diversified" for purposes of the 1940 Act. Generally, a
"diversified" investment company may not, with respect to 75% of its assets,
invest more than 5% of its assets in any one issuer and may not own more than
10% of the outstanding voting securities of any one issuer. Because each Fund is
non-diversified, it is not subject to these diversification requirements.
Although the Funds are non-diversified for purposes of the 1940 Act, each Fund
intends to meet the diversification requirements of a regulated investment
company under Subchapter M of the Code. Under the Code, the Funds have the
flexibility to invest as much as 50% of their assets in as few as two issuers,
provided that no single issuer accounts for more than 25% of a Fund's portfolio.
The remaining 50% of a Fund's assets must be diversified so that no more than 5%
of a Fund's assets are invested in the securities of a single issuer.
Each Fund may invest up to 25% of its assets in inverse floaters when the
underlying bond is tax-exempt. Otherwise, each Fund's investments in taxable
instruments, non-insured securities (for the Acquired Fund) and securities rated
below investment grade (for the Acquiring Fund), including inverse floaters on
taxable bonds, are limited to 20% of the Fund's net assets. Inverse floaters are
instruments with floating or variable interest rates that move in the opposite
direction to short-term interest rates or interest rate indices.
Each Fund may invest up to an aggregate of 20% of its net assets in
futures, options and swaps, so long as each Fund's investments in these
securities when aggregated with other taxable instruments, non-insured
securities (for the Acquired Fund) and securities rated below investment grade
(for the Acquiring Fund) do not exceed 20% of the Fund's net assets.
When DMC, the Funds' investment manager, believes that unusual or adverse
economic, market or other conditions warrant a more defensive posture, DMC may
temporarily select investments for a Fund other than those investments that are
the Fund's primary focus. The Acquiring Fund may invest without limit in
short-term, tax-exempt obligations on a temporary, defensive basis. The Acquired
Fund may invest up to 35% of its net assets in short-term, tax-exempt
obligations, without obtaining insurance, provided that such investments are
rated in either the highest short-term or long-term rating category by an NRSRO.
When investing in this manner a Fund may be unable to achieve its investment
objective.
How do the fundamental investment restrictions of the Funds differ?
The Funds have adopted identical fundamental investment restrictions. A
Fund may not change any of its fundamental investment restrictions without a
prior Majority Vote of its shareholders. The Acquiring Fund's fundamental
investment restrictions are listed in the Acquiring Fund's Statement of
Additional Information dated January 3, 2007 related to the Fund Prospectus,
which is incorporated by reference into the Statement of Additional Information
relating to this Prospectus/Proxy Statement and is available upon request.
What are the risk factors associated with investments in the Funds?
Like all investments, any investment in the Funds involves risk. There is
no assurance that either Fund will meet its investment objectives. A Fund's
ability to achieve its objective will depend, among other things, on the
portfolio managers' analytical and portfolio management skills. As with most
investments in mutual funds, the best results are achieved when investments in
the Funds are held for a number of years.
The risks of investing in the Funds are basically the same as those of
other investments in municipal securities of similar quality. Investments in the
Funds are subject to several risks, which are summarized below.
Interest Rate Risk. Interest rate risk is generally the most significant
type of risk for the Funds. Interest rate risk is the risk that securities, and
in particular bonds with longer maturities, will decrease in value if interest
rates rise. These changes can be unpredictable, and, as such, the Funds will
generally not try to increase return by aggressively capitalizing on interest
rate changes. Each Fund seeks to manage this risk by managing the duration of
the Fund's portfolio securities. As of December 31, 2006, the Acquired Fund's
and the Acquiring Fund's average effective portfolio maturity was approximately
6.5 years and 6.2 years, respectively, and each Fund's average effective
duration was approximately 5.1 years and 5.3 years, respectively. Maturity is
defined as the length of time until a bond issuer must repay the underlying loan
principal to bondholders. Duration is a measurement of a fixed-income
investment's price volatility; the larger the number, the greater the likely
price change for a given change in interest rates.
Market Risk. Market risk is the risk that a majority of securities in a
certain market--such as bonds--will decline in value because of economic
conditions, future expectations or investor confidence. This risk may cause the
price fluctuation of a security because of the changes in general economic and
interest rate conditions that affect the bond market or municipal bond market as
a whole. Additionally, the Funds may engage in transactions where payment occurs
before the actual delivery of the security. Because the market price of the
security may fluctuate during the time after payment but prior to delivery, a
Fund assumes the risk that the value of the security at delivery may be less
than the purchase price.
Industry and Security Risk. Industry risk is the risk that the value of
securities in a particular industry will decline because of changing
expectations for the performance of that industry. Securities risk is the risk
that the value of an individual security will decline because of changing
expectations for the performance of the individual issuer of the security. To
mitigate this risk, DMC spreads each Fund's assets across different types of
municipal bonds and among bonds representing different industries and regions
within the State of Minnesota. DMC will generally concentrate investments in a
particular sector when the supply of bonds in other sectors does not suit the
Funds' investment needs. This will expose a Fund to greater industry and
security risk. However, the Acquired Fund may be less subject to industry and
security risk than the Acquiring Fund because payment of interest and principal
on a substantial portion of the bonds in its portfolio is insured.
Credit Risk. Credit risk is the possibility that an issuer of a debt
security--or an entity that insures the debt security--will be unable to make
interest payments on, and to pay the principal of, a security when due. A change
in the credit risk associated with a particular debt security may cause a
corresponding change in that security's price and, therefore, impact the Fund's
net asset value. The purpose of insurance is to protect against credit risk. In
the event of a default of an insured municipal security, the insurer is
contractually required to make payments of interest and principal under the
terms of the municipal security. To the extent that the Acquired Fund invests
more of its assets in insured municipal securities or in securities that are
more highly rated as compared to the Acquiring Fund, the Acquired Fund may be
subject to less credit risk. There is no assurance, however, that the company
insuring the payment of interest and principal when due to the bondholders will
meet its obligations. Moreover, this insurance does not guarantee the market
value of the insured municipal securities held in a Fund's portfolio and it does
not guarantee the value of an investment in a Fund. The average weighted credit
quality of the portfolio of the Acquired Fund and the Acquiring Fund was AA and
A, respectively (as rated by S&P), as of December 31, 2006 and the average
weighted credit quality of the portfolio of the Acquiring Fund after the
Transaction is currently expected to be AA.
Call Risk. Call risk is the likelihood that a security will be prepaid
(commonly referred to as being "called") before maturity. An issuer is more
likely to call its bonds when interest rates are falling, because the issuer can
issue new bonds with lower interest payments. If a bond is called, a Fund may
have to replace it with a lower-yielding security. DMC takes this type of risk
into consideration, and when appropriate, attempts to invest in bonds that
protect investors against early prepayment.
High-Yield Bond Risk. Investing in lower-rated, higher-risk bonds entails
the risk of losing principal, which may be greater than the risk of principal
loss associated with investment-grade bonds. In addition, the risk of default or
price changes due to changes in the issuer's credit quality is greater with
lower-rated securities. Issuers of lower-rated securities are typically in
weaker financial health than issuers of higher-rated securities, and their
ability to make interest payments or repay principal is less certain. The market
prices of lower-rated, high-yield securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general or
regional economic difficulty. High-yield securities may also not trade as
frequently, and when they do trade, their prices may be significantly higher or
lower than expected. Thus, high-yield securities may be less liquid and more
volatile than higher-quality securities.
The Acquired Fund may not invest in such high-yield bonds. However, the
Acquiring Fund may invest up to 20% of its net assets in such securities,
subject to the minimum quality limitations as described in the section entitled
"Are there any significant differences between the investment strategies and
policies of the Acquired Fund and the Acquiring Fund?" above. To the extent that
the Acquiring Fund invests in such high-yield bonds, the Acquiring Fund may be
subject to greater risks associated with such investments, such as the loss of
principal, credit risk, liquidity risk and volatility, as compared to the
Acquired Fund. The Acquiring Fund has historically invested in high-yield bonds,
subject to the 20% limitation described above.
Geographic Concentration Risk. Largely because of tax avoidance
considerations, both Funds typically invest primarily in debt obligations issued
by the state of Minnesota and, therefore, events in that state are likely to
affect each Fund's investments and performance. These events may include
economic or political policy changes; tax base erosion; state constitutional
limits on tax increases; budget deficits and other financial difficulties; and
changes in the ratings assigned to municipal issuers within that state.
Diversification. Because each Fund is non-diversified (as described above),
each Fund may be more susceptible than a fully diversified fund to adverse
economic, political, business, or regulatory developments affecting a single
issuer, industry, or economic sector. This, in turn, can affect the Fund's net
asset value.
Liquidity Risk. Liquidity risk is the possibility that securities held by a
Fund cannot be readily sold within seven days at approximately the price at
which the Fund values them. Each Fund limits its exposure to illiquid securities
to no more than 15% of the Fund's net assets.
Alternative Minimum Tax Risk. Each Fund may invest up to 20% of its assets
in bonds whose income is subject to the federal alternative minimum tax. If a
Fund invests in bonds whose income is subject to an alternative minimum tax,
that portion of the Fund's distributions would be taxable for shareholders who
are subject to this tax.
What vote is necessary to approve the Plan?
Required Vote. Provided that "Quorum" requirements (as defined below) have
been satisfied, the Plan must be approved by a Majority Vote, meaning the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Acquired Fund; or (2) 67% or more of the shares of the Acquired Fund present
at the Meeting if the holders of more than 50% of the Acquired Fund's
outstanding shares are present or represented by proxy. With respect to the
Acquired Fund, "Quorum" means one-third (33 1/3%) of the shares entitled to vote
at the Meeting are present in person or represented by proxy at the Meeting.
MORE INFORMATION ABOUT THE FUNDS
Administration, Transfer Agency and Fund Accounting Services. Delaware
Service Company, Inc. ("DSC"), 2005 Market Street, Philadelphia, Pennsylvania
19103, an affiliate of DMC, acts as the administrator and shareholder servicing,
dividend disbursing and transfer agent for each Fund and for other mutual funds
in the Delaware Companies. DSC also provides fund accounting services to each
Fund. Those services include performing or overseeing all functions related to
calculating each Fund's net asset value and providing all financial reporting
services, regulatory compliance testing and other related accounting services.
For its transfer agency, shareholder servicing, fund accounting and
administration services, DSC is paid fees by each Fund according to fee
schedules that are the same for each retail fund in the Delaware Companies.
These fees are charged to each Fund on a pro rata basis.
Custodial Services. Mellon Bank, N.A., is the custodian of the securities
and other assets of the Funds. The main office of Mellon Bank, N.A. is One
Mellon Center, Pittsburgh, PA 15258.
Additional Information. More information about the Acquiring Fund is
included in (i) the Fund Prospectus, which is included with and considered a
part of this Proxy Statement/Prospectus, (ii) its Statement of Additional
Information dated January 3, 2007, as amended to date, related to the Fund
Prospectus; and (iii) the Statement of Additional Information dated [February
1,] 2007 (relating to this Proxy Statement/Prospectus), which is incorporated by
reference herein. The Acquiring Fund's Statement of Additional Information dated
January 3, 2007 contains the Acquiring Fund's Statement of Net Assets, Statement
of Operations, Statement of Changes in Net Assets and Notes to Financial
Statements, as well as the report of Ernst & Young LLP, the Acquiring Fund's
independent registered public accounting firm, for the fiscal year ended August
31, 2006. You may request free copies of the Statements of Additional
Information (including any supplements), which have been filed with the SEC, by
calling 1-800-523-1918 or by writing to the Trusts: Attention: Account Services,
2005 Market Street, Philadelphia, PA 19103.
This Proxy Statement/Prospectus, which constitutes part of a Registration
Statement filed by the Acquiring Fund with the SEC under the Securities Act of
1933, as amended, omits certain of the information contained in such
Registration Statement. Reference is hereby made to the Registration Statement
and to the exhibits and amendments thereto for further information with respect
to the Acquiring Fund and the shares it offers. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the SEC.
Each Fund also files proxy materials, reports, and other information with
the SEC in accordance with the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act. These materials can be
inspected and copied at the public reference facilities maintained by the SEC,
100 F Street, N.E., Room 1580, Washington, D.C. 20549. Also, copies of such
material can be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, SEC, Washington, D.C. 20549, at prescribed
rates or from the SEC's Internet site at www.sec.gov. To request information
regarding the Funds, you may also send an e-mail to the SEC at
publicinfo@sec.gov.
VOTING INFORMATION
How will the shareholder voting be handled?
Only shareholders of record of the Acquired Fund at the close of business
on January 8, 2007 (the "Record Date"), will be entitled to notice of and to
vote at the Meeting on the matters described in this Proxy Statement/Prospectus,
and will be entitled to one vote for each full share and a fractional vote for
each fractional share that they hold. If sufficient votes to approve the
Proposal are not received by the date of the Meeting, the Meeting may be
adjourned to permit further solicitations of proxies. A majority of the votes
cast by shareholders of the Acquired Fund present in person or by proxy at the
Meeting (whether or not sufficient to constitute a Quorum) may adjourn the
Meeting. The Meeting may also be adjourned by the Chairperson of the Meeting. It
is anticipated that the persons named as proxies on the enclosed proxy cards
will use the authority granted to them to vote on adjournment in their
discretion.
Abstentions and broker non-votes will be included for purposes of
determining whether a Quorum is present at the Meeting for a particular matter,
and will have the same effect as a vote "against" the Proposal. Broker non-votes
are proxies from brokers or nominees indicating that such persons have not
received voting instructions from the beneficial owner or other person entitled
to vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary power. The Acquired Fund does not expect to
receive any broker non-votes.
How do I ensure my vote is accurately recorded?
You may attend the Meeting and vote in person. You may also vote by
completing, signing and returning the enclosed proxy card in the enclosed
postage paid envelope, or by telephone or through the Internet. If you return
your signed proxy card or vote by telephone or through the Internet, your vote
will be officially cast at the Meeting by the persons appointed as proxies. A
proxy card is, in essence, a ballot. If you simply sign and date the proxy card
but give no voting instructions, your shares will be voted in favor of the
Proposal and in accordance with the views of management upon any unexpected
matters that come before the Meeting or adjournment of the Meeting. If your
shares are held of record by a broker-dealer and you wish to vote in person at
the Meeting, you should obtain a Legal Proxy from your broker of record and
present it at the Meeting.
May I revoke my proxy?
Shareholders may revoke their proxy at any time before it is voted by
sending a written notice to Voyageur Insured Funds expressly revoking their
proxy, by signing and forwarding to Voyageur Insured Funds a later-dated proxy,
or by attending the Meeting and voting in person. If your shares are held in the
name of your broker, you will have to make arrangements with your broker to
revoke a previously executed proxy.
What other matters will be voted upon at the Meeting?
The Board of Voyageur Insured Funds does not intend to bring any matters
before the Meeting with respect to the Acquired Fund other than those described
in this Proxy Statement/Prospectus. The Board of Voyageur Insured Funds is not
aware of any other matters to be brought before the Meeting with respect to the
Acquired Fund by others. If any other matter legally comes before the Meeting,
proxies for which discretion has been granted will be voted in accordance with
the views of management.
Who is entitled to vote?
Only shareholders of record on the Record Date will be entitled to vote at
the Meeting. There were 21,086,781.307 outstanding shares of the Acquired Fund
entitled to vote as of the Record Date.
What other solicitations will be made?
This proxy solicitation is being made by the Board of Voyageur Insured
Funds for use at the Meeting. The cost of this proxy solicitation will be shared
as set forth below. In addition to solicitation by mail, solicitations also may
be made by advertisement, telephone, telegram, facsimile transmission or other
electronic media, or personal contacts. Voyageur Insured Funds will request
broker-dealer firms, custodians, nominees and fiduciaries to forward proxy
materials to the beneficial owners of the shares of record. Voyageur Insured
Funds may reimburse broker-dealer firms, custodians, nominees and fiduciaries
for their reasonable expenses incurred in connection with such proxy
solicitation. In addition to solicitations by mail, officers and employees of
Voyageur Insured Funds, Delaware Management Business Trust and their affiliates,
without extra pay, may conduct additional solicitations by telephone, telecopy
and personal interviews. Voyageur Insured Funds has engaged Computershare Fund
Services, Inc. ("Computershare") to solicit proxies from brokers, banks, other
institutional holders and individual shareholders at an anticipated cost of
between $8,260 to $17,820, including out of pocket expenses, which will be borne
as described below. Fees and expenses may be greater depending on the effort
necessary to obtain shareholder votes. Voyageur Insured Funds has also agreed to
indemnify Computershare against certain liabilities and expenses, including
liabilities under the federal securities laws. Voyageur Insured Funds expects
that the solicitations will be primarily by mail, but also may include
telephone, telecopy or oral solicitations.
As the Meeting date approaches, certain shareholders of the Acquired Fund
may receive a telephone call from a representative of Computershare if their
votes have not yet been received. Proxies that are obtained telephonically will
be recorded in accordance with the procedures described below. These procedures
are designed to ensure that both the identity of the shareholder casting the
vote and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Computershare
representative is required to ask for each shareholder's full name and address,
or the zip code or employer identification number, and to confirm that the
shareholder has received the proxy materials in the mail. If the shareholder is
a corporation or other entity, the Computershare representative is required to
ask for the person's title and confirmation that the person is authorized to
direct the voting of the shares. If the information solicited agrees with the
information provided to Computershare, then the Computershare representative has
the responsibility to explain the process, read the Proposal listed on the proxy
card and ask for the shareholder's instructions on the Proposal. Although the
Computershare representative is permitted to answer questions about the process,
he or she is not permitted to recommend to the shareholder how to vote, other
than to read any recommendation set forth in this Proxy Statement/Prospectus.
Computershare will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call Computershare immediately if his or her
instructions are not correctly reflected in the confirmation.
Who will pay the expenses of the Proposal?
The total costs of the Transaction are estimated to be approximately
$110,000. The costs of the Transaction, including the costs of soliciting
proxies in connection with the Meeting, will be shared by the following parties
in the percentages indicated: 33.33% by the Acquired Fund, 33.33% by the
Acquiring Fund, and 33.34% by DMC.
How do I submit a shareholder proposal?
Voyageur Insured Funds is not required to, and does not intend to, hold
regular annual shareholders' meetings. A shareholder wishing to submit a
proposal for consideration for inclusion in a proxy statement for the next
shareholders' meeting should send his or her written proposal to the offices of
Voyageur Insured Funds, directed to the attention of its Secretary, at the
address of its principal executive office printed on the first page of this
Proxy Statement/Prospectus, so that it is received within a reasonable time
before any such meeting. The inclusion and/or presentation of any such proposal
is subject to the applicable requirements of the proxy rules under the
Securities Exchange Act of 1934. Submission of a proposal by a shareholder does
not guarantee that the proposal will be included in Voyageur Insured Funds'
proxy statement or presented at the meeting.
PRINCIPAL HOLDERS OF SHARES
On the Record Date, the officers and Trustees of each Trust, as a group,
owned less than 1% of the outstanding voting shares of any Fund, or class
thereof.
To the best knowledge of the Trusts, as of the Record Date, no person,
except as set forth in the table on Exhibit B to this Proxy
Statement/Prospectus, owned of record 5% or more of the outstanding shares of
any class of the Acquired Fund and the Acquiring Fund. Except as noted therein,
the Trusts have no knowledge of beneficial ownership.
EXHIBITS TO
PROXY STATEMENT/PROSPECTUS
Exhibit
A Form of Agreement and Plan of Reorganization between Voyageur Tax Free
Funds, on behalf of the Minnesota Fund, and Voyageur Insured Funds, on
behalf of the Minnesota Insured Fund
B Principal Holders of Shares
OTHER DOCUMENTS INCLUDED WITH
THIS PROXY STATEMENT/PROSPECTUS
o Prospectus of Delaware Tax-Free Minnesota Fund dated December 29, 2006, as
supplemented to date.
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN VOYAGEUR TAX FREE FUNDS,
ON BEHALF OF THE MINNESOTA FUND, AND VOYAGEUR INSURED FUNDS,
ON BEHALF OF THE MINNESOTA INSURED FUND
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made as of
this __th day of [March] 2007, by and between Voyageur Tax Free Funds, a
statutory trust created under the laws of the State of Delaware, with its
principal place of business at 2005 Market Street, Philadelphia, Pennsylvania
19103, on behalf of its series, Delaware Tax-Free Minnesota Fund ("Acquiring
Fund"), and Voyageur Insured Funds, a statutory trust created under the laws of
the State of Delaware, with its principal place of business also at 2005 Market
Street, Philadelphia, Pennsylvania 19103, on behalf of its series, Delaware
Tax-Free Minnesota Insured Fund ("Acquired Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan") will consist of:
(i) the acquisition by Voyageur Tax Free Funds on behalf of Acquiring Fund of
substantially all of the property, assets and goodwill of Acquired Fund in
exchange solely for (a) shares of beneficial interest, without par value, of
Acquiring Fund - Class A ("Acquiring Fund Class A Shares"), (b) shares of
beneficial interest, without par value, of Acquiring Fund - Class B ("Acquiring
Fund Class B Shares"), and (c) shares of beneficial interest, without par value,
of Acquiring Fund - Class C ("Acquiring Fund Class C Shares"); (ii) the
distribution of (a) Acquiring Fund Class A shares to the holders of Acquired
Fund - Class A Shares ("Acquired Fund Class A Shares"), (b) Acquiring Fund Class
B Shares to the holders of Acquired Fund - Class B Shares ("Acquired Fund Class
B Shares"), and (c) Acquiring Fund Class C Shares to the holders of Acquired
Fund - Class C Shares ("Acquired Fund Class C Shares"), according to their
respective interests in complete liquidation of Acquired Fund; and (iii) the
dissolution of Acquired Fund as soon as practicable after the closing (as
referenced in Section 3 hereof, hereinafter called the "Closing"), all upon and
subject to the terms and conditions of this Agreement hereinafter set forth.
AGREEMENT
In order to consummate the Plan and in consideration of the premises and of
the covenants and agreements hereinafter set forth, and intending to be legally
bound, the parties hereto covenant and agree as follows:
1. Sale and Transfer of Assets, Liquidation and Dissolution of Acquired
Fund
(a) Subject to the terms and conditions of this Agreement, and in
reliance on the representations and warranties of Voyageur Tax Free Funds
herein contained, and in consideration of the delivery by Voyageur Tax Free
Funds of the number of its shares of beneficial interest of Acquiring Fund
hereinafter provided, Voyageur Insured Funds, on behalf of Acquired Fund,
agrees that it will sell, convey, transfer and deliver to Voyageur Tax Free
Funds, on behalf of Acquiring Fund, at the Closing provided for in Section
3, all of the then existing assets of Acquired Fund as of the close of
business (which hereinafter shall be, unless otherwise noted, the regular
close of business of the New York Stock Exchange, Inc. ("NYSE")) ("Close of
Business") on the valuation date (as defined in Section 3 hereof,
hereinafter called the "Valuation Date"), free and clear of all liens,
encumbrances, and claims whatsoever (other than shareholders' rights of
redemption and such restrictions as might arise under the Securities Act of
1933, as amended (the "1933 Act"), with respect to privately placed or
otherwise restricted securities that Acquired Fund may have acquired in the
ordinary course of business), except for cash, bank deposits, or cash
equivalent securities in an estimated amount necessary (1) to pay Acquired
Fund's costs and expenses of carrying out this Agreement (including, but
not limited to, fees of counsel and accountants, and expenses of its
liquidation and dissolution contemplated hereunder), which costs and
expenses shall be established on the books of Acquired Fund as liability
reserves, (2) to discharge all of Acquired Fund's Liabilities (as defined
below) on its books at the Close of Business on the Valuation Date
including, but not limited to, its income dividends and capital gains
distributions, if any, payable for any period prior to, and through, the
Close of Business on the Valuation Date, and (3) to pay such contingent
liabilities as the trustees of Voyageur Insured Funds shall reasonably deem
to exist against Acquired Fund, if any, at the Close of Business on the
Valuation Date, for which contingent and other appropriate liability
reserves shall be established on the books of Acquired Fund (hereinafter
"Net Assets"). Voyageur Insured Funds, on behalf of Acquired Fund, shall
also retain any and all rights that it may have over and against any person
that may have accrued up to and including the Close of Business on the
Valuation Date. Voyageur Insured Funds agrees to use commercially
reasonable efforts to identify all of Acquired Fund's liabilities, debts,
obligations and duties of any nature, whether accrued, absolute, contingent
or otherwise ("Liabilities") prior to the Valuation Date and to discharge
all such known Liabilities on or prior to the Valuation Date. In no event
will Acquiring Fund assume or otherwise be responsible for any Liabilities
of Acquired Fund.
(b) Subject to the terms and conditions of this Agreement, and in
reliance on the representations and warranties of Voyageur Insured Funds on
behalf of Acquired Fund herein contained, and in consideration of such
sale, conveyance, transfer, and delivery, Voyageur Tax Free Funds agrees at
the Closing to deliver to Voyageur Insured Funds, on behalf of Acquired
Fund: (i) the number of Acquiring Fund Class A Shares determined by
dividing the net asset value per share of Acquired Fund Class A Shares as
of the Close of Business on the Valuation Date by the net asset value per
share of Acquiring Fund Class A Shares as of Close of Business on the
Valuation Date, and multiplying the result by the number of outstanding
Acquired Fund Class A Shares as of Close of Business on the Valuation Date;
(ii) the number of Acquiring Fund Class B Shares determined by dividing the
net asset value per share of Acquired Fund Class B Shares as of Close of
Business on the Valuation Date by the net asset value per share of
Acquiring Fund Class B Shares as of Close of Business on the Valuation
Date, and multiplying the result by the number of outstanding Acquired Fund
Class B Shares as of Close of Business on the Valuation Date; and (iii) the
number of Acquiring Fund Class C Shares determined by dividing the net
asset value per share of Acquired Fund Class C Shares as of Close of
Business on the Valuation Date by the net asset value per share of
Acquiring Fund Class C Shares as of Close of Business on the Valuation
Date, and multiplying the result by the number of outstanding Acquired Fund
Class C Shares as of Close of Business on the Valuation Date. All such
values shall be determined in the manner and as of the time set forth in
Section 2 hereof.
(c) As soon as practicable following the Closing, Voyageur Insured
Funds shall dissolve Acquired Fund and distribute pro rata to Acquired
Fund's shareholders of record as of the Close of Business on the Valuation
Date, the shares of beneficial interest of Acquiring Fund received by
Acquired Fund pursuant to this Section 1. Such dissolution and distribution
shall be accomplished by the establishment of accounts on the share records
of Acquiring Fund of the type and in the amounts due such shareholders
pursuant to this Section 1 based on their respective holdings of shares of
Acquired Fund as of the Close of Business on the Valuation Date. Fractional
shares of beneficial interest of Acquiring Fund shall be carried to the
third decimal place. No certificates representing shares of beneficial
interest of Acquiring Fund will be issued to shareholders of Acquired Fund
Shares irrespective of whether such shareholders hold their shares in
certificated form.
(d) At the Closing, each outstanding certificate that, prior to
Closing, represented shares of beneficial interest of Acquired Fund, shall
be cancelled and shall no longer evidence ownership thereof.
(e) At the Closing, each shareholder of record of Acquired Fund as of
the record date (the "Distribution Record Date") with respect to any unpaid
dividends and other distributions that were declared prior to the Closing,
including any dividend or distribution declared pursuant to Section 9(e)
hereof, shall have the right to receive such unpaid dividends and
distributions with respect to the shares of Acquired Fund that such person
had on such Distribution Record Date.
2. Valuation
(a) The value of Acquired Fund's Net Assets to be acquired by
Acquiring Fund hereunder shall be computed as of Close of Business on the
Valuation Date using the valuation procedures set forth in Acquired Fund's
currently effective prospectus and statement of additional information.
(b) The net asset value of Acquiring Fund Class A Shares, Acquiring
Fund Class B Shares and Acquiring Fund Class C Shares shall be determined
to the nearest full cent as of the Close of Business on the Valuation Date
using the valuation procedures set forth in Acquiring Fund's currently
effective prospectus and statement of additional information.
(c) The net asset value of Acquired Fund Class A Shares, Acquired Fund
Class B Shares and Acquired Fund Class C Shares shall be determined to the
nearest full cent as of the Close of Business on the Valuation Date, using
the valuation procedures as set forth in Acquired Fund's currently
effective prospectus and statement of additional information.
3. Closing and Valuation Date
The Valuation Date shall be [April 13], 2007, or such later date as the
parties may mutually agree. The Closing shall take place at the principal office
of Voyageur Tax Free Funds, 2005 Market Street, Philadelphia, Pennsylvania 19103
at approximately 9:00 a.m., Eastern Time, on the first business day following
the Valuation Date. Notwithstanding anything herein to the contrary, in the
event that on the Valuation Date (a) the NYSE shall be closed to trading or
trading thereon shall be restricted or (b) trading or the reporting of trading
on such exchange or elsewhere shall be disrupted so that, in the judgment of
Voyageur Tax Free Funds or Voyageur Insured Funds, accurate appraisal of the
value of the net assets of Acquired Fund or Acquiring Fund is impracticable, the
Valuation Date shall be postponed until the first business day after the day
when trading shall have been fully resumed without restriction or disruption,
reporting shall have been restored and accurate appraisal of the value of the
net assets of Acquired Fund and Acquiring Fund is practicable in the judgment of
Voyageur Tax Free Funds and Voyageur Insured Funds. Voyageur Insured Funds shall
have provided for delivery as of the Closing of those Net Assets of Acquired
Fund to be transferred to Voyageur Tax Free Funds' Custodian, Mellon Bank, N.A.,
One Mellon Center, Pittsburg, PA 15285. Also, Voyageur Insured Funds shall
deliver at the Closing a list (which may be in electronic form) of names and
addresses of the shareholders of record of its Acquired Fund Shares, and the
number of full and fractional shares of beneficial interest of such classes
owned by each such shareholder, indicating thereon which such shares are
represented by outstanding certificates and which by book-entry accounts, all as
of the Close of Business on the Valuation Date, certified by its transfer agent,
or by its President or Vice-President to the best of their knowledge and belief.
Voyageur Tax Free Funds shall provide evidence satisfactory to Voyageur Insured
Funds in such manner as Voyageur Insured Funds may request that such shares of
beneficial interest of Acquiring Fund have been registered in an open account on
the books of Acquiring Fund.
4. Representations and Warranties by Voyageur Insured Funds
Voyageur Insured Funds represents and warrants to Voyageur Tax Free Funds
that:
(a) Voyageur Insured Funds is a statutory trust created under the laws
of the State of Delaware on December 17, 1998, and is validly existing and
in good standing under the laws of that State. Voyageur Insured Funds, of
which Acquired Fund is a separate series, is duly registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company. Such registration is in full force
and effect as of the date hereof and will be in full force and effect as of
the Closing and all of its shares sold have been sold pursuant to an
effective registration statement filed under the 1933 Act, except for any
shares sold pursuant to the private offering exemption for the purpose of
raising initial capital.
(b) Voyageur Insured Funds is authorized to issue an unlimited number
of shares of beneficial interest of Acquired Fund, with no par value. Each
outstanding share of Acquired Fund is validly issued, fully paid,
non-assessable and has full voting rights.
(c) The financial statements appearing in Acquired Fund Annual Report
to Shareholders for the fiscal year ended August 31, 2006, audited by Ernst
& Young, LLP, copies of which have been delivered to Voyageur Tax Free
Funds, and any unaudited financial statements since that date, copies of
which may be furnished to Voyageur Tax Free Funds, fairly present the
financial position of Acquired Fund as of the date indicated, and the
results of its operations for the period indicated, in conformity with
generally accepted accounting principles applied on a consistent basis.
(d) The books and records of Acquired Fund made available to Voyageur
Tax Free Funds and/or its counsel are true and correct in all material
respects and contain no material omissions with respect to the business and
operations of Acquired Fund.
(e) The statement of assets and liabilities to be furnished by
Voyageur Insured Funds as of the Close of Business on the Valuation Date
for the purpose of determining the number of shares of beneficial interest
of Acquiring Fund to be issued pursuant to Section 1 hereof will accurately
reflect the Net Assets of Acquired Fund and outstanding shares of
beneficial interest, as of such date, in conformity with generally accepted
accounting principles applied on a consistent basis.
(f) At the Closing, Voyageur Insured Funds, on behalf of Acquired
Fund, will have good and marketable title to all of the securities and
other assets shown on the statement of assets and liabilities referred to
in subsection (e) above, free and clear of all liens or encumbrances of any
nature whatsoever except such restrictions as might arise under the 1933
Act with respect to privately placed or otherwise restricted securities
that it may have acquired in the ordinary course of business and such
imperfections of title or encumbrances as do not materially detract from
the value or use of the assets subject thereto, or materially affect title
thereto.
(g) Voyageur Insured Funds has the necessary trust power and trust
authority to conduct its business and the business of Acquired Fund as such
businesses are now being conducted.
(h) Voyageur Insured Funds is not a party to or obligated under any
provision of its Agreement and Declaration of Trust, By-Laws, or any
material contract or any other material commitment or obligation, and is
not subject to any order or decree that would be violated by its execution
of or performance under this Agreement.
(i) Voyageur Insured Funds has full trust power and trust authority to
enter into and perform its obligations under this Agreement, subject to
approval of this Agreement by Acquired Fund's shareholders. Except as
provided in the immediately preceding sentence, the execution, delivery and
performance of this Agreement have been validly authorized, and this
Agreement constitutes its legal, valid and binding obligation enforceable
against it in accordance with its terms, subject as to enforcement to the
effect of bankruptcy, insolvency, reorganization, arrangement among
creditors, moratorium, fraudulent transfer or conveyance, and other similar
laws of general applicability relating to or affecting creditor's rights
and to general equity principles.
(j) Neither Voyageur Insured Funds nor Acquired Fund is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
(k) Voyageur Insured Funds does not have any unamortized or unpaid
organizational fees or expenses.
(l) Voyageur Insured Funds has elected to treat Acquired Fund as a
regulated investment company ("RIC") for federal income tax purposes under
Part I of Subchapter M of the Code, Acquired Fund is a "fund" as defined in
Section 851(g)(2) of the Code, has qualified as a RIC for each taxable year
since its inception and will qualify as a RIC as of the Closing, and
consummation of the transactions contemplated by the Plan will not cause it
to fail to be qualified as a RIC as of the Closing.
5. Representations and Warranties by Voyageur Tax Free Funds
Voyageur Tax Free Funds represents and warrants to Voyageur Insured Funds
that:
(a) Voyageur Tax Free Funds is a statutory trust created under the
laws of the State of Delaware on December 17, 1998, and is validly existing
and in good standing under the laws of that State. Voyageur Tax Free Funds,
of which Acquiring Fund is a separate series of shares, is duly registered
under the 1940 Act as an open-end, management investment company, such
registration is in full force and effect as of the date hereof and will be
in full force and effect as of the Closing and all of its shares sold have
been sold pursuant to an effective registration statement filed under the
1933 Act, except for any shares sold pursuant to the private offering
exemption for the purpose of raising initial capital.
(b) Voyageur Tax Free Funds is authorized to issue an unlimited number
of shares of beneficial interest, without par value, of Acquiring Fund.
Each outstanding share of Acquiring Fund is fully paid, non-assessable and
has full voting rights. The shares of beneficial interest of Acquiring Fund
to be issued pursuant to Section 1 hereof will, upon their issuance, be
validly issued and fully paid and non-assessable and have full voting
rights.
(c) At the Closing, each class of shares of beneficial interest of
Acquiring Fund to be issued pursuant to this Agreement will be eligible for
offering to the public in those states of the United States and
jurisdictions in which the corresponding class of shares of Acquired Fund
are presently eligible for offering to the public, and there are an
unlimited number of shares registered under the 1933 Act such that there is
a sufficient number of such shares to permit the transfers contemplated by
this Agreement to be consummated.
(d) The statement of assets and liabilities of Acquiring Fund to be
furnished by Voyageur Tax Free Funds as of the Close of Business on the
Valuation Date for the purpose of determining the number of shares of
beneficial interest of Acquiring Fund to be issued pursuant to Section 1
hereof will accurately reflect the net assets of Acquiring Fund and
outstanding shares of beneficial interest, as of such date, in conformity
with generally accepted accounting principles applied on a consistent
basis.
(e) At the Closing, Voyageur Tax Free Funds will have good and
marketable title to all of the securities and other assets shown on the
statement of assets and liabilities referred to in subsection (d) above,
free and clear of all liens or encumbrances of any nature whatsoever except
such restrictions as might arise under the 1933 Act with respect to
privately placed or otherwise restricted securities that it may have
acquired in the ordinary course of business and such imperfections of title
or encumbrances as do not materially detract from the value or use of the
assets subject thereto, or materially affect title thereto.
(f) Voyageur Tax Free Funds has the necessary trust power and trust
authority to conduct its business and the business of Acquiring Fund as
such businesses are now being conducted.
(g) Voyageur Tax Free Funds is not a party to or obligated under any
provision of its Agreement and Declaration of Trust, By-Laws, or any
material contract or any other material commitment or obligation, and is
not subject to any order or decree that would be violated by its execution
of or performance under this Agreement.
(h) Voyageur Tax Free Funds has full trust power and trust authority
to enter into and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been validly
authorized, and this Agreement constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms, subject, as
to enforcement, to the effect of bankruptcy, insolvency reorganization,
arrangements among creditors, moratorium, fraudulent transfer or
conveyance, and other similar laws of general applicability relating to or
affecting creditors rights and to general equity principles.
(i) Neither Voyageur Tax Free Funds nor Acquiring Fund is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(j) The books and records of Acquiring Fund made available to Voyageur
Insured Funds and/or its counsel are true and correct in all material
respects and contain no material omissions with respect to the business and
operations of Acquiring Fund.
(k) Voyageur Tax Free Funds has elected to treat Acquiring Fund as a
RIC for federal income tax purposes under Part I of Subchapter M of the
Code, Acquiring Fund is a "fund" as defined in Section 851(g)(2) of the
Code, has qualified as a RIC for each taxable year since its inception and
will qualify as a RIC as of the Closing, and consummation of the
transactions contemplated by the Plan will not cause it to fail to be
qualified as a RIC as of the Closing.
6. Representations and Warranties by Voyageur Insured Funds and Voyageur
Tax Free Funds
Voyageur Insured Funds and Voyageur Tax Free Funds each represents and
warrants to the other that:
(a) Except as discussed in its currently effective prospectus, there
are no legal, administrative or other proceedings or investigations against
it, or, to its knowledge, threatened against it, that would materially
affect its financial condition or its ability to consummate the
transactions contemplated by this Agreement. It is not charged with or, to
its knowledge, threatened with, any violation or investigation of any
possible violation of any provisions of any federal, state or local law or
regulation or administrative ruling relating to any aspect of its business.
(b) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(c) It has duly and timely filed, on behalf of Acquired Fund or
Acquiring Fund, as appropriate, all Tax (as defined below) returns and
reports (including information returns), which are required to be filed by
such Acquired Fund or Acquiring Fund, and all such returns and reports
accurately state the amount of Tax owed for the periods covered by the
returns, or, in the case of information returns, the amount and character
of income required to be reported by such Acquired Fund or Acquiring Fund.
On behalf of Acquired Fund or Acquiring Fund, as appropriate, it has paid
or made provision and properly accounted for all Taxes (as defined below)
due or properly shown to be due on such returns and reports. The amounts
set up as provisions for Taxes in the books and records of Acquired Fund or
Acquiring Fund, as appropriate, as of the Close of Business on the
Valuation Date will, to the extent required by generally accepted
accounting principles, be sufficient for the payment of all Taxes of any
kind, whether accrued, due, absolute, contingent or otherwise, which were
or which may be payable by Acquired Fund or Acquiring Fund, as appropriate,
for any periods or fiscal years prior to and including the Close of
Business on the Valuation Date, including all Taxes imposed before or after
the Close of Business on the Valuation Date that are attributable to any
such period or fiscal year. No return filed by it, on behalf of Acquired
Fund or Acquiring Fund, as appropriate, is currently being audited by the
Internal Revenue Service or by any state or local taxing authority. As used
in this Agreement, "Tax" or "Taxes" means all federal, state, local and
foreign (whether imposed by a country or political subdivision or authority
thereunder) income, gross receipts, excise, sales, use, value added,
employment, franchise, profits, property, ad valorem or other taxes, stamp
taxes and duties, fees, assessments or charges, whether payable directly or
by withholding, together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority (foreign or
domestic) with respect thereto. To its knowledge, there are no levies,
liens or encumbrances relating to Taxes existing, threatened or pending
with respect to the assets of Acquired Fund or Acquiring Fund, as
appropriate.
(d) All information provided to Voyageur Insured Funds by Voyageur Tax
Free Funds, and by Voyageur Insured Funds to Voyageur Tax Free Funds, for
inclusion in, or transmittal with, the Combined Proxy Statement and
Prospectus with respect to this Agreement pursuant to which approval of
Acquired Fund's shareholders will be sought, shall not contain any untrue
statement of a material fact, or omit to state a material fact required to
be stated therein in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
(e) Except in the case of Voyageur Insured Funds with respect to the
approval of Acquired Fund's shareholders of this Agreement, no consent,
approval, authorization or order of any court or governmental authority, or
of any other person or entity, is required for the consummation of the
transactions contemplated by this Agreement, except as may be required by
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), the 1940 Act, or state securities laws or Delaware statutory trust
laws (including, in the case of each of the foregoing, the rules and
regulations thereunder).
7. Covenants of Voyageur Insured Funds
(a) Voyageur Insured Funds covenants to operate the business of
Acquired Fund as presently conducted between the date hereof and the
Closing.
(b) Voyageur Insured Funds undertakes that Acquired Fund will not
acquire the shares of beneficial interest of Acquiring Fund for the purpose
of making distributions thereof other than to Acquired Fund's shareholders.
(c) Voyageur Insured Funds covenants that by the Closing, all of
Acquired Fund's federal and other Tax returns and reports required by law
to be filed on or before such date shall have been filed and all federal
and other Taxes shown as due on said returns either shall have been paid or
adequate liability reserves shall have been provided for the payment of
such Taxes.
(d) Voyageur Insured Funds will at the Closing provide Voyageur Tax
Free Funds with:
(1) A statement of the respective tax basis of all investments to
be transferred by Acquired Fund to Acquiring Fund.
(2) A copy (which may be in electronic form) of the shareholder
ledger accounts including, without limitation, the name, address and
taxpayer identification number of each shareholder of record, the
number of shares of beneficial interest held by each shareholder, the
dividend reinvestment elections applicable to each shareholder, and
the backup withholding and nonresident alien withholding
certifications, notices or records on file with Acquired Fund with
respect to each shareholder, for all of the shareholders of record of
Acquired Fund's shares as of the Close of Business on the Valuation
Date, who are to become holders of Acquiring Fund as a result of the
transfer of assets that is the subject of this Agreement, certified by
its transfer agent or its President or its Vice-President to the best
of their knowledge and belief.
(e) The Board of Trustees of Voyageur Insured Funds shall call, and
Voyageur Insured Funds shall hold, a Special Meeting of Acquired Fund's
shareholders to consider and vote upon this Agreement (the "Special
Meeting"), and Voyageur Insured Funds shall take all other actions
reasonably necessary to obtain approval of the transactions contemplated
herein. Voyageur Insured Funds agrees to mail to each shareholder of record
entitled to vote at the Special Meeting at which action on this Agreement
is to be considered, in sufficient time to comply with requirements as to
notice thereof, a Combined Proxy Statement and Prospectus that complies in
all material respects with the applicable provisions of Section 14(a) of
the 1934 Act and Section 20(a) of the 1940 Act, and the rules and
regulations promulgated thereunder.
(f) Voyageur Insured Funds shall supply to Voyageur Tax Free Funds, at
the Closing, the statement of the assets and liabilities described in
Section 4(e) of this Agreement in conformity with the requirements
described in such Section.
8. Covenants of Voyageur Tax Free Funds
(a) Voyageur Tax Free Funds covenants that the shares of beneficial
interest of Acquiring Fund to be issued and delivered to Acquired Fund
pursuant to the terms of Section 1 hereof shall have been duly authorized
as of the Closing and, when so issued and delivered, shall be registered
under the 1933 Act, validly issued, and fully paid and non-assessable, and
no shareholder of Acquiring Fund shall have any statutory or contractual
preemptive right of subscription or purchase in respect thereof, other than
any rights created pursuant to this Agreement.
(b) Voyageur Tax Free Funds covenants to operate the business of
Acquiring Fund as presently conducted between the date hereof and the
Closing.
(c) Voyageur Tax Free Funds covenants that by the Closing, all of
Acquiring Fund's federal and other tax returns and reports required by law
to be filed on or before such date shall have been filed and all federal
and other taxes shown as due on said returns shall have either been paid or
adequate liability reserves shall have been provided for the payment of
such taxes.
(d) Voyageur Tax Free Funds shall supply to Voyageur Insured Funds, at
the Closing, the statement of assets and liabilities described in Section
5(d) of this Agreement in conformity with the requirements described in
such Section.
(e) Voyageur Tax Free Funds shall have filed with the United States
Securities and Exchange Commission (the "Commission") a Registration
Statement on Form N-14 under the 1933 Act ("Registration Statement"),
relating to the shares of beneficial interest of Acquiring Fund issuable
hereunder, and shall have used its best efforts to provide that such
Registration Statement becomes effective as promptly as practicable. At the
time such Registration Statement becomes effective, it (i) complied in all
material respects with the applicable provisions of the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations promulgated thereunder;
and (ii) will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. At the time the Registration
Statement becomes effective, at the time of Acquired Fund's shareholders'
meeting, and at the Closing, the prospectus and statement of additional
information included in the Registration Statement did not and will not
contain an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
9. Conditions Precedent to be Fulfilled by Voyageur Insured Funds and
Voyageur Tax Free Funds
The obligations of Voyageur Insured Funds and Voyageur Tax Free Funds to
effectuate this Agreement and the Plan hereunder shall be subject to the
following respective conditions:
(a) That (1) all the representations and warranties of the other party
contained herein shall be true and correct in all material respects as of
the Closing with the same effect as though made as of and at such date; (2)
the other party shall have performed all obligations required by this
Agreement to be performed by it at or prior to the Closing; and (3) the
other party shall have delivered to such party a certificate signed by the
President or Vice-President and by the Secretary or equivalent officer to
the foregoing effect.
(b) That the other party shall have delivered to such party a copy of
the resolutions approving this Agreement adopted by the other party's Board
of Trustees, certified by the Secretary or equivalent officer.
(c) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted nor threatened
to institute any proceeding seeking to enjoin the consummation of the
reorganization contemplated hereby under Section 25(c) of the 1940 Act, and
no other legal, administrative or other proceeding shall be instituted or
threatened that would materially and adversely affect the financial
condition of either party or would prohibit the transactions contemplated
hereby.
(d) That this Agreement, the Plan and the transactions contemplated
hereby shall have been approved by the appropriate action of the
shareholders of Acquired Fund at an annual or special meeting or any
adjournment thereof.
(e) That Acquired Fund shall have declared a distribution or
distributions on or prior to the Valuation Date that, together with all
previous distributions, shall have the effect of distributing to its
shareholders (i) all of its ordinary income, capital gain net income and
net interest income excludable under Section 103(a) of the Code, if any,
for the period from the close of its last fiscal year to the Close of
Business on the Valuation Date, and (ii) any undistributed ordinary income,
capital gain net income and net interest income excludable under Section
103(a) of the Code from any prior period. Capital gain net income has the
meaning given such term by Section 1222(g) of the Code.
(f) That all required consents of other parties and all other
consents, orders and permits of federal, state and local authorities
(including those of the Commission and of state Blue Sky securities
authorities, including any necessary "no-action" positions or exemptive
orders from such federal and state authorities) to permit consummation of
the transaction contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve risk
of material adverse effect on the assets and properties of Acquired Fund or
Acquiring Fund.
(g) That prior to or at the Closing, Voyageur Insured Funds and
Voyageur Tax Free Funds shall receive an opinion from Stradley Ronon
Stevens & Young, LLP ("SRSY") to the effect that, provided the acquisition
contemplated hereby is carried out in accordance with this Agreement and in
accordance with customary representations provided by Voyageur Insured
Funds and Voyageur Tax Free Funds in certificates delivered to SRSY:
(1) The acquisition by Acquiring Fund of substantially all of the
assets of Acquired Fund in exchange solely for Acquiring Fund shares
to be issued pursuant to Section 1 hereof, followed by the
distribution by Acquired Fund to its shareholders of Acquiring Fund
shares in complete liquidation of Acquired Fund, will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code,
and Acquiring Fund and Acquired Fund will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Acquired Fund upon the
transfer of substantially all of its assets to Acquiring Fund in
exchange solely for the voting shares of Acquiring Fund (to be issued
in accordance with Section 1 hereof) under Section 361(a) and Section
357(a) of the Code;
(3) No gain or loss will be recognized by Acquiring Fund upon the
receipt by it of substantially all of the assets of Acquired Fund in
exchange solely for the voting shares of Acquiring Fund (to be issued
in accordance with Section 1 hereof) under Section 1032(a) of the
Code;
(4) No gain or loss will be recognized by Acquired Fund upon the
distribution of Acquiring Fund shares to Acquired Fund shareholders in
accordance with Section 1 hereof in liquidation of Acquired Fund under
Section 361(c)(1) of the Code.
(5) The basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the basis of such assets to
Acquired Fund immediately prior to the exchange under Section 362(b)
of the Code;
(6) The holding period of the assets of Acquired Fund received by
Acquiring Fund will include the period during which such assets were
held by Acquired Fund under Section 1223(2) of the Code;
(7) No gain or loss will be recognized by the shareholders of
Acquired Fund upon the exchange of their shares in Acquired Fund for
the voting shares (including fractional shares to which they may be
entitled) of Acquiring Fund (to be issued in accordance with Section 1
hereof) under Section 354(a) of the Code;
(8) The basis of Acquiring Fund shares received by Acquired Fund
shareholders in accordance with Section 1 hereof (including fractional
shares to which they may be entitled) will be the same as the basis of
the shares of Acquired Fund exchanged therefor under Section 358(a)(1)
of the Code;
(9) The holding period of Acquiring Fund's shares received by
Acquired Fund's shareholders in accordance with Section 1 hereof
(including fractional shares to which they may be entitled) will
include the holding period of Acquired Fund's shares surrendered in
exchange therefor, provided that Acquired Fund shares were held as a
capital asset on the date of the Reorganization under Section 1223(l)
of the Code; and
(10) Acquiring Fund will succeed to and take into account as of
the date of the transfer (as defined in Section 1.381(b)-1(b) of the
regulations issued by the United States Treasury (the "Treasury
Regulations")) the items of Acquired Fund described in Section 381(c)
of the Code, subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code, and the Treasury
Regulations.
(h) That Voyageur Tax Free Funds shall have received an opinion in
form and substance reasonably satisfactory to it from SRSY, counsel to
Voyageur Insured Funds, to the effect that, subject in all respects to the
effects of bankruptcy, insolvency, arrangement among creditors, moratorium,
fraudulent transfer or conveyance, and other similar laws of general
applicability relating to or affecting creditor's rights and to general
equity principles:
(1) Voyageur Insured Funds was created as a statutory trust
(formerly known as a business trust) under the laws of the State of
Delaware on December 17, 1998, and is validly existing and in good
standing under the laws of the State of Delaware;
(2) Voyageur Insured Funds is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
Acquired Fund;
(3) Voyageur Insured Funds is an open-end, investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Acquired Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
Voyageur Insured Funds, the unfavorable outcome of which would
materially and adversely affect Voyageur Insured Funds or Acquired
Fund;
(5) To such counsel's knowledge, no consent, approval,
authorization or order of any court, governmental authority or agency
is required for the consummation by Voyageur Insured Funds of the
transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, and Delaware
laws (including, in the case of each of the foregoing, the rules and
regulations thereunder) and such as may be required under state
securities laws;
(6) Neither the execution, delivery nor performance of this
Agreement by Voyageur Insured Funds violates any provision of its
Agreement and Declaration of Trust, its By-Laws, or the provisions of
any agreement or other instrument, known to such counsel to which
Voyageur Insured Funds is a party or by which Voyageur Insured Funds
is otherwise bound; and
(7) This Agreement has been validly authorized and executed by
Voyageur Insured Funds and represents the legal, valid and binding
obligation of Voyageur Insured Funds and is enforceable against
Voyageur Insured Funds in accordance with its terms.
In giving the opinions set forth above, SRSY may state that it is relying
on certificates of the officers of Voyageur Insured Funds with regard to matters
of fact and certain certifications and written statements of governmental
officials with respect to the good standing of Voyageur Insured Funds.
(i) That Voyageur Insured Funds shall have received an opinion in form
and substance reasonably satisfactory to it from SRSY, counsel to Voyageur
Tax Free Funds, to the effect that, subject in all respects to the effects
of bankruptcy, insolvency, arrangement among creditors, moratorium,
fraudulent transfer or conveyance, and other similar laws of general
applicability relating to or affecting creditor's rights and to general
equity principles:
(1) Voyageur Tax Free Funds was created as a statutory trust
(formerly known as a business trust) under the laws of the State of
Delaware on December 17, 1998, and is validly existing and in good
standing under the laws of the State of Delaware;
(2) Voyageur Tax Free Funds is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
Acquiring Fund;
(3) Voyageur Tax Free Funds is an open-end investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Acquiring Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
Voyageur Tax Free Funds, the unfavorable outcome of which would
materially and adversely affect Voyageur Tax Free Funds or Acquiring
Fund;
(5) The shares of beneficial interest of Acquiring Fund to be
issued pursuant to the terms of Section 1 hereof have been duly
authorized and, when issued and delivered as provided in this
Agreement, will have been validly issued and fully paid and will be
non-assessable by Voyageur Tax Free Funds or Acquiring Fund, and to
such counsel's knowledge, no shareholder has any preemptive right to
subscription or purchase in respect thereof other than any rights that
may be deemed to have been granted pursuant to this Agreement;
(6) To such counsel's knowledge, no consent, approval,
authorization or order of any court, governmental authority or agency
is required for the consummation by Voyageur Tax Free Funds of the
transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, and Delaware
laws (including, in the case of each of the foregoing, the rules and
regulations thereunder) and such as may be required under state
securities laws;
(7) Neither the execution, delivery nor performance of this
Agreement by Voyageur Tax Free Funds violates any provision of its
Agreement and Declaration of Trust, its By-Laws, or the provisions of
any agreement or other instrument, known to such counsel to which
Voyageur Tax Free Funds is a party or by which Voyageur Tax Free Funds
is otherwise bound; and
(8) This Agreement has been validly authorized and executed by
Voyageur Tax Free Funds and represents the legal, valid and binding
obligation of Voyageur Tax Free Funds and is enforceable against
Voyageur Tax Free Funds in accordance with its terms.
In giving the opinions set forth above, SRSY may state that it is relying
on certificates of the officers of Voyageur Tax Free Funds with regard to
matters of fact and certain certifications and written statements of
governmental officials with respect to the good standing of Voyageur Tax Free
Funds.
(j) That Voyageur Tax Free Funds' Registration Statement with respect
to the shares of beneficial interest of Acquiring Fund to be delivered to
Acquired Fund's shareholders in accordance with Section 1 hereof shall have
become effective, and no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto, shall have
been issued prior to the Closing or shall be in effect at the Closing, and
no proceedings for the issuance of such an order shall be pending or
threatened on that date.
(k) That the shares of beneficial interest of Acquiring Fund to be
delivered in accordance with Section 1 hereof shall be eligible for sale by
Voyageur Tax Free Funds with each state commission or agency with which
such eligibility is required in order to permit the shares lawfully to be
delivered to each Acquired Fund shareholder.
(l) That at the Closing, Voyageur Insured Funds, on behalf of Acquired
Fund, transfers to Acquiring Fund aggregate Net Assets of Acquired Fund
comprising at least 90% in fair market value of the total net assets and
70% in fair market value of the total gross assets recorded on the books of
Acquired Fund at the Close of Business on the Valuation Date.
10. Fees and Expenses The expenses of entering into and carrying out the
provisions of this Agreement, whether or not consummated, shall be borne 33.33%
by Acquired Fund; 33.33% by Acquiring Fund; and 33.34% by Delaware Management
Company, a series of Delaware Management Business Trust.
11. Termination; Waiver; Order
(a) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Plan abandoned at
any time (whether before or after adoption thereof by the shareholders of
Acquired Fund) prior to the Closing as follows:
(1) by mutual consent of Voyageur Insured Funds and Voyageur Tax
Free Funds;
(2) by Voyageur Tax Free Funds if any condition precedent to its
obligations set forth in Section 9 has not been fulfilled or waived by
Voyageur Tax Free Funds; or
(3) by Voyageur Insured Funds if any condition precedent to its
obligations set forth in Section 9 has not been fulfilled or waived by
Voyageur Insured Funds.
(b) If the transactions contemplated by this Agreement have not been
consummated by December 31, 2007, this Agreement shall automatically
terminate on that date, unless a later date is agreed to by both Voyageur
Insured Funds and Voyageur Tax Free Funds.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect,
and there shall not be any liability on the part of either Voyageur Insured
Funds or Voyageur Tax Free Funds or persons who are their trustees,
officers, agents or shareholders in respect of this Agreement.
(d) At any time prior to the Closing, any of the terms or conditions
of this Agreement may be waived by either Voyageur Insured Funds or
Voyageur Tax Free Funds, respectively (whichever is entitled to the benefit
thereof).
(e) The respective representations, warranties and covenants contained
in Sections 4-8 hereof shall expire with, and be terminated by, the
consummation of the Plan, and neither Voyageur Insured Funds nor Voyageur
Tax Free Funds, nor any of their officers, trustees, agents or shareholders
shall have any liability with respect to such representations or warranties
after the Closing. This provision shall not protect any officer, trustee,
agent or shareholder of Voyageur Insured Funds or Voyageur Tax Free Funds
against any liability to the entity for which that officer, trustee, agent
or shareholder so acts or to its shareholders to which that officer,
trustee, agent or shareholder would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties in the conduct of such office.
(f) If any order or orders of the Commission with respect to this
Agreement shall be issued prior to the Closing and shall impose any terms
or conditions that are determined by action of the Board of Trustees of
Voyageur Insured Funds or the Board of Trustees of Voyageur Tax Free Funds
to be acceptable, such terms and conditions shall be binding as if a part
of this Agreement without further vote or approval of the shareholders of
Acquired Fund, unless such further vote is required by applicable law or by
mutual consent of the parties.
12. Liability of Voyageur Tax Free Funds and Voyageur Insured Funds
(a) Each party acknowledges and agrees that all obligations of
Voyageur Tax Free Funds under this Agreement are binding only with respect
to Acquiring Fund; that any liability of Voyageur Tax Free Funds under this
Agreement with respect to Acquiring Fund, or in connection with the
transactions contemplated herein with respect to Acquiring Fund, shall be
discharged only out of the assets of Acquiring Fund; that no other series
of Voyageur Tax Free Funds shall be liable with respect to this Agreement
or in connection with the transactions contemplated herein; and that
neither Voyageur Insured Funds nor Acquired Fund shall seek satisfaction of
any such obligation or liability from the shareholders of Voyageur Tax Free
Funds, the trustees, officers, employees or agents of Voyageur Tax Free
Funds, or any of them.
(b) Each party acknowledges and agrees that all obligations of
Voyageur Insured Funds under this Agreement are binding only with respect
to Acquired Fund; that any liability of Voyageur Insured Funds under this
Agreement with respect to Acquired Fund, or in connection with the
transactions contemplated herein with respect to Acquired Fund, shall be
discharged only out of the assets of Acquired Fund; that no other series of
Voyageur Insured Funds shall be liable with respect to this Agreement or in
connection with the transactions contemplated herein; and that neither
Voyageur Tax Free Funds nor Acquiring Fund shall seek satisfaction of any
such obligation or liability from the shareholders of Voyageur Insured
Funds, the trustees, officers, employees or agents of Voyageur Insured
Funds, or any of them.
13. Final Tax Returns and Forms 1099 of Acquired Fund
(a) After the Closing, Voyageur Insured Funds shall or shall cause its
agents to prepare any federal, state or local Tax returns, including any
Forms 1099, required to be filed by Voyageur Insured Funds with respect to
Acquired Fund's final taxable year ending with its complete liquidation and
for any prior periods or taxable years and shall further cause such Tax
returns and Forms 1099 to be duly filed with the appropriate taxing
authorities.
(b) Notwithstanding the provisions of Section 1 hereof, any expenses
incurred by Voyageur Insured Funds or Acquired Fund (other than for payment
of Taxes) in connection with the preparation and filing of said Tax returns
and Forms 1099 after the Closing, shall be borne by Acquired Fund to the
extent such expenses have been or should have been accrued by Acquired Fund
in the ordinary course without regard to the Plan contemplated by this
Agreement; any excess expenses shall be borne by Delaware Management
Company, a series of Delaware Management Business Trust, at the time such
Tax returns and Forms 1099 are prepared.
14. Cooperation and Exchange of Information
Voyageur Tax Free Funds and Voyageur Insured Funds will provide each other
and their respective representatives with such cooperation and information as
either of them reasonably may request of the other in filing any Tax returns,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Each party or their respective agents will
retain for a period of six (6) years following the Closing all returns,
schedules and work papers and all material records or other documents relating
to Tax matters of Acquired Fund and Acquiring Fund for its taxable period first
ending after the Closing and for all prior taxable periods.
15. Entire Agreement and Amendments
This Agreement embodies the entire Agreement between the parties and there
are no agreements, understandings, restrictions, or warranties between the
parties other than those set forth herein or herein provided for. This Agreement
may be amended only by mutual consent of the parties in writing. Neither this
Agreement nor any interest herein may be assigned without the prior written
consent of the other party.
16. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
17. Notices
Any notice, report, or demand required or permitted by any provision of
this Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Voyageur Insured
Funds or Voyageur Tax Free Funds at 2005 Market Street, Philadelphia, PA 19103,
Attention: Secretary.
18. Governing Law
This Agreement shall be governed by and carried out in accordance with the
laws of the State of Delaware.
19. Effect of Facsimile Signature
A facsimile signature of an authorized officer of a party hereto on this
Agreement and/or any transfer document shall have the same effect as if executed
in the original by such officer.
IN WITNESS WHEREOF, Voyageur Insured Funds and Voyageur Tax Free Funds have
each caused this Agreement and Plan of Reorganization to be executed on its
behalf by its duly authorized officers, all as of the day and year first-above
written.
Voyageur Insured Funds, on behalf of the Delaware
Tax-Free Minnesota Insured Fund
By: ______________________________________________
(name) (title)
Voyageur Tax Free Funds, on behalf of the Delaware
Tax-Free Minnesota Fund
By: ______________________________________________
(name) (title)
EXHIBIT B
PRINCIPAL HOLDERS OF SHARES
- ------------------------------------------------------------------------------------------------------
FUND NAME / CLASS NAME AND ADDRESS OF ACCOUNT SHARE AMOUNT PERCENTAGE
- ------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota Insured MLPF&S For the Sole Benefit 83,822.512 7.58%
Fund - Class C Shares of its Customers
4800 Deer Lake Drive E
2nd Floor
Jacksonville, FL 32246-8484
-----------------------------------------------------------------
US Bancorp Investments Inc. 78,461.230 7.10%
60 Livingston Avenue
Saint Paul, MN 55107-2292
- ------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota Fund - MLPF&S For the Sole Benefit 129,673.089 15.51%
Class B Shares of its Customers
Attn: Fund Administration
4800 Deer Lake Drive E
2nd Floor
Jacksonville, FL 32246-8484
- ------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota Fund - MLPF&S For the Sole Benefit 167,472.488 13.44%
Class C Shares of its Customers
Attn: Fund Administration
4800 Deer Lake Drive E
2nd Floor
Jacksonville, FL 32246-8484
- ------------------------------------------------------------------------------------------------------
To vote by Telephone
(1) Read the Proxy Statement/Prospectus and have the Proxy card at hand.
(2) Call 1-888-221-0697.
(3) Follow the recorded instructions.
To vote by Internet
(1) Read the Proxy Statement/Prospectus and have the Proxy card at hand.
(2) Go to www.proxyweb.com.
(3) Follow the on-line instructions.
To vote by Mail
(1) Read the Proxy Statement/Prospectus.
(2) Check the appropriate box on the reverse side.
(3) Sign, date and return the Proxy card in the envelope provided.
Unless you're voting by Telephone or Internet, please sign, date and return
promptly in the return envelope. NO POSTAGE IS REQUIRED.
DELAWARE TAX-FREE MINNESOTA INSURED FUND (THE "FUND")
a series of Voyageur Insured Funds (the "Trust")
SPECIAL MEETING OF SHAREHOLDERS - MARCH 30, 2007
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF THE TRUST
The undersigned, revoking previous proxies, hereby appoint(s) A.G. Ciavarelli,
David F. Connor and Michael E. Dresnin, or any of them, attorneys with full
power of substitution, to vote all shares of the Fund, as indicated below, that
the undersigned is entitled to vote at the above stated Special Meeting of
Shareholders to be held at the offices of Delaware Investments located at 2001
Market Street, 2nd Floor Auditorium, Philadelphia, PA 19103-7055 on March 30,
2007 at 3:00 p.m., Eastern Time, and at any adjournments thereof. All powers may
be exercised by two or more of said proxy holders or substitutes voting or
acting or, if only one votes and acts, then by that one. This proxy shall be
voted on the proposal described in the Proxy Statement/Prospectus as specified
on the reverse side. Receipt of the Notice of Meeting and the accompanying Proxy
Statement/Prospectus is hereby acknowledged.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WITH RESPECT TO THE
FUND. THE FOLLOWING MATTER IS PROPOSED BY THE FUND. THE BOARD OF TRUSTEES
RECOMMENDS A VOTE FOR THE PROPOSAL. IF NO SPECIFICATION IS MADE AND THIS PROXY
IS SIGNED AND RETURNED, THE PROXY SHALL BE VOTED FOR THE PROPOSAL. PLEASE REFER
TO THE PROXY STATEMENT/PROSPECTUS FOR A DISCUSSION OF THE PROPOSAL. IF OTHER
MATTERS PROPERLY COME BEFORE THE MEETING TO BE VOTED ON, THE SHARES REPRESENTED
BY THE PROXY HOLDERS WILL BE VOTED AND CONSENTED ON THOSE MATTERS IN ACCORDANCE
WITH THE VIEWS OF MANAGEMENT.
Date: __________________, 2007
Signature(s) (Joint Owners) (Please sign within box)
THIS PROXY CARD IS ONLY VALID WHEN SIGNED: To avoid the additional expense to
the Fund of further solicitation, please date and sign name(s) above as printed
on this card to authorize the voting of your shares as indicated. Where shares
are registered with joint owners, only one joint owner need sign. Persons
signing as executor, administrator, trustee or other representative should give
full title as such.
PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. PLEASE
DO NOT USE FINE POINT PENS. [X]
Proposal:
1. To approve an Agreement and Plan of Reorganization between Voyageur
Insured Funds, on behalf of the Delaware Tax-Free Minnesota Insured Fund (the
"Acquired Fund"), and Voyageur Tax Free Funds, on behalf of the Delaware
Tax-Free Minnesota Fund (the "Acquiring Fund"), which provides for: (i) the
acquisition by the Acquiring Fund of substantially all of the assets of the
Acquired Fund, in exchange for shares of the Acquiring Fund; (ii) the pro rata
distribution of shares of the Acquiring Fund to the shareholders of the
Acquired Fund; and (iii) the liquidation and dissolution of the Acquired Fund.
For Against Abstain
[ ] [ ] [ ]
2. To vote upon any other business as may properly come before the Meeting or
any adjournment thereof.
PLEASE SIGN AN DATE ON THE REVERSE SIDE.
YOUR VOTE IS IMPORTANT - PLEASE ACT TODAY.
STATEMENT OF ADDITIONAL INFORMATION
FOR
DELAWARE TAX-FREE MINNESOTA FUND
a series of
VOYAGEUR TAX FREE FUNDS
Dated [February 1,] 2007
Acquisition of Substantially All of the Assets of:
DELAWARE TAX-FREE MINNESOTA INSURED FUND
(a series of Voyageur Insured Funds)
By and in exchange for shares of
DELAWARE TAX-FREE MINNESOTA FUND
(a series of Voyageur Tax Free Funds)
This Statement of Additional Information ("SAI") relates specifically to the
proposed acquisition of substantially all of the assets of Delaware Tax-Free
Minnesota Insured Fund (the "Minnesota Insured Fund") in exchange for shares of
Delaware Tax Free Minnesota Fund (the "Minnesota Fund").
This SAI consists of this Cover Page and the following documents, each of which
is attached to and is legally considered to be a part of this SAI.
1. Statement of Additional Information of the Minnesota Fund, dated
January 3, 2007 as previously filed via EDGAR is incorporated herein
by reference to Voyageur Tax Free Funds' filing under Rule 497
[Accession No. 0001137439-07-000037] filed January 9, 2007 and will be
mailed to any shareholder who requests this SAI. The Minnesota Fund's
Statement of Additional Information dated January 3, 2007 contains the
Minnesota Fund's Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets and Notes to Financial Statements,
as well as the report of Ernst & Young LLP, the Acquiring Fund's
independent registered public accounting firm, for the fiscal year
ended August 31, 2006.
2. Statement of Additional Information of the Minnesota Insured Fund,
dated January 3, 2007 as previously filed via EDGAR is incorporated
herein by reference to Voyageur Insured Funds' filing under Rule 497
[Accession No. 0001137439-07-000037] filed January 9, 2007 and will be
mailed to any shareholder who requests this SAI. The Minnesota Insured
Fund's Statement of Additional Information dated January 3, 2007
contains the Minnesota Insured Fund's Statement of Net Assets,
Statement of Operations, Statement of Changes in Net Assets and Notes
to Financial Statements, as well as the report of Ernst & Young LLP,
the Acquiring Fund's independent registered public accounting firm,
for the fiscal year ended August 31, 2006.
3. Pro Forma Financial Statements for the reorganization of the Minnesota
Insured Fund with and into the Minnesota Fund.
This SAI is not a prospectus; you should read this SAI in conjunction with
the Proxy Statement/Prospectus dated [February 1,] 2007, relating to the
above-referenced transaction. You can request a copy of the Proxy
Statement/Prospectus by calling 1-800-523-1918 or by writing to the Delaware
Tax-Free Minnesota Fund at Attention: Account Services, 2005 Market Street,
Philadelphia, PA 19103-7094.
Delaware Tax-Free Minnesota Fund
Pro Forma Portfolio of Investments(A)
As of August 31, 2006
(Unaudited)
% of Total
Investments
(Pro Forma Delaware Tax-Free Minnesota Fund
Combined) Par/Shares Market Value
------------------ ---------------------------------------------------
Municipal Bonds 97.69%
Corporate-Backed Revenue Bonds 3.92%
Cloquet Pollution Control Revenue (Potlatch Corp.
Project) 5.90% 10/1/26 $ 6,500,000 $ 6,612,255
Laurentian Energy Authority I Series A 5.00%
12/1/21 8,000,000 8,082,080
Sartell Environmental Improvement Revenue
(International Paper)
Series A 5.20% 6/1/27 5,465,000 5,615,014
Seaway Port Authority of Duluth Industrial
Development Dock & Wharf
Revenues (Cargill, Inc. Project) Series E
6.125% 11/1/14 4,500,000 4,598,010
-----------------------------
24,907,359
-----------------------------
Education Revenue Bonds 5.79%
Minnesota State Colleges & Universities Revenue
Fund Series A
5.00% 10/1/22 (FSA) 0 0
5.00% 10/1/29 (MBIA) 1,665,000 1,758,873
Minnesota State Higher Education Facilities
Authority Revenue
(Augsburg College)
Series 6-C 5.00% 5/1/20 1,250,000 1,293,763
Series 6-J1 5.00% 5/1/36 2,225,000 2,257,685
(College of St. Benedict) Series 4-G 6.20%
3/1/16 1,000,000 1,001,380
(St. Catherine College) Series 5-N1
5.00% 10/1/18 0 0
5.25% 10/1/22 1,500,000 1,559,640
5.375% 10/1/32 1,000,000 1,047,430
St. Cloud Housing & Redevelopment Authority Revenue
(State University Foundation Project) 5.00%
5/1/23 0 0
University of Minnesota
&(1) 5.50% 7/1/21 10,500,000 12,065,498
&(2) 5.75% 7/1/18 3,840,000 4,490,112
-----------------------------
25,474,381
-----------------------------
Electric Revenue Bonds 10.25%
Chaska Electric Revenue (Generating Facilities)
Series A 5.00% 10/1/30 3,000,000 3,096,030
Minnesota State Municipal Power Agency
5.00% 10/1/35 3,000,000 3,087,030
Series A 5.00% 10/1/34 4,250,000 4,363,518
Series A 5.125% 10/1/29 3,000,000 3,114,450
Northern Minnesota Municipal Power Agency Electric
System Revenue
^Series A 5.849% 1/1/09 (AMBAC) 3,815,000 3,505,413
Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,565,300
&(3) Northern Municipal Power Agency Electric System
Revenue
5.25% 1/1/13 (FSA) 0 0
Puerto Rico Electric Power Authority Power Revenue
Series GG 4.75% 9/1/21 (FSA) 0 0
Series OO 5.00% 7/1/13 (CIFG) 0 0
Rochester Electric Utilities Revenue 5.25% 12/1/30 4,915,000 5,091,350
Shakopee Public Utilities Commission Revenue 5.125%
2/1/26 (MBIA) 1,000,000 1,026,100
Southern Minnesota Municipal Power Agency Supply
System Revenue Series A
5.00% 1/1/12 (AMBAC) 4,205,000 4,476,601
5.00% 1/1/13 (MBIA) 5,820,000 6,248,526
5.25% 1/1/15 (AMBAC) 3,000,000 3,309,180
Southern Minnesota Municipal Power Agency Supply
System Revenue
&(4) 5.25% 1/1/15 (AMBAC) 5,900,000 6,508,084
&(5) 5.25% 1/1/14 (AMBAC) 4,000,000 4,382,720
Western Minnesota Municipal Power Agency Series B
5.00% 1/1/15 (MBIA) 0 0
-----------------------------
50,774,302
-----------------------------
Escrowed to Maturity Bonds 5.86%
Dakota/Washington Counties Housing & Redevelopment
Authority
Anoka Single Family Residential Mortgage Revenue
8.45% 9/1/19 (GNMA) (AMT) 0 0
Dakota/Washington Counties Housing & Redevelopment
Authority
Bloomington Mortgage Single Family Residential
Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 0 0
8.375% 9/1/21 (GNMA) (MBIA) (AMT) 0 0
Southern Minnesota Municipal Power Agency Supply
System Revenue
Series B 5.50% 1/1/15 (AMBAC) 990,000 1,048,024
University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,298,160
Western Minnesota Municipal Power Agency Supply
Revenue Series A
6.60% 1/1/10 0 0
9.75% 1/1/16 (MBIA) 185,000 266,172
-----------------------------
3,612,356
-----------------------------
Health Care Revenue Bonds 23.95%
Aitkin Health Care Facilities Revenue (Riverwood
Health Care Center)
5.60% 2/1/32 1,500,000 1,534,395
Apple Valley, Minnesota Economic Development
Authority Health Care
Revenue (Augustana Home St. Paul Project)
Series A 6.00% 1/1/40 2,700,000 2,742,336
Apple Valley, Minnesota Economic Development
Authority Health Care
Revenue (Evercare Senior Living Project)
Series A 6.125% 6/1/35 4,000,000 4,027,440
Bemidji Health Care Facilities First Meeting Revenue
(North Country
Health Services)
5.00% 9/1/24 (RADIAN) 740,000 763,391
Bloomington Housing & Redevelopment Authority
Housing Revenue
(Senior Summerhouse Bloomington Project,
Presbyterian Homes
Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,490,110
Breckenridge Catholic Health Initiatives
5.00% 5/1/30 2,000,000 2,085,860
Buffalo Health Care Revenue (Central Minnesota
Senior Housing Project)
Series A 5.50% 9/1/33 1,270,000 1,262,926
Duluth Economic Development Authority Health Care
Facilities
Revenue Benedictine Health System (St. Mary's
Hospital)
5.25% 2/15/28 0 0
5.25% 2/15/33 10,000,000 10,377,300
5.50% 2/15/23 1,000,000 1,070,240
Maple Grove Health Care Facilities Revenue
(North Memorial Health Care)
5.00% 9/1/29 1,000,000 1,032,560
5.00% 9/1/35 5,850,000 6,005,669
Marshall Medical Center Gross Revenue
Weiner Memorial Medical
Center Project) 6.00% 11/1/28 1,000,000 1,044,190
Minneapolis Health Care Facility Revenue
(Jones-Harrison
Residence Project) 5.60% 10/1/30 1,550,000 1,562,943
Minneapolis Health Care System Revenue
Allina Health Systems)
Series A 5.75% 11/15/32 9,500,000 10,198,725
(Fairview Health Services) Series D
5.00% 11/15/30 (AMBAC) 2,500,000 2,624,925
5.00% 11/15/34 (AMBAC) 2,500,000 2,617,775
Minneapolis/St. Paul Housing & Redevelopment
Authority
Health Care System Revenue
(Allina Health Systems)
5.00% 11/15/13 (AMBAC) 0 0
(Healthpartners Obligation Group Project)
5.625% 12/1/22 0 0
5.875% 12/1/29 0 0
Minnesota Agriculture & Economic Development Board
Revenue
(Benedictine Health Systems) 5.75% 2/1/29 1,895,000 1,924,733
(Fairview Health Care System) Series A
5.75% 11/15/26 (MBIA) 0 0
6.375% 11/15/29 15,000 16,235
Northfield Hospital Revenue
5.375% 11/1/26 3,785,000 4,011,343
Prior Lake Senior Housing Revenue
(Shepherds Path Senio Housing) Series B
5.70% 8/1/36 2,000,000 2,016,760
5.75% 8/1/41 1,000,000 1,008,820
Rochester Health Care Facilities Revenue
(Mayo Clinic) 5.00% 11/15/36 7,000,000 7,303,100
(Mayo Foundation) Series B 5.50% 11/15/27 700,000 725,522
Rochester Health Care Facilities Revenue
(Mayo Foundation),
&(6) Series A 5.50% 11/15/27 4,200,000 4,353,153
&(7) Series B 5.50% 11/15/27 16,750,000 17,360,789
Rochester, Minnesota Multifamily Revenue
(Wedum Shorewood
Campus Project) 6.60% 6/1/36 3,890,000 4,015,997
Shakopee Health Care Facilities Revenue (St. Francis
Regional
Medical Center)
5.10% 9/1/25 2,000,000 2,074,840
5.25% 9/1/34 7,000,000 7,281,750
St. Louis Park Health Care Facilities Revenue
(Park Nicollet Health
Services) Series B
5.25% 7/1/30 9,420,000 9,871,972
5.50% 7/1/25 0 0
St. Paul Housing & Redevelopment Authority Hospital
Revenue
(Health East Project)
6.00% 11/15/35 4,340,000 4,769,573
Series A 5.70% 11/1/15 1,300,000 1,341,678
St. Paul Housing & Redevelopment Authority Hospital
Revenue (St.
Paul/Ramsey Medical Center Project)
5.50% 5/15/13 (AMBAC) 0 0
Washington County Housing & Redevelopment Authority
Hospital
Facilities Revenue (Health East Project)
.50% 11/15/27 1,000,000 1,023,100
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 0 0
5.00% 2/1/25 (FSA) 0 0
Woodbury Economic Development Authority Housing
Revenue
(Senior Summerhouse Woodbury Project) Series B
5.75% 6/1/41 2,250,000 2,294,550
-----------------------------
123,834,700
-----------------------------
Housing Revenue Bonds 5.93%
Brooklyn Center Multifamily Housing Revenue
(Shingle Creek)
5.40% 5/20/43 (GNMA) (AMT) 1,000,000 1,026,180
Dakota County Housing & Redevelopment Authority
Single Family
Mortgage Revenue Series B 5.85% 10/1/30
(GNMA)(FNMA)(AMT) 0 0
Eagan Multifamily Revenue (Woodridge Apartments)
5.90% 8/1/20 (GNMA) 0 0
Hopkins Multifamily Housing Revenue (Hopkins
Renaissance
Project-Section 8) 6.375% 4/1/20 1,000,000 1,033,180
@Hutchinson Multifamily Housing Revenue (Evergreen
Apartments
Project-Section 8) 5.75% 11/1/28 910,000 848,490
Minneapolis Multifamily Housing Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 0 0
(Grant Street Apartments Project) Series A
7.25% 11/1/29 750,000 776,745
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 4,000,000 4,157,280
(Sumner Field) Series A
5.50% 11/20/26 (GNMA) (AMT) 1,000,000 1,034,649
(Trinity Apartments-Section 8) Series A
6.75% 5/1/21 1,810,000 1,864,924
Minnesota State Housing Finance Agency Rental
Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) 0 0
Series I 5.15% 7/1/38 (AMT) 5,550,000 5,688,918
Minnesota State Housing Finance Agency Single Family
Mortgage
Series A 5.30% 7/1/19 585,000 609,084
Series B 5.35% 1/1/33 (AMT) 2,965,000 3,042,742
Series J 5.90% 7/1/28 (AMT) 4,950,000 509,909
@Park Rapids Multifamily Revenue
(The Court Apartments
Project-Section 8) 6.30% 2/1/20 2,835,000 2,630,228
St. Cloud Housing & Redevelopment Authority Revenue
(Sterling
Heights Apartments Project) 7.55% 4/1/39 (AMT) 1,000,000 1,057,410
St. Louis Park Residential Mortgage Revenue
Series A 7.25% 4/20/23 (GNMA) 78,000 78,179
Stillwater Multifamily Housing Revenue (Stillwater
Cottages Project)
7.25% 11/1/27 (AMT) 1,540,000 1,573,587
Series A 7.00% 11/1/27 1,000,000 1,021,570
Wadena Housing & Redevelopment Authority Multifamily
Housing
Revenue (Humphrey Manor East Project) 6.00% 2/1/19 1,860,000 1,860,316
Washington County Housing & Redevelopment Authority
Governmental Revenue (Briar Pond) Series C 7.25%
8/20/34 955,000 922,329
White Bear Lake Multifamily Revenue (Lake Square)
Series A
5.875% 2/1/15 (FHA) 0 0
Willmar Housing & Redevelopment Authority
Multifamily Housing
Revenue (Highland Apartments-Section 8)
5.85% 6/1/19 935,000 935,000
-----------------------------
30,670,720
-----------------------------
Lease Revenue Bonds 3.33%
Hopkins Housing & Redevelopment Authority Public
Works and Fire
Station Series A 5.00% 2/1/23 (MBIA) 0 0
Minneapolis Special School District #001 Series A
5.00% 2/1/18 (FSA) 0 0
5.00% 2/1/19 (FSA) 0 0
5.00% 2/1/20 (FSA) 0 0
Puerto Rico Public Buildings Authority Revenue
(Government
Facilities) Series D 5.25% 7/1/36 1,070,000 1,105,995
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 2,500,000 2,639,725
5.125% 12/1/27 1,000,000 1,053,270
5.25% 12/1/27 0 0
(Robert Street Office Building Project)
4.75% 12/1/23 2,000,000 2,054,800
5.00% 12/1/27 2,500,000 2,618,150
Series 9 5.25% 12/1/27 725,000 769,899
-----------------------------
10,241,839
-----------------------------
Local General Obligation Bonds 18.73%
Big Lake Independent School District #727 Series A
5.00% 2/1/17 (FSA) 0 0
5.00% 2/1/20 (FSA) 0 0
Bloomington Independent School District #271
Series B 5.00% 2/1/17 5,300,000 5,516,505
Cambridge Independent School District #911
Series A 4.75% 2/1/30 (MBIA) 1,035,000 1,060,585
Centennial Independent School District #012
Series A 5.00% 2/1/18 (FSA) 0 0
Dakota County Capital Improvement
Series A 4.75% 2/1/26 1,000,000 1,021,730
Dakota County Community Development Agency
Governmental
Housing Development 5.00% 1/1/21 0 0
Farmington Independent School District #192 Capital
Appreciation Series B
5.00% 2/1/27 (FSA) 6,705,000 7,074,445
^5.34% 2/1/21 (FSA) 1,500,000 730,455
^5.422% 2/1/20 (FSA) 1,650,000 849,272
Hennepin County Regional Railroad Authority
5.00% 12/1/31 4,030,000 4,169,881
^Lakeville Independent School District #194
Capital Appreciation
Series B 5.450% 2/1/19 (FSA) 8,000,000 4,281,440
Lakeville Independent School District #194
Series A 4.75% 2/1/22 (FSA) 5,500,000 5,698,164
^Mahtomedi Independent School District #832
Capital Appreciation
Series B 5.898% 2/1/14 (MBIA) 1,540,000 1,151,366
Metropolitan Council Waste Water Treatment
Series B 5.00% 12/1/21 1,200,000 1,280,508
Minneapolis Library 5.00% 12/1/25 1,500,000 1,577,640
Minneapolis Tax Increment Revenue
(St. Anthony Falls Project) 5.75% 2/1/27 1,000,000 1,027,560
Morris Independent School District #769
5.00% 2/1/24 (MBIA) 0 0
Mounds View Independent School District #621
5.00% 2/1/20 (MBIA) 0 0
5.375% 2/1/24 (FGIC) 0 0
New Brighton Tax Increment Series A
5.00% 2/1/26 (MBIA) 0 0
5.00% 2/1/27 (MBIA) 1,000,000 1,065,600
5.00% 2/1/28 (MBIA) 1,000,000 1,064,730
Osseo Independent School District #279
Series A 5.00% 2/1/21 (FSA)
Prior Lake Independent School District #719
Series B 5.00% 2/1/19 (FSA) 3,145,000 3,373,358
Ramsey County State Aid Series C 5.00% 2/1/28 1,060,000 1,110,573
Robbinsdale Independent School District #281
5.00% 2/1/21 (FSA) 0 0
Rockford Independent School District #883
&(8) 5.625% 2/1/23 (FSA) 7,020,000 7,446,290
&(9) 5.60% 2/1/21 (FSA) 0 0
^Rosemont Independent School District #196
Capital Appreciation
Series B
5.80% 4/1/09 (FSA) 0 0
5.85% 4/1/10 (FSA) 0 0
5.931% 4/1/11 (FSA) 2,600,000 2,191,930
5.96% 4/1/12 (FSA) 1,850,000 1,498,500
6.008% 4/1/13 (FSA) 1,915,000 1,486,959
^Sartell Independent School District #748
Capital Appreciation Series B
5.976% 2/1/13 (MBIA) 540,000 419,186
6.099% 2/1/15 (MBIA) 1,075,000 766,647
6.15% 2/1/16 (MBIA) 1,750,000 1,191,173
^Sauk Rapids Independent School District #047
Series B
5.982% 2/1/15 (FSA) 0 0
6.083% 2/1/17 (FSA) 0 0
South Washington County Independent School
District #833
&(10) 5.60% 2/1/20 (MBIA) 0 0
&(11) 5.60% 2/1/21 (MBIA) 0 0
St. Michael Independent School District #885
5.00% 2/1/20 (FSA) 0 0
5.00% 2/1/27 (FSA) 0 0
St. Paul Housing & Redevelopment Authority Tax
Increment (Upper
Landing Project) Series A 6.80% 3/1/29 1,000,000 1,073,320
St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 1,905,000 1,975,980
Todd Morrison Cass & Wadena Counties United
Hospital District
(Health Care Facilities Lakewood)
5.00% 12/1/21 2,000,000 2,061,880
5.00% 12/1/34 1,000,000 1,015,870
5.125% 12/1/24 1,000,000 1,035,980
-----------------------------
64,217,527
-----------------------------
§Pre-Refunded Bonds 8.93%
Chaska Electric Revenue Series A 6.00% 10/1/25-10 1,000,000 1,090,550
Little Canada Multifamily Housing Revenue
Alternative Development
(Montreal Courts Apartments Project) Series A
6.10% 12/1/17-07 1,230,000 1,255,449
6.25% 12/1/27-07 2,900,000 2,985,666
Minneapolis Community Development Agency (Supported
Development Revenue) Series G-3 5.45% 12/1/31-11 0 0
Minneapolis Health Care System Revenue
(Fairview Health Services)
Series A 5.625% 5/15/32-12 11,525,000 12,765,204
Minneapolis Tax Increment Revenue
Series E 5.00% 3/1/13-09 6,265,000 6,481,268
Minnesota Agricultural & Economic Development
Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26-07 (MBIA) 0 0
6.375% 11/15/29-10 485,000 540,630
Minnesota Higher Education Facilities Series 4-1
6.00% 10/1/12-06 980,000 981,901
6.00% 10/1/16-06 1,400,000 1,402,716
Minnesota Public Facilities Authority Water
Pollution Control Revenue
Series A 5.00% 3/1/20-10 3,000,000 3,138,480
Series B 4.75% 3/1/19-09 2,000,000 2,056,200
Minnesota State Higher Education Facilities
Authority Revenue
(Hameline University) Series 4-1
6.00% 10/1/12-06 270,000 270,532
6.00% 10/1/16-06 390,000 390,768
Puerto Rico Public Buildings Authority Guaranteed
Government
Facilities Revenue Series D 5.25% 7/1/36-12 2,930,000 3,168,561
Southern Minnesota Municipal Power Agency Supply
Revenue Series A
5.75% 1/1/18 0 0
5.75% 1/1/18 (AMBAC) 0 0
Southern Minnesota Municipal Power Agency Supply
System Revenue
Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,055,450
-----------------------------
37,583,375
-----------------------------
Special Tax Bonds 1.03%
^Minneapolis Community Development Agency Tax
Increment
Revenue 6.674% 9/1/09 (MBIA) 5,750,000 5,157,175
Virgin Islands Public Finance Authority
(Matching Fund Loan) Series A
5.25% 10/1/22 0 0
-----------------------------
5,157,175
-----------------------------
State General Obligation Bonds 4.56%
Minnesota State
5.00% 11/1/20 (FSA) 8,175,000 8,564,784
5.00% 8/1/21 2,400,000 2,538,216
Minnesota State Refunding Various Purposes
5.00% 6/1/13 5,175,000 5,296,509
Puerto Rico Commonwealth Public Improvement
Series A
5.00% 7/1/34 4,500,000 4,597,695
5.50% 7/1/19 (MBIA) 1,500,000 1,723,230
Puerto Rico Commonwealth Series B
5.00% 7/1/35 1,500,000 1,537,980
Puerto Rico Government Development Bank
Senior Notes
Series B 5.00% 12/1/14 1,000,000 1,064,340
-----------------------------
25,322,754
-----------------------------
Transportation Revenue Bonds 3.89%
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series A
5.00% 1/1/22 (AMBAC) 3,440,000 3,513,066
5.00% 1/1/22 (MBIA) 0 0
5.125% 1/1/25 (FGIC) 0 0
5.25% 1/1/16 (MBIA) 1,460,000 1,570,011
5.25% 1/1/32 (FGIC) 5,000,000 5,235,999
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series C
5.125% 1/1/20 (FGIC) 0 0
5.25% 1/1/32 (FGIC) 2,250,000 2,354,378
5.50% 1/1/17 (FGIC) 2,500,000 2,669,725
-----------------------------
15,343,179
-----------------------------
Water & Sewer Revenue Bonds 1.52%
&(12) Minnesota Public Facilities Authority Water
Pollution Control Revenue
5.25% 3/1/18 10,000,000 10,399,649
-----------------------------
10,399,649
-----------------------------
Total Municipal Bonds 427,539,316
-----------------------------
Short-Term Investments 2.31%
Money Market Instruments 0.19%
Federated Minnesota Municipal Cash Trust 418,165 418,165
-----------------------------
418,165
-----------------------------
oVariable Rate Demand Notes 2.12%
Midwest Consortium of Municipal Utilities Revenue
Series A
(LOC - U.S. Bank N.A.) 3.40% 1/1/25 100,000 1,000,000
Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 1,000,000 1,000,000
Minneapolis Health Care System Revenue
(Fairview Health Services) Series A
3.40% 11/15/32 (AMBAC)(SPA) 0 0
Minneapolis Revenue (Guthrie Theater Project)
Series A
(LOC - Wells Fargo Bank) 3.27% 10/1/23 0 0
Minnesota State Higher Education Facilities
Authority Revenue
(Carleton College) Series 6-D 3.30% 4/1/35 (SPA) 6,000,000 6,000,000
-----------------------------
8,000,000
-----------------------------
8,418,165
-----------------------------
Total Investments at Market 100.00% $ 435,957,481
-----------------------------
Total Investments at Cost $ 418,029,238
-----------------------------
Delaware Tax-Free Minnesota Fund
Pro Forma Portfolio of Investments(A)
As of August 31, 2006
(Unaudited)
Delaware Tax-Free Minnesota Insured Fund
Par/Shares Market Value
-----------------------------------------
Municipal Bonds
Corporate-Backed Revenue Bonds
Cloquet Pollution Control Revenue (Potlatch Corp.
Project) 5.90% 10/1/26 $ - $ -
Laurentian Energy Authority I Series A 5.00%
12/1/21 0 0
Sartell Environmental Improvement Revenue
(International Paper)
Series A 5.20% 6/1/27 1,800,000 1,849,410
Seaway Port Authority of Duluth Industrial
Development Dock & Wharf
Revenues (Cargill, Inc. Project) Series E
6.125% 11/1/14 0 0
--------------------------
1,849,410
--------------------------
Education Revenue Bonds
Minnesota State Colleges & Universities Revenue
Fund Series A
5.00% 10/1/22 (FSA) 5,135,000 5,420,198
5.00% 10/1/29 (MBIA) 4,000,000 4,225,520
Minnesota State Higher Education Facilities
Authority Revenue
(Augsburg College)
Series 6-C 5.00% 5/1/20 0 0
Series 6-J1 5.00% 5/1/36 0 0
(College of St. Benedict) Series 4-G 6.20%
3/1/16 0 0
(St. Catherine College) Series 5-N1
5.00% 10/1/18 2,200,000 2,272,666
5.25% 10/1/22 0 0
5.375% 10/1/32 0 0
St. Cloud Housing & Redevelopment Authority Revenue
(State University Foundation Project) 5.00%
5/1/23 2,000,000 2,084,440
University of Minnesota
&(1) 5.50% 7/1/21 0 0
&(2) 5.75% 7/1/18 0 0
--------------------------
14,002,824
--------------------------
Electric Revenue Bonds
Chaska Electric Revenue (Generating Facilities)
Series A 5.00% 10/1/30 0 0
Minnesota State Municipal Power Agency
5.00% 10/1/35 0 0
Series A 5.00% 10/1/34 2,000,000 2,053,420
Series A 5.125% 10/1/29 0 0
Northern Minnesota Municipal Power Agency Electric
System Revenue
^Series A 5.849% 1/1/09 (AMBAC) 0 0
Series B 4.75% 1/1/20 (AMBAC) 0 0
&(3) Northern Municipal Power Agency Electric System
Revenue
5.25% 1/1/13 (FSA) 9,170,000 9,663,438
Puerto Rico Electric Power Authority Power Revenue
Series GG 4.75% 9/1/21 (FSA) 1,000,000 1,024,320
Series OO 5.00% 7/1/13 (CIFG) 1,315,000 1,419,385
Rochester Electric Utilities Revenue 5.25% 12/1/30 0 0
Shakopee Public Utilities Commission Revenue 5.125%
2/1/26 (MBIA) 1,850,000 1,898,285
Southern Minnesota Municipal Power Agency Supply
System Revenue Series A
5.00% 1/1/12 (AMBAC) 0 0
5.00% 1/1/13 (MBIA) 0 0
5.25% 1/1/15 (AMBAC) 1,500,000 1,654,590
Southern Minnesota Municipal Power Agency Supply
System Revenue
&(4) 5.25% 1/1/15 (AMBAC) 0 0
&(5) 5.25% 1/1/14 (AMBAC) 0 0
Western Minnesota Municipal Power Agency Series B
5.00% 1/1/15 (MBIA) 1,365,000 1,481,503
--------------------------
19,194,941
--------------------------
Escrowed to Maturity Bonds
Dakota/Washington Counties Housing & Redevelopment
Authority
Anoka Single Family Residential Mortgage Revenue
8.45% 9/1/19 (GNMA) (AMT) 9,000,000 12,815,280
Dakota/Washington Counties Housing & Redevelopment
Authority
Bloomington Mortgage Single Family Residential
Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 540,076
8.375% 9/1/21 (GNMA) (MBIA) (AMT) 14,115,000 20,532,384
Southern Minnesota Municipal Power Agency Supply
System Revenue
Series B 5.50% 1/1/15 (AMBAC) 0 0
University of Minnesota Series A 5.50% 7/1/21 0 0
Western Minnesota Municipal Power Agency Supply
Revenue Series A
6.60% 1/1/10 1,650,000 1,738,473
9.75% 1/1/16 (MBIA) 530,000 762,548
--------------------------
36,388,761
--------------------------
Health Care Revenue Bonds
Aitkin Health Care Facilities Revenue (Riverwood
Health Care Center)
5.60% 2/1/32 0 0
Apple Valley, Minnesota Economic Development
Authority Health Care
Revenue (Augustana Home St. Paul Project)
Series A 6.00% 1/1/40 0 0
Apple Valley, Minnesota Economic Development
Authority Health Care
Revenue (Evercare Senior Living Project)
Series A 6.125% 6/1/35 0 0
Bemidji Health Care Facilities First Meeting Revenue
(North Country
Health Services)
5.00% 9/1/24 (RADIAN) 0 0
Bloomington Housing & Redevelopment Authority
Housing Revenue
(Senior Summerhouse Bloomington Project,
Presbyterian Homes
Housing & Assisted Living, Inc.) 6.125% 5/1/35 0 0
Breckenridge Catholic Health Initiatives
5.00% 5/1/30 0 0
Buffalo Health Care Revenue (Central Minnesota
Senior Housing Project)
Series A 5.50% 9/1/33 0 0
Duluth Economic Development Authority Health Care
Facilities
Revenue Benedictine Health System (St. Mary's
Hospital)
5.25% 2/15/28 8,500,000 8,897,034
5.25% 2/15/33 0 0
5.50% 2/15/23 0 0
Maple Grove Health Care Facilities Revenue
(North Memorial Health Care)
5.00% 9/1/29 0 0
5.00% 9/1/35 0 0
Marshall Medical Center Gross Revenue
Weiner Memorial Medical
Center Project) 6.00% 11/1/28 0 0
Minneapolis Health Care Facility Revenue
(Jones-Harrison
Residence Project) 5.60% 10/1/30 0 0
Minneapolis Health Care System Revenue
Allina Health Systems)
Series A 5.75% 11/15/32 7,800,000 8,373,690
(Fairview Health Services) Series D
5.00% 11/15/30 (AMBAC) 0 0
5.00% 11/15/34 (AMBAC) 8,250,000 8,638,658
Minneapolis/St. Paul Housing & Redevelopment
Authority
Health Care System Revenue
(Allina Health Systems)
5.00% 11/15/13 (AMBAC) 6,490,000 6,496,166
(Healthpartners Obligation Group Project)
5.625% 12/1/22 650,000 695,799
5.875% 12/1/29 1,000,000 1,081,610
Minnesota Agriculture & Economic Development Board
Revenue
(Benedictine Health Systems) 5.75% 2/1/29 0 0
(Fairview Health Care System) Series A
5.75% 11/15/26 (MBIA) 180,000 187,549
6.375% 11/15/29 0 0
Northfield Hospital Revenue
5.375% 11/1/26 0 0
Prior Lake Senior Housing Revenue
(Shepherds Path Senio Housing) Series B
5.70% 8/1/36 0 0
5.75% 8/1/41 0 0
Rochester Health Care Facilities Revenue
(Mayo Clinic) 5.00% 11/15/36 0 0
(Mayo Foundation) Series B 5.50% 11/15/27 0 0
Rochester Health Care Facilities Revenue
(Mayo Foundation),
&(6) Series A 5.50% 11/15/27 0 0
&(7) Series B 5.50% 11/15/27 0 0
Rochester, Minnesota Multifamily Revenue
(Wedum Shorewood
Campus Project) 6.60% 6/1/36 0 0
Shakopee Health Care Facilities Revenue (St. Francis
Regional
Medical Center)
5.10% 9/1/25 0 0
5.25% 9/1/34 0 0
St. Louis Park Health Care Facilities Revenue
(Park Nicollet Health
Services) Series B
5.25% 7/1/30 0 0
5.50% 7/1/25 2,000,000 2,145,000
St. Paul Housing & Redevelopment Authority Hospital
Revenue
(Health East Project)
6.00% 11/15/35 0 0
Series A 5.70% 11/1/15 0 0
St. Paul Housing & Redevelopment Authority Hospital
Revenue (St.
Paul/Ramsey Medical Center Project)
5.50% 5/15/13 (AMBAC) 1,000,000 1,001,360
Washington County Housing & Redevelopment Authority
Hospital
Facilities Revenue (Health East Project)
.50% 11/15/27 0 0
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 1,000,000 1,052,890
5.00% 2/1/25 (FSA) 1,000,000 1,049,430
Woodbury Economic Development Authority Housing
Revenue
(Senior Summerhouse Woodbury Project) Series B
5.75% 6/1/41 0 0
--------------------------
39,619,186
--------------------------
Housing Revenue Bonds
Brooklyn Center Multifamily Housing Revenue
(Shingle Creek)
5.40% 5/20/43 (GNMA) (AMT) 0 0
Dakota County Housing & Redevelopment Authority
Single Family
Mortgage Revenue Series B 5.85% 10/1/30
(GNMA)(FNMA)(AMT) 288,000 294,684
Eagan Multifamily Revenue (Woodridge Apartments)
5.90% 8/1/20 (GNMA) 1,000,000 1,025,670
Hopkins Multifamily Housing Revenue (Hopkins
Renaissance
Project-Section 8) 6.375% 4/1/20 0 0
@Hutchinson Multifamily Housing Revenue (Evergreen
Apartments
Project-Section 8) 5.75% 11/1/28 0 0
Minneapolis Multifamily Housing Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,566,135
(Grant Street Apartments Project) Series A
7.25% 11/1/29 0 0
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 4,000,000 4,157,280
(Sumner Field) Series A
5.50% 11/20/26 (GNMA) (AMT) 0 0
(Trinity Apartments-Section 8) Series A
6.75% 5/1/21 0 0
Minnesota State Housing Finance Agency Rental
Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) 1,642,000 1,652,279
Series I 5.15% 7/1/38 (AMT) 0 0
Minnesota State Housing Finance Agency Single Family
Mortgage
Series A 5.30% 7/1/19 0 0
Series B 5.35% 1/1/33 (AMT) 0 0
Series J 5.90% 7/1/28 (AMT) 0 0
@Park Rapids Multifamily Revenue
(The Court Apartments
Project-Section 8) 6.30% 2/1/20 0 0
St. Cloud Housing & Redevelopment Authority Revenue
(Sterling
Heights Apartments Project) 7.55% 4/1/39 (AMT) 0 0
St. Louis Park Residential Mortgage Revenue
Series A 7.25% 4/20/23 (GNMA) 0 0
Stillwater Multifamily Housing Revenue (Stillwater
Cottages Project)
7.25% 11/1/27 (AMT) 0 0
Series A 7.00% 11/1/27 0 0
Wadena Housing & Redevelopment Authority Multifamily
Housing
Revenue (Humphrey Manor East Project) 6.00% 2/1/19 0 0
Washington County Housing & Redevelopment Authority
Governmental Revenue (Briar Pond) Series C 7.25%
8/20/34 0 0
White Bear Lake Multifamily Revenue (Lake Square)
Series A
5.875% 2/1/15 (FHA) 1,055,000 1,081,407
Willmar Housing & Redevelopment Authority
Multifamily Housing
Revenue (Highland Apartments-Section 8)
5.85% 6/1/19 0 0
--------------------------
9,777,455
--------------------------
Lease Revenue Bonds
Hopkins Housing & Redevelopment Authority Public
Works and Fire
Station Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,269,810
Minneapolis Special School District #001 Series A
5.00% 2/1/18 (FSA) 1,545,000 1,629,141
5.00% 2/1/19 (FSA) 1,535,000 1,618,596
5.00% 2/1/20 (FSA) 1,690,000 1,782,037
Puerto Rico Public Buildings Authority Revenue
(Government
Facilities) Series D 5.25% 7/1/36 0 0
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 0 0
5.125% 12/1/27 2,000,000 2,106,540
5.25% 12/1/27 3,840,000 4,062,605
(Robert Street Office Building Project)
4.75% 12/1/23 0 0
5.00% 12/1/27 0 0
Series 9 5.25% 12/1/27 0 0
--------------------------
12,468,729
--------------------------
Local General Obligation Bonds
Big Lake Independent School District #727 Series A
5.00% 2/1/17 (FSA) 1,040,000 1,082,484
5.00% 2/1/20 (FSA) 1,000,000 1,040,850
Bloomington Independent School District #271
Series B 5.00% 2/1/17 0 0
Cambridge Independent School District #911
Series A 4.75% 2/1/30 (MBIA) 0 0
Centennial Independent School District #012
Series A 5.00% 2/1/18 (FSA) 1,270,000 1,339,164
Dakota County Capital Improvement
Series A 4.75% 2/1/26 0 0
Dakota County Community Development Agency
Governmental
Housing Development 5.00% 1/1/21 1,275,000 1,327,237
Farmington Independent School District #192 Capital
Appreciation Series B
5.00% 2/1/27 (FSA) 4,000,000 4,220,400
^5.34% 2/1/21 (FSA) 0 0
^5.422% 2/1/20 (FSA) 0 0
Hennepin County Regional Railroad Authority
5.00% 12/1/31 0 0
^Lakeville Independent School District #194
Capital Appreciation
Series B 5.450% 2/1/19 (FSA) 0 0
Lakeville Independent School District #194
Series A 4.75% 2/1/22 (FSA) 2,350,000 2,434,671
^Mahtomedi Independent School District #832
Capital Appreciation
Series B 5.898% 2/1/14 (MBIA) 0 0
Metropolitan Council Waste Water Treatment
Series B 5.00% 12/1/21 0 0
Minneapolis Library 5.00% 12/1/25 0 0
Minneapolis Tax Increment Revenue
(St. Anthony Falls Project) 5.75% 2/1/27 0 0
Morris Independent School District #769
5.00% 2/1/24 (MBIA) 4,875,000 5,191,485
Mounds View Independent School District #621
5.00% 2/1/20 (MBIA) 2,970,000 3,125,806
5.375% 2/1/24 (FGIC) 6,170,000 6,572,346
New Brighton Tax Increment Series A
5.00% 2/1/26 (MBIA) 1,185,000 1,266,860
5.00% 2/1/27 (MBIA) 0 0
5.00% 2/1/28 (MBIA) 0 0
Osseo Independent School District #279
Series A 5.00% 2/1/21 (FSA) 3,570,000 3,764,422
Prior Lake Independent School District #719
Series B 5.00% 2/1/19 (FSA) 0 0
Ramsey County State Aid Series C 5.00% 2/1/28 0 0
Robbinsdale Independent School District #281
5.00% 2/1/21 (FSA) 1,310,000 1,381,343
Rockford Independent School District #883
&(8) 5.625% 2/1/23 (FSA) 0 0
&(9) 5.60% 2/1/21 (FSA) 3,210,000 3,402,359
^Rosemont Independent School District #196
Capital Appreciation
Series B
5.80% 4/1/09 (FSA) 1,860,000 1,693,214
5.85% 4/1/10 (FSA) 2,240,000 1,962,845
5.931% 4/1/11 (FSA) 0 0
5.96% 4/1/12 (FSA) 0 0
6.008% 4/1/13 (FSA) 0 0
^Sartell Independent School District #748
Capital Appreciation Series B
5.976% 2/1/13 (MBIA) 0 0
6.099% 2/1/15 (MBIA) 0 0
6.15% 2/1/16 (MBIA) 0 0
^Sauk Rapids Independent School District #047
Series B
5.982% 2/1/15 (FSA) 2,700,000 1,788,723
6.083% 2/1/17 (FSA) 2,245,000 1,316,288
South Washington County Independent School
District #833
&(10) 5.60% 2/1/20 (MBIA) 6,880,000 7,292,284
&(11) 5.60% 2/1/21 (MBIA) 7,290,000 7,726,853
St. Michael Independent School District #885
5.00% 2/1/20 (FSA) 1,970,000 2,073,346
5.00% 2/1/27 (FSA) 3,435,000 3,572,675
St. Paul Housing & Redevelopment Authority Tax
Increment (Upper
Landing Project) Series A 6.80% 3/1/29 0 0
St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 0 0
Todd Morrison Cass & Wadena Counties United
Hospital District
(Health Care Facilities Lakewood)
5.00% 12/1/21 0 0
5.00% 12/1/34 0 0
5.125% 12/1/24 0 0
--------------------------
63,575,655
--------------------------
§Pre-Refunded Bonds
Chaska Electric Revenue Series A 6.00% 10/1/25-10 0 0
Little Canada Multifamily Housing Revenue
Alternative Development
(Montreal Courts Apartments Project) Series A
6.10% 12/1/17-07 0 0
6.25% 12/1/27-07 0 0
Minneapolis Community Development Agency (Supported
Development Revenue) Series G-3 5.45% 12/1/31-11 2,000,000 2,169,280
Minneapolis Health Care System Revenue
(Fairview Health Services)
Series A 5.625% 5/15/32-12 5,400,000 5,981,094
Minneapolis Tax Increment Revenue
Series E 5.00% 3/1/13-09 0 0
Minnesota Agricultural & Economic Development
Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26-07 (MBIA) 10,070,000 10,525,264
6.375% 11/15/29-10 0 0
Minnesota Higher Education Facilities Series 4-1
6.00% 10/1/12-06 0 0
6.00% 10/1/16-06 0 0
Minnesota Public Facilities Authority Water
Pollution Control Revenue
Series A 5.00% 3/1/20-10 0 0
Series B 4.75% 3/1/19-09 0 0
Minnesota State Higher Education Facilities
Authority Revenue
(Hameline University) Series 4-1
6.00% 10/1/12-06 0 0
6.00% 10/1/16-06 0 0
Puerto Rico Public Buildings Authority Guaranteed
Government
Facilities Revenue Series D 5.25% 7/1/36-12 0 0
Southern Minnesota Municipal Power Agency Supply
Revenue Series A
5.75% 1/1/18 3,790,000 4,000,156
5.75% 1/1/18 (AMBAC) 670,000 707,152
Southern Minnesota Municipal Power Agency Supply
System Revenue
Series A 5.75% 1/1/18-16 (MBIA) 0 0
--------------------------
23,382,946
--------------------------
Special Tax Bonds
^Minneapolis Community Development Agency Tax
Increment
Revenue 6.674% 9/1/09 (MBIA) 0 0
Virgin Islands Public Finance Authority
(Matching Fund Loan) Series A
5.25% 10/1/22 1,785,000 1,882,854
--------------------------
1,882,854
--------------------------
State General Obligation Bonds
Minnesota State
5.00% 11/1/20 (FSA) 5,500,000 5,762,239
5.00% 8/1/21 0 0
Minnesota State Refunding Various Purposes
5.00% 6/1/13 0 0
Puerto Rico Commonwealth Public Improvement
Series A
5.00% 7/1/34 0 0
5.50% 7/1/19 (MBIA) 0 0
Puerto Rico Commonwealth Series B
5.00% 7/1/35 0 0
Puerto Rico Government Development Bank
Senior Notes
Series B 5.00% 12/1/14 0 0
--------------------------
5,762,239
--------------------------
Transportation Revenue Bonds
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series A
5.00% 1/1/22 (AMBAC) 0 0
5.00% 1/1/22 (MBIA) 2,000,000 2,092,020
5.125% 1/1/25 (FGIC) 100,000 103,457
5.25% 1/1/16 (MBIA) 0 0
5.25% 1/1/32 (FGIC) 0 0
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series C
5.125% 1/1/20 (FGIC) 2,000,000 2,099,560
5.25% 1/1/32 (FGIC) 6,595,000 6,900,942
5.50% 1/1/17 (FGIC) 0 0
--------------------------
11,195,979
--------------------------
Water & Sewer Revenue Bonds
&(12) Minnesota Public Facilities Authority Water
Pollution Control Revenue
5.25% 3/1/18 0 0
--------------------------
0
--------------------------
Total Municipal Bonds 239,100,979
--------------------------
Short-Term Investments
Money Market Instruments
Federated Minnesota Municipal Cash Trust 857,402 857,402
--------------------------
857,402
--------------------------
oVariable Rate Demand Notes
Midwest Consortium of Municipal Utilities Revenue
Series A
(LOC - U.S. Bank N.A.) 3.40% 1/1/25 1,000,000 1,000,000
Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 0 0
Minneapolis Health Care System Revenue
(Fairview Health Services) Series A
3.40% 11/15/32 (AMBAC)(SPA) 1,400,000 1,400,000
Minneapolis Revenue (Guthrie Theater Project)
Series A
(LOC - Wells Fargo Bank) 3.27% 10/1/23 1,000,000 1,000,000
Minnesota State Higher Education Facilities
Authority Revenue
(Carleton College) Series 6-D 3.30% 4/1/35 (SPA) 3,060,000 3,060,000
--------------------------
6,460,000
--------------------------
7,317,402
--------------------------
Total Investments at Market $ 246,418,381
--------------------------
Total Investments at Cost $ 231,382,840
--------------------------
Delaware Tax-Free Minnesota Fund
Pro Forma Portfolio of Investments(A)
As of August 31, 2006
(Unaudited)
Delaware Tax-Free Minnesota Fund
Pro Forma Combined
Par/Shares Market Value
---------------------------------------------------
Municipal Bonds
Corporate-Backed Revenue Bonds
Cloquet Pollution Control Revenue (Potlatch Corp.
Project) 5.90% 10/1/26 $ 6,500,000 $ 6,612,255
Laurentian Energy Authority I Series A 5.00%
12/1/21 8,000,000 8,082,080
Sartell Environmental Improvement Revenue
(International Paper)
Series A 5.20% 6/1/27 7,265,000 7,464,424
Seaway Port Authority of Duluth Industrial
Development Dock & Wharf
Revenues (Cargill, Inc. Project) Series E
6.125% 11/1/14 4,500,000 4,598,010
-----------------------------
26,756,769
-----------------------------
Education Revenue Bonds
Minnesota State Colleges & Universities Revenue
Fund Series A
5.00% 10/1/22 (FSA) 5,135,000 5,420,198
5.00% 10/1/29 (MBIA) 5,665,000 5,984,393
Minnesota State Higher Education Facilities
Authority Revenue
(Augsburg College)
Series 6-C 5.00% 5/1/20 1,250,000 1,293,763
Series 6-J1 5.00% 5/1/36 2,225,000 2,257,685
(College of St. Benedict) Series 4-G 6.20%
3/1/16 1,000,000 1,001,380
(St. Catherine College) Series 5-N1
5.00% 10/1/18 2,200,000 2,272,666
5.25% 10/1/22 1,500,000 1,559,640
5.375% 10/1/32 1,000,000 1,047,430
St. Cloud Housing & Redevelopment Authority Revenue
(State University Foundation Project) 5.00%
5/1/23 2,000,000 2,084,440
University of Minnesota
&(1) 5.50% 7/1/21 10,500,000 12,065,498
&(2) 5.75% 7/1/18 3,840,000 4,490,112
------------------------------
39,477,205
------------------------------
Electric Revenue Bonds
Chaska Electric Revenue (Generating Facilities)
Series A 5.00% 10/1/30 3,000,000 3,096,030
Minnesota State Municipal Power Agency
5.00% 10/1/35 3,000,000 3,087,030
Series A 5.00% 10/1/34 6,250,000 6,416,938
Series A 5.125% 10/1/29 3,000,000 3,114,450
Northern Minnesota Municipal Power Agency Electric
System Revenue
^Series A 5.849% 1/1/09 (AMBAC) 3,815,000 3,505,413
Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,565,300
&(3) Northern Municipal Power Agency Electric System
Revenue
5.25% 1/1/13 (FSA) 9,170,000 9,663,438
Puerto Rico Electric Power Authority Power Revenue
Series GG 4.75% 9/1/21 (FSA) 1,000,000 1,024,320
Series OO 5.00% 7/1/13 (CIFG) 1,315,000 1,419,385
Rochester Electric Utilities Revenue 5.25% 12/1/30 4,915,000 5,091,350
Shakopee Public Utilities Commission Revenue 5.125%
2/1/26 (MBIA) 2,850,000 2,924,385
Southern Minnesota Municipal Power Agency Supply
System Revenue Series A
5.00% 1/1/12 (AMBAC) 4,205,000 4,476,601
5.00% 1/1/13 (MBIA) 5,820,000 6,248,526
5.25% 1/1/15 (AMBAC) 4,500,000 4,963,770
Southern Minnesota Municipal Power Agency Supply
System Revenue
&(4) 5.25% 1/1/15 (AMBAC) 5,900,000 6,508,084
&(5) 5.25% 1/1/14 (AMBAC) 4,000,000 4,382,720
Western Minnesota Municipal Power Agency Series B
5.00% 1/1/15 (MBIA) 1,365,000 1,481,503
------------------------------
69,969,243
------------------------------
Escrowed to Maturity Bonds
Dakota/Washington Counties Housing & Redevelopment
Authority
Anoka Single Family Residential Mortgage Revenue
8.45% 9/1/19 (GNMA) (AMT) 9,000,000 12,815,280
Dakota/Washington Counties Housing & Redevelopment
Authority
Bloomington Mortgage Single Family Residential
Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 540,076
8.375% 9/1/21 (GNMA) (MBIA) (AMT) 14,115,000 20,532,384
Southern Minnesota Municipal Power Agency Supply
System Revenue
Series B 5.50% 1/1/15 (AMBAC) 990,000 1,048,024
University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,298,160
Western Minnesota Municipal Power Agency Supply
Revenue Series A
6.60% 1/1/10 1,650,000 1,738,473
9.75% 1/1/16 (MBIA) 715,000 1,028,720
------------------------------
40,001,117
------------------------------
Health Care Revenue Bonds
Aitkin Health Care Facilities Revenue (Riverwood
Health Care Center)
5.60% 2/1/32 1,500,000 1,534,395
Apple Valley, Minnesota Economic Development
Authority Health Care
Revenue (Augustana Home St. Paul Project)
Series A 6.00% 1/1/40 2,700,000 2,742,336
Apple Valley, Minnesota Economic Development
Authority Health Care
Revenue (Evercare Senior Living Project)
Series A 6.125% 6/1/35 4,000,000 4,027,440
Bemidji Health Care Facilities First Meeting Revenue
(North Country
Health Services)
5.00% 9/1/24 (RADIAN) 740,000 763,391
Bloomington Housing & Redevelopment Authority
Housing Revenue
(Senior Summerhouse Bloomington Project,
Presbyterian Homes
Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,490,110
Breckenridge Catholic Health Initiatives
5.00% 5/1/30 2,000,000 2,085,860
Buffalo Health Care Revenue (Central Minnesota
Senior Housing Project)
Series A 5.50% 9/1/33 1,270,000 1,262,926
Duluth Economic Development Authority Health Care
Facilities
Revenue Benedictine Health System (St. Mary's
Hospital)
5.25% 2/15/28 8,500,000 8,897,034
5.25% 2/15/33 10,000,000 10,377,300
5.50% 2/15/23 1,000,000 1,070,240
Maple Grove Health Care Facilities Revenue
(North Memorial Health Care)
5.00% 9/1/29 1,000,000 1,032,560
5.00% 9/1/35 5,850,000 6,005,669
Marshall Medical Center Gross Revenue
Weiner Memorial Medical
Center Project) 6.00% 11/1/28 1,000,000 1,044,190
Minneapolis Health Care Facility Revenue
(Jones-Harrison
Residence Project) 5.60% 10/1/30 1,550,000 1,562,943
Minneapolis Health Care System Revenue
Allina Health Systems)
Series A 5.75% 11/15/32 17,300,000 18,572,415
(Fairview Health Services) Series D
5.00% 11/15/30 (AMBAC) 2,500,000 2,624,925
5.00% 11/15/34 (AMBAC) 10,750,000 11,256,433
Minneapolis/St. Paul Housing & Redevelopment
Authority
Health Care System Revenue
(Allina Health Systems)
5.00% 11/15/13 (AMBAC) 6,490,000 6,496,166
(Healthpartners Obligation Group Project)
5.625% 12/1/22 650,000 695,799
5.875% 12/1/29 1,000,000 1,081,610
Minnesota Agriculture & Economic Development Board
Revenue
(Benedictine Health Systems) 5.75% 2/1/29 1,895,000 1,924,733
(Fairview Health Care System) Series A
5.75% 11/15/26 (MBIA) 180,000 187,549
6.375% 11/15/29 15,000 16,235
Northfield Hospital Revenue
5.375% 11/1/26 3,785,000 4,011,343
Prior Lake Senior Housing Revenue
(Shepherds Path Senio Housing) Series B
5.70% 8/1/36 2,000,000 2,016,760
5.75% 8/1/41 1,000,000 1,008,820
Rochester Health Care Facilities Revenue
(Mayo Clinic) 5.00% 11/15/36 7,000,000 7,303,100
(Mayo Foundation) Series B 5.50% 11/15/27 700,000 725,522
Rochester Health Care Facilities Revenue
(Mayo Foundation),
&(6) Series A 5.50% 11/15/27 4,200,000 4,353,153
&(7) Series B 5.50% 11/15/27 16,750,000 17,360,789
Rochester, Minnesota Multifamily Revenue
(Wedum Shorewood
Campus Project) 6.60% 6/1/36 3,890,000 4,015,997
Shakopee Health Care Facilities Revenue (St. Francis
Regional
Medical Center)
5.10% 9/1/25 2,000,000 2,074,840
5.25% 9/1/34 7,000,000 7,281,750
St. Louis Park Health Care Facilities Revenue
(Park Nicollet Health
Services) Series B
5.25% 7/1/30 9,420,000 9,871,972
5.50% 7/1/25 2,000,000 2,145,000
St. Paul Housing & Redevelopment Authority Hospital
Revenue
(Health East Project)
6.00% 11/15/35 4,340,000 4,769,573
Series A 5.70% 11/1/15 1,300,000 1,341,678
St. Paul Housing & Redevelopment Authority Hospital
Revenue (St.
Paul/Ramsey Medical Center Project)
5.50% 5/15/13 (AMBAC) 1,000,000 1,001,360
Washington County Housing & Redevelopment Authority
Hospital
Facilities Revenue (Health East Project)
.50% 11/15/27 1,000,000 1,023,100
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 1,000,000 1,052,890
5.00% 2/1/25 (FSA) 1,000,000 1,049,430
Woodbury Economic Development Authority Housing
Revenue
(Senior Summerhouse Woodbury Project) Series B
5.75% 6/1/41 2,250,000 2,294,550
------------------------------
163,453,886
------------------------------
Housing Revenue Bonds
Brooklyn Center Multifamily Housing Revenue
(Shingle Creek)
5.40% 5/20/43 (GNMA) (AMT) 1,000,000 1,026,180
Dakota County Housing & Redevelopment Authority
Single Family
Mortgage Revenue Series B 5.85% 10/1/30
(GNMA)(FNMA)(AMT) 288,000 294,684
Eagan Multifamily Revenue (Woodridge Apartments)
5.90% 8/1/20 (GNMA) 1,000,000 1,025,670
Hopkins Multifamily Housing Revenue (Hopkins
Renaissance
Project-Section 8) 6.375% 4/1/20 1,000,000 1,033,180
@Hutchinson Multifamily Housing Revenue (Evergreen
Apartments
Project-Section 8) 5.75% 11/1/28 910,000 848,490
Minneapolis Multifamily Housing Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,566,135
(Grant Street Apartments Project) Series A
7.25% 11/1/29 750,000 776,745
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 8,000,000 8,314,560
(Sumner Field) Series A
5.50% 11/20/26 (GNMA) (AMT) 1,000,000 1,034,649
(Trinity Apartments-Section 8) Series A
6.75% 5/1/21 1,810,000 1,864,924
Minnesota State Housing Finance Agency Rental
Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) 1,642,000 1,652,279
Series I 5.15% 7/1/38 (AMT) 5,550,000 5,688,918
Minnesota State Housing Finance Agency Single Family
Mortgage
Series A 5.30% 7/1/19 585,000 609,084
Series B 5.35% 1/1/33 (AMT) 2,965,000 3,042,742
Series J 5.90% 7/1/28 (AMT) 4,950,000 509,909
@Park Rapids Multifamily Revenue
(The Court Apartments
Project-Section 8) 6.30% 2/1/20 2,835,000 2,630,228
St. Cloud Housing & Redevelopment Authority Revenue
(Sterling
Heights Apartments Project) 7.55% 4/1/39 (AMT) 1,000,000 1,057,410
St. Louis Park Residential Mortgage Revenue
Series A 7.25% 4/20/23 (GNMA) 78,000 78,179
Stillwater Multifamily Housing Revenue (Stillwater
Cottages Project)
7.25% 11/1/27 (AMT) 1,540,000 1,573,587
Series A 7.00% 11/1/27 1,000,000 1,021,570
Wadena Housing & Redevelopment Authority Multifamily
Housing
Revenue (Humphrey Manor East Project) 6.00% 2/1/19 1,860,000 1,860,316
Washington County Housing & Redevelopment Authority
Governmental Revenue (Briar Pond) Series C 7.25%
8/20/34 955,000 922,329
White Bear Lake Multifamily Revenue (Lake Square)
Series A
5.875% 2/1/15 (FHA) 1,055,000 1,081,407
Willmar Housing & Redevelopment Authority
Multifamily Housing
Revenue (Highland Apartments-Section 8)
5.85% 6/1/19 935,000 935,000
------------------------------
40,448,175
------------------------------
Lease Revenue Bonds
Hopkins Housing & Redevelopment Authority Public
Works and Fire
Station Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,269,810
Minneapolis Special School District #001 Series A
5.00% 2/1/18 (FSA) 1,545,000 1,629,141
5.00% 2/1/19 (FSA) 1,535,000 1,618,596
5.00% 2/1/20 (FSA) 1,690,000 1,782,037
Puerto Rico Public Buildings Authority Revenue
(Government
Facilities) Series D 5.25% 7/1/36 1,070,000 1,105,995
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 2,500,000 2,639,725
5.125% 12/1/27 3,000,000 3,159,810
5.25% 12/1/27 3,840,000 4,062,605
(Robert Street Office Building Project)
4.75% 12/1/23 2,000,000 2,054,800
5.00% 12/1/27 2,500,000 2,618,150
Series 9 5.25% 12/1/27 725,000 769,899
------------------------------
22,710,568
------------------------------
Local General Obligation Bonds
Big Lake Independent School District #727 Series A
5.00% 2/1/17 (FSA) 1,040,000 1,082,484
5.00% 2/1/20 (FSA) 1,000,000 1,040,850
Bloomington Independent School District #271
Series B 5.00% 2/1/17 5,300,000 5,516,505
Cambridge Independent School District #911
Series A 4.75% 2/1/30 (MBIA) 1,035,000 1,060,585
Centennial Independent School District #012
Series A 5.00% 2/1/18 (FSA) 1,270,000 1,339,164
Dakota County Capital Improvement
Series A 4.75% 2/1/26 1,000,000 1,021,730
Dakota County Community Development Agency
Governmental
Housing Development 5.00% 1/1/21 1,275,000 1,327,237
Farmington Independent School District #192 Capital
Appreciation Series B
5.00% 2/1/27 (FSA) 10,705,000 11,294,845
^5.34% 2/1/21 (FSA) 1,500,000 730,455
^5.422% 2/1/20 (FSA) 1,650,000 849,272
Hennepin County Regional Railroad Authority
5.00% 12/1/31 4,030,000 4,169,881
^Lakeville Independent School District #194
Capital Appreciation
Series B 5.450% 2/1/19 (FSA) 8,000,000 4,281,440
Lakeville Independent School District #194
Series A 4.75% 2/1/22 (FSA) 7,850,000 8,132,835
^Mahtomedi Independent School District #832
Capital Appreciation
Series B 5.898% 2/1/14 (MBIA) 1,540,000 1,151,366
Metropolitan Council Waste Water Treatment
Series B 5.00% 12/1/21 1,200,000 1,280,508
Minneapolis Library 5.00% 12/1/25 1,500,000 1,577,640
Minneapolis Tax Increment Revenue
(St. Anthony Falls Project) 5.75% 2/1/27 1,000,000 1,027,560
Morris Independent School District #769
5.00% 2/1/24 (MBIA) 4,875,000 5,191,485
Mounds View Independent School District #621
5.00% 2/1/20 (MBIA) 2,970,000 3,125,806
5.375% 2/1/24 (FGIC) 6,170,000 6,572,346
New Brighton Tax Increment Series A
5.00% 2/1/26 (MBIA) 1,185,000 1,266,860
5.00% 2/1/27 (MBIA) 1,000,000 1,065,600
5.00% 2/1/28 (MBIA) 1,000,000 1,064,730
Osseo Independent School District #279
Series A 5.00% 2/1/21 (FSA) 3,570,000 3,764,422
Prior Lake Independent School District #719
Series B 5.00% 2/1/19 (FSA) 3,145,000 3,373,358
Ramsey County State Aid Series C 5.00% 2/1/28 1,060,000 1,110,573
Robbinsdale Independent School District #281
5.00% 2/1/21 (FSA) 1,310,000 1,381,343
Rockford Independent School District #883
&(8) 5.625% 2/1/23 (FSA) 7,020,000 7,446,290
&(9) 5.60% 2/1/21 (FSA) 3,210,000 3,402,359
^Rosemont Independent School District #196
Capital Appreciation
Series B
5.80% 4/1/09 (FSA) 1,860,000 1,693,214
5.85% 4/1/10 (FSA) 2,240,000 1,962,845
5.931% 4/1/11 (FSA) 2,600,000 2,191,930
5.96% 4/1/12 (FSA) 1,850,000 1,498,500
6.008% 4/1/13 (FSA) 1,915,000 1,486,959
^Sartell Independent School District #748
Capital Appreciation Series B
5.976% 2/1/13 (MBIA) 540,000 419,186
6.099% 2/1/15 (MBIA) 1,075,000 766,647
6.15% 2/1/16 (MBIA) 1,750,000 1,191,173
^Sauk Rapids Independent School District #047
Series B
5.982% 2/1/15 (FSA) 2,700,000 1,788,723
6.083% 2/1/17 (FSA) 2,245,000 1,316,288
South Washington County Independent School
District #833
&(10) 5.60% 2/1/20 (MBIA) 6,880,000 7,292,284
&(11) 5.60% 2/1/21 (MBIA) 7,290,000 7,726,853
St. Michael Independent School District #885
5.00% 2/1/20 (FSA) 1,970,000 2,073,346
5.00% 2/1/27 (FSA) 3,435,000 3,572,675
St. Paul Housing & Redevelopment Authority Tax
Increment (Upper
Landing Project) Series A 6.80% 3/1/29 1,000,000 1,073,320
St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 1,905,000 1,975,980
Todd Morrison Cass & Wadena Counties United
Hospital District
(Health Care Facilities Lakewood)
5.00% 12/1/21 2,000,000 2,061,880
5.00% 12/1/34 1,000,000 1,015,870
5.125% 12/1/24 1,000,000 1,035,980
------------------------------
127,793,182
------------------------------
§Pre-Refunded Bonds
Chaska Electric Revenue Series A 6.00% 10/1/25-10 1,000,000 1,090,550
Little Canada Multifamily Housing Revenue
Alternative Development
(Montreal Courts Apartments Project) Series A
6.10% 12/1/17-07 1,230,000 1,255,449
6.25% 12/1/27-07 2,900,000 2,985,666
Minneapolis Community Development Agency (Supported
Development Revenue) Series G-3 5.45% 12/1/31-11 2,000,000 2,169,280
Minneapolis Health Care System Revenue
(Fairview Health Services)
Series A 5.625% 5/15/32-12 16,925,000 18,746,298
Minneapolis Tax Increment Revenue
Series E 5.00% 3/1/13-09 6,265,000 6,481,268
Minnesota Agricultural & Economic Development
Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26-07 (MBIA) 10,070,000 10,525,264
6.375% 11/15/29-10 485,000 540,630
Minnesota Higher Education Facilities Series 4-1
6.00% 10/1/12-06 980,000 981,901
6.00% 10/1/16-06 1,400,000 1,402,716
Minnesota Public Facilities Authority Water
Pollution Control Revenue
Series A 5.00% 3/1/20-10 3,000,000 3,138,480
Series B 4.75% 3/1/19-09 2,000,000 2,056,200
Minnesota State Higher Education Facilities
Authority Revenue
(Hameline University) Series 4-1
6.00% 10/1/12-06 270,000 270,532
6.00% 10/1/16-06 390,000 390,768
Puerto Rico Public Buildings Authority Guaranteed
Government
Facilities Revenue Series D 5.25% 7/1/36-12 2,930,000 3,168,561
Southern Minnesota Municipal Power Agency Supply
Revenue Series A
5.75% 1/1/18 3,790,000 4,000,156
5.75% 1/1/18 (AMBAC) 670,000 707,152
Southern Minnesota Municipal Power Agency Supply
System Revenue
Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,055,450
------------------------------
60,966,321
------------------------------
Special Tax Bonds
^Minneapolis Community Development Agency Tax
Increment
Revenue 6.674% 9/1/09 (MBIA) 5,750,000 5,157,175
Virgin Islands Public Finance Authority
(Matching Fund Loan) Series A
5.25% 10/1/22 1,785,000 1,882,854
------------------------------
7,040,029
------------------------------
State General Obligation Bonds
Minnesota State
5.00% 11/1/20 (FSA) 13,675,000 14,327,023
5.00% 8/1/21 2,400,000 2,538,216
Minnesota State Refunding Various Purposes
5.00% 6/1/13 5,175,000 5,296,509
Puerto Rico Commonwealth Public Improvement
Series A
5.00% 7/1/34 4,500,000 4,597,695
5.50% 7/1/19 (MBIA) 1,500,000 1,723,230
Puerto Rico Commonwealth Series B
5.00% 7/1/35 1,500,000 1,537,980
Puerto Rico Government Development Bank
Senior Notes
Series B 5.00% 12/1/14 1,000,000 1,064,340
------------------------------
31,084,993
------------------------------
Transportation Revenue Bonds
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series A
5.00% 1/1/22 (AMBAC) 3,440,000 3,513,066
5.00% 1/1/22 (MBIA) 2,000,000 2,092,020
5.125% 1/1/25 (FGIC) 100,000 103,457
5.25% 1/1/16 (MBIA) 1,460,000 1,570,011
5.25% 1/1/32 (FGIC) 5,000,000 5,235,999
Minneapolis/St. Paul Metropolitan Airports
Commission Revenue Series C
5.125% 1/1/20 (FGIC) 2,000,000 2,099,560
5.25% 1/1/32 (FGIC) 8,845,000 9,255,320
5.50% 1/1/17 (FGIC) 2,500,000 2,669,725
------------------------------
26,539,158
------------------------------
Water & Sewer Revenue Bonds
&(12) Minnesota Public Facilities Authority Water
Pollution Control Revenue
5.25% 3/1/18 10,000,000 10,399,649
------------------------------
10,399,649
------------------------------
Total Municipal Bonds 666,640,295
------------------------------
Short-Term Investments
Money Market Instruments
Federated Minnesota Municipal Cash Trust 1,275,567 1,275,567
------------------------------
1,275,567
------------------------------
oVariable Rate Demand Notes
Midwest Consortium of Municipal Utilities Revenue
Series A
(LOC - U.S. Bank N.A.) 3.40% 1/1/25 1,100,000 2,000,000
Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 1,000,000 1,000,000
Minneapolis Health Care System Revenue
(Fairview Health Services) Series A
3.40% 11/15/32 (AMBAC)(SPA) 1,400,000 1,400,000
Minneapolis Revenue (Guthrie Theater Project)
Series A
(LOC - Wells Fargo Bank) 3.27% 10/1/23 1,000,000 1,000,000
Minnesota State Higher Education Facilities
Authority Revenue
(Carleton College) Series 6-D 3.30% 4/1/35 (SPA) 9,060,000 9,060,000
------------------------------
14,460,000
------------------------------
15,735,567
------------------------------
Total Investments at Market $ 682,375,862
------------------------------
Total Investments at Cost $ 649,412,078
------------------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
CIFG - CDC IXIS Financial Guaranty
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
SPA - Stand-by Purchase Agreement
§Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S.
Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the
year in which the bond is pre-refunded.
oVariable rate security. The interest rate shown is the rate as of August 31,
2006.
^Zero coupon security. The interest rate shown is the yield at the time of
purchase.
@Illiquid security. At August 31, 2006, the aggregate amount of illiquid
securities equals $3,478,718, which represented 0.55% of the combined Funds'
market value of investments. See Note #6 in "Pro Forma Notes to Financial
Statements."
&(1) Security held in a trust in connection with the Inverse Floater security
$5,250,000, 7.453%, 7/1/21.
&(2) Security held in a trust in connection with the Inverse Floater security
$1,920,000, 7.96%, 7/1/18.
&(3) Security held in a trust in connection with the Inverse Floater security
$4,585,000, 6.946%, 1/1/13.
&(4) Security held in a trust in connection with the Inverse Floater security
$2,950,000, 7.251%, 1/1/15.
&(5) Security held in a trust in connection with the Inverse Floater security
$2,000,000, 6.966%, 1/1/14.
&(6) Security held in a trust in connection with the Inverse Floater security
$2,100,000, 7.453%, 11/15/27.
&(7) Security held in a trust in connection with the Inverse Floater security
$8,375,000, 7.453%, 11/15/27.
&(8) Security held in a trust in connection with the Inverse Floater security
$3,510,000, 7.706%, 2/1/23.
&(9) Security held in a trust in connection with the Inverse Floater security
$1,605,000, 7.656%, 2/1/21.
&(10) Security held in a trust in connection with the Inverse Floater security
$3,440,000, 7.656%, 2/1/20.
&(11) Security held in a trust in connection with the Inverse Floater security
$3,645,000, 7.656%, 2/1/21.
&(12) Security held in a trust in connection with the Inverse Floater security
$5,000,000, 6.946%, 3/1/18.
&An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates. Interest
rate disclosed is in effect as of August 31, 2006. For additional information on
the Inverse Floater programs, see Note #6 in "Proforma Notes to Financial
Statements."
(A) No adjustments are shown to the unaudited pro forma combined portfolio of
investments due to the fact that upon completion of the acquisition, no
securities would need to be sold in order for the Acquiring Fund to comply with
its Prospectus and SEC and IRS guidelines and restrictions. However, the
foregoing sentence shall not restrict in any way the ability of the investment
adviser of either of the Funds from buying or selling securities in the normal
course of such Fund's business and operations.
See Pro Forma Notes to Financial Statements
Delaware Tax-Free Minnesota Fund
PRO FORMA COMBINED
Statement of Assets and Liabilities
As of August 31, 2006
(Unaudited)
Delaware Tax-Free
Minnesota Fund
Delaware Tax-Free Delaware Tax-Free Pro Forma Pro Forma
Minnesota Fund Minnesota Insured Fund Adjustments Combined
-------------------- ----------------------- ----------- ------------------
Assets
Investments, at market value $ 435,957,481 $ 246,418,381 $ - $ 682,375,862
Cash 1,882 6,280 8,162
Receivable for fund shares sold 628,451 2,913,948 3,542,399
Interest receivable 5,572,658 312,175 5,884,833
-------------------- ----------------------- ----------- ------------------
Total Assets 442,160,472 249,650,784 - 691,811,256
-------------------- ----------------------- ----------- ------------------
Liabilities
Liability for Inverse Floater programs 31,105,000 13,275,000
Accrued expenses and other liabilities 404,468 232,423 636,891
Payable for securities purchased 1,255,890 - 1,255,890
Payable for fund shares purchased 238,427 82,589 321,016
Payable for distributions to
shareholders 401,929 224,098 626,027
Interest and related expense payable
for Inverse Floater programs 556,023 241,623 797,646
Transaction costs payable - - 73,334 * 73,334
-------------------- ----------------------- ----------- ------------------
Total Liabilities 33,961,737 14,055,733 73,334 3,710,804
-------------------- ----------------------- ----------- ------------------
Net Assets $ 408,198,735 $ 235,595,051 $ (73,334) $ 688,100,452
==================== ======================= =========== ==================
Investment at Cost $ 418,029,238 $ 231,382,840 $ - $ 649,412,078
Components of Net Assets
Shares of beneficial interest
(unlimited authorization - no par) $ 389,782,636 $ 220,321,556 $ - $ 610,104,192
Distributions in excess of net
investment income (22,418) - (73,334)* (95,752)
Accumulated net realized gain on
investments 510,274 237,954 748,228
Net unrealized appreciation of
investments 17,928,243 15,035,541 32,963,784
-------------------- ----------------------- ----------- ------------------
Net Assets $ 408,198,735 $ 235,595,051 $ (73,334) $ 643,720,452
==================== ======================= =========== ==================
* Adjustment reflects the costs of
the transaction to be incurred
by the Funds.
Shares Outstanding 32,667,613 21,640,206 (2,784,308) 51,523,511
Class A Shares 30,552,280 19,552,653 (2,512,941) 47,591,992
Class B Shares 908,021 936,209 (121,757) 1,722,473
Class C Shares 1,207,312 1,151,344 (149,610) 2,209,046
Net Assets:
Class A Shares $ 381,719,633 $ 212,859,134 ($67,416) $ 594,511,351
Class B Shares 11,353,799 10,182,240 ($2,605) 21,533,434
Class C Shares 15,125,303 12,553,677 ($3,313) 27,675,667
Net asset value per share:
Class A Shares $12.49 $10.89 $12.49
Class B Shares $12.50 $10.88 $12.50
Class C Shares $12.53 $10.90 $12.53
Offering price per share:
Class A Shares $13.08 $11.40 $13.08
See Pro Forma Notes to Financial
Statements
Delaware Tax-Free Minnesota Fund
PRO FORMA COMBINED
Statement of Operations
For the Twelve Months Ended August 31, 2006
(Unaudited)
Delaware Tax-Free
Delaware Tax-Free Delaware Tax-Free Pro Forma Minnesota Fund
Minnesota Fund Minnesota Insured Fund Adjustments Pro Forma Combined
------------------------------------------------------------------------------------
Investment Income
Interest income $ 21,137,119 $ 12,150,622 $ - $ 33,287,741
------------------------------------------------------------------------------------
Expenses
Management fees 2,190,839 1,188,037 50,833(A) 3,429,709
Interest and related expense 1,051,651 449,819 1,501,470
Distribution expenses - Class A 928,423 535,795 1,464,218
Distribution expenses - Class B 122,428 111,364 233,792
Distribution expenses - Class C 144,811 122,115 266,926
Dividend disbursing and transfer
agent fees and expenses 203,190 134,876 338,066
Accounting and administration
expenses 159,334 95,043 254,377
Reports and statements to
shareholders 31,031 27,876 58,907
Legal and professional fees 61,009 47,903 (10,600)(B) 98,312
Registration fees 27,692 17,639 (16,565)(B) 28,766
Insurance fees 11,229 5,975 17,204
Trustees' fees 20,743 13,468 34,211
Custodian fees 19,475 10,740 (2,000)(B) 28,215
Pricing fees 4,009 2,633 (474)(B) 6,168
Taxes (other than taxes on income) 1,302 743 2,045
Other 13,269 8,043 (1,175)(B) 20,137
------------------------------------------------------------------------------------
4,990,435 2,772,069 20,019 7,782,523
Less expenses absorbed or waived (15,468) (28,216) (200,258)(C) (243,942)
Less expense paid indirectly (2,148) (811) 811 (B) (2,148)
------------------------------------------------------------------------------------
Total expenses 4,972,819 2,743,042 (179,428) 7,536,433
------------------------------------------------------------------------------------
Net Investment Income 16,164,300 9,407,580 179,428 25,751,308
------------------------------------------------------------------------------------
Net Realized and Unrealized Gain/
(Loss) on Investments:
Net realized gain on investments 420,471 (191,561) - 228,910
Change in unrealized appreciation/
(depreciation) of investments (5,618,279) (4,320,530) - (9,938,809)
------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments (5,197,808) (4,512,091) - (9,709,899)
Change in Net Assets Resulting from
Operations $ 10,966,492 $ 4,895,489 $ 179,428 $ 16,041,409
====================================================================================
(A) Increase to reflect higher management fee for the surviving Fund.
(B) Decrease to reflect appropriate expense levels by merging the Funds.
(C) In addition to the fee waiver/fee reimbursement currently in place for the
Delaware Tax-Free Minnesota Fund through December 31, 2007, DMC has
contractually agreed to cap (the "Expense Cap") the total expenses of the
combined Fund for at least one year after the closing date of the
Transaction in order to ensure that the combined Fund's total expenses
(excluding inverse floater program expenses and the expenses related to the
Transaction) do not exceed the Delaware Tax-Free Minnesota Insured Fund's
total expenses (excluding inverse floater program expenses and the expenses
related to the Transaction). The Expense Cap also excludes taxes, interest,
brokerage fees, certain insurance costs and non-routine expenses. For
purposes of these waivers and reimbursements, non-routine expenses may also
include such additional costs and expenses, as may be agreed upon from time
to time by the combined Fund's Board and DMC.
See Pro Forma Notes to Financial Statements
Delaware Tax-Free Minnesota Fund
Pro Forma Notes to Financial Statements
August 31, 2006 (Unaudited)
Voyageur Tax Free Funds (the "Trust") is organized as a Delaware statutory trust
and offers the Delaware Tax-Free Minnesota Fund. These financial statements and
related notes pertain to the Delaware Tax-Free Minnesota Fund (the "Fund"). The
Trust is an open-end investment company. The Fund is considered non-diversified
under the Investment Company Act of 1940, as amended. The Fund offers Class A,
Class B and Class C shares. Class A shares are sold with a front-end sales
charge of up to 4.50%. Class A share purchases of $1,000,000 or more will incur
a contingent deferred sales charge of up to 1% if redeemed during the first two
years, provided that, a financial advisor was paid commission on the purchase of
those shares. Class B shares are sold with a contingent deferred sales charge
that declines from 4.00% to zero depending upon the period of time the shares
are held. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately eight years after purchase. Class C shares are
sold with a contingent deferred sales charge of 1%, if redeemed during the first
twelve months.
The investment objective of the Fund is to seek as high a level of current
income exempt from federal income tax and from the Minnesota state personal
income tax, as is consistent with preservation of capital.
1. Basis of Pro forma Presentation
The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of Delaware Tax-Free Minnesota Insured Fund by
Delaware Tax-Free Minnesota Fund. The following notes refer to the accompanying
pro forma financial statements as if the above-mentioned acquisition of Delaware
Tax-Free Minnesota Insured Fund by Delaware Tax-Free Minnesota Fund had taken
place as of September 1, 2006.
Under the terms of the Agreement and Plan of Reorganization, the combination of
Delaware Tax-Free Minnesota Insured Fund and Delaware Tax-Free Minnesota Fund
will be accounted for by a method of accounting for tax-free mergers of
investment companies. The acquisition would be accomplished by an acquisition
(the "Transaction") of the net assets of Delaware Tax-Free Minnesota Insured
Fund in exchange for shares of the Delaware Tax-Free Minnesota Fund at net asset
value. The statement of assets and liabilities and the related statement of
operations of Delaware Tax-Free Minnesota Insured Fund and Delaware Tax-Free
Minnesota Fund have been combined as of and for the twelve months ended August
31, 2006 or Statement of Additional Information dated January 3, 2007.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements of Delaware Tax-Free Minnesota Insured Fund and
Delaware Tax-Free Minnesota Fund included in their annual report dated August
31, 2006 or Statement of Additional Information dated January 3, 2007.
2. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Open-end investment
companies are valued at their published net asset value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith under the direction of the Fund's Board of
Trustees. In determining whether market quotations are readily available or fair
valuation will be used, various factors will be taken into consideration, such
as market closures, aftermarket trading or significant events after local market
trading (e.g., government actions or pronouncements, trading volume or
volatility on markets, exchanges among dealers, or news events).
Federal Income Taxes - The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented, and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Although the Fund's tax
positions are currently being evaluated, management does not expect the adoption
of FIN 48 to have a material impact on the Fund's financial statements.
Class Accounting - Investment income and common expenses are allocated to the
classes of the Fund on the basis of "settled shares" of each class in relation
to the net assets of the Fund. Realized and unrealized gain (loss) on
investments is allocated to the various classes of the Fund on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates - The preparation of financial statements in conformity with
U.S. 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.
Interest and Related Expenses - Interest and related expenses include, but are
not limited to, interest expense, remarketing fees, liquidity fees, and
trustees' fees from the Delaware Tax-Free Minnesota Fund's participation in
inverse floater programs where the Fund has transferred its own bonds to a trust
that issues floating rate securities and inverse floating rate securities with
an aggregate principal amount equal to the principal of the transferred bonds.
The Fund receives the inverse floater securities and cash from the trust in
consideration of the conveyance of the municipal bonds to the trust. The cash
received is treated as a form of liability for accounting purposes. Interest
expense is recorded by the Fund based on the interest rate of the floating rate
securities. Remarketing fees, liquidity fees, and trustees' fees expenses are
recorded on the accrual basis.
For the year ended August 31, 2006, Delaware Tax-Free Minnesota Fund had an
average daily liability from the participation in inverse floater programs of
$44,380,000 and recorded interest expense at an average rate of 3.38%.
Other - Expenses directly attributable to the Fund are charged directly to the
Fund. Other expenses common to various funds within the Delaware
Investments(R)Family of Funds are allocated amongst the funds on the basis of
average net assets. Management fees and some other expenses are paid monthly.
Security transactions are recorded on the date the securities are purchased or
sold (trade date) for financial reporting purposes. 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.
Discounts and premiums are amortized to interest income over the lives of the
respective securities. The Fund declares dividends daily from net investment
income and pays such dividends monthly and declares and pays distributions from
net realized gain on investments, if any, annually.
The Fund receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in custodian fees on the Statement of
Operations with the corresponding expense offset shown as "expense paid
indirectly."
3. Allocation of Transaction Costs
The total costs of the Transaction between Delaware Tax-Free Minnesota Insured
Fund and Delaware Tax-Free Minnesota Fund are estimated to be $110,000. The
costs of the Transaction, including costs of soliciting proxies in connection
with the shareholder meeting, will be shared by the following parties in the
percentages indicated: 33.33% by Delaware Tax-Free Minnesota Insured Fund,
33.33% by Delaware Tax-Free Minnesota Fund and 33.34% by Delaware Management
Company ("DMC"), a series of Delaware Management Business Trust.
4. Investment Management, Administration Agreements and Other Transactions with
Affiliates
In accordance with the terms of its investment management agreement, the Fund
pays DMC, the investment manager, an annual fee which is calculated daily at the
rate of 0.55% on the first $500 million of average daily net assets of the Fund,
0.50% on the next $500 million, 0.45% on the next $1.5 billion and 0.425% on
average daily net assets in excess $2.5 billion.
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse the Fund to the extent necessary to ensure that annual
operating expenses, exclusive of 12b-1 plan expenses, taxes, interest, inverse
floater program expenses, brokerage fees, certain insurance costs and
non-routine expenses or costs, including, but not limited to, those relating to
reorganizations, litigation, certain Trustee retirement plan expenses,
conducting shareholder meetings and liquidations (collectively, "non-routine
expenses"), do not exceed 0.68% of average daily net assets of the Fund through
December 31, 2007. From January 1, 2006 through December 31, 2006, DMC had
contractually agreed to waive its fees and/or reimburse expenses in order to
prevent total operating expenses (excluding any 12b-1 fees, taxes, interest,
brokerage fees, extraordinary expenses and certain insurance costs) from
exceeding 0.68% of the average daily net assets of the Fund. Prior to December
30, 2005, DMC had contractually agreed to waive its fees to prevent such
expenses from exceeding 0.69% of the average daily net assets of the Fund. In
addition to the fee waiver/fee reimbursement currently in place for the Fund
through December 31, 2007, DMC has contractually agreed to cap (the "Expense
Cap") the total expenses of the Fund for at least one year after the closing
date of the Transaction in order to ensure that the Fund's total expenses
(excluding inverse floater program expenses and the expenses related to the
Transaction) do not exceed the Delaware Tax-Free Minnesota Insured Fund's total
expenses (excluding inverse floater program expenses and the expenses related to
the Transaction). The Expense Cap also excludes taxes, interest, brokerage fees,
certain insurance costs and non-routine expenses. For purposes of these waivers
and reimbursements, non-routine expenses may also include such additional costs
and expenses, as may be agreed upon from time to time by the Fund's Board and
DMC.
Delaware Service Company, Inc. ("DSC"), an affiliate of DMC, provides
accounting, administration, dividend disbursing and transfer agent services. The
Fund pays DSC a monthly fee computed at the annual rate of 0.04% of the Fund's
average daily net assets for accounting and administration services. The Fund
paid DSC a monthly fee based on the number of shareholder accounts for dividend
disbursing and transfer agent services.
Pursuant to a distribution agreement and distribution plan, the Fund pays
Delaware Distributors, L.P. ("DDLP"), the distributor and an affiliate of DMC,
an annual distribution and service fee not to exceed 0.25% of the average daily
net assets of the Class A shares and 1.00% of the average daily net assets of
the Class B and C shares.
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust.
These officers and trustees are paid no compensation by the Fund.
5. Line of Credit
The Fund, along with certain other funds in the Delaware Investments(R)Family of
Funds (the "Participants"), participates in a $225,000,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Fund had no amount outstanding as of August 31, 2006, or at any time during the
period.
6. Credit and Market Risks
The Fund concentrates its 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 Portfolio of Investments.
The Fund may participate in inverse floater programs where it transfers its own
bonds to a trust that issues floating rate securities and inverse floating rate
securities ("inverse floaters") with an aggregate principal amount equal to the
principal of the transferred bonds. The inverse floaters received by the Fund
are derivative tax-exempt obligations with floating or variable interest rates
that move in the opposite direction of short-term interest rates, usually at an
accelerated speed. Consequently, the market values of the inverse floaters will
generally be more volatile than other tax-exempt investments. The Fund typically
uses inverse floaters to adjust the duration of its portfolio. Duration measures
a portfolio's sensitivity to changes in interest rates. By holding inverse
floaters with a different duration than the underlying bonds that the Fund
transferred to the trust, the Fund seeks to adjust its portfolio's sensitivity
to changes in interest rates. The Fund may also invest in inverse floaters to
add additional income to the Fund or to adjust the Fund's exposure to a specific
segment of the yield curve. Such securities are denoted on the Portfolio of
Investments.
The Fund may invest in advanced refunded bonds, escrow secured bonds or defeased
bonds. Under current federal tax laws and regulations, state and local
government borrowers are permitted to refinance outstanding bonds by issuing new
bonds. The issuer refinances the outstanding debt to either reduce interest
costs or to remove or alter restrictive covenants imposed by the bonds being
refinanced. A refunding transaction where the municipal securities are being
refunded within 90 days from the issuance of the refunding issue is known as a
"current refunding". "Advance refunded bonds" are bonds in which the refunded
bond issue remains outstanding for more than 90 days following the issuance of
the refunding issue. In an advance refunding, the issuer will use the proceeds
of a new bond issue to purchase high grade interest bearing debt securities
which are then deposited in an irrevocable escrow account held by an escrow
agent to secure all future payments of principal and interest and bond premium
of the advance refunded bond. Bonds are "escrowed to maturity" when the proceeds
of the refunding issue are deposited in an escrow account for investment
sufficient to pay all of the principal and interest on the original interest
payment and maturity dates. Bonds are considered "pre-refunded" when the
refunding issue's proceeds are escrowed only until a permitted call date or
dates on the refunded issue with the refunded issue being redeemed at the time,
including any required premium. Bonds become "defeased" when the rights and
interests of the bondholders and of their lien on the pledged revenues or other
security under the terms of the bond contract and are substituted with an
alternative source of revenues (the escrow securities) sufficient to meet
payments of principal and interest to maturity or to the first call dates.
Escrowed secured bonds will often receive a rating of AAA from Moody's Investors
Service, Inc., Standard & Poor's Ratings Group, and/or Fitch Ratings due to the
strong credit quality of the escrow securities and the irrevocable nature of the
escrow deposit agreement. The Fund will purchase escrow secured bonds without
additional insurance only where the escrow is invested in securities of the U.S.
government or agencies or instrumentalities of the U.S. government.
The Fund may invest a portion of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair the Fund from disposing of them in a
timely manner and at a fair price when it is necessary or desirable to do so.
While maintaining oversight, the Board of Trustees has delegated to DMC the
day-to-day functions of determining whether individual securities are liquid for
purposes of the Fund's limitation on investments in illiquid assets. At August
31, 2006, there were no Rule 144A securities. Illiquid securities have been
identified on the Portfolio of Investments.
8. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts. Management has reviewed the Fund's existing
contracts and expects the risk of loss to be remote.
PART C
OTHER INFORMATION
Item 15. Indemnification. Article VI of the Amended and Restated By-Laws (May
19, 2005) incorporated into this filing by reference to Post-Effective
Amendment No. 40 filed October 31, 2005.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the provisions described in
response to Item 15, or otherwise, the Registrant has been advised
that in the opinion of the U.S. Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 16. Exhibits. The following exhibits are incorporated by reference to the
Registrant's previously filed registration statements on Form N-1A
indicated below, except as noted:
(1) Copies of the charter of the Registrant as now in effect;
(a) Executed Agreement and Declaration of Trust (December 17,
1998) incorporated into this filing by reference to
Post-Effective Amendment No. 33 filed August 16, 1999.
(b) Executed Certificate of Trust (December 17, 1998)
incorporated into this filing by reference to Post-Effective
Amendment No. 33 filed August 16, 1999.
(2) Copies of the existing bylaws or corresponding instrument of the
Registrant;
(a) Amended and Restated By-Laws (May 19, 2005) incorporated
into this filing by reference to Post-Effective Amendment
No. 40 filed October 31, 2005.
(3) Copies of any voting trust agreement affecting more than 5
percent of any class of equity securities of the Registrant;
Not applicable.
(4) Copies of the agreement of acquisition, reorganization, merger,
liquidation and any amendments to it;
(a) Form of Agreement and Plan of Reorganization between the
Registrant, on behalf of Delaware Tax-Free Minnesota Fund,
and Voyageur Insured Funds, on behalf of its series,
Delaware Tax-Free Minnesota Insured Fund, is filed herewith
as Exhibit A to the Prospectus/Proxy Statement.
(5) Copies of all instruments defining the rights of holders of the
securities being registered including, where applicable, the
relevant portion of the articles of incorporation or by-laws of
the Registrant;
(a) Agreement and Declaration of Trust. Articles III, IV, V and
VI of Agreement and Declaration of Trust (December 17, 1998)
incorporated into this filing by reference to Post-Effective
Amendment No. 33 filed August 16, 1999.
(b) By-Laws. Article II of the Amended and Restated By-Laws (May
19, 2005) incorporated into this filing by reference to
Post-Effective Amendment No. 40 filed October 31, 2005.
(6) Copies of all investment advisory contracts relating to the
management of the assets of the Registrant.
(a) Executed Investment Management Agreement (November 1, 1999)
between Delaware Management Company (a series of Delaware
Management Business Trust) and the Registrant incorporated
into this filing by reference to Post-Effective Amendment
No. 35 filed October 30, 2000.
(7) Copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(a) Distribution Agreements.
(i) Executed Distribution Agreement (April 19, 2001)
between Delaware Distributors, L.P. and the Registrant
incorporated into this filing by reference to
Post-Effective Amendment No. 36 filed October 31, 2001.
(ii) Form of Third Amended and Restated Financial
Intermediary Distribution Agreement between Lincoln
Financial Distributors, Inc. and Delaware Distributors,
L.P. on behalf of the Registrant incorporated into this
filing by reference to Post-Effective Amendment No. 42
filed January 3, 2007.
(iii) Dealer's Agreement (January 2001) incorporated into
this filing by reference to Post-Effective Amendment
No. 37 filed November 18, 2002.
(iv) Vision Mutual Fund Gateway(R) Agreement (November 2000)
incorporated into this filing by reference to
Post-Effective Amendment No. 37 filed November 18,
2002.
(v) Registered Investment Advisers Agreement (January 2001)
incorporated into this filing by reference to
Post-Effective Amendment No. 37 filed November 18,
2002.
(vi) Bank/Trust Agreement (August 2004) incorporated into
this filing by reference to Post-Effective Amendment
No. 39 filed December 3, 2004.
(8) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
trustees or officers of the Registrant in their capacity as such.
Furnish a reasonably detailed description of any plan that is not
set forth in a formal document;
Not applicable.
(9) Copies of all custodian agreements and depository contracts under
Section 17(f) of the Investment Company Act of 1940, as amended
(the "1940 Act") for securities and similar investments of the
Registrant, including the schedule of remuneration;
(a) Amended and Restated Mutual Fund Custody and Services
Agreement (May 2002) between Mellon Bank, N.A. and the
Registrant incorporated into this filing by reference to
Post-Effective Amendment No. 37 filed November 18, 2002.
(b) Executed Amendment (November 28, 2003) to the Amended and
Restated Mutual Fund Custody and Services Agreement
incorporated into this filing by reference to Post-Effective
Amendment No. 39 filed December 3, 2004.
(10) Copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act and any agreements with any person
relating to implementation of the plan, and copies of any plan
entered into by Registrant pursuant to Rule 18f-3 under the 1940
Act, any agreement with any person relating to implementation of
the plan, any amendment to the plan, and a copy of the portion of
the minutes of the meeting of the Registrant's trustees
describing any action taken to revoke the plan;
(a) Plans under Rule 12b-1 for Class A, B and C (April 19, 2001)
incorporated into this filing by reference to Post-Effective
Amendment No. 28 filed October 31, 2001.
(b) Plan under Rule 18f-3. Plan under Rule 18f-3 (August 31,
2006) incorporated into this filing by reference to Form
N-14 filed September 1, 2006.
(11) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and nonassessable;
(a) Opinion and Consent of Counsel (January 18, 2007) relating
to the Registrant attached as Exhibit No. EX-99.11.a.
(12) An opinion, and consent to their use, of counsel or, in lieu of
an opinion, a copy of the revenue ruling from the Internal
Revenue Service, supporting the tax matters and consequences to
shareholders discussed in the prospectus;
(a) To be filed by amendment.
(13) Copies of all material contracts of the Registrant not made in
the ordinary course of business which are to be performed in
whole or in part on or after the date of filing the registration
statement;
(a) Executed Shareholder Services Agreement (April 19, 2001)
between Delaware Service Company, Inc. and the Registrant
incorporated into this filing by reference to Post-Effective
Amendment No. 36 filed October 31, 2001.
(i) Executed Schedule B (December 1, 2006) to the
Shareholder Services Agreement incorporated into this
filing by reference to Post-Effective Amendment No. 42
filed January 3, 2007.
(ii) Executed Letter Amendment to the Shareholder Services
Agreement (August 23, 2002) incorporated into this
filing by reference to Post-Effective Amendment No. 38
filed October 31, 2003.
(b) Executed Delaware Group of Funds Fund Accounting Agreement
(August 19, 1996) between Delaware Service Company, Inc. and
the Registrant incorporated into this filing by reference to
Post-Effective Amendment No. 29 filed August 28, 1997.
(i) Executed Schedule B (May 19, 2005) to Delaware
Investments Family of Funds Fund Accounting Agreement
incorporated into this filing by reference to
Post-Effective Amendment No. 40 filed October 31, 2005.
(ii) Executed Amendment No. 31 (August 31, 2006) to Schedule
A of the Delaware Investments Family of Funds Fund
Accounting Agreement incorporated into this filing by
reference to Form N-14 filed September 1, 2006.
(c) Form of Advisory Expense Limitation Letter (December 2006)
between Delaware Management Company and the Registrant
incorporated into this filing by reference to Post-Effective
Amendment No. 42 filed January 3, 2007.
(14) Copies of any other opinions, appraisals, or rulings, and
consents to their use, relied on in preparing the registration
statement and required by Section 7 of the Securities Act of
1933, as amended (the "1933 Act" or "Securities Act");
(a) Consent of Independent Registered Public Accounting Firm
(January 2007) attached as Exhibit No. EX-99.14.a.
(15) All financial statements omitted pursuant to Item 14(a)(1);
Not applicable.
(16) Manually signed copies of any power of attorney pursuant to which
the name of any person has been signed to the registration
statement; and
(a) Powers of Attorney (November 15, 2006) incorporated into
this filing by reference to Post-Effective Amendment No. 42
filed January 3, 2007.
(17) Any additional exhibits which the Registrant may wish to file.
(a) Code of Ethics for the Delaware Investments Family of Funds
(February 2006) incorporated into this filing by reference
to Form N-14 filed September 1, 2006.
(b) Code of Ethics for Delaware Investments (Delaware Management
Business Trust, Delaware Management Company and Delaware
Distributors, L.P.) (February 2006) incorporated into this
filing by reference to Form N-14 filed September 1, 2006.
(c) Code of Ethics for Lincoln Financial Distributors, Inc.
(December 2005) incorporated into this filing by reference
to Form N-14 filed September 1, 2006.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file by Post-Effective
Amendment the opinion and consent of counsel regarding the tax
consequences of the proposed reorganization required by Item 16
(12) of Form N-14 within a reasonable time after receipt of such
opinion.
SIGNATURES
As required by the Securities Act of 1933, as amended, (the "1933 Act"),
the Registration Statement has been signed on behalf of the Registrant in the
City of Philadelphia and the Commonwealth of Pennsylvania on this 18th day of
January, 2007.
VOYAGEUR TAX FREE FUNDS
By: /s/ Patrick P. Coyne
Patrick P. Coyne
Chairman//President/Chief Executive Officer
As required by the 1933 Act, this Registration Statement has been signed by
the following persons in the capacities and on the dates indicated:
Signature Title Date
- -------------------------------- ------------------------------- ---------------
/s/ Patrick P. Coyne Chairman/President/Chief January 18, 2007
Patrick P. Coyne Executive Officer (Principal
Executive Officer) and Trustee
Thomas L. Bennett * Trustee January 18, 2007
Thomas L. Bennett
John A. Fry * Trustee January 18, 2007
John A. Fry
Anthony D. Knerr * Trustee January 18, 2007
Anthony D. Knerr
Lucinda S. Landreth * Trustee January 18, 2007
Lucinda S. Landreth
Ann R. Leven * Trustee January 18, 2007
Ann R. Leven
Thomas F. Madison * Trustee January 18, 2007
Thomas F. Madison
Janet L. Yeomans * Trustee January 18, 2007
Janet L. Yeomans
J. Richard Zecher * Trustee January 18, 2007
J. Richard Zecher
Richard Salus * Senior Vice President/Chief January 18, 2007
Richard Salus Financial Officer (Principal
Financial Officer)
*By: /s/ Patrick P. Coyne
Patrick P. Coyne
as Attorney-in-Fact for
each of the persons indicated
(Pursuant to Powers of Attorney previously filed)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
EXHIBITS
TO
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ------------- ------------------------------------------------------------------
EX-99.11.a. Opinion and Consent of Counsel (January 18, 2007) relating to the
Registrant
EX-99.14.a. Consent of Independent Registered Public Accounting Firm (January
2007)
