UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
| Investment Company Act file number: | | 811-03910 |
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| Exact name of registrant as specified in charter: | | Voyageur Tax Free Funds |
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| Address of principal executive offices: | | 2005 Market Street |
| | Philadelphia, PA 19103 |
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| Name and address of agent for service: | | David F. Connor, Esq. |
| | 2005 Market Street |
| | Philadelphia, PA 19103 |
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| Registrant’s telephone number, including area code: | | (800) 523-1918 |
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| Date of fiscal year end: | | August 31 |
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| Date of reporting period: | | August 31, 2014 |
Item 1. Reports to Stockholders
Annual report
Fixed income mutual funds
Delaware Tax-Free Minnesota Fund
Delaware Tax-Free Minnesota Intermediate Fund
Delaware Minnesota High-Yield Municipal Bond Fund
August 31, 2014
Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds’ prospectus and their summary prospectuses, which may be obtained by visiting delawareinvestments.com or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.
You can obtain shareholder reports and prospectuses online instead of in the mail.
Visit delawareinvestments.com/edelivery.
Experience Delaware Investments
Delaware Investments is committed to the pursuit of consistently superior asset management and unparalleled client service. We believe in our investment processes, which seek to deliver consistent results, and in convenient services that help add value for our clients.
If you are interested in learning more about creating an investment plan, contact your financial advisor.
You can learn more about Delaware Investments or obtain a prospectus for Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund at delawareinvestments.com.
Manage your investments online
| — | | 24-hour access to your account information |
| — | | Check your account balance and recent transactions |
| — | | Request statements or literature |
| — | | Make purchases and redemptions |
Delaware Management Holdings, Inc. and its subsidiaries (collectively known by the marketing name of Delaware Investments) are wholly owned subsidiaries of Macquarie Group Limited, a global provider of banking, financial, advisory, investment and funds management services.
Investments in Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 and its holding companies, including their subsidiaries or related companies (Macquarie Group), and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the Funds, the repayment of capital from the Funds, or any particular rate of return.
Table of contents
Unless otherwise noted, views expressed herein are current as of Aug. 31, 2014, and subject to change.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. Delaware Investments, a member of Macquarie Group, refers to Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s distributor, Delaware Distributors, L.P. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide.
© 2014 Delaware Management Holdings, Inc.
All third-party marks cited are the property of their respective owners.
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| Portfolio management review | | | |
Delaware Investments® Minnesota Municipal Bond Funds | | | September 9, 2014 | |
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| Performance preview (for the year ended August 31, 2014) | | | | | | |
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| Delaware Tax-Free Minnesota Fund (Class A shares) | | 1-year return | | | +10.03% | |
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| Barclays Municipal Bond Index (benchmark) | | 1-year return | | | +10.14% | |
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| Lipper Minnesota Municipal Debt Funds Average | | 1-year return | | | +9.84% | |
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Past performance does not guarantee future results.
For complete, annualized performance for Delaware Tax-Free Minnesota Fund, please see the table on page 6.
The performance of Class A shares excludes the applicable sales charge and reflects the reinvestment of all distributions. The Lipper Minnesota Municipal Debt Funds Average compares funds that limit assets to those securities that are exempt from taxation in Minnesota (double tax-exempt) or a city in Minnesota (triple tax-exempt). Please see page 8 for a description of the index.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
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| Delaware Tax-Free Minnesota Intermediate Fund (Class A shares) | | 1-year return | | | +7.79% | |
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| Barclays 3–15 Year Blend Municipal Bond Index (benchmark) | | 1-year return | | | +8.22% | |
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| Lipper Other States Intermediate Municipal Debt Funds Average | | 1-year return | | | +6.76% | |
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Past performance does not guarantee future results.
For complete, annualized performance for Delaware Tax-Free Minnesota Intermediate Fund, please see the table on page 9.
The performance of Class A shares excludes the applicable sales charge and reflects the reinvestment of all distributions. The Lipper Other States Intermediate Municipal Debt Funds Average compares funds that invest in municipal debt issues with dollar-weighted average maturities of 5 to 10 years and are exempt from taxation on a specified city or state basis. Please see page 11 for a description of the index.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
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| Delaware Minnesota High-Yield Municipal Bond Fund (Class A shares) | | 1-year return | | | +10.25% | |
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| Barclays Municipal Bond Index (benchmark) | | 1-year return | | | +10.14% | |
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| Lipper Minnesota Municipal Debt Funds Average | | 1-year return | | | +9.84% | |
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Past performance does not guarantee future results.
For complete, annualized performance for Delaware Minnesota High-Yield Municipal Bond Fund, please see the table on page 12.
The performance of Class A shares excludes the applicable sales charge and reflects the reinvestment of all distributions. The Lipper Minnesota Municipal Debt Funds Average compares funds that limit assets to those securities that are exempt from taxation in Minnesota (double tax-exempt) or a city in Minnesota (triple tax-exempt). Please page 15 for a description of the index.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
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Portfolio management review
Delaware Investments® Minnesota Municipal Bond Funds
Economic backdrop
The U.S. economy continued to grow slowly but relatively steadily during the Funds’ fiscal year ended Aug. 31, 2014. During the third and fourth quarters of 2013, the nation’s gross domestic product — which measures the country’s economic output — expanded by a healthy 4.5% and 3.5%, respectively. In the first quarter of 2014, however, GDP growth actually contracted by 2.1%, partly resulting from poor winter weather across much of the country. The nation’s economic circumstances subsequently improved, and the economy grew by an estimated 4.2% in the second quarter. (Source: U.S. Commerce Department.)
One sign of the strengthening economy was the continued improvement in the U.S. employment picture. The nation’s jobless rate was 6.1% at the end of the fiscal year, down from 7.2% at the start of this period, matching its lowest level in nearly six years.
As inflation remained under control and the country’s economic growth appeared solid enough to be self-sustaining, the U.S. Federal Reserve initiated its long-anticipated plan to taper its quantitative easing (QE) economic stimulus program, which had been implemented to lower long-term interest rates. Accordingly, the Fed began reducing its monthly purchases of Treasury and mortgage debt by $10 billion a month. Despite the gradual end of QE, the Fed made clear that the economy was still sufficiently vulnerable and that it would maintain its short-term target interest rate at close to zero, where the rate has been since late 2008.
Municipal bond market conditions
When the Funds’ fiscal year began, the municipal bond market was a few months into a protracted downturn. One factor behind the drop in tax-exempt bond prices was a rise in interest rates, which lasted several months in the spring of 2014,
due in part to uncertainty about the direction of the Fed’s monetary policy.
The other major challenge for municipal bond prices was the fallout from major credit problems affecting two large municipal borrowers. The first came from the city of Detroit, which filed for Chapter 9 bankruptcy protection in July 2013. The second was the worsening of fiscal conditions in Puerto Rico, whose debt is exempt from income taxes in all 50 states and is therefore widely held by U.S. mutual funds.
The deteriorating Puerto Rico situation led to significant investment outflows from Puerto Rico bonds, as many investors were concerned about a further downgrade of the commonwealth’s credit quality, making the bonds even harder to sell. Puerto Rico’s credit rating was ultimately downgraded to below-investment-grade status in February by Standard & Poor’s, with Moody’s Investors Service (Moody’s) following suit in July. As a result, Puerto Rican debt experienced considerable price declines during the fiscal year, one of the few segments of the municipal bond market to do so.
The fear of rising rates, combined with these two credit situations, triggered record outflows from the municipal bond market between the start of the fiscal year and the end of 2013. With the turmoil in the market causing a drop in municipal bond prices, nontraditional buyers of municipal debt such as hedge funds and other institutional investors saw what we considered to be a large and anomalous discrepancy between the prices of taxable and tax-exempt debt, encouraging them to slowly move back into the municipal bond market. At the beginning of the fiscal year, for example, 30-year municipal bond yields were 120% of those of comparable U.S. Treasury debt — a highly unusual situation given the tax advantages of municipal bonds (source: Thomson).
By the beginning of 2014, more individual investors began to return to the tax-exempt
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market amid more favorable conditions. Amid renewed concerns about the strength of the U.S. and global economic recovery, interest rates fell, which proved positive for bond prices. At the same time, the technical backdrop shifted to favor municipal debt, with increased demand for these securities coupled with relatively limited supply of newly issued tax-exempt debt. In this environment, municipal bonds significantly outpaced Treasury securities, bringing the ratio of their yields to a more historically normal 98% at period end (source: Bloomberg).
Especially in 2014, municipal securities with longer maturities and lower credit ratings outperformed shorter-dated, higher-rated bonds. It appeared that as investors became more optimistic about the municipal bond market, they grew more comfortable assuming higher levels of interest rate and credit risk. The yield curve notably flattened as a result, with yields on long-term bonds declining to a much greater extent than those on shorter-dated issues, indicating that investors were willing to accept an increasing amount of interest rate risk in exchange for the potential of steadily declining yields.
Bonds with lower credit ratings outperformed their higher-grade counterparts during the fiscal year. As an example, bonds rated AAA by Standard & Poor’s gained 7.75% for the 12-month reporting period, compared with 9.72%, 11.43%, and 12.36%, for the AA, A, and BBB credit-quality tiers, respectively. Below-investment-grade bonds did somewhat worse than BBB securities, however, partly reflecting the weak results from Puerto Rican debt. (Source: Thomson Reuters.)
Sticking to our strategy
We maintained a consistent management strategy for all of the Funds profiled in this report. We employ a bottom-up approach to investing: We evaluate securities one by one, working with our analysts to conduct thorough credit research and ultimately selecting securities we believe offer a
favorable risk-reward trade-off, as well as income generation potential for the Funds’ shareholders.
Based on our confidence in our research process, we continued to emphasize bonds with credit ratings of A and BBB, the lowest two credit ratings in the investment grade bond universe. In our view, these securities offer favorable value potential as we continue to use our experience and research capabilities to make what we believe are sound long-term credit choices.
The Funds entered the period with a modest amount of cash, albeit a slightly higher allocation than usual. This cash allowed us to buy bonds we found attractive, especially in the first few months of the fiscal year, when bond prices were relatively low and yields were high.
At the start of the fiscal year, the Funds had modest exposure to credit-challenged Puerto Rico bonds as a result of previously taken defensive measures. On our concerns about the region’s credit quality and the volatility in the prices of its debt, we gradually liquidated all of the Funds’ holdings in Puerto Rico–backed securities.
At the end of the fiscal year, the Funds were positioned neutrally from a duration perspective, meaning that their levels of sensitivity to changes in interest rates were in line with that of their respective benchmarks. In our view, this duration stance was prudent given that, despite continued low interest rates, many investors have been anticipating higher rates for several years now.
Within the Funds
As mentioned previously, longer-dated, lower-rated securities tended to outperform shorter-maturity, higher-quality issues during the Funds’ fiscal year, and these trends are generally reflected in the strongest- and weakest-performing holdings in each portfolio.
In Delaware Tax-Free Minnesota Fund, the strongest-performing securities in absolute terms were longer-maturity, lower-rated credits. Leading
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Portfolio management review
Delaware Investments® Minnesota Municipal Bond Funds
the way was a St. Paul Housing and Redevelopment bond issue for the Episcopal Homes project, a senior housing community. These long-dated securities had a 2048 maturity and provided a total return of 36%. Performing nearly as well were Red Wing, Minn., Senior Housing Revenue refunding bonds for the Deer Crest Project. These securities, with a 2042 maturity, added 33% during the fiscal year.
Other meaningful outperformers in Delaware Tax-Free Minnesota Fund were St. Paul Portfolio Authority solid waste disposal revenue bonds for the Gerdau Steel Mill Project. These lower-investment-grade-rated issues with a 2037 maturity produced a total return of 33%. The bonds for the Episcopal Homes and the Gerdau Steel Mill projects were also the strongest two performers in absolute terms for Delaware Minnesota High-Yield Municipal Bond Fund, and the latter was the strongest absolute performer in Delaware Tax-Free Minnesota Intermediate Fund.
In contrast, market conditions left various high-quality bonds behind, including Minnesota single-family housing bonds whose solid AA+/Aa1 credit ratings led to an incrementally negative return during the fiscal year (these bonds finished the fiscal year at -0.39%). While they lost only a small amount of value, they nevertheless had the weakest absolute returns in both Delaware Tax-Free Minnesota Fund and Delaware Minnesota High-Yield Municipal Bond Fund.
Shorter dated school district bonds also lagged the market, given their high credit quality in an environment that favored lower-rated issues. For example, Delaware Tax-Free Minnesota Fund’s position in Osseo, Minn., school district bonds produced a roughly flat return, both because of a strong underlying rating (Aa2), in addition to carrying the state’s relatively high AA+/Aa1 credit rating. In similar fashion, Delaware Minnesota High-Yield Municipal Bond Fund saw only minimally positive performance from its Hopkins,
Minn., school district bonds, which also shared the state’s AA+/Aa1 rating and shorter maturity date.
Senior housing bonds had a meaningful positive effect on the results of Delaware Tax-Free Minnesota Intermediate Fund. Its allocation to Deephaven, Minn., bonds for the St. Therese senior living project proved beneficial, as these nonrated securities generated returns of as much as 27% during the fiscal year.
Underperformers for Delaware Tax-Free Minnesota Intermediate Fund included Northern Municipal Power Agency Revenue bonds (returning 0.50%) and Minnesota Public Facilities Authority Water Pollution Control Revenue bonds (returning 0.54%).
Minnesota economic backdrop
In our view, Minnesota has a fundamentally sound economy and is not dependent on any one sector. Employment is diverse, with a mix of manufacturing, services, and trade similar to the nation. Other relevant notes:
| — | | In July 2014, nonfarm employment of 2.8 million was up 1.6% from a year earlier. |
| — | | The state’s unemployment rate of 4.5% in July 2014 was well below national levels of 6.2%. |
| — | | Personal income per capita is consistently above the national average; for the past five years the state’s per capita personal income has been 105–108% of the national average. |
| — | | Minnesota closed fiscal 2014 with $19.3 billion, or 0.9% above budget estimates. The $38 billion budget for the 2014-2015 biennium closed a $627 million shortfall. The budget increased the income tax on high-income earners to 9.85%, eliminated certain corporate tax subsidies, and raised the tobacco tax by $1.60, while reducing property tax pressures |
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| | through refunds and additional funding for aids to local governments. |
| — | | In May 2014, the governor signed into law the 2014-2015 supplemental budget to account for a $1.2 billion revenue surplus. This budget calls for $283 million in additional spending on education funding, infrastructure, and healthcare. Additionally, the governor signed a $1.2 billion infrastructure bill and a $103 million tax-relief bill including property tax reductions. (Data: bls.gov, Minnesota Management & Budget, Moody’s.) |
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| Performance summaries | | |
| Delaware Tax-Free Minnesota Fund | | August 31, 2014 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data current for the most recent month end by calling 800 523-1918 or visiting our website at delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
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| Fund and benchmark performance1, 2 | | | Average annual total returns through August 31, 2014 | |
| | | 1 year | | | 5 years | | | 10 years | | | Lifetime | |
Class A (Est. Feb. 27, 1984) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +10.03 | % | | | +5.13 | % | | | +4.48 | % | | | n/a | |
Including sales charge | | | +5.11 | % | | | +4.17 | % | | | +4.01 | % | | | n/a | |
Class B (Est. March 11, 1995) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +10.03 | % | | | +4.56 | % | | | +3.86 | % | | | n/a | |
Including sales charge | | | +6.03 | % | | | +4.31 | % | | | +3.86 | % | | | n/a | |
Class C (Est. May 4, 1994) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +9.19 | % | | | +4.34 | % | | | +3.70 | % | | | n/a | |
Including sales charge | | | +8.19 | % | | | +4.34 | % | | | +3.70 | % | | | n/a | |
Institutional Class (Est. Dec. 31, 2013) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | n/a | | | | n/a | | | | n/a | | | | +7.74% | |
Including sales charge | | | n/a | | | | n/a | | | | n/a | | | | +7.74% | |
Barclays Municipal Bond Index | | | +10.14 | % | | | +5.39 | % | | | +4.77 | % | | | n/a | |
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 7. Performance would have been lower had expense limitations not been in effect.
Class A shares are sold with a maximum front-end sales charge of 4.50%, and have an annual distribution and service fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
All remaining Class B shares were converted to Class A shares on Sept. 25, 2014. Prior to Sept. 25, 2014, Class B shares were available for purchase only through dividend reinvestment and certain permitted exchanges as was described in the prospectus. Class B shares had a contingent deferred sales charge that declined from 4.00% to zero depending on the period of time the shares were held. They were also subject to an annual distribution and service fee of 1.00% of average daily net assets. This fee was contractually limited to 0.25% of average daily net assets from Sept. 1, 2013 through Aug. 31, 2014.*
| * | The contractual waiver period is from April 1, 2013 through Dec. 29, 2014. |
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Please see Note 11 in “Notes to financial statements” for more information. Ten-year performance figures for Class B shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund and benchmark performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.
Funds that invest primarily in one state may be more susceptible to the economic, regulatory, and other factors of that state than funds that invest more broadly.
Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable.
Bond ratings are determined by a nationally recognized statistical rating organization.
2The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Management Company has agreed to reimburse certain expenses and/or waive certain fees in order to prevent total annual fund operating expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, nonroutine expenses)) from exceeding 0.65% of the Fund’s average daily net assets during the period from Sept. 1, 2013, through Aug. 31, 2014.** Please see the most recent prospectus and any applicable supplement(s) for additional information on these fee waivers and/or reimbursements.
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| Fund expense ratios | | Class A | | Class B† | | Class C | | Institutional
Class |
Total annual operating expenses | | 0.95% | | 1.70% | | 1.70% | | 0.70% |
(without fee waivers) | | | | | | | | |
Net expenses | | 0.90% | | 0.90% | | 1.65% | | 0.65% |
(including fee waivers, if any) | | | | | | | | |
Type of waiver | | Contractual | | Contractual | | Contractual | | Contractual |
**The contractual waiver period is from Dec. 28, 2012 through Dec. 29, 2014.
† See Note 11 in “Notes to financial statements.”
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Performance summaries
Delaware Tax-Free Minnesota Fund
Performance of a $10,000 investment1
Average annual total returns from Aug. 31, 2004, through Aug. 31, 2014
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| For period beginning Aug. 31, 2004, through Aug. 31, 2014 | | Starting value | | | Ending value | |
| | Barclays Municipal Bond Index | | | $10,000 | | | | $15,935 | |
| | Delaware Tax-Free Minnesota Fund — Class A shares | | | $9,550 | | | | $14,812 | |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Aug. 31, 2004, and includes the effect of a 4.50% front-end sales charge and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 7. Please note additional details on pages 6 through 8.
The chart also assumes $10,000 invested in the Barclays Municipal Bond Index as of Aug. 31, 2004. The Barclays Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
| | | | | | | | | | |
| | | Nasdaq symbols | | CUSIPs | | | | | |
Class A | | DEFFX | | | 928918101 | | | | | |
Class B | | DMOBX | | | 928928696 | | | | | |
Class C | | DMOCX | | | 928918408 | | | | | |
Institutional Class | | DMNIX | | | 928918705 | | | | | |
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| | |
| Performance summaries | | |
| Delaware Tax-Free Minnesota Intermediate Fund | | August 31, 2014 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data current for the most recent month end by calling 800 523-1918 or visiting our website at delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
| | | | | | | | | | | | | | | | |
| Fund and benchmark performance1, 2 | | | Average annual total returns through August 31, 2014 | |
| | | 1 year | | | 5 years | | | 10 years | | | Lifetime | |
Class A (Est. Oct. 27, 1985) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +7.79 | % | | | +4.22 | % | | | +4.01 | % | | | n/a | |
Including sales charge | | | +4.79 | % | | | +3.63 | % | | | +3.72 | % | | | n/a | |
Class C (Est. May 4, 1994) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +6.96 | % | | | +3.35 | % | | | +3.13 | % | | | n/a | |
Including sales charge | | | +5.96 | % | | | +3.35 | % | | | +3.13 | % | | | n/a | |
Institutional Class (Est. Dec. 31, 2013) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | n/a | | | | n/a | | | | n/a | | | | +5.85% | |
Including sales charge | | | n/a | | | | n/a | | | | n/a | | | | +5.85% | |
Barclays 3–15 Year Blend Municipal Bond Index | | | +8.22 | % | | | +4.89 | % | | | +4.61 | % | | | n/a | |
1Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 10. Performance would have been lower had expense limitations not been in effect.
Class A shares are sold with a maximum front-end sales charge of 2.75%, and have an annual distribution and service fee of 0.25% of average daily net assets. This fee has been contractually limited to 0.15% of average daily net assets from Sept. 1, 2013, through Aug. 31, 2014.*
Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Performance for Class C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
| * | The contractual waiver period is from Dec. 28, 2012 through Dec. 29, 2014. |
9
Performance summaries
Delaware Tax-Free Minnesota Intermediate Fund
The “Fund and benchmark performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.
Funds that invest primarily in one state may be more susceptible to the economic, regulatory, and other factors of that state than funds that invest more broadly.
Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable.
Bond ratings are determined by a nationally recognized statistical rating organization.
2The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Management Company has agreed to reimburse certain expenses and/or waive certain fees in order to prevent total annual fund operating expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, nonroutine expenses)) from exceeding 0.69% of the Fund’s average daily net assets during the period from Sept. 1, 2013, through Aug. 31, 2014.** Please see the most recent prospectus and any applicable supplement(s) for additional information on these fee waivers and/or reimbursements.
| | | | | | | | |
| Fund expense ratios | | Class A | | Class C | | Institutional Class | | |
Total annual operating expenses | | 0.97% | | 1.72% | | 0.72% | | |
(without fee waivers) | | | | | | | | |
Net expenses | | 0.84% | | 1.69% | | 0.69% | | |
(including fee waivers, if any) | | | | | | | | |
Type of waiver | | Contractual | | Contractual | | Contractual | | |
**The contractual waiver period is from Dec. 28, 2012 through Dec. 29, 2014.
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Performance of a $10,000 investment1
Average annual total returns from Aug. 31, 2004, through Aug. 31, 2014
| | | | | | | | | | |
| For period beginning Aug. 31, 2004, through Aug. 31, 2014 | | Starting value | | | Ending value | |
| | Barclays 3–15 Year Blend Municipal Bond Index | | | $10,000 | | | | $15,693 | |
| | Delaware Tax-Free Minnesota Intermediate Fund — Class A shares | | | $9,725 | | | | $14,401 | |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Aug. 31, 2004 and includes the effect of a 2.75% front-end sales charge and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 10. Please note additional details on pages 9 through 11.
The chart also assumes $10,000 invested in the Barclays 3–15 Year Blend Municipal Bond Index as of Aug. 31, 2004 The Barclays 3–15 Year Blend Municipal Bond Index measures the total return performance of investment grade, U.S. tax-exempt bonds with maturities from 2 to 17 years.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
| | | | | | | | | | |
| | | Nasdaq symbols | | CUSIPs | | | | | |
Class A | | DXCCX | | | 928930106 | | | | | |
Class C | | DVSCX | | | 928930205 | | | | | |
Institutional Class | | DMIIX | | | 92910U109 | | | | | |
11
| | |
| Performance summaries | | |
| Delaware Minnesota High-Yield Municipal Bond Fund | | August 31, 2014 |
The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Please obtain the performance data current for the most recent month end by calling 800 523-1918 or visiting our website at delawareinvestments.com/performance. Current performance may be lower or higher than the performance data quoted.
| | | | | | | | | | | | | | | | |
| Fund and benchmark performance1, 2 | | | Average annual total returns through August 31, 2014 | |
| | | 1 year | | | 5 years | | | 10 years | | | Lifetime | |
Class A (Est. June 4, 1996) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +10.25 | % | | | +5.94 | % | | | +4.81 | % | | | n/a | |
Including sales charge | | | +5.31 | % | | | +4.96 | % | | | +4.33 | % | | | n/a | |
Class B (Est. June 12, 1996) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +10.16 | % | | | +5.31 | % | | | +4.18 | % | | | n/a | |
Including sales charge | | | +6.16 | % | | | +5.07 | % | | | +4.18 | % | | | n/a | |
Class C (Est. June 7, 1996) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | +9.41 | % | | | +5.15 | % | | | +4.03 | % | | | n/a | |
Including sales charge | | | +8.41 | % | | | +5.15 | % | | | +4.03 | % | | | n/a | |
Institutional Class (Est. Dec. 31, 2013) | | | | | | | | | | | | | | | | |
Excluding sales charge | | | n/a | | | | n/a | | | | n/a | | | | +8.21% | |
Including sales charge | | | n/a | | | | n/a | | | | n/a | | | | +8.21% | |
Barclays Municipal Bond Index | | | +10.14 | % | | | +5.39 | % | | | +4.77 | % | | | n/a | |
1 Returns reflect the reinvestment of all distributions and are presented both with and without the applicable sales charges described below. Returns do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Expense limitations were in effect for certain classes during some or all of the periods shown in the “Fund and benchmark performance” table. Expenses for each class are listed on the “Fund expense ratios” table on page 14. Performance would have been lower had expense limitations not been in effect.
Class A shares are sold with a maximum front-end sales charge of 4.50%, and have an annual distribution and service fee of 0.25% of average daily net assets. Performance for Class A shares, excluding sales charges, assumes that no front-end sales charge applied.
All remaining Class B shares were converted to Class A shares on Sept. 25, 2014. Prior to Sept. 25, 2014, Class B shares were available for purchase only through dividend reinvestment and certain permitted exchanges as was described in the prospectus. Class B shares had a contingent deferred sales charge that declined from 4.00% to zero depending on the period of time the shares were held. They were also subject to an annual distribution and service fee of 1.00% of average daily net assets. This fee was contractually limited to 0.25% of average daily net assets from Oct. 1, 2013 through Aug. 31, 2014.*
| * | The contractual waiver period is from Oct. 1, 2013 through Dec. 29, 2014. |
12
Prior to Oct. 1, 2013, there was no waiver. Please see Note 11 in “Notes to financial statements” for more information. Ten-year performance figures for Class B shares reflect conversion to Class A shares after approximately eight years.
Class C shares are sold with a contingent deferred sales charge of 1.00% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1.00% of average daily net assets.
Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or that the investment was not redeemed.
Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts.
The “Fund and benchmark performance” table and the “Performance of a $10,000 investment” graph do not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.
Funds that invest primarily in one state may be more susceptible to the economic, regulatory, and other factors of that state than funds that invest more broadly.
High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.
Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable.
Bond ratings are determined by a nationally recognized statistical rating organization.
13
Performance summaries
Delaware Minnesota High-Yield Municipal Bond Fund
2 The Fund’s expense ratios, as described in the most recent prospectus, are disclosed in the following “Fund expense ratios” table. Delaware Management Company has agreed to reimburse certain expenses and/or waive certain fees in order to prevent total annual fund operating expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, acquired fund fees and expenses, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations (collectively, nonroutine expenses)) from exceeding 0.64% of the Fund’s average daily net assets during the period from Sept. 1, 2013, through Aug. 31, 2014.** Please see the most recent prospectus and any applicable supplement(s) for additional information on these fee waivers and/or reimbursements.
| | | | | | | | |
| Fund expense ratios | | Class A | | Class B† | | Class C | | Institutional
Class |
Total annual operating expenses | | 0.99% | | 1.74% | | 1.74% | | 0.74% |
(without fee waivers) | | | | | | | | |
Net expenses | | 0.89% | | 0.89% | | 1.64% | | 0.64% |
(including fee waivers, if any) | | | | | | | | |
Type of waiver | | Contractual | | Contractual | | Contractual | | Contractual |
**The contractual waiver period is from Dec. 28, 2012 through Dec. 29, 2014.
†See Note 11 in “Notes to financial statements.”
14
Performance of a $10,000 investment1
Average annual total returns from Aug. 31, 2004, through Aug. 31, 2014
| | | | | | | | | | |
For period beginning Aug. 31, 2004, through Aug. 31, 2014 | | | Starting value | | | | Ending value | |
| | Barclays Municipal Bond Index | | | $10,000 | | | | $15,935 | |
| | Delaware Minnesota High-Yield Municipal Bond Fund — Class A | | | $9,550 | | | | $15,281 | |
1 The “Performance of a $10,000 investment” graph assumes $10,000 invested in Class A shares of the Fund on Aug. 31, 2004, and includes the effect of a 4.50% front-end sales charge and the reinvestment of all distributions. The graph does not reflect the deduction of taxes the shareholders would pay on Fund distributions or redemptions of Fund shares. Expense limitations were in effect for some or all of the periods shown. Performance would have been lower had expense limitations not been in effect. Expenses are listed in the “Fund expense ratios” table on page 14. Please note additional details on pages 12 through 15.
The chart also assumes $10,000 invested in the Barclays Municipal Bond Index as of Aug. 31, 2004. The Barclays Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Performance of other Fund classes will vary due to different charges and expenses.
| | | | | | | | |
| | | Nasdaq symbols | | CUSIPs | | | | |
Class A | | DVMHX | | 928928316 | | | | |
Class B | | DVMYX | | 928928290 | | | | |
Class C | | DVMMX | | 928928282 | | | | |
Institutional Class | | DMHIX | | 928928175 | | | | |
15
Disclosure of Fund expenses
For the six-month period from March 1, 2014 to August 31, 2014 (Unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. These following examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from March 1, 2014 to Aug. 31, 2014.
Actual expenses
The first section of the tables shown, “Actual Fund return,” provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second section of the tables shown, “Hypothetical 5% return,” provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of each table is useful in comparing ongoing costs only, will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Funds’ expenses shown in the tables reflect fee waivers in effect. The expenses shown in each table assume reinvestment of all dividends and distributions.
16
Delaware Tax-Free Minnesota Fund
Expense analysis of an investment of $1,000
| | | | | | | | |
| | | Beginning
Account Value
3/1/14 | | Ending
Account Value
8/31/14 | | Annualized
Expense Ratio | | Expenses
Paid During Period
3/1/14 to 8/31/14* |
Actual Fund return† | | | | | | | | |
Class A | | $1,000.00 | | $1,043.50 | | 0.90% | | $4.64 |
Class B** | | 1,000.00 | | 1,043.50 | | 0.90% | | 4.64 |
Class C | | 1,000.00 | | 1,039.50 | | 1.65% | | 8.48 |
Institutional Class | | 1,000.00 | | 1,044.80 | | 0.65% | | 3.35 |
Hypothetical 5% return (5% return before expenses) | | | | |
Class A | | $1,000.00 | | $1,020.67 | | 0.90% | | $4.58 |
Class B** | | 1,000.00 | | 1,020.67 | | 0.90% | | 4.58 |
Class C | | 1,000.00 | | 1,016.89 | | 1.65% | | 8.39 |
Institutional Class | | 1,000.00 | | 1,021.93 | | 0.65% | | 3.31 |
Delaware Tax-Free Minnesota Intermediate Fund
Expense analysis of an investment of $1,000
| | | | | | | | |
| | | Beginning
Account Value
3/1/14 | | Ending
Account Value
8/31/14 | | Annualized
Expense Ratio | | Expenses
Paid During Period
3/1/14 to 8/31/14* |
Actual Fund return† | | | | | | | | |
Class A | | $1,000.00 | | $1,031.80 | | 0.84% | | $4.30 |
Class C | | 1,000.00 | | 1,028.20 | | 1.69% | | 8.64 |
Institutional Class | | 1,000.00 | | 1,033.30 | | 0.69% | | 3.54 |
Hypothetical 5% return (5% return before expenses) | | | | |
Class A | | $1,000.00 | | $1,020.97 | | 0.84% | | $4.28 |
Class C | | 1,000.00 | | 1,016.69 | | 1.69% | | 8.59 |
Institutional Class | | 1,000.00 | | 1,021.73 | | 0.69% | | 3.52 |
17
Disclosure of Fund expenses
For the six-month period from March 1, 2014 to August 31, 2014 (Unaudited)
Delaware Minnesota High-Yield Municipal Bond Fund
Expense analysis of an investment of $1,000
| | | | | | | | |
| | | Beginning
Account Value
3/1/14 | | Ending
Account Value
8/31/14 | | Annualized
Expense Ratio | | Expenses
Paid During Period
3/1/14 to 8/31/14* |
Actual Fund return† | | | | | | | | |
Class A | | $1,000.00 | | $1,045.90 | | 0.89% | | $4.59 |
Class B** | | 1,000.00 | | 1,046.80 | | 0.89% | | 4.59 |
Class C | | 1,000.00 | | 1,041.90 | | 1.64% | | 8.44 |
Institutional Class | | 1,000.00 | | 1,048.50 | | 0.64% | | 3.30 |
Hypothetical 5% return (5% return before expenses) | | | | |
Class A | | $1,000.00 | | $1,020.72 | | 0.89% | | $4.53 |
Class B** | | 1,000.00 | | 1,020.72 | | 0.89% | | 4.53 |
Class C | | 1,000.00 | | 1,016.94 | | 1.64% | | 8.34 |
Institutional Class | | 1,000.00 | | 1,021.98 | | 0.64% | | 3.26 |
| * | “Expenses Paid During Period” are equal to the relevant Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
| ** | See Note 11 in “Notes to financial statements.” |
| † | Because actual returns reflect only the most recent six-month period, the returns shown may differ significantly from fiscal year returns. |
18
Security type / sector / territory allocations
| | |
| Delaware Tax-Free Minnesota Fund | | As of August 31, 2014 (Unaudited) |
Sector designations may be different than the sector designations presented in other fund materials.
| | | | | | |
Security type / sector | | | Percentage of net assets | | | |
Municipal Bonds* | | | 99.62% | | | |
Corporate-Backed Revenue Bonds | | | 3.78% | | | |
Education Revenue Bonds | | | 10.15% | | | |
Electric Revenue Bonds | | | 5.58% | | | |
Healthcare Revenue Bonds | | | 41.04% | | | |
Housing Revenue Bonds | | | 5.37% | | | |
Lease Revenue Bonds | | | 2.35% | | | |
Local General Obligation Bonds | | | 8.30% | | | |
Pre-Refunded/Escrowed to Maturity Bonds | | | 9.79% | | | |
Special Tax Revenue Bonds | | | 2.66% | | | |
State General Obligation Bonds | | | 4.53% | | | |
Transportation Revenue Bonds | | | 3.38% | | | |
Water & Sewer Revenue Bonds | | | 2.69% | | | |
Short-Term Investments | | | 0.35% | | | |
Total Value of Securities | | | 99.97% | | | |
Receivables and Other Assets Net of Liabilities | | | 0.03% | | | |
Total Net Assets | | | 100.00% | | | |
* As of the date of this report, Delaware Tax-Free Minnesota Fund held bonds issued by or on behalf of territories and the states of the United States as follows: |
State / territory | | | (as a percentage of net assets) |
Minnesota | | | 99.57% | | | |
U.S. Virgin Islands | | | 0.40% | | | |
Total | | | 99.97% | | | |
19
Security type / sector allocations
| | |
| Delaware Tax-Free Minnesota Intermediate Fund | | As of August 31, 2014 (Unaudited) |
Sector designations may be different than the sector designations presented in other fund materials.
| | | | | | |
Security type / sector | | | Percentage of net assets | | | |
Municipal Bonds | | | 99.13% | | | |
Corporate-Backed Revenue Bonds | | | 3.26% | | | |
Education Revenue Bonds | | | 16.98% | | | |
Electric Revenue Bonds | | | 8.00% | | | |
Healthcare Revenue Bonds | | | 35.62% | | | |
Housing Revenue Bonds | | | 1.43% | | | |
Lease Revenue Bonds | | | 5.26% | | | |
Local General Obligation Bonds | | | 11.96% | | | |
Pre-Refunded/Escrowed to Maturity Bonds | | | 2.46% | | | |
Special Tax Revenue Bonds | | | 2.71% | | | |
State General Obligation Bonds | | | 4.74% | | | |
Transportation Revenue Bonds | | | 5.33% | | | |
Water & Sewer Revenue Bond | | | 1.38% | | | |
Short-Term Investments | | | 0.82% | | | |
Total Value of Securities | | | 99.95% | | | |
Receivables and Other Assets Net of Liabilities | | | 0.05% | | | |
Total Net Assets | | | 100.00% | | | |
20
Security type / sector allocations
| | |
| Delaware Minnesota High-Yield Municipal Bond Fund | | As of August 31, 2014 (Unaudited) |
Sector designations may be different than the sector designations presented in other fund materials.
| | | | | | |
Security type / sector | | | Percentage of net assets | | | |
Municipal Bonds | | | 99.88% | | | |
Corporate-Backed Revenue Bonds | | | 4.07% | | | |
Education Revenue Bonds | | | 14.61% | | | |
Electric Revenue Bonds | | | 6.41% | | | |
Healthcare Revenue Bonds | | | 43.67% | | | |
Housing Revenue Bonds | | | 8.01% | | | |
Lease Revenue Bonds | | | 3.98% | | | |
Local General Obligation Bonds | | | 8.37% | | | |
Pre-Refunded Bond | | | 0.79% | | | |
Special Tax Revenue Bonds | | | 5.46% | | | |
State General Obligation Bond | | | 0.76% | | | |
Transportation Revenue Bonds | | | 3.75% | �� | | |
Short-Term Investments | | | 0.65% | | | |
Total Value of Securities | | | 100.53% | | | |
Liabilities Net of Receivables and Other Assets | | | (0.53%) | | | |
Total Net Assets | | | 100.00% | | | |
21
Schedules of investments
| | |
| Delaware Tax-Free Minnesota Fund | | August 31, 2014 |
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds – 99.62% | | | | | | | | |
| |
Corporate-Backed Revenue Bonds – 3.78% | | | | | | | | |
Cloquet Pollution Control Revenue | | | | | | | | |
(Potlatch Project) 5.90% 10/1/26 | | | 7,000,000 | | | $ | 7,005,600 | |
Laurentian Energy Authority I Cogeneration Revenue | | | | | | | | |
Series A 5.00% 12/1/21 | | | 8,000,000 | | | | 7,851,600 | |
St. Paul Port Authority Solid Waste Disposal Revenue | | | | | | | | |
(Gerdau St. Paul Steel Mill Project) | | | | | | | | |
Series 7 4.50% 10/1/37 (AMT) | | | 6,530,000 | | | | 6,437,470 | |
| | | | | | | | |
| | | | | | | 21,294,670 | |
| | | | | | | | |
Education Revenue Bonds – 10.15% | | | | | | | | |
Duluth Housing & Redevelopment Authority Revenue | | | | | | | | |
(Public School Academy) Series A 5.875% 11/1/40 | | | 3,500,000 | | | | 3,715,005 | |
Forest Lake Charter School Revenue Fund | | | | | | | | |
(Forest Lake International Language Academy) | | | | | | | | |
Series A 5.50% 8/1/36 | | | 580,000 | | | | 628,413 | |
Series A 5.75% 8/1/44 | | | 1,190,000 | | | | 1,293,756 | |
Hugo Charter School Lease Revenue | | | | | | | | |
(Noble Academy Project) | | | | | | | | |
Series A 5.00% 7/1/34 | | | 580,000 | | | | 601,414 | |
Series A 5.00% 7/1/44 | | | 1,770,000 | | | | 1,807,135 | |
Minneapolis Student Housing Revenue | | | | | | | | |
(Riverton Community Housing Project) | | | | | | | | |
5.25% 8/1/39 | | | 470,000 | | | | 469,981 | |
5.50% 8/1/49 | | | 2,260,000 | | | | 2,281,086 | |
Minnesota Colleges & Universities Revenue Fund | | | | | | | | |
Series A 5.00% 10/1/20 | | | 1,060,000 | | | | 1,266,912 | |
Series A 5.00% 10/1/21 | | | 1,340,000 | | | | 1,619,202 | |
Series A 5.00% 10/1/28 | | | 8,900,000 | | | | 10,078,805 | |
Series A 5.00% 10/1/29 (NATL-RE) | | | 5,665,000 | | | | 5,907,065 | |
Minnesota Higher Education Facilities Authority Revenue | | | | | | | | |
(Augsburg College) Series 6-J1 5.00% 5/1/36 | | | 2,225,000 | | | | 2,236,904 | |
(Bethel University) Series 6-R 5.50% 5/1/37 | | | 2,500,000 | | | | 2,569,800 | |
(Carleton College) | | | | | | | | |
Series 6-T 5.00% 1/1/28 | | | 1,000,000 | | | | 1,111,650 | |
Series 7-D 5.00% 3/1/30 | | | 1,500,000 | | | | 1,707,015 | |
(St. Catherine University) | | | | | | | | |
Series 7-Q 5.00% 10/1/21 | | | 1,300,000 | | | | 1,488,773 | |
Series 7-Q 5.00% 10/1/23 | | | 350,000 | | | | 400,005 | |
Series 7-Q 5.00% 10/1/24 | | | 475,000 | | | | 537,030 | |
Series 7-Q 5.00% 10/1/27 | | | 200,000 | | | | 220,230 | |
(St. Scholastica College) Series 7-J 6.30% 12/1/40 | | | 1,800,000 | | | | 2,033,928 | |
(University of St. Thomas) | | | | | | | | |
Series 6-X 5.25% 4/1/39 | | | 5,000,000 | | | | 5,432,050 | |
22
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Education Revenue Bonds (continued) | | | | | | | | |
Minnesota Higher Education Facilities Authority Revenue | | | | | | | | |
(University of St. Thomas) | | | | | | | | |
Series 7-A 5.00% 10/1/39 | | | 2,000,000 | | | $ | 2,225,860 | |
Series 7-U 5.00% 4/1/23 | | | 550,000 | | | | 662,403 | |
Otsego Charter School Lease Revenue | | | | | | | | |
(Kaleidoscope Charter School) | | | | | | | | |
Series A 5.00% 9/1/34 | | | 765,000 | | | | 773,407 | |
Series A 5.00% 9/1/44 | | | 1,500,000 | | | | 1,474,815 | |
University of Minnesota | | | | | | | | |
Series A 5.25% 12/1/28 | | | 1,000,000 | | | | 1,194,390 | |
Series A 5.25% 12/1/29 | | | 1,850,000 | | | | 2,201,223 | |
Series D 5.00% 12/1/27 | | | 1,000,000 | | | | 1,174,150 | |
| | | | | | | | |
| | | | | | | 57,112,407 | |
| | | | | | | | |
Electric Revenue Bonds – 5.58% | | | | | | | | |
Chaska Electric Revenue | | | | | | | | |
(Generating Facilities) Series A 5.00% 10/1/30 | | | 3,000,000 | | | | 3,113,610 | |
Hutchinson Utilities Commission Revenue | | | | | | | | |
Series A 4.00% 12/1/21 | | | 700,000 | | | | 780,479 | |
Series A 5.00% 12/1/19 | | | 520,000 | | | | 607,942 | |
Minnesota Municipal Power Agency Electric Revenue | | | | | | | | |
5.00% 10/1/29 | | | 395,000 | | | | 460,143 | |
5.00% 10/1/30 | | | 500,000 | | | | 579,635 | |
5.00% 10/1/33 | | | 1,205,000 | | | | 1,380,099 | |
5.00% 10/1/35 | | | 3,000,000 | | | | 3,113,610 | |
Series A 5.00% 10/1/34 | | | 4,750,000 | | | | 4,770,710 | |
Series A 5.125% 10/1/29 | | | 3,000,000 | | | | 3,013,410 | |
Northern Municipal Power Agency Revenue | | | | | | | | |
Series A 5.00% 1/1/25 | | | 125,000 | | | | 147,819 | |
Series A 5.00% 1/1/26 | | | 425,000 | | | | 497,709 | |
Series A 5.00% 1/1/31 | | | 520,000 | | | | 588,214 | |
Rochester Electric Utility Revenue | | | | | | | | |
Series B 5.00% 12/1/27 | | | 295,000 | | | | 354,711 | |
Series B 5.00% 12/1/28 | | | 275,000 | | | | 328,867 | |
Series B 5.00% 12/1/31 | | | 1,365,000 | | | | 1,606,469 | |
Series B 5.00% 12/1/33 | | | 300,000 | | | | 349,350 | |
Southern Minnesota Municipal Power Agency Power Supply System Revenue | | | | | | | | |
Capital Appreciation Series A 6.70% 1/1/25 (NATL-RE) ^ | | | 5,000,000 | | | | 3,712,700 | |
Western Minnesota Municipal Power Agency Revenue | | | | | | | | |
Series A 5.00% 1/1/34 | | | 1,000,000 | | | | 1,159,600 | |
Series A 5.00% 1/1/40 | | | 1,250,000 | | | | 1,429,800 | |
23
Schedules of investments
Delaware Tax-Free Minnesota Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Electric Revenue Bonds (continued) | | | | | | | | |
Western Minnesota Municipal Power Agency Revenue | | | | | | | | |
Series A 5.00% 1/1/46 | | | 3,000,000 | | | $ | 3,426,330 | |
| | | | | | | | |
| | | | | | | 31,421,207 | |
| | | | | | | | |
Healthcare Revenue Bonds – 41.04% | | | | | | | | |
Aitkin Health Care Facilities Revenue | | | | | | | | |
(Riverwood Health Care Center) 5.60% 2/1/32 | | | 2,100,000 | | | | 2,130,261 | |
Alexandria Senior Housing Revenue | | | | | | | | |
(Knute Nelson Senior Living) | | | | | | | | |
6.00% 7/1/35 | | | 1,500,000 | | | | 1,584,990 | |
6.20% 7/1/45 | | | 2,000,000 | | | | 2,126,120 | |
Anoka Health Care Facilities Revenue | | | | | | | | |
(Homestead Anoka Project) | | | | | | | | |
Series A 7.00% 11/1/40 | | | 1,000,000 | | | | 1,061,670 | |
Series A 7.00% 11/1/46 | | | 1,220,000 | | | | 1,292,444 | |
Anoka Housing Facilities Revenue | | | | | | | | |
(Senior Homestead Anoka Project) | | | | | | | | |
Series B 6.875% 11/1/34 | | | 2,015,000 | | | | 2,144,383 | |
Apple Valley Economic Development Authority Health Care Revenue | | | | | | | | |
(Augustana Home St. Paul Project) | | | | | | | | |
Series A 6.00% 1/1/40 | | | 2,700,000 | | | | 2,728,404 | |
Breckenridge Catholic Health Initiatives | | | | | | | | |
Series A 5.00% 5/1/30 | | | 2,500,000 | | | | 2,509,300 | |
Center City Health Care Facilities Revenue | | | | | | | | |
(Hazelden Betty Ford Foundation Project) | | | | | | | | |
5.00% 11/1/26 | | | 500,000 | | | | 591,335 | |
5.00% 11/1/44 | | | 500,000 | | | | 550,650 | |
Deephaven Housing & Healthcare Revenue | | | | | | | | |
(St. Therese Senior Living Project) | | | | | | | | |
Series A 5.00% 4/1/38 | | | 730,000 | | | | 723,970 | |
Series A 5.00% 4/1/40 | | | 705,000 | | | | 695,948 | |
Series A 5.00% 4/1/48 | | | 315,000 | | | | 309,169 | |
Duluth Economic Development Authority | | | | | | | | |
(St. Luke’s Hospital Authority Obligation Group) | | | | | | | | |
5.75% 6/15/32 | | | 1,850,000 | | | | 2,009,969 | |
6.00% 6/15/39 | | | 3,570,000 | | | | 3,889,122 | |
Fergus Falls Health Care Facilities Revenue | | | | | | | | |
(Lake Region Health Care) | | | | | | | | |
5.15% 8/1/35 | | | 1,250,000 | | | | 1,282,463 | |
5.40% 8/1/40 | | | 1,000,000 | | | | 1,031,120 | |
24
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
Glencoe Health Care Facilities Revenue | | | | | | | | |
(Glencoe Regional Health Services Project) | | | | | | | | |
4.00% 4/1/24 | | | 500,000 | | | $ | 524,175 | |
4.00% 4/1/25 | | | 660,000 | | | | 690,109 | |
4.00% 4/1/31 | | | 60,000 | | | | 61,259 | |
Hayward Health Care Facilities Revenue | | | | | | | | |
(American Baptist Homes Midwest Obligated Group) | | | | | | | | |
5.375% 8/1/34 | | | 660,000 | | | | 667,432 | |
5.75% 2/1/44 | | | 500,000 | | | | 506,955 | |
Maple Grove Health Care System Revenue | | | | | | | | |
(Maple Grove Hospital) | | | | | | | | |
5.25% 5/1/28 | | | 4,500,000 | | | | 4,680,315 | |
5.25% 5/1/37 | | | 2,950,000 | | | | 3,037,113 | |
Minneapolis Health Care System Revenue | | | | | | | | |
(Fairview Health Services) | | | | | | | | |
Series A 6.375% 11/15/23 | | | 180,000 | | | | 211,739 | |
Series A 6.625% 11/15/28 | | | 3,000,000 | | | | 3,568,140 | |
Series B 6.50% 11/15/38 (ASSURED GTY) | | | 1,140,000 | | | | 1,348,244 | |
Series D 5.00% 11/15/30 (AMBAC) | | | 2,500,000 | | | | 2,540,100 | |
Series D 5.00% 11/15/34 (AMBAC) | | | 4,750,000 | | | | 4,817,687 | |
(Jones-Harrison Residence Project) 5.60% 10/1/30 | | | 1,050,000 | | | | 1,050,199 | |
Minneapolis National Marrow Donor Program Revenue | | | | | | | | |
4.875% 8/1/25 | | | 6,430,000 | | | | 6,694,980 | |
Minneapolis – St. Paul Housing & Redevelopment Authority Health Care Revenue | | | | | | | | |
(Children’s Hospital) | | | | | | | | |
Series A 5.00% 8/15/30 | | | 2,750,000 | | | | 2,800,105 | |
Series A 5.25% 8/15/35 | | | 2,085,000 | | | | 2,343,540 | |
Minnesota Agricultural & Economic Development Board Revenue | | | | | | | | |
(Benedictine Health Systems) 5.75% 2/1/29 | | | 1,895,000 | | | | 1,895,512 | |
(Essentia Remarketing) | | | | | | | | |
Series C-1 5.00% 2/15/30 (ASSURED GTY) | | | 5,725,000 | | | | 6,279,581 | |
Series C-1 5.25% 2/15/23 (ASSURED GTY) | | | 5,000,000 | | | | 5,705,000 | |
Series C-1 5.50% 2/15/25 (ASSURED GTY) | | | 5,120,000 | | | | 5,874,842 | |
Un-Refunded Balance | | | | | | | | |
Series A 5.75% 11/15/26 (NATL-RE) | | | 180,000 | | | | 180,317 | |
Series A 6.375% 11/15/29 | | | 15,000 | | | | 15,067 | |
Northfield Hospital & Skilled Nursing Revenue | | | | | | | | |
5.375% 11/1/26 | | | 3,785,000 | | | | 3,901,427 | |
25
Schedules of investments
Delaware Tax-Free Minnesota Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
Red Wing Senior Housing | | | | | | | | |
(Deer Crest Project) | | | | | | | | |
Series A 5.00% 11/1/27 | | | 430,000 | | | $ | 453,998 | |
Series A 5.00% 11/1/32 | | | 330,000 | | | | 342,741 | |
Series A 5.00% 11/1/42 | | | 1,250,000 | | | | 1,279,387 | |
Rochester Health Care & Housing Revenue | | | | | | | | |
(Samaritan Bethany) Series A 7.375% 12/1/41 | | | 5,220,000 | | | | 5,851,463 | |
(The Homestead at Rochester Project) Series A | | | | | | | | |
6.875% 12/1/48 | | | 2,980,000 | | | | 3,305,774 | |
Rochester Health Care Facilities Revenue | | | | | | | | |
(Mayo Clinic) | | | | | | | | |
4.00% 11/15/41 | | | 4,515,000 | | | | 4,683,229 | |
Series A 4.00% 11/15/30 • | | | 750,000 | | | | 843,300 | |
Series D Remarketing 5.00% 11/15/38 | | | 6,405,000 | | | | 7,306,248 | |
(Olmsted Medical Center Project) | | | | | | | | |
5.00% 7/1/24 | | | 295,000 | | | | 350,324 | |
5.00% 7/1/33 | | | 650,000 | | | | 727,740 | |
5.875% 7/1/30 | | | 1,850,000 | | | | 2,086,893 | |
Sartell Health Care Facilities Revenue | | | | | | | | |
(Country Manor Campus Project) | | | | | | | | |
Series A 5.25% 9/1/27 | | | 1,280,000 | | | | 1,340,429 | |
Series A 5.30% 9/1/37 | | | 1,200,000 | | | | 1,223,052 | |
Series A 6.375% 9/1/42 | | | 2,435,000 | | | | 2,526,337 | |
Sauk Rapids Health Care Housing Facilities Revenue | | | | | | | | |
(Good Shepherd Lutheran Home) 5.125% 1/1/39 | | | 1,350,000 | | | | 1,350,365 | |
Shakopee Health Care Facilities Revenue | | | | | | | | |
(St. Francis Regional Medical Center) | | | | | | | | |
4.00% 9/1/31 | | | 915,000 | | | | 939,321 | |
5.00% 9/1/24 | | | 575,000 | | | | 691,949 | |
5.00% 9/1/25 | | | 750,000 | | | | 893,107 | |
5.00% 9/1/26 | | | 575,000 | | | | 679,035 | |
5.00% 9/1/27 | | | 405,000 | | | | 474,948 | |
5.00% 9/1/28 | | | 425,000 | | | | 492,027 | |
5.00% 9/1/29 | | | 425,000 | | | | 490,059 | |
5.00% 9/1/34 | | | 730,000 | | | | 819,797 | |
Sherburne County Health Care Facilities Revenue | | | | | | | | |
(Guardian Angels Health Services) 5.55% 10/1/36 | | | 1,500,000 | | | | 1,501,200 | |
St. Cloud Health Care Revenue | | | | | | | | |
(Centracare Health System Project) | | | | | | | | |
5.375% 5/1/31 (ASSURED GTY) | | | 1,000,000 | | | | 1,107,610 | |
5.50% 5/1/39 (ASSURED GTY) | | | 6,000,000 | | | | 6,603,780 | |
Series A 5.00% 5/1/25 | | | 1,035,000 | | | | 1,061,506 | |
26
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
St. Cloud Health Care Revenue | | | | | | | | |
(Centracare Health System Project) | | | | | | | | |
Series A 5.125% 5/1/30 | | | 9,350,000 | | | $ | 10,500,705 | |
St. Louis Park Health Care Facilities Revenue | | | | | | | | |
(Park Nicollet Health Services) | | | | | | | | |
5.75% 7/1/39 | | | 16,975,000 | | | | 18,780,121 | |
Series C 5.50% 7/1/23 | | | 3,000,000 | | | | 3,325,680 | |
Series C 5.625% 7/1/26 | | | 1,925,000 | | | | 2,120,465 | |
Series C 5.75% 7/1/30 | | | 5,035,000 | | | | 5,519,921 | |
St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue | | | | | | | | |
(Allina Health System) | | | | | | | | |
Series A 5.00% 11/15/18 (NATL-RE) | | | 5,720,000 | | | | 6,457,651 | |
Series A-1 5.25% 11/15/29 | | | 5,605,000 | | | | 6,436,278 | |
(Health Partners Obligation Group Project) 5.25% 5/15/36 | | | 7,900,000 | | | | 8,181,003 | |
St. Paul Housing & Redevelopment Authority Hospital Revenue | | | | | | | | |
(Health East Project) | | | | | | | | |
6.00% 11/15/30 | | | 4,000,000 | | | | 4,196,520 | |
6.00% 11/15/35 | | | 10,340,000 | | | | 10,826,394 | |
St. Paul Housing & Redevelopment Authority Housing & Health Care Facilities Revenue | | | | | | | | |
(Senior Carondelet Village Project) | | | | | | | | |
Series A 6.00% 8/1/42 | | | 3,075,000 | | | | 3,253,781 | |
(Senior Episcopal Homes Project) 5.125% 5/1/48 | | | 3,100,000 | | | | 3,124,955 | |
St. Paul Housing & Redevelopment Authority Multifamily Housing Revenue | | | | | | | | |
(Marian Center Project) | | | | | | | | |
Series A 5.30% 11/1/30 | | | 500,000 | | | | 501,660 | |
Series A 5.375% 5/1/43 | | | 500,000 | | | | 500,865 | |
Stillwater Health Care Revenue | | | | | | | | |
(Health System Obligation Group) 5.00% 6/1/35 | | | 1,000,000 | | | | 1,008,280 | |
Washington County Housing & Redevelopment Authority Healthcare & Housing Revenue | | | | | | | | |
(Birchwood & Woodbury Projects) | | | | | | | | |
Series A 5.625% 6/1/37 | | | 1,500,000 | | | | 1,511,730 | |
Wayzata Senior Housing Revenue | | | | | | | | |
(Folkestone Senior Living Community) | | | | | | | | |
Series A 5.50% 11/1/32 | | | 1,050,000 | | | | 1,136,719 | |
Series A 5.75% 11/1/39 | | | 2,365,000 | | | | 2,564,677 | |
Series A 6.00% 5/1/47 | | | 3,685,000 | | | | 4,031,869 | |
27
Schedules of investments
Delaware Tax-Free Minnesota Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
Winona Health Care Facilities Revenue | | | | | | | | |
(Winona Health Obligation) | | | | | | | | |
4.50% 7/1/25 | | | 850,000 | | | $ | 892,296 | |
4.65% 7/1/26 | | | 540,000 | | | | 566,897 | |
| | | | | | | | |
| | | | | | | 230,919,242 | |
| | | | | | | | |
Housing Revenue Bonds – 5.37% | | | | | | | | |
Minneapolis Multifamily Housing Revenue | | | | | | | | |
(Grant Street Apartments Project) | | | | | | | | |
Series A 7.25% 11/1/29 | | | 690,000 | | | | 691,139 | |
(Seward Towers Project) 5.00% 5/20/36 (GNMA) | | | 7,815,000 | | | | 7,918,705 | |
(Trinity Apartments ) Series A 6.75% 5/1/21 (HUD) | | | 1,120,000 | | | | 1,122,005 | |
Minnesota Housing Finance Agency | | | | | | | | |
(Residential Housing) | | | | | | | | |
Series D 4.80% 7/1/38 (AMT) — | | | 1,935,000 | | | | 1,954,892 | |
Series I 4.85% 7/1/38 (AMT) | | | 1,455,000 | | | | 1,470,976 | |
Series I 5.15% 7/1/38 (AMT) | | | 4,175,000 | | | | 4,225,351 | |
Series L 5.10% 7/1/38 (AMT) | | | 7,430,000 | | | | 7,712,934 | |
Series M 4.875% 7/1/37 (AMT) | | | 2,255,000 | | | | 2,279,760 | |
Minnesota Housing Finance Agency Homeownership Finance | | | | | | | | |
(Non-Agency Mortgage-Backed Securities Program) | | | | | | | | |
Series D 4.70% 1/1/31 (GNMA) (FNMA) (FHLMC) | | | 2,215,000 | | | | 2,415,413 | |
Willmar Housing & Redevelopment Authority Multifamily Housing Revenue | | | | | | | | |
(Highland Apartments) 5.85% 6/1/19 (HUD) | | | 450,000 | | | | 450,698 | |
| | | | | | | | |
| | | | | | | 30,241,873 | |
| | | | | | | | |
Lease Revenue Bonds – 2.35% | | | | | | | | |
Minnesota General Fund Revenue Appropriations | | | | | | | | |
Series A 5.00% 6/1/38 | | | 1,250,000 | | | | 1,432,387 | |
Series A 5.00% 6/1/43 | | | 3,835,000 | | | | 4,341,105 | |
Series B 5.00% 3/1/28 | | | 2,500,000 | | | | 2,931,525 | |
University of Minnesota Special Purpose Revenue | | | | | | | | |
(State Supported Biomed Science Research) | | | | | | | | |
5.00% 8/1/35 | | | 3,960,000 | | | | 4,524,379 | |
| | | | | | | | |
| | | | | | | 13,229,396 | |
| | | | | | | | |
Local General Obligation Bonds – 8.30% | | | | | | | | |
Anoka County Capital Improvement | | | | | | | | |
Series A 5.00% 2/1/22 | | | 500,000 | | | | 576,205 | |
Brainerd Independent School District No. 181 | | | | | | | | |
(School Building) Series A 4.00% 2/1/23 | | | 5,990,000 | | | | 6,650,098 | |
Farmington Independent School District No. 192 | | | | | | | | |
(School Building) Series B 5.00% 2/1/27 (AGM) | | | 10,705,000 | | | | 10,901,330 | |
28
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Local General Obligation Bonds (continued) | | | | | | | | |
Metropolitan Council Waste Water Treatment | | | | | | | | |
Series B 5.00% 12/1/21 | | | 1,200,000 | | | $ | 1,213,980 | |
Series C 5.00% 3/1/28 | | | 5,000,000 | | | | 5,345,950 | |
New Brighton Tax Increment | | | | | | | | |
Series A 5.00% 2/1/27 (NATL-RE) | | | 1,000,000 | | | | 1,088,320 | |
Osseo Independent School District No. 279 | | | | | | | | |
(School Building) Series A 5.00% 2/1/17 | | | 1,030,000 | | | | 1,142,847 | |
Sartell - St. Stephen Independent School District No. 748 Capital Appreciation | | | | | | | | |
Series B 6.05% 2/1/15 (NATL-RE) ^ | | | 1,075,000 | | | | 1,072,710 | |
Series B 6.10% 2/1/16 (NATL-RE) ^ | | | 1,750,000 | | | | 1,732,237 | |
South Washington County Independent School District No. 833 (School Building) | | | | | | | | |
Series A 4.75% 2/1/25 | | | 2,500,000 | | | | 2,789,725 | |
Series A 4.75% 2/1/26 | | | 3,600,000 | | | | 4,003,128 | |
Series A 4.75% 2/1/27 | | | 2,300,000 | | | | 2,531,081 | |
St. Paul Independent School District No. 625 | | | | | | | | |
(School Building) Series B 5.00% 2/1/23 | | | 1,660,000 | | | | 2,036,737 | |
Staples United Hospital District Health Care Facilities | | | | | | | | |
(Todd Morrison ETC Hospital-Lakewood) | | | | | | | | |
5.00% 12/1/21 | | | 2,000,000 | | | | 2,022,240 | |
5.125% 12/1/24 | | | 1,000,000 | | | | 1,010,550 | |
Willmar City | | | | | | | | |
(Rice Memorial Hospital Project) Series A 5.00% 2/1/25 | | | 2,210,000 | | | | 2,561,456 | |
| | | | | | | | |
| | | | | | | 46,678,594 | |
| | | | | | | | |
Pre-Refunded / Escrowed to Maturity Bonds – 9.79% | | | | | | | | |
Dakota-Washington Counties Housing & Redevelopment Authority Single Family Residential Mortgage Revenue | | | | | | | | |
8.15% 9/1/16 (NATL-RE) (IBC) (GNMA) (AMT) | | | 405,000 | | | | 461,206 | |
(Anoka County) 8.45% 9/1/19 (GNMA) (AMT) | | | 9,000,000 | | | | 11,772,450 | |
(Bloomington Single Family Residential Mortgage) | | | | | | | | |
Series B 8.375% 9/1/21 (GNMA) (FHA) (VA) (AMT) | | | 14,115,000 | | | | 19,480,817 | |
Prior Lake-Savage Independent School District No. 719 | | | | | | | | |
(School Building) Series B 5.00% 2/1/19-15 (AGM) § | | | 3,145,000 | | | | 3,209,944 | |
Southern Minnesota Municipal Power Agency Power Supply System Revenue | | | | | | | | |
Series A 5.75% 1/1/18-17 § | | | 2,815,000 | | | | 2,910,935 | |
Series A 5.75% 1/1/18-17 (AMBAC)(TCRS) § | | | 490,000 | | | | 506,699 | |
Series A 5.75% 1/1/18-17 (NATL-RE) (IBC) § | | | 745,000 | | | | 770,390 | |
University of Minnesota | | | | | | | | |
Series A 5.50% 7/1/21 | | | 12,500,000 | | | | 15,213,500 | |
29
Schedules of investments
Delaware Tax-Free Minnesota Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Pre-Refunded / Escrowed to Maturity Bonds (continued) | | | | | | | | |
Western Minnesota Municipal Power Agency Revenue | | | | | | | | |
Series A 9.75% 1/1/16 (NATL-RE) | | | 715,000 | | | $ | 777,462 | |
| | | | | | | | |
| | | | | | | 55,103,403 | |
| | | | | | | | |
Special Tax Revenue Bonds – 2.66% | | | | | | | | |
Hennepin County Sales Tax Revenue | | | | | | | | |
(Second Lien-Ballpark Project) | | | | | | | | |
Series B 5.00% 12/15/19 | | | 2,100,000 | | | | 2,382,828 | |
Series B 5.00% 12/15/20 | | | 1,000,000 | | | | 1,133,670 | |
Series B 5.00% 12/15/24 | | | 1,150,000 | | | | 1,299,707 | |
Minneapolis Development Revenue | | | | | | | | |
(Limited Tax Supported Common Bond Fund) | | | | | | | | |
Series 2-A 6.00% 12/1/40 | | | 3,000,000 | | | | 3,431,490 | |
Minneapolis Tax Increment Revenue | | | | | | | | |
(St. Anthony Falls Project) 5.75% 2/1/27 | | | 1,000,000 | | | | 1,000,570 | |
Minnesota 911 Revenue | | | | | | | | |
(Public Safety Radio Communication System Project) | | | | | | | | |
5.00% 6/1/24 | | | 2,925,000 | | | | 3,389,139 | |
5.00% 6/1/25 | | | 2,000,000 | | | | 2,310,400 | |
| | | | | | | | |
| | | | | | | 14,947,804 | |
| | | | | | | | |
State General Obligation Bonds – 4.53% | | | | | | | | |
Minnesota | | | | | | | | |
Series A 5.00% 10/1/24 | | | 4,625,000 | | | | 5,580,155 | |
Series A 5.00% 10/1/27 | | | 5,280,000 | | | | 6,305,429 | |
(State Trunk Highway) Series B 5.00% 10/1/29 | | | 5,000,000 | | | | 5,901,600 | |
(Various Purposes) | | | | | | | | |
Series A 4.00% 8/1/27 | | | 1,000,000 | | | | 1,106,240 | |
Series F 5.00% 10/1/22 | | | 3,500,000 | | | | 4,326,910 | |
Virgin Islands Public Finance Authority | | | | | | | | |
(Matching Fund Senior Lien) 5.00% 10/1/29 (AGM) | | | 2,000,000 | | | | 2,274,080 | |
| | | | | | | | |
| | | | | | | 25,494,414 | |
| | | | | | | | |
Transportation Revenue Bonds – 3.38% | | | | | | | | |
Minneapolis-St. Paul Metropolitan Airports Commission Revenue | | | | | | | | |
Senior Series A 5.00% 1/1/28 | | | 1,250,000 | | | | 1,437,250 | |
Subordinate | | | | | | | | |
Series B 5.00% 1/1/26 | | | 575,000 | | | | 661,457 | |
Series B 5.00% 1/1/27 | | | 1,160,000 | | | | 1,323,653 | |
Series B 5.00% 1/1/28 | | | 2,750,000 | | | | 3,112,670 | |
Series B 5.00% 1/1/29 | | | 120,000 | | | | 135,320 | |
Series B 5.00% 1/1/30 | | | 1,675,000 | | | | 1,879,484 | |
Series B 5.00% 1/1/31 | | | 1,750,000 | | | | 1,953,910 | |
30
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Transportation Revenue Bonds (continued) | | | | | | | | |
St. Paul Housing & Redevelopment Authority Parking Revenue | | | | | | | | |
(Parking Facilities Project) | | | | | | | | |
Series A 5.00% 8/1/30 | | | 1,870,000 | | | $ | 2,107,527 | |
Series A 5.00% 8/1/35 | | | 1,145,000 | | | | 1,205,559 | |
(Smith Avenue Project) Series B 5.00% 8/1/35 | | | 1,500,000 | | | | 1,680,825 | |
St. Paul Port Authority Revenue | | | | | | | | |
(Amherst H Wilder Foundation) Series 3 5.00% 12/1/36 | | | 3,200,000 | | | | 3,492,768 | |
| | | | | | | | |
| | | | | | | 18,990,423 | |
| | | | | | | | |
Water & Sewer Revenue Bonds – 2.69% | | | | | | | | |
Metropolitan Council Waste Water Treatment Revenue | | | | | | | | |
Series B 4.00% 9/1/27 | | | 2,400,000 | | | | 2,671,704 | |
Series B 5.00% 9/1/22 | | | 2,125,000 | | | | 2,640,291 | |
Series B 5.00% 9/1/25 | | | 3,245,000 | | | | 3,939,105 | |
Series E 5.00% 9/1/22 | | | 2,745,000 | | | | 3,410,635 | |
Series E 5.00% 9/1/23 | | | 2,000,000 | | | | 2,458,680 | |
| | | | | | | | |
| | | | | | | 15,120,415 | |
| | | | | | | | |
Total Municipal Bonds (cost $521,648,193) | | | | | | | 560,553,848 | |
| | | | | | | | |
| | |
| | | Number of
shares | | | | |
| |
Short-Term Investments – 0.35% | | | | | | | | |
| |
Money Market Instrument – 0.11% | | | | | | | | |
Minnesota Municipal Cash Trust | | | 604,055 | | | | 604,055 | |
| | | | | | | | |
| | | | | | | 604,055 | |
| | | | | | | | |
| | |
| | | Principal amount° | | | | |
Variable Rate Demand Note – 0.24%¤ | | | | | | | | |
Minneapolis-St. Paul Housing & Redevelopment Authority Health Care Revenue | | | | | | | | |
(Allina Health System) Series B-1 0.01% 11/15/35 | | | | | | | | |
(LOC- JPMorgan Chase Bank, N.A.) | | | 1,345,000 | | | | 1,345,000 | |
| | | | | | | | |
| | | | | | | 1,345,000 | |
| | | | | | | | |
Total Short-Term Investments (cost $1,949,055) | | | | | | | 1,949,055 | |
| | | | | | | | |
Total Value of Securities – 99.97%
(cost $523,597,248) | | | | | | $ | 562,502,903 | |
| | | | | | | | |
| ¤ | Tax-exempt obligations that contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the unpaid principal balance plus accrued interest upon a short notice period (generally up to 30 days) prior to specified dates either from the issuer or by drawing on a bank letter of credit, a guarantee, or insurance issued with respect to such instrument. The rate shown is the rate as of Aug. 31, 2014. |
31
Schedules of investments
Delaware Tax-Free Minnesota Fund
| ° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
| — | Variable rate security. The rate shown is the rate as of Aug. 31, 2014. Interest rates reset periodically. |
| ^ | Zero coupon security. The rate shown is the yield at the time of purchase. |
| § | Pre-refunded bonds. Municipal bonds 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. See Note 8 in “Notes to financial statements.” |
Summary of abbreviations:
AGM – Insured by Assured Guaranty Municipal Corporation
AMBAC – Insured by AMBAC Assurance Corporation
AMT – Subject to Alternative Minimum Tax
ASSURED GTY – Insured by Assured Guaranty Corporation
FHA – Federal Housing Administration
FHLMC – Federal Home Loan Mortgage Corporation Collateral
FNMA – Federal National Mortgage Association Collateral
GNMA – Government National Mortgage Association Collateral
HUD – Housing and Urban Development Section 8
IBC – Insured Bond Certificate
LOC – Letter of Credit
NATL-RE – Insured by National Public Finance Guarantee Corporation
TCRS – Temporary Custodial Receipts
VA – Veterans Administration Collateral
See accompanying notes, which are an integral part of the financial statements.
32
| | |
Schedules of investments Delaware Tax-Free Minnesota Intermediate Fund | | August 31, 2014 |
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds – 99.13% | | | | | | | | |
| |
Corporate-Backed Revenue Bonds – 3.26% | | | | | | | | |
Cloquet Pollution Control Revenue | | | | | | | | |
(Potlatch Project) 5.90% 10/1/26 | | | 1,695,000 | | | $ | 1,696,356 | |
Laurentian Energy Authority Cogeneration Revenue | | | | | | | | |
Series A 5.00% 12/1/21 | | | 750,000 | | | | 736,087 | |
St. Paul Port Authority Solid Waste Disposal Revenue | | | | | | | | |
(Gerdau St. Paul Steel Mill Project) Series 7 | | | | | | | | |
4.50% 10/1/37 (AMT) | | | 1,025,000 | | | | 1,010,476 | |
| | | | | | | | |
| | | | | | | 3,442,919 | |
| | | | | | | | |
Education Revenue Bonds – 16.98% | | | | | | | | |
Forest Lake Charter School Revenue Fund | | | | | | | | |
(Forest Lake International Language Academy) Series A | | | | | | | | |
5.50% 8/1/36 | | | 420,000 | | | | 455,057 | |
Hugo Charter School Lease Revenue | | | | | | | | |
(Noble Academy Project) Series A 5.00% 7/1/29 | | | 530,000 | | | | 561,222 | |
Minneapolis Student Housing Revenue | | | | | | | | |
(Riverton Community Housing Project) 5.25% 8/1/39 | | | 525,000 | | | | 524,979 | |
Minnesota Colleges & Universities Revenue Fund | | | | | | | | |
Series A 4.00% 10/1/18 | | | 1,000,000 | | | | 1,122,660 | |
Series A 5.00% 10/1/28 | | | 1,000,000 | | | | 1,132,450 | |
Minnesota Higher Education Facilities Authority Revenue | | | | | | | | |
(Carleton College) Series 6-T 4.75% 1/1/23 | | | 1,000,000 | | | | 1,114,960 | |
(Hamline University) Series 7-E 5.00% 10/1/29 | | | 250,000 | | | | 272,185 | |
(Macalester College) Series 6-P 4.25% 3/1/27 | | | 750,000 | | | | 779,617 | |
(St. Catherine University) Series 7-Q 5.00% 10/1/22 | | | 425,000 | | | | 489,591 | |
(St. Johns University) | | | | | | | | |
Series 6-U 4.40% 10/1/21 | | | 325,000 | | | | 361,592 | |
Series 6-U 4.50% 10/1/23 | | | 265,000 | | | | 295,191 | |
(St. Scholastica College) Series H 5.125% 12/1/30 | | | 1,000,000 | | | | 1,085,590 | |
(University of St. Thomas) | | | | | | | | |
Series 5-Y 5.25% 10/1/19 | | | 1,590,000 | | | | 1,597,187 | |
Series 6-X 5.00% 4/1/24 | | | 1,000,000 | | | | 1,101,380 | |
Series 7-U 4.00% 4/1/26 | | | 1,400,000 | | | | 1,529,710 | |
Otsego Charter School Lease Revenue | | | | | | | | |
(Kaleidoscope Charter School) Series A 4.15% 9/1/24 | | | 600,000 | | | | 601,464 | |
University of Minnesota | | | | | | | | |
Series A 5.00% 12/1/23 | | | 1,000,000 | | | | 1,202,800 | |
Series A 5.25% 12/1/28 | | | 750,000 | | | | 895,793 | |
Series D 5.00% 12/1/26 | | | 1,000,000 | | | | 1,179,440 | |
University of Minnesota Special Purpose Revenue | | | | | | | | |
(State Supported Stadium Debt) 5.00% 8/1/18 | | | 1,500,000 | | | | 1,630,620 | |
| | | | | | | | |
| | | | | | | 17,933,488 | |
| | | | | | | | |
33
Schedules of investments
Delaware Tax-Free Minnesota Intermediate Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Electric Revenue Bonds – 8.00% | | | | | | | | |
Central Minnesota Municipal Power Agency | | | | | | | | |
(Brookings Twin Cities Transmission Project) | | | | | | | | |
Series E 5.00% 1/1/21 | | | 1,095,000 | | | $ | 1,270,879 | |
Series E 5.00% 1/1/23 | | | 1,000,000 | | | | 1,158,290 | |
Chaska Electric Revenue | | | | | | | | |
(Generating Facilities) Series A 5.25% 10/1/25 | | | 1,100,000 | | | | 1,157,563 | |
Minnesota Municipal Power Agency Electric Revenue | | | | | | | | |
5.25% 10/1/21 | | | 1,000,000 | | | | 1,054,500 | |
Northern Municipal Power Agency Electric System Revenue | | | | | | | | |
Series A 5.00% 1/1/15 (ASSURED GTY) | | | 1,000,000 | | | | 1,016,610 | |
Series A 5.00% 1/1/17 (ASSURED GTY) | | | 1,000,000 | | | | 1,102,900 | |
Series A 5.00% 1/1/25 | | | 200,000 | | | | 236,510 | |
Western Minnesota Municipal Power Agency Supply Revenue | | | | | | | | |
Series A 5.00% 1/1/33 | | | 1,250,000 | | | | 1,455,025 | |
| | | | | | | | |
| | | | | | | 8,452,277 | |
| | | | | | | | |
Healthcare Revenue Bonds – 35.62% | | | | | | | | |
Anoka Health Care Facilities Revenue | | | | | | | | |
(Senior Homestead Anoka Project) Series B | | | | | | | | |
6.875% 11/1/34 | | | 750,000 | | | | 798,157 | |
Center City Health Care Facilities Revenue | | | | | | | | |
(Hazelden Betty Ford Foundation Project) | | | | | | | | |
5.00% 11/1/25 | | | 250,000 | | | | 298,137 | |
Deephaven Housing & Healthcare Revenue | | | | | | | | |
(St. Therese Senior Living Project) | | | | | | | | |
Series A 5.00% 4/1/38 | | | 135,000 | | | | 133,885 | |
Series A 5.00% 4/1/40 | | | 125,000 | | | | 123,395 | |
Duluth Economic Development Authority | | | | | | | | |
(St. Luke’s Hospital Authority Obligation Group) | | | | | | | | |
5.75% 6/15/32 | | | 750,000 | | | | 814,853 | |
Fergus Falls Health Care Facilities Revenue | | | | | | | | |
(Lake Region Health Care) 4.75% 8/1/25 | | | 500,000 | | | | 515,860 | |
Glencoe Health Care Facilities Revenue | | | | | | | | |
(Glencoe Regional Health Services Project) | | | | | | | | |
4.00% 4/1/26 | | | 270,000 | | | | 280,157 | |
Hayward Health Care Facilities Revenue | | | | | | | | |
(American Baptist Homes Midwest Obligated Group) | | | | | | | | |
4.25% 8/1/24 | | | 770,000 | | | | 774,012 | |
Minneapolis Health Care System Revenue | | | | | | | | |
(Fairview Health Services) | | | | | | | | |
Series A 6.625% 11/15/28 | | | 1,500,000 | | | | 1,784,070 | |
Series B 6.50% 11/15/38 (ASSURED GTY) | | | 1,730,000 | | | | 2,046,019 | |
34
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
Minneapolis National Marrow Donor Program Revenue | | | | | | | | |
5.00% 8/1/17 | | | 1,205,000 | | | $ | 1,306,606 | |
Minneapolis-St. Paul Housing & Redevelopment Authority Health Care Revenue | | | | | | | | |
(Children’s Hospital) Series A 5.25% 8/15/25 | | | 1,000,000 | | | | 1,143,600 | |
Minnesota Agricultural & Economic Development Board Revenue | | | | | | | | |
(Essentia Remarketing) Series C-1 | | | | | | | | |
5.50% 2/15/25 (ASSURED GTY) | | | 2,500,000 | | | | 2,868,575 | |
Moorhead Economic Development Authority Multifamily Housing Revenue | | | | | | | | |
(Eventide Lutheran Home Project) 4.70% 6/1/18 | | | 475,000 | | | | 475,755 | |
Rochester Health Care & Housing Revenue | | | | | | | | |
(Samaritan Bethany) Series A 6.875% 12/1/29 | | | 950,000 | | | | 1,058,490 | |
Rochester Health Care Facilities Revenue | | | | | | | | |
(Mayo Clinic) | | | | | | | | |
Series A 4.00% 11/15/30 — | | | 500,000 | | | | 562,200 | |
Series C 4.50% 11/15/38 — | | | 4,160,000 | | | | 4,872,234 | |
(Olmsted Medical Center Project) | | | | | | | | |
5.00% 7/1/19 | | | 415,000 | | | | 478,765 | |
5.125% 7/1/20 | | | 1,000,000 | | | | 1,122,700 | |
Sartell Health Care Facilities Revenue | | | | | | | | |
(Country Manor Campus Project) | | | | | | | | |
Series A 5.00% 9/1/21 | | | 1,050,000 | | | | 1,134,903 | |
Series A 6.125% 9/1/30 | | | 845,000 | | | | 874,719 | |
Sauk Rapids Health Care Housing Facilities Revenue | | | | | | | | |
(Good Shepherd Lutheran Home) 5.125% 1/1/39 | | | 575,000 | | | | 575,155 | |
St. Cloud Health Care Revenue | | | | | | | | |
(Centracare Health System Project) | | | | | | | | |
Series A 5.00% 5/1/16 | | | 500,000 | | | | 538,090 | |
Series A 5.125% 5/1/30 | | | 3,320,000 | | | | 3,728,592 | |
St. Louis Park Health Care Facilities Revenue | | | | | | | | |
(Park Nicollet Health Services) | | | | | | | | |
5.50% 7/1/29 | | | 1,000,000 | | | | 1,107,500 | |
Series C 5.625% 7/1/26 | | | 2,500,000 | | | | 2,753,850 | |
St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue | | | | | | | | |
(Allina Health System) Series A-2 5.25% 11/15/28 | | | 2,000,000 | | | | 2,301,940 | |
(Gillette Children’s Specialty Project) | | | | | | | | |
5.00% 2/1/20 | | | 500,000 | | | | 501,445 | |
5.00% 2/1/27 | | | 1,000,000 | | | | 1,062,620 | |
35
Schedules of investments
Delaware Tax-Free Minnesota Intermediate Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
St. Paul Housing & Redevelopment Authority Housing & Health Care Facilities Revenue | | | | | | | | |
(Senior Carondelet Village Project) Series A 6.25% 8/1/30 | | | 1,000,000 | | | $ | 1,069,270 | |
(Senior Episcopal Homes Project) 5.00% 5/1/33 | | | 500,000 | | | | 506,990 | |
| | | | | | | | |
| | | | | | | 37,612,544 | |
| | | | | | | | |
Housing Revenue Bonds – 1.43% | | | | | | | | |
Minneapolis Multifamily Housing Revenue | | | | | | | | |
(Trinity Apartments) Series A 6.75% 5/1/21 (HUD) | | | 1,175,000 | | | | 1,177,103 | |
Minnesota Housing Finance Agency | | | | | | | | |
(Residential Housing) Series I 5.10% 7/1/20 (AMT) | | | 330,000 | | | | 330,640 | |
| | | | | | | | |
| | | | | | | 1,507,743 | |
| | | | | | | | |
Lease Revenue Bonds – 5.26% | | | | | | | | |
Minnesota General Fund Revenue Appropriations | | | | | | | | |
Series A 5.00% 6/1/38 | | | 1,100,000 | | | | 1,260,501 | |
Series A 5.00% 6/1/43 | | | 715,000 | | | | 809,359 | |
Series B 5.00% 3/1/21 | | | 250,000 | | | | 301,217 | |
Series B 5.00% 3/1/27 | | | 1,000,000 | | | | 1,179,120 | |
St. Paul Housing & Redevelopment Authority | | | | | | | | |
(Minnesota Public Radio) 5.00% 12/1/25 | | | 1,000,000 | | | | 1,112,700 | |
Virginia Housing & Redevelopment Authority Health Care Facility Lease Revenue | | | | | | | | |
5.25% 10/1/25 | | | 880,000 | | | | 893,596 | |
| | | | | | | | |
| | | | | | | 5,556,493 | |
| | | | | | | | |
Local General Obligation Bonds – 11.96% | | | | | | | | |
Anoka County Capital Improvement | | | | | | | | |
Series C 5.00% 2/1/27 | | | 500,000 | | | | 559,440 | |
Anoka-Hennepin Independent School District No. 11 | | | | | | | | |
(School Building) Series A 5.00% 2/1/17 | | | 1,000,000 | | | | 1,109,040 | |
Duluth Independent School District No. 709 | | | | | | | | |
Series A 4.25% 2/1/20 (AGM) | | | 1,710,000 | | | | 1,870,860 | |
Hennepin County | | | | | | | | |
Series B 4.00% 12/1/20 | | | 500,000 | | | | 578,265 | |
Mankato Independent School District No. 77 | | | | | | | | |
(School Building) 4.125% 2/1/22 | | | 1,000,000 | | | | 1,095,410 | |
Metropolitan Council Waste Water Treatment | | | | | | | | |
Series C 5.00% 3/1/16 | | | 560,000 | | | | 600,230 | |
Series C 5.00% 3/1/28 | | | 1,000,000 | | | | 1,069,190 | |
Minneapolis Various Purposes | | | | | | | | |
4.00% 12/1/23 | | | 1,500,000 | | | | 1,608,285 | |
Robbinsdale Independent School District No. 281 | | | | | | | | |
(School Building) Series A 5.00% 2/1/20 | | | 1,850,000 | | | | 2,198,115 | |
36
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Local General Obligation Bonds (continued) | | | | | | | | |
South Washington County Independent School District | | | | | | | | |
No. 833 (School Building) | | | | | | | | |
Series A 4.00% 2/1/22 | | | 750,000 | | | $ | 802,793 | |
White Bear Lake Independent School District No. 624 | | | | | | | | |
(Alternative Facilities) Series B 4.75% 2/1/22 | | | 1,000,000 | | | | 1,132,160 | |
| | | | | | | | |
| | | | | | | 12,623,788 | |
| | | | | | | | |
Pre-Refunded / Escrowed to Maturity Bonds – 2.46% | | | | | | | | |
Minnesota Public Facilities Authority Water Pollution Control Revenue | | | | | | | | |
Series C 5.00% 3/1/18-15§ | | | 1,000,000 | | | | 1,024,610 | |
University of Minnesota | | | | | | | | |
Series A 5.75% 7/1/16 | | | 1,000,000 | | | | 1,099,770 | |
Series A 5.75% 7/1/18 | | | 400,000 | | | | 473,952 | |
| | | | | | | | |
| | | | | | | 2,598,332 | |
| | | | | | | | |
Special Tax Revenue Bonds – 2.71% | | | | | | | | |
Minneapolis Tax Increment Revenue | | | | | | | | |
(Ivy Tower Project) 5.50% 2/1/22 @ | | | 415,000 | | | | 415,025 | |
Minnesota 911 Revenue | | | | | | | | |
(Public Safety Radio Communication System project) | | | | | | | | |
4.25% 6/1/18 (ASSURED GTY) | | | 1,170,000 | | | | 1,317,479 | |
4.50% 6/1/25 (ASSURED GTY) | | | 1,000,000 | | | | 1,126,310 | |
| | | | | | | | |
| | | | | | | 2,858,814 | |
| | | | | | | | |
State General Obligation Bonds – 4.74% | | | | | | | | |
Minnesota | | | | | | | | |
5.00% 8/1/15 | | | 2,000,000 | | | | 2,090,540 | |
(State Trunk Highway) Series B 5.00% 10/1/22 | | | 400,000 | | | | 488,020 | |
(Various Purposes) | | | | | | | | |
Series A 5.00% 12/1/21 | | | 1,000,000 | | | | 1,188,750 | |
Series F 5.00% 10/1/22 | | | 1,000,000 | | | | 1,236,260 | |
| | | | | | | | |
| | | | | | | 5,003,570 | |
| | | | | | | | |
Transportation Revenue Bonds – 5.33% | | | | | | | | |
Minneapolis-St. Paul Metropolitan Airports Commission Revenue | | | | | | | | |
Series A 5.00% 1/1/22 (AMBAC) | | | 1,260,000 | | | | 1,383,455 | |
Subordinate | | | | | | | | |
Series B 5.00% 1/1/22 (AMT) | | | 1,000,000 | | | | 1,145,340 | |
Series B 5.00% 1/1/26 | | | 710,000 | | | | 816,756 | |
Series B 5.00% 1/1/31 | | | 750,000 | | | | 837,390 | |
Series C 5.00% 1/1/21 | | | 275,000 | | | | 318,915 | |
Series D 5.00% 1/1/22 (AMT) | | | 1,000,000 | | | | 1,127,660 | |
| | | | | | | | |
| | | | | | | 5,629,516 | |
| | | | | | | | |
37
Schedules of investments
Delaware Tax-Free Minnesota Intermediate Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Water & Sewer Revenue Bond – 1.38% | | | | | | | | |
St. Paul Sewer Revenue | | | | | | | | |
Series D 5.00% 12/1/20 | | | 1,275,000 | | | $ | 1,457,516 | |
| | | | | | | | |
| | | | | | | 1,457,516 | |
| | | | | | | | |
Total Municipal Bonds (cost $98,506,721) | | | | | | | 104,677,000 | |
| | | | | | | | |
| |
| Number of
shares |
| | | | |
| |
Short-Term Investments – 0.82% | | | | | | | | |
| |
Money Market Instrument – 0.35% | | | | | | | | |
Minnesota Municipal Cash Trust | | | 369,233 | | | | 369,233 | |
| | | | | | | | |
| | | | | | | 369,233 | |
| | | | | | | | |
| | | Principal amount | ° | | | | |
Variable Rate Demand Note – 0.47%¤ | | | | | | | | |
Minneapolis-St. Paul Housing & Redevelopment Authority Health Care Revenue (Allina Health System) | | | | | | | | |
Series B-2 | | | | | | | | |
0.01% 11/15/35 (LOC- JPMorgan Chase Bank, N.A.) | | | 500,000 | | | | 500,000 | |
| | | | | | | | |
| | | | | | | 500,000 | |
| | | | | | | | |
Total Short-Term Investments (cost $869,233) | | | | | | | 869,233 | |
| | | | | | | | |
| | |
Total Value of Securities – 99.95%
(cost $99,375,954) | | | | | | $ | 105,546,233 | |
| | | | | | | | |
| @ | Illiquid security. At Aug. 31, 2014, the aggregate value of illiquid securities was $415,025, which represents 0.39% of the Fund’s net assets. See Note 8 in “Notes to financial statements.” |
| ¤ | Tax-exempt obligations that contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the unpaid principal balance plus accrued interest upon a short notice period (generally up to 30 days) prior to specified dates either from the issuer or by drawing on a bank letter of credit, a guarantee, or insurance issued with respect to such instrument. The rate shown is the rate as of Aug. 31, 2014. |
| ° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
| — | Variable rate security. The rate shown is the rate as of Aug. 31, 2014. Interest rates reset periodically. |
| § | Pre-refunded bonds. Municipal bonds 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. See Note 8 in “Notes to financial statements.” |
Summary of abbreviations:
AGM – Insured by Assured Guaranty Municipal Corporation
AMBAC – Insured by AMBAC Assurance Corporation
AMT – Subject to Alternative Minimum Tax
38
Summary of abbreviations:
ASSURED GTY – Insured by Assured Guaranty Corporation
HUD – Housing and Urban Development Section 8
LOC – Letter of Credit
N.A. – North America
See accompanying notes, which are an integral part of the financial statements.
39
| | |
| Schedules of investments | | |
| Delaware Minnesota High-Yield Municipal Bond Fund | | August 31, 2014 |
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds – 99.88% | | | | | | | | |
| |
Corporate-Backed Revenue Bonds – 4.07% | | | | | | | | |
Cloquet Pollution Control Revenue | | | | | | | | |
(Potlatch Project) 5.90% 10/1/26 | | | 2,700,000 | | | $ | 2,702,160 | |
Laurentian Energy Authority I Cogeneration Revenue | | | | | | | | |
Series A 5.00% 12/1/21 | | | 1,750,000 | | | | 1,717,537 | |
St. Paul Port Authority Solid Waste Disposal Revenue | | | | | | | | |
(Gerdau St. Paul Steel Mill Project) | | | | | | | | |
Series 7 4.50% 10/1/37 (AMT) | | | 2,055,000 | | | | 2,025,881 | |
| | | | | | | | |
| | | | | | | 6,445,578 | |
| | | | | | | | |
Education Revenue Bonds – 14.61% | | | | | | | | |
Baytown Township Lease Revenue | | | | | | | | |
(St. Croix Preparatory Academy) Series A 7.00% 8/1/38 | | | 500,000 | | | | 525,060 | |
Deephaven Eagle Ridge Academy Project | | | | | | | | |
Series A 5.50% 7/1/43 | | | 500,000 | | | | 529,125 | |
Duluth Housing & Redevelopment Authority Revenue | | | | | | | | |
(Public School Academy) Series A 5.875% 11/1/40 | | | 1,000,000 | | | | 1,061,430 | |
Forest Lake Charter School Revenue Fund | | | | | | | | |
(Forest Lake International Language Academy) | | | | | | | | |
Series A 5.75% 8/1/44 | | | 455,000 | | | | 494,671 | |
Hugo Charter School Lease Revenue | | | | | | | | |
(Noble Academy Project) | | | | | | | | |
Series A 5.00% 7/1/34 | | | 165,000 | | | | 171,092 | |
Series A 5.00% 7/1/44 | | | 495,000 | | | | 505,385 | |
Minneapolis Student Housing Revenue | | | | | | | | |
(Riverton Community Housing Project) 5.25% 8/1/39 | | | 800,000 | | | | 799,968 | |
Minnesota Higher Education Facilities Authority Revenue | | | | | | | | |
(Augsburg College) Series 6-J1 5.00% 5/1/36 | | | 1,000,000 | | | | 1,005,350 | |
(Bethel University) Series 6-R 5.50% 5/1/37 | | | 1,500,000 | | | | 1,541,880 | |
(Carleton College) Series 7-D 5.00% 3/1/40 | | | 1,055,000 | | | | 1,181,800 | |
(Macalester College) Series 6-P 4.25% 3/1/32 | | | 1,000,000 | | | | 1,023,510 | |
(St. Catherine University) | | | | | | | | |
Series 7-Q 5.00% 10/1/25 | | | 325,000 | | | | 364,364 | |
Series 7-Q 5.00% 10/1/26 | | | 280,000 | | | | 309,254 | |
(St. John’s University) Series 6-U 4.75% 10/1/33 | | | 825,000 | | | | 909,026 | |
(St. Olaf College) | | | | | | | | |
Series 6-O 4.50% 10/1/32 | | | 1,000,000 | | | | 1,051,830 | |
Series 6-O 5.00% 10/1/22 | | | 1,000,000 | | | | 1,088,400 | |
(St. Scholastica College) Series H 5.125% 12/1/40 | | | 750,000 | | | | 808,560 | |
(University of St. Thomas) | | | | | | | | |
Series 6-I 5.00% 4/1/23 | | | 1,500,000 | | | | 1,601,835 | |
Series 7-A 5.00% 10/1/39 | | | 1,000,000 | | | | 1,112,930 | |
Otsego Charter School Lease Revenue | | | | | | | | |
(Kaleidoscope Charter School) Series A 5.00% 9/1/44 | | | 1,475,000 | | | | 1,450,235 | |
40
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Education Revenue Bonds (continued) | | | | | | | | |
St. Paul Housing & Redevelopment Authority Charter School Lease Revenue | | | | | | | | |
(Nova Classical Academy) Series A 6.625% 9/1/42 | | | 1,500,000 | | | $ | 1,674,690 | |
St. Paul Housing & Redevelopment Authority Lease Revenue | | | | | | | | |
(St. Paul Conservatory for Performing Artists) Series A 4.625% 3/1/43 | | | 1,000,000 | | | | 988,280 | |
University of Minnesota | | | | | | | | |
Series A 5.125% 4/1/34 | | | 1,000,000 | | | | 1,139,430 | |
Series A 5.25% 12/1/28 | | | 1,500,000 | | | | 1,791,585 | |
| | | | | | | | |
| | | | | | | 23,129,690 | |
| | | | | | | | |
Electric Revenue Bonds – 6.41% | | | | | | | | |
Central Minnesota Municipal Power Agency | | | | | | | | |
(Brookings Twin Cities Transmission Project) 5.00% 1/1/42 | | | 1,500,000 | | | | 1,630,785 | |
Chaska Electric Revenue | | | | | | | | |
(Generating Facilities) Series A 5.25% 10/1/25 | | | 1,000,000 | | | | 1,052,330 | |
Hutchinson Utilities Commission Revenue | | | | | | | | |
Series A 5.00% 12/1/22 | | | 490,000 | | | | 581,983 | |
Series A 5.00% 12/1/26 | | | 360,000 | | | | 415,512 | |
Minnesota Municipal Power Agency Electric Revenue | | | | | | | | |
5.00% 10/1/27 | | | 165,000 | | | | 194,287 | |
Series A 5.00% 10/1/28 | | | 500,000 | | | | 585,295 | |
Series A 5.00% 10/1/34 | | | 2,750,000 | | | | 2,761,990 | |
Northern Municipal Power Agency Revenue | | | | | | | | |
5.00% 1/1/18 (ASSURED GTY) | | | 1,000,000 | | | | 1,136,500 | |
Series A 5.00% 1/1/24 | | | 335,000 | | | | 399,762 | |
Western Minnesota Municipal Power Agency Revenue | | | | | | | | |
Series A 5.00% 1/1/33 | | | 250,000 | | | | 291,005 | |
Series A 5.00% 1/1/34 | | | 450,000 | | | | 521,820 | |
Series A 5.00% 1/1/40 | | | 500,000 | | | | 571,920 | |
| | | | | | | | |
| | | | | | | 10,143,189 | |
| | | | | | | | |
Healthcare Revenue Bonds – 43.67% | | | | | | | | |
Aitkin Health Care Facilities Revenue | | | | | | | | |
(Riverwood Health Care Center) 5.50% 2/1/24 | | | 700,000 | | | | 715,183 | |
Anoka Health Care Facilities Revenue | | | | | | | | |
(Homestead Anoka Project) Series A 7.00% 11/1/46 | | | 1,650,000 | | | | 1,747,977 | |
Anoka Housing & Redevelopment Authority Revenue | | | | | | | | |
(Fridley Medical Center Project) Series A 6.875% 5/1/40 | | | 1,000,000 | | | | 1,075,690 | |
41
Schedules of investments
Delaware Minnesota High-Yield Municipal Bond Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
Apple Valley Economic Development Authority Health Care Revenue | | | | | | | | |
(Augustana Home St. Paul Project) | | | | | | | | |
Series A 5.80% 1/1/30 | | | 1,000,000 | | | $ | 1,010,930 | |
Breckenridge Catholic Health Initiatives | | | | | | | | |
Series A 5.00% 5/1/30 | | | 2,000,000 | | | | 2,007,440 | |
Cloquet Housing Facilities | | | | | | | | |
(HADC Cloquet Project) Series A 5.00% 8/1/48 | | | 850,000 | | | | 852,389 | |
Deephaven Housing & Healthcare Revenue | | | | | | | | |
(St. Therese Senior Living Project) | | | | | | | | |
Series A 5.00% 4/1/38 | | | 200,000 | | | | 198,348 | |
Series A 5.00% 4/1/40 | | | 190,000 | | | | 187,560 | |
Series A 5.00% 4/1/48 | | | 185,000 | | | | 181,576 | |
Duluth Economic Development Authority | | | | | | | | |
(St. Luke’s Hospital Authority Obligation Group) | | | | | | | | |
5.75% 6/15/32 | | | 750,000 | | | | 814,853 | |
6.00% 6/15/39 | | | 1,000,000 | | | | 1,089,390 | |
Glencoe Health Care Facilities Revenue | | | | | | | | |
(Glencoe Regional Health Services Project) | | | | | | | | |
4.00% 4/1/31 | | | 185,000 | | | | 188,883 | |
Hayward Health Care Facilities Revenue | | | | | | | | |
(American Baptist Homes Midwest Obligated Group) | | | | | | | | |
5.375% 8/1/34 | | | 750,000 | | | | 758,445 | |
Mahtomedi Senior Housing Revenue | | | | | | | | |
(St. Andrew’s Village Project) 5.75% 12/1/40 | | | 1,000,000 | | | | 1,010,750 | |
Maple Grove Health Care System Revenue | | | | | | | | |
(Maple Grove Hospital) | | | | | | | | |
5.25% 5/1/28 | | | 2,200,000 | | | | 2,288,154 | |
5.25% 5/1/37 | | | 1,000,000 | | | | 1,029,530 | |
Minneapolis Health Care System Revenue | | | | | | | | |
(Fairview Health Services) | | | | | | | | |
Series A 6.625% 11/15/28 | | | 2,000,000 | | | | 2,378,760 | |
Series B 6.50% 11/15/38 (ASSURED GTY) | | | 250,000 | | | | 295,667 | |
Series D 5.00% 11/15/34 (AMBAC) | | | 3,000,000 | | | | 3,042,750 | |
Minnesota Agricultural & Economic Development Board Revenue | | | | | | | | |
(Benedictine Health Systems) 5.75% 2/1/29 | | | 1,000,000 | | | | 1,000,270 | |
Moorhead Economic Development Authority Multifamily Housing Revenue | | | | | | | | |
(Eventide Lutheran Home Project) Series A 5.15% 6/1/29 | | | 550,000 | | | | 550,193 | |
Northfield Hospital & Skilled Nursing Revenue 5.375% 11/1/31 | | | 1,000,000 | | | | 1,025,760 | |
42
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
Oak Park Heights Housing Revenue | | | | | | | | |
(Oakgreen Commons Project) 7.00% 8/1/45 | | | 1,500,000 | | | $ | 1,641,615 | |
Oakdale Senior Housing | | | | | | | | |
(Oak Meadows Project) 5.00% 4/1/34 | | | 500,000 | | | | 502,765 | |
Owatonna Senior Housing Revenue | | | | | | | | |
(Senior Living Project) | | | | | | | | |
Series A 5.80% 10/1/29 | | | 400,000 | | | | 407,336 | |
Series A 6.00% 4/1/41 | | | 1,250,000 | | | | 1,270,037 | |
Rochester Health Care & Housing Revenue | | | | | | | | |
(Samaritan Bethany) | | | | | | | | |
Series A 6.875% 12/1/29 | | | 1,000,000 | | | | 1,114,200 | |
Series A 7.375% 12/1/41 | | | 375,000 | | | | 420,364 | |
(The Homestead at Rochester Project) | | | | | | | | |
Series A 5.25% 12/1/23 | | | 175,000 | | | | 186,471 | |
Series A 6.875% 12/1/48 | | | 800,000 | | | | 887,456 | |
Rochester Health Care Facilities Revenue | | | | | | | | |
(Mayo Clinic) | | | | | | | | |
4.00% 11/15/41 | | | 1,790,000 | | | | 1,856,695 | |
Series C 4.50% 11/15/38 — | | | 1,925,000 | | | | 2,254,579 | |
(Olmsted Medical Center Project) | | | | | | | | |
5.00% 7/1/22 | | | 350,000 | | | | 413,574 | |
5.00% 7/1/27 | | | 245,000 | | | | 284,232 | |
5.00% 7/1/28 | | | 225,000 | | | | 259,513 | |
Sartell Health Care Facilities Revenue | | | | | | | | |
(Country Manor Campus Project) | | | | | | | | |
Series A 5.25% 9/1/22 | | | 1,080,000 | | | | 1,177,880 | |
Series A 6.25% 9/1/36 | | | 925,000 | | | | 959,123 | |
Sauk Rapids Health Care Housing Facilities Revenue | | | | | | | | |
(Good Shepherd Lutheran Home) 5.125% 1/1/39 | | | 825,000 | | | | 825,223 | |
Shakopee Health Care Facilities Revenue | | | | | | | | |
(St. Francis Regional Medical Center) | | | | | | | | |
4.00% 9/1/31 | | | 130,000 | | | | 133,455 | |
5.00% 9/1/34 | | | 105,000 | | | | 117,916 | |
St. Cloud Health Care Revenue | | | | | | | | |
(Centracare Health System Project) | | | | | | | | |
5.50% 5/1/39 (ASSURED GTY) | | | 1,500,000 | | | | 1,650,945 | |
Series A 5.125% 5/1/30 | | | 3,125,000 | | | | 3,509,594 | |
St. Louis Park Health Care Facilities Revenue | | | | | | | | |
(Park Nicollet Health Services) | | | | | | | | |
5.75% 7/1/39 | | | 3,830,000 | | | | 4,237,282 | |
Series C 5.50% 7/1/23 | | | 1,000,000 | | | | 1,108,560 | |
43
Schedules of investments
Delaware Minnesota High-Yield Municipal Bond Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Healthcare Revenue Bonds (continued) | | | | | | | | |
St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue | | | | | | | | |
(Allina Health System) Series A | | | | | | | | |
5.00% 11/15/18 (NATL-RE) | | | 1,900,000 | | | $ | 2,145,024 | |
(Health Partners Obligation Group Project) | | | | | | | | |
5.25% 5/15/36 | | | 1,000,000 | | | | 1,035,570 | |
St. Paul Housing & Redevelopment Authority Hospital Revenue | | | | | | | | |
(Health East Project) | | | | | | | | |
6.00% 11/15/25 | | | 1,000,000 | | | | 1,049,890 | |
6.00% 11/15/30 | | | 1,000,000 | | | | 1,049,130 | |
St. Paul Housing & Redevelopment Authority Housing & Health Care Facilities Revenue | | | | | | | | |
(Senior Carondelet Village Project) | | | | | | | | |
Series A 6.00% 8/1/42 | | | 770,000 | | | | 814,768 | |
(Senior Episcopal Homes Project) | | | | | | | | |
5.125% 5/1/48 | | | 1,700,000 | | | | 1,713,685 | |
Series A 5.15% 11/1/42 | | | 775,000 | | | | 781,425 | |
St. Paul Housing & Redevelopment Authority Multifamily Housing Revenue | | | | | | | | |
(Marian Center Project) Series A 5.375% 5/1/43 | | | 1,000,000 | | | | 1,001,730 | |
Stillwater Health Care Revenue | | | | | | | | |
(Health System Obligation Group) | | | | | | | | |
5.00% 6/1/25 | | | 2,000,000 | | | | 2,023,640 | |
5.00% 6/1/35 | | | 1,000,000 | | | | 1,008,280 | |
Twin Valley Congregate Housing Revenue | | | | | | | | |
(Living Options Project) 5.95% 11/1/28 @ | | | 1,825,000 | | | | 1,822,737 | |
Victoria Health Care Facilities Revenue | | | | | | | | |
(Augustana Emerald Care Project) 5.00% 8/1/39 | | | 1,500,000 | | | | 1,523,610 | |
Washington County Housing & Redevelopment Authority Healthcare & Housing Revenue | | | | | | | | |
(Birchwood & Woodbury Projects) | | | | | | | | |
Series A 5.625% 6/1/37 | | | 1,000,000 | | | | 1,007,820 | |
Wayzata Senior Housing Revenue | | | | | | | | |
(Folkestone Senior Living Community) | | | | | | | | |
Series A 5.50% 11/1/32 | | | 260,000 | | | | 281,473 | |
Series A 5.75% 11/1/39 | | | 590,000 | | | | 639,814 | |
Series A 6.00% 5/1/47 | | | 920,000 | | | | 1,006,600 | |
Winona Health Care Facilities Revenue | | | | | | | | |
(Winona Health Obligation Group) 5.15% 7/1/31 | | | 1,500,000 | | | | 1,557,375 | |
| | | | | | | | |
| | | | | | | 69,131,884 | |
| | | | | | | | |
44
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Housing Revenue Bonds – 8.01% | | | | | | | | |
Chaska Multifamily Housing Revenue | | | | | | | | |
(West Suburban Housing Partners Project) | | | | | | | | |
5.875% 3/1/31 (AMT) | | | 1,000,000 | | | $ | 970,730 | |
Minneapolis Multifamily Housing Revenue | | | | | | | | |
(Grant Street Apartments Project) Series A 7.25% 11/1/29 | | | 1,915,000 | | | | 1,918,160 | |
(Olson Townhomes Project) 6.00% 12/1/19 (AMT) | | | 900,000 | | | | 900,603 | |
(Trinity Apartments ) Series A 6.75% 5/1/21 (HUD) | | | 435,000 | | | | 435,779 | |
Minneapolis-St. Paul Housing Finance Board Mortgage-Backed Securities Program | | | | | | | | |
(City Living project) Series A-2 5.00% 12/1/38 (GNMA) (FNMA) (AMT) | | | 97,081 | | | | 98,138 | |
Minnesota Housing Finance Agency | | | | | | | | |
(Rental Housing) Series A-1 5.00% 8/1/40 (AMT) | | | 2,265,000 | | | | 2,280,017 | |
(Residential Housing) | | | | | | | | |
Series G 5.00% 7/1/36 (AMT) | | | 710,000 | | | | 714,913 | |
Series I 4.85% 7/1/38 (AMT) | | | 830,000 | | | | 839,113 | |
Series L 5.10% 7/1/38 (AMT) | | | 1,130,000 | | | | 1,173,030 | |
Series M 4.875% 7/1/37 (AMT) | | | 1,845,000 | | | | 1,865,258 | |
St. Paul Housing & Redevelopment Authority Multifamily Housing Revenue | | | | | | | | |
(Selby Grotto Housing Project) | | | | | | | | |
5.50% 9/20/44 (GNMA) (FHA) (AMT) | | | 750,000 | | | | 750,728 | |
Stillwater Multifamily Housing Revenue | | | | | | | | |
(Orleans Homes Project) 5.50% 2/1/42 (AMT) | | | 750,000 | | | | 736,425 | |
| | | | | | | | |
| | | | | | | 12,682,894 | |
| | | | | | | | |
Lease Revenue Bonds – 3.98% | | | | | | | | |
Minnesota General Fund Revenue Appropriations | | | | | | | | |
Series A 5.00% 6/1/38 | | | 1,750,000 | | | | 2,005,343 | |
Series A 5.00% 6/1/43 | | | 1,000,000 | | | | 1,131,970 | |
Series B 5.00% 3/1/21 | | | 250,000 | | | | 301,217 | |
University of Minnesota Special Purpose Revenue | | | | | | | | |
(State Supported Stadium Debt) 5.00% 8/1/29 | | | 2,660,000 | | | | 2,863,118 | |
| | | | | | | | |
| | | | | | | 6,301,648 | |
| | | | | | | | |
Local General Obligation Bonds – 8.37% | | | | | | | | |
Chaska Independent School District No.112 | | | | | | | | |
(School Building) Series A 4.50% 2/1/28 (NATL-RE) | | | 1,000,000 | | | | 1,075,760 | |
Farmington Independent School District No. 192 | | | | | | | | |
(School Building) Series B 5.00% 2/1/27 (AGM) | | | 1,000,000 | | | | 1,018,340 | |
Foley Independent School District No. 51 | | | | | | | | |
(School Building) Series A 5.00% 2/1/21 | | | 1,105,000 | | | | 1,175,400 | |
45
Schedules of investments
Delaware Minnesota High-Yield Municipal Bond Fund
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
Local General Obligation Bonds (continued) | | | | | | | | |
Hopkins Independent School District No. 270 | | | | | | | | |
(Alternative Facilities) 5.00% 2/1/26 (NATL-RE) | | | 1,055,000 | | | $ | 1,075,351 | |
Metropolitan Council Waste Water Treatment | | | | | | | | |
Series B 5.00% 12/1/21 | | | 500,000 | | | | 505,825 | |
Series C 5.00% 3/1/28 | | | 1,000,000 | | | | 1,069,190 | |
Minneapolis Various Purposes | | | | | | | | |
4.00% 12/1/23 | | | 1,500,000 | | | | 1,608,285 | |
South Washington County Independent School District No. 833 | | | | | | | | |
(School Building) Series A 4.75% 2/1/27 | | | 1,500,000 | | | | 1,650,705 | |
Staples United Hospital District Health Care Facilities | | | | | | | | |
(Todd Morrison ETC Hospital-Lakewood) | | | | | | | | |
5.00% 12/1/21 | | | 610,000 | | | | 616,783 | |
5.125% 12/1/24 | | | 205,000 | | | | 207,163 | |
5.25% 12/1/26 | | | 1,540,000 | | | | 1,555,693 | |
White Bear Lake Independent School District No. 624 | | | | | | | | |
(Alternative Facilities) Series B 4.75% 2/1/22 | | | 1,500,000 | | | | 1,698,240 | |
| | | | | | | | |
| | | | | | | 13,256,735 | |
| | | | | | | | |
Pre-Refunded Bond – 0.79% | | | | | | | | |
Bemidji Health Care Facilities First Mortgage Revenue | | | | | | | | |
(North Country Health Services) 5.00% 9/1/20-16§ | | | 1,150,000 | | | | 1,255,754 | |
| | | | | | | | |
| | | | | | | 1,255,754 | |
| | | | | | | | |
Special Tax Revenue Bonds – 5.46% | | | | | | | | |
Hennepin County Sales Tax Revenue | | | | | | | | |
(First Lien-Ball Park Project) Series B 5.00% 12/15/24 | | | 1,000,000 | | | | 1,130,180 | |
(Second Lien-Ballpark Project) | | | | | | | | |
Series B 5.00% 12/15/20 | | | 1,500,000 | | | | 1,700,505 | |
Series B 5.00% 12/15/24 | | | 1,000,000 | | | | 1,130,180 | |
Minneapolis Development Revenue | | | | | | | | |
(Limited Tax Supported Common Bond Fund) | | | | | | | | |
Series 2-A 5.00% 6/1/28 (AMT) | | | 1,170,000 | | | | 1,207,265 | |
Minneapolis Tax Increment Revenue | | | | | | | | |
(Ivy Tower Project) 5.70% 2/1/29 @ | | | 785,000 | | | | 757,525 | |
(St. Anthony Falls Project) 5.65% 2/1/27 | | | 500,000 | | | | 500,245 | |
Minnesota 911 Revenue | | | | | | | | |
(Public Safety Radio Commission System Project) | | | | | | | | |
5.00% 6/1/24 (ASSURED GTY) | | | 1,000,000 | | | | 1,133,660 | |
St. Paul Port Authority | | | | | | | | |
(Limited Tax Brownfields Redevelopment Tax) | | | | | | | | |
Series 2 5.00% 3/1/37 | | | 1,000,000 | | | | 1,079,090 | |
| | | | | | | | |
| | | | | | | 8,638,650 | |
| | | | | | | | |
46
| | | | | | | | |
| | | Principal amount° | | | Value (U.S. $) | |
| |
Municipal Bonds (continued) | | | | | | | | |
| |
State General Obligation Bond – 0.76% | | | | | | | | |
Minnesota | | | | | | | | |
Series A 5.00% 10/1/24 | | | 1,000,000 | | | $ | 1,206,520 | |
| | | | | | | | |
| | | | | | | 1,206,520 | |
| | | | | | | | |
Transportation Revenue Bonds – 3.75% | | | | | | | | |
Minneapolis – St. Paul Metropolitan Airports Commission Revenue | | | | | | | | |
5.00% 1/1/21 | | | 1,000,000 | | | | 1,187,240 | |
5.00% 1/1/22 | | | 2,000,000 | | | | 2,340,560 | |
Subordinate Series B 5.00% 1/1/29 | | | 2,130,000 | | | | 2,401,937 | |
| | | | | | | | |
| | | | | | | 5,929,737 | |
| | | | | | | | |
Total Municipal Bonds (cost $150,375,791) | | | | | | | 158,122,279 | |
| | | | | | | | |
| | |
| |
| Number of
shares |
| | | | |
| |
Short-Term Investments – 0.65% | | | | | | | | |
| |
Money Market Instrument – 0.34% | | | | | | | | |
Minnesota Municipal Cash Trust | | | 535,065 | | | | 535,065 | |
| | | | | | | | |
| | | | | | | 535,065 | |
| | | | | | | | |
| | | Principal amount | ° | | | | |
Variable Rate Demand Note – 0.31%¤ | | | | | | | | |
Minneapolis-St. Paul Housing & Redevelopment Authority Health Care Revenue (Allina Health System) Series B-1 0.01% 11/15/35 (LOC- JPMorgan Chase Bank, N.A.) | | | 500,000 | | | | 500,000 | |
| | | | | | | | |
| | | | | | | 500,000 | |
| | | | | | | | |
Total Short-Term Investments (cost $1,035,065) | | | | | | | 1,035,065 | |
| | | | | | | | |
| | |
Total Value of Securities – 100.53%
(cost $151,410,856) | | | | | | $ | 159,157,344 | |
| | | | | | | | |
| @ | Illiquid security. At Aug. 31, 2014, the aggregate value of illiquid securities was $2,580,262, which represents 1.63% of the Fund’s net assets. See Note 8 in “Notes to financial statements.” |
| ¤ | Tax-exempt obligations that contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the unpaid principal balance plus accrued interest upon a short notice period (generally up to 30 days) prior to specified dates either from the issuer or by drawing on a bank letter of credit, a guarantee, or insurance issued with respect to such instrument. The rate shown is the rate as of Aug. 31, 2014. |
| ° | Principal amount shown is stated in U.S. dollars unless noted that the security is denominated in another currency. |
| — | Variable rate security. The rate shown is the rate as of Aug. 31, 2014. Interest rates reset periodically. |
47
Schedules of investments
Delaware Minnesota High-Yield Municipal Bond Fund
| § | Pre-refunded bonds. Municipal bonds 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. See Note 8 in “Notes to financial statements.” |
Summary of abbreviations:
AGM – Insured by Assured Guaranty Municipal Corporation
AMBAC – Insured by AMBAC Assurance Corporation
AMT – Subject to Alternative Minimum Tax
ASSURED GTY – Insured by Assured Guaranty Corporation
FHA – Federal Housing Administration
FNMA – Federal National Mortgage Association collateral
GNMA – Government National Mortgage Association Collateral
HUD – Housing and Urban Development Section 8
LOC – Letter of Credit
NATL-RE – Insured by National Public Finance Guarantee Corporation
See accompanying notes, which are an integral part of the financial statements.
48
This page intentionally left blank.
Statements of assets and liabilities
August 31, 2014
| | | | | | | | | | | | |
| | | Delaware
Tax-Free
Minnesota Fund | | | Delaware
Tax-Free
Minnesota
Intermediate
Fund | | | Delaware
Minnesota
High-Yield
Municipal
Bond Fund | |
Assets: | | | | | | | | | | | | |
Investments, at value1 | | $ | 560,553,848 | | | $ | 104,677,000 | | | $ | 158,122,279 | |
Short-term investments, at value2 | | | 1,949,055 | | | | 869,233 | | | | 1,035,065 | |
Cash | | | 1,858 | | | | 110,185 | | | | 22,736 | |
Interest receivable | | | 7,443,223 | | | | 1,186,826 | | | | 2,113,469 | |
Receivable for securities sold | | | 1,005,448 | | | | 99,537 | | | | 199,074 | |
Receivable for fund shares sold | | | 80,328 | | | | 26,057 | | | | 47,689 | |
| | | | | | | | | | | | |
Total assets | | | 571,033,760 | | | | 106,968,838 | | | | 161,540,312 | |
| | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | |
Payable for securities purchased | | | 6,997,728 | | | | 1,157,194 | | | | 2,878,288 | |
Distributions payable | | | 475,481 | | | | 74,277 | | | | 137,151 | |
Payable for fund shares redeemed | | | 342,769 | | | | 13,684 | | | | 23,011 | |
Investment management fees payable | | | 233,870 | | | | 36,948 | | | | 52,995 | |
Distribution fees payable to affiliates | | | 142,775 | | | | 22,226 | | | | 52,936 | |
Other accrued expenses | | | 139,136 | | | | 61,014 | | | | 70,963 | |
Other affiliates payable | | | 24,997 | | | | 4,457 | | | | 7,139 | |
Trustees’ fees and expenses payable | | | 2,887 | | | | 542 | | | | 809 | |
| | | | | | | | | | | | |
Total liabilities | | | 8,359,643 | | | | 1,370,342 | | | | 3,223,292 | |
| | | | | | | | | | | | |
Total Net Assets | | $ | 562,674,117 | | | $ | 105,598,496 | | | $ | 158,317,020 | |
| | | | | | | | | | | | |
| | | |
Net Assets Consist of: | | | | | | | | | | | | |
Paid-in capital | | $ | 528,038,780 | | | $ | 99,769,672 | | | $ | 155,874,454 | |
Distributions in excess of net investment income | | | (215,430 | ) | | | (785 | ) | | | — | |
Accumulated net realized loss on investments | | | (4,054,888 | ) | | | (340,670 | ) | | | (5,303,922 | ) |
Net unrealized appreciation of investments | | | 38,905,655 | | | | 6,170,279 | | | | 7,746,488 | |
| | | | | | | | | | | | |
Total Net Assets | | $ | 562,674,117 | | | $ | 105,598,496 | | | $ | 158,317,020 | |
| | | | | | | | | | | | |
50
| | | | | | | | | | | | |
| | | Delaware
Tax-Free
Minnesota Fund | | | Delaware
Tax-Free
Minnesota
Intermediate
Fund | | | Delaware
Minnesota High-Yield
Municipal
Bond Fund | |
Net Asset Value | | | | | | | | | | | | |
Class A: | | | | | | | | | | | | |
Net assets | | $ | 503,071,861 | | | $ | 90,570,596 | | | $ | 119,044,109 | |
Shares of beneficial interest outstanding, unlimited authorization, no par | | | 39,711,749 | | | | 7,999,586 | | | | 10,939,674 | |
Net asset value per share | | $ | 12.67 | | | $ | 11.32 | | | $ | 10.88 | |
Sales charge | | | 4.50 | % | | | 2.75 | % | | | 4.50 | % |
Offering price per share, equal to net asset value per share/(1 – sales charge) | | $ | 13.27 | | | $ | 11.64 | | | $ | 11.39 | |
| | | |
Class B: | | | | | | | | | | | | |
Net assets | | $ | 457,053 | | | $ | — | | | $ | 524,455 | |
Shares of beneficial interest outstanding, unlimited authorization, no par | | | 36,045 | | | | — | | | | 48,124 | |
Net asset value per share | | $ | 12.68 | | | $ | — | | | $ | 10.90 | |
| | | |
Class C: | | | | | | | | | | | | |
Net assets | | $ | 41,612,010 | | | $ | 12,651,487 | | | $ | 32,278,764 | |
Shares of beneficial interest outstanding, unlimited authorization, no par | | | 3,274,285 | | | | 1,115,052 | | | | 2,960,484 | |
Net asset value per share | | $ | 12.71 | | | $ | 11.35 | | | $ | 10.90 | |
| | | |
Institutional Class: | | | | | | | | | | | | |
Net assets | | $ | 17,533,193 | | | $ | 2,376,413 | | | $ | 6,469,692 | |
| Shares of beneficial interest outstanding, unlimited authorization, no par | | | 1,384,399 | | | $ | 209,795 | | | $ | 594,761 | |
Net asset value per share | | $ | 12.66 | | | $ | 11.33 | | | $ | 10.88 | |
| | | |
| | | | | | | | | | | | |
1 Investments, at cost | | $ | 521,648,193 | | | $ | 98,506,721 | | | $ | 150,375,791 | |
2 Short-term investments, at cost | | | 1,949,055 | | | | 869,233 | | | | 1,035,065 | |
See accompanying notes, which are an integral part of the financial statements.
51
Statements of operations
Year ended August 31, 2014
| | | | | | | | | | | | |
| | | Delaware
Tax-Free
Minnesota Fund | | | Delaware
Tax-Free
Minnesota
Intermediate
Fund | | | Delaware
Minnesota
High-Yield
Municipal
Bond Fund | |
Investment Income: | | | | | | | | | | | | |
Interest | | $ | 25,499,925 | | | $ | 4,052,447 | | | $ | 7,238,398 | |
| | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | |
Management fees | | | 3,074,356 | | | | 516,368 | | | | 845,275 | |
Distribution expenses — Class A | | | 1,299,869 | | | | 223,323 | | | | 301,085 | |
Distribution expenses — Class B | | | 7,370 | | | | — | | | | 8,488 | |
Distribution expenses — Class C | | | 410,996 | | | | 135,723 | | | | 317,313 | |
Dividend disbursing and transfer agent fees and expenses | | | 411,465 | | | | 86,675 | | | | 124,343 | |
Accounting and administration expenses | | | 199,376 | | | | 36,394 | | | | 54,207 | |
Legal fees | | | 66,759 | | | | 15,118 | | | | 18,855 | |
Registration fees | | | 48,225 | | | | 26,562 | | | | 19,275 | |
Reports and statements to shareholders | | | 47,382 | | | | 11,877 | | | | 12,058 | |
Audit and tax | | | 38,339 | | | | 38,339 | | | | 38,339 | |
Trustees’ fees and expenses | | | 27,960 | | | | 5,095 | | | | 7,586 | |
Custodian fees | | | 20,546 | | | | 3,976 | | | | 6,449 | |
Other | | | 38,566 | | | | 14,538 | | | | 18,586 | |
| | | | | | | | | | | | |
| | | 5,691,209 | | | | 1,113,988 | | | | 1,771,859 | |
Less expenses waived | | | (297,959 | ) | | | (41,890 | ) | | | (160,600 | ) |
Less waived distribution expenses — Class A | | | — | | | | (89,329 | ) | | | — | |
Less waived distribution expenses — Class B | | | (5,528 | ) | | | — | | | | (5,587 | ) |
Less expense paid indirectly | | | (177 | ) | | | (34 | ) | | | (55 | ) |
| | | | | | | | | | | | |
Total operating expenses | | | 5,387,545 | | | | 982,735 | | | | 1,605,617 | |
| | | | | | | | | | | | |
Net Investment Income | | | 20,112,380 | | | | 3,069,712 | | | | 5,632,781 | |
| | | | | | | | | | | | |
Net Realized and Unrealized Gain (Loss): | | | | | | | | | | | | |
Net realized loss on investments | | | (4,216,461 | ) | | | (340,570 | ) | | | (2,149,197 | ) |
Net change in unrealized appreciation (depreciation) of investments | | | 37,898,163 | | | | 4,951,173 | | | | 11,247,335 | |
| | | | | | | | | | | | |
Net Realized and Unrealized Gain | | | 33,681,702 | | | | 4,610,603 | | | | 9,098,138 | |
| | | | | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 53,794,082 | | | $ | 7,680,315 | | | $ | 14,730,919 | |
| | | | | | | | | | | | |
See accompanying notes, which are an integral part of the financial statements.
52
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Statements of changes in net assets
Delaware Tax-Free Minnesota Fund
| | | | | | | | |
| | | Year ended | |
| | | 8/31/14 | | | 8/31/13 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 20,112,380 | | | $ | 21,461,636 | |
Net realized gain (loss) | | | (4,216,461 | ) | | | 2,145,694 | |
Net change in unrealized appreciation (depreciation) | | | 37,898,163 | | | | (50,707,918 | ) |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | 53,794,082 | | | | (27,100,588 | ) |
| | | | | | | | |
| | |
Dividends and Distributions to Shareholders from: | | | | | | | | |
Net investment income: | | | | | | | | |
Class A | | | (18,743,216 | ) | | | (20,186,778 | ) |
Class B | | | (26,624 | ) | | | (50,134 | ) |
Class C | | | (1,173,105 | ) | | | (1,242,809 | ) |
Institutional Class | | | (120,985 | ) | | | — | |
| | |
Net realized gain: | | | | | | | | |
Class A | | | (1,519,482 | ) | | | (3,872,930 | ) |
Class B | | | (2,735 | ) | | | (13,102 | ) |
Class C | | | (120,598 | ) | | | (297,920 | ) |
| | | | | | | | |
| | | (21,706,745 | ) | | | (25,663,673 | ) |
| | | | | | | | |
| | |
Capital Share Transactions: | | | | | | | | |
Proceeds from shares sold: | | | | | | | | |
Class A | | | 23,900,452 | | | | 63,022,699 | |
Class C | | | 4,208,245 | | | | 13,072,102 | |
Institutional Class | | | 17,420,134 | | | | — | |
| | |
Net asset value of shares issued upon reinvestment of dividends and distributions: | | | | | | | | |
Class A | | | 16,665,158 | | | | 19,692,497 | |
Class B | | | 23,343 | | | | 49,256 | |
Class C | | | 1,158,509 | | | | 1,385,823 | |
Institutional Class | | | 102,271 | | | | — | |
| | | | | | | | |
| | | 63,478,112 | | | | 97,222,377 | |
| | | | | | | | |
54
| | | | | | | | |
| | | Year ended | |
| | | 8/31/14 | | | 8/31/13 | |
Capital Share Transactions (continued): | | | | | | | | |
Cost of shares redeemed: | | | | | | | | |
Class A | | $ | (107,570,429 | ) | | $ | (70,545,571 | ) |
Class B | | | (752,262 | ) | | | (900,873 | ) |
Class C | | | (9,063,484 | ) | | | (8,894,656 | ) |
Institutional Class | | | (166,057 | ) | | | — | |
| | | | | | | | |
| | | (117,552,232 | ) | | | (80,341,100 | ) |
| | | | | | | | |
| | |
Increase (decrease) in net assets derived from capital share transactions | | | (54,074,120 | ) | | | 16,881,277 | |
| | | | | | | | |
Net Decrease in Net Assets | | | (21,986,783 | ) | | | (35,882,984 | ) |
| | |
Net Assets: | | | | | | | | |
Beginning of year | | | 584,660,900 | | | | 620,543,884 | |
| | | | | | | | |
End of year | | $ | 562,674,117 | | | $ | 584,660,900 | |
| | | | | | | | |
Distributions in excess of net investment income | | $ | (215,430 | ) | | $ | (179,083 | ) |
| | | | | | | | |
See accompanying notes, which are an integral part of the financial statements.
55
Statements of changes in net assets
Delaware Tax-Free Minnesota Intermediate Fund
| | | | | | | | |
| | | Year ended | |
| | | 8/31/14 | | | 8/31/13 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 3,069,712 | | | $ | 3,191,167 | |
Net realized gain (loss) | | | (340,570 | ) | | | 214,983 | |
Net change in unrealized appreciation (depreciation) | | | 4,951,173 | | | | (7,031,138 | ) |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | 7,680,315 | | | | (3,624,988 | ) |
| | | | | | | | |
| | |
Dividends and Distributions to Shareholders from: | | | | | | | | |
Net investment income: | | | | | | | | |
Class A | | | (2,754,465 | ) | | | (2,861,355 | ) |
Class B | | | — | | | | (1,380 | ) |
Class C | | | (303,742 | ) | | | (328,444 | ) |
Institutional Class | | | (11,542 | ) | | | — | |
| | |
Net realized gain: | | | | | | | | |
Class A | | | (78,152 | ) | | | (129,475 | ) |
Class B | | | — | | | | (165 | ) |
Class C | | | (12,741 | ) | | | (21,049 | ) |
| | | | | | | | |
| | | (3,160,642 | ) | | | (3,341,868 | ) |
| | | | | | | | |
| | |
Capital Share Transactions: | | | | | | | | |
Proceeds from shares sold: | | | | | | | | |
Class A | | | 13,175,028 | | | | 13,706,590 | |
Class C | | | 1,244,117 | | | | 2,367,119 | |
Institutional Class | | | 2,551,083 | | | | — | |
| | |
Net asset value of shares issued upon reinvestment of dividends and distributions: | | | | | | | | |
Class A | | | 2,527,475 | | | | 2,601,208 | |
Class B1 | | | — | | | | 1,545 | |
Class C | | | 294,351 | | | | 321,602 | |
Institutional Class | | | 9,474 | | | | — | |
| | | | | | | | |
| | | 19,801,528 | | | | 18,998,064 | |
| | | | | | | | |
56
| | | | | | | | |
| | | Year ended | |
| | | 8/31/14 | | | 8/31/13 | |
Capital Share Transactions (continued): | | | | | | | | |
Cost of shares redeemed: | | | | | | | | |
Class A | | $ | (19,151,079 | ) | | $ | (17,238,576 | ) |
Class B1 | | | — | | | | (127,300 | ) |
Class C | | | (4,017,165 | ) | | | (3,386,183 | ) |
Institutional Class | | | (202,713 | ) | | | — | |
| | | | | | | | |
| | | (23,370,957 | ) | | | (20,752,059 | ) |
| | | | | | | | |
Decrease in net assets derived from capital share transactions | | | (3,569,429 | ) | | | (1,753,995 | ) |
| | | | | | | | |
Net Increase (Decrease) in Net Assets | | | 950,244 | | | | (8,720,851 | ) |
| | |
Net Assets: | | | | | | | | |
Beginning of year | | | 104,648,252 | | | | 113,369,103 | |
| | | | | | | | |
End of year | | $ | 105,598,496 | | | $ | 104,648,252 | |
| | | | | | | | |
| | |
Undistributed (distributions in excess of) net investment income | | $ | (785 | ) | | $ | 2,522 | |
| | | | | | | | |
1 Class B was fully liquidated on May 31, 2013.
See accompanying notes, which are an integral part of the financial statements.
57
Statements of changes in net assets
Delaware Minnesota High-Yield Municipal Bond Fund
| | | | | | | | |
| | | Year ended | |
| | | 8/31/14 | | | 8/31/13 | |
Increase (Decrease) in Net Assets from Operations: | | | | | | | | |
Net investment income | | $ | 5,632,781 | | | $ | 5,797,360 | |
Net realized gain (loss) | | | (2,149,197 | ) | | | 133,909 | |
Net change in unrealized appreciation (depreciation) | | | 11,247,335 | | | | (13,202,802 | ) |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | 14,730,919 | | | | (7,271,533 | ) |
| | | | | | | | |
| | |
Dividends and Distributions to Shareholders from: | | | | | | | | |
Net investment income: | | | | | | | | |
Class A | | | (4,582,286 | ) | | | (4,698,827 | ) |
Class B | | | (31,645 | ) | | | (46,735 | ) |
Class C | | | (969,612 | ) | | | (1,031,373 | ) |
Institutional Class | | | (27,089 | ) | | | — | |
| | | | | | | | |
| | | (5,610,632 | ) | | | (5,776,935 | ) |
| | | | | | | | |
| | |
Capital Share Transactions: | | | | | | | | |
Proceeds from shares sold: | | | | | | | | |
Class A | | | 18,470,038 | | | | 26,920,043 | |
Class B | | | — | | | | 28,000 | |
Class C | | | 3,069,486 | | | | 7,275,100 | |
Institutional Class | | | 6,561,505 | | | | — | |
| | |
Net asset value of shares issued upon reinvestment of dividends and distributions: | | | | | | | | |
Class A | | | 3,678,088 | | | | 3,752,121 | |
Class B | | | 28,590 | | | | 43,518 | |
Class C | | | 869,107 | | | | 907,936 | |
Institutional Class | | | 21,519 | | | | — | |
| | | | | | | | |
| | | 32,698,333 | | | | 38,926,718 | |
| | | | | | | | |
58
| | | | | | | | |
| | | Year ended | |
| | | 8/31/14 | | | 8/31/13 | |
Capital Share Transactions (continued): | | | | | | | | |
Cost of shares redeemed: | | | | | | | | |
Class A | | $ | (31,473,375 | ) | | $ | (24,054,167 | ) |
Class B | | | (886,465 | ) | | | (556,617 | ) |
Class C | | | (6,688,975 | ) | | | (5,642,646 | ) |
Institutional Class | | | (154,969 | ) | | | — | |
| | | | | | | | |
| | | (39,203,784 | ) | | | (30,253,430 | ) |
| | | | | | | | |
Increase (decrease) in net assets derived from capital share transactions | | | (6,505,451 | ) | | | 8,673,288 | |
| | | | | | | | |
Net Increase (Decrease) in Net Assets | | | 2,614,836 | | | | (4,375,180 | ) |
| | |
Net Assets: | | | | | | | | |
Beginning of year | | | 155,702,184 | | | | 160,077,364 | |
| | | | | | | | |
End of year | | $ | 158,317,020 | | | $ | 155,702,184 | |
| | | | | | | | |
See accompanying notes, which are an integral part of the financial statements.
59
Financial highlights
Delaware Tax-Free Minnesota Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
| |
|
|
Net asset value, beginning of period |
|
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
|
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
|
Net asset value, end of period |
|
Total return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
60
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 11.970 | | | | | | $ | 13.030 | | | | | | $ | 12.480 | | | | | | $ | 12.730 | | | | | | $ | 12.180 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.445 | | | | | | | 0.445 | | | | | | | 0.487 | | | | | | | 0.492 | | | | | | | 0.484 | |
| | | | 0.734 | | | | | | | (0.973 | ) | | | | | | 0.660 | | | | | | | (0.198 | ) | | | | | | 0.550 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 1.179 | | | | | | | (0.528 | ) | | | | | | 1.147 | | | | | | | 0.294 | | | | | | | 1.034 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.444 | ) | | | | | | (0.445 | ) | | | | | | (0.488 | ) | | | | | | (0.492 | ) | | | | | | (0.484 | ) |
| | | | (0.035 | ) | | | | | | (0.087 | ) | | | | | | (0.109 | ) | | | | | | (0.052 | ) | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.479 | ) | | | | | | (0.532 | ) | | | | | | (0.597 | ) | | | | | | (0.544 | ) | | | | | | (0.484 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 12.670 | | | | | | $ | 11.970 | | | | | | $ | 13.030 | | | | | | $ | 12.480 | | | | | | $ | 12.730 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 10.03% | | | | | | | (4.24% | ) | | | | | | 9.41% | | | | | | | 2.50% | | | | | | | 8.66% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 503,072 | | | | | | $ | 540,533 | | | | | | $ | 577,061 | | | | | | $ | 538,170 | | | | | | $ | 586,651 | |
| | | | 0.90% | | | | | | | 0.90% | | | | | | | 0.90% | | | | | | | 0.91% | | | | | | | 0.93% | |
| | | | | | | | | |
| | | | 0.95% | | | | | | | 0.95% | | | | | | | 0.92% | | | | | | | 0.93% | | | | | | | 0.93% | |
| | | | 3.61% | | | | | | | 3.47% | | | | | | | 3.81% | | | | | | | 4.02% | | | | | | | 3.89% | |
| | | | 3.56% | | | | | | | 3.42% | | | | | | | 3.79% | | | | | | | 4.00% | | | | | | | 3.89% | |
| | | | | 10% | | | | | | | 16% | | | | | | | 16% | | | | | | | 12% | | | | | | | 20% | |
61
Financial highlights
Delaware Tax-Free Minnesota Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
| |
|
|
Net asset value, beginning of period |
|
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
|
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
|
Net asset value, end of period |
|
Total return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
62
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 11.980 | | | | | | $ | 13.040 | | | | | | $ | 12.490 | | | | | | $ | 12.740 | | | | | | $ | 12.190 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.446 | | | | | | | 0.387 | | | | | | | 0.391 | | | | | | | 0.400 | | | | | | | 0.391 | |
| | | | 0.734 | | | | | | | (0.973 | ) | | | | | | 0.660 | | | | | | | (0.197 | ) | | | | | | 0.550 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 1.180 | | | | | | | (0.586 | ) | | | | | | 1.051 | | | | | | | 0.203 | | | | | | | 0.941 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.445 | ) | | | | | | (0.387 | ) | | | | | | (0.392 | ) | | | | | | (0.401 | ) | | | | | | (0.391 | ) |
| | | | (0.035 | ) | | | | | | (0.087 | ) | | | | | | (0.109 | ) | | | | | | (0.052 | ) | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.480 | ) | | | | | | (0.474 | ) | | | | | | (0.501 | ) | | | | | | (0.453 | ) | | | | | | (0.391 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 12.680 | | | | | | $ | 11.980 | | | | | | $ | 13.040 | | | | | | $ | 12.490 | | | | | | $ | 12.740 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 10.03% | | | | | | | (4.66% | ) | | | | | | 8.59% | | | | | | | 1.74% | | | | | | | 7.85% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 457 | | | | | | $ | 1,143 | | | | | | $ | 2,115 | | | | | | $ | 3,697 | | | | | | $ | 7,234 | |
| | | | 0.90% | | | | | | | 1.39% | | | | | | | 1.65% | | | | | | | 1.66% | | | | | | | 1.68% | |
| | | | | | | | | |
| | | | 1.70% | | | | | | | 1.70% | | | | | | | 1.67% | | | | | | | 1.68% | | | | | | | 1.68% | |
| | | | 3.61% | | | | | | | 2.98% | | | | | | | 3.06% | | | | | | | 3.27% | | | | | | | 3.14% | |
| | | | | | | | | |
| | | | 2.81% | | | | | | | 2.67% | | | | | | | 3.04% | | | | | | | 3.25% | | | | | | | 3.14% | |
| | | | | 10% | | | | | | | 16% | | | | | | | 16% | | | | | | | 12% | | | | | | | 20% | |
63
Financial highlights
Delaware Tax-Free Minnesota Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
| |
|
|
Net asset value, beginning of period |
|
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
|
Less dividends and distributions from: |
Net investment income |
Net realized gain |
Total dividends and distributions |
|
Net asset value, end of period |
|
Total return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
|
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
64
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 12.010 | | | | | | $ | 13.070 | | | | | | $ | 12.520 | | | | | | $ | 12.780 | | | | | | $ | 12.220 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.354 | | | | | | | 0.350 | | | | | | | 0.392 | | | | | | | 0.401 | | | | | | | 0.392 | |
| | | | 0.734 | | | | | | | (0.973 | ) | | | | | | 0.660 | | | | | | | (0.207 | ) | | | | | | 0.560 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 1.088 | | | | | | | (0.623 | ) | | | | | | 1.052 | | | | | | | 0.194 | | | | | | | 0.952 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.353 | ) | | | | | | (0.350 | ) | | | | | | (0.393 | ) | | | | | | (0.402 | ) | | | | | | (0.392 | ) |
| | | | (0.035 | ) | | | | | | (0.087 | ) | | | | | | (0.109 | ) | | | | | | (0.052 | ) | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.388 | ) | | | | | | (0.437 | ) | | | | | | (0.502 | ) | | | | | | (0.454 | ) | | | | | | (0.392 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 12.710 | | | | | | $ | 12.010 | | | | | | $ | 13.070 | | | | | | $ | 12.520 | | | | | | $ | 12.780 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 9.19% | | | | | | | (4.93% | ) | | | | | | 8.58% | | | | | | | 1.66% | | | | | | | 7.91% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 41,612 | | | | | | $ | 42,985 | | | | | | $ | 41,368 | | | | | | $ | 34,425 | | | | | | $ | 38,981 | |
| | | | 1.65% | | | | | | | 1.65% | | | | | | | 1.65% | | | | | | | 1.66% | | | | | | | 1.68% | |
| | | | | | | | | |
| | | | 1.70% | | | | | | | 1.70% | | | | | | | 1.67% | | | | | | | 1.68% | | | | | | | 1.68% | |
| | | | 2.86% | | | | | | | 2.72% | | | | | | | 3.06% | | | | | | | 3.27% | | | | | | | 3.14% | |
| | | | | | | | | |
| | | | 2.81% | | | | | | | 2.67% | | | | | | | 3.04% | | | | | | | 3.25% | | | | | | | 3.14% | |
| | | | | 10% | | | | | | | 16% | | | | | | | 16% | | | | | | | 12% | | | | | | | 20% | |
65
Financial highlights
Delaware Tax-Free Minnesota Fund Institutional Class
Selected data for each share of the Fund outstanding throughout the period was as follows:
| | | | |
| | | 12/31/131
to 8/31/14 | |
| |
Net asset value, beginning of period | | $ | 12.070 | |
| |
Income from investment operations: | | | | |
Net investment income2 | �� | | 0.336 | |
Net realized and unrealized gain | | | 0.589 | |
| | | | |
Total from investment operations | | | 0.925 | |
| | | | |
| |
Less dividends and distributions from: | | | | |
Net investment income | | | (0.335 | ) |
| | | | |
Total dividends and distributions | | | (0.335 | ) |
| | | | |
| |
Net asset value, end of period | | $ | 12.660 | |
| | | | |
| |
Total return3 | | | 7.74% | |
| |
Ratios and supplemental data: | | | | |
Net assets, end of period (000 omitted) | | $ | 17,533 | |
Ratio of expenses to average net assets | | | 0.65% | |
Ratio of expenses to average net assets prior to fees waived | | | 0.70% | |
Ratio of net investment income to average net assets | | | 3.84% | |
Ratio of net investment income to average net assets prior to fees waived | | | 3.79% | |
Portfolio turnover | | | 10% | 4 |
| | | | | |
| 1 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
| 2 | The average shares outstanding has been applied for per share information. |
| 3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during the period shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
| 4 | Portfolio turnover is representative of the Fund for the entire year. |
See accompanying notes, which are an integral part of the financial statements.
66
This page intentionally left blank.
Financial highlights
Delaware Tax-Free Minnesota Intermediate Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
| | |
| | |
Net asset value, beginning of period | | |
| |
Income (loss) from investment operations: | | |
Net investment income1 | | |
Net realized and unrealized gain (loss) | | |
Total from investment operations. | | |
| |
Less dividends and distributions from: | | |
Net investment income | | |
Net realized gain | | |
Total dividends and distributions | | |
| |
Net asset value, end of period | | |
| |
Total return2 | | |
| |
Ratios and supplemental data: | | |
Net assets, end of period (000 omitted) | | |
Ratio of expenses to average net assets | | |
Ratio of expenses to average net assets prior to fees waived | | |
Ratio of net investment income to average net assets | | |
Ratio of net investment income to average net assets prior to fees waived | | |
Portfolio turnover | | |
| | | |
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
68
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 10.840 | | | | | | $ | 11.530 | | | | | | $ | 11.130 | | | | | | $ | 11.290 | | | | | | $ | 10.820 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.342 | | | | | | | 0.330 | | | | | | | 0.355 | | | | | | | 0.375 | | | | | | | 0.376 | |
| | | | 0.490 | | | | | | | (0.675 | ) | | | | | | 0.400 | | | | | | | (0.160 | ) | | | | | | 0.469 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.832 | | | | | | | (0.345 | ) | | | | | | 0.755 | | | | | | | 0.215 | | | | | | | 0.845 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.342 | ) | | | | | | (0.330 | ) | | | | | | (0.355 | ) | | | | | | (0.375 | ) | | | | | | (0.375 | ) |
| | | | (0.010 | ) | | | | | | (0.015 | ) | | | | | | — | | | | | | | — | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.352 | ) | | | | | | (0.345 | ) | | | | | | (0.355 | ) | | | | | | (0.375 | ) | | | | | | (0.375 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 11.320 | | | | | | $ | 10.840 | | | | | | $ | 11.530 | | | | | | $ | 11.130 | | | | | | $ | 11.290 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 7.79% | | | | | | | (3.09% | ) | | | | | | 6.88% | | | | | | | 2.02% | | | | | | | 7.96% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 90,571 | | | | | | $ | 90,110 | | | | | | $ | 97,032 | | | | | | $ | 87,924 | | | | | | $ | 96,568 | |
| | | | 0.84% | | | | | | | 0.84% | | | | | | | 0.84% | | | | | | | 0.84% | | | | | | | 0.82% | |
| | | | | | | | | |
| | | | 0.98% | | | | | | | 0.97% | | | | | | | 0.94% | | | | | | | 0.95% | | | | | | | 0.96% | |
| | | | 3.08% | | | | | | | 2.89% | | | | | | | 3.12% | | | | | | | 3.43% | | | | | | | 3.42% | |
| | | | | | | | | |
| | | | 2.94% | | | | | | | 2.76% | | | | | | | 3.02% | | | | | | | 3.32% | | | | | | | 3.28% | |
| | | | | 14% | | | | | | | 17% | | | | | | | 21% | | | | | | | 24% | | | | | | | 22% | |
69
Financial highlights
Delaware Tax-Free Minnesota Intermediate Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
| | |
| | |
Net asset value, beginning of period | | |
| |
Income (loss) from investment operations: | | |
Net investment income1 | | |
Net realized and unrealized gain (loss) | | |
Total from investment operations | | |
| |
Less dividends and distributions from: | | |
Net investment income | | |
Net realized gain | | |
Total dividends and distributions | | |
| |
Net asset value, end of period | | |
| |
Total return2 | | |
| |
Ratios and supplemental data: | | |
Net assets, end of period (000 omitted) | | |
Ratio of expenses to average net assets | | |
Ratio of expenses to average net assets prior to fees waived | | |
Ratio of net investment income to average net assets | | |
Ratio of net investment income to average net assets prior to fees waived | | |
Portfolio turnover | | |
| | | |
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during some of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
70
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 10.860 | | | | | | $ | 11.560 | | | | | | $ | 11.160 | | | | | | $ | 11.320 | | | | | | $ | 10.840 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.249 | | | | | | | 0.233 | | | | | | | 0.259 | | | | | | | 0.283 | | | | | | | 0.283 | |
| | | | 0.500 | | | | | | | (0.685 | ) | | | | | | 0.400 | | | | | | | (0.160 | ) | | | | | | 0.479 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.749 | | | | | | | (0.452 | ) | | | | | | 0.659 | | | | | | | 0.123 | | | | | | | 0.762 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.249 | ) | | | | | | (0.233 | ) | | | | | | (0.259 | ) | | | | | | (0.283 | ) | | | | | | (0.282 | ) |
| | | | (0.010 | ) | | | | | | (0.015 | ) | | | | | | — | | | | | | | — | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.259 | ) | | | | | | (0.248 | ) | | | | | | (0.259 | ) | | | | | | (0.283 | ) | | | | | | (0.282 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 11.350 | | | | | | $ | 10.860 | | | | | | $ | 11.560 | | | | | | $ | 11.160 | | | | | | $ | 11.320 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 6.96% | | | | | | | (3.99% | ) | | | | | | 5.96% | | | | | | | 1.16% | | | | | | | 7.14% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 12,651 | | | | | | $ | 14,538 | | | | | | $ | 16,210 | | | | | | $ | 13,949 | | | | | | $ | 14,649 | |
| | | | 1.69% | | | | | | | 1.69% | | | | | | | 1.69% | | | | | | | 1.69% | | | | | | | 1.67% | |
| | | | | | | | | |
| | | | 1.73% | | | | | | | 1.72% | | | | | | | 1.69% | | | | | | | 1.70% | | | | | | | 1.71% | |
| | | | 2.23% | | | | | | | 2.04% | | | | | | | 2.27% | | | | | | | 2.58% | | | | | | | 2.57% | |
| | | | | | | | | |
| | | | 2.19% | | | | | | | 2.01% | | | | | | | 2.27% | | | | | | | 2.57% | | | | | | | 2.53% | |
| | | | | 14% | | | | | | | 17% | | | | | | | 21% | | | | | | | 24% | | | | | | | 22% | |
71
Financial highlights
Delaware Tax-Free Minnesota Intermediate Fund Institutional Class
Selected data for each share of the Fund outstanding throughout the period was as follows:
| | | | |
| | | 12/31/131
to 8/31/14 | |
| |
Net asset value, beginning of period | | $ | 10.950 | |
| |
Income from investment operations: | | | | |
Net investment income2 | | | 0.255 | |
Net realized and unrealized gain | | | 0.380 | |
| | | | |
Total from investment operations | | | 0.635 | |
| | | | |
| |
Less dividends and distributions from: | | | | |
Net investment income | | | (0.255 | ) |
| | | | |
Total dividends and distributions | | | (0.255 | ) |
| | | | |
| |
Net asset value, end of period | | $ | 11.330 | |
| | | | |
| |
Total return3 | | | 5.85% | |
Ratios and supplemental data: | | | | |
Net assets, end of period (000 omitted) | | $ | 2,376 | |
Ratio of expenses to average net assets | | | 0.69% | |
Ratio of expenses to average net assets prior to fees waived | | | 0.73% | |
Ratio of net investment income to average net assets | | | 3.21% | |
Ratio of net investment income to average net assets prior to fees waived | | | 3.17% | |
Portfolio turnover | | | 14% | 4 |
| 1 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
| 2 | The average shares outstanding has been applied for per share information. |
| 3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during the period shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
| 4 | Portfolio turnover is representative of the Fund for the entire year. |
See accompanying notes, which are an integral part of the financial statements.
72
This page intentionally left blank.
Financial highlights
Delaware Minnesota High-Yield Municipal Bond Fund Class A
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
| |
Net asset value, beginning of period |
|
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
|
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
|
Net asset value, end of period |
|
Total return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
74
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 10.250 | | | | | | $ | 11.080 | | | | | | $ | 10.490 | | | | | | $ | 10.710 | | | | | | $ | 9.910 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 0.404 | | | | | | | 0.399 | | | | | | | 0.420 | | | | | | | 0.430 | | | | | | | 0.415 | |
| | | | 0.628 | | | | | | | (0.831 | ) | | | | | | 0.596 | | | | | | | (0.222 | ) | | | | | | 0.798 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 1.032 | | | | | | | (0.432 | ) | | | | | | 1.016 | | | | | | | 0.208 | | | | | | | 1.213 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | (0.402 | ) | | | | | | (0.398 | ) | | | | | | (0.426 | ) | | | | | | (0.428 | ) | | | | | | (0.413 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.402 | ) | | | | | | (0.398 | ) | | | | | | (0.426 | ) | | | | | | (0.428 | ) | | | | | | (0.413 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 10.880 | | | | | | $ | 10.250 | | | | | | $ | 11.080 | | | | | | $ | 10.490 | | | | | | $ | 10.710 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 10.25% | | | | | | | (4.06% | ) | | | | | | 9.86% | | | | | | | 2.12% | | | | | | | 12.46% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 119,044 | | | | | | $ | 121,232 | | | | | | $ | 124,717 | | | | | | $ | 108,830 | | | | | | $ | 119,038 | |
| | | | 0.89% | | | | | | | 0.89% | | | | | | | 0.89% | | | | | | | 0.91% | | | | | | | 0.93% | |
| | | | | | | | | |
| | | | 0.99% | | | | | | | 0.99% | | | | | | | 0.97% | | | | | | | 0.98% | | | | | | | 0.98% | |
| | | | 3.82% | | | | | | | 3.64% | | | | | | | 3.89% | | | | | | | 4.20% | | | | | | | 4.02% | |
| | | | | | | | | |
| | | | 3.72% | | | | | | | 3.54% | | | | | | | 3.81% | | | | | | | 4.13% | | | | | | | 3.97% | |
| | | | | 15% | | | | | | | 14% | | | | | | | 13% | | | | | | | 5% | | | | | | | 11% | |
75
Financial highlights
Delaware Minnesota High-Yield Municipal Bond Fund Class B
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
| |
Net asset value, beginning of period |
|
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
|
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
|
Net asset value, end of period |
|
Total return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects waivers by the manager and/or distributor. Performance would have been lower had the waivers not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
76
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 10.270 | | | | | | $ | 11.090 | | | | | | $ | 10.510 | | | | | | $ | 10.720 | | | | | | $ | 9.920 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 0.397 | | | | | | | 0.318 | | | | | | | 0.340 | | | | | | | 0.354 | | | | | | | 0.338 | |
| | | | 0.628 | | | | | | | (0.822 | ) | | | | | | 0.586 | | | | | | | (0.212 | ) | | | | | | 0.798 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 1.025 | | | | | | | (0.504 | ) | | | | | | 0.926 | | | | | | | 0.142 | | | | | | | 1.136 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | (0.395 | ) | | | | | | (0.316 | ) | | | | | | (0.346 | ) | | | | | | (0.352 | ) | | | | | | (0.336 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.395 | ) | | | | | | (0.316 | ) | | | | | | (0.346 | ) | | | | | | (0.352 | ) | | | | | | (0.336 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 10.900 | | | | | | $ | 10.270 | | | | | | $ | 11.090 | | | | | | $ | 10.510 | | | | | | $ | 10.720 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 10.16% | | | | | | | (4.68% | ) | | | | | | 8.93% | | | | | | | 1.46% | | | | | | | 11.62% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | $524 | | | | | | $ | 1,330 | | | | | | $ | 1,928 | | | | | | $ | 2,892 | | | | | | $ | 4,130 | |
| | | | 0.98% | | | | | | | 1.64% | | | | | | | 1.64% | | | | | | | 1.66% | | | | | | | 1.68% | |
| | | | | | | | | |
| | | | 1.74% | | | | | | | 1.74% | | | | | | | 1.72% | | | | | | | 1.73% | | | | | | | 1.73% | |
| | | | 3.73% | | | | | | | 2.89% | | | | | | | 3.14% | | | | | | | 3.45% | | | | | | | 3.27% | |
| | | | | | | | | |
| | | | 2.97% | | | | | | | 2.79% | | | | | | | 3.06% | | | | | | | 3.38% | | | | | | | 3.22% | |
| | | | | 15% | | | | | | | 14% | | | | | | | 13% | | | | | | | 5% | | | | | | | 11% | |
77
Financial highlights
Delaware Minnesota High-Yield Municipal Bond Fund Class C
Selected data for each share of the Fund outstanding throughout each period were as follows:
|
| |
Net asset value, beginning of period |
|
Income (loss) from investment operations: |
Net investment income1 |
Net realized and unrealized gain (loss) |
Total from investment operations |
|
Less dividends and distributions from: |
Net investment income |
Total dividends and distributions |
|
Net asset value, end of period |
|
Total return2 |
|
Ratios and supplemental data: |
Net assets, end of period (000 omitted) |
Ratio of expenses to average net assets |
Ratio of expenses to average net assets prior to fees waived |
Ratio of net investment income to average net assets |
Ratio of net investment income to average net assets prior to fees waived |
Portfolio turnover |
| 1 | The average shares outstanding has been applied for per share information. |
| 2 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return during all of the periods shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
See accompanying notes, which are an integral part of the financial statements.
78
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended |
| | | 8/31/14 | | | | 8/31/13 | | | | 8/31/12 | | | | 8/31/11 | | | | 8/31/10 |
| | | $ | 10.270 | | | | | | $ | 11.100 | | | | | | $ | 10.510 | | | | | | $ | 10.730 | | | | | | $ | 9.930 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 0.326 | | | | | | | 0.318 | | | | | | | 0.340 | | | | | | | 0.354 | | | | | | | 0.338 | |
| | | | 0.628 | | | | | | | (0.832 | ) | | | | | | 0.596 | | | | | | | (0.222 | ) | | | | | | 0.798 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 0.954 | | | | | | | (0.514 | ) | | | | | | 0.936 | | | | | | | 0.132 | | | | | | | 1.136 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | (0.324 | ) | | | | | | (0.316 | ) | | | | | | (0.346 | ) | | | | | | (0.352 | ) | | | | | | (0.336 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | (0.324 | ) | | | | | | (0.316 | ) | | | | | | (0.346 | ) | | | | | | (0.352 | ) | | | | | | (0.336 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 10.900 | | | | | | $ | 10.270 | | | | | | $ | 11.100 | | | | | | $ | 10.510 | | | | | | $ | 10.730 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | 9.41% | | | | | | | (4.77% | ) | | | | | | 9.03% | | | | | | | 1.36% | | | | | | | 11.61% | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | $ | 32,279 | | | | | | $ | 33,140 | | | | | | $ | 33,432 | | | | | | $ | 26,718 | | | | | | $ | 28,727 | |
| | | | 1.64% | | | | | | | 1.64% | | | | | | | 1.64% | | | | | | | 1.66% | | | | | | | 1.68% | |
| | | | | | | | | |
| | | | 1.74% | | | | | | | 1.74% | | | | | | | 1.72% | | | | | | | 1.73% | | | | | | | 1.73% | |
| | | | 3.07% | | | | | | | 2.89% | | | | | | | 3.14% | | | | | | | 3.45% | | | | | | | 3.27% | |
| | | | | | | | | |
| | | | 2.97% | | | | | | | 2.79% | | | | | | | 3.06% | | | | | | | 3.38% | | | | | | | 3.22% | |
| | | | | 15% | | | | | | | 14% | | | | | | | 13% | | | | | | | 5% | | | | | | | 11% | |
79
Financial highlights
Delaware Minnesota High-Yield Municipal Bond Fund Institutional Class
Selected data for each share of the Fund outstanding throughout the period was as follows:
| | | | |
| | | 12/31/131
to 8/31/14 | |
| |
Net asset value, beginning of period | | $ | 10.350 | |
| |
Income from investment operations: | | | | |
Net investment income2 | | | 0.312 | |
Net realized and unrealized gain | | | 0.528 | |
| | | | |
Total from investment operations | | | 0.840 | |
| | | | |
| |
Less dividends and distributions from: | | | | |
Net investment income | | | (0.310 | ) |
| | | | |
Total dividends and distributions | | | (0.310 | ) |
| | | | |
| |
Net asset value, end of period | | $ | 10.880 | |
| | | | |
| |
Total return3 | | | 8.21% | |
| |
Ratios and supplemental data: | | | | |
Net assets, end of period (000 omitted) | | $ | 6,470 | |
Ratio of expenses to average net assets | | | 0.64% | |
Ratio of expenses to average net assets prior to fees waived | | | 0.74% | |
Ratio of net investment income to average net assets | | | 4.04% | |
Ratio of net investment income to average net assets prior to fees waived | | | 3.94% | |
Portfolio turnover | | | 15% | 4 |
| 1 | Date of commencement of operations; ratios have been annualized and total return has not been annualized. |
| 2 | The average shares outstanding has been applied for per share information. |
| 3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return during the period shown reflects a waiver by the manager. Performance would have been lower had the waiver not been in effect. |
| 4 | Portfolio turnover is representative of the Fund for the entire year. |
See accompanying notes, which are an integral part of the financial statements.
80
Notes to financial statements
| | | | |
| Delaware Investments® Minnesota Municipal Bond Funds | | | August 31, 2014 | |
Voyageur Mutual Funds is organized as a Delaware statutory trust and offers five series: Delaware Minnesota High-Yield Municipal Bond Fund, Delaware National High-Yield Municipal Bond Fund, Delaware Tax-Free California Fund, Delaware Tax-Free Idaho Fund, and Delaware Tax-Free New York Fund. Voyageur Tax-Free Funds is organized as a Delaware statutory trust and offers Delaware Tax-Free Minnesota Fund. Voyageur Intermediate Tax-Free Funds is organized as a Delaware statutory trust and offers Delaware Tax-Free Minnesota Intermediate Fund. Voyageur Mutual Funds, Voyageur Tax-Free Funds, and Voyageur Intermediate Tax-Free Funds are individually referred to as a Trust and collectively as the Trusts. These financial statements and the related notes pertain to Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund (each referred to as a Fund, or collectively, as the Funds). The above Trusts are open-end investment companies. The Funds are considered diversified under the Investment Company Act of 1940, as amended, and offer Class A, Class B* (except Delaware Tax-Free Minnesota Intermediate Fund), Class C, and Institutional Class shares. Class A shares are sold with a maximum front-end sales charge of 4.50% for Delaware Tax-Free Minnesota Fund and Delaware Minnesota High-Yield Municipal Bond Fund, and 2.75% for Delaware Tax-Free Minnesota Intermediate Fund. Class A share purchases of $1,000,000 or more will incur a contingent deferred sales charge (CDSC) of 1.00% if redeemed during the first year, and 0.50% during the second year for Delaware Tax-Free Minnesota Fund and Delaware Minnesota High-Yield Municipal Bond Fund, and 0.75% for Delaware Tax-Free Minnesota Intermediate Fund, if redeemed within the first year, provided that Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase of those shares. Class B shares may be purchased only through dividend reinvestment and certain permitted exchanges. Prior to June 1, 2007, Class B shares were sold with a CDSC that declined from 4.00% to zero for Delaware Tax-Free Minnesota Fund and Delaware Minnesota High-Yield Municipal Bond Fund depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase for Delaware Tax-Free Minnesota Fund and Delaware Minnesota High-Yield Municipal Bond Fund.* Class C shares are sold with a CDSC of 1.00%, if redeemed during the first 12 months. Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to certain eligible investors.
The investment objective of Delaware Tax-Free Minnesota 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.
The investment objective of Delaware Tax-Free Minnesota Intermediate Fund is to seek to provide investors with preservation of capital and, secondarily, current income exempt from federal income tax and the Minnesota state personal income tax, by maintaining a dollar-weighted average effective portfolio maturity of 10 years or less.
The investment objective of Delaware Minnesota High-Yield Municipal Bond Fund is to seek as high a level of current income exempt from federal income tax and from Minnesota state personal income taxes, primarily through investment in medium- and lower-grade municipal obligations.
*See Note 11.
81
Notes to financial statements
Delaware Investments® Minnesota Municipal Bond Funds
1. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and are consistently followed by the Funds.
Security Valuation – Debt securities are valued based upon valuations provided by an independent pricing service or broker and reviewed by management. To the extent current market prices are not available, the pricing service may take into account developments related to the specific security, as well as transactions in comparable securities. Valuations for fixed income securities utilize matrix systems, which reflect such factors as security prices, yields, maturities, and ratings, and are supplemented by dealer and exchange quotations. Open-end investment companies are valued at their published net asset value. Generally, 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 each Fund’s Board of Trustees (each, a Board or, collectively the Boards). 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 or suspension of trading in a security.
Federal Income Taxes – No provision for federal income taxes has been made as each Fund intends to continue to qualify for federal income tax purposes as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to shareholders. Each Fund evaluates tax positions taken or expected to be taken in the course of preparing each 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 are recorded as a tax benefit or expense in the current year. Management has analyzed each Fund’s tax positions taken for all open federal income tax years (Aug. 31, 2011–Aug. 31, 2014) and has concluded that no provision for federal income tax is required in each Fund’s financial statements.
Class Accounting – Investment income and common expenses are allocated to the various classes of each Fund on the basis of “settled shares” of each class in relation to the net assets of each Fund. Realized and unrealized gain (loss) on investments are allocated to the various classes of each 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. GAAP requires management to make estimates and assumptions that affect the fair value of investments, the reported amounts of assets and liabilities and disclosure of contingent 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 and the differences could be material.
Other – Expenses directly attributable to a Fund are charged directly to that Fund. Other expenses common to various funds within the Delaware Investments® Family of Funds are generally allocated among such 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 on debt securities are amortized to interest income over the lives of the respective securities using the effective interest method. Each Fund declares dividends daily from net
82
investment income and pays the dividends monthly and declares and pays distributions from net realized gain on investments, if any, annually. Each Fund may distribute more frequently, if necessary for tax purposes. Dividends and distributions, if any, are recorded on the ex-dividend date.
Each Fund may receive earnings credits from its custodian when positive cash balances are maintained, which may be used to offset custody fees. There were no earnings credits for the year ended Aug. 31, 2014.
Each Fund receives earnings credits from its transfer agent when positive cash balances are maintained, which may be used to offset transfer agent fees. If the amount earned is greater than one dollar, the expense paid under this arrangement is included on the “Statements of operations” under “Dividend disbursing and transfer agent fees and expenses” with the corresponding expense offset shown as “Less expense paid indirectly.” For the year ended Aug. 31, 2014, each Fund earned the following amounts under this agreement:
| | | | | | |
| | | | | Delaware Tax-Free | | Delaware Minnesota |
| | | Delaware Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
| | $177 | | $34 | | $55 |
2. Investment Management, Administration Agreements and Other Transactions with Affiliates In accordance with the terms of its respective investment management agreement, each Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee, which is calculated based on each Fund’s average daily net assets as follows: |
| | | Delaware Tax-Free | | Delaware Tax-Free
Minnesota | | Delaware Minnesota
High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
On the first $500 million | | 0.550% | | 0.500% | | 0.550% |
On the next $500 million | | 0.500% | | 0.475% | | 0.500% |
On the next $1.5 billion | | 0.450% | | 0.450% | | 0.450% |
In excess of $2.5 billion | | 0.425% | | 0.425% | | 0.425% |
DMC has contractually agreed to waive that portion, if any, of its management fee and/or pay/reimburse each Fund to the extent necessary to ensure that total annual fund operating expenses (excluding any 12b-1 fees, taxes, interest, inverse floater program expenses, acquired fund fees and expenses, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder
83
Notes to financial statements
Delaware Investments® Minnesota Municipal Bond Funds
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
meetings, and liquidations (collectively, nonroutine expenses)) do not exceed the following percentages of each Fund’s average daily net assets from Sept. 1, 2013 through Aug. 31, 2014.* For purposes of this waiver and reimbursement, nonroutine expenses may also include such additional costs and expenses, as may be agreed upon from time to time by each Fund’s Board and DMC. These expense waivers and reimbursements may only be terminated by agreement of DMC and the Funds.
| | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
Operating expense limitation as a percentage of average daily net assets (per annum) | | 0.65% | | 0.69% | | 0.64% |
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides fund accounting and financial administration oversight services to the Funds. For these services, the Funds pay DSC fees based on the aggregate daily net assets of the Delaware Investments® Family of Funds at the following annual rate: 0.0050% of the first $30 billion; 0.0045% of the next $10 billion; 0.0040% of the next $10 billion; and 0.0025% of aggregate average daily net assets in excess of $50 billion. The fees payable to DSC under the service agreement described above are allocated among all Funds in the Delaware Investments Family of Funds on a relative net asset value basis. For the year ended Aug. 31, 2014, the Funds were charged for these services as follows: |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
| | $27,185 | | $4,970 | | $7,396 |
DSC is also the transfer agent and dividend disbursing agent of the Funds. For these services, the Funds pay DSC fees based on the aggregate daily net assets of the retail funds within the Delaware Investments® Family of Funds at the following annual rate: 0.025% of the first $20 billion; 0.020% of the next $5 billion; 0.015% of the next $5 billion; and 0.013% on average daily net assets in excess of $30 billion. These amounts are included on the “Statements of operations” under “Dividend and disbursing and transfer agent fees and expenses.” For the year ended Aug. 31, 2014, the amount charged by DSC for each Fund was as follows: |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
| | $123,365 | | $22,549 | | $33,558 |
Pursuant to a sub-transfer agency agreement between DSC and BNY Mellon Investment Servicing (US) Inc. (BNYMIS), BNYMIS provides certain sub-transfer agency services to the Funds. Sub-transfer agency fees are passed on to and paid directly by the Funds.
*The contractual waiver period is from Dec. 28, 2012 through Dec. 29, 2014.
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Pursuant to a distribution agreement and distribution plan, each Fund pays 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 C shares, and 1.00% of the average daily net assets of the Class B shares for Delaware Tax-Free Minnesota Fund and Delaware Minnesota High-Yield Municipal Bond Fund. DDLP has contracted to waive Delaware Tax-Free Minnesota Intermediate Fund’s Class A shares 12b-1 fees from Sept. 1, 2013 through Aug. 31, 2014* to 0.15% of average daily net assets. DDLP has contracted to waive Delaware Tax-Free Minnesota Fund and Delaware Minnesota High-Yield Municipal Bond Fund’s Class B shares’ 12b-1 fees from Sept. 1, 2013 through Aug. 31, 2014** to 0.25% of average daily net assets. Institutional Class shares pay no distribution and service fees.
As provided in the investment management agreement, each Fund bears a portion of the cost of certain resources shared with DMC, including the cost of internal personnel of DMC and/or its affiliates that provide legal, tax, and regulatory reporting services to the Funds. For the year ended Aug. 31, 2014, each Fund was charged for internal legal, tax, and regulatory reporting services provided by DMC and/or its affiliates’ employees as follows:
| | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
| | $16,345 | | $2,975 | | $4,428 |
For the year ended Aug. 31, 2014, DDLP earned commissions on sales of each Fund’s Class A shares as follows:
| | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
| | $39,161 | | $7,377 | | $15,419 |
For the year ended Aug. 31, 2014, DDLP received gross CDSC commissions on redemption of each Fund’s Class A and Class C shares, respectively, and these commissions were entirely used to offset upfront commissions previously paid by DDLP to broker/dealers on sales of those shares. The amounts received were as follows:
| | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
Class A | | $ 31 | | $ — | | $ — |
Class C | | 2,218 | | 1,660 | | 2,857 |
*The contractual waiver period is from Dec. 28, 2012 through Dec. 29, 2014.
**The contractual waiver period is from April 1, 2013 through Dec. 29, 2014 for Delaware Tax-Free Minnesota Fund and Oct.1, 2013 through Dec. 29, 2014 for Delaware Minnesota High-Yield Municipal Bond Fund. Prior to Oct. 1, 2013, there was no Class B waiver for Delaware Minnesota High-Yield Municipal Bond Fund.
85
Notes to financial statements
Delaware Investments® Minnesota Municipal Bond Funds
2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued)
Trustees’ fees include expenses accrued by each Fund for each Trustee’s retainer and meeting fees. Certain officers of DMC, DSC, and DDLP are officers and/or Trustees of the Trusts. These officers and Trustees are paid no compensation by the Funds.
3. Investments
For the year ended Aug. 31, 2014, each Fund made purchases and sales of investment securities other than short-term investments as follows:
| | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
Purchases | | $ 58,422,717 | | $14,312,807 | | $22,011,547 |
Sales | | 106,273,987 | | 16,723,451 | | 26,068,542 |
At Aug. 31, 2014, the cost of investments and unrealized appreciation (depreciation) for federal income tax purposes for each Fund were as follows:
| | | | | | | | | | | | |
| | | Delaware | | | Delaware Tax-Free | | | Delaware Minnesota | |
| | | Tax-Free | | | Minnesota | | | High-Yield Municipal | |
| | | Minnesota Fund | | | Intermediate Fund | | | Bond Fund | |
Cost of investments | | $ | 523,436,749 | | | $ | 99,376,029 | | | $ | 151,277,001 | |
| | | | | | | | | | | | |
Aggregate unrealized appreciation | | $ | 39,422,528 | | | $ | 6,202,713 | | | $ | 8,058,117 | |
Aggregate unrealized depreciation | | | (356,374) | | | | (32,509) | | | | (177,774) | |
| | | | | | | | | | | | |
Net unrealized appreciation | | $ | 39,066,154 | | | $ | 6,170,204 | | | $ | 7,880,343 | |
| | | | | | | | | | | | |
U.S. GAAP defines fair value as the price that each Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. A three-level hierarchy for fair value measurements has been established based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. Each Fund’s investment in its entirety is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-level hierarchy of inputs is summarized below.
| Level 1 – | Inputs are quoted prices in active markets for identical investments. (Examples: equity securities, open-end investment companies, futures contracts, exchange-traded options contracts) |
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| Level 2 – | Other observable inputs, including, but not limited to: quoted prices for identical or similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs. (Examples: debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities) |
| Level 3 – | Significant unobservable inputs, including each Fund’s own assumptions used to determine the fair value of investments. (Examples: broker-quoted securities, fair valued securities) |
Level 3 investments are valued using significant unobservable inputs. Each Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity, and industry. The derived value of a Level 3 investment may not represent the value which is received upon disposition and this could impact the results of operations.
The following tables summarize the valuation of each Fund’s investments by fair value hierarchy levels as of Aug. 31, 2014:
| | | | | | | | | | | | |
| | | Delaware Tax-Free Minnesota Fund | |
| | | |
| | | Level 1 | | | Level 2 | | | Total | |
Municipal Bonds | | $ | — | | | $ | 560,553,848 | | | $ | 560,553,848 | |
Short-Term Investments1 | | | 604,055 | | | | 1,345,000 | | | | 1,949,055 | |
| | | | | | | | | | | | |
Total | | $ | 604,055 | | | $ | 561,898,848 | | | $ | 562,502,903 | |
| | | | | | | | | | | | |
| |
| | | Delaware Tax-Free Minnesota Intermediate Fund | |
| | | |
| | | Level 1 | | | Level 2 | | | Total | |
Municipal Bonds | | $ | — | | | $ | 104,677,000 | | | $ | 104,677,000 | |
Short-Term Investments1 | | | 369,233 | | | | 500,000 | | | | 869,233 | |
| | | | | | | | | | | | |
Total | | $ | 369,233 | | | $ | 105,177,000 | | | $ | 105,546,233 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Delaware Minnesota High-Yield Municipal Bond Fund | |
| | | |
| | | Level 1 | | | Level 2 | | | Total | |
Municipal Bonds | | | $ — | | | | $158,122,279 | | | | $158,122,279 | |
Short-Term Investments1 | | | 535,065 | | | | 500,000 | | | | 1,035,065 | |
| | | | | | | | | | | | |
Total | | | $535,065 | | | | $158,622,279 | | | | $159,157,344 | |
| | | | | | | | | | | | |
| 1 | Security type is valued across multiple levels. Level 1 investments represent exchange-traded investments while Level 2 investments represent matrix-priced investments. The amounts attributed to Level 1 investments and Level 2 investments represent the following percentages of the total market value of this security type for each Fund: |
87
Notes to financial statements
Delaware Investments® Minnesota Municipal Bond Funds
3. Investments (continued)
| | | | | | | | | | | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
Short-Term Investments | | | | | | | | | | | | | | | |
Level 1 | | | | 30.99 | % | | | | 42.48 | % | | | | 51.69 | % |
Level 2 | | | | 69.01 | % | | | | 57.52 | % | | | | 48.31 | % |
| | | | | | | | | | | | | | | |
Total | | | | 100.00 | % | | | | 100.00 | % | | | | 100.00 | % |
| | | | | | | | | | | | | | | |
During the year ended Aug. 31, 2014, there were no transfers between Level 1 investments, Level 2 investments, or Level 3 investments that had a significant impact to the Funds. Each Fund’s policy is to recognize transfers between levels at the beginning of the reporting period.
A reconciliation of Level 3 investments is presented when each Fund has a significant amount of Level 3 investments at the beginning, interim, or end of the period in relation to net assets. At Aug. 31, 2014, there were no Level 3 investments.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Additionally, distributions from net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the years ended Aug. 31, 2014 and 2013 were as follows:
| | | | | | | | | | | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
Year ended 8/31/14 | | | | | | | | | | | | | | | |
| | | |
Ordinary income | | | $ | 2,809 | | | | $ | — | | | | $ | — | |
Tax-exempt income | | | | 20,097,468 | | | | | 3,073,055 | | | | | 5,610,632 | |
Long-term capital gains | | | | 1,606,468 | | | | | 87,587 | | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | $ | 21,706,745 | | | | $ | 3,160,642 | | | | $ | 5,610,632 | |
| | | | | | | | | | | | | | | |
| | | |
Year ended 8/31/13 | | | | | | | | | | | | | | | |
Ordinary income | | | $ | 599,882 | | | | $ | — | | | | $ | — | |
Tax-exempt income | | | | 21,456,177 | | | | | 3,191,179 | | | | | 5,776,935 | |
Long-term capital gains | | | | 3,607,614 | | | | | 150,689 | | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | $ | 25,663,673 | | | | $ | 3,341,868 | | | | $ | 5,776,935 | |
| | | | | | | | | | | | | | | |
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5. Components of Net Assets on a Tax Basis
As of Aug. 31, 2014, the components of net assets on a tax basis were as follows:
| | | | | | | | | | | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
Shares of beneficial interest | | | $ | 528,038,780 | | | | $ | 99,769,672 | | | | $ | 155,874,454 | |
Undistributed tax-exempt income | | | | 260,051 | | | | | 73,492 | | | | | 137,151 | |
Capital loss carryforwards | | | | (4,215,387 | ) | | | | (340,595 | ) | | | | (5,437,777 | ) |
Distributions payable | | | | (475,481 | ) | | | | (74,277 | ) | | | | (137,151 | ) |
Unrealized appreciation | | | | 39,066,154 | | | | | 6,170,204 | | | | | 7,880,343 | |
| | | | | | | | | | | | | | | |
Net assets | | | $ | 562,674,117 | | | | $ | 105,598,496 | | | | $ | 158,317,020 | |
| | | | | | | | | | | | | | | |
The differences between book basis and tax basis components of net assets are primarily attributable to tax treatment of market discount and premium on debt instruments.
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of dividends and distributions, and tax treatment of market discount and premium on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. For the year ended Aug. 31, 2014, each Fund recorded the following reclassifications:
| | | | | | | | | | | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
Distributions in excess of net investment income | | | $ | (84,797 | ) | | | $ | (3,270 | ) | | | $ | (22,149 | ) |
Accumulated net realized loss | | | | 84,797 | | | | | 3,270 | | | | | 22,149 | |
For federal income tax purposes, capital loss carry forwards may be carried forward and applied against future capital gains. Capital loss carry forwards remaining at Aug. 31, 2014 will expire as follows:
| | | | | | | | | | | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
Year of expiration | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
2017 | | | $ | — | | | | $ | — | | | | $ | 83,961 | |
2018 | | | | — | | | | | — | | | | | 2,974,512 | |
| | | | | | | | | | | | | | | |
Total | | | $ | — | | | | $ | — | | | | $ | 3,058,473 | |
| | | | | | | | | | | | | | | |
On Dec. 22, 2010, the Regulated Investment Company Modernization Act of 2010 (Act) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after the
89
Notes to financial statements
Delaware Investments® Minnesota Municipal Bond Funds
5. Components of Net Assets on a Tax Basis (continued)
date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Losses incurred that will be carried forward under the Act at are as follows:
| | | | | | | | | | |
| | | Loss carryforward character |
| | | Short-term | | Long-term |
Delaware Tax-Free Minnesota Fund | | | $ | 2,102,768 | | | | $ | 2,112,619 | |
Delaware Tax-Free Minnesota Intermediate Fund | | | | 309,590 | | | | | 31,005 | |
Delaware Minnesota High-Yield Municipal Bond Fund | | | | 762,980 | | | | | 1,616,324 | |
6. Capital Shares
Transactions in capital shares were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Delaware Tax-Free | | | Delaware Minnesota | |
| | | Delaware Tax-Free | | | Minnesota | | | High-Yield Municipal | |
| | | Minnesota Fund | | | Intermediate Fund | | | Bond Fund | |
| | | Year ended | | | Year ended | | | Year ended | |
| | | 8/31/14 | | | 8/31/13 | | | 8/31/14 | | | 8/31/13 | | | 8/31/14 | | | 8/31/13 | |
Shares sold: | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | 1,943,462 | | | | 4,933,586 | | | | 1,190,344 | | | | 1,195,316 | | | | 1,749,743 | | | | 2,446,076 | |
Class B* | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,511 | |
Class C | | | 338,752 | | | | 1,005,884 | | | | 112,022 | | | | 205,682 | | | | 288,536 | | | | 654,674 | |
Institutional Class | | | 1,389,451 | | | | — | | | | 227,004 | | | | — | | | | 607,167 | | | | — | |
|
| Shares issued upon reinvestment of dividends and distributions: | |
Class A | | | 1,352,756 | | | | 1,537,395 | | | | 227,528 | | | | 228,479 | | | | 347,473 | | | | 343,443 | |
Class B* | | | 1,901 | | | | 3,832 | | | | — | | | | 139 | | | | 2,708 | | | | 3,969 | |
Class C | | | 93,759 | | | | 107,825 | | | | 26,463 | | | | 28,169 | | | | 81,961 | | | | 82,979 | |
Institutional Class | | | 8,142 | | | | — | | | | 840 | | | | — | | | | 1,989 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 5,128,223 | | | | 7,588,522 | | | | 1,784,201 | | | | 1,657,785 | | | | 3,079,577 | | | | 3,533,652 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed: | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | (8,748,013 | ) | | | (5,605,922 | ) | | | (1,730,738 | ) | | | (1,524,093 | ) | | | (2,982,941 | ) | | | (2,221,602 | ) |
Class B* | | | (61,275 | ) | | | (70,605 | ) | | | — | | | | (11,086 | ) | | | (84,153 | ) | | | (50,674 | ) |
Class C | | | (738,325 | ) | | | (699,199 | ) | | | (361,678 | ) | | | (298,126 | ) | | | (636,359 | ) | | | (523,144 | ) |
Institutional Class | | | (13,194 | ) | | | — | | | | (18,049 | ) | | | — | | | | (14,395 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | (9,560,807 | ) | | | (6,375,726 | ) | | | (2,110,465 | ) | | | (1,833,305 | ) | | | (3,717,848 | ) | | | (2,795,420 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (4,432,584 | ) | | | 1,212,796 | | | | (326,264 | ) | | | (175,520 | ) | | | (638,271 | ) | | | 738,232 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
*Delaware Tax-Free Minnesota Intermediate Fund’s Class B was fully liquidated on May 31, 2013.
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For the years ended Aug. 31, 2014 and 2013, the following shares and values were converted from Class B to Class A. The amounts are included in Class B redemptions, and Class A subscriptions in the tables on the previous page and the “Statements of changes in net assets.”
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Year ended | | | | | | | | | Year ended | | | | |
| | | | | | 8/31/14 | | | | | | | | | 8/31/13 | | | | |
| | | Class B | | | Class A | | | | | | Class B | | | Class A | | | | |
| | | Shares | | | Shares | | | Value | | | Shares | | | Shares | | | Value | |
Delaware Tax-Free Minnesota Fund | | | 30,058 | | | | 30,113 | | | $ | 371,303 | | | | 32,546 | | | | 32,612 | | | $ | 417,886 | |
Delaware Minnesota High-Yield Municipal Bond Fund | | | 23,300 | | | | 23,364 | | | | 245,373 | �� | | | 9,252 | | | | 9,271 | | | | 101,850 | |
Certain shareholders of Class A may exchange their share for Institutional Class shares. The following shares and values were exchanged from Class A to Institutional Class. These exchange transactions are included as subscriptions and redemptions in the tables on the previous page and the “Statements of changes in net assets.”
| | | | | | | | | | | | |
| | | | | | Year ended | | | | |
| | | | | | 8/31/14 | | | | |
| | | Class A | | | Institutional Class | | | | |
| | | Shares | | | Shares | | | Value | |
Delaware Tax-Free Minnesota Fund | | | 20,896 | | | | 20,971 | | | $ | 262,760 | |
Delaware Tax-Free Minnesota Intermediate Fund | | | 112,227 | | | | 112,447 | | | | 1,262,654 | |
7. Line of Credit
Each Fund, along with certain other funds in the Delaware Investments® Family of Funds (Participants), was a participant in a $125,000,000 revolving line of credit to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Under the agreement, the Participants were charged an annual commitment fee of 0.08%, which was allocated across the Participants on the basis of each Participant’s allocation of the entire facility. The Participants were permitted to borrow up to a maximum of one third of their net assets under the agreement. Each Participant was individually, and not jointly, liable for its particular advances, if any, under the line of credit. The line of credit under the agreement expired on Nov. 12, 2013.
On Nov. 12, 2013, each Fund, along with the other Participants, entered into an amendment to the agreement for a $225,000,000 revolving line of credit. The line of credit is to be used as described above and operates in substantially the same manner as the original agreement. The line of credit available under the agreement will expire on Nov. 10, 2014.
The Funds had no amounts outstanding as of Aug. 31, 2014, or at any time during the year then ended.
91
Notes to financial statements
Delaware Investments® Minnesota Municipal Bond Funds
8. Geographic, Credit, and Market Risks
The Funds concentrate their investments in securities issued by municipalities, mainly in Minnesota, and may be subject to geographic concentration risk. In addition, the Funds have the flexibility to invest in issuers in U.S. territories such as Puerto Rico, the U.S. Virgin Islands, and Guam whose bonds are also free of federal and individual state income taxes.
The value of the Funds’ investments may be adversely affected by new legislation within the state or, U.S. territories, 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 value may fluctuate for other reasons and there is no certainty that the insurance company will meet its obligations. A real or perceived decline in creditworthiness of a bond insurer can have an adverse impact on the value of insured bonds held in each Fund. At Aug. 31, 2014, the percentages of each Fund’s net assets insured by bond insurers are listed below and these securities have been identified in the “Schedules of investments.”
| | | | | | | | | | | | | | | |
| | | Delaware | | Delaware Tax-Free | | Delaware Minnesota |
| | | Tax-Free | | Minnesota | | High-Yield Municipal |
| | | Minnesota Fund | | Intermediate Fund | | Bond Fund |
| | | | 12.01% | | | | | 12.06% | | | | | 7.94% | |
Each Fund invests a portion of its assets in high yield fixed income securities, which are securities rated lower than BBB-by Standard & Poor’s Financial Services LLC (S&P) and lower than Baa3 by Moody’s Investors Service Inc. (Moody’s), or similarly rated by another nationally recognized statistical rating organization. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities.
Each Fund invests in certain obligations that may have liquidity protection designed to ensure that the receipt of payments due on the underlying security is timely. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained by the issuer or sponsor through third parties, through various means of structuring the transaction or through a combination of such approaches. Each Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
Each Fund may invest in advance 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
92
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 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, S&P, and/or Fitch Ratings due to the strong credit quality of the escrow securities and the irrevocable nature of the escrow deposit agreement.
Each Fund may invest up to 15% of its net 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 each 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 Boards have delegated to DMC, the day-to-day functions of determining whether individual securities are liquid for purposes of each Fund’s limitation on investments in illiquid securities. Securities eligible for resale pursuant to Rule 144A, which are determined to be liquid, are not subject to each Fund’s 15% limit on investments in illiquid securities. As of Aug. 31, 2014, there were no Rule 144A securities held by the Funds. Illiquid securities have been identified on the “Schedules of investments.”
9. Contractual Obligations
Each Fund enters into contracts in the normal course of business that contain a variety of indemnifications. Each Fund’s maximum exposure under these arrangements is unknown. However, each Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed each Fund’s existing contracts and expects the risk of loss to be remote.
10. Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after Dec. 15, 2014, and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on each Fund’s financial statement disclosures.
11. Subsequent Events
Effective Sept. 25, 2014, all remaining shares of Class B were converted to Class A shares.
Management has determined that no other material events or transactions occurred subsequent to Aug. 31, 2014, that would require recognition or disclosure in the Funds’ financial statements.
93
Report of independent registered
public accounting firm
To the Board of Trustees of Voyageur Tax-Free Funds, Voyageur Intermediate Tax-Free Funds and Voyageur Mutual Funds and the Shareholders of Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Intermediate Fund and Delaware Minnesota High-Yield Municipal Bond Fund:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Delaware Tax-Free Minnesota Fund (constituting Voyageur Tax-Free Funds), Delaware Tax-Free Minnesota Intermediate Fund (constituting Voyageur Intermediate Tax-Free Funds) and Delaware Minnesota High-Yield Municipal Bond Fund (one of the series constituting Voyageur Mutual Funds) (hereafter collectively referred to as the “Funds”) at August 31, 2014, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2014 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where confirmations of security purchases had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 16, 2014
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Other Fund information (Unaudited)
Delaware Investments® Minnesota Municipal Bond Funds
Tax Information
The information set forth below is for each Fund’s fiscal year as required by federal income tax laws. Shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal years of the Funds. Accordingly, the information needed by shareholders for income tax purposes will be sent to them in January of each year. Please consult your tax advisor for proper treatment of this information.
All disclosures are based on financial information available as of the date of this annual report and, accordingly are subject to change. For any and all items requiring reporting, it is the intention of the Funds to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
For the fiscal year ended Aug. 31, 2014, each Fund reports distributions paid during the year as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | (A) | | (B) | | (C) | | |
| | | Ordinary | | Tax-Exempt | | Long-Term | | |
| | | Income | | Income | | Capital Gain | | Total |
| | | Distributions | | Distributions | | Distributions | | Distributions |
| | | (Tax Basis) | | (Tax Basis) | | (Tax Basis) | | (Tax Basis) |
Delaware Tax-Free | | | | | | | | | | | | | | | | | | | | |
Minnesota Fund | | | | 0.01 | % | | | | 92.59 | % | | | | 7.40 | % | | | | 100.00 | % |
Delaware Tax-Free | | | | | | | | | | | | | | | | | | | | |
Minnesota Intermediate | | | | | | | | | | | | | | | | | | | | |
Fund | | | | — | | | | | 97.23 | % | | | | 2.77 | % | | | | 100.00 | % |
Delaware Minnesota | | | | | | | | | | | | | | | | | | | | |
High-Yield Municipal | | | | | | | | | | | | | | | | | | | | |
Bond Fund | | | | — | | | | | 100.00 | % | | | | — | | | | | 100.00 | % |
(A), (B) and (C) are based on a percentage of each Fund’s total distributions.
Board Consideration of Delaware Minnesota High-Yield Municipal Bond Fund, Delaware Tax-Free Minnesota Fund, and Delaware Tax-Free Minnesota Intermediate Fund Investment Management Agreements
At a meeting held on Aug. 19-21, 2014 (the “Annual Meeting”), the Board of Trustees (the “Board”), including a majority of disinterested or independent Trustees, approved the renewal of the Investment Management Agreements for Delaware Minnesota High-Yield Municipal Bond Fund, Delaware Tax-Free Minnesota Fund, and Delaware Tax-Free Minnesota Intermediate Fund (each, a “Fund” and together, the “Funds”). In making its decision, the Board considered information furnished at regular quarterly Board meetings, including reports detailing Fund performance, investment strategies and expenses, as well as information prepared specifically in connection with the renewal of the investment advisory and sub-advisory contracts. Information furnished specifically in connection with the renewal of the Investment Management Agreements with Delaware Management Company (“DMC”) included materials provided by DMC and its affiliates (“Delaware Investments”) concerning, among other things, the nature, extent and quality of services provided to the Funds, the costs of such services to the Funds, economies of scale and the financial condition and profitability of Delaware Investments. In addition, in connection with the
95
Other Fund information (Unaudited)
Delaware Investments® Minnesota Municipal Bond Funds
Board Consideration of Delaware Minnesota High-Yield Municipal Bond Fund, Delaware Tax-Free Minnesota Fund, and Delaware Tax-Free Minnesota Intermediate Fund Investment Management Agreements (continued)
Annual Meeting, reports were provided to the Trustees in May 2014 and included reports provided by Lipper, Inc., an independent statistical compilation organization (“Lipper”). The Lipper reports compared each Fund’s investment performance and expenses with those of other comparable mutual funds. The Independent Trustees reviewed and discussed the Lipper reports with independent legal counsel to the Independent Trustees. The Board requested and received information regarding DMC’s policy with respect to advisory fee levels and its breakpoint philosophy; the structure of portfolio manager compensation; the investment manager’s profitability; comparative client fee information; and any constraints or limitations on the availability of securities for certain investment styles, which had in the past year inhibited, or which were likely in the future to inhibit, DMC’s ability to invest fully in accordance with Fund policies.
In considering information relating to the approval of each Fund’s advisory agreement, the Independent Trustees received assistance and advice from and met separately with independent legal counsel to the Independent Trustees. Although the Board gave attention to all information furnished, the following discussion identifies, under separate headings, the primary factors taken into account by the Board during its contract renewal considerations.
Nature, Extent and Quality of Service. The Board considered the services provided by Delaware Investments to each Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board considered reports furnished to it throughout the year, which covered matters such as the relative performance of the Funds, compliance of portfolio managers with the investment policies, strategies and restrictions for the Funds, compliance by DMC and Delaware Distributors, L.P. (together, “Management”) personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex and adherence to fair value pricing procedures as established by the Board. The Board was pleased with the current staffing of the Funds’ investment manager and the emphasis placed on research in the investment process. The Board recognized DMC’s recent receipt of several industry distinctions. The Board gave favorable consideration to DMC’s efforts to control expenditures while maintaining service levels committed to Fund matters. The Board noted that, in the third and fourth quarters of 2013, Management reduced the maximum 12b-1 fee for certain funds; and in November 2013 Management negotiated a substantial reduction in fees for fund accounting services provided to the Funds. The Board noted the benefits provided to Fund shareholders through each shareholder’s ability to exchange an investment in one Delaware Investments fund for the same class of shares in another Delaware Investments fund without a sales charge, to reinvest Fund dividends into additional shares of the same Fund or into additional shares of other Delaware Investments funds, and the privilege to combine holdings in other Delaware Investments funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments.
Investment Performance. The Board placed significant emphasis on the investment performance of the Funds in view of the importance of investment performance to shareholders. Although the Board gave appropriate consideration to performance reports and discussions with portfolio managers at Investment
96
Committee meetings throughout the year, the Board gave particular weight to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for each Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Lipper (the “Performance Universe”). A fund with the best performance ranked first, and a fund with the poorest performance ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25%, the second quartile; the next 25%, the third quartile; and the poorest/ worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for each Fund was shown for the past one-, three-, five-, and ten-year periods, to the extent applicable, ended March 31, 2014. The Board’s objective is that each Fund’s performance for the periods considered be at or above the median of its Performance Universe. The following paragraphs summarize the performance results for the Funds and the Board’s view of such performance.
Delaware Minnesota High-Yield Municipal Bond Fund – Lipper currently classifies the Fund as a Minnesota municipal debt fund. However, Management believes that it would be more appropriate to include the Fund in the high yield municipal debt funds category, which would provide a comparison to a representative peer group based on credit quality instead of a peer group based on state of issuance. Accordingly, the Lipper report prepared for the Fund compares the Fund’s performance to two separate Performance Universes – one consisting of the Fund and all retail and institutional Minnesota municipal debt funds and the other consisting of the Fund and all retail and institutional high yield municipal debt funds. When compared to other Minnesota municipal debt funds, the Lipper report comparison showed that the Fund’s total return for the one-year period was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the three-, five-, and ten-year periods was in the first quartile of its Performance Universe. When compared to other high yield municipal debt funds, the Lipper report comparison showed that the Fund’s total return for the one- and ten-year periods was in the first quartile of the Performance Universe and the Fund’s total return for the three- and five-year periods was in the fourth quartile of its Performance Universe. The Board observed that, when compared to other high yield municipal debt funds, the Fund’s performance results were mixed. In evaluating the Fund’s performance, the Board considered the Fund’s short-term performance results, which were strong. On balance, the Board was satisfied with performance.
Delaware Tax-Free Minnesota Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional Minnesota municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three-, and five-year periods was in the second quartile of its Performance Universe. The report further showed that the Fund’s total return for the ten-year period was in the first quartile of its Performance Universe. The Board was satisfied with performance.
Delaware Tax-Free Minnesota Intermediate Fund – The Performance Universe for the Fund consisted of the Fund and all retail and institutional other state intermediate municipal debt funds as selected by Lipper. The Lipper report comparison showed that the Fund’s total return for the one-, three-, five-, and ten-year periods was in the first quartile of its Performance Universe. The Board was satisfied with performance.
97
Other Fund information (Unaudited)
Delaware Investments® Minnesota Municipal Bond Funds
Board Consideration of Delaware Minnesota High-Yield Municipal Bond Fund, Delaware Tax-Free Minnesota Fund, and Delaware Tax-Free Minnesota Intermediate Fund Investment Management Agreements (continued)
Comparative Expenses. The Board considered expense comparison data for the Delaware Investments Family of Funds. Management provided the Board with information on pricing levels and fee structures for each Fund as of its most recently completed fiscal year. The Board also focused on the comparative analysis of effective management fees and total expense ratios of each Fund versus effective management fees and expense ratios of a group of similar funds as selected by Lipper (the “Expense Group”). In reviewing comparative costs, each Fund’s contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) within the Expense Group, taking into account any applicable breakpoints and fee waivers. Each Fund’s total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and comparative total expenses including 12b-1 and non 12b-1 service fees. The Board considered fees paid to Delaware Investments for non-management services. The Board’s objective is to limit each Fund’s total expense ratio to be competitive with that of the Expense Group. The following paragraphs summarize the expense results for the Funds and the Board’s view of such expenses.
Delaware Minnesota High-Yield Municipal Bond Fund – When compared to other Minnesota municipal debt funds, the expense comparisons for the Fund showed that its actual management fee was in the quartile with the second highest expenses in its Expense Group and its total expenses were in the quartile with the highest expenses of the Expense Group. When compared to other high yield municipal debt funds, the expense comparisons for the Fund showed that its actual management fee was in the quartile with the lowest expenses of its Expense Group and its total expenses were in the quartile with the second lowest expenses of the Expense. The Board noted that, when compared to other Minnesota municipal debt funds, the Fund’s total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered fee waivers in place through December 2014 and various initiatives implemented by Management, such as the outsourcing of certain transfer agency services and a negotiation of lower fees for fund accounting services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Delaware Tax-Free Minnesota Fund – The expense comparisons for the Fund showed that its actual management fee was in the quartile with the second highest expenses of its Expense Group and its total expenses were in the quartile with the highest expenses of its Expense Group. The Board noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered waivers in place through December 2014 and various initiatives implemented by Management, such as the outsourcing of certain transfer agency services and a negotiation of lower fees for fund accounting services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Delaware Tax-Free Minnesota Intermediate Fund – The expense comparisons for the Fund showed that its actual management fee was in the quartile with the second lowest expenses of its Expense
98
Group and its total expenses were in the quartile with the second highest expenses of its Expense Group. The Board noted that the Fund’s total expenses were not in line with the Board’s objective. In evaluating the total expenses, the Board considered waivers in place through December 2014 and various initiatives implemented by Management, such as the outsourcing of certain transfer agency services and a negotiation of lower fees for fund accounting services, which had created an opportunity for a further reduction in expenses. The Board was satisfied with Management’s efforts to improve the Fund’s total expense ratio and to bring it in line with the Board’s objective.
Management Profitability. The Board considered the level of profits realized by Delaware Investments in connection with the operation of the Funds. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments’ business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflects recent operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments’ efforts to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from recent industry-wide Securities and Exchange Commission initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds and the benefits from allocation of fund brokerage to improve trading efficiencies. The Board found that the management fees were reasonable in light of the services rendered and the level of profitability of Delaware Investments.
Economies of Scale. The Trustees considered whether economies of scale are realized by Delaware Investments as each Fund’s assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees reviewed the standardized advisory fee pricing and structure, approved by the Board and shareholders, which includes breakpoints. Breakpoints in the advisory fee occur when the advisory fee rate is reduced on assets in excess of specified levels. Breakpoints result in a lower advisory fee than would otherwise be the case on all assets when the asset levels specified are exceeded. The Board noted that the fee under each Fund’s management contract fell within the standard structure. Although the Funds have not reached a size at which they can take advantage of breakpoints, the Board recognized that the fees were structured so that when the Funds grow, economies of scale may be shared.
99
Board of trustees / directors and officers addendum
Delaware Investments® Family of Funds
A mutual fund is governed by a Board of Trustees / Directors (“Trustees”), which has oversight responsibility for the management of a fund’s business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor, and others who perform services for the fund. The independent fund trustees, in particular, are advocates
| | | | |
| Name, Address, | | Position(s) | | Length of |
| and Birth Date | | Held with Fund(s) | | Time Served |
Interested Trustees | | | | |
| Patrick P. Coyne1 | | Chairman, President, | | Chairman and Trustee |
| 2005 Market Street | | Chief Executive Officer, | | since August 16, 2006 |
| Philadelphia, PA 19103 | | and Trustee | | |
| April 1963 | | | | President and |
| | | | Chief Executive Officer |
| | | | since August 1, 2006 |
Independent Trustees | | | | |
| Thomas L. Bennett | | Trustee | | Since March 2005 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
October 1947 | | | | |
| Joseph W. Chow | | Trustee | | Since January 2013 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
January 1953 | | | | |
| John A. Fry | | Trustee | | Since January 2001 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
May 1960 | | | | |
| 1 | Patrick P. Coyne is considered to be an “Interested Trustee” because he is an executive officer of the Fund’s(s’) investment advisor. |
100
for shareholder interests. Each trustee has served in that capacity since he or she was elected to or appointed to the Board of Trustees, and will continue to serve until his or her retirement or the election of a new trustee in his or her place. The following is a list of the Trustees and Officers with certain background and related information.
| | | | |
| | Number of Portfolios in | | |
| Principal Occupation(s) | | Fund Complex Overseen | | Other Directorships |
| During Past 5 Years | | by Trustee or Officer | | Held by Trustee or Officer |
| | |
| | | | |
| Patrick P. Coyne has served in | | 70 | | Board of Governors Member |
| various executive capacities | | | | Investment Company |
| at different times at | | | | Institute (ICI) |
| Delaware Investments.2 | | | | |
| | | | Director and Audit |
| | | | Committee Member |
| | | | Kaydon Corp. |
| | | | (2007–2013) |
| | |
| | | | |
| Private Investor | | 70 | | Director |
| (March 2004–Present) | | | | Bryn Mawr Bank Corp. (BMTC) |
| | | | (2007–2011) |
| Executive Vice President | | 70 | | Director and Audit Committee |
| (Emerging Economies | | | | Member — Hercules |
| Strategies, Risk and | | | | Technology Growth |
| Corporate Administration) | | | | Capital, Inc. |
| State Street Corporation | | | | (2004–2014) |
(July 2004–March 2011) | | | | |
| President | | 70 | | Director — Hershey Trust |
| Drexel University | | | | |
| (August 2010–Present) | | | | Director and Audit |
| | | | Committee Member |
| President | | | | Community Health Systems |
| Franklin & Marshall College | | | | |
(July 2002–July 2010) | | | | |
| 2 | Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund’s(s’) investment advisor, principal underwriter, and its transfer agent. |
101
Board of trustees / directors and officers addendum
Delaware Investments® Family of Funds
| | | | |
| Name, Address, | | Position(s) | | Length of |
| and Birth Date | | Held with Fund(s) | | Time Served |
Independent Trustees (continued) | | | | |
| Lucinda S. Landreth | | Trustee | | Since March 2005 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
| June 1947 | | | | |
| Frances A. Sevilla-Sacasa | | Trustee | | Since September 2011 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
January 1956 | | | | |
| Thomas K. Whitford | | Trustee | | Since January 2013 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
March 1956 | | | | |
102
| | | | |
| | Number of Portfolios in | | |
| Principal Occupation(s) | | Fund Complex Overseen | | Other Directorships |
| During Past 5 Years | | by Trustee or Officer | | Held by Trustee or Officer |
| | |
| | | | |
| Private Investor | | 70 | | None |
(2004–Present) | | | | |
| Chief Executive Officer — | | 70 | | Trust Manager and |
| Banco Itaú | | | | Audit Committee |
| International | | | | Member — Camden |
(April 2012–Present) | | | | Property Trust |
| Executive Advisor to Dean | | | | |
(August 2011–March 2012) and Interim Dean | | | | |
| (January 2011–July 2011) — | | | | |
| University of Miami School of | | | | |
Business Administration | | | | |
| President — U.S. Trust, | | | | |
| Bank of America Private | | | | |
| Wealth Management | | | | |
| (Private Banking) | | | | |
(July 2007–December 2008) | | | | |
Vice Chairman | | 70 | | Director — HSBC Finance |
| (2010–April 2013) | | | | Corporation and HSBC |
| Chief Administrative | | | | North America Holdings Inc. |
Officer (2008–2010) and Executive Vice | | | | |
| President and Chief | | | | |
| Administrative Officer | | | | |
| (2007–2009) — | | | | |
| PNC Financial | | | | |
| Services Group | | | | |
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Board of trustees / directors and officers addendum
Delaware Investments® Family of Funds
| | | | |
| Name, Address, | | Position(s) | | Length of |
| and Birth Date | | Held with Fund(s) | | Time Served |
Independent Trustees (continued) | | | | |
| Janet L. Yeomans | | Trustee | | Since April 1999 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
July 1948 | | | | |
J. Richard Zecher | | Trustee | | Since March 2005 |
| 2005 Market Street | | | | |
| Philadelphia, PA 19103 | | | | |
July 1940 | | | | |
104
| | | | |
| | Number of Portfolios in | | |
| Principal Occupation(s) | | Fund Complex Overseen | | Other Directorships |
| During Past 5 Years | | by Trustee or Officer | | Held by Trustee or Officer |
| | | | |
| Vice President and Treasurer | | 70 | | Director, Audit |
| (January 2006–July 2012) | | | | Committee Chair, Investment |
| Vice President — | | | | Committee Member, |
| Mergers & Acquisitions | | | | and Governance |
| (January 2003–January 2006), | | | | Committee Member |
| and Vice President | | | | Okabena Company |
| and Treasurer | | | | |
| (July 1995–January 2003) | | | | Chair — 3M |
| 3M Corporation | | | | Investment Management |
| | | | Company |
| | | | | (2005–2012) |
| Founder | | 70 | | Director and Compensation |
| Investor Analytics | | | | Committee Chairman |
| (Risk Management) | | | | Investor Analytics |
| (May 1999–Present) | | | | |
| | | | Director — P/E Investments |
| Founder | | | | |
| P/E Investments | | | | |
| (Hedge Fund) | | | | |
(September 1996–Present) | | | | |
105
Board of trustees / directors and officers addendum
Delaware Investments® Family of Funds
| | | | |
| Name, Address, | | Position(s) | | Length of |
| and Birth Date | | Held with Fund(s) | | Time Served |
Officers | | | | |
| David F. Connor | | Senior Vice President, | | Senior Vice President, |
| 2005 Market Street | | Deputy General | | Deputy General Counsel |
| Philadelphia, PA 19103 | | Counsel, and Secretary | | since May 2013; |
| December 1963 | | | | Vice President, Deputy |
| | | | General Counsel |
| | | | September 2000 – |
| | | | May 2013; Secretary since |
| | | | | October 2005 |
| Daniel V. Geatens | | Vice President | | Treasurer since October 2007 |
| 2005 Market Street | | and Treasurer | | |
| Philadelphia, PA 19103 | | | | |
October 1972 | | | | |
David P. O’Connor | | Executive Vice President, | | Executive Vice President |
| 2005 Market Street | | General Counsel | | since February 2012; |
| Philadelphia, PA 19103 | | and Chief Legal Officer | | Senior Vice President |
| February 1966 | | | | October 2005 – |
| | | | February 2012; |
| | | | General Counsel and |
| | | | Chief Legal Officer |
| | | | | since October 2005 |
| Richard Salus | | Senior Vice President | | Chief Financial Officer |
| 2005 Market Street | | and Chief Financial Officer | | since November 2006 |
| Philadelphia, PA 19103 | | | | |
October 1963 | | | | |
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is available, without charge, upon request by calling 800 523-1918.
106
| | | | |
| | Number of Portfolios in | | |
| Principal Occupation(s) | | Fund Complex Overseen | | Other Directorships |
| During Past 5 Years | | by Trustee or Officer | | Held by Trustee or Officer |
| | |
| | | | |
| David F. Connor has served as | | 70 | | None3 |
| Deputy General Counsel of | | | | |
Delaware Investments since 2000. | | | | |
Daniel V. Geatens has served | | 70 | | None3 |
in various capacities at different times at | | | | |
Delaware Investments. | | | | |
David P. O’Connor has served | | 70 | | None3 |
in various executive and legal capacities at different times at Delaware Investments. | | | | |
Richard Salus has served in | | 70 | | None3 |
various executive capacities at different times at | | | | |
Delaware Investments. | | | | |
| 3 | David F. Connor, Daniel V. Geatens, David P. O’Connor, and Richard Salus serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. |
107
About the organization
| | | | | | |
| Board of trustees | | | | | | |
| Patrick P. Coyne | | Joseph W. Chow | | Lucinda S. Landreth | | Thomas K. Whitford |
| Chairman, President, and | | Former Executive Vice | | Former Chief Investment | | Former Vice Chairman |
| Chief Executive Officer | | President | | Officer | | PNC Financial Services Group |
| Delaware Investments® | | State Street Corporation | | Assurant, Inc. | | Pittsburgh, PA |
| Family of Funds | | Brookline, MA | | Philadelphia, PA | | |
| Philadelphia, PA | | | | | | Janet L. Yeomans |
| | John A. Fry | | Frances A. | | Former Vice President |
| Thomas L. Bennett | | President | | Sevilla-Sacasa | | and Treasurer |
| Private Investor | | Drexel University | | Chief Executive Officer | | 3M Corporation |
| Rosemont, PA | | Philadelphia, PA | | Banco Itaú | | St. Paul, MN |
| | | | International Miami, FL | | J. Richard Zecher |
| | | | | Founder |
| | | | | | Investor Analytics |
| | | | | | Scottsdale, AZ |
Affiliated officers | | | | | | |
| David F. Connor | | Daniel V. Geatens | | David P. O’Connor | | Richard Salus |
| Senior Vice President, | | Vice President and | | Executive Vice President, | | Senior Vice President and |
| Deputy General Counsel, | | Treasurer | | General Counsel, | | Chief Financial Officer |
| and Secretary | | Delaware Investments | | and Chief Legal Officer | | Delaware Investments |
| Delaware Investments | | Family of Funds | | Delaware Investments | | Family of Funds |
| Family of Funds | | Philadelphia, PA | | Family of Funds | | Philadelphia, PA |
| Philadelphia, PA | | | | Philadelphia, PA | | |
This annual report is for the information of Delaware Tax-Free Minnesota Fund, Delaware Tax-Free Minnesota Intermediate Fund, and Delaware Minnesota High-Yield Municipal Bond Fund shareholders, but it may be used with prospective investors when preceded or accompanied by the Delaware Investments Fund fact sheet for the most recently completed calendar quarter. These documents are available at delawareinvestments.com.
Delaware Investments is the marketing name of Delaware Management Holdings, Inc. and its subsidiaries.
Each Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s Forms N-Q, as well as a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities are available without charge (i) upon request, by calling 800 523-1918; and (ii) on the SEC’s website at sec.gov. In addition, a description of the policies and procedures that each Fund uses to determine how to vote proxies (if any) relating to portfolio securities and each Fund’s Schedule of Investments are available without charge on the Funds’ website at delawareinvestments.com. Each Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.; information on the operation of the Public Reference Room may be obtained by calling 800 SEC-0330.
Information (if any) regarding how the Funds voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Funds’ website at delawareinvestments.com; and (ii) on the SEC’s website at sec.gov.
108
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant’s Code of Business Ethics has been posted on the Delaware Investments Internet Web site at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this Web site within five business days of such amendment or waiver and will remain on the Web site for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant’s Board of Trustees/Directors has determined that certain members of the registrant’s Audit Committee are audit committee financial experts, as defined below. For purposes of this item, an “audit committee financial expert” is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and financial statements;
b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial reporting; and
e. An understanding of audit committee functions.
An “audit committee financial expert” shall have acquired such attributes through:
a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions;
c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or
d. Other relevant experience.
The registrant’s Board of Trustees/Directors has also determined that each member of the registrant’s Audit Committee is independent. In order to be “independent” for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an “interested person” of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant’s Audit Committee are set forth below:
Joseph W. Chow
Lucinda S. Landreth1
Frances A. Sevilla-Sacasa
Janet L. Yeomans
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $34,125 for the fiscal year ended August 31, 2014.
____________________
1 The instructions to Form N-CSR require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on “other relevant experience.” The Board of Trustees/Directors has determined that Ms. Landreth qualifies as an audit committee financial expert by virtue of her experience as a financial analyst, her Chartered Financial Analyst (CFA) designation and her service as an audit committee chairperson for a non-profit organization.
The aggregate fees billed for services provided to the registrant by its independent auditors for the audit of the registrant’s annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $29,935 for the fiscal year ended August 31, 2013.
(b) Audit-related fees.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended August 31, 2014.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $618,000 for the registrant’s fiscal year ended August 31, 2014. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year end audit procedures, group reporting and subsidiary statutory audits.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the registrant’s financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended August 31, 2013.
The aggregate fees billed by the registrant’s independent auditors for services relating to the performance of the audit of the financial statements of the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $618,000 for the registrant’s fiscal year ended August 31, 2013. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: year end audit procedures, group reporting and subsidiary statutory audits.
(c) Tax fees.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $4,120 for the fiscal year ended August 31, 2014. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2014. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant were $4,000 for the fiscal year ended August 31, 2013. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These tax-related services were as follows: review of income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant’s independent auditors for tax-related services provided to the registrant’s investment adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2013. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(d) All other fees.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended August 31, 2014.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2014. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
The aggregate fees billed for all services provided by the independent auditors to the registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended August 31, 2013.
The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the registrant’s independent auditors to the registrant’s adviser and other service providers under common control with the adviser and that relate directly to the operations or financial reporting of the registrant were $0 for the registrant’s fiscal year ended August 31, 2013. The percentage of these fees relating to services approved by the registrant’s Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
(e) The registrant’s Audit Committee has established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the “Pre-Approval Policy”) with respect to services provided by the registrant’s independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee has pre-approved the services set forth in the table below with respect to the registrant up to the specified fee limits. Certain fee limits are based on aggregate fees to the registrant and other registrants within the Delaware Investments Family of Funds.
| Service | Range of Fees |
| Audit Services | |
| Statutory audits or financial audits for new Funds | up to $40,000 per Fund |
| Services associated with SEC registration statements (e.g., Form N-1A, Form N-14, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end Fund offerings, consents), and assistance in responding to SEC comment letters | up to $10,000 per Fund |
| Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit-related services” rather than “audit services”) | up to $25,000 in the aggregate |
| Audit-Related Services | |
| Consultations by Fund management as to the accounting or disclosure treatment of transactions or events and /or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be considered “audit services” rather than “audit-related services”) | up to $25,000 in the aggregate |
| Tax Services | |
| U.S. federal, state and local and international tax planning and advice (e.g., consulting on statutory, regulatory or administrative developments, evaluation of Funds’ tax compliance function, etc.) | up to $25,000 in the aggregate |
| U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) | up to $5,000 per Fund |
| Review of federal, state, local and international income, franchise and other tax returns | up to $5,000 per Fund |
Under the Pre-Approval Policy, the Audit Committee has also pre-approved the services set forth in the table below with respect to the registrant’s investment adviser and other entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the registrant (the “Control Affiliates”) up to the specified fee limit. This fee limit is based on aggregate fees to the investment adviser and its Control Affiliates.
| Service | Range of Fees |
| Non-Audit Services | |
| Services associated with periodic reports and other documents filed with the SEC and assistance in responding to SEC comment letters | up to $10,000 in the aggregate |
The Pre-Approval Policy requires the registrant’s independent auditors to report to the Audit Committee at each of its regular meetings regarding all services initiated since the last such report was rendered, including those services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s independent auditors for services rendered to the registrant and to its investment adviser and other service providers under common control with the adviser were $8,090,937 and $8,891,311 for the registrant’s fiscal years ended August 31, 2014 and August 31, 2013, respectively.
(h) In connection with its selection of the independent auditors, the registrant’s Audit Committee has considered the independent auditors’ provision of non-audit services to the registrant’s investment adviser and other service providers under common control with the adviser that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors’ provision of these services is compatible with maintaining the auditors’ independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Included as part of report to shareholders filed under Item 1 of this Form N-CSR.
(b) Divestment of securities in accordance with Section 13(c) of the Investment Company Act of 1940.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant’s fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.
Name of Registrant: VOYAGEUR TAX FREE FUNDS
| /s/ PATRICK P. COYNE |
| By: | Patrick P. Coyne |
| Title: | Chief Executive Officer |
| Date: | November 5, 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ PATRICK P. COYNE |
| By: | Patrick P. Coyne |
| Title: | Chief Executive Officer |
| Date: | November 5, 2014 |
| |
| /s/ RICHARD SALUS |
| By: | Richard Salus |
| Title: | Chief Financial Officer |
| Date: | November 5, 2014 |
