U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No. ____
/ / Post-Effective Amendment No. ____
(Check appropriate box or boxes)
VOYAGEUR TAX FREE FUNDS
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(Exact Name of Registrant as Specified in Charter)
(800) 523-1918
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(Area Code and Telephone Number)
2005 Market Street, Philadelphia, PA 19103-7094
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Address of Principal Executive Offices: (Number, Street, City, State, Zip Code)
David F. Connor, Esq., 2005 Market Street, Philadelphia, PA 19103-7094
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Name and Address of Agent for Service: (Number, Street, City, State, Zip Code)
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective
under the Securities Act of 1933, as amended.
Title of the securities being registered:
Class A, Class B and Class C Shares of beneficial interest, no par value, of
Delaware Tax-Free Minnesota Fund, one series of Registrant. No filing fee is
due because Registrant is relying on Section 24(f) of the
Investment Company Act of 1940, as amended.
It is proposed that this filing will become effective on October 2, 2006,
pursuant to Rule 488 under the Securities Act of 1933, as amended.
--- C O N T E N T S ---
This Registration Statement includes the following:
1. Facing Page
2. Contents Page
3. Part A - Proxy Statement/Prospectus
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
7. Exhibits
Delaware Investments (R)
A member of Lincoln Financial Group (R)
PROXY MATERIALS
Delaware Tax-Free Minnesota Insured Fund
Dear Shareholder:
I am writing to let you know that a meeting of shareholders of the Delaware
Tax-Free Minnesota Insured Fund (the "Fund") will be held on November 30, 2006.
The purpose of the meeting is to vote on an important proposal that affects the
Fund and your investment in it. As a shareholder, you have the opportunity to
voice your opinion on the matters that affect your Fund. This package contains
information about the proposal and the materials to use when voting by mail, by
telephone or through the Internet.
Please read the enclosed materials and cast your vote. Please vote your shares
promptly. Your vote is extremely important, no matter how large or small your
holdings may be.
The proposal has been carefully reviewed by the Fund's Board of Trustees. The
Trustees, most of whom are not affiliated with Delaware Investments, are
responsible for protecting your interests as a shareholder. The Trustees believe
the proposal is in the best interests of shareholders. They recommend that you
vote FOR the proposal.
The enclosed Q&A is provided to assist you in understanding the proposal. The
proposal is described in greater detail in the enclosed Proxy
Statement/Prospectus.
Voting is quick and easy. Everything you need is enclosed. To cast your vote,
simply complete the proxy card enclosed in this package. Be sure to sign the
card before mailing it in the postage-paid envelope. You may also vote your
shares by touch-tone telephone or through the Internet. Simply call the
toll-free number or visit the web site indicated on your proxy card, and follow
the recorded or online instructions.
If you have any questions before you vote, please call Computershare Fund
Services, Inc. ("Computershare"), the Fund's proxy solicitor, at 1-866-479-1426.
Computershare will be glad to help you get your vote in quickly. You may also
receive a telephone call from Computershare reminding you to vote your shares.
Thank you for your participation in this important initiative.
Sincerely,
/s/ Patrick P. Coyne
Patrick P. Coyne
Chairman, President and Chief Executive Officer
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND
AND VOTE ON THE PROPOSAL
Below is a brief overview of the proposal to be voted upon. Your vote is
important. Please read the full text of the Proxy Statement/Prospectus, which
you should retain for future reference. If you need another copy of the Proxy
Statement/Prospectus, please call Delaware Investments at 1-800-523-1918.
We appreciate you placing your trust in Delaware Investments and we look forward
to helping you achieve your financial goals.
What proposal am I being asked to vote on?
You are being asked to vote to approve an Agreement and Plan of Reorganization
between Delaware Tax-Free Minnesota Insured Fund (the "Minnesota Insured Fund")
and Delaware Tax-Free Minnesota Fund (the "Minnesota Fund").
Proposal: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
What reorganization is the Board proposing?
Shareholders of the Minnesota Insured Fund are being asked to consider and
approve a reorganization ("Transaction") that will have the effect of
reorganizing the Minnesota Insured Fund with and into the Minnesota Fund.
How will the Transaction benefit shareholders?
The Funds' Boards considered a number of factors before approving the
Transaction. After considering these factors, the Boards concluded that
shareholders will potentially benefit from the Transaction in the following
ways:
o Based upon current market conditions, including the limited demand for
insured municipal securities in the current lower yield environment, the
Transaction potentially would enhance asset growth for the benefit of
shareholders of the Minnesota Insured Fund, as shareholders of the
Minnesota Fund.
o The investment strategies and policies of the Minnesota Insured Fund are
substantially the same as, but not identical to, the investment strategies
and policies of the Minnesota Fund. However, the investment objectives of
both Funds are identical and both Funds are required to invest at least 80%
of their net assets in Minnesota municipal securities and other obligations
that offer similar tax benefits.
o The Minnesota Fund offers a stronger track record as compared to the
Minnesota Insured Fund over the past 1-, 3-, 5- and 10-year periods and has
a higher 30-day yield as of June 30, 2006. (Of course, past performance is
no guarantee of future results.)
o Shareholders of the Minnesota Insured Fund, which is required to invest
substantially in insured municipal securities, could benefit from being
investors in the Minnesota Fund, which does not have a policy requiring it
to invest substantially in insured municipal securities, because of the
decreased price volatility associated with non-insured municipal securities
in the current rising interest rate environment.
How will the Transaction work?
The Minnesota Fund will acquire substantially all of the assets of the Minnesota
Insured Fund in exchange for shares of the Minnesota Fund. The Minnesota Insured
Fund will then distribute the Minnesota Fund shares on a pro rata basis to its
shareholders. At the time of the Transaction, any shares you own of the
Minnesota Insured Fund will be cancelled and you will receive new shares in the
same class of the Minnesota Fund that will have a value equal to the value of
your shares in the Minnesota Insured Fund. More detailed information about the
transfer of assets by the Minnesota Insured Fund and the issuance of shares by
the Minnesota Fund can be found in the Proxy Statement/Prospectus.
What is the anticipated timetable for the Transaction?
The shareholder meeting is scheduled for November 30, 2006. It is currently
anticipated that the Transaction, if approved by shareholders, will take place
before the end of the year. Whether or not you plan to attend the Meeting,
please vote your shares by mail, by telephone or through the Internet. If you
determine at a later date that you wish to attend this Meeting, you may revoke
your proxy and vote in person, as provided in the attached Proxy
Statement/Prospectus.
COMMON QUESTIONS AND GENERAL INFORMATION
Has the Board of Trustees approved the proposal?
Yes. The Minnesota Insured Fund's Board of Trustees has unanimously approved the
proposal and recommends that you vote to approve it.
How many votes am I entitled to cast?
As a shareholder, you are entitled to one vote for each full share and a
fractional vote for each fractional share of the Minnesota Insured Fund that you
own on the record date. The record date is September 25, 2006.
How do I vote my shares?
You can vote your shares by completing and signing the enclosed proxy card(s)
and mailing it in the enclosed postage-paid envelope. You may also vote by
touch-tone telephone by calling the toll-free number printed on your proxy
card(s) and following the recorded instructions. In addition, you may also vote
through the Internet by visiting www.delawareinvestments.com and following the
on-line instructions. If you need any assistance, or have any questions
regarding the proposal or how to vote your shares, please call Computershare
Fund Services, Inc., the Minnesota Insured Fund's proxy solicitor, at
1-866-479-1426.
How do I sign the proxy card?
Individual Accounts: Shareholders should sign exactly as their names appear on
the account registration shown on the card.
Joint Accounts: Either owner may sign, but the name of the person signing
should conform exactly to a name shown in the
registration.
All Other Accounts: The person signing must indicate his or her capacity.
For example, if Ms. Ann B. Collins serves as a trustee
for a trust account or other type of entity, she should
sign, "Ann B. Collins, Trustee."
How can I find more information on the Proposal?
You should read the Proxy Statement/Prospectus that provides details regarding
the proposal. If you have any questions, please call Computershare Fund
Services, Inc., the Minnesota Insured Fund's proxy solicitor at 1-866-479-1426.
DELAWARE TAX-FREE MINNESOTA INSURED FUND
(a series of Voyageur Insured Funds)
2005 Market Street
Philadelphia, Pennsylvania 19103
NOTICE OF MEETING OF SHAREHOLDERS
To be held on November 30, 2006
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Meeting (the "Meeting") of Shareholders of
Delaware Tax-Free Minnesota Insured Fund (the "Minnesota Insured Fund" or
"Acquired Fund"), a series of Voyageur Insured Funds, has been called by the
Board of Trustees of Voyageur Insured Funds and will be held at the offices of
Delaware Investments located at 2001 Market Street, 2nd Floor Auditorium,
Philadelphia, PA 19103, on November 30, 2006 at 3:00 p.m., Eastern Time. The
Meeting is being called for the following reasons:
1. To approve an Agreement and Plan of Reorganization between Voyageur
Insured Funds, on behalf of the Minnesota Insured Fund, and Voyageur
Tax Free Funds, on behalf of the Delaware Tax-Free Minnesota Fund (the
"Minnesota Fund" or "Acquiring Fund"), which provides for: (i) the
acquisition by the Acquiring Fund of substantially all of the assets
of the Acquired Fund, in exchange for shares of the Acquiring Fund;
(ii) the pro rata distribution of shares of the Acquiring Fund to the
shareholders of the Acquired Fund; and (iii) the liquidation and
dissolution of the Acquired Fund.
2. To vote upon any other business as may properly come before the
Meeting or any adjournment thereof.
Shareholders of record of the Acquired Fund as of the close of business on
September 25, 2006 are entitled to notice of, and to vote at, the Meeting or any
adjournment thereof. Whether or not you plan to attend the Meeting, please vote
your shares by returning the proxy card by mail in the enclosed postage-paid
envelope provided, or by voting by telephone or over the Internet. Your vote is
important.
By Order of the Board of Trustees,
/s/ David F. Connor
David F. Connor
Secretary
[October 2,] 2006
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To secure the largest possible representation and to save the expense of further
mailings, please mark your proxy card, sign it, and return it in the enclosed
envelope, which requires no postage if mailed in the United States. If you
prefer, you may instead vote by telephone or the Internet. You may revoke your
Proxy at any time at or before the Meeting or vote in person if you attend the
Meeting, as provided in the attached Proxy Statement/Prospectus.
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PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
Page
What Are Shareholders Being Asked to Vote On?.................................2
Proposal: To Approve an Agreement and Plan of Reorganization ................2
Summary.......................................................................2
What is the purpose of the Proposal?.......................................2
How do the investment objectives, strategies and policies of the
Acquired Fund and the Acquiring Fund compare?..............................3
What are the principal risks associated with investments in the Funds?.....4
What are the general tax consequences of the Transaction?..................4
Who manages the Funds?.....................................................5
What are the fees and expenses of each Fund and what might they
be after the Transaction?..................................................5
How do the performance records of the Funds compare?.......................9
Where can I find more financial information about the Funds?...............9
What are the other key features of the Funds?..............................9
Reasons for the Transaction..................................................11
Information About the Transaction and the Plan...............................14
How will the Transaction be carried out? .................................14
Who will pay the expenses of the Transaction? ............................14
What are the tax consequences of the Transaction? ........................15
What should I know about shares of the Acquiring Fund? ...................15
What are the capitalizations of the Funds and what might the
capitalizations be after the Transaction? ................................16
Comparison of Investment Objectives, Strategies, Policies and Risks..........17
Are there any significant differences between the investment
objectives of the Acquired Fund and the Acquiring Fund? ..................17
Are there any significant differences between the investment
strategies and policies of the Acquired Fund and the Acquiring Fund? .....17
How do the fundamental investment restrictions of the
Funds differ? ............................................................20
What are the risk factors associated with investments in
the Funds? ...............................................................20
What vote is necessary to approve the Plan? ..............................22
More Information About the Funds.............................................23
Voting Information...........................................................24
Principal Holders of Shares..................................................26
i
EXHIBITS
Exhibit A - Form of Agreement and Plan of Reorganization
Exhibit B - Principal Holders of Shares as of September 25, 2006
ii
PROXY STATEMENT/PROSPECTUS
Dated [October 2,] 2006
Acquisition of Substantially All of the Assets of:
DELAWARE TAX-FREE MINNESOTA INSURED FUND
(a series of Voyageur Insured Funds)
By and in exchange for shares of
DELAWARE TAX-FREE MINNESOTA FUND
(a series of Voyageur Tax Free Funds)
This Proxy Statement/Prospectus solicits proxies to be voted at a meeting
(the "Meeting") of shareholders of Delaware Tax-Free Minnesota Insured Fund (the
"Minnesota Insured Fund" or "Acquired Fund"), a series of Voyageur Insured
Funds. The Meeting has been called by the Board of Trustees of Voyageur Insured
Funds (the "Board") to vote on the approval of the Plan (as more fully described
below).
The principal offices of Voyageur Insured Funds and Voyageur Tax Free Funds
(each a "Trust" and collectively, the "Trusts") are located at 2005 Market
Street, Philadelphia, PA 19103. You can reach the offices of the Trusts by
telephone by calling 1-800-523-1918.
The Meeting will be held at the offices of Delaware Investments located at
2001 Market Street, 2nd Floor Auditorium, Philadelphia, PA 19103, on November
30, 2006 at 3:00 p.m., Eastern Time. The Board, on behalf of the Minnesota
Insured Fund, is soliciting these proxies. This Proxy Statement/Prospectus will
first be sent to shareholders on or about [October 12, 2006].
This Proxy Statement/Prospectus gives you the information about an
investment in the Delaware Tax-Free Minnesota Fund (the "Minnesota Fund" or
"Acquiring Fund") and about other matters that you should know before voting and
investing. You should retain it for future reference. A Statement of Additional
Information dated [October 2,] 2006 (the "Statement of Additional Information"),
relating to this Proxy Statement/Prospectus contains more information about the
Acquiring Fund, the Acquired Fund (each, a "Fund" and, collectively, the
"Funds") and the proposed transaction, and has been filed with the U.S.
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference.
The Prospectus of the Acquiring Fund dated December 29, 2005, as amended to
date (the "Fund Prospectus"), is included with and is considered a part of this
Proxy Statement/Prospectus, and is intended to provide you with information
about the Acquiring Fund.
You can request a free copy of the Statement of Additional Information, the
Fund Prospectus, the Annual Report to Shareholders of the Minnesota Fund for the
fiscal year ended August 31, 2005 and for the fiscal year ended August 31, 2006
(when available) or the Semi-
Annual Report to Shareholders of the Minnesota Fund for the period ended
February 28, 2006 by calling 1-800-523-1918, or by writing to the Trusts at
Attention: Account Services, 2005 Market Street, Philadelphia, PA 19103.
Like all mutual funds, the SEC has not approved or disapproved these
securities or passed upon the adequacy of this Proxy Statement/Prospectus. Any
representation to the contrary is a criminal offense.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other U.S. government agency.
Mutual fund shares involve investment risks, including the possible loss of
principal.
WHAT ARE SHAREHOLDERS BEING ASKED TO VOTE ON?
PROPOSAL: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
Shareholders of the Acquired Fund are being asked to consider and approve
an Agreement and Plan of Reorganization (the "Plan") that will have the effect
of reorganizing the Acquired Fund with and into the Acquiring Fund as summarized
below.
The Plan provides for: (i) the acquisition by the Acquiring Fund of
substantially all of the assets of the Acquired Fund in exchange for shares of
the Acquiring Fund; (ii) the pro rata distribution of shares of the Acquiring
Fund to the shareholders of the Acquired Fund; and (iii) the liquidation and
dissolution of the Acquired Fund. If the shareholders of the Acquired Fund vote
to approve the Plan, as a shareholder of the Acquired Fund you will receive
Acquiring Fund shares equal in total value to, and of the same class as, your
investment in the Acquired Fund. The Acquired Fund will then be liquidated.
SUMMARY
This is only a summary of certain information contained in the Proposal.
You should read the more complete information in the rest of this Proxy
Statement/Prospectus, including the Plan (attached as Exhibit A) and the Fund
Prospectus included with this Proxy Statement/Prospectus.
What is the purpose of the Proposal?
The Board approved the Plan for the Acquired Fund and recommends that
shareholders of the Acquired Fund approve the Plan. If shareholders of the
Acquired Fund approve the Plan, substantially all of the Acquired Fund's assets
will be transferred to the Acquiring Fund in exchange for the Acquiring Fund's
shares equal in value to the assets of the Acquired Fund that are transferred to
the Acquiring Fund. The Acquiring Fund shares will then be distributed pro rata
to the Acquired Fund's shareholders and the Acquired Fund will be liquidated and
dissolved. The proposed transaction for the Acquired Fund is referred to in this
Proxy Statement/Prospectus as the "Transaction."
2
The Transaction, if approved for the Acquired Fund, will result in your
shares of the Acquired Fund being exchanged for Acquiring Fund shares of the
same class equal in value (but having a different price per share) to your
shares of the Acquired Fund. This means that you will cease to be a shareholder
of the Acquired Fund and will become a shareholder of the Acquiring Fund. This
exchange will occur on a date agreed to by the parties to the Plan (hereafter,
the "Closing Date"), which is currently expected to be in the last quarter of
2006.
For the reasons set forth below under "Reasons for the Transaction," the
Boards of the Trusts have concluded that the Transaction is in the best
interests of the Acquired Fund and the Acquiring Fund. The Boards have also
concluded that no dilution in value would result to the shareholders of the
Acquired Fund and the Acquiring Fund as a result of the Transaction.
How do the investment objectives, strategies and policies of the Acquired Fund
and the Acquiring Fund compare?
Like the Acquired Fund, the Acquiring Fund is a mutual fund within the
Delaware Investments(R)Family of Funds (the "Delaware Companies") that is
managed by Delaware Management Company ("DMC"), a series of Delaware Management
Business Trust. The investment objective of the Acquired Fund is identical to
the investment objective of the Acquiring Fund. Both the Acquired Fund and the
Acquiring Fund seek as high a level of current income exempt from federal income
tax and from the Minnesota state personal income tax as is consistent with
preservation of capital. Each Fund's investment objective is fundamental and may
not be changed by the Board without prior shareholder approval.
In addition, the investment strategies and policies of the Acquired Fund
are substantially similar, but not identical, to the investment strategies and
policies of the Acquiring Fund. Both Funds have adopted a fundamental investment
policy to seek to achieve their investment objectives by investing at least 80%
of their net assets in municipal securities that are exempt from federal income
taxes, including the federal alternative minimum tax, and the Minnesota state
personal income tax. As described below, a Fund may not change its fundamental
investment policies and restrictions without prior shareholder approval. The
most significant difference between the Acquired Fund and the Acquiring Fund is
that the Acquiring Fund does not have a mandate regarding "insured municipal
securities." Insured municipal securities are debt securities issued by or on
behalf of a state or territory, its agencies, instrumentalities, municipalities
or other political sub-divisions, for which such issuers have obtained insurance
for the payment of interest and principal (when due) to the bondholders. This
insurance is designed to protect against certain risks (as described below) -
the insurance, however, does not guarantee the market value of the insured
municipal securities held in a Fund's portfolio and it does not guarantee the
value of an investment in a Fund.
The Acquired Fund has adopted a non-fundamental investment policy, which
may be changed with prior notice to shareholders (no shareholder approval is
required), to invest at least 80% of its net assets in insured municipal
securities. The Acquiring Fund has not adopted such an investment policy. The
Acquiring Fund may invest without limitation in insured municipal securities;
however, as of June 30, 2006, only 28% of the Acquiring Fund's assets were
invested
3
in insured municipal securities, which has generally been typical with respect
to the Acquiring Fund in the past.
For further information about the investment objectives and policies of the
Funds, see "Comparison of Investment Objectives, Policies and Risks" below.
What are the principal risks associated with investments in the Funds?
As with most investments, investments in the Funds involve certain risks.
There can be no guarantee against losses resulting from an investment in either
Fund, nor can there be any assurance that either Fund will achieve its
investment objective. Investments in the Funds involve risks associated with
changes in interest rates, market conditions, industry conditions and the
financial strength of issuers of the portfolio securities held by a Fund. The
risks associated with an investment in the Acquired Fund are substantially
identical to the risks associated with an investment in the Acquiring Fund.
However, to the extent that the Acquired Fund invests more of its assets in
insured municipal securities as compared to the Acquiring Fund, the Acquired
Fund may be subject to less credit risk because the payment of interest and
principal with respect to such insured municipal securities is insured by an
insurance company. There is no assurance, however, that an insurance company
will meet its obligations with respect to the insured municipal securities.
Also, both Funds are considered to be "non-diversified," meaning that they
may invest more of their assets in a fewer number of issuers than diversified
funds. Accordingly, to the extent that a Fund invests its assets in fewer
issuers as compared to a diversified fund, the Fund may be more susceptible than
a fully diversified fund to adverse economic, political, business, or regulatory
developments affecting a single issuer, industry, or economic sector. This, in
turn, can affect the Fund's net asset value.
For further information about the risks of investing in the Funds, see
"Comparison of Investment Objectives, Policies and Risks" below.
What are the general tax consequences of the Transaction?
It is expected that shareholders of the Acquired Fund will not recognize
any gain or loss for federal income tax purposes as a result of the exchange of
their shares for shares of the Acquiring Fund pursuant to the Transaction. You
should, however, consult your tax adviser regarding the effect, if any, of the
Transaction in light of your individual circumstances. You should also consult
your tax adviser about other state and local tax consequences of the
Transaction, if any, because the information about tax consequences in this
document relates to the federal income tax consequences of the Transaction only.
For further information about the federal income tax consequences of the
Transaction, see "Information About the Transaction - What are the tax
consequences of the Transaction?"
4
Who manages the Funds?
The management of the business and affairs of each Fund is the
responsibility of the Board of the applicable Trust. The Boards and senior
management select officers who are responsible for the day-to-day operations of
the Funds.
DMC manages the assets of each of the Funds and makes each Fund's
investment decisions. DMC is a series of Delaware Management Business Trust,
which is an indirect subsidiary of Delaware Management Holdings, Inc., and is
located at 2005 Market Street, Philadelphia, Pennsylvania 19103. DMC and its
predecessors have been managing the assets of the Delaware Companies since 1938.
As of June 30, 2006, DMC and its affiliates within Delaware Investments were
managing in the aggregate more than $145 billion in assets in various
institutional or separately managed, investment company and insurance accounts.
In addition, the portfolio managers for the Acquired Fund and the Acquiring
Fund are the same. There will be no management changes involved with the
proposed Transaction. As a result, the following individuals will continue to
manage the Acquiring Fund after completion of the Transaction:
Joseph R. Baxter and Robert F. Collins have primary responsibility for
making the day-to-day investment decisions for the Acquired Fund and the
Acquiring Fund. Mr. Baxter assumed responsibility for both Funds on May 22, 2003
and Mr. Collins assumed responsibility for both Funds on June 25, 2004.
Joseph R. Baxter, Senior Vice President, Head of Municipal Bond Department
and Senior Portfolio Manager, joined Delaware Investments in 1999. He heads the
firm's municipal bond department and is responsible for setting the department's
investment strategy. He is also a co-portfolio manager of the firm's municipal
bond fund clients and several other client accounts. Before joining Delaware
Investments, he held investment positions with First Union, most recently as a
municipal portfolio manager with the Evergreen Funds.
Robert F. Collins, Senior Vice President/Senior Portfolio Manager, joined
Delaware Investments in 2004 and is a co-portfolio manager of several of the
firm's municipal bond fund clients and other client accounts. Prior to joining
Delaware Investments, he spent five years as a co-manager of the municipal
portfolio management group within PNC Advisors, where he oversaw the tax-exempt
investments of high net worth and institutional accounts. Before that, he headed
the municipal fixed income team at Wilmington Trust, where he managed funds and
high net worth accounts. Mr. Collins earned a bachelor's degree in economics
from Ursinus College, and he is also a former president of the Financial
Analysts of Wilmington, Delaware.
What are the fees and expenses of each Fund and what might they be after the
Transaction?
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Funds. The sales charge structure for each Fund is
identical and the operating
5
expenses shown are based on expenses incurred during each Fund's fiscal year
ended August 31, 2005.
FEE TABLES FOR
THE MINNESOTA INSURED FUND AND THE MINNESOTA FUND
A. Class A Shares
Actual Pro forma
--------------------------------- Minnesota
Minnesota Minnesota Fund -
Insured Fund - Fund - Class A After
Class A Class A Transaction
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price).............................. 4.50% 4.50% 4.50%
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a
percentage of original purchase price or
redemption price, whichever is lower).......... None(1) None(1) None(1)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees.............................. 0.50% 0.55% 0.54%
Distribution and Service (12b-1) Fees........ 0.25% 0.25% 0.25%
Other Expenses............................... 0.15% 0.14% 0.14%(5)
-------- -------- --------
Total Annual Fund Operating Expenses......... 0.90% 0.94% 0.93%
Fee Waiver/Expense Reimbursement............. (0.01%)(2) (0.01%)(2) (0.03%)(6)
-------- -------- --------
Net Expenses................................. 0.89% 0.93% 0.90%
======== ======== ========
B. Class B Shares
Actual Pro forma
--------------------------------- Minnesota
Minnesota Minnesota Fund -
Insured Fund - Fund - Class B After
Class B Class B Transaction
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price).............................. None None None
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a
percentage of original purchase price or
redemption price, whichever is lower).......... 4.00%(3) 4.00%(3) 4.00%(3)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees.............................. 0.50% 0.55% 0.54%
Distribution and Service (12b-1) Fees........ 1.00% 1.00% 1.00%
Other Expenses............................... 0.15% 0.14% 0.14%(5)
-------- -------- --------
Total Annual Fund Operating Expenses......... 1.65% 1.69% 1.68%
Fee Waiver/Expense Reimbursement............. (0.01%)(2) (0.01%)(2) (0.03%)(6)
-------- -------- --------
Net Expenses................................. 1.64% 1.68% 1.65%
======== ======== ========
6
C. Class C Shares
Actual Pro forma
--------------------------------- Minnesota
Minnesota Minnesota Fund -
Insured Fund - Fund - Class C After
Class C Class C Transaction
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price).............................. None None None
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a
percentage of original purchase price or
redemption price, whichever is lower).......... 1.00%(4) 1.00%(4) 1.00%(4)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees.............................. 0.50% 0.55% 0.54%
Distribution and Service (12b-1) Fees........ 1.00% 1.00% 1.00%
Other Expenses............................... 0.15% 0.14% 0.14%(5)
-------- -------- --------
Total Annual Fund Operating Expenses......... 1.65% 1.69% 1.68%
Fee Waiver/Expense Reimbursement............. (0.01%)(2) (0.01%)(2) (0.03%)(6)
-------- -------- --------
Net Expenses................................. 1.64% 1.68% 1.65%
======== ======== ========
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial advisor who is paid a
commission, a contingent deferred sales charge will apply to redemptions made
within two years of purchase. Additional Class A purchase options that involve a
contingent deferred sales charge may be permitted from time to time and will be
disclosed in the applicable Fund's Prospectus if they are available.
(2) DMC has contracted to waive its fee and/or pay expenses of each Fund through
December 31, 2006, in order to prevent total operating expenses (excluding any
12b-1 fees, taxes, interest, brokerage fees, extraordinary expenses and certain
insurance costs) from exceeding 0.68% of average daily net assets of the
Minnesota Fund and 0.64% of average daily net assets of the Minnesota Insured
Fund.
(3) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 4.00%, which declines to 3.00%
during the second year, 2.25% during the third year, 1.50% during the fourth and
fifth years, 1.00% during the sixth year and 0% thereafter.
(4) Class C shares redeemed within one year of purchase are subject to a 1.00%
contingent deferred sales charge.
(5) Included in "Other Expenses" are the one-time estimated costs of the
Transaction, which are anticipated to total approximately $109,189, of which
$36,396 is applicable to the Minnesota Fund. The costs of the Transaction are
not subject to the fee waiver currently in place. If the one-time costs of the
Transaction were not included, "Total Annual Fund Operating Expenses" and "Net
Expenses" would be 0.92% and 0.89%, 1.67% and 1.64% and 1.67% and 1.64%, for
Class A, Class B and Class C shares, respectively.
(6) DMC has contractually agreed to waive its fee and/or pay expenses of the
Minnesota Fund for at least one year after the Closing Date of the Transaction,
in order to prevent total operating expenses (excluding any 12b-1 fees, taxes,
interest, brokerage fees, extraordinary expenses and certain insurance costs)
from exceeding 0.64% of average daily net assets of the Minnesota Fund.
7
Examples
These examples are intended to help you compare the costs of investing in
Minnesota Insured Fund shares with the cost of investing in Minnesota Fund
shares of the comparable class, both before and after the Transaction. You can
also use these examples to compare the costs of these Funds with the costs of
other mutual funds. We show the cumulative amount of Fund expenses on a
hypothetical investment of $10,000 in the Minnesota Insured Fund and the
Minnesota Fund for the time periods indicated and then sell all of your shares
at the end of those periods. The examples assume a 5% return each year.(1) These
are examples only and do not represent future expenses, which may be greater or
less than those shown below. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
Class A Shares 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $537 $723 $925 $1,507
Minnesota Fund $541 $735 $946 $1,552
Pro forma Minnesota Fund (after
the Transaction) $538 $730 $939 $1,539
Class B Shares(2) 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $567 $744 $1,046 $1,754
Minnesota Fund $571 $757 $1,067 $1,798
Pro forma Minnesota Fund (after
the Transaction) $568 $752 $1,060 $1,785
Class C Shares 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $267 $519 $896 $1,954
Minnesota Fund $271 $532 $917 $1,997
Pro forma Minnesota Fund (after
the Transaction) $268 $527 $910 $1,984
You would pay the following expenses on the same investment if you did not sell
your shares:
Class B Shares(2) 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $167 $519 $896 $1,754
Minnesota Fund $171 $532 $917 $1,798
Pro forma Minnesota Fund (after
the Transaction) $168 $527 $910 $1,785
Class C Shares 1 Year 3 Years 5 Years 10 Years
Minnesota Insured Fund $167 $519 $896 $1,954
Minnesota Fund $171 $532 $917 $1,997
Pro forma Minnesota Fund (after
the Transaction) $168 $527 $910 $1,984
(1) Each Fund's actual rate of return may be greater or less than the
hypothetical 5% return we used here. This example reflects the net operating
expenses with expense waivers for the one-year contractual period and the total
operating expenses without expense waivers for years two through ten.
(2) The Class B example reflects the conversion of Class B shares to Class A
shares after eight years. Information for the ninth and tenth years reflects
expenses of the Class A shares.
These are just examples. They do not represent past or future expenses or
returns. Each of the Funds pays its own operating expenses. The effects of these
expenses are reflected in the net asset value and are not directly charged to
your account. The expenses of each of the Funds are comprised of expenses
attributable to each Fund, respectively, as well as expenses not attributable to
any particular series of that Trust that are allocated among the various series
of the Trust.
8
How do the performance records of the Funds compare?
As described under the section "Reasons for the Transaction," the Board of
each Trust considered a number of factors when reviewing the Plan and
considering the proposed Transaction. The performance history of the Funds, as
of June 30, 2006, was among the factors that the Boards considered. The
performance history of the Funds (without sales charges) as of that date is
shown below:
Average Annual Total Returns as of June 30,
2006
Fund and Class 1 Year 3 Years 5 Years 10 Years
0.26% 2.94% 4.60% 5.12%
Minnesota Insured Fund--Class A
Minnesota Fund--Class A 0.74% 3.72% 5.28% 5.44%
Minnesota Insured Fund--Class B (0.49%) 2.18% 3.82% 4.49%
Minnesota Fund--Class B (0.01%) 2.94% 4.49% 4.83%
Minnesota Insured Fund--Class C (0.58%) 2.17% 3.83% 4.34%
Minnesota Fund--Class C 0.07% 3.00% 4.51% 4.68%
Where can I find more financial information about the Funds?
The Acquiring Fund's Annual Report, which is included with the Statement of
Additional Information, and the Acquired Fund's Annual Report contain a
discussion of the Funds' performance during the past fiscal year and show per
share information for each of the past five fiscal years. These documents, and
the Funds' Semi-Annual Reports, are available upon request. (See "More
Information About the Funds.") The Fund Prospectus also contains further
financial information about the Acquiring Fund.
What are other key features of the Funds?
Investment Management Fees. DMC is the investment manager of each Fund. DMC
has entered into separate investment management agreements relating to each Fund
that provide for reductions in fee rates for a Fund as the assets of the Fund
increase. The investment management fees for the Funds are:
- ------------------------------- ------------------------------------------------
Fund Investment Management Fee
- ------------------------------- ------------------------------------------------
Acquired Fund 0.50% on first $500 million
0.475% on next $500 million
0.45% on next $1.5 billion
0.425% on assets in excess of $2.5 billion
- ------------------------------- ------------------------------------------------
Acquiring Fund 0.55% on first $500 million
0.50% on next $500 million
0.45% on next $1.5 billion
0.425% on assets in excess of $2.5 billion
- ------------------------------- ------------------------------------------------
9
DMC has contracted to waive that portion, if any, of the annual management
fees payable by each Fund and to pay certain expenses of each Fund for the
period through December 31, 2006 to the extent necessary to limit the total
operating expenses of each Fund to the levels described in the Fee Tables
beginning on page __. Moreover, once the Transaction is complete, DMC has
contractually agreed to waive its fee and/or pay expenses of the Acquiring Fund
for at least one year after the Closing Date, in order to prevent total
operating expenses (excluding any 12b-1 fees, taxes, interest, brokerage fees,
extraordinary expenses and certain insurance costs) from exceeding 0.64% of
average daily net assets of the Acquiring Fund. DMC's fee waiver after the
Closing Date also is reflected in the pro forma Fee Tables beginning on page __.
Distribution Services. Pursuant to underwriting agreements relating to each
Fund, Delaware Distributors, L.P. ("DDLP"), 2005 Market Street, Philadelphia,
Pennsylvania 19103, serves as the national distributor for the shares of the
Funds. DDLP pays the expenses of the promotion and distribution of the Funds'
shares, except for payments by the Funds on behalf of Class A shares, Class B
shares and Class C shares under their respective 12b-1 Plans. DDLP is an
indirect subsidiary of Delaware Management Holdings, Inc. and an affiliate of
DMC.
Pursuant to a contractual arrangement with DDLP, Lincoln Financial
Distributors, Inc. ("LFD"), 2001 Market Street, Philadelphia, Pennsylvania
19103-7055, is primarily responsible for promoting the sale of Fund shares
through broker/dealers, financial advisors and other financial intermediaries.
LFD is also an affiliate of DDLP and DMC.
Rule 12b-1 Plans. Each Fund has adopted a separate distribution plan or
"Rule 12b-1 Plan" for each of its Class A shares, Class B shares and Class C
shares (collectively, the "Rule 12b-1 Plans" and, each individually, a "Rule
12b-1 Plan").
Each Rule 12b-1 Plan permits the relevant Fund to pay out of the assets of
the Class A shares, Class B shares and Class C shares, as applicable, monthly
fees to DDLP for its services and expenses in distributing and promoting shares
of such classes. These expenses may include, among others, preparing and
distributing advertisements, sales literature and prospectuses and reports used
for sales purposes, compensating sales and marketing personnel, and paying
distribution and maintenance fees to securities brokers and dealers who enter
into dealer agreements with DDLP. The Rule 12b-1 Plan expenses relating to Class
B shares and Class C shares are also used to pay DDLP for advancing the
commission costs to dealers with respect to the initial sale of such Class B and
Class C shares. In addition, each Fund's Rule 12b-1 Plan permits the relevant
Fund to make payments out of the assets of the Class A shares, Class B shares
and Class C shares to other unaffiliated parties, such as banks, who either aid
in the distribution of shares of, or provide services to, such Classes.
The maximum aggregate annual fee payable by each Fund under its Rule 12b-1
Plans and each Fund's Distribution Agreement is, on an annual basis: up to 0.25%
of the average daily net assets of Class A shares; and up to 1.00% (0.25% of
which are service fees to be paid to DDLP, dealers and others for providing
personal service and/or maintaining shareholder accounts) of Class B shares' and
Class C shares' average daily net assets. The Boards for the Trusts may reduce
these amounts at any time. DDLP may contractually waive these amounts or a
portion of the amount at any time. All of the distribution expenses incurred by
DDLP and others, such as
10
broker/dealers, in excess of the amount paid on behalf of Class A shares, Class
B shares and Class C shares are borne by such persons without any reimbursement
on behalf of such Classes.
Purchase, Exchange and Redemption Procedures. Procedures for the purchase,
exchange and redemption of each Fund's shares are identical. You may refer to
the Fund Prospectus under the section entitled "About Your Account" for the
purchase, exchange, and redemption procedures applicable to the purchases,
exchanges and redemptions of the Acquiring Fund's shares.
Dividends, Distributions and Taxes. For each Fund, dividends are declared
daily and paid monthly, while capital gains, if any, are distributed annually.
For more information about dividends, distributions and the tax implications of
investing in the Acquiring Fund, please see the Fund Prospectus under the
section entitled "About Your Account--Dividends, distributions and taxes."
REASONS FOR THE TRANSACTION
Based on the considerations described below, the Boards, including the
trustees who are deemed to be independent trustees (each, an "Independent
Trustee" and, collectively, the "Independent Trustees") under the Investment
Company Act of 1940, as amended (the "1940 Act"), on behalf of the Acquired Fund
and the Acquiring Fund, have determined that the Transaction would be in the
best interest of the Acquired Fund and the Acquiring Fund and that the interests
of the Acquired Fund's and the Acquiring Fund's existing shareholders would not
be diluted as a result of the Transaction.
At a meeting of the Boards for the Trusts held on August 16-17, 2006, DMC
presented the Plan to the Trustees and provided the Trustees with data and
analysis regarding the proposed Transaction. At the meeting, the Boards
considered a number of factors, including the following:
o The compatibility of the Acquired Fund's investment objective,
policies and restrictions with the investment objective, policies and
restrictions of the Acquiring Fund;
o The relative investment performance and yields of the Acquired Fund
and the Acquiring Fund;
o The relative size of the Acquired Fund as compared to the Acquiring
Fund both before and after the Transaction;
o The relative expense ratios of the Funds and the anticipated impact of
the proposed Transaction on the expense ratios of the Acquiring Fund
both before and after expense caps and fee waivers;
o The proposal of DMC to cap the Acquiring Fund's total expenses once
the Transaction is completed for a one-year period so that the
Acquiring Fund's total
11
expenses, as a percentage of average net assets, are the same as the
Acquired Fund's total expenses, as a percentage of average net assets,
before the Transaction;
o The anticipated federal income tax consequences of the Transaction
with respect to each Fund and its shareholders;
o The estimated costs of the Transaction and the extent to which the
Funds would bear a portion of such costs; and
o The potential benefits of the proposed Transaction for the
shareholders of the Acquired Fund and the Acquiring Fund.
The Boards noted that the investment objective for the Acquired Fund is
identical to the investment objective of the Acquiring Fund and that both Funds
are required to invest 80% of their net assets in Minnesota municipal securities
and other obligations that offer similar tax benefits. The Boards also noted
that the portfolio of the Acquired Fund has historically been managed in
substantially the same manner as the portfolio of the Acquiring Fund. The Boards
considered the differences with respect to the Funds' investments in insured
municipal securities and the relative differences in the credit quality of the
portfolios' investments. The materials provided to the Boards also explained
that the investment strategies and policies of the Acquired Fund are
substantially similar to the investment strategies and policies of the Acquiring
Fund, except that the Acquiring Fund is not required to invest 80% of its net
assets in "insured securities," and the Acquiring Fund may invest up to 20% of
its total assets in non-investment grade securities whereas the Acquired Fund
may invest up to 20% of its total assets in non-insured municipal securities
that are investment grade.
DMC informed the Boards that, in its view, shareholders of the Acquired
Fund, which is required to invest substantially in insured municipal securities,
could benefit from investing in the Acquiring Fund, which does not have a policy
requiring it to invest in insured municipal securities, due to the decreased
price volatility associated with non-insured municipal securities in the current
rising interest rate environment. Additionally, DMC informed the Boards that the
demand for insured municipal bond funds is limited, especially in the current
lower yield environment.
With respect to performance, the materials provided to the Boards showed
that the Acquiring Fund's Class A shares had a stronger performance record for
the trailing 1-year, 3-year, 5-year and 10-year periods (through June 30, 2006).
In addition, over the trailing 1-year, 3-year, 5-year and 10-year periods, the
Acquiring Fund had a stronger performance rank relative to its Lipper category
(Minnesota Municipal Debt Funds) than does the Acquired Fund which is in the
same Lipper category. The materials also demonstrated that the 30-day SEC yield
of the Acquiring Fund is higher than the Acquired Fund's yield (as of June 30,
2006). As a result, DMC advised the Boards that shareholders of the Acquired
Fund also may benefit from a higher income stream.
12
The Boards also considered sales and redemption data as well as the
respective asset levels of each Fund as presented by DDLP. The information
provided to the Boards indicated that the Acquiring Fund had positive net cash
flow while the Acquired Fund had negative net cash flow during the one-year
period ended December 31, 2005 and the six-month period ended June 30, 2006.
DDLP also reported that the Acquiring Fund is significantly larger in terms of
total asset level than the Acquired Fund and that shareholders of both Funds
could benefit from the growth in assets realized by combining the Funds, as
explained more fully below.
In deciding whether to recommend approval of the Transaction to
shareholders, the Boards also considered the fees and expense ratios of the
Acquiring Fund and the Acquired Fund and the impact of existing and proposed
contractual fee waivers of such expense ratios. The Boards considered the
potential benefits afforded by a larger fund through economies of scale from the
spreading of fixed costs over a larger asset base and by reaching or utilizing,
to a greater extent, breakpoints in investment management fees, although there
can be no assurance that operational savings will be realized. At the Board
meetings, DMC informed the Boards that, with the contractual fee waivers and
expense limitations in place at that time, the total expenses for the Acquiring
Fund (excluding the one-time costs of the Transaction) are slightly higher than
the total expenses of the Acquired Fund on Class A, Class B and Class C shares.
The Boards also considered that the contractual fee waivers and expense
limitations were due to expire on December 31, 2006. In addition, the Board
noted that DMC has implemented a contractual expense waiver on the Acquiring
Fund which must remain in effect through December 31, 2006 and that this expense
limitation will not change as a result of the Transaction. Moreover, the Board
considered the proposal of DMC to cap the Acquiring Fund's total expenses once
the Transaction is completed for a one-year period following the Closing Date so
that the Acquiring Fund's total expenses (notwithstanding the expenses of the
Transaction), as a percentage of average net assets, are the same as the
Acquired Fund's total expenses, as a percentage of average net assets, before
the Transaction. Finally, DMC also reported that Acquiring Fund shareholders
could benefit from: (i) the savings the Acquiring Fund would realize in
acquiring municipal securities and other assets in the Transaction as opposed to
purchasing them in the open market; (ii) the fact that the Acquiring Fund would
receive securities from the Acquired Fund at substantially higher embedded
yields than are available on similar securities in the current marketplace; and
(iii) the fact that the Acquiring Fund would maintain its high overall credit
quality after the Transaction with a less significant decrease in yield than
would be possible were DMC to purchase similar securities in the open market.
DMC informed the Boards that the Transaction will be structured as a
tax-free reorganization. DMC also informed the Boards as to the cost of the
Transaction, including the costs associated with the solicitation of proxies.
The Boards considered that the expenses of the Transaction would be shared
one-third by the Acquiring Fund, one-third by the Acquired Fund and one-third by
DMC.
The Boards of the Trusts approved the Plan, concluding that the Transaction
is in the best interests of the Acquired Fund and the Acquiring Fund and that no
dilution of value would result to the shareholders of either Fund from the
Transaction. The Board of Voyageur Insured Funds then decided to recommend that
shareholders of the Acquired Fund vote to approve the
13
Transaction. The Trustees approving the Plan and making the foregoing
determinations included all of the Independent Trustees.
For the reasons discussed above, the Board of Trustees of Voyageur Insured
Funds, on behalf of the Acquired Fund, unanimously recommends that you vote
FOR the Proposal.
If the shareholders of the Acquired Fund do not approve the Plan, the Board
of Voyageur Insured Funds may consider other possible courses of action for the
Acquired Fund, including liquidation and dissolution.
INFORMATION ABOUT THE TRANSACTION AND THE PLAN
This is only a summary of the Plan. You should read the actual Plan
relating to the Transaction, which is attached as Exhibit A to this Proxy
Statement/Prospectus and is incorporated herein by reference.
How will the Transaction be carried out?
If the shareholders of the Acquired Fund approve the Plan, the Transaction
will take place after the parties to the Plan satisfy various conditions.
If the shareholders of the Acquired Fund approve the Plan, the Acquired
Fund will deliver to the Acquiring Fund substantially all of its assets on the
Closing Date. In exchange, Voyageur Insured Funds, on behalf of the Acquired
Fund, will receive the Acquiring Fund's shares to be distributed pro rata to the
Acquired Fund's shareholders. The value of the assets to be delivered to the
Acquiring Fund shall be the value of such assets computed as of the close of
business of the New York Stock Exchange, Inc. ("NYSE") (normally 4:00 p.m.,
Eastern Time) on the last business day prior to the Closing Date.
If the Transaction is approved, the stock transfer books of the Acquired
Fund will be permanently closed as of the close of business of the NYSE on the
business day before the Closing Date. The Acquired Fund will accept requests for
redemption only if received in proper form before that time. Requests received
after that time will be considered requests to redeem shares of the Acquiring
Fund.
To the extent permitted by law, the Plan may be amended without shareholder
approval at the direction of the Boards of the Trusts. The respective Boards may
also agree to terminate and abandon the Transaction at any time before or after
the approval of shareholders of the Acquired Fund or may terminate and abandon
the Transaction if certain conditions required under the Plan have not been
satisfied.
Who will pay the expenses of the Transaction?
The expenses resulting from the Acquired Fund's participation in the
Transaction, including solicitation of proxies, will be shared by the following
parties in the percentages indicated: 33.33% by the Acquired Fund, 33.33% by the
Acquiring Fund, and 33.34% by DMC.
14
The Funds will bear these transaction costs without regard to any of the expense
limits noted above.
What are the tax consequences of the Transaction?
The Transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). Based on certain assumptions made and
representations to be received from each Trust on behalf of the Acquired Fund
and the Acquiring Fund, it is expected that Stradley, Ronon, Stevens & Young,
LLP will provide a legal opinion that, for federal income tax purposes, (i)
shareholders of the Acquired Fund will not recognize any gain or loss as a
result of the exchange of their shares of the Acquired Fund for shares of the
Acquiring Fund, and (ii) the Acquiring Fund and its shareholders will not
recognize any gain or loss upon receipt of the Acquired Fund's assets.
Following the Transaction, any capital loss carryovers (together with any
current year loss and net unrealized depreciation in the value of the assets) of
the Acquired Fund will be subject to an annual limitation for federal income tax
purposes. Capital losses can generally be carried forward to each of the eight
(8) taxable years succeeding the loss year to offset future capital gains.
However, this limitation may result in a portion of the capital loss carryovers
of the Acquired Fund, which might otherwise have been utilized to offset future
capital gains, to expire unutilized. At its fiscal year ended August 31, 2005,
the Acquired Fund had no capital loss carryovers. As of July 7, 2006, the
Acquired Fund on a tax-basis had net realized long-term capital losses of
$185,821 and net unrealized appreciation of investments of $11,577,241.
After the Transaction, you will continue to be responsible for tracking the
adjusted tax basis and holding period for your shares for federal income tax
purposes. You should consult your tax adviser regarding the effect, if any, of
the Transaction in light of your individual circumstances. You should also
consult your tax adviser about the state and local tax consequences, if any, of
the Transaction because this discussion only relates to the federal income tax
consequences.
What should I know about shares of the Acquiring Fund?
If the Transaction is approved by the Acquired Fund's shareholders, full
and fractional shares of the Acquiring Fund will be distributed to shareholders
of the Acquired Fund in accordance with the procedures described above. When
issued, each share will be validly issued and fully paid and non-assessable. The
shares of the Acquiring Fund will be recorded electronically in each
shareholder's account. The Acquiring Fund will then send a confirmation to each
shareholder. As of the Closing Date, any outstanding certificates, if any,
representing shares of the Acquired Fund will be cancelled.
The Acquiring Fund shares to be issued in the Transaction have the same
rights and privileges as the shares of the Acquired Fund. For example, all
shares have non-cumulative voting rights. This gives holders of more than 50% of
the shares voting the ability to elect all of
15
the members of the Board. If this happens, holders of the remaining shares
voting will not be able to elect any trustees.
Like the Acquired Fund, the Acquiring Fund does not routinely hold annual
meetings of shareholders. The Acquiring Fund may hold special meetings for
matters requiring shareholder approval. A meeting of the Acquiring Fund's
shareholders may also be called at any time by the Board or by the chairperson
of the Board or by the president.
For purposes of calculating any applicable contingent deferred sales
charges, the period you have held your shares in the Acquired Fund will be
counted toward, and carried over as, the holding period of the shares you
receive in the Acquiring Fund.
What are the capitalizations of the Funds and what might the capitalizations be
after the Transaction?
The following table sets forth, as of February 28, 2006, the separate
capitalizations of the Acquired Fund and the Acquiring Fund, and the estimated
capitalization of the Acquiring Fund as adjusted to give effect to the proposed
Transaction. The capitalization of the Acquiring Fund is likely to be different
if and when the Transaction is actually consummated.
Acquiring Fund
Pro Forma after
Adjustments to Transaction
Acquired Fund Acquiring Fund Capitalization(1) (estimated)
Net assets (all classes) $238,727,102 $403,632,806 ($72,792) $642,287,116
Total shares outstanding 21,800,442 32,247,619 51,318,093
Class A net assets $214,789,192 $376,235,697 ($66,673) $590,958,216
Class A shares outstanding 19,615,153 30,062,381 47,223,624
Class A net asset value per
share $10.95 $12.52 $12.51
Class B net assets $11,487,928 $12,965,091 ($2,920) $24,450,099
Class B shares outstanding 1,050,054 1,035,103 1,952,216
Class B net asset value per
share $10.94 $12.53 $12.52
Class C net assets $12,449,982 $14,432,018 ($3,199) $26,878,801
Class C shares outstanding 1,135,235 1,150,135 2,142,253
Class C net asset value per
share $10.97 $12.55 $12.55
(1)The adjustments reflect the costs of the Transaction incurred by each Fund.
16
COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES,
POLICIES AND RISKS
This section describes the investment objectives, principal investment
strategies and the key investment policies of the Funds, and certain noteworthy
differences between such objectives, strategies and policies, as well as the
risks associated with such objectives, strategies and policies. For a complete
description of the Acquiring Fund's investment strategies, policies and risks,
you should read the Fund Prospectus, which accompanies this Proxy
Statement/Prospectus.
Are there any significant differences between the investment objectives of the
Acquired Fund and the Acquiring Fund?
The investment objective of the Acquired Fund is identical to the
investment objective of the Acquiring Fund. Each Fund seeks as high a level of
current income exempt from federal income tax and from the Minnesota state
personal income tax as is consistent with preservation of capital. Each Fund's
investment objective is fundamental and may not be changed without prior
shareholder approval.
Are there any significant differences between the investment strategies and
policies of the Acquired Fund and the Acquiring Fund?
The investment strategies and policies of the Acquired Fund are
substantially similar, but not identical, to the investment strategies and
policies of the Acquiring Fund. Both Funds have adopted a fundamental investment
policy to seek to achieve their investment objectives by investing at least 80%
of their net assets in municipal securities that are exempt from federal income
taxes, including the federal alternative minimum tax, and the Minnesota state
personal income tax. A Fund may not change its fundamental investment policies
and restrictions without prior shareholder approval. As a result, these
fundamental investment policies for a Fund may not be changed without the
approval of the lesser of (i) a majority of the outstanding shares of the Fund,
or (ii) 67% or more of the shares present at a meeting of shareholders at which
the holders of more than 50% of the outstanding shares are present or
represented by proxy at the meeting ("Majority Vote").
The most significant difference between the Acquired Fund and the Acquiring
Fund is that the Acquiring Fund does not have a mandate regarding "insured
municipal securities." Insured municipal securities are debt securities issued
by or on behalf of a state or territory, its agencies, instrumentalities,
municipalities or other political sub-divisions, for which such issuers have
obtained insurance for the payment of interest and principal (when due) to the
bondholders. This insurance is designed to protect against certain risks (as
described below) - the insurance, however, does not guarantee the market value
of the insured municipal securities held in a Fund's portfolio and it does not
guarantee the value of a shareholder's investment in a Fund. The Acquired Fund
has adopted a non-fundamental investment policy, which may be changed with prior
notice to shareholders (no shareholder approval is required), to invest at least
80% of its net assets in insured municipal securities. The Acquiring Fund has
not adopted such an investment policy. The Acquiring Fund may invest without
limitation in insured municipal securities; however, as of June 30, 2006, only
28% of the Acquiring Fund's assets were invested
17
in insured municipal securities, which has generally been typical with respect
to the Acquiring Fund in the past.
Each Fund invests primarily in tax-exempt obligations, commonly known as
municipal bonds, which are debt obligations issued by or on behalf of a state or
territory, its agencies, instrumentalities, municipalities or other political
sub-divisions. There are several different types of municipal bonds, including
general obligation bonds and revenue bonds. Each Fund is required to derive at
least 95% of its income from Minnesota obligations. The Acquired Fund may invest
in general obligation and revenue bonds, provided that, under normal market
conditions and after the application of insurance, at least 80% of the Acquired
Fund's net assets are invested in insured municipal securities that are rated at
least AAA by Standard & Poor's Ratings Services ("S&P") or an equivalent rating
by another nationally recognized statistical rating organization ("NRSRO"). The
Acquired Fund may not invest in non-investment grade municipal securities,
commonly referred to as high-yield securities. In addition, the Acquired Fund
may invest up to 20% of its total assets in non-insured municipal securities
that are investment grade - i.e., are rated within one of the top four quality
grades by an NRSRO or of equivalent quality, as determined by DMC.
The Acquiring Fund does not have such limitations with respect to insured
municipal securities; however, the Acquiring Fund does have limitations with
respect to the credit quality of its portfolio securities. As a matter of
non-fundamental policy, the Acquiring Fund will primarily invest in bonds rated
in the top four rating categories by an NRSRO or bonds that are unrated, but
which DMC, as the investment manager, determines to be of comparable quality.
The Acquiring Fund may invest up to 20% of its net assets in high-yield,
lower-rated fixed income securities that are not investment grade, but will not
invest in any securities that are rated lower than B by S&P or an equivalent
rating by another NRSRO. The quality limitation applies at the time of purchase.
As a result of the Transaction, shareholders in the Acquired Fund, which
invests primarily in insured municipal securities, would become shareholders in
the Acquiring Fund, which does not invest primarily in insured municipal
securities. The Acquiring Fund may invest without limitation in insured
municipal securities; however, as described above, historically a portion of the
Acquiring Fund's assets have been invested in insured municipal securities.
Note, however, that the average weighted credit quality of the portfolio of each
Fund individually was AA (as rated by S&P) as of June 30, 2006 and the average
weighted credit quality of the portfolio of the Acquiring Fund after the
Transaction is currently expected to remain at AA.
Each Fund may invest up to 20% of its assets in private activity or private
placement bonds. Such securities are used to finance certain non-government
activities, and the interest income from these securities, although exempt from
federal income tax, is subject to the federal alternative minimum tax.
Depending on market conditions and other factors, each of the Funds invests
in securities with maturities of varying lengths. In general, each Fund
maintains an average effective portfolio maturity of between 5 and 30 years.
However, as of June 30, 2006, each Fund's average effective portfolio maturity
was approximately 7 years.
18
Each Fund may invest without limit in municipal lease obligations primarily
through certificates of participation. Certificates of participation are widely
used by state and local governments to finance the purchase of property and
facilities.
Each Fund has adopted a non-fundamental policy that prohibits the Fund from
concentrating its investments in the securities of issuers primarily engaged in
the same industry. Generally, this investment restriction prohibits a Fund from
investing 25% or more of the value of the Fund's assets in securities of issuers
in any one industry. Certain types of bonds and obligations are excluded from
this restriction. In particular, the Funds' restrictions on industry
concentration do not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. In addition, each Fund may invest
more than 25% of its total assets in certain sectors of the municipal bond
market in circumstances in which other appropriate investments may be limited
(e.g., housing, health care and utility). In addition, each Fund may invest more
than 25% of its total assets in industrial development bonds and education
bonds.
The Funds are "non-diversified" for purposes of the 1940 Act. Generally, a
"diversified" investment company may not, with respect to 75% of its assets,
invest more than 5% of its assets in any one issuer and may not own more than
10% of the outstanding voting securities of any one issuer. Because each Fund is
non-diversified, it is not subject to these diversification requirements.
Although the Funds are non-diversified for purposes of the 1940 Act, each Fund
intends to meet the diversification requirements of a regulated investment
company under Subchapter M of the Code. Under the Code, the Funds have the
flexibility to invest as much as 50% of their assets in as few as two issuers,
provided that no single issuer accounts for more than 25% of a Fund's portfolio.
The remaining 50% of a Fund's assets must be diversified so that no more than 5%
of a Fund's assets are invested in the securities of a single issuer.
Each Fund may invest up to 25% of its assets in inverse floaters when the
underlying bond is tax-exempt. Otherwise, each Fund's investments in taxable
instruments, non-insured securities (for the Acquired Fund) and securities rated
below investment grade (for the Acquiring Fund), including inverse floaters on
taxable bonds, are limited to 20% of the Fund's net assets. Inverse floaters are
instruments with floating or variable interest rates that move in the opposite
direction to short-term interest rates or interest rate indices.
Each Fund may invest up to an aggregate of 20% of its net assets in
futures, options and swaps, so long as each Fund's investments in these
securities when aggregated with other taxable instruments, non-insured
securities (for the Acquired Fund) and securities rated below investment grade
(for the Acquiring Fund) do not exceed 20% of the Fund's net assets.
When DMC, the Funds' investment manager, believes that unusual or adverse
economic, market or other conditions warrant a more defensive posture, DMC may
temporarily select investments for a Fund other than those investments that are
the Fund's primary focus. The Acquiring Fund may invest without limit in
short-term, tax-exempt obligations on a temporary, defensive basis. The Acquired
Fund may invest up to 35% of its net assets in short-term, tax-exempt
obligations, without obtaining insurance, provided that such investments are
rated in
19
either the highest short-term or long-term rating category by an NRSRO. When
investing in this manner a Fund may be unable to achieve its investment
objective.
How do the fundamental investment restrictions of the Funds differ?
The Funds have adopted identical fundamental investment restrictions. A
Fund may not change any of its fundamental investment restrictions without a
prior Majority Vote of its shareholders. The Acquiring Fund's fundamental
investment restrictions are listed in the Acquiring Fund's Statement of
Additional Information dated December 29, 2005 related to the Fund Prospectus,
which is incorporated by reference into the Statement of Additional Information
relating to this Prospectus/Proxy Statement and is available upon request.
What are the risk factors associated with investments in the Funds?
Like all investments, any investment in the Funds involves risk. There is
no assurance that either Fund will meet its investment objectives. A Fund's
ability to achieve its objective will depend, among other things, on the
portfolio managers' analytical and portfolio management skills. As with most
investments in mutual funds, the best results are achieved when investments in
the Funds are held for a number of years.
The risks of investing in the Funds are basically the same as those of
other investments in municipal securities of similar quality. Investments in the
Funds are subject to several risks, which are summarized below.
Interest Rate Risk. Interest rate risk is generally the most significant
type of risk for the Funds. Interest rate risk is the risk that securities, and
in particular bonds with longer maturities, will decrease in value if interest
rates rise. These changes can be unpredictable, and, as such, the Funds will
generally not try to increase return by aggressively capitalizing on interest
rate changes. Each Fund seeks to manage this risk by managing the duration of
the Fund's portfolio securities. As of June 30, 2006, each Fund's average
effective portfolio maturity was approximately seven years and each Fund's
average effective duration was five years. Maturity is defined as the length of
time until a bond issuer must repay the underlying loan principal to
bondholders. Duration is a measurement of a fixed-income investment's price
volatility; the larger the number, the greater the likely price change for a
given change in interest rates.
Market Risk. Market risk is the risk that a majority of securities in a
certain market--such as bonds--will decline in value because of economic
conditions, future expectations or investor confidence. This risk may cause the
price fluctuation of a security because of the changes in general economic and
interest rate conditions that affect the bond market or municipal bond market as
a whole. Additionally, the Funds may engage in transactions where payment occurs
before the actual delivery of the security. Because the market price of the
security may fluctuate during the time after payment but prior to delivery, a
Fund assumes the risk that the value of the security at delivery may be less
than the purchase price.
Industry and Security Risk. Industry risk is the risk that the value of
securities in a particular industry will decline because of changing
expectations for the performance of that
20
industry. Securities risk is the risk that the value of an individual security
will decline because of changing expectations for the performance of the
individual issuer of the security. To mitigate this risk, DMC spreads each
Fund's assets across different types of municipal bonds and among bonds
representing different industries and regions within the State of Minnesota. DMC
will generally concentrate investments in a particular sector when the supply of
bonds in other sectors does not suit the Funds' investment needs. This will
expose a Fund to greater industry and security risk. However, the Acquired Fund
may be less subject to industry and security risk than the Acquiring Fund
because payment of interest and principal on a substantial portion of the bonds
in its portfolio is insured.
Credit Risk. Credit risk is the possibility that an issuer of a debt
security--or an entity that insures the debt security--will be unable to make
interest payments on, and to pay the principal of, a security when due. A change
in the credit risk associated with a particular debt security may cause a
corresponding change in that security's price and, therefore, impact the Fund's
net asset value. The purpose of insurance is to protect against credit risk. In
the event of a default of an insured municipal security, the insurer is
contractually required to make payments of interest and principal under the
terms of the municipal security. To the extent that the Acquired Fund invests
more of its assets in insured municipal securities or in securities that are
more highly rated as compared to the Acquiring Fund, the Acquired Fund may be
subject to less credit risk. There is no assurance, however, that the company
insuring the payment of interest and principal when due to the bondholders will
meet its obligations. Moreover, this insurance does not guarantee the market
value of the insured municipal securities held in a Fund's portfolio and it does
not guarantee the value of an investment in a Fund. Note, however, that despite
these differences in the credit risk associated with each Fund, the average
weighted credit quality of the portfolio of each Fund individually was AA (as
rated by S&P) as of June 30, 2006 and the average weighted credit quality of the
portfolio of the Acquiring Fund after the Transaction is currently expected to
remain at AA.
Call Risk. Call risk is the likelihood that a security will be prepaid
(commonly referred to as being "called") before maturity. An issuer is more
likely to call its bonds when interest rates are falling, because the issuer can
issue new bonds with lower interest payments. If a bond is called, a Fund may
have to replace it with a lower-yielding security. DMC takes this type of risk
into consideration, and when appropriate, attempts to invest in bonds that
protect investors against early prepayment.
High-Yield Bond Risk. Investing in lower-rated, higher-risk bonds entails
the risk of losing principal, which may be greater than the risk of principal
loss associated with investment-grade bonds. In addition, the risk of default or
price changes due to changes in the issuer's credit quality is greater with
lower-rated securities. Issuers of lower-rated securities are typically in
weaker financial health than issuers of higher-rated securities, and their
ability to make interest payments or repay principal is less certain. The market
prices of lower-rated, high-yield securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general or
regional economic difficulty. High-yield securities may also not trade as
frequently, and when they do trade, their prices may be significantly higher or
lower than expected. Thus, high-yield securities may be less liquid and more
volatile than higher-quality securities.
21
The Acquired Fund may not invest in such high-yield bonds. However, the
Acquiring Fund may invest up to 20% of its net assets in such securities,
subject to the minimum quality limitations as described in the section entitled
"Are there any significant differences between the investment strategies and
policies of the Acquired Fund and the Acquiring Fund?" above. To the extent that
the Acquiring Fund invests in such high-yield bonds, the Acquiring Fund may be
subject to greater risks associated with such investments, such as the loss of
principal, credit risk, liquidity risk and volatility, as compared to the
Acquired Fund. The Acquiring Fund has historically invested in high-yield bonds,
subject to the 20% limitation described above.
Geographic Concentration Risk. Largely because of tax avoidance
considerations, both Funds typically invest primarily in debt obligations issued
by the state of Minnesota and, therefore, events in that state are likely to
affect each Fund's investments and performance. These events may include
economic or political policy changes; tax base erosion; state constitutional
limits on tax increases; budget deficits and other financial difficulties; and
changes in the ratings assigned to municipal issuers within that state.
Diversification. Because each Fund is non-diversified (as described above),
each Fund may be more susceptible than a fully diversified fund to adverse
economic, political, business, or regulatory developments affecting a single
issuer, industry, or economic sector. This, in turn, can affect the Fund's net
asset value.
Liquidity Risk. Liquidity risk is the possibility that securities held by a
Fund cannot be readily sold within seven days at approximately the price at
which the Fund values them. Each Fund limits its exposure to illiquid securities
to no more than 15% of the Fund's net assets.
Alternative Minimum Tax Risk. Each Fund may invest up to 20% of its assets
in bonds whose income is subject to the federal alternative minimum tax. If a
Fund invests in bonds whose income is subject to an alternative minimum tax,
that portion of the Fund's distributions would be taxable for shareholders who
are subject to this tax.
What vote is necessary to approve the Plan?
Required Vote. Provided that "Quorum" requirements (as defined below) have
been satisfied, the Plan must be approved by a Majority Vote, meaning the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Acquired Fund; or (2) 67% or more of the shares of the Acquired Fund present
at the Meeting if the holders of more than 50% of the Acquired Fund's
outstanding shares are present or represented by proxy. With respect to the
Acquired Fund, "Quorum" means one-third (33 1/3%) of the shares entitled to vote
at the Meeting are present in person or represented by proxy at the Meeting.
22
MORE INFORMATION ABOUT THE FUNDS
Administration, Transfer Agency and Fund Accounting Services. Delaware
Service Company, Inc. ("DSC"), 2005 Market Street, Philadelphia, Pennsylvania
19103, an affiliate of DMC, acts as the administrator and shareholder servicing,
dividend disbursing and transfer agent for each Fund and for other mutual funds
in the Delaware Companies. DSC also provides fund accounting services to each
Fund. Those services include performing or overseeing all functions related to
calculating each Fund's net asset value and providing all financial reporting
services, regulatory compliance testing and other related accounting services.
For its transfer agency, shareholder servicing, fund accounting and
administration services, DSC is paid fees by each Fund according to fee
schedules that are the same for each retail fund in the Delaware Companies.
These fees are charged to each Fund on a pro rata basis.
Custodial Services. Mellon Bank, N.A., is the custodian of the securities
and other assets of the Funds. The main office of Mellon Bank, N.A. is One
Mellon Center, Pittsburgh, PA 15258.
Additional Information. More information about the Acquiring Fund is
included in (i) the Fund Prospectus, which is included with and considered a
part of this Proxy Statement/Prospectus, (ii) its Statement of Additional
Information dated December 29, 2005, as amended to date, related to the Fund
Prospectus; (iii) its Annual Report to Shareholders for the year ended August
31, 2005 and for the year ended August 31, 2006, when available (each, an
"Annual Report"), (iv) its Semi-Annual Report to Shareholders for the period
ended February 28, 2006 ("Semi-Annual Report"), and (v) the Statement of
Additional Information dated [October 2,] 2006 (relating to this Proxy
Statement/Prospectus), which is incorporated by reference herein. You may
request free copies of the Statements of Additional Information (including any
supplements), the Annual Report and/or the Semi-Annual Report, which have been
filed with the SEC, by calling 1-800-523-1918 or by writing to the Trusts:
Attention: Account Services, 2005 Market Street, Philadelphia, PA 19103.
This Proxy Statement/Prospectus, which constitutes part of a Registration
Statement filed by the Acquiring Fund with the SEC under the Securities Act of
1933, as amended, omits certain of the information contained in such
Registration Statement. Reference is hereby made to the Registration Statement
and to the exhibits and amendments thereto for further information with respect
to the Acquiring Fund and the shares it offers. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the SEC.
Each Fund also files proxy materials, reports, and other information with
the SEC in accordance with the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act. These materials can be
inspected and copied at the public reference facilities maintained by the SEC,
100 F Street, N.E., Room 1580, Washington, D.C. 20549. Also, copies of such
material can be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, SEC, Washington, D.C. 20549, at prescribed
rates
23
or from the SEC's Internet site at www.sec.gov. To request information regarding
the Funds, you may also send an e-mail to the SEC at publicinfo@sec.gov.
VOTING INFORMATION
How will the shareholder voting be handled?
Only shareholders of record of the Acquired Fund at the close of business
on September 25, 2006 (the "Record Date"), will be entitled to notice of and to
vote at the Meeting on the matters described in this Proxy Statement/Prospectus,
and will be entitled to one vote for each full share and a fractional vote for
each fractional share that they hold. If sufficient votes to approve the
Proposal are not received by the date of the Meeting, the Meeting may be
adjourned to permit further solicitations of proxies. A majority of the votes
cast by shareholders of the Acquired Fund present in person or by proxy at the
Meeting (whether or not sufficient to constitute a Quorum) may adjourn the
Meeting. The Meeting may also be adjourned by the Chairperson of the Meeting. It
is anticipated that the persons named as proxies on the enclosed proxy cards
will use the authority granted to them to vote on adjournment in their
discretion.
Abstentions and broker non-votes will be included for purposes of
determining whether a Quorum is present at the Meeting for a particular matter,
and will have the same effect as a vote "against" the Proposal. Broker non-votes
are proxies from brokers or nominees indicating that such persons have not
received voting instructions from the beneficial owner or other person entitled
to vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary power. The Acquired Fund does not expect to
receive any broker non-votes.
How do I ensure my vote is accurately recorded?
You may attend the Meeting and vote in person. You may also vote by
completing, signing and returning the enclosed proxy card in the enclosed
postage paid envelope, or by telephone or through the Internet. If you return
your signed proxy card or vote by telephone or through the Internet, your vote
will be officially cast at the Meeting by the persons appointed as proxies. A
proxy card is, in essence, a ballot. If you simply sign and date the proxy card
but give no voting instructions, your shares will be voted in favor of the
Proposal and in accordance with the views of management upon any unexpected
matters that come before the Meeting or adjournment of the Meeting. If your
shares are held of record by a broker-dealer and you wish to vote in person at
the Meeting, you should obtain a Legal Proxy from your broker of record and
present it at the Meeting.
May I revoke my proxy?
Shareholders may revoke their proxy at any time before it is voted by
sending a written notice to Voyageur Insured Funds expressly revoking their
proxy, by signing and forwarding to Voyageur Insured Funds a later-dated proxy,
or by attending the Meeting and voting in person. If your shares are held in the
name of your broker, you will have to make arrangements with your broker to
revoke a previously executed proxy.
24
What other matters will be voted upon at the Meeting?
The Board of Voyageur Insured Funds does not intend to bring any matters
before the Meeting with respect to the Acquired Fund other than those described
in this Proxy Statement/Prospectus. The Board of Voyageur Insured Funds is not
aware of any other matters to be brought before the Meeting with respect to the
Acquired Fund by others. If any other matter legally comes before the Meeting,
proxies for which discretion has been granted will be voted in accordance with
the views of management.
Who is entitled to vote?
Only shareholders of record on the Record Date will be entitled to vote at
the Meeting. There were ____________ outstanding shares of the Acquired Fund
entitled to vote as of the Record Date.
What other solicitations will be made?
This proxy solicitation is being made by the Board of Voyageur Insured
Funds for use at the Meeting. The cost of this proxy solicitation will be shared
as set forth below. In addition to solicitation by mail, solicitations also may
be made by advertisement, telephone, telegram, facsimile transmission or other
electronic media, or personal contacts. Voyageur Insured Funds will request
broker-dealer firms, custodians, nominees and fiduciaries to forward proxy
materials to the beneficial owners of the shares of record. Voyageur Insured
Funds may reimburse broker-dealer firms, custodians, nominees and fiduciaries
for their reasonable expenses incurred in connection with such proxy
solicitation. In addition to solicitations by mail, officers and employees of
Voyageur Insured Funds and Delaware Management Business Trust, without extra
pay, may conduct additional solicitations by telephone, telecopy and personal
interviews. Voyageur Insured Funds has engaged Computershare Fund Services, Inc.
("Computershare") to solicit proxies from brokers, banks, other institutional
holders and individual shareholders at an anticipated cost of between $8,260 to
$17,820, including out of pocket expenses, which will be borne as described
below. Fees and expenses may be greater depending on the effort necessary to
obtain shareholder votes. Voyageur Insured Funds has also agreed to indemnify
Computershare against certain liabilities and expenses, including liabilities
under the federal securities laws. Voyageur Insured Funds expects that the
solicitations will be primarily by mail, but also may include telephone,
telecopy or oral solicitations.
As the Meeting date approaches, certain shareholders of the Acquired Fund
may receive a telephone call from a representative of Computershare if their
votes have not yet been received. Proxies that are obtained telephonically will
be recorded in accordance with the procedures described below. These procedures
are designed to ensure that both the identity of the shareholder casting the
vote and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Computershare
representative is required to ask for each shareholder's full name and address,
or the zip code or employer
25
identification number, and to confirm that the shareholder has received the
proxy materials in the mail. If the shareholder is a corporation or other
entity, the Computershare representative is required to ask for the person's
title and confirmation that the person is authorized to direct the voting of the
shares. If the information solicited agrees with the information provided to
Computershare, then the Computershare representative has the responsibility to
explain the process, read the Proposal listed on the proxy card and ask for the
shareholder's instructions on the Proposal. Although the Computershare
representative is permitted to answer questions about the process, he or she is
not permitted to recommend to the shareholder how to vote, other than to read
any recommendation set forth in this Proxy Statement/Prospectus. Computershare
will record the shareholder's instructions on the card. Within 72 hours, the
shareholder will be sent a letter or mailgram to confirm his or her vote and
asking the shareholder to call Computershare immediately if his or her
instructions are not correctly reflected in the confirmation.
Who will pay the expenses of the Proposal?
The total costs of the Transaction are estimated to be approximately
$110,000. The costs of the Transaction, including the costs of soliciting
proxies in connection with the Meeting, will be shared by the following parties
in the percentages indicated: 33.33% by the Acquired Fund, 33.33% by the
Acquiring Fund, and 33.34% by DMC.
How do I submit a shareholder proposal?
Voyageur Insured Funds is not required to, and does not intend to, hold
regular annual shareholders' meetings. A shareholder wishing to submit a
proposal for consideration for inclusion in a proxy statement for the next
shareholders' meeting should send his or her written proposal to the offices of
Voyageur Insured Funds, directed to the attention of its Secretary, at the
address of its principal executive office printed on the first page of this
Proxy Statement/Prospectus, so that it is received within a reasonable time
before any such meeting. The inclusion and/or presentation of any such proposal
is subject to the applicable requirements of the proxy rules under the
Securities Exchange Act of 1934. Submission of a proposal by a shareholder does
not guarantee that the proposal will be included in Voyageur Insured Funds'
proxy statement or presented at the meeting.
PRINCIPAL HOLDERS OF SHARES
On the Record Date, the officers and Trustees of each Trust, as a group,
owned less than 1% of the outstanding voting shares of any Fund, or class
thereof.
To the best knowledge of the Trusts, as of the Record Date, no person,
except as set forth in the table at Exhibit B to this Proxy
Statement/Prospectus, owned of record 5% or more of the outstanding shares of
any class of the Acquired Fund and the Acquiring Fund. Except as noted therein,
the Trusts have no knowledge of beneficial ownership.
26
EXHIBITS TO
PROXY STATEMENT/PROSPECTUS
Exhibit
A Form of Agreement and Plan of Reorganization between Voyageur Tax Free
Funds, on behalf of the Minnesota Fund, and Voyageur Insured Funds, on
behalf of the Minnesota Insured Fund
B Principal Holders of Shares
OTHER DOCUMENTS INCLUDED WITH
THIS PROXY STATEMENT/PROSPECTUS
o Prospectus of Delaware Tax-Free Minnesota Fund dated December 29,
2005, as supplemented to date.
27
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
VOYAGEUR TAX FREE FUNDS, ON BEHALF OF THE MINNESOTA FUND, AND
VOYAGEUR INSURED FUNDS, ON BEHALF OF THE MINNESOTA INSURED FUND
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made as
of this __th day of [November] 2006, by and between Voyageur Tax Free Funds, a
statutory trust created under the laws of the State of Delaware, with its
principal place of business at 2005 Market Street, Philadelphia, Pennsylvania
19103, on behalf of its series, Delaware Tax-Free Minnesota Fund ("Acquiring
Fund"), and Voyageur Insured Funds, a statutory trust created under the laws of
the State of Delaware, with its principal place of business also at 2005 Market
Street, Philadelphia, Pennsylvania 19103, on behalf of its series, Delaware
Tax-Free Minnesota Insured Fund ("Acquired Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan") will
consist of: (i) the acquisition by Voyageur Tax Free Funds on behalf of
Acquiring Fund of substantially all of the property, assets and goodwill of
Acquired Fund in exchange solely for (a) shares of beneficial interest, without
par value, of Acquiring Fund - Class A ("Acquiring Fund Class A Shares"), (b)
shares of beneficial interest, without par value, of Acquiring Fund - Class B
("Acquiring Fund Class B Shares"), and (c) shares of beneficial interest,
without par value, of Acquiring Fund - Class C ("Acquiring Fund Class C
Shares"); (ii) the distribution of (a) Acquiring Fund Class A shares to the
holders of Acquired Fund - Class A Shares ("Acquired Fund Class A Shares"), (b)
Acquiring Fund Class B Shares to the holders of Acquired Fund - Class B Shares
("Acquired Fund Class B Shares"), and (c) Acquiring Fund Class C Shares to the
holders of Acquired Fund - Class C Shares ("Acquired Fund Class C Shares"),
according to their respective interests in complete liquidation of Acquired
Fund; and (iii) the dissolution of Acquired Fund as soon as practicable after
the closing (as referenced in Section 3 hereof, hereinafter called the
"Closing"), all upon and subject to the terms and conditions of this Agreement
hereinafter set forth.
AGREEMENT
In order to consummate the Plan and in consideration of the premises
and of the covenants and agreements hereinafter set forth, and intending to be
legally bound, the parties hereto covenant and agree as follows:
1. Sale and Transfer of Assets, Liquidation and Dissolution of Acquired
Fund
(a) Subject to the terms and conditions of this Agreement, and in
reliance on the representations and warranties of Voyageur Tax Free Funds herein
contained, and in consideration of the delivery by Voyageur Tax Free Funds of
the number of its shares of beneficial interest of Acquiring Fund hereinafter
provided, Voyageur Insured Funds, on behalf of Acquired Fund, agrees that it
will sell, convey, transfer and deliver to Voyageur Tax Free Funds, on behalf of
Acquiring Fund, at the Closing provided for in Section 3, all of the then
existing assets of Acquired Fund as of the close of business (which hereinafter
shall be, unless otherwise noted, the regular close of business of the New York
Stock Exchange, Inc. ("NYSE")) ("Close of
A-1
Business") on the valuation date (as defined in Section 3 hereof, hereinafter
called the "Valuation Date"), free and clear of all liens, encumbrances, and
claims whatsoever (other than shareholders' rights of redemption and such
restrictions as might arise under the Securities Act of 1933, as amended (the
"1933 Act"), with respect to privately placed or otherwise restricted securities
that Acquired Fund may have acquired in the ordinary course of business), except
for cash, bank deposits, or cash equivalent securities in an estimated amount
necessary (1) to pay Acquired Fund's costs and expenses of carrying out this
Agreement (including, but not limited to, fees of counsel and accountants, and
expenses of its liquidation and dissolution contemplated hereunder), which costs
and expenses shall be established on the books of Acquired Fund as liability
reserves, (2) to discharge all of Acquired Fund's Liabilities (as defined below)
on its books at the Close of Business on the Valuation Date including, but not
limited to, its income dividends and capital gains distributions, if any,
payable for any period prior to, and through, the Close of Business on the
Valuation Date, and (3) to pay such contingent liabilities as the trustees of
Voyageur Insured Funds shall reasonably deem to exist against Acquired Fund, if
any, at the Close of Business on the Valuation Date, for which contingent and
other appropriate liability reserves shall be established on the books of
Acquired Fund (hereinafter "Net Assets"). Voyageur Insured Funds, on behalf of
Acquired Fund, shall also retain any and all rights that it may have over and
against any person that may have accrued up to and including the Close of
Business on the Valuation Date. Voyageur Insured Funds agrees to use
commercially reasonable efforts to identify all of Acquired Fund's liabilities,
debts, obligations and duties of any nature, whether accrued, absolute,
contingent or otherwise ("Liabilities") prior to the Valuation Date and to
discharge all such known Liabilities on or prior to the Valuation Date. In no
event will Acquiring Fund assume or otherwise be responsible for any Liabilities
of Acquired Fund.
(b) Subject to the terms and conditions of this Agreement, and in
reliance on the representations and warranties of Voyageur Insured Funds on
behalf of Acquired Fund herein contained, and in consideration of such sale,
conveyance, transfer, and delivery, Voyageur Tax Free Funds agrees at the
Closing to deliver to Voyageur Insured Funds, on behalf of Acquired Fund: (i)
the number of Acquiring Fund Class A Shares determined by dividing the net asset
value per share of Acquired Fund Class A Shares as of the Close of Business on
the Valuation Date by the net asset value per share of Acquiring Fund Class A
Shares as of Close of Business on the Valuation Date, and multiplying the result
by the number of outstanding Acquired Fund Class A Shares as of Close of
Business on the Valuation Date; (ii) the number of Acquiring Fund Class B Shares
determined by dividing the net asset value per share of Acquired Fund Class B
Shares as of Close of Business on the Valuation Date by the net asset value per
share of Acquiring Fund Class B Shares as of Close of Business on the Valuation
Date, and multiplying the result by the number of outstanding Acquired Fund
Class B Shares as of Close of Business on the Valuation Date; and (iii) the
number of Acquiring Fund Class C Shares determined by dividing the net asset
value per share of Acquired Fund Class C Shares as of Close of Business on the
Valuation Date by the net asset value per share of Acquiring Fund Class C Shares
as of Close of Business on the Valuation Date, and multiplying the result by the
number of outstanding Acquired Fund Class C Shares as of Close of Business on
the Valuation Date. All such values shall be determined in the manner and as of
the time set forth in Section 2 hereof.
(c) As soon as practicable following the Closing, Voyageur Insured
Funds shall dissolve Acquired Fund and distribute pro rata to Acquired Fund's
shareholders of record as of the Close of Business on the Valuation Date, the
shares of beneficial interest of Acquiring
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Fund received by Acquired Fund pursuant to this Section 1. Such dissolution and
distribution shall be accomplished by the establishment of accounts on the share
records of Acquiring Fund of the type and in the amounts due such shareholders
pursuant to this Section 1 based on their respective holdings of shares of
Acquired Fund as of the Close of Business on the Valuation Date. Fractional
shares of beneficial interest of Acquiring Fund shall be carried to the third
decimal place. No certificates representing shares of beneficial interest of
Acquiring Fund will be issued to shareholders of Acquired Fund Shares
irrespective of whether such shareholders hold their shares in certificated
form.
(d) At the Closing, each outstanding certificate that, prior to
Closing, represented shares of beneficial interest of Acquired Fund, shall be
cancelled and shall no longer evidence ownership thereof.
(e) At the Closing, each shareholder of record of Acquired Fund as of
the record date (the "Distribution Record Date") with respect to any unpaid
dividends and other distributions that were declared prior to the Closing,
including any dividend or distribution declared pursuant to Section 9(e) hereof,
shall have the right to receive such unpaid dividends and distributions with
respect to the shares of Acquired Fund that such person had on such Distribution
Record Date.
2. Valuation
(a) The value of Acquired Fund's Net Assets to be acquired by
Acquiring Fund hereunder shall be computed as of Close of Business on the
Valuation Date using the valuation procedures set forth in Acquired Fund's
currently effective prospectus and statement of additional information.
(b) The net asset value of a share of beneficial interest of
Acquiring Fund Class A Shares, Acquiring Fund Class B Shares and Acquiring Fund
Class C Shares shall be determined to the nearest full cent as of the Close of
Business on the Valuation Date using the valuation procedures set forth in
Acquiring Fund's currently effective prospectus and statement of additional
information.
(c) The net asset value of a share of beneficial interest of Acquired
Fund Class A Shares, Acquired Fund Class B Shares and Acquired Fund Class C
Shares shall be determined to the nearest full cent as of the Close of Business
on the Valuation Date, using the valuation procedures as set forth in Acquired
Fund's currently effective prospectus and statement of additional information.
3. Closing and Valuation Date
The Valuation Date shall be [December 15], 2006, or such later date as
the parties may mutually agree. The Closing shall take place at the principal
office of Voyageur Tax Free Funds, 2005 Market Street, Philadelphia,
Pennsylvania 19103 at approximately 9:00 a.m., Eastern Time, on the first
business day following the Valuation Date. Notwithstanding anything herein to
the contrary, in the event that on the Valuation Date (a) the NYSE shall be
closed to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on such exchange or elsewhere shall be disrupted so that,
in the judgment of Voyageur Tax Free Funds or Voyageur Insured Funds, accurate
appraisal of the value of the net assets of Acquired Fund or Acquiring
A-3
Fund is impracticable, the Valuation Date shall be postponed until the first
business day after the day when trading shall have been fully resumed without
restriction or disruption, reporting shall have been restored and accurate
appraisal of the value of the net assets of Acquired Fund and Acquiring Fund is
practicable in the judgment of Voyageur Tax Free Funds and Voyageur Insured
Funds. Voyageur Insured Funds shall have provided for delivery as of the Closing
of those Net Assets of Acquired Fund to be transferred to Voyageur Tax Free
Funds' Custodian, Mellon Bank, N.A., One Mellon Center, Pittsburg, PA 15285.
Also, Voyageur Insured Funds shall deliver at the Closing a list (which may be
in electronic form) of names and addresses of the shareholders of record of its
Acquired Fund Shares, and the number of full and fractional shares of beneficial
interest of such classes owned by each such shareholder, indicating thereon
which such shares are represented by outstanding certificates and which by
book-entry accounts, all as of the Close of Business on the Valuation Date,
certified by its transfer agent, or by its President or Vice-President to the
best of their knowledge and belief. Voyageur Tax Free Funds shall issue and
deliver a certificate or certificates evidencing the shares of Acquiring Fund to
be delivered at the Closing to said transfer agent registered in such manner as
Voyageur Insured Funds may request, or provide evidence satisfactory to Voyageur
Insured Funds in such manner as Voyageur Insured Funds may request that such
shares of beneficial interest of Acquiring Fund have been registered in an open
account on the books of Acquiring Fund.
4. Representations and Warranties by Voyageur Insured Funds
Voyageur Insured Funds represents and warrants to Voyageur Tax Free
Funds that:
(a) Voyageur Insured Funds is a statutory trust created under the
laws of the State of Delaware on December 17, 1998, and is validly existing and
in good standing under the laws of that State. Voyageur Insured Funds, of which
Acquired Fund is a separate series, is duly registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, management
investment company. Such registration is in full force and effect as of the date
hereof and will be in full force and effect as of the Closing and all of its
shares sold have been sold pursuant to an effective registration statement filed
under the 1933 Act, except for any shares sold pursuant to the private offering
exemption for the purpose of raising initial capital.
(b) Voyageur Insured Funds is authorized to issue an unlimited number
of shares of beneficial interest of Acquired Fund, with no par value. Each
outstanding share of Acquired Fund is validly issued, fully paid, non-assessable
and has full voting rights.
(c) The financial statements appearing in Acquired Fund Annual Report
to Shareholders for the fiscal year ended August 31, 2006, audited by Ernest &
Young, LLP, copies of which have been delivered to Voyageur Tax Free Funds, and
any unaudited financial statements, copies of which may be furnished to Voyageur
Tax Free Funds, fairly present the financial position of Acquired Fund as of the
date indicated, and the results of its operations for the period indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(d) The books and records of Acquired Fund made available to Voyageur
Tax Free Funds and/or its counsel are true and correct in all material respects
and contain no material omissions with respect to the business and operations of
Acquired Fund.
A-4
(e) The statement of assets and liabilities to be furnished by
Voyageur Insured Funds as of the Close of Business on the Valuation Date for the
purpose of determining the number of shares of beneficial interest of Acquiring
Fund to be issued pursuant to Section 1 hereof will accurately reflect the Net
Assets of Acquired Fund and outstanding shares of beneficial interest, as of
such date, in conformity with generally accepted accounting principles applied
on a consistent basis.
(f) At the Closing, Voyageur Insured Funds, on behalf of Acquired
Fund, will have good and marketable title to all of the securities and other
assets shown on the statement of assets and liabilities referred to in
subsection (e) above, free and clear of all liens or encumbrances of any nature
whatsoever except such restrictions as might arise under the 1933 Act with
respect to privately placed or otherwise restricted securities that it may have
acquired in the ordinary course of business and such imperfections of title or
encumbrances as do not materially detract from the value or use of the assets
subject thereto, or materially affect title thereto.
(g) Voyageur Insured Funds has the necessary trust power and trust
authority to conduct its business and the business of Acquired Fund as such
businesses are now being conducted.
(h) Voyageur Insured Funds is not a party to or obligated under any
provision of its Agreement and Declaration of Trust, By-Laws, or any material
contract or any other material commitment or obligation, and is not subject to
any order or decree that would be violated by its execution of or performance
under this Agreement.
(i) Voyageur Insured Funds has full trust power and trust authority
to enter into and perform its obligations under this Agreement, subject to
approval of this Agreement by Acquired Fund's shareholders. Except as provided
in the immediately preceding sentence, the execution, delivery and performance
of this Agreement have been validly authorized, and this Agreement constitutes
its legal, valid and binding obligation enforceable against it in accordance
with its terms, subject as to enforcement to the effect of bankruptcy,
insolvency, reorganization, arrangement among creditors, moratorium, fraudulent
transfer or conveyance, and other similar laws of general applicability relating
to or affecting creditor's rights and to general equity principles.
(j) Neither Voyageur Insured Funds nor Acquired Fund is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
(k) Voyageur Insured Funds does not have any unamortized or unpaid
organizational fees or expenses.
(l) Voyageur Insured Funds has elected to treat Acquired Fund as a
regulated investment company ("RIC") for federal income tax purposes under Part
I of Subchapter M of the Code, Acquired Fund is a "fund" as defined in Section
851(g)(2) of the Code, has qualified as a RIC for each taxable year since its
inception and will qualify as a RIC as of the Closing, and consummation of the
transactions contemplated by the Plan will not cause it to fail to be qualified
as a RIC as of the Closing.
A-5
5. Representations and Warranties by Voyageur Tax Free Funds
Voyageur Tax Free Funds represents and warrants to Voyageur Insured
Funds that:
(a) Voyageur Tax Free Funds is a statutory trust created under the
laws of the State of Delaware on December 17, 1998, and is validly existing and
in good standing under the laws of that State. Voyageur Tax Free Funds, of which
Acquiring Fund is a separate series of shares, is duly registered under the 1940
Act as an open-end, management investment company, such registration is in full
force and effect as of the date hereof or will be in full force and effect as of
the Closing and all of its shares sold have been sold pursuant to an effective
registration statement filed under the 1933 Act, except for any shares sold
pursuant to the private offering exemption for the purpose of raising initial
capital.
(b) Voyageur Tax Free Funds is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of Acquiring Fund.
Each outstanding share of Acquiring Fund is fully paid, non-assessable and has
full voting rights. The shares of beneficial interest of Acquiring Fund to be
issued pursuant to Section 1 hereof will, upon their issuance, be validly issued
and fully paid and non-assessable and have full voting rights.
(c) At the Closing, each class of shares of beneficial interest of
Acquiring Fund to be issued pursuant to this Agreement will be eligible for
offering to the public in those states of the United States and jurisdictions in
which the corresponding class of shares of Acquired Fund are presently eligible
for offering to the public, and there are an unlimited number of shares
registered under the 1933 Act such that there is a sufficient number of such
shares to permit the transfers contemplated by this Agreement to be consummated.
(d) The statement of assets and liabilities of Acquiring Fund to be
furnished by Voyageur Tax Free Funds as of the Close of Business on the
Valuation Date for the purpose of determining the number of shares of beneficial
interest of Acquiring Fund to be issued pursuant to Section 1 hereof will
accurately reflect the net assets of Acquiring Fund and outstanding shares of
beneficial interest, as of such date, in conformity with generally accepted
accounting principles applied on a consistent basis.
(e) At the Closing, Voyageur Tax Free Funds will have good and
marketable title to all of the securities and other assets shown on the
statement of assets and liabilities referred to in subsection (d) above, free
and clear of all liens or encumbrances of any nature whatsoever except such
restrictions as might arise under the 1933 Act with respect to privately placed
or otherwise restricted securities that it may have acquired in the ordinary
course of business and such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
(f) Voyageur Tax Free Funds has the necessary trust power and trust
authority to conduct its business and the business of Acquiring Fund as such
businesses are now being conducted.
A-6
(g) Voyageur Tax Free Funds is not a party to or obligated under any
provision of its Agreement and Declaration of Trust, By-Laws, or any material
contract or any other material commitment or obligation, and is not subject to
any order or decree that would be violated by its execution of or performance
under this Agreement.
(h) Voyageur Tax Free Funds has full trust power and trust authority
to enter into and perform its obligations under this Agreement. The execution,
delivery and performance of this Agreement have been validly authorized, and
this Agreement constitutes its legal, valid and binding obligation enforceable
against it in accordance with its terms, subject, as to enforcement, to the
effect of bankruptcy, insolvency reorganization, arrangements among creditors,
moratorium, fraudulent transfer or conveyance, and other similar laws of general
applicability relating to or affecting creditors rights and to general equity
principles.
(i) Neither Voyageur Tax Free Funds nor Acquiring Fund is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(j) The books and records of Acquiring Fund made available to
Voyageur Insured Funds and/or its counsel are true and correct in all material
respects and contain no material omissions with respect to the business and
operations of Acquiring Fund.
(k) Voyageur Tax Free Funds has elected to treat Acquiring Fund as a
regulated investment company ("RIC") for federal income tax purposes under Part
I of Subchapter M of the Code, Acquiring Fund is a "fund" as defined in Section
851(g)(2) of the Code, has qualified as a RIC for each taxable year since its
inception and will qualify as a RIC as of the Closing, and consummation of the
transactions contemplated by the Plan will not cause it to fail to be qualified
as a RIC as of the Closing.
6. Representations and Warranties by Voyageur Insured Funds and Voyageur
Tax Free Funds
Voyageur Insured Funds and Voyageur Tax Free Funds each represents and
warrants to the other that:
(a) Except as discussed in its currently effective prospectus, there
are no legal, administrative or other proceedings or investigations against it,
or, to its knowledge, threatened against it, that would materially affect its
financial condition or its ability to consummate the transactions contemplated
by this Agreement. It is not charged with or, to its knowledge, threatened with,
any violation or investigation of any possible violation of any provisions of
any federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(b) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(c) It has duly and timely filed, on behalf of Acquired Fund or
Acquiring Fund, as appropriate, all Tax (as defined below) returns and reports
(including information returns), which are required to be filed by such Acquired
Fund or Acquiring Fund, and all such returns and reports accurately state the
amount of Tax owed for the periods covered by the
A-7
returns, or, in the case of information returns, the amount and character of
income required to be reported by such Acquired Fund or Acquiring Fund. On
behalf of Acquired Fund or Acquiring Fund, as appropriate, it has paid or made
provision and properly accounted for all Taxes (as defined below) due or
properly shown to be due on such returns and reports. The amounts set up as
provisions for Taxes in the books and records of Acquired Fund or Acquiring
Fund, as appropriate, as of the Close of Business on the Valuation Date will, to
the extent required by generally accepted accounting principles, be sufficient
for the payment of all Taxes of any kind, whether accrued, due, absolute,
contingent or otherwise, which were or which may be payable by Acquired Fund or
Acquiring Fund, as appropriate, for any periods or fiscal years prior to and
including the Close of Business on the Valuation Date, including all Taxes
imposed before or after the Close of Business on the Valuation Date that are
attributable to any such period or fiscal year. No return filed by it, on behalf
of Acquired Fund or Acquiring Fund, as appropriate, is currently being audited
by the Internal Revenue Service or by any state or local taxing authority. As
used in this Agreement, "Tax" or "Taxes" means all federal, state, local and
foreign (whether imposed by a country or political subdivision or authority
thereunder) income, gross receipts, excise, sales, use, value added, employment,
franchise, profits, property, ad valorem or other taxes, stamp taxes and duties,
fees, assessments or charges, whether payable directly or by withholding,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (foreign or domestic) with respect
thereto. To its knowledge, there are no levies, liens or encumbrances relating
to Taxes existing, threatened or pending with respect to the assets of Acquired
Fund or Acquiring Fund, as appropriate.
(d) All information provided to Voyageur Insured Funds by Voyageur
Tax Free Funds, and by Voyageur Insured Funds to Voyageur Tax Free Funds, for
inclusion in, or transmittal with, the Combined Proxy Statement and Prospectus
with respect to this Agreement pursuant to which approval of Acquired Fund's
shareholders will be sought, shall not contain any untrue statement of a
material fact, or omit to state a material fact required to be stated therein in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(e) Except in the case of Voyageur Insured Funds with respect to the
approval of Acquired Fund's shareholders of this Agreement, no consent,
approval, authorization or order of any court or governmental authority, or of
any other person or entity, is required for the consummation of the transactions
contemplated by this Agreement, except as may be required by the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, or
state securities laws or Delaware statutory trust laws (including, in the case
of each of the foregoing, the rules and regulations thereunder).
7. Covenants of Voyageur Insured Funds
(a) Voyageur Insured Funds covenants to operate the business of
Acquired Fund as presently conducted between the date hereof and the Closing.
(b) Voyageur Insured Funds undertakes that Acquired Fund will not
acquire the shares of beneficial interest of Acquiring Fund for the purpose of
making distributions thereof other than to Acquired Fund's shareholders.
A-8
(c) Voyageur Insured Funds covenants that by the Closing, all of
Acquired Fund's federal and other Tax returns and reports required by law to be
filed on or before such date shall have been filed and all federal and other
Taxes shown as due on said returns either shall have been paid or adequate
liability reserves shall have been provided for the payment of such Taxes.
(d) Voyageur Insured Funds will at the Closing provide Voyageur Tax
Free Funds with:
(1) A statement of the respective tax basis of all investments
to be transferred by Acquired Fund to Acquiring Fund.
(2) A copy (which may be in electronic form) of the shareholder
ledger accounts including, without limitation, the name, address and
taxpayer identification number of each shareholder of record, the
number of shares of beneficial interest held by each shareholder, the
dividend reinvestment elections applicable to each shareholder, and
the backup withholding and nonresident alien withholding
certifications, notices or records on file with Acquired Fund with
respect to each shareholder, for all of the shareholders of record of
Acquired Fund's shares as of the Close of Business on the Valuation
Date, who are to become holders of Acquiring Fund as a result of the
transfer of assets that is the subject of this Agreement, certified by
its transfer agent or its President or its Vice-President to the best
of their knowledge and belief.
(e) The Board of Trustees of Voyageur Insured Funds shall call, and
Voyageur Insured Funds shall hold, a Special Meeting of Acquired Fund's
shareholders to consider and vote upon this Agreement (the "Special Meeting")
and Voyageur Insured Funds shall take all other actions reasonably necessary to
obtain approval of the transactions contemplated herein. Voyageur Insured Funds
agrees to mail to each shareholder of record entitled to vote at the Special
Meeting at which action on this Agreement is to be considered, in sufficient
time to comply with requirements as to notice thereof, a Combined Proxy
Statement and Prospectus that complies in all material respects with the
applicable provisions of Section 14(a) of the 1934 Act and Section 20(a) of the
1940 Act, and the rules and regulations promulgated thereunder.
(f) Voyageur Insured Funds shall supply to Voyageur Tax Free Funds,
at the Closing, the statement of the assets and liabilities described in Section
4(e) of this Agreement in conformity with the requirements described in such
Section.
8. Covenants of Voyageur Tax Free Funds
(a) Voyageur Tax Free Funds covenants that the shares of beneficial
interest of Acquiring Fund to be issued and delivered to Acquired Fund pursuant
to the terms of Section 1 hereof shall have been duly authorized as of the
Closing and, when so issued and delivered, shall be registered under the 1933
Act, validly issued, and fully paid and non-assessable, and no shareholder of
Acquiring Fund shall have any statutory or contractual preemptive right of
subscription or purchase in respect thereof, other than any rights created
pursuant to this Agreement.
A-9
(b) Voyageur Tax Free Funds covenants to operate the business of
Acquiring Fund as presently conducted between the date hereof and the Closing.
(c) Voyageur Tax Free Funds covenants that by the Closing, all of
Acquiring Fund's federal and other tax returns and reports required by law to be
filed on or before such date shall have been filed and all federal and other
taxes shown as due on said returns shall have either been paid or adequate
liability reserves shall have been provided for the payment of such taxes.
(d) Voyageur Tax Free Funds shall supply to Voyageur Insured Funds,
at the Closing, the statement of assets and liabilities described in Section
5(d) of this Agreement in conformity with the requirements described in such
Section.
(e) Voyageur Tax Free Funds shall have filed with the United States
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form N-14 under the 1933 Act ("Registration Statement"), relating to the
shares of beneficial interest of Acquiring Fund issuable hereunder, and shall
have used its best efforts to provide that such Registration Statement becomes
effective as promptly as practicable. At the time such Registration Statement
becomes effective, it (i) complied in all material respects with the applicable
provisions of the 1933 Act, the 1934 Act and the 1940 Act, and the rules and
regulations promulgated thereunder; and (ii) will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. At
the time the Registration Statement becomes effective, at the time of Acquired
Fund's shareholders' meeting, and at the Closing, the prospectus and statement
of additional information included in the Registration Statement did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
9. Conditions Precedent to be Fulfilled by Voyageur Insured Funds and
Voyageur Tax Free Funds
The obligations of Voyageur Insured Funds and Voyageur Tax Free Funds
to effectuate this Agreement and the Plan hereunder shall be subject to the
following respective conditions:
(a) That (1) all the representations and warranties of the other
party contained herein shall be true and correct in all material respects as of
the Closing with the same effect as though made as of and at such date; (2) the
other party shall have performed all obligations required by this Agreement to
be performed by it at or prior to the Closing; and (3) the other party shall
have delivered to such party a certificate signed by the President or
Vice-President and by the Secretary or equivalent officer to the foregoing
effect.
(b) That the other party shall have delivered to such party a copy of
the resolutions approving this Agreement adopted by the other party's Board of
Trustees, certified by the Secretary or equivalent officer.
(c) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted nor threatened to
institute any proceeding
A-10
seeking to enjoin the consummation of the reorganization contemplated hereby
under Section 25(c) of the 1940 Act, and no other legal, administrative or other
proceeding shall be instituted or threatened that would materially and adversely
affect the financial condition of either party or would prohibit the
transactions contemplated hereby.
(d) That this Agreement, the Plan and the transactions contemplated
hereby shall have been approved by the appropriate action of the shareholders of
Acquired Fund at an annual or special meeting or any adjournment thereof.
(e) That Acquired Fund shall have declared a distribution or
distributions prior to the Valuation Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its ordinary income, capital gain net income and net interest income
excludable under Section 103(a) of the Code, if any, for the period from the
close of its last fiscal year to the Close of Business on the Valuation Date,
and (ii) any undistributed ordinary income, capital gain net income and net
interest income excludable under Section 103(a) of the Code from any prior
period. Capital gain net income has the meaning given such term by Section
1222(g) of the Code.
(f) That all required consents of other parties and all other
consents, orders and permits of federal, state and local authorities (including
those of the Commission and of state Blue Sky securities authorities, including
any necessary "no-action" positions or exemptive orders from such federal and
state authorities) to permit consummation of the transaction contemplated hereby
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve risk of material adverse effect on the assets and
properties of Acquired Fund or Acquiring Fund.
(g) That prior to or at the Closing, Voyageur Insured Funds and
Voyageur Tax Free Funds shall receive an opinion from Stradley Ronon Stevens &
Young, LLP ("SRSY") to the effect that, provided the acquisition contemplated
hereby is carried out in accordance with this Agreement and in accordance with
customary representations provided by Voyageur Insured Funds and Voyageur Tax
Free Funds in certificates delivered to SRSY:
(1) The acquisition by Acquiring Fund of substantially all of
the assets of Acquired Fund in exchange solely for Acquiring Fund
shares to be issued pursuant to Section 1 hereof, followed by the
distribution by Acquired Fund to its shareholders of Acquiring Fund
shares in complete liquidation of Acquired Fund, will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code,
and Acquiring Fund and Acquired Fund will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Acquired Fund upon the
transfer of substantially all of its assets to Acquiring Fund in
exchange solely for the voting shares of Acquiring Fund (to be issued
in accordance with Section 1 hereof) under Section 361(a) and Section
357(a) of the Code;
(3) No gain or loss will be recognized by Acquiring Fund upon
the receipt by it of substantially all of the assets of Acquired Fund
in exchange solely
A-11
for the voting shares of Acquiring Fund (to be issued in accordance
with Section 1 hereof) under Section 1032(a) of the Code;
(4) No gain or loss will be recognized by Acquired Fund upon the
distribution of Acquiring Fund shares to Acquired Fund shareholders in
accordance with Section 1 hereof in liquidation of Acquired Fund under
Section 361(c)(1) of the Code.
(5) The basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the basis of such assets to
Acquired Fund immediately prior to the exchange under Section 362(b)
of the Code;
(6) The holding period of the assets of Acquired Fund received
by Acquiring Fund will include the period during which such assets
were held by Acquired Fund under Section 1223(2) of the Code;
(7) No gain or loss will be recognized by the shareholders of
Acquired Fund upon the exchange of their shares in Acquired Fund for
the voting shares (including fractional shares to which they may be
entitled) of Acquiring Fund (to be issued in accordance with Section 1
hereof) under Section 354(a) of the Code;
(8) The basis of Acquiring Fund shares received by Acquired Fund
shareholders in accordance with Section 1 hereof (including fractional
shares to which they may be entitled) will be the same as the basis of
the shares of Acquired Fund exchanged therefor under Section 358(a)(1)
of the Code;
(9) The holding period of Acquiring Fund's shares received by
Acquired Fund's shareholders in accordance with Section 1 hereof
(including fractional shares to which they may be entitled) will
include the holding period of Acquired Fund's shares surrendered in
exchange therefor, provided that Acquired Fund shares were held as a
capital asset on the date of the Reorganization under Section 1223(l)
of the Code; and
(10) Acquiring Fund will succeed to and take into account as of
the date of the transfer (as defined in Section 1.381(b)-1(b) of the
regulations issued by the United States Treasury (the "Treasury
Regulations")) the items of Acquired Fund described in Section 381(c)
of the Code, subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code, and the Treasury
Regulations.
(h) That Voyageur Tax Free Funds shall have received an opinion in
form and substance reasonably satisfactory to it from SRSY, counsel to Voyageur
Insured Funds, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, arrangement among creditors, moratorium, fraudulent
transfer or conveyance, and other similar laws of general applicability relating
to or affecting creditor's rights and to general equity principles:
(1) Voyageur Insured Funds was created as a statutory trust
(formerly known as a business trust) under the laws of the State of
Delaware on December
A-12
17, 1998, and is validly existing and in good standing under the laws
of the State of Delaware;
(2) Voyageur Insured Funds is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
Voyageur Insured Funds and of Acquired Fund. Assuming that the initial
shares of beneficial interest of Acquired Fund were issued in
accordance with the 1940 Act, and the Agreement and Declaration of
Trust and By-Laws of Voyageur Insured Funds, and that all other such
outstanding shares of Acquired Fund were sold, issued and paid for in
accordance with the terms of Acquired Fund prospectus in effect at the
time of such sales, each such outstanding share is validly issued,
fully paid and non-assessable;
(3) Voyageur Insured Funds is an open-end, investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Acquired Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
Voyageur Insured Funds, the unfavorable outcome of which would
materially and adversely affect Voyageur Insured Funds or Acquired
Fund;
(5) To such counsel's knowledge, no consent, approval,
authorization or order of any court, governmental authority or agency
is required for the consummation by Voyageur Insured Funds of the
transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, and Delaware
laws (including, in the case of each of the foregoing, the rules and
regulations thereunder) and such as may be required under state
securities laws;
(6) Neither the execution, delivery nor performance of this
Agreement by Voyageur Insured Funds violates any provision of its
Agreement and Declaration of Trust, its By-Laws, or the provisions of
any agreement or other instrument, known to such counsel to which
Voyageur Insured Funds is a party or by which Voyageur Insured Funds
is otherwise bound; and
(7) This Agreement has been validly authorized and executed by
Voyageur Insured Funds and represents the legal, valid and binding
obligation of Voyageur Insured Funds and is enforceable against
Voyageur Insured Funds in accordance with its terms.
In giving the opinions set forth above, SRSY may state that it is
relying on certificates of the officers of Voyageur Insured Funds with regard to
matters of fact and certain certifications and written statements of
governmental officials with respect to the good standing of Voyageur Insured
Funds.
(i) That Voyageur Insured Funds shall have received an opinion in
form and substance reasonably satisfactory to it from SRSY, counsel to Voyageur
Tax Free Funds, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, arrangement among
A-13
creditors, moratorium, fraudulent transfer or conveyance, and other similar laws
of general applicability relating to or affecting creditor's rights and to
general equity principles:
(1) Voyageur Tax Free Funds was created as a statutory trust
(formerly known as a business trust) under the laws of the State of
Delaware on December 17, 1998, and is validly existing and in good
standing under the laws of the State of Delaware;
(2) Voyageur Tax Free Funds is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
Acquiring Fund;
(3) Voyageur Tax Free Funds is an open-end investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Acquiring Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
Voyageur Tax Free Funds, the unfavorable outcome of which would
materially and adversely affect Voyageur Tax Free Funds or Acquiring
Fund;
(5) The shares of beneficial interest of Acquiring Fund to be
issued pursuant to the terms of Section 1 hereof have been duly
authorized and, when issued and delivered as provided in this
Agreement, will have been validly issued and fully paid and will be
non-assessable by Voyageur Tax Free Funds or Acquiring Fund, and to
such counsel's knowledge, no shareholder has any preemptive right to
subscription or purchase in respect thereof other than any rights that
may be deemed to have been granted pursuant to this Agreement;
(6) To such counsel's knowledge, no consent, approval,
authorization or order of any court, governmental authority or agency
is required for the consummation by Voyageur Tax Free Funds of the
transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, and Delaware
laws (including, in the case of each of the foregoing, the rules and
regulations thereunder) and such as may be required under state
securities laws;
(7) Neither the execution, delivery nor performance of this
Agreement by Voyageur Tax Free Funds violates any provision of its
Agreement and Declaration of Trust, its By-Laws, or the provisions of
any agreement or other instrument, known to such counsel to which
Voyageur Tax Free Funds is a party or by which Voyageur Tax Free Funds
is otherwise bound; and
(8) This Agreement has been validly authorized and executed by
Voyageur Tax Free Funds and represents the legal, valid and binding
obligation of Voyageur Tax Free Funds and is enforceable against
Voyageur Tax Free Funds in accordance with its terms.
In giving the opinions set forth above, SRSY may state that it is
relying on certificates of the officers of Voyageur Tax Free Funds with regard
to matters of fact and certain
A-14
certifications and written statements of governmental officials with respect to
the good standing of Voyageur Tax Free Funds.
(j) That Voyageur Tax Free Funds' Registration Statement with respect
to the shares of beneficial interest of Acquiring Fund to be delivered to
Acquired Fund's shareholders in accordance with Section 1 hereof shall have
become effective, and no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto, shall have been
issued prior to the Closing or shall be in effect at the Closing, and no
proceedings for the issuance of such an order shall be pending or threatened on
that date.
(k) That the shares of beneficial interest of Acquiring Fund to be
delivered in accordance with Section 1 hereof shall be eligible for sale by
Voyageur Tax Free Funds with each state commission or agency with which such
eligibility is required in order to permit the shares lawfully to be delivered
to each Acquired Fund shareholder.
(l) That at the Closing, Voyageur Insured Funds, on behalf of
Acquired Fund, transfers to Acquiring Fund aggregate Net Assets of Acquired Fund
comprising at least 90% in fair market value of the total net assets and 70% in
fair market value of the total gross assets recorded on the books of Acquired
Fund at the Close of Business on the Valuation Date.
10. Fees and Expenses The expenses of entering into and carrying out the
provisions of this Agreement, whether or not consummated, shall be borne 33.33%
by Acquired Fund; 33.33% by Acquiring Fund; and 33.34% by Delaware Management
Company, a series of Delaware Management Business Trust.
11. Termination; Waiver; Order
(a) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Plan abandoned at any
time (whether before or after adoption thereof by the shareholders of Acquired
Fund) prior to the Closing as follows:
(1) by mutual consent of Voyageur Insured Funds and Voyageur Tax
Free Funds;
(2) by Voyageur Tax Free Funds if any condition precedent to its
obligations set forth in Section 9 has not been fulfilled or waived by
Voyageur Tax Free Funds; or
(3) by Voyageur Insured Funds if any condition precedent to its
obligations set forth in Section 9 has not been fulfilled or waived by
Voyageur Insured Funds.
(b) If the transactions contemplated by this Agreement have not been
consummated by June 30, 2007, this Agreement shall automatically terminate on
that date, unless a later date is agreed to by both Voyageur Insured Funds and
Voyageur Tax Free Funds.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability
A-15
on the part of either Voyageur Insured Funds or Voyageur Tax Free Funds or
persons who are their trustees, officers, agents or shareholders in respect of
this Agreement.
(d) At any time prior to the Closing, any of the terms or conditions
of this Agreement may be waived by either Voyageur Insured Funds or Voyageur Tax
Free Funds, respectively (whichever is entitled to the benefit thereof).
(e) The respective representations, warranties and covenants
contained in Sections 4-8 hereof shall expire with, and be terminated by, the
consummation of the Plan, and neither Voyageur Insured Funds nor Voyageur Tax
Free Funds, nor any of their officers, trustees, agents or shareholders shall
have any liability with respect to such representations or warranties after the
Closing. This provision shall not protect any officer, trustee, agent or
shareholder of Voyageur Insured Funds or Voyageur Tax Free Funds against any
liability to the entity for which that officer, trustee, agent or shareholder so
acts or to its shareholders to which that officer, trustee, agent or shareholder
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties in the conduct of such office.
(f) If any order or orders of the Commission with respect to this
Agreement shall be issued prior to the Closing and shall impose any terms or
conditions that are determined by action of the Board of Trustees of Voyageur
Insured Funds or the Board of Trustees of Voyageur Tax Free Funds to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the shareholders of Acquired Fund,
unless such further vote is required by applicable law or by mutual consent of
the parties.
12. Liability of Voyageur Tax Free Funds and Voyageur Insured Funds
(a) Each party acknowledges and agrees that all obligations of
Voyageur Tax Free Funds under this Agreement are binding only with respect to
Acquiring Fund; that any liability of Voyageur Tax Free Funds under this
Agreement with respect to Acquiring Fund, or in connection with the transactions
contemplated herein with respect to Acquiring Fund, shall be discharged only out
of the assets of Acquiring Fund; that no other series of Voyageur Tax Free Funds
shall be liable with respect to this Agreement or in connection with the
transactions contemplated herein; and that neither Voyageur Insured Funds nor
Acquired Fund shall seek satisfaction of any such obligation or liability from
the shareholders of Voyageur Tax Free Funds, the trustees, officers, employees
or agents of Voyageur Tax Free Funds, or any of them.
(b) Each party acknowledges and agrees that all obligations of
Voyageur Insured Funds under this Agreement are binding only with respect to
Acquired Fund; that any liability of Voyageur Insured Funds under this Agreement
with respect to Acquired Fund, or in connection with the transactions
contemplated herein with respect to Acquired Fund, shall be discharged only out
of the assets of Acquired Fund; that no other series of Voyageur Insured Funds
shall be liable with respect to this Agreement or in connection with the
transactions contemplated herein; and that neither Voyageur Tax Free Funds nor
Acquiring Fund shall seek satisfaction of any such obligation or liability from
the shareholders of Voyageur Insured Funds, the trustees, officers, employees or
agents of Voyageur Insured Funds, or any of them.
A-16
13. Final Tax Returns and Forms 1099 of Acquired Fund
(a) After the Closing, Voyageur Insured Funds shall or shall cause
its agents to prepare any federal, state or local Tax returns, including any
Forms 1099, required to be filed by Voyageur Insured Funds with respect to
Acquired Fund's final taxable year ending with its complete liquidation and for
any prior periods or taxable years and shall further cause such Tax returns and
Forms 1099 to be duly filed with the appropriate taxing authorities.
(b) Notwithstanding the provisions of Section 1 hereof, any expenses
incurred by Voyageur Insured Funds or Acquired Fund (other than for payment of
Taxes) in connection with the preparation and filing of said Tax returns and
Forms 1099 after the Closing, shall be borne by Acquired Fund to the extent such
expenses have been or should have been accrued by Acquired Fund in the ordinary
course without regard to the Plan contemplated by this Agreement; any excess
expenses shall be borne by Delaware Management Company, a series of Delaware
Management Business Trust, at the time such Tax returns and Forms 1099 are
prepared.
14. Cooperation and Exchange of Information
Voyageur Tax Free Funds and Voyageur Insured Funds will provide each
other and their respective representatives with such cooperation and information
as either of them reasonably may request of the other in filing any Tax returns,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Each party or their respective agents will
retain for a period of six (6) years following the Closing all returns,
schedules and work papers and all material records or other documents relating
to Tax matters of Acquired Fund and Acquiring Fund for its taxable period first
ending after the Closing and for all prior taxable periods.
15. Entire Agreement and Amendments
This Agreement embodies the entire Agreement between the parties and
there are no agreements, understandings, restrictions, or warranties between the
parties other than those set forth herein or herein provided for. This Agreement
may be amended only by mutual consent of the parties in writing. Neither this
Agreement nor any interest herein may be assigned without the prior written
consent of the other party.
16. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts together
shall constitute but one instrument.
17. Notices
Any notice, report, or demand required or permitted by any provision
of this Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Voyageur Insured
Funds or Voyageur Tax Free Funds at 2005 Market Street, Philadelphia, PA 19103,
Attention: Secretary.
A-17
18. Governing Law
This Agreement shall be governed by and carried out in accordance with
the laws of the State of Delaware.
19. Effect of Facsimile Signature
A facsimile signature of an authorized officer of a party hereto on
this Agreement and/or any transfer document shall have the same effect as if
executed in the original by such officer.
IN WITNESS WHEREOF, Voyageur Insured Funds and Voyageur Tax Free Funds
have each caused this Agreement and Plan of Reorganization to be executed on its
behalf by its duly authorized officers, all as of the day and year first-above
written.
Voyageur Insured Funds, on behalf of the
Delaware Tax-Free Minnesota Insured Fund
By:
(name) (title)
Voyageur Tax Free Funds, on behalf of the
Delaware Tax-Free Minnesota Fund
By:
(name) (title)
A-18
EXHIBIT B
PRINCIPAL HOLDERS OF SHARES
- --------------------------------------------------------------------------------------------------------
FUND NAME / CLASS NAME AND ADDRESS OF ACCOUNT SHARE AMOUNT PERCENTAGE
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota
Insured Fund - Class A Shares ------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota
Insured Fund - Class B Shares ------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota
Insured Fund - Class C Shares ------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
B-1
- --------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota
Fund - Class A Shares ------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota
Fund - Class B Shares ------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Delaware Tax-Free Minnesota
Fund - Class C Shares ------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
B-2
DELAWARE TAX-FREE MINNESOTA INSURED FUND (THE "FUND")
MEETING OF SHAREHOLDERS - NOVEMBER 30, 2006
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) A.G. Ciavarelli,
David F. Connor and Michael E. Dresnin or any of them, attorneys, with full
power of substitution, to vote all shares of the Fund, as indicated above, that
the undersigned is entitled to vote at the above stated Meeting of Shareholders
to be held at the offices of Delaware Investments located at 2001 Market Street,
2nd Floor Auditorium, Philadelphia, PA 19103-7055 on November 30, 2006 at 3:00
p.m., Eastern Time and at any adjournments thereof. All powers may be exercised
by two or more of said proxy holders or substitutes voting or acting or, if only
one votes and acts, then by that one. This proxy shall be voted on the proposal
described in the Proxy Statement/Prospectus as specified on the reverse side.
Receipt of the Notice of Meeting and the accompanying Proxy Statement/Prospectus
is hereby acknowledged.
To vote by Mail: (1) Read the Proxy Statement; (2) Check the appropriate box on
the reverse side; and (3) Sign, date and return the proxy card in the envelope
provided.
To vote by Telephone: (1) Read the Proxy Statement and have the proxy card at
hand; (2) Call [1-888-221-0697]; and (3) Follow the recorded instructions.
To vote by Internet: (1) Read the Proxy Statement and have the proxy card at
hand; (2) Go to www.proxyweb.com; and (3) Follow the on-line directions.
MIS EDITS: # OF CHANGES ___/___ PRF 1 ___ PRF 2 ____
OK TO PRINT AS IS* ____________ *By signing this form
you are authorizing MIS to print this form in its
current state.
_____________________________________________________
SIGNATURE OF PERSON AUTHORIZING PRINTING DATE
LABEL BELOW FOR MIS USE ONLY!
PO# ______
DELAWARE INVESTMENTS #___
DELAWARE TAX-FREE MINNESOTA INSURED FUND
ORIGINAL2UP [____________]
DOREEN (DELAWARE __________________)
REVISION #1 [___________]
REVIEW #1 [_____________]
UNLESS YOU'RE VOTING BY TELEPHONE OR INTERNET, PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
Date: __________________________
[GRAPHIC OMITTED]
Signature(s) (Joint Owners) (Please sign within box)
THIS PROXY CARD IS ONLY VALID WHEN SIGNED: To avoid the additional expense to
the Fund of further solicitation, please date and sign name(s) above as printed
on this card to authorize the voting of your shares as indicated. Persons
signing as executor, administrator, trustee or other representative should give
full title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WITH RESPECT TO THE
FUND. THE FOLLOWING MATTER IS PROPOSED BY THE FUND. THE BOARD OF TRUSTEES
RECOMMENDS A VOTE FOR THE PROPOSAL. IF NO SPECIFICATION IS MADE AND THIS PROXY
IS SIGNED AND RETURNED, THE PROXY SHALL BE VOTED FOR THE PROPOSAL. PLEASE REFER
TO THE PROXY STATEMENT/PROSPECTUS FOR A DISCUSSION OF THE PROPOSAL. IF OTHER
MATTERS PROPERLY COME BEFORE THE MEETING TO BE VOTED ON, THE SHARES REPRESENTED
BY THE PROXY HOLDERS WILL BE VOTED AND CONSENTED ON THOSE MATTERS IN ACCORDANCE
WITH THE VIEWS OF MANAGEMENT.
PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. PLEASE
DO NOT USE FINE POINT PENS. [X]
Proposal: For Against Abstain
1. To approve an Agreement and Plan of [ ] [ ] [ ]
Reorganization between Voyageur Insured Funds, on
behalf of the Delaware Tax-Free Minnesota Insured
Fund (the "Acquired Fund"), and Voyageur Tax Free
Funds, on behalf of the Delaware Tax-Free
Minnesota Fund (the "Acquiring Fund"), which
provides for: (i) the acquisition by the
Acquiring Fund of substantially all of the assets
of the Acquired Fund, in exchange for shares of
the Acquiring Fund; (ii) the pro rata
distribution of shares of the Acquiring Fund to
the shareholders of the Acquired Fund; and (iii)
the liquidation and dissolution of the Acquired
Fund.
2. To vote upon any other business as may
properly come before the Meeting or any
adjournment thereof.
MIS EDITS: # OF CHANGES ___/___ PRF 1 ___ PRF 2 ____
OK TO PRINT AS IS* ____________ *By signing this form
you are authorizing MIS to print this form in its
current state.
_____________________________________________________
SIGNATURE OF PERSON AUTHORIZING PRINTING DATE
LABEL BELOW FOR MIS USE ONLY!
PO# ______
DELAWARE INVESTMENTS #___
DELAWARE TAX-FREE MINNESOTA INSURED FUND
ORIGINAL2UP [____________]
DOREEN (DELAWARE __________________)
REVISION #1 [___________]
REVIEW #1 [_____________]
STATEMENT OF ADDITIONAL INFORMATION
FOR
DELAWARE TAX-FREE MINNESOTA FUND
a series of
VOYAGEUR TAX FREE FUNDS
Dated [October 2,] 2006
Acquisition of Substantially All of the Assets of:
DELAWARE TAX-FREE MINNESOTA INSURED FUND
(a series of Voyageur Insured Funds)
By and in exchange for shares of
DELAWARE TAX-FREE MINNESOTA FUND
(a series of Voyageur Tax Free Funds)
This Statement of Additional Information ("SAI") relates specifically to the
proposed acquisition of substantially all of the assets of Delaware Tax-Free
Minnesota Insured Fund (the "Minnesota Insured Fund") in exchange for shares of
Delaware Tax Free Minnesota Fund (the "Minnesota Fund").
This SAI consists of this Cover Page and the following documents, each of which
is attached to and is legally considered to be a part of this SAI.
1. Statement of Additional Information of the Minnesota Fund, dated
December 29, 2005 as previously filed via EDGAR is incorporated herein
by reference to Voyageur Tax Free Funds' filing under Rule 497
[Accession No. 0000950116-06-000012] filed January 3, 2006 and will be
mailed to any Shareholder who requests this SAI.
2. Supplements to the Statement of Additional Information of the
Minnesota Fund, dated December 29, 2005 as previously filed via EDGAR
are incorporated herein by reference to Voyageur Tax Free Funds'
filings under Rule 497 [Accession Nos. 0000809064-06-000002,
0000910682-06-000012, 0000201670-06-000008, 0000910682-06-000019,
0000910682-06-000021] filed January 3, 2006, June 8, 2006, July 18,
2006, July 31, 2006 and August 2, 2006, respectively, and will be
mailed to any Shareholder who requests this SAI.
3. Annual Report of the Minnesota Fund for the fiscal year ended August
31, 2005 as previously filed via EDGAR is incorporated herein by
reference to Voyageur Tax Free Funds' N-CSR [Accession No.
0000950116-05-003423] filed November 4, 2005 and will be mailed to any
Shareholder who requests this SAI.
4. Semi-Annual Report of the Minnesota Fund for the fiscal period ended
February 28, 2006 as previously filed via EDGAR is incorporated herein
by reference to Voyageur Tax Free Funds' N-CSR [Accession No.
0001206774-06-001111] filed May 10, 2006 and will be mailed to any
Shareholder who requests this SAI.
5. Annual Report of the Minnesota Insured Fund for the fiscal year ended
August 31, 2005 as previously filed via EDGAR is incorporated herein
by reference to Voyageur Insured Funds' N-CSR [Accession No.
0000950116-05-003418] filed November 4, 2005 and will be mailed to any
Shareholder who requests this SAI.
6. Semi-Annual Report of the Minnesota Insured Fund for the fiscal period
ended February 28, 2006 as previously filed via EDGAR is incorporated
herein by reference to Voyageur Insured Funds' N-CSR [Accession No.
0001206774-06-001108] filed May 10, 2006 and will be mailed to any
Shareholder who requests this SAI.
7. Pro Forma Financial Statements for the reorganization of the Minnesota
Insured Fund with and into the Minnesota Fund.
This SAI is not a prospectus; you should read this SAI in conjunction with
the Proxy Statement/Prospectus dated [October 2,] 2006, relating to the
above-referenced transaction. You can request a copy of the Proxy
Statement/Prospectus by calling 1-800-523-1918 or by writing to the Delaware
Tax-Free Minnesota Fund at Attention: Account Services, 2005 Market Street,
Philadelphia, PA 19103-7094.
Delaware Tax-Free Minnesota Fund
Pro Forma Portfolio of Investments(A)
As of February 28, 2006 % of Total
(Unaudited) Investments
(Pro Forma Delaware Tax-Free Minnesota Fund
Combined) Par Market Value
----------- --------------------------------------
----------- --------------------------------------
Municipal Bonds 96.36%
Airport Revenue Bonds 5.04%
Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A
5.00% 1/1/22 (AMBAC) $3,440,000 $3,554,002
5.00% 1/1/22 (MBIA) 0 0
5.125% 1/1/25 (FGIC) 0 0
5.25% 1/1/16 (MBIA) 1,460,000 1,572,289
5.25% 1/1/32 (FGIC) 5,000,000 5,285,900
Minneapolis/St. Paul Metropolitian Airports Commission Revenue Series B
5.00% 1/1/35 (AMBAC) 5,145,000 5,374,569
Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series C
5.125% 1/1/20 (FGIC) 0 0
5.25% 1/1/32 (FGIC) 2,250,000 2,378,655
5.50% 1/1/17 (FGIC) 2,500,000 2,685,625
---------------------
20,851,040
---------------------
Combined Utilities 0.46%
Shakopee Public Utilities Commission Revenue 5.125% 2/1/26 (MBIA) 1,000,000 1,034,920
---------------------
1,034,920
---------------------
Continuing Care/Retirement Revenue Bonds 2.78%
Apple Valley, Minnesota Economic Development Authority Health Care
Revenue (Augustana Home St. Paul Project) Series A 6.00% 1/1/40 2,700,000 2,733,966
Apple Valley, Minnesota Economic Development Authority Health Care
Revenue (Evercare Senior Living Project) Series A 6.125% 6/1/35 4,000,000 3,980,680
Bloomington Housing & Redevelopment Authority Housing Revenue
(Senior Summerhouse Bloomington Project, Presbyterian Homes
Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,495,479
Minneapolis Health Care Facility Revenue (Jones-Harrison
Residence Project) 5.60% 10/1/30 1,550,000 1,551,163
Minnesota Agriculture & Economic Development Board Revenue
(Benedictine Health Systems) 5.75% 2/1/29 1,895,000 1,917,948
Rochester, Minnesota Multifamily Revenue (Wedum Shorewood
Campus Project) 6.60% 6/1/36 3,890,000 4,020,510
---------------------
17,699,746
---------------------
Corporate-Backed Revenue Bonds 2.92%
Cloquet Pollution Control Revenue (Potlatch Corp. Project) 5.90% 10/1/26 6,500,000 6,585,085
Sartell Environmental Improvement Revenue (International Paper)
Series A 5.20% 6/1/27 5,465,000 5,595,559
Seaway Port Authority of Duluth Industrial Development Dock & Wharf
Revenues (Cargill, Inc. Project) Series E 6.125% 11/1/14 4,500,000 4,608,045
---------------------
16,788,689
---------------------
Dedicated Tax & Fees Revenue Bonds 1.10%
^Minneapolis Community Development Agency Tax Increment
Revenue 6.674% 9/1/09 (MBIA) 5,750,000 5,086,220
Virgin Islands Public Finance Authority (Matching Fund Loan) Series A
5.25% 10/1/22 0 0
---------------------
5,086,220
---------------------
Electric & Gas Revenue Bonds 10.74%
Chaska Electric Revenue (Generating Facilitites) Series A 5.00% 10/1/30 3,000,000 3,106,230
Laurentian Energy Authority I Series A 5.00% 12/1/21 8,000,000 8,104,879
Minnesota State Municipal Power Agency
Series A 5.00% 10/1/34 4,250,000 4,388,550
Series A 5.125% 10/1/29 3,000,000 3,138,780
5.00% 10/1/35 3,000,000 3,106,230
Northern Minnesota Municipal Power Agency Electric System
^Revenue Series A 5.849% 1/1/09 (AMBAC) 3,815,000 3,455,818
Revenue Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,582,675
&Northern Municipal Power Agency Electric System Revenue, Inverse
Floater ROLs Series II-R-32 7.176% 1/1/13 (FSA) 0 0
Puerto Rico Electric Power Authority Power Revenue
Series GG 4.75% 9/1/21 (FSA) 0 0
Series OO 5.00% 7/1/13 (CIFG) 0 0
Rochester Electric Utilities Revenue 5.25% 12/1/30 4,915,000 5,127,623
Southern Minnesota Municipal Power Agency Supply System Revenue Series A
5.00% 1/1/12 (AMBAC) 4,205,000 4,504,438
5.00% 1/1/13 (MBIA) 5,820,000 6,271,516
5.25% 1/1/15 (AMBAC) 3,000,000 3,320,370
&Southern Minnesota Municipal Power Agency Supply System
Revenue, Inverse Floater ROLs
Series II-R-189-3 7.196% 1/1/14 (AMBAC) 2,000,000 2,397,040
Series II-R-189 7.316% 1/1/15 (AMBAC) 2,950,000 3,580,061
Western Minnesota Municipal Power Agency Series B 5.00% 1/1/15 (MBIA) 0 0
---------------------
53,084,210
---------------------
Escrowed to Maturity Bonds 6.74%
Dakota/Washington Counties Housing & Redevelopment Authority
Anoka Single Family Residential Mortgage Revenue 8.45% 9/1/19 (GNMA) (AMT) 0 0
Dakota/Washington Counties Housing & Redevelopment Authority
Bloomington Mortage Single Family Residential Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 0 0
8.375% 9/1/21 (GNMA) (MBIA) (AMT) 0 0
Southern Minnesota Municipal Power Agency Supply Revenue Series A
5.75% 1/1/18 0 0
5.75% 1/1/18 (AMBAC) 0 0
Southern Minnesota Municipal Power Agency Supply System Revenue
Series B 5.50% 1/1/15 (AMBAC) 990,000 1,058,389
Western Minnesota Municipal Power Agency Supply Revenue Series A
6.60% 1/1/10 0 0
9.75% 1/1/16 (MBIA) 185,000 269,649
---------------------
1,328,038
---------------------
Higher Education Revenue Bonds 5.22%
Minnesota State Colleges & Universities Revenue Fund Series A
5.00% 10/1/22 (FSA) 0 0
5.00% 10/1/29 (MBIA) 1,665,000 1,769,878
Minnesota State Higher Education Facilities Authority Revenue
(Augsburg College) Series 6-C 5.00% 5/1/20 1,250,000 1,303,138
(College of St. Benedict) Series 4-G 6.20% 3/1/16 1,000,000 1,001,520
(Hamline University) Series 4-1
6.00% 10/1/12 270,000 271,909
6.00% 10/1/16 390,000 394,298
(St. Catherine College) Series 5-N1
5.00% 10/1/18
5.25% 10/1/22 1,500,000 1,572,645
5.375% 10/1/32 1,000,000 1,052,010
St. Cloud Housing & Redevelopment Authority Revenue (State
University Foundation Project) 5.00% 5/1/23 0 0
University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,313,420
&University of Minnesota, Inverse Floater ROLs Series II-R-29
7.683% 7/1/21 5,250,000 6,895,349
8.19% 7/1/18 1,920,000 2,612,506
---------------------
19,186,673
---------------------
Hospital Revenue Bonds 18.37%
Bemidji Health Care Facilities First Meeting Revenue (North Country
Health Services)
5.00% 9/1/24 (RADIAN) 740,000 769,985
6.05% 9/1/16 600,000 600,978
6.05% 9/1/24 1,825,000 1,827,902
Breckenridge Catholic Health Initiatives 5.00% 5/1/30 2,000,000 2,092,720
Duluth Economic Development Authority Health Care Facilities
Revenue Benedictine Health System (St. Mary's Hospital)
5.25% 2/15/28 0 0
5.25% 2/15/33 10,000,000 10,331,499
5.50% 2/15/23 1,000,000 1,065,950
Maple Grove Health Care Facilities Revenue (North Memorial Health Care)
5.00% 9/1/29 1,000,000 1,035,590
5.00% 9/1/35 5,850,000 6,012,689
Marshall Medical Center Gross Revenue (Weiner Memorial Medical
Center Project) 6.00% 11/1/28 1,000,000 1,047,280
Minneapolis Health Care System Revenue
(Allina Health Systems)
Series A 5.75% 11/15/32 9,500,000 10,206,420
(Fairview Health Services) Series D
5.00% 11/15/30 (AMBAC) 1,500,000 1,580,130
5.00% 11/15/34 (AMBAC) 2,500,000 2,625,650
Minneapolis/St. Paul Housing & Redevelopment Authority Health Care
System Revenue
(Allina Health Systems)
5.00% 11/15/13 (AMBAC) 0 0
(Healthpartners Obligation Group Project)
5.625% 12/1/22 0 0
5.875% 12/1/29 0 0
Minnesota Agricultural & Economic Development Broad Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26 (MBIA) 0 0
6.375% 11/15/29 15,000 16,293
Rochester Health Care Facilities Revenue (Mayo Foundation) Series B
5.50% 11/15/27 700,000 731,129
&Rochester Health Care Facilities Revenue (Mayo Foundation),
Inverse Floater ROLs Series II-R-28
Series A 7.683% 11/15/27 2,100,000 2,286,795
Series B 7.683% 11/15/27 8,375,000 9,119,956
Shakopee Health Care Facilities Revenue (St. Francis Regional
Medical Center)
5.10% 9/1/25 2,000,000 2,068,740
5.25% 9/1/34 7,000,000 7,223,790
St. Louis Park Health Care Facilities Revenue (Park Nicollet Health
Services) Series B
5.25% 7/1/30 9,420,000 9,790,018
5.50% 7/1/25 0 0
St. Paul Housing & Redevelopment Authority Hospital Revenue
(Health East Project)
Series A 5.70% 11/1/15 1,300,000 1,346,579
6.00% 11/15/35 4,340,000 4,703,735
St. Paul Housing & Redevelopment Authority Hospital Revenue (St.
Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 0 0
Washington County Housing & Redevelopment Authority Hospital
Facilities Revenue (Health East Project) 5.50% 11/15/27 1,000,000 1,021,320
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 0 0
5.00% 2/1/25 (FSA) 0 0
---------------------
77,505,148
---------------------
Multifamily Housing Revenue Bonds 6.84%
Brooklyn Center Multifamily Housing Revenue (Shingle Creek)
5.40% 5/20/43 (GNMA) (AMT) 1,000,000 1,027,530
Carver County Housing & Redevelopment Authority Multifamily
Revenue (Lake Grace Apartments Project) Series A 6.00% 7/1/28 1,435,000 1,475,654
Eagan Multifamily Revenue (Woodridge Apartments) 5.90% 8/1/20 (GNMA) 0 0
Eden Prairie Multifamily Housing Revenue (Tanager Creek) Series A
8.05% 6/20/31 (GNMA) 7,605,000 7,883,495
Hopkins Multifamily Housing Revenue (Auburn Apartments Project) Series A
8.05% 6/20/31 (GNMA) 0 0
Hopkins Multifamily Housing Revenue (Hopkins Renaissance
Project-Section 8) 6.375% 4/1/20 1,000,000 1,033,380
@Hutchinson Multifamily Housing Revenue (Evergreen Apartments
Project-Section 8) 5.75% 11/1/28 910,000 849,412
Minneapolis Multifamily Housing Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 0 0
(Grant Street Apartments Project) Series A
7.25% 11/1/29 750,000 767,865
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 4,000,000 4,163,200
(Sumner Field) Series A
5.50% 11/20/26 (GNMA) (AMT) 1,000,000 1,046,490
(Trinity Apartments-Section 8) Series A
6.75% 5/1/21 1,810,000 1,869,459
Minnesota State Housing Finance Agency Rental Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) 0 0
@Park Rapids Multifamily Revenue (The Court Apartments
Project-Section 8) 6.30% 2/1/20 2,870,000 2,670,018
St. Cloud Housing & Redevelopment Authority Revenue (Sterling
Heights Apartments Project) 7.55% 4/1/39 (AMT) 1,000,000 1,046,310
Stillwater Multifamily Housing Revenue (Stillwater Cottages Project)
Series A 7.00% 11/1/27 1,000,000 1,027,260
7.25% 11/1/27 (AMT) 1,540,000 1,583,459
Wadena Housing & Redevelopment Authority Multifamily Housing
Revenue (Humphrey Manor East Project) 6.00% 2/1/19 1,860,000 1,832,825
Washington County Housing & Redevelopment Authority
Governmental Revenue (Briar Pond) Series C 7.25% 8/20/34 960,000 894,173
White Bear Lake Multifamily Revenue (Lake Square) Series A
5.875% 2/1/15 (FHA) 0 0
Willmar Housing & Redevelopment Authority Multifamily Housing
Revenue (Highland Apartments-Section 8) 5.85% 6/1/19 960,000 960,000
---------------------
30,130,530
---------------------
Municipal Lease Revenue Bonds 3.59%
Hopkins Housing & Redevelopment Authority Public Works and Fire
Station Series A 5.00% 2/1/23 (MBIA) 0 0
Minneapolis Special School District #001 Series A
5.00% 2/1/18 (FSA) 0 0
5.00% 2/1/19 (FSA) 0 0
5.00% 2/1/20 (FSA) 0 0
Puerto Rico Public Buildings Authority Revenue (Government
Facilities) Series D 5.25% 7/1/36 1,070,000 1,124,014
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 2,500,000 2,659,100
5.125% 12/1/27 1,000,000 1,059,890
5.25% 12/1/27 0 0
(Robert Street Office Building Project)
4.75% 12/1/23 2,000,000 2,064,720
5.00% 12/1/27 2,500,000 2,635,325
Series 9 5.25% 12/1/27 725,000 776,163
---------------------
10,319,212
---------------------
Political Subdivision General Obligation Bonds 2.62%
Dakota County Capital Improvement Series A 4.75% 2/1/26 1,000,000 1,025,780
Dakota County Community Development Agency Governmental
Housing Development 5.00% 1/1/21 0 0
Hennepin County Regional Railroad Authority 5.00% 12/1/31 4,030,000 4,203,169
Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 1,200,000 1,291,068
Minneapolis Library 5.00% 12/1/25 1,500,000 1,589,070
Ramsey County State Aid Series C 5.00% 2/1/28 1,060,000 1,116,646
St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 1,905,000 2,002,117
Todd Morrison Cass & Wadena Counties United Hospital District
(Health Care Facilities Lakewood)
5.00% 12/1/21 2,000,000 2,081,140
5.00% 12/1/34 1,000,000 1,021,260
5.125% 12/1/24 1,000,000 1,043,660
---------------------
15,373,910
---------------------
§Pre-Refunded Bonds 8.81%
Chaska Electric Revenue Series A 6.00% 10/1/25-10 1,000,000 1,104,040
Little Canada Multifamily Housing Revenue Alternative Development
(Montreal Courts Apartments Project) Series A
6.10% 12/1/17-07 1,270,000 1,308,760
6.25% 12/1/27-07 2,900,000 3,023,453
Minneapolis Community Development Agency (Supported
Development Revenue) Series G-3 5.45% 12/1/31-11 0 0
Minneapolis Health Care System Revenue (Fairview Health Services)
Series A 5.625% 5/15/32-12 11,525,000 12,851,183
Minneapolis Tax Increment Revenue Series E 5.00% 3/1/13-09 6,265,000 6,543,479
Minnesota Agricultural & Economic Development Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26-07 (MBIA) 0 0
6.375% 11/15/29-10 485,000 545,591
Minnesota Higher Education Facilities Series 4-1
6.00% 10/1/12-06 980,000 994,739
6.00% 10/1/16-06 1,400,000 1,421,056
Minnesota Public Facilities Authority Water Pollution Control Revenue
Series A 5.00% 3/1/20-10 3,000,000 3,166,710
Series B 4.75% 3/1/19-09 2,000,000 2,073,580
Puerto Rico Public Buildings Authority Guaranteed Government
Facilities Revenue Series D 5.25% 7/1/36-12 2,930,000 3,180,163
Southern Minnesota Municipal Power Agency Supply System Revenue
Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,068,730
---------------------
37,281,484
---------------------
School District General Obligation Bonds 14.71%
Big Lake Independent School District #727 Series A
5.00% 2/1/17 (FSA) 0 0
5.00% 2/1/20 (FSA) 0 0
Bloomington Independent School District #271 Series B 5.00% 2/1/17 5,300,000 5,540,143
Cambridge Independent School District #911 Series A 4.75% 2/1/30 (MBIA) 1,035,000 1,064,166
Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 0 0
Farmington Independent School District #192 Capital Appreciation Series B
5.00% 2/1/27 (FSA) 6,705,000 7,113,401
^5.34% 2/1/21 (FSA) 1,500,000 720,420
^5.422% 2/1/20 (FSA) 1,650,000 836,798
^Lakeville Independent School District #194 Capital Appreciation
Series B 5.450% 2/1/19 (FSA) 8,000,000 4,197,920
Lakeville Independent School District #194 Series A 4.75% 2/1/22 (FSA) 5,500,000 5,731,990
^Mahtomedi Independent School District #832 Capital Appreciation
Series B 5.898% 2/1/14 (MBIA) 1,540,000 1,130,144
Morris Independent School District #769 5.00% 2/1/24 (MBIA) 0 0
Mounds View Independent School District #621
5.00% 2/1/20 (MBIA) 0 0
5.375% 2/1/24 (FGIC) 0 0
Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA)
Prior Lake Independent School District #719 Series B 5.00% 2/1/19 (FSA) 3,145,000 3,390,027
Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 0 0
&Rockford Independent School District #883, Inverse Floater ROLs
Series II-R-30-A 7.936% 2/1/23 (FSA) 3,510,000 4,014,352
Series II-R-30-B 7.886% 2/1/21 (FSA) 0 0
^Rosemont Independent School District #196 Capital Appreciation
Series B
5.80% 4/1/09 (FSA) 0 0
5.85% 4/1/10 (FSA) 0 0
5.931% 4/1/11 (FSA) 2,600,000 2,161,588
5.96% 4/1/12 (FSA) 1,850,000 1,474,598
6.008% 4/1/13 (FSA) 1,915,000 1,461,854
^Sartell Independent School District #748 Capital Appreciation Series B
5.976% 2/1/13 (MBIA) 540,000 412,285
6.099% 2/1/15 (MBIA) 1,075,000 753,134
6.15% 2/1/16 (MBIA) 1,750,000 1,172,500
^Sauk Rapids Independent School District #047 Series B
5.982% 2/1/15 (FSA) 0 0
6.083% 2/1/17 (FSA) 0 0
&South Washington County Independent School District #833, Inverse
Floater ROLs Series II-R-34-A
7.886% 2/1/20 (MBIA) 0 0
7.886% 2/1/21 (MBIA) 0 0
St. Michael Independent School District #885
5.00% 2/1/20 (FSA) 0 0
5.00% 2/1/27 (FSA) 0 0
---------------------
41,175,320
---------------------
Single Family Housing Revenue Bonds 0.74%
Dakota County Housing & Redevelopment Authority Single Family
Mortgage Revenue Series B 5.85% 10/1/30 (GNMA) (FNMA) (AMT) 0 0
Minnesota State Housing Finance Agency Single Family Mortgage
Series A 5.30% 7/1/19 635,000 665,601
Series B 5.35% 1/1/33 (AMT) 2,970,000 3,046,091
Series J 5.90% 7/1/28 (AMT) 525,000 542,640
St. Louis Park Residential Mortgage Revenue Series A 7.25% 4/20/23 (GNMA) 128,000 128,099
---------------------
4,382,431
---------------------
State General Obligation Bonds 3.51%
Minnesota State
5.00% 11/1/20 (FSA) 8,175,000 8,644,245
5.00% 8/1/21 2,400,000 2,559,648
Minnesota State Refunding Various Purposes 5.00% 6/1/13 5,175,000 5,346,189
---------------------
16,550,082
---------------------
Tax Increment / Special Assessment Bonds 0.32%
Minneapolis Tax Increment Revenue (St. Anthony Falls Project) 5.75% 2/1/27 1,000,000 1,021,310
St. Paul Housing & Redevelopment Authority Tax Increment (Upper
Landing Project) Series A 6.80% 3/1/29 1,000,000 1,015,440
---------------------
2,036,750
---------------------
Territorial General Obligation Bonds 1.00%
Puerto Rico Commonwealth Public Improvement Series A
5.00% 7/1/34 4,500,000 4,637,430
5.50% 7/1/19 (MBIA) 1,500,000 1,738,380
---------------------
6,375,810
---------------------
Water & Sewer Revenue Bonds 0.86%
&Minnesota Public Facilities Authority Water Pollution Control
Revenue, Inverse Floater ROLs Series II-R-31 7.176% 3/1/18 5,000,000 5,509,550
---------------------
5,509,550
---------------------
Total Municipal Bonds 381,699,763
---------------------
Short-Term Investments 3.64%
Money Market Instruments 0.55%
Federated Minnesota Municipal Cash Trust 2,823,937 2,823,937
---------------------
2,823,937
---------------------
oVariable Rate Demand Notes 3.08%
Hennepin County Series A 3.05% 12/1/25 (SPA) 6,150,000 6,150,000
Midwest Consortium of Municipal Utilites Revenue Series A
(LOC - U.S. Bank N.A.) 3.20% 1/1/25 2,000,000 2,000,000
Minneapolis Convention Center
Series A 3.05% 12/1/14 (SPA) 1,570,000 1,570,000
3.05% 12/1/18 1,200,000 1,200,000
Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 2,895,000 2,895,000
Minneapolis Library 3.05% 12/1/32 1,035,000 1,035,000
Minneapolis Tax Increment Mill Quarter 3.05% 3/1/32 (SPA) 1,060,000 1,060,000
Minnesota State Higher Education St. Catherine 3.15% 10/1/32 700,000 700,000
---------------------
16,610,000
---------------------
19,433,937
---------------------
Total Investments at Market 100.00% 401,133,700
=====================
Total Investments at Cost 382,564,603
=====================
Delaware Tax-Free Minnesota Fund
Pro Forma Portfolio of Investments(A)
As of February 28, 2006
(Unaudited)
Delaware Tax-Free Minnesota Insured Fund
Par Market Value
--------------------------------------------
--------------------------------------------
Municipal Bonds
Airport Revenue Bonds
Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A
5.00% 1/1/22 (AMBAC) $0 $0
5.00% 1/1/22 (MBIA) 2,000,000 2,100,860
5.125% 1/1/25 (FGIC) 100,000 104,293
5.25% 1/1/16 (MBIA) 0 0
5.25% 1/1/32 (FGIC) 0 0
Minneapolis/St. Paul Metropolitian Airports Commission Revenue Series B
5.00% 1/1/35 (AMBAC) 0 0
Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series C
5.125% 1/1/20 (FGIC) 2,000,000 2,113,820
5.25% 1/1/32 (FGIC) 6,595,000 6,972,102
5.50% 1/1/17 (FGIC) 0 0
----------------------
11,291,075
----------------------
Combined Utilities
Shakopee Public Utilities Commission Revenue 5.125% 2/1/26 (MBIA) 1,850,000 1,914,602
----------------------
1,914,602
----------------------
Continuing Care/Retirement Revenue Bonds
Apple Valley, Minnesota Economic Development Authority Health Care
Revenue (Augustana Home St. Paul Project) Series A 6.00% 1/1/40 0 0
Apple Valley, Minnesota Economic Development Authority Health Care
Revenue (Evercare Senior Living Project) Series A 6.125% 6/1/35 0 0
Bloomington Housing & Redevelopment Authority Housing Revenue
(Senior Summerhouse Bloomington Project, Presbyterian Homes
Housing & Assisted Living, Inc.) 6.125% 5/1/35 0 0
Minneapolis Health Care Facility Revenue (Jones-Harrison
Residence Project) 5.60% 10/1/30 0 0
Minnesota Agriculture & Economic Development Board Revenue
(Benedictine Health Systems) 5.75% 2/1/29 0 0
Rochester, Minnesota Multifamily Revenue (Wedum Shorewood
Campus Project) 6.60% 6/1/36 0 0
----------------------
0
----------------------
Corporate-Backed Revenue Bonds
Cloquet Pollution Control Revenue (Potlatch Corp. Project) 5.90% 10/1/26 0 0
Sartell Environmental Improvement Revenue (International Paper)
Series A 5.20% 6/1/27 1,800,000 1,843,002
Seaway Port Authority of Duluth Industrial Development Dock & Wharf
Revenues (Cargill, Inc. Project) Series E 6.125% 11/1/14 0 0
----------------------
1,843,002
----------------------
Dedicated Tax & Fees Revenue Bonds
^Minneapolis Community Development Agency Tax Increment
Revenue 6.674% 9/1/09 (MBIA) 0 0
Virgin Islands Public Finance Authority (Matching Fund Loan) Series A
5.25% 10/1/22 1,785,000 1,919,607
----------------------
1,919,607
----------------------
Electric & Gas Revenue Bonds
Chaska Electric Revenue (Generating Facilitites) Series A 5.00% 10/1/30 0 0
Laurentian Energy Authority I Series A 5.00% 12/1/21 0 0
Minnesota State Municipal Power Agency
Series A 5.00% 10/1/34 2,000,000 2,065,200
Series A 5.125% 10/1/29 0 0
5.00% 10/1/35 0 0
Northern Minnesota Municipal Power Agency Electric System
^Revenue Series A 5.849% 1/1/09 (AMBAC) 0 0
Revenue Series B 4.75% 1/1/20 (AMBAC) 0 0
&Northern Municipal Power Agency Electric System Revenue, Inverse
Floater ROLs Series II-R-32 7.176% 1/1/13 (FSA) 4,585,000 5,172,201
Puerto Rico Electric Power Authority Power Revenue
Series GG 4.75% 9/1/21 (FSA) 1,000,000 1,036,980
Series OO 5.00% 7/1/13 (CIFG) 3,640,000 3,942,848
Rochester Electric Utilities Revenue 5.25% 12/1/30 0 0
Southern Minnesota Municipal Power Agency Supply System Revenue Series A
5.00% 1/1/12 (AMBAC) 0 0
5.00% 1/1/13 (MBIA) 0 0
5.25% 1/1/15 (AMBAC) 1,500,000 1,660,185
&Southern Minnesota Municipal Power Agency Supply System
Revenue, Inverse Floater ROLs
Series II-R-189-3 7.196% 1/1/14 (AMBAC) 0 0
Series II-R-189 7.316% 1/1/15 (AMBAC) 0 0
Western Minnesota Municipal Power Agency Series B 5.00% 1/1/15 (MBIA) 1,365,000 1,485,366
----------------------
15,362,780
----------------------
Escrowed to Maturity Bonds
Dakota/Washington Counties Housing & Redevelopment Authority
Anoka Single Family Residential Mortgage Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 12,985,200
Dakota/Washington Counties Housing & Redevelopment Authority
Bloomington Mortage Single Family Residential Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 546,839
8.375% 9/1/21 (GNMA) (MBIA) (AMT) 14,115,000 20,769,093
Southern Minnesota Municipal Power Agency Supply Revenue Series A
5.75% 1/1/18 3,790,000 4,050,487
5.75% 1/1/18 (AMBAC) 670,000 716,049
Southern Minnesota Municipal Power Agency Supply System Revenue
Series B 5.50% 1/1/15 (AMBAC) 0 0
Western Minnesota Municipal Power Agency Supply Revenue Series A
6.60% 1/1/10 1,650,000 1,766,127
9.75% 1/1/16 (MBIA) 530,000 772,507
----------------------
41,606,302
----------------------
Higher Education Revenue Bonds
Minnesota State Colleges & Universities Revenue Fund Series A
5.00% 10/1/22 (FSA) 5,135,000 5,455,783
5.00% 10/1/29 (MBIA) 4,000,000 4,251,960
Minnesota State Higher Education Facilities Authority Revenue
(Augsburg College) Series 6-C 5.00% 5/1/20 0 0
(College of St. Benedict) Series 4-G 6.20% 3/1/16 0 0
(Hamline University) Series 4-1
6.00% 10/1/12 0 0
6.00% 10/1/16 0 0
(St. Catherine College) Series 5-N1
5.00% 10/1/18 2,200,000 2,284,304
5.25% 10/1/22 0 0
5.375% 10/1/32 0 0
St. Cloud Housing & Redevelopment Authority Revenue (State
University Foundation Project) 5.00% 5/1/23 2,000,000 2,096,660
University of Minnesota Series A 5.50% 7/1/21 0 0
&University of Minnesota, Inverse Floater ROLs Series II-R-29
7.683% 7/1/21 0 0
8.19% 7/1/18 0 0
----------------------
14,088,707
----------------------
Hospital Revenue Bonds
Bemidji Health Care Facilities First Meeting Revenue (North Country
Health Services)
5.00% 9/1/24 (RADIAN) 0 0
6.05% 9/1/16 0 0
6.05% 9/1/24 0 0
Breckenridge Catholic Health Initiatives 5.00% 5/1/30 0 0
Duluth Economic Development Authority Health Care Facilities
Revenue Benedictine Health System (St. Mary's Hospital)
5.25% 2/15/28 8,500,000 8,810,250
5.25% 2/15/33 0 0
5.50% 2/15/23 0 0
Maple Grove Health Care Facilities Revenue (North Memorial Health Care)
5.00% 9/1/29 0 0
5.00% 9/1/35 0 0
Marshall Medical Center Gross Revenue (Weiner Memorial Medical
Center Project) 6.00% 11/1/28 0 0
Minneapolis Health Care System Revenue
(Allina Health Systems)
Series A 5.75% 11/15/32 7,800,000 8,380,008
(Fairview Health Services) Series D
5.00% 11/15/30 (AMBAC) 0 0
5.00% 11/15/34 (AMBAC) 8,250,000 8,664,645
Minneapolis/St. Paul Housing & Redevelopment Authority Health Care
System Revenue
(Allina Health Systems)
5.00% 11/15/13 (AMBAC) 6,490,000 6,497,658
(Healthpartners Obligation Group Project)
5.625% 12/1/22 650,000 698,932
5.875% 12/1/29 1,000,000 1,078,600
Minnesota Agricultural & Economic Development Broad Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26 (MBIA) 180,000 189,504
6.375% 11/15/29 0 0
Rochester Health Care Facilities Revenue (Mayo Foundation) Series B
5.50% 11/15/27 0 0
&Rochester Health Care Facilities Revenue (Mayo Foundation),
Inverse Floater ROLs Series II-R-28
Series A 7.683% 11/15/27 0 0
Series B 7.683% 11/15/27 0 0
Shakopee Health Care Facilities Revenue (St. Francis Regional
Medical Center)
5.10% 9/1/25 0 0
5.25% 9/1/34 0 0
St. Louis Park Health Care Facilities Revenue (Park Nicollet Health
Services) Series B
5.25% 7/1/30 0 0
5.50% 7/1/25 2,000,000 2,135,540
St. Paul Housing & Redevelopment Authority Hospital Revenue
(Health East Project)
Series A 5.70% 11/1/15 0 0
6.00% 11/15/35 0 0
St. Paul Housing & Redevelopment Authority Hospital Revenue (St.
Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,001,620
Washington County Housing & Redevelopment Authority Hospital
Facilities Revenue (Health East Project) 5.50% 11/15/27 0 0
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 1,000,000 1,060,250
5.00% 2/1/25 (FSA) 1,000,000 1,055,290
----------------------
39,572,297
----------------------
Multifamily Housing Revenue Bonds
Brooklyn Center Multifamily Housing Revenue (Shingle Creek)
5.40% 5/20/43 (GNMA) (AMT) 0 0
Carver County Housing & Redevelopment Authority Multifamily
Revenue (Lake Grace Apartments Project) Series A 6.00% 7/1/28 0 0
Eagan Multifamily Revenue (Woodridge Apartments) 5.90% 8/1/20 (GNMA) 1,000,000 1,033,180
Eden Prairie Multifamily Housing Revenue (Tanager Creek) Series A
8.05% 6/20/31 (GNMA) 0 0
Hopkins Multifamily Housing Revenue (Auburn Apartments Project) Series A
8.05% 6/20/31 (GNMA) 3,790,000 3,931,708
Hopkins Multifamily Housing Revenue (Hopkins Renaissance
Project-Section 8) 6.375% 4/1/20 0 0
@Hutchinson Multifamily Housing Revenue (Evergreen Apartments
Project-Section 8) 5.75% 11/1/28 0 0
Minneapolis Multifamily Housing Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,571,325
(Grant Street Apartments Project) Series A
7.25% 11/1/29 0 0
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 4,000,000 4,163,200
(Sumner Field) Series A
5.50% 11/20/26 (GNMA) (AMT) 0 0
(Trinity Apartments-Section 8) Series A
6.75% 5/1/21 0 0
Minnesota State Housing Finance Agency Rental Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) 1,642,000 1,660,505
@Park Rapids Multifamily Revenue (The Court Apartments
Project-Section 8) 6.30% 2/1/20 0 0
St. Cloud Housing & Redevelopment Authority Revenue (Sterling
Heights Apartments Project) 7.55% 4/1/39 (AMT) 0 0
Stillwater Multifamily Housing Revenue (Stillwater Cottages Project)
Series A 7.00% 11/1/27 0 0
7.25% 11/1/27 (AMT) 0 0
Wadena Housing & Redevelopment Authority Multifamily Housing
Revenue (Humphrey Manor East Project) 6.00% 2/1/19 0 0
Washington County Housing & Redevelopment Authority
Governmental Revenue (Briar Pond) Series C 7.25% 8/20/34 0 0
White Bear Lake Multifamily Revenue (Lake Square) Series A
5.875% 2/1/15 (FHA) 1,055,000 1,088,222
Willmar Housing & Redevelopment Authority Multifamily Housing
Revenue (Highland Apartments-Section 8) 5.85% 6/1/19 0 0
----------------------
13,448,140
----------------------
Municipal Lease Revenue Bonds
Hopkins Housing & Redevelopment Authority Public Works and Fire
Station Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,277,651
Minneapolis Special School District #001 Series A
5.00% 2/1/18 (FSA) 1,545,000 1,638,704
5.00% 2/1/19 (FSA) 1,535,000 1,628,098
5.00% 2/1/20 (FSA) 1,690,000 1,788,831
Puerto Rico Public Buildings Authority Revenue (Government
Facilities) Series D 5.25% 7/1/36 0 0
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 0 0
5.125% 12/1/27 2,000,000 2,119,780
5.25% 12/1/27 3,840,000 4,096,973
(Robert Street Office Building Project)
4.75% 12/1/23 0 0
5.00% 12/1/27 0 0
Series 9 5.25% 12/1/27 0 0
----------------------
12,550,037
----------------------
Political Subdivision General Obligation Bonds
Dakota County Capital Improvement Series A 4.75% 2/1/26 0 0
Dakota County Community Development Agency Governmental
Housing Development 5.00% 1/1/21 1,275,000 1,336,366
Hennepin County Regional Railroad Authority 5.00% 12/1/31 0 0
Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 0 0
Minneapolis Library 5.00% 12/1/25 0 0
Ramsey County State Aid Series C 5.00% 2/1/28 0 0
St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 0 0
Todd Morrison Cass & Wadena Counties United Hospital District
(Health Care Facilities Lakewood)
5.00% 12/1/21 0 0
5.00% 12/1/34 0 0
5.125% 12/1/24 0 0
----------------------
1,336,366
----------------------
§Pre-Refunded Bonds
Chaska Electric Revenue Series A 6.00% 10/1/25-10 0 0
Little Canada Multifamily Housing Revenue Alternative Development
(Montreal Courts Apartments Project) Series A
6.10% 12/1/17-07 0 0
6.25% 12/1/27-07 0 0
Minneapolis Community Development Agency (Supported
Development Revenue) Series G-3 5.45% 12/1/31-11 2,000,000 2,185,100
Minneapolis Health Care System Revenue (Fairview Health Services)
Series A 5.625% 5/15/32-12 5,400,000 6,021,378
Minneapolis Tax Increment Revenue Series E 5.00% 3/1/13-09 0 0
Minnesota Agricultural & Economic Development Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26-07 (MBIA) 10,070,000 10,653,758
6.375% 11/15/29-10 0 0
Minnesota Higher Education Facilities Series 4-1
6.00% 10/1/12-06 0 0
6.00% 10/1/16-06 0 0
Minnesota Public Facilities Authority Water Pollution Control Revenue
Series A 5.00% 3/1/20-10 0 0
Series B 4.75% 3/1/19-09 0 0
Puerto Rico Public Buildings Authority Guaranteed Government
Facilities Revenue Series D 5.25% 7/1/36-12 0 0
Southern Minnesota Municipal Power Agency Supply System Revenue
Series A 5.75% 1/1/18-16 (MBIA) 0 0
----------------------
18,860,236
----------------------
School District General Obligation Bonds
Big Lake Independent School District #727 Series A
5.00% 2/1/17 (FSA) 1,040,000 1,088,672
5.00% 2/1/20 (FSA) 1,000,000 1,046,800
Bloomington Independent School District #271 Series B 5.00% 2/1/17 0 0
Cambridge Independent School District #911 Series A 4.75% 2/1/30 (MBIA) 0 0
Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,347,026
Farmington Independent School District #192 Capital Appreciation Series B
5.00% 2/1/27 (FSA) 4,000,000 4,243,640
^5.34% 2/1/21 (FSA) 0 0
^5.422% 2/1/20 (FSA) 0 0
^Lakeville Independent School District #194 Capital Appreciation
Series B 5.450% 2/1/19 (FSA) 0 0
Lakeville Independent School District #194 Series A 4.75% 2/1/22 (FSA) 2,350,000 2,449,123
^Mahtomedi Independent School District #832 Capital Appreciation
Series B 5.898% 2/1/14 (MBIA) 0 0
Morris Independent School District #769 5.00% 2/1/24 (MBIA) 4,875,000 5,234,873
Mounds View Independent School District #621
5.00% 2/1/20 (MBIA) 2,970,000 3,143,686
5.375% 2/1/24 (FGIC) 6,170,000 6,622,013
Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,775,489
Prior Lake Independent School District #719 Series B 5.00% 2/1/19 (FSA) 0 0
Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 1,310,000 1,385,404
&Rockford Independent School District #883, Inverse Floater ROLs
Series II-R-30-A 7.936% 2/1/23 (FSA) 0 0
Series II-R-30-B 7.886% 2/1/21 (FSA) 1,605,000 1,831,995
^Rosemont Independent School District #196 Capital Appreciation
Series B
5.80% 4/1/09 (FSA) 1,860,000 1,669,796
5.85% 4/1/10 (FSA) 2,240,000 1,934,957
5.931% 4/1/11 (FSA) 0 0
5.96% 4/1/12 (FSA) 0 0
6.008% 4/1/13 (FSA) 0 0
^Sartell Independent School District #748 Capital Appreciation Series B
5.976% 2/1/13 (MBIA) 0 0
6.099% 2/1/15 (MBIA) 0 0
6.15% 2/1/16 (MBIA) 0 0
^Sauk Rapids Independent School District #047 Series B
5.982% 2/1/15 (FSA) 2,700,000 1,750,437
6.083% 2/1/17 (FSA) 2,245,000 1,280,930
&South Washington County Independent School District #833, Inverse
Floater ROLs Series II-R-34-A
7.886% 2/1/20 (MBIA) 3,440,000 3,944,992
7.886% 2/1/21 (MBIA) 3,645,000 4,180,086
St. Michael Independent School District #885
5.00% 2/1/20 (FSA) 1,970,000 2,085,206
5.00% 2/1/27 (FSA) 3,435,000 3,589,609
----------------------
52,604,734
----------------------
Single Family Housing Revenue Bonds
Dakota County Housing & Redevelopment Authority Single Family
Mortgage Revenue Series B 5.85% 10/1/30 (GNMA) (FNMA) (AMT) 328,000 336,731
Minnesota State Housing Finance Agency Single Family Mortgage
Series A 5.30% 7/1/19 0 0
Series B 5.35% 1/1/33 (AMT) 0 0
Series J 5.90% 7/1/28 (AMT) 0 0
St. Louis Park Residential Mortgage Revenue Series A 7.25% 4/20/23 (GNMA) 0 0
----------------------
336,731
----------------------
State General Obligation Bonds
Minnesota State
5.00% 11/1/20 (FSA) 5,500,000 5,815,700
5.00% 8/1/21 0 0
Minnesota State Refunding Various Purposes 5.00% 6/1/13 0 0
----------------------
5,815,700
----------------------
Tax Increment / Special Assessment Bonds
Minneapolis Tax Increment Revenue (St. Anthony Falls Project) 5.75% 2/1/27 0 0
St. Paul Housing & Redevelopment Authority Tax Increment (Upper
Landing Project) Series A 6.80% 3/1/29 0 0
----------------------
0
----------------------
Territorial General Obligation Bonds
Puerto Rico Commonwealth Public Improvement Series A
5.00% 7/1/34 0 0
5.50% 7/1/19 (MBIA) 0 0
----------------------
0
----------------------
Water & Sewer Revenue Bonds
&Minnesota Public Facilities Authority Water Pollution Control
Revenue, Inverse Floater ROLs Series II-R-31 7.176% 3/1/18 0 0
----------------------
0
----------------------
Total Municipal Bonds 232,550,316
----------------------
Short-Term Investments
Money Market Instruments
Federated Minnesota Municipal Cash Trust 701,005 701,005
----------------------
701,005
----------------------
oVariable Rate Demand Notes
Hennepin County Series A 3.05% 12/1/25 (SPA) 0 0
Midwest Consortium of Municipal Utilites Revenue Series A
(LOC - U.S. Bank N.A.) 3.20% 1/1/25 1,900,000 1,900,000
Minneapolis Convention Center
Series A 3.05% 12/1/14 (SPA) 1,140,000 1,140,000
3.05% 12/1/18 0 0
Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 0 0
Minneapolis Library 3.05% 12/1/32 0 0
Minneapolis Tax Increment Mill Quarter 3.05% 3/1/32 (SPA) 0 0
Minnesota State Higher Education St. Catherine 3.15% 10/1/32 0 0
----------------------
3,040,000
----------------------
3,741,005
----------------------
Total Investments at Market 236,291,321
======================
Total Investments at Cost 219,906,827
======================
Delaware Tax-Free Minnesota Fund
Pro Forma Portfolio of Investments(A)
As of February 28, 2006
(Unaudited)
Delaware Tax-Free Minnesota Fund
Pro Forma Combined
Par/Shares Market Value
--------------------------------------------
--------------------------------------------
Municipal Bonds
Airport Revenue Bonds
Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series A
5.00% 1/1/22 (AMBAC) $3,440,000 $3,554,002
5.00% 1/1/22 (MBIA) 2,000,000 2,100,860
5.125% 1/1/25 (FGIC) 100,000 104,293
5.25% 1/1/16 (MBIA) 1,460,000 1,572,289
5.25% 1/1/32 (FGIC) 5,000,000 5,285,900
Minneapolis/St. Paul Metropolitian Airports Commission Revenue Series B
5.00% 1/1/35 (AMBAC) 5,145,000 5,374,569
Minneapolis/St. Paul Metropolitan Airports Commission Revenue Series C
5.125% 1/1/20 (FGIC) 2,000,000 2,113,820
5.25% 1/1/32 (FGIC) 8,845,000 9,350,757
5.50% 1/1/17 (FGIC) 2,500,000 2,685,625
-----------------------
32,142,115
-----------------------
Combined Utilities
Shakopee Public Utilities Commission Revenue 5.125% 2/1/26 (MBIA) 2,850,000 2,949,522
-----------------------
2,949,522
-----------------------
Continuing Care/Retirement Revenue Bonds
Apple Valley, Minnesota Economic Development Authority Health Care
Revenue (Augustana Home St. Paul Project) Series A 6.00% 1/1/40 2,700,000 2,733,966
Apple Valley, Minnesota Economic Development Authority Health Care
Revenue (Evercare Senior Living Project) Series A 6.125% 6/1/35 4,000,000 3,980,680
Bloomington Housing & Redevelopment Authority Housing Revenue
(Senior Summerhouse Bloomington Project, Presbyterian Homes
Housing & Assisted Living, Inc.) 6.125% 5/1/35 3,420,000 3,495,479
Minneapolis Health Care Facility Revenue (Jones-Harrison
Residence Project) 5.60% 10/1/30 1,550,000 1,551,163
Minnesota Agriculture & Economic Development Board Revenue
(Benedictine Health Systems) 5.75% 2/1/29 1,895,000 1,917,948
Rochester, Minnesota Multifamily Revenue (Wedum Shorewood
Campus Project) 6.60% 6/1/36 3,890,000 4,020,510
-----------------------
17,699,746
-----------------------
Corporate-Backed Revenue Bonds
Cloquet Pollution Control Revenue (Potlatch Corp. Project) 5.90% 10/1/26 6,500,000 6,585,085
Sartell Environmental Improvement Revenue (International Paper)
Series A 5.20% 6/1/27 7,265,000 7,438,561
Seaway Port Authority of Duluth Industrial Development Dock & Wharf
Revenues (Cargill, Inc. Project) Series E 6.125% 11/1/14 4,500,000 4,608,045
-----------------------
18,631,691
-----------------------
Dedicated Tax & Fees Revenue Bonds
^Minneapolis Community Development Agency Tax Increment
Revenue 6.674% 9/1/09 (MBIA) 5,750,000 5,086,220
Virgin Islands Public Finance Authority (Matching Fund Loan) Series A
5.25% 10/1/22 1,785,000 1,919,607
-----------------------
7,005,827
-----------------------
Electric & Gas Revenue Bonds
Chaska Electric Revenue (Generating Facilitites) Series A 5.00% 10/1/30 3,000,000 3,106,230
Laurentian Energy Authority I Series A 5.00% 12/1/21 8,000,000 8,104,879
Minnesota State Municipal Power Agency
Series A 5.00% 10/1/34 6,250,000 6,453,750
Series A 5.125% 10/1/29 3,000,000 3,138,780
5.00% 10/1/35 3,000,000 3,106,230
Northern Minnesota Municipal Power Agency Electric System
^Revenue Series A 5.849% 1/1/09 (AMBAC) 3,815,000 3,455,818
Revenue Series B 4.75% 1/1/20 (AMBAC) 2,500,000 2,582,675
&Northern Municipal Power Agency Electric System Revenue, Inverse
Floater ROLs Series II-R-32 7.176% 1/1/13 (FSA) 4,585,000 5,172,201
Puerto Rico Electric Power Authority Power Revenue
Series GG 4.75% 9/1/21 (FSA) 1,000,000 1,036,980
Series OO 5.00% 7/1/13 (CIFG) 3,640,000 3,942,848
Rochester Electric Utilities Revenue 5.25% 12/1/30 4,915,000 5,127,623
Southern Minnesota Municipal Power Agency Supply System Revenue Series A
5.00% 1/1/12 (AMBAC) 4,205,000 4,504,438
5.00% 1/1/13 (MBIA) 5,820,000 6,271,516
5.25% 1/1/15 (AMBAC) 4,500,000 4,980,555
&Southern Minnesota Municipal Power Agency Supply System
Revenue, Inverse Floater ROLs
Series II-R-189-3 7.196% 1/1/14 (AMBAC) 2,000,000 2,397,040
Series II-R-189 7.316% 1/1/15 (AMBAC) 2,950,000 3,580,061
Western Minnesota Municipal Power Agency Series B 5.00% 1/1/15 (MBIA) 1,365,000 1,485,366
-----------------------
68,446,990
-----------------------
Escrowed to Maturity Bonds
Dakota/Washington Counties Housing & Redevelopment Authority
Anoka Single Family Residential Mortgage Revenue 8.45% 9/1/19 (GNMA) (AMT) 9,000,000 12,985,200
Dakota/Washington Counties Housing & Redevelopment Authority
Bloomington Mortage Single Family Residential Mortgage Revenue
8.15% 9/1/16 (GNMA) (MBIA) (AMT) 405,000 546,839
8.375% 9/1/21 (GNMA) (MBIA) (AMT) 14,115,000 20,769,093
Southern Minnesota Municipal Power Agency Supply Revenue Series A
5.75% 1/1/18 3,790,000 4,050,487
5.75% 1/1/18 (AMBAC) 670,000 716,049
Southern Minnesota Municipal Power Agency Supply System Revenue
Series B 5.50% 1/1/15 (AMBAC) 990,000 1,058,389
Western Minnesota Municipal Power Agency Supply Revenue Series A
6.60% 1/1/10 1,650,000 1,766,127
9.75% 1/1/16 (MBIA) 715,000 1,042,156
-----------------------
42,934,340
-----------------------
Higher Education Revenue Bonds
Minnesota State Colleges & Universities Revenue Fund Series A
5.00% 10/1/22 (FSA) 5,135,000 5,455,783
5.00% 10/1/29 (MBIA) 5,665,000 6,021,838
Minnesota State Higher Education Facilities Authority Revenue
(Augsburg College) Series 6-C 5.00% 5/1/20 1,250,000 1,303,138
(College of St. Benedict) Series 4-G 6.20% 3/1/16 1,000,000 1,001,520
(Hamline University) Series 4-1
6.00% 10/1/12 270,000 271,909
6.00% 10/1/16 390,000 394,298
(St. Catherine College) Series 5-N1
5.00% 10/1/18 2,200,000 2,284,304
5.25% 10/1/22 1,500,000 1,572,645
5.375% 10/1/32 1,000,000 1,052,010
St. Cloud Housing & Redevelopment Authority Revenue (State
University Foundation Project) 5.00% 5/1/23 2,000,000 2,096,660
University of Minnesota Series A 5.50% 7/1/21 2,000,000 2,313,420
&University of Minnesota, Inverse Floater ROLs Series II-R-29
7.683% 7/1/21 5,250,000 6,895,349
8.19% 7/1/18 1,920,000 2,612,506
-----------------------
33,275,380
-----------------------
Hospital Revenue Bonds
Bemidji Health Care Facilities First Meeting Revenue (North Country
Health Services)
5.00% 9/1/24 (RADIAN) 740,000 769,985
6.05% 9/1/16 600,000 600,978
6.05% 9/1/24 1,825,000 1,827,902
Breckenridge Catholic Health Initiatives 5.00% 5/1/30 2,000,000 2,092,720
Duluth Economic Development Authority Health Care Facilities
Revenue Benedictine Health System (St. Mary's Hospital)
5.25% 2/15/28 8,500,000 8,810,250
5.25% 2/15/33 10,000,000 10,331,499
5.50% 2/15/23 1,000,000 1,065,950
Maple Grove Health Care Facilities Revenue (North Memorial Health Care)
5.00% 9/1/29 1,000,000 1,035,590
5.00% 9/1/35 5,850,000 6,012,689
Marshall Medical Center Gross Revenue (Weiner Memorial Medical
Center Project) 6.00% 11/1/28 1,000,000 1,047,280
Minneapolis Health Care System Revenue
(Allina Health Systems)
Series A 5.75% 11/15/32 17,300,000 18,586,428
(Fairview Health Services) Series D
5.00% 11/15/30 (AMBAC) 1,500,000 1,580,130
5.00% 11/15/34 (AMBAC) 10,750,000 11,290,295
Minneapolis/St. Paul Housing & Redevelopment Authority Health Care
System Revenue
(Allina Health Systems)
5.00% 11/15/13 (AMBAC) 6,490,000 6,497,658
(Healthpartners Obligation Group Project)
5.625% 12/1/22 650,000 698,932
5.875% 12/1/29 1,000,000 1,078,600
Minnesota Agricultural & Economic Development Broad Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26 (MBIA) 180,000 189,504
6.375% 11/15/29 15,000 16,293
Rochester Health Care Facilities Revenue (Mayo Foundation) Series B
5.50% 11/15/27 700,000 731,129
&Rochester Health Care Facilities Revenue (Mayo Foundation),
Inverse Floater ROLs Series II-R-28
Series A 7.683% 11/15/27 2,100,000 2,286,795
Series B 7.683% 11/15/27 8,375,000 9,119,956
Shakopee Health Care Facilities Revenue (St. Francis Regional
Medical Center)
5.10% 9/1/25 2,000,000 2,068,740
5.25% 9/1/34 7,000,000 7,223,790
St. Louis Park Health Care Facilities Revenue (Park Nicollet Health
Services) Series B
5.25% 7/1/30 9,420,000 9,790,018
5.50% 7/1/25 2,000,000 2,135,540
St. Paul Housing & Redevelopment Authority Hospital Revenue
(Health East Project)
Series A 5.70% 11/1/15 1,300,000 1,346,579
6.00% 11/15/35 4,340,000 4,703,735
St. Paul Housing & Redevelopment Authority Hospital Revenue (St.
Paul/Ramsey Medical Center Project) 5.50% 5/15/13 (AMBAC) 1,000,000 1,001,620
Washington County Housing & Redevelopment Authority Hospital
Facilities Revenue (Health East Project) 5.50% 11/15/27 1,000,000 1,021,320
Willmar (Rice Memorial Hospital Project)
5.00% 2/1/22 (FSA) 1,000,000 1,060,250
5.00% 2/1/25 (FSA) 1,000,000 1,055,290
-----------------------
117,077,445
-----------------------
Multifamily Housing Revenue Bonds
Brooklyn Center Multifamily Housing Revenue (Shingle Creek)
5.40% 5/20/43 (GNMA) (AMT) 1,000,000 1,027,530
Carver County Housing & Redevelopment Authority Multifamily
Revenue (Lake Grace Apartments Project) Series A 6.00% 7/1/28 1,435,000 1,475,654
Eagan Multifamily Revenue (Woodridge Apartments) 5.90% 8/1/20 (GNMA) 1,000,000 1,033,180
Eden Prairie Multifamily Housing Revenue (Tanager Creek) Series A
8.05% 6/20/31 (GNMA) 7,605,000 7,883,495
Hopkins Multifamily Housing Revenue (Auburn Apartments Project) Series A
8.05% 6/20/31 (GNMA) 3,790,000 3,931,708
Hopkins Multifamily Housing Revenue (Hopkins Renaissance
Project-Section 8) 6.375% 4/1/20 1,000,000 1,033,380
@Hutchinson Multifamily Housing Revenue (Evergreen Apartments
Project-Section 8) 5.75% 11/1/28 910,000 849,412
Minneapolis Multifamily Housing Revenue
(Bottineau Commons Project)
5.45% 4/20/43 (GNMA) (AMT) 1,500,000 1,571,325
(Grant Street Apartments Project) Series A
7.25% 11/1/29 750,000 767,865
(Seward Towers Project)
5.00% 5/20/36 (GNMA) 8,000,000 8,326,400
(Sumner Field) Series A
5.50% 11/20/26 (GNMA) (AMT) 1,000,000 1,046,490
(Trinity Apartments-Section 8) Series A
6.75% 5/1/21 1,810,000 1,869,459
Minnesota State Housing Finance Agency Rental Housing Revenue
Series C-2 5.95% 2/1/15 (AMBAC) 1,642,000 1,660,505
@Park Rapids Multifamily Revenue (The Court Apartments
Project-Section 8) 6.30% 2/1/20 2,870,000 2,670,018
St. Cloud Housing & Redevelopment Authority Revenue (Sterling
Heights Apartments Project) 7.55% 4/1/39 (AMT) 1,000,000 1,046,310
Stillwater Multifamily Housing Revenue (Stillwater Cottages Project)
Series A 7.00% 11/1/27 1,000,000 1,027,260
7.25% 11/1/27 (AMT) 1,540,000 1,583,459
Wadena Housing & Redevelopment Authority Multifamily Housing
Revenue (Humphrey Manor East Project) 6.00% 2/1/19 1,860,000 1,832,825
Washington County Housing & Redevelopment Authority
Governmental Revenue (Briar Pond) Series C 7.25% 8/20/34 960,000 894,173
White Bear Lake Multifamily Revenue (Lake Square) Series A
5.875% 2/1/15 (FHA) 1,055,000 1,088,222
Willmar Housing & Redevelopment Authority Multifamily Housing
Revenue (Highland Apartments-Section 8) 5.85% 6/1/19 960,000 960,000
-----------------------
43,578,670
-----------------------
Municipal Lease Revenue Bonds
Hopkins Housing & Redevelopment Authority Public Works and Fire
Station Series A 5.00% 2/1/23 (MBIA) 1,210,000 1,277,651
Minneapolis Special School District #001 Series A
5.00% 2/1/18 (FSA) 1,545,000 1,638,704
5.00% 2/1/19 (FSA) 1,535,000 1,628,098
5.00% 2/1/20 (FSA) 1,690,000 1,788,831
Puerto Rico Public Buildings Authority Revenue (Government
Facilities) Series D 5.25% 7/1/36 1,070,000 1,124,014
St. Paul Port Authority Lease Revenue
(Cedar Street Office Building Project)
5.00% 12/1/22 2,500,000 2,659,100
5.125% 12/1/27 3,000,000 3,179,670
5.25% 12/1/27 3,840,000 4,096,973
(Robert Street Office Building Project)
4.75% 12/1/23 2,000,000 2,064,720
5.00% 12/1/27 2,500,000 2,635,325
Series 9 5.25% 12/1/27 725,000 776,163
-----------------------
22,869,249
-----------------------
Political Subdivision General Obligation Bonds
Dakota County Capital Improvement Series A 4.75% 2/1/26 1,000,000 1,025,780
Dakota County Community Development Agency Governmental
Housing Development 5.00% 1/1/21 1,275,000 1,336,366
Hennepin County Regional Railroad Authority 5.00% 12/1/31 4,030,000 4,203,169
Metropolitan Council Waste Water Treatment Series B 5.00% 12/1/21 1,200,000 1,291,068
Minneapolis Library 5.00% 12/1/25 1,500,000 1,589,070
Ramsey County State Aid Series C 5.00% 2/1/28 1,060,000 1,116,646
St. Peter's Hospital Series A 5.00% 9/1/24 (MBIA) 1,905,000 2,002,117
Todd Morrison Cass & Wadena Counties United Hospital District
(Health Care Facilities Lakewood)
5.00% 12/1/21 2,000,000 2,081,140
5.00% 12/1/34 1,000,000 1,021,260
5.125% 12/1/24 1,000,000 1,043,660
-----------------------
16,710,276
-----------------------
§Pre-Refunded Bonds
Chaska Electric Revenue Series A 6.00% 10/1/25-10 1,000,000 1,104,040
Little Canada Multifamily Housing Revenue Alternative Development
(Montreal Courts Apartments Project) Series A
6.10% 12/1/17-07 1,270,000 1,308,760
6.25% 12/1/27-07 2,900,000 3,023,453
Minneapolis Community Development Agency (Supported
Development Revenue) Series G-3 5.45% 12/1/31-11 2,000,000 2,185,100
Minneapolis Health Care System Revenue (Fairview Health Services)
Series A 5.625% 5/15/32-12 16,925,000 18,872,561
Minneapolis Tax Increment Revenue Series E 5.00% 3/1/13-09 6,265,000 6,543,479
Minnesota Agricultural & Economic Development Board Revenue
(Fairview Health Care System) Series A
5.75% 11/15/26-07 (MBIA) 10,070,000 10,653,758
6.375% 11/15/29-10 485,000 545,591
Minnesota Higher Education Facilities Series 4-1
6.00% 10/1/12-06 980,000 994,739
6.00% 10/1/16-06 1,400,000 1,421,056
Minnesota Public Facilities Authority Water Pollution Control Revenue
Series A 5.00% 3/1/20-10 3,000,000 3,166,710
Series B 4.75% 3/1/19-09 2,000,000 2,073,580
Puerto Rico Public Buildings Authority Guaranteed Government
Facilities Revenue Series D 5.25% 7/1/36-12 2,930,000 3,180,163
Southern Minnesota Municipal Power Agency Supply System Revenue
Series A 5.75% 1/1/18-16 (MBIA) 1,000,000 1,068,730
-----------------------
56,141,720
-----------------------
School District General Obligation Bonds
Big Lake Independent School District #727 Series A
5.00% 2/1/17 (FSA) 1,040,000 1,088,672
5.00% 2/1/20 (FSA) 1,000,000 1,046,800
Bloomington Independent School District #271 Series B 5.00% 2/1/17 5,300,000 5,540,143
Cambridge Independent School District #911 Series A 4.75% 2/1/30 (MBIA) 1,035,000 1,064,166
Centennial Independent School District #012 Series A 5.00% 2/1/18 (FSA) 1,270,000 1,347,026
Farmington Independent School District #192 Capital Appreciation Series B
5.00% 2/1/27 (FSA) 10,705,000 11,357,041
^5.34% 2/1/21 (FSA) 1,500,000 720,420
^5.422% 2/1/20 (FSA) 1,650,000 836,798
^Lakeville Independent School District #194 Capital Appreciation
Series B 5.450% 2/1/19 (FSA) 8,000,000 4,197,920
Lakeville Independent School District #194 Series A 4.75% 2/1/22 (FSA) 7,850,000 8,181,113
^Mahtomedi Independent School District #832 Capital Appreciation
Series B 5.898% 2/1/14 (MBIA) 1,540,000 1,130,144
Morris Independent School District #769 5.00% 2/1/24 (MBIA) 4,875,000 5,234,873
Mounds View Independent School District #621
5.00% 2/1/20 (MBIA) 2,970,000 3,143,686
5.375% 2/1/24 (FGIC) 6,170,000 6,622,013
Osseo Independent School District #279 Series A 5.00% 2/1/21 (FSA) 3,570,000 3,775,489
Prior Lake Independent School District #719 Series B 5.00% 2/1/19 (FSA) 3,145,000 3,390,027
Robbinsdale Independent School District #281 5.00% 2/1/21 (FSA) 1,310,000 1,385,404
&Rockford Independent School District #883, Inverse Floater ROLs
Series II-R-30-A 7.936% 2/1/23 (FSA) 3,510,000 4,014,352
Series II-R-30-B 7.886% 2/1/21 (FSA) 1,605,000 1,831,995
^Rosemont Independent School District #196 Capital Appreciation
Series B
5.80% 4/1/09 (FSA) 1,860,000 1,669,796
5.85% 4/1/10 (FSA) 2,240,000 1,934,957
5.931% 4/1/11 (FSA) 2,600,000 2,161,588
5.96% 4/1/12 (FSA) 1,850,000 1,474,598
6.008% 4/1/13 (FSA) 1,915,000 1,461,854
^Sartell Independent School District #748 Capital Appreciation Series B
5.976% 2/1/13 (MBIA) 540,000 412,285
6.099% 2/1/15 (MBIA) 1,075,000 753,134
6.15% 2/1/16 (MBIA) 1,750,000 1,172,500
^Sauk Rapids Independent School District #047 Series B
5.982% 2/1/15 (FSA) 2,700,000 1,750,437
6.083% 2/1/17 (FSA) 2,245,000 1,280,930
&South Washington County Independent School District #833, Inverse
Floater ROLs Series II-R-34-A
7.886% 2/1/20 (MBIA) 3,440,000 3,944,992
7.886% 2/1/21 (MBIA) 3,645,000 4,180,086
St. Michael Independent School District #885
5.00% 2/1/20 (FSA) 1,970,000 2,085,206
5.00% 2/1/27 (FSA) 3,435,000 3,589,609
-----------------------
93,780,054
-----------------------
Single Family Housing Revenue Bonds
Dakota County Housing & Redevelopment Authority Single Family
Mortgage Revenue Series B 5.85% 10/1/30 (GNMA) (FNMA) (AMT) 328,000 336,731
Minnesota State Housing Finance Agency Single Family Mortgage
Series A 5.30% 7/1/19 635,000 665,601
Series B 5.35% 1/1/33 (AMT) 2,970,000 3,046,091
Series J 5.90% 7/1/28 (AMT) 525,000 542,640
St. Louis Park Residential Mortgage Revenue Series A 7.25% 4/20/23 (GNMA) 128,000 128,099
-----------------------
4,719,162
-----------------------
State General Obligation Bonds
Minnesota State
5.00% 11/1/20 (FSA) 13,675,000 14,459,945
5.00% 8/1/21 2,400,000 2,559,648
Minnesota State Refunding Various Purposes 5.00% 6/1/13 5,175,000 5,346,189
-----------------------
22,365,782
-----------------------
Tax Increment / Special Assessment Bonds
Minneapolis Tax Increment Revenue (St. Anthony Falls Project) 5.75% 2/1/27 1,000,000 1,021,310
St. Paul Housing & Redevelopment Authority Tax Increment (Upper
Landing Project) Series A 6.80% 3/1/29 1,000,000 1,015,440
-----------------------
2,036,750
-----------------------
Territorial General Obligation Bonds
Puerto Rico Commonwealth Public Improvement Series A
5.00% 7/1/34 4,500,000 4,637,430
5.50% 7/1/19 (MBIA) 1,500,000 1,738,380
-----------------------
6,375,810
-----------------------
Water & Sewer Revenue Bonds
&Minnesota Public Facilities Authority Water Pollution Control
Revenue, Inverse Floater ROLs Series II-R-31 7.176% 3/1/18 5,000,000 5,509,550
-----------------------
5,509,550
-----------------------
Total Municipal Bonds 614,250,079
-----------------------
Short-Term Investments
Money Market Instruments
Federated Minnesota Municipal Cash Trust 3,524,942 3,524,942
-----------------------
3,524,942
-----------------------
oVariable Rate Demand Notes
Hennepin County Series A 3.05% 12/1/25 (SPA) 6,150,000 6,150,000
Midwest Consortium of Municipal Utilites Revenue Series A
(LOC - U.S. Bank N.A.) 3.20% 1/1/25 3,900,000 3,900,000
Minneapolis Convention Center
Series A 3.05% 12/1/14 (SPA) 2,710,000 2,710,000
3.05% 12/1/18 1,200,000 1,200,000
Minneapolis Guthrie Parking Ramp 3.05% 12/1/33 (SPA) 2,895,000 2,895,000
Minneapolis Library 3.05% 12/1/32 1,035,000 1,035,000
Minneapolis Tax Increment Mill Quarter 3.05% 3/1/32 (SPA) 1,060,000 1,060,000
Minnesota State Higher Education St. Catherine 3.15% 10/1/32 700,000 700,000
-----------------------
19,650,000
-----------------------
23,174,942
-----------------------
Total Investments at Market 637,425,021
=======================
Total Investments at Cost $ 602,471,430
=======================
- -----------------------------------------------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Assurance Corporation
AMT - Subject to Alternative Minimum Tax
CIFG - CDC IXIS Financial Guaranty
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FNMA - Insured by Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by Government National Mortgage Association
LOC - Letter of Credit
MBIA - Insured by the Municipal Bond Insurance Association
RADIAN - Insured by Radian Asset Assurance
ROLs - Residual Options Long
SPA - Stand-by Purchase Agreement
§Pre-Refunded Bonds. Municipals that are generally backed or secured by U.S.
Treasury bonds. For Pre-Refunded Bonds, the stated maturity is followed by the
year in which the bond is pre-refunded.
oVariable rate security. The interest rate shown is the rate as of February 28,
2006.
&An inverse floater bond is a type of bond with variable or floating interest
rates that move in the opposite direction of short-term interest rates. Interest
rate disclosed is in effect as of February 28, 2006.
^Zero coupon security. The interest rate shown is the yield at the time of
purchase.
@Illiquid security. At February 28,2006, the aggregate amount of illiquid
securities equals $3,519,430, which represented 0.55% of the combined Funds'
market value of investments.
(A) No adjustments are shown to the unaudited pro forma combined portfolio of
investments due to the fact that upon completion of the acquisition, no
securities would need to be sold in order for the Acquiring Fund to comply with
its Prospectus and SEC and IRS guidelines and restrictions. However, the
foregoing sentence shall not restrict in any way the ability of the investment
adviser of either of the Funds from buying or selling securities in the normal
course of such Fund's business and operations.
See Pro Forma Notes to Financial Statements
Delaware Tax-Free Minnesota Fund
PRO FORMA COMBINED
Statement of Assets and Liabilities
As of February 28, 2006
(Unaudited)
Delaware Tax-Free
Minnesota Fund
Delaware Tax-Free Delaware Tax-Free Pro Forma Pro Forma
Minnesota Fund Minnesota Insured Fund Adjustments Combined
------------------- ------------------------ --------------- -------------------
Assets
Investments, at market value $ 401,133,700 $ 236,291,321 $ - $ 637,425,021
Cash 7,891 6,873 14,764
Receivable for fund shares sold 815,699 98,015 913,714
Interest receivable 5,006,683 2,917,711 7,924,394
------------------- ----------------------- --------------- -------------------
Total Assets 406,963,973 239,313,920 - 646,277,893
------------------- ----------------------- --------------- -------------------
Liabilities
Accrued expenses and other liabilities 399,318 227,048 626,366
Payable for securities purchased 2,535,486 - 2,535,486
Payable for fund shares purchased 118,319 211,981 330,300
Payable for distributions to shareholders 278,044 147,789 425,833
Transaction costs payable - - 72,792 * 72,792
------------------- ----------------------- --------------- -------------------
Total Liabilities 3,331,167 586,818 72,792 3,990,777
------------------- ----------------------- --------------- -------------------
Net Assets $ 403,632,806 $ 238,727,102 $ (72,792) $ 642,287,116
=================== ======================= =============== ===================
Investment at Cost $ 382,564,603 $ 219,906,827 $ - $ 602,471,430
Analysis of Net Assets
Accumulated paid in capital $ 384,593,993 $ 222,056,876 $ - $ 606,650,869
Undistributed net investment income 147,934 - (72,792)* 75,142
Accumulated net realized gain on investments 321,782 285,732 607,514
Unrealized appreciation of investments 18,569,097 16,384,494 34,953,591
------------------- ----------------------- --------------- -------------------
Net Assets $ 403,632,806 $ 238,727,102 $ (72,792) $ 642,287,116
=================== ======================= =============== ===================
* Adjustment reflects the costs of the transaction to be incurred by the
Funds.
Shares Outstanding 32,247,619 21,800,442 (2,729,968) 51,318,093
Class A Shares 30,062,381 19,615,153 (2,453,910) 47,223,624
Class B Shares 1,035,103 1,050,054 (132,941) 1,952,216
Class C Shares 1,150,135 1,135,235 (143,117) 2,142,253
Net Assets:
Class A Shares $ 376,235,697 $ 214,789,192 ($66,673) $ 590,958,216
Class B Shares 12,965,091 11,487,928 ($2,920) 24,450,099
Class C Shares 14,432,018 12,449,982 ($3,199) 26,878,801
Net asset value per share:
Class A Shares $12.52 $10.95 $12.51
Class B Shares $12.53 $10.94 $12.52
Class C Shares $12.55 $10.97 $12.55
Offering price per share:
Class A Shares $13.11 $11.47 $13.10
See Pro Forma Notes to Financial Statements
Delaware Tax-Free Minnesota Fund
PRO FORMA COMBINED
Statement of Operations
For the Twelve Months Ended February 28, 2006
(Unaudited)
Delaware Tax-Free
Delaware Tax-Free Minnesota Fund
Delaware Tax- Minnesota Pro Forma Pro Forma
Free Minnesota Fund Insured Fund Adjustments Combined
--------------------- ------------------ ----------- -------------
Investment Income
Interest income $ 19,802,606 $ 12,036,440 $ - $ 31,839,046
--------------------- ------------------ ----------- -------------
Expenses
Management fees 2,152,672 1,233,111 54,302 (A) 3,440,085
Distribution expenses - Class A 911,526 555,029 1,466,555
Distribution expenses - Class B 128,690 121,917 250,607
Distribution expenses - Class C 137,152 124,813 261,965
Dividend disbursing and transfer
agent fees and expenses 200,487 136,981 337,468
Accounting and administration expenses 148,717 93,466 242,183
Reports and statements to shareholders 13,424 20,349 (6,150)(B) 27,623
Legal and professional fees 71,318 48,947 (21,000)(B) 99,265
Registration fees 29,913 30,066 (30,000)(B) 29,979
Insurance fees 32,715 20,165 52,880
Trustees' fees 20,993 13,213 34,206
Custodian fees 14,484 7,024 (1,720)(B) 19,788
Pricing fees 4,316 2,353 (1,000)(B) 5,669
Taxes (other than taxes on income) 2,390 592 2,982
Other 16,381 11,242 27,623
--------------------- ------------------ ----------- -------------
3,885,178 2,419,268 (5,568) 298,878
Less expenses absorbed or waived (20,311) (34,814) (194,249)(C) (249,374)
Less expense paid indirectly (1,864) (796) 796 (B) (1,864)
--------------------- ------------------ ----------- -------------
Total expenses 3,863,003 2,383,658 (199,021) 6,047,640
--------------------- ------------------ ----------- -------------
Net Investment Income 5,939,603 9,652,782 199,021 25,791,406
--------------------- ------------------ ----------- -------------
Net Realized and Unrealized Gain/(Loss)
on Investments:
Net realized gain on investments 741,041 422,695 - 1,163,736
Change in unrealized appreciation/
(depreciation) of investments (467,400) (1,527,949) - (1,995,349)
--------------------- ------------------ ----------- -------------
Net Realized and Unrealized Gain
on Investments 273,641 (1,105,254) - (831,613)
Change in Net Assets Resulting
from Operations $ 16,213,244 $ 8,547,528 $ 199,021 $ 24,959,793
==================== ================== =========== =============
(A) Increase to reflect higher management fee for the surviving Fund.
(B) Decrease to reflect appropriate expense levels by merging the Funds.
(C) Once the Transaction is complete, Delaware Management Company has
contractually agreed to waive its fees to prevent annual operating
expenses, exclusive of taxes, interest, brokerage commissions, distribution
fees, certain insurance costs and extraordinary expenses from exceeding
0.64% of the average daily net assets of the Fund for at least one year
after the Closing Date.
See Pro Forma Notes to Financial Statements
Delaware Tax-Free Minnesota Fund
Pro Forma Notes to Financial Statements
February 28, 2006 (Unaudited)
Voyageur Tax Free Funds (the "Trust") is organized as a Delaware statutory trust
and offers the Delaware Tax-Free Minnesota Fund. These financial statements and
related notes pertain to the Delaware Tax-Free Minnesota Fund (the "Fund"). The
Trust is an open-end investment company. The Fund is considered non-diversified
under the Investment Company Act of 1940, as amended. The Fund offers Class A,
Class B and Class C shares. Class A shares are sold with a front-end sales
charge of up to 4.50%. Class A share purchases of $1,000,000 or more will incur
a contingent deferred sales charge of up to 1% if redeemed during the first two
years, provided that, a financial advisor was paid commission on the purchase of
those shares. Class B shares are sold with a contingent deferred sales charge
that declines from 4.00% to zero depending upon the period of time the shares
are held. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately eight years after purchase. Class C shares are
sold with a contingent deferred sales charge of 1%, if redeemed during the first
12 months.
The investment objective of the Fund is to seek as high a level of current
income exempt from federal income tax and from the Minnesota state personal
income tax, as is consistent with preservation of capital.
1. Basis of Pro forma Presentation
The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of Delaware Tax-Free Minnesota Insured Fund by
Delaware Tax-Free Minnesota Fund. The following notes refer to the accompanying
pro forma financial statements as if the above-mentioned acquisition of Delaware
Tax-Free Minnesota Insured Fund by Delaware Tax-Free Minnesota Fund had taken
place as of March 1, 2005.
Under the terms of the Agreement and Plan of Reorganization, the combination of
Delaware Tax-Free Minnesota Insured Fund and Delaware Tax-Free Minnesota Fund
will be accounted for by a method of accounting for tax-free mergers of
investment companies. The acquisition would be accomplished by an acquisition
(the "Transaction") of the net assets of Delaware Tax-Free Minnesota Insured
Fund in exchange for shares of the Delaware Tax-Free Minnesota Fund at net asset
value. The statement of assets and liabilities and the related statement of
operations of Delaware Tax-Free Minnesota Insured Fund and Delaware Tax-Free
Minnesota Fund have been combined as of and for the twelve months ended February
28, 2006.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements of Delaware Tax-Free Minnesota Insured Fund and
Delaware Tax-Free Minnesota Fund included in their annual report dated August
31, 2005 and semi-annual report dated February 28, 2006.
2. Significant Accounting Policies
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term debt securities having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Shares of open-end
investment companies are valued at their published net asset value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith under the direction of the
Fund's Board of Trustees. In determining whether market quotations are readily
available or fair valuation will be used, various factors will be taken into
consideration, such as market closures, aftermarket trading or significant
events after local market trading (e.g., government actions or pronouncements,
trading volume or volatility on markets, exchanges among dealers, or news
events).
Federal Income Taxes - The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting - Investment income and common expenses are allocated to the
classes of the Fund on the basis of "settled shares" of each class in relation
to the net assets of the Fund. Realized and unrealized gain (loss) on
investments is allocated to the various classes of the Fund on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Use of Estimates - The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other - Expenses common to all funds within the Delaware Investments(R)Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and some other expenses are paid monthly. Security transactions
are recorded on the date the securities are purchased or sold (trade date) for
financial reporting purposes. Costs used in calculating realized gains and
losses on the sale of investment securities are those of the specific securities
sold. Interest income is recorded on the accrual basis. Discounts and premiums
are amortized to interest income over the lives of the respective securities.
The Fund declares dividends daily from net investment income and pays such
dividends monthly and declares and pays distributions from net realized gain on
investments, if any, annually.
The Fund receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in custodian fees on the Statement of
Operations with the corresponding expense offset shown as "expense paid
indirectly."
3. Allocation of Transaction Costs
The total costs of the Transaction between Delaware Tax-Free Minnesota Insured
Fund and Delaware Tax-Free Minnesota Fund are estimated to be $109,189. The
costs of the Transaction, including costs of soliciting proxies in connection
with the shareholder meeting, will be shared by the following parties in the
percentages indicated: 33.33% by Delaware Tax-Free Minnesota Insured Fund,
33.33% by Delaware Tax-Free Minnesota Fund and 33.34% by Delaware Management
Company ("DMC"), a series of Delaware Management Business Trust.
4. Investment Management, Administration Agreements and Other Transactions
with Affiliates
In accordance with the terms of its investment management agreement, the Fund
pays DMC, the investment manager, an annual fee which is calculated daily at the
rate of 0.55% on the first $500 million of average daily net assets of the Fund,
0.50% on the next $500 million, 0.45% on the next $1.5 billion and 0.425% on
average daily net assets in excess $2.5 billion.
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse the Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed 0.68% of average daily net assets of the Fund through December 31, 2006.
Prior to December 30, 2005, DMC had contractually agreed to waive its fees to
prevent such expenses from exceeding 0.69% of the average daily net assets of
the Fund. Once the Transaction is complete, DMC has contractually agreed to
waive its fees to prevent such expenses from exceeding 0.64% of the average
daily net assets of the Fund for at least one year after the Closing Date.
Delaware Service Company, Inc. ("DSC"), an affiliate of DMC, provides
accounting, administration, dividend disbursing and transfer agent services.
Effective May 19, 2005, the Fund pays DSC a monthly fee computed at the annual
rate of 0.04% of the Fund's average daily net assets for accounting and
administration services. Prior to May 19, 2005, the Fund paid DSC a monthly fee
based on average net assets subject to certain minimums for accounting and
administration services. The Fund paid DSC a monthly fee based on the number of
shareholder accounts for dividend disbursing and transfer agent services.
Pursuant to a distribution agreement and distribution plan, the Fund pays
Delaware Distributors, L.P. ("DDLP"), the distributor and an affiliate of DMC,
an annual distribution and service fee not to exceed 0.25% of the average daily
net assets of the Class A shares and 1.00% of the average daily net assets of
the Class B and C shares.
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust.
These officers and trustees are paid no compensation by the Fund.
5. Line of Credit
The Fund, along with certain other funds in the Delaware Investments(R)Family of
Funds (the "Participants"), participates in a $225,000,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Fund had no amount outstanding as of February 28, 2006, or at any time during
the period.
6. Credit and Market Risks
The Fund concentrates its investments in securities issued by municipalities,
mainly in Minnesota. The value of these investments may be adversely affected by
new legislation within the state, regional or local economic conditions, and
differing levels of supply and demand for municipal bonds. Many municipalities
insure repayment for their obligations. Although bond insurance reduces the risk
of loss due to default by an issuer, such bonds remain subject to the risk that
market value may fluctuate for other reasons and there is no assurance that the
insurance company will meet its obligations. These securities have been
identified in the Portfolio of Investments.
The Fund may invest in inverse floating rate securities ("inverse floaters"), a
type of derivative tax-exempt obligation with floating or variable interest
rates that move in the opposite direction of short-term interest rates, usually
at an accelerated speed. Consequently, the market values of inverse floaters
will generally be more volatile than other tax-exempt investments. Such
securities are denoted on the Portfolio of Investments.
The Fund may invest a portion of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair the Fund from disposing of them in a
timely manner and at a fair price when it is necessary or desirable to do so.
While maintaining oversight, the Board of Trustees has delegated to DMC the
day-to-day functions of determining whether individual securities are liquid for
purposes of the Fund's limitation on investments in illiquid assets. At February
28, 2006, there were no Rule 144A securities. Illiquid securities have been
identified on the Portfolio of Investments.
7. Pre-Refunded Bonds
The Fund may invest in advanced refunded bonds, escrow secured bonds or defeased
bonds. Under current federal tax laws and regulations, state and local
government borrowers are permitted to refinance outstanding bonds by issuing new
bonds. The issuer refinances the outstanding debt to either reduce interest
costs or to remove or alter restrictive covenants imposed by the bonds being
refinanced. A refunding transaction where the municipal securities are being
refunded within 90 days or less from the issuance of the refunding issue is
known as a "current refunding." "Advance refunded bonds" are bonds in which the
refunded bond issue remains outstanding for more than 90 days following the
issuance of the refunding issue. In an advance refunding, the issuer will use
the proceeds of a new bond issue to purchase high grade interest bearing debt
securities which are then deposited in an irrevocable escrow account held by an
escrow agent to secure all future payments of principal and interest and bond
premium of the advance refunded bond. Bonds are "escrowed to maturity" when the
proceeds of the refunding issue are deposited in an escrow account for
investment sufficient to pay all of the principal and interest on the original
interest payment and maturity dates.
Bonds are considered "pre-refunded" when the refunding issue's proceeds are
escrowed only until a permitted call date or dates on the refunded issue with
the refunded issue being redeemed at the time, including any required premium.
Bonds become "defeased" when the rights and interests of the bondholders and of
their lien on the pledged revenues or other security under the terms of the bond
contract and are substituted with an alternative source of revenues (the escrow
securities) sufficient to meet payments of principal and interest to maturity or
to the first call dates. Escrowed secured bonds will often receive a rating of
AAA from Moody's Investors Service, Inc., Standard & Poor's Rating Group, and/or
Fitch due to the strong credit quality of the escrow securities and the
irrevocable nature of the escrow deposit agreement. Delaware Tax Free Minnesota
Fund will purchase escrow secured bonds without additional insurance only where
the escrow is invested in securities of the U.S. government or agencies or
instrumentalities of the U.S. government.
8. Contractual Obligations
The Fund enters into contracts in the normal course of business that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts. Management has reviewed the Fund's existing
contracts and expects the risk of loss to be remote.
PART C
OTHER INFORMATION
Item 15. Indemnification. Article VI of the Amended and Restated By-Laws
(May 19, 2005) incorporated into this filing by reference to
Post-Effective Amendment No. 40 filed October 31, 2005.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the provisions described in
response to Item 15, or otherwise, the Registrant has been advised
that in the opinion of the U.S. Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 16. Exhibits. The following exhibits are incorporated by reference to the
Registrant's previously filed registration statements on Form N-1A
indicated below, except as noted:
(1) Copies of the charter of the Registrant as now in effect;
(a) Executed Agreement and Declaration of Trust (December 17,
1998) incorporated into this filing by reference to
Post-Effective Amendment No. 33 filed August 16, 1999.
(b) Executed Certificate of Trust (December 17, 1998)
incorporated into this filing by reference to Post-Effective
Amendment No. 33 filed August 16, 1999.
(2) Copies of the existing bylaws or corresponding instrument of the
Registrant;
(a) Amended and Restated By-Laws (May 19, 2005) incorporated
into this filing by reference to Post-Effective Amendment
No. 40 filed October 31, 2005.
(3) Copies of any voting trust agreement affecting more than 5
percent of any class of equity securities of the Registrant;
Not applicable.
(4) Copies of the agreement of acquisition, reorganization, merger,
liquidation and any amendments to it;
(a) Form of Agreement and Plan of Reorganization between the
Registrant, on behalf of Delaware Tax-Free Minnesota Fund,
and Voyageur Insured Funds, on behalf of its series,
Delaware Tax-Free Minnesota Insured Fund, is filed herewith
as Exhibit A to the Prospectus/Proxy Statement.
(5) Copies of all instruments defining the rights of holders of the
securities being registered including, where applicable, the
relevant portion of the articles of incorporation or by-laws of
the Registrant;
(a) Agreement and Declaration of Trust. Articles III, IV, V and
VI of Agreement and Declaration of Trust (December 17, 1998)
incorporated into this filing by reference to Post-Effective
Amendment No. 33 filed August 16, 1999.
(b) By-Laws. Article II of the Amended and Restated By-Laws (May
19, 2005) incorporated into this filing by reference to
Post-Effective Amendment No. 40 filed October 31, 2005.
(6) Copies of all investment advisory contracts relating to the
management of the assets of the Registrant.
(a) Executed Investment Management Agreement (November 1, 1999)
between Delaware Management Company and the Registrant
incorporated into this filing by reference to Post-Effective
Amendment No. 35 filed October 30, 2000.
(7) Copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(a) Distribution Agreements.
(i) Executed Distribution Agreement (April 19, 2001)
between Delaware Distributors, L.P. and the Registrant
incorporated into this filing by reference to
Post-Effective Amendment No. 36 filed October 31, 2001.
(ii) Executed Second Amended and Restated Financial
Intermediary Distribution Agreement (August 21, 2003)
between Delaware Distributors, L.P. and Lincoln
Financial Distributors, Inc. on behalf of the
Registrant incorporated into this filing by reference
to Post-Effective Amendment No. 38 filed December 3,
2004.
(iii) Executed Amendment No. 1 (October 31, 2005) to
Appendix A to Second Amended and Restated Financial
Intermediary Distribution Agreement attached as Exhibit
No. EX-99.7.a.iii.
(iv) Dealer's Agreement (January 2001) incorporated into
this filing by reference to Post-Effective Amendment
No. 37 filed November 18, 2002.
(v) Vision Mutual Fund Gateway(R)Agreement (November 2000)
incorporated into this filing by reference to
Post-Effective Amendment No. 37 filed November 18,
2002.
(vi) Registered Investment Advisers Agreement (January 2001)
incorporated into this filing by reference to
Post-Effective Amendment No. 37 filed November 18,
2002.
(vii) Bank/Trust Agreement (August 2004) incorporated into
this filing by reference to Post-Effective Amendment
No. 39 filed December 3, 2004.
(8) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
trustees or officers of the Registrant in their capacity as such.
Furnish a reasonably detailed description of any plan that is not
set forth in a formal document;
Not applicable.
(9) Copies of all custodian agreements and depository contracts under
Section 17(f) of the Investment Company Act of 1940, as amended
(the "1940 Act") for securities and similar investments of the
Registrant, including the schedule of remuneration;
(a) Amended and Restated Mutual Fund Custody and Services
Agreement (May 2002) between Mellon Bank, N.A. and the
Registrant incorporated into this filing by reference to
Post-Effective Amendment No. 37 filed November 18, 2002.
(b) Executed Amendment (November 28, 2003) to the Amended and
Restated Mutual Fund Custody and Services Agreement
incorporated into this filing by reference to Post-Effective
Amendment No. 39 filed December 3, 2004.
(10) Copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act and any agreements with any person
relating to implementation of the plan, and copies of any plan
entered into by Registrant pursuant to Rule 18f-3 under the 1940
Act, any agreement with any person relating to implementation of
the plan, any amendment to the plan, and a copy of the portion of
the minutes of the meeting of the Registrant's trustees
describing any action taken to revoke the plan;
(a) Plans under Rule 12b-1 for Class A, B and C (April 19, 2001)
incorporated into this filing by reference to Post-Effective
Amendment No. 28 filed October 31, 2001.
(b) Plan under Rule 18f-3. Plan under Rule 18f-3 (August 31,
2006) attached as Exhibit No. EX-10.b.
(11) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and nonassessable;
(a) Opinion of Counsel (August 5, 1999) incorporated into this
filing by reference to Post-Effective Amendment No. 33 filed
August 16, 1999.
(12) An opinion, and consent to their use, of counsel or, in lieu of
an opinion, a copy of the revenue ruling from the Internal
Revenue Service, supporting the tax matters and consequences to
shareholders discussed in the prospectus;
(a) To be filed by amendment.
(13) Copies of all material contracts of the Registrant not made in
the ordinary course of business which are to be performed in
whole or in part on or after the date of filing the registration
statement;
(a) Executed Shareholder Services Agreement (April 19, 2001)
between Delaware Service Company, Inc. and the Registrant
incorporated into this filing by reference to Post-Effective
Amendment No. 36 filed October 31, 2001.
(i) Executed Schedule B (May 19, 2005) to Shareholder
Services Agreement incorporated into this filing by
reference to Post-Effective Amendment No. 40 filed
October 31, 2005.
(ii) Executed Letter Amendment to the Shareholder Services
Agreement (August 23, 2002) incorporated into this
filing by reference to Post-Effective Amendment No. 38
filed October 31, 2003.
(b) Executed Delaware Group of Funds Fund Accounting Agreement
(August 19, 1996) between Delaware Service Company, Inc. and
the Registrant incorporated into this filing by reference to
Post-Effective Amendment No. 29 filed August 28, 1997.
(i) Executed Schedule B (May 19, 2005) to Delaware
Investments Family of Funds Fund Accounting Agreement
incorporated into this filing by reference to
Post-Effective Amendment No. 40 filed October 31, 2005.
(ii) Form of Amendment No. 31 (August 31, 2006) to Schedule
A of the Delaware Investments Family of Funds Fund
Accounting Agreement attached as Exhibit No.
EX-99.13.b.ii.
(c) Executed Advisory Expense Limitation Letter (December 28,
2005) between Delaware Management Company and the Registrant
incorporated into this filing by reference to Post-Effective
Amendment No. 41 filed December 29, 2005.
(14) Copies of any other opinions, appraisals, or rulings, and
consents to their use, relied on in preparing the registration
statement and required by Section 7 of the Securities Act of
1933, as amended (the "1933 Act" or "Securities Act");
(a) Consent of Independent Registered Public Accounting Firm
(August 2006) attached as Exhibit No. EX-99.14.a.
(15) All financial statements omitted pursuant to Item 14(a)(1);
Not applicable.
(16) Manually signed copies of any power of attorney pursuant to which
the name of any person has been signed to the registration
statement; and
(a) Powers of Attorney (August 16, 2006) attached as Exhibit No.
EX-99.16.a.
(17) Any additional exhibits which the Registrant may wish to file.
(a) Code of Ethics for the Delaware Investments Family of Funds
(February 2006) attached as Exhibit No. EX-99.17.a.
(b) Code of Ethics for Delaware Investments (Delaware Management
Business Trust, Delaware Management Company and Delaware
Distributors, L.P.) (February 2006) attached as Exhibit No.
EX-99.17.b.
(c) Code of Ethics for Lincoln Financial Distributors, Inc.
(December 2005) attached as Exhibit No. EX-99.17.c.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file by Post-Effective
Amendment the opinion and consent of counsel regarding the tax
consequences of the proposed reorganization required by Item 16
(12) of Form N-14 within a reasonable time after receipt of such
opinion.
SIGNATURES
As required by the Securities Act of 1933, as amended, (the "1933 Act"),
the Registration Statement has been signed on behalf of the Registrant in the
City of Philadelphia and the Commonwealth of Pennsylvania on this 1st day of
September, 2006.
VOYAGEUR TAX FREE FUNDS
By: /s/ Patrick P. Coyne
Patrick P. Coyne
Chairman/President/Chief Executive Officer
As required by the 1933 Act, this Registration Statement has been signed by
the following persons in the capacities and on the dates indicated:
Signature Title Date
/s/ Patrick P. Coyne Chairman/President/Chief Executive Officer September 1, 2006
Patrick P. Coyne (Principal Executive Officer) and Trustee
/s/ Thomas L. Bennett * Trustee September 1, 2006
Thomas L. Bennett
/s/ John A. Fry * Trustee September 1, 2006
John A. Fry
/s/ Anthony D. Knerr * Trustee September 1, 2006
Anthony D. Knerr
/s/ Lucinda S. Landreth * Trustee September 1, 2006
Lucinda S. Landreth
/s/ Ann R. Leven * Trustee September 1, 2006
Ann R. Leven
/s/ Thomas F. Madison * Trustee September 1, 2006
Thomas F. Madison
/s/ Janet L. Yeomans * Trustee September 1, 2006
Janet L. Yeomans
/s/ J. Richard Zecher * Trustee September 1, 2006
J. Richard Zecher
/s/ Michael P. Bishof * Senior Vice President/Chief Financial Officer September 1, 2006
Michael P. Bishof (Principal Financial Officer)
*By: /s/ Patrick P. Coyne
Patrick P. Coyne
as Attorney-in-Fact for
each of the persons indicated
(Pursuant to Powers of Attorney filed herewith)
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
EXHIBITS
TO
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
Exhibit No. Exhibit
EX-99.7.a.iii. Executed Amendment No. 1 (October 31, 2005) to Appendix A to
Second Amended and Restated Financial Intermediary
Distribution Agreement
EX-99.10.b. Plan under Rule 18f-3 (August 31, 2006)
EX-99.13.b.ii. Form of Amendment No. 31 (August 31, 2006) to Schedule A
of the Delaware Investments Family of Funds Fund Accounting
Agreement
EX-99.14.a. Consent of Independent Registered Public Accounting Firm
(August 2006)
EX-99.16.a. Powers of Attorney (August 16, 2006)
EX-99.17.a. Code of Ethics for the Delaware Investments Family of Funds
(February 2006)
EX-99.17.b. Code of Ethics for Delaware Investments (Delaware Management
Business Trust, Delaware Management Company and Delaware
Distributors, L.P.) (February 2006)
EX-99.17.c. Code of Ethics for Lincoln Financial Distributors, Inc.
(December 2005)
