PROSPECTUS
Dated March 1, 1995 as supplemented November 9, 1995
- --------------------------------------------------------------------------------
Each of the funds listed on this page (individually, a "Fund" and together, the
"Funds") is a series of an open end management investment company, commonly
referred to as a mutual fund. Three styles of funds are contained in this
combined Prospectus: limited term tax free funds (the "Limited Term Tax Free
Funds"), longer term tax free funds (the "Tax Free Funds") and longer term
insured tax free funds (the "Insured Tax Free Funds"). The investment objective
of each Limited Term Tax Free Fund is to provide investors with preservation of
capital and, secondarily, current income exempt from federal income tax and
(except for the "national" fund) the personal income tax, if any, of the Fund's
particular state, by maintaining a weighted average portfolio maturity of 10
years or less. The investment objective of each Tax Free Fund and Insured Tax
Free Fund is to seek as high a level of current income exempt from federal
income tax and (except for the "national" fund) from the personal income tax, if
any, of the Fund's particular state, as is consistent with preservation of
capital. The weighted average maturity of the investment portfolio of each Tax
Free Fund and Insured Tax Free Fund is expected to be approximately 15 to 25
years. There is no assurance that any Fund will achieve its investment
objective.
Tax Exempt Obligations (as defined herein) in the investment portfolios of
the Insured Tax Free Funds consist primarily of insured securities and "escrow
secured" or "defeased" bonds. Insurance on portfolio securities does not
guarantee the market value of such securities or the value of the Insured Tax
Free Funds' shares. See "Investment Objectives and Policies -- Insured Tax Free
Funds."
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C>
Voyageur Arizona Limited Term Tax Free Fund Voyageur Kansas Tax Free Fund
Voyageur Arizona Insured Tax Free Fund(1) Voyageur Minnesota Limited Term Tax Free Fund(1)
Voyageur Arizona Tax Free Fund Voyageur Minnesota Insured Fund(1)
Voyageur California Limited Term Tax Free Fund Voyageur Minnesota Tax Free Fund(1)
Voyageur California Insured Tax Free Fund(1) Voyageur Missouri Insured Tax Free Fund
Voyageur California Tax Free Fund Voyageur New Mexico Tax Free Fund
Voyageur Colorado Limited Term Tax Free Fund Voyageur North Dakota Tax Free Fund
Voyageur Colorado Insured Tax Free Fund Voyageur Oregon Insured Tax Free Fund
Voyageur Colorado Tax Free Fund(1) Voyageur Utah Tax Free Fund
Voyageur Florida Limited Term Tax Free Fund Voyageur Washington Insured Tax Free Fund
Voyageur Florida Insured Tax Free Fund(1) Voyageur Wisconsin Tax Free Fund
Voyageur Florida Tax Free Fund Voyageur National Limited Term Tax Free Fund(1)
Voyageur Idaho Tax Free Fund Voyageur National Insured Tax Free Fund(1)
Voyageur Iowa Tax Free Fund Voyageur National Tax Free Fund(1)
- --------------------------------------------------------------------------------------------------
</TABLE>
1 Diversified series
The Funds' investment adviser is Voyageur Fund Managers, Inc. ("Voyageur"). The
address of Voyageur and the Funds is 90 South Seventh Street, Suite 4400,
Minneapolis, Minnesota 55402.
AN INVESTMENT IN ANY OF THE FUNDS IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK AND IS NOT INSURED OR GUARANTEED BY THE
UNITED STATES GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER FEDERAL AGENCY. AN INVESTMENT IN ANY OF THE FUNDS
INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL DUE TO
FLUCTUATIONS IN THE APPLICABLE FUND'S NET ASSET VALUE.
This Prospectus sets forth certain information about the Funds that a
prospective investor ought to know before investing. Investors should read and
retain this Prospectus for future reference. The Funds have filed a Statement of
Additional Information (dated March 1, 1995) with the Securities and Exchange
Commission. The Statement of Additional Information is available free of charge
by telephone (800-553- 2143) and is incorporated by reference herein in its
entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Funds offer investors a choice among classes of shares which offer
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances.
CLASS A SHARES
An investor who purchases Class A shares pays a sales charge at the time of
purchase. As a result, Class A shares are not subject to any charges when they
are redeemed (except for sales at net asset value in excess of $1 million or
sales subject to special promotions identified from time to time by Voyageur
which in either case are subject to a contingent deferred sales charge). The
initial sales charge may be reduced or waived for certain purchases. Class A
shares of each Fund are subject to a Rule 12b-1 fee payable at an annual rate of
.25% of a Fund's average daily net assets attributable to Class A shares. See
"How to Purchase Shares -- Class A Shares."
CLASS B SHARES
Class B shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 4% if redeemed within six years of
purchase. Class B shares are also subject to a higher Rule 12b-1 fee than Class
A shares. The Rule 12b-1 fee for Class B shares will be paid at an annual rate
of 1% of a Fund's average daily net assets attributable to Class B shares. Class
B shares will automatically convert to Class A shares at net asset value
approximately eight years after purchase. Class B shares provide an investor the
benefit of putting all of the investor's dollars to work from the time the
investment is made but until conversion will have a higher expense ratio and pay
lower dividends than Class A shares due to the higher Rule 12b-1 fee. See "How
to Purchase Shares -- Class B Shares."
CLASS C SHARES
Class C shares are sold without an initial sales charge. Class C shares are also
subject to a higher Rule 12b-1 fee than Class A shares. The Rule 12b-1 fee for
Class C shares of each Fund will be paid at an annual rate of 1% of the Fund's
average daily net assets attributable to Class C shares. Class C shares provide
an investor the benefit of putting all of the investor's dollars to work from
the time the investment is made, but will have a higher expense ratio and pay
lower dividends than Class A shares due to the higher Rule 12b-1 fee. See "How
to Purchase Shares -- Class C Shares." Class C shares do not convert to any
other class of shares.
The decision as to which class of shares provides a more suitable
investment for an investor depends on a number of factors, including the amount
and intended length of the investment. Investors making investments that qualify
for reduced sales charges might consider Class A shares. Other investors might
consider Class B or Class C shares because all of the purchase price is invested
immediately. Voyageur will treat orders for Class B shares for $250,000 or more
as orders for Class A shares or declined. Sales personnel may receive different
compensation depending on which class of shares they sell.
SHARES OF THE FUNDS COVERED BY THIS PROSPECTUS ARE NOT REGISTERED IN ALL STATES.
SHARES THAT ARE NOT REGISTERED IN ONE OR MORE STATES ARE NOT BEING OFFERED AND
SOLD IN SUCH STATES.
<TABLE>
<CAPTION>
FEES AND EXPENSES
- ------------------------------------------------------------------------------------------------------------
Shareholder Transaction
Expenses Annual Fund Operating Expenses
------------------------ as a percentage of Average Net Assets Total
After Fee Waivers and Fund
Reimbursement Agreements Operating
Maximum ------------------------------------------ Expenses
Front End Maximum Without
Sales Load CDSC Manage- Total Fund Voluntary
Imposed on Imposed on ment Other Operating Waiver and
VOYAGEUR FUNDS (a) Purchases Redemptions Fee 12B-1 Fee Expenses Expenses Reimbursement
- ------------------------------------------------------------------------------------------------------------
STATE LONG TERM FUNDS
<S> <C> <C> <C> <C> <C> <C> <C>
Arizona Tax Free - Class A 4.75% 100% 0.25% 0.25% --% 0.50% 1.25%
Arizona Tax Free - Class B N/A* 4.00 0.25 1.00 -- 1.25 2.00
Arizona Tax Free - Class C N/A* None 0.25 1.00 -- 1.25 2.00
California Tax Free - Class A 4.75 1.00** 0.25 0.25 -- 0.50 1.25
California Tax Free - Class B N/A* 4.00 0.25 1.00 -- 1.25 2.00
California Tax Free - Class C N/A* None 0.25 1.00 -- 1.25 2.00
Colorado Tax Free - Class A 3.75 1.00** 0.50 0.10 0.20 0.80 0.95
Colorado Tax Free - Class B N/A* 4.00 0.50 1.00 0.20 1.70 1.70
Colorado Tax Free - Class C N/A* None 0.50 1.00 0.20 1.70 1.70
Florida Tax Free - Class A 4.75 1.00** 0.25 0.25 -- 0.50 1.25
Florida Tax Free - Class B N/A* 4.00 0.25 1.00 -- 1.25 2.00
Florida Tax Free - Class C N/A* None 0.25 1.00 -- 1.25 2.00
Idaho Tax Free - Class A 3.75 1.00** 0.25 0.25 -- 0.50 1.25
Idaho Tax Free - Class B N/A* 4.00 0.25 1.00 -- 1.25 2.00
Idaho Tax Free - Class C N/A* None 0.25 1.00 -- 1.25 2.00
Iowa Tax Free - Class A 3.75 1.00** 0.50 0.10 0.30 0.90 1.25
Iowa Tax Free - Class B N/A* 4.00 0.50 1.00 0.30 1.80 2.00
Iowa Tax Free - Class C N/A* None 0.50 1.00 0.30 1.80 2.00
Kansas Tax Free - Class A 4.75 1.00** 0.50 0.10 -- 0.60 1.25
Kansas Tax Free - Class B N/A* 4.00 0.50 1.00 -- 1.50 2.00
Kansas Tax Free - Class C N/A* None 0.50 1.00 -- 1.50 2.00
Minnesota Tax Free - Class A 4.75 1.00** 0.50 0.25 0.16 0.91 0.91
Minnesota Tax Free - Class B N/A* 4.00 0.50 1.00 0.16 1.66 1.66
Minnesota Tax Free - Class C N/A* None 0.50 1.00 0.16 1.66 1.66
New Mexico Tax Free - Class A 3.75 1.00** 0.50 0.10 0.40 1.00 1.15
New Mexico Tax Free - Class B N/A* 4.00 0.50 1.00 0.40 1.90 1.90
New Mexico Tax Free - Class C N/A* None 0.50 1.00 0.40 1.90 1.90
North Dakota Tax Free - Class A 4.75 1.00** 0.50 0.05 0.45 1.00 1.20
North Dakota Tax Free - Class B N/A* 4.00 0.50 1.00 0.45 1.95 1.95
North Dakota Tax Free - Class C N/A* None 0.50 1.00 0.45 1.95 1.95
Utah Tax Free - Class A 3.75 1.00** 0.50 0.10 -- 0.60 1.25
Utah Tax Free - Class B N/A* 4.00 0.50 1.00 -- 1.50 2.00
Utah Tax Free - Class C N/A* None 0.50 1.00 -- 1.50 2.00
Wisconsin Tax Free - Class A 3.75 1.00** 0.50 0.10 0.45 1.05 1.20
Wisconsin Tax Free - Class B N/A* 4.00 0.50 1.00 0.45 1.95 1.95
Wisconsin Tax Free - Class C N/A* None 0.50 1.00 0.45 1.95 1.95
STATE INSURED FUNDS
Arizona Insured - Class A 4.75% 1.00**% 0.50% 0.20% 0.20% 0.90% 0.95%
Arizona Insured - Class B N/A* 4.00 0.50 1.00 0.20 1.70 1.70
Arizona Insured - Class C N/A* None 0.50 1.00 0.20 1.70 1.70
California Insured - Class A 4.75 1.00** 0.50 0.15 0.15 0.80 1.20
California Insured - Class B N/A* 4.00 0.50 1.00 0.15 1.65 1.95
California Insured - Class C N/A* None 0.50 1.00 0.15 1.65 1.95
Colorado Insured - Class A 3.75 1.00** 0.25 0.25 -- 0.50 1.25
Colorado Insured - Class B N/A* 4.00 0.25 1.00 -- 1.25 2.00
Colorado Insured - Class C N/A* None 0.25 1.00 -- 1.25 2.00
Florida Insured - Class A 4.75 1.00** 0.50 0.05 0.20 0.75 1.00
Florida Insured - Class B N/A* 4.00 0.50 1.00 0.20 1.70 1.75
Florida Insured - Class C N/A* None 0.50 1.00 0.20 1.70 1.75
Minnesota Insured - Class A 4.75 100 0.50 0.25 0.20 0.95 1.00
Minnesota Insured - Class B N/A* 4.00 0.50 1.00 0.20 1.70 1.75
Minnesota Insured - Class C N/A* None 0.50 1.00 0.20 1.70 1.75
Missouri Insured - Class A 4.75 1.00** 0.50 0.10 -- 0.60 1.20
Missouri Insured - Class B N/A* 4.00 0.50 1.00 -- 1.50 1.95
Missouri Insured - Class C N/A* None 0.50 1.00 -- 1.50 1.95
Oregon Insured - Class A 4.75 1.00** 0.50 0.10 0.10 0.70 1.25
Oregon Insured - Class B N/A* 4.00 0.50 1.00 0.10 1.60 2.00
Oregon Insured - Class C N/A* None 0.50 1.00 0.10 1.60 2.00
Washington Insured - Class A 4.75 1.00** 0.50 0.10 -- 0.60 1.25
Washington Insured - Class B N/A* 4.00 0.50 1.00 -- 1.50 2.00
Washington Insured - Class C N/A* None 0.50 1.00 -- 1.50 2.00
STATE LIMITED TERM FUNDS
Arizona Limited Term - Class A 2.75% 1.00**% 0.25% 0.25% --% 0.50% 1.25%
Arizona Limited Term - Class B N/A* 3.00 0.25 1.00 -- 1.25 2.00
Arizona Limited Term- Class C N/A* None 0.25 1.00 -- 1.25 2.00
California Limited Term - Class A 2.75 1.00** 0.25 0.25 -- 0.50 1.25
California Limited Term - Class B N/A* 3.00 0.25 1.00 -- 1.25 2.00
California Limited Term - Class C N/A* None 0.25 1.00 -- 1.25 2.00
Colorado Limited Term - Class A 2.75 1.00** 0.25 0.25 -- 0.50 1.25
Colorado Limited Term- Class B N/A* 3.00 0.25 1.00 -- 1.25 2.00
Colorado Limited Term- Class C N/A* None 0.25 1.00 -- 1.25 2.00
Florida Limited - Class A 2.75 1.00** 0.40 0.15 0.25 0.80 1.25
Florida Limited - Class B N/A* 3.00 0.40 1.00 0.25 1.65 2.00
Florida Limited - Class C N/A* None 0.40 1.00 0.25 1.65 2.00
Minnesota Limited Term - Class A 2.75 1.00** 0.40 0.25 0.27 0.92 0.92
Minnesota Limited Term - Class B N/A* 3.00 0.40 1.00 0.27 1.67 1.67
Minnesota Limited Term - Class C N/A* None 0.40 1.00 0.27 1.67 1.67
NATIONAL FUNDS
National Tax Free - Class A 4.75% 1.00**% 0.25% 0.25% --% 0.50% 1.25%
National Tax Free - Class B N/A* 4.00 0.25 1.00 -- 1.25 2.00
National Tax Free - Class C N/A* None 0.25 1.00 -- 1.25 2.00
National Insured - Class A 4.75 1.00** 0.50 0.20 0.10 0.80 1.25
National Insured - Class B N/A* 4.00 0.50 1.00 0.10 1.60 2.00
National Insured - Class C N/A* None 0.50 1.00 0.10 1.60 2.00
National Limited Term - Class A 2.75 1.00* 0.25 0.25 -- 0.50 1.25
National Limited Term - Class B N/A* 3.00 0.25 1.00 -- 1.25 2.00
National Limited Term - Class C N/A* None 0.25 1.00 -- 1.25 2.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
FEES AND EXPENSES (CONTINUED)
- --------------------------------------------------------------------------------
Example of Expenses
An investor in a Voyageur Fund would pay
the following dollar amount of expenses on
a $1,00 investment assuming
(1) a 5% annual return and
(2) redemption at the end of each period
-----------------------------------------------
VOYAGEUR FUNDS (a) 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
STATE LONG TERM FUNDS
Arizona Tax Free - Class A $52 $63 $ -- $--
Arizona Tax Free - Class B 53** 70*** -- --
Arizona Tax Free - Class C 13 40 -- --
California Tax Free - Class A 52 63 -- --
California Tax Free - Class B 53*** 70*** -- --
California Tax Free - Class C 13 40 -- --
Colorado Tax Free - Class A 45 62 80 133
Colorado Tax Free - Class B 57*** 84*** 112*** 177
Colorado Tax Free - Class C 17 54 92 201
Florida Tax Free - Class A 52 63 -- --
Florida Tax Free - Class B 53*** 70*** -- --
Florida Tax Free - Class C 13 40 -- --
Idaho Tax Free - Class A 42 53 -- --
Idaho Tax Free - Class B 53*** 70*** -- --
Idaho Tax Free - Class C 13 40 -- --
Iowa Tax Free - Class A 46 65 85 144
Iowa Tax Free - Class B 58*** 87*** 117*** 188
Iowa Tax Free - Class C 18 57 97 212
Kansas Tax Free - Class A 53 66 79 119
Kansas Tax Free - Class B 55*** 77*** 102*** 155
Kansas Tax Free - Class C 15 47 82 179
Minnesota Tax Free - Class A 56 75 95 154
Minnesota Tax Free - Class B 57*** 82*** 110*** 176
Minnesota Tax Free - Class C 17 52 90 197
New Mexico Tax Free - Class A 47 68 91 155
New Mexico Tax Free - Class B 59*** 90*** 123*** 199
New Mexico Tax Free - Class C 19 60 103 222
North Dakota Tax Free - Class A 57 78 100 164
North Dakota Tax Free - Class B 60*** 91*** 125*** 203
North Dakota Tax Free - Class C 20 61 105 227
Utah Tax Free - Class A 43 56 70 110
Utah Tax Free - Class B 55*** 77*** 102*** 155
Utah Tax Free - Class C 15 47 82 179
Wisconsin Tax Free - Class A 48 70 93 161
Wisconsin Tax Free - Class B 60*** 91*** 125*** 204
Wisconsin Tax Free - Class C 20 61 105 227
STATE INSURED FUNDS
Arizona Insured - Class A $56 $75 $95 $153
Arizona Insured - Class B 57*** 84*** 112*** 179
Arizona Insured - Class C 17 54 92 201
California Insured - Class A 55 72 90 142
California Insured - Class B 57*** 82*** 110*** 173
California Insured - Class C 17 52 90 195
Colorado Insured - Class A 42 53 -- --
Colorado Insured - Class B 53*** 70*** -- --
Colorado Insured - Class C 13 40 -- --
Florida Insured - Class A 55 70 87 136
Florida Insured - Class B 57*** 84*** 112*** 175
Florida Insured - Class C 17 54 92 201
Minnesota Insured - Class A 57 76 98 159
Minnesota Insured - Class B 57*** 84*** 112*** 181
Minnesota Insured - Class C 17 54 92 201
Missouri Insured - Class A 53 66 79 119
Missouri Insured - Class B 55*** 77*** 102*** 155
Missouri Insured - Class C 15 47 82 179
Oregon Insured - Class A 54 69 85 130
Oregon Insured - Class B 56 80*** 107*** 166
Oregon Insured - Class C 16 50 87 190
Washington Insured - Class A 53 66 79 119
Washington Insured - Class B 55*** 77*** 102*** 155
Washington Insured - Class C 15 47 82 179
STATE LIMITED TERM FUNDS
Arizona Limited Term - Class A $32 $43 $-- $--
Arizona Limited Term - Class B 53*** 70*** -- --
Arizona Limited Term - Class C 13 40 -- --
California Limited Term - Class A 32 43 -- --
California Limited Term - Class B 53*** 70*** -- --
California Limited Term - Class C 13 40 -- --
Colorado Limited Term - Class A 32 43 -- --
Colorado Limited Term - Class B 53*** 70*** -- --
Colorado Limited Term - Class C 13 40 -- --
Florida Limited - Class A 35 52 71 124
Florida Limited - Class B 57*** 82*** 110*** 173
Florida Limited - Class C 17 52 90 195
Minnesota Limited Term - Class A 37 56 77 138
Minnesota Limited Term - Class B 57*** 83*** 111 177
Minnesota Limited Term - Class C 17 53 91 198
NATIONAL FUNDS
National Tax Free - Class A $52 $63 $-- $--
National Tax Free - Class B 53*** 70*** -- --
National Tax Free - Class C 13 40 -- --
National Insured - Class A 55 72 90 142
National Insured - Class B 56*** 80*** 107*** 168
National Insured - Class C 16 50 87 190
National Limited Term - Class A 32 43 -- --
National Limited Term - Class B 53*** 70*** -- --
National Limited Term - Class C 13 40 -- --
- --------------------------------------------------------------------------------
* Class B and Class C shares are sold without a front end sales charge, but
their Rule 12b-1 fees may cause long term shareholders to pay more than the
economic equivalent of the maximum permitted front end sales charges.
** A contingent deferred sales charge of up to 1.00% is imposed on certain
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more.
*** Class B share expenses would be lower assuming no redemption at the end of
the period.
(a) The Underwriter pays broker-dealers and financial institutions an annual
fee equal to .25% of the average daily net assets attributable to the Class
A shares (.15% for Class A shares of Limited Term Funds), .15% of the
average daily net assets attributable to the Class B shares, and .75% of
the average daily net assets attributable to the Class C shares held by
their customers. The fee is paid quarterly commencing when such shares are
sold.
THE EXAMPLES CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The purpose of the above Fees and Expenses table is to
assist the investor in understanding the various costs and expenses that
investors in the Funds will bear directly or indirectly. The information set
forth in the table reflects actual expenses incurred during fiscal 1994 for the
Class A shares of Minnesota Tax Free Fund and Minnesota Limited Term Tax Free
Fund. For all other Funds, such information has been restated to reflect
anticipated voluntary Rule 12b-1 waivers and expense reimbursements during
fiscal 1995. After December 31, 1995, such expense waivers and reimbursements
may be discontinued or modified by Voyageur and the Underwriter in their sole
discretion. The Funds' investment adviser, Voyageur, is contractually obligated
to pay certain of the operating expenses (excluding rule 12b-1 fees) of each
Fund which exceed 1% of the Fund's average daily net assets on an annual basis,
as further discussed in the section "Management--Expenses of the Funds." For the
fiscal period ended December 31, 1994, Voyageur and the Underwriter voluntarily
waived certain fees and absorbed certain expenses of each Fund then in existence
except for Minnesota Tax Free Fund and Minnesota Limited Term Tax Free Fund.
Absent such fee and expense waivers, Total Fund Operating Expenses for such
period would be equivalent to the corresponding percentages disclosed under the
column "Ratio of Expenses to Average Net Assets Assuming No Voluntary Waivers"
in the section "Financial Highlights".
FINANCIAL HIGHLIGHTS
The following table shows certain per share data and selected information for a
share outstanding during the indicated periods for each Fund. This information
has been audited by KPMG Peat Marwick LLP, independent auditors, and should be
read in conjunction with the financial statements of each Fund contained in its
annual report. An annual report of each Fund is available without charge by
contacting the Funds at 800-553-2143. In addition to financial statements, the
annual reports contain further information about the performance of the Funds.
Per share data is not presented for all classes since not all classes of shares
were outstanding during the periods presented below.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Income from
Investment
Operations Less Distributions
---------------- ------------------
Net
Realized Dividends
Net and from Distrib-
Asset Net Unrealized Net utions
Value Invest- Gains Invest- from Net Asset
Beginning ment (Loss) on ment Captial Value End
VOYAGEUR STATE FUNDS of Period Income Securities Income Gains of Period
- --------------------------------------------------------------------------------
ARIZONA INSURED
Class A - 12/31/94 $11.31 0.55 (1.37) (0.53) (0.10)(h)$ 9.86
Calss A - 12/31/93 10.71 0.58 0.74 (0.58) (0.14) 11.31
Class A - 12/31/92 10.39 0.61 0.38 (0.61) (0.06) 10.71
Class A - 12/31/91(a) 10.00 0.50 0.47 (0.50) (0.08) 10.39
Class C - 12/31/94(a) 10.43 0.27 (0.51) (0.25) (0.08)(h) 9.86
CALIFORNIA INSURED
Class A - 12/31/94(b) 9.51 0.10 (0.18) (0.09) (0.01) 9.33
Class A - 10/31/94 11.08 0.55 (1.52) (0.54) (0.06) 9.51
Class A - 10/31/93 10.02 0.60 1.11 (0.60) (0.05) 11.08
Class A - 10/31/92(a) 10.00 -- 0.02 -- -- 10.02
Class B - 12/31/94(b) 9.51 0.08 (0.17) (0.08) (0.01) 9.33
Class B - 10/31/94(a) 10.68 0.31 (1.16) (0.30) (0.02) 9.51
COLORADO TAX FREE
Class A - 12/31/94 11.10 0.55 (1.54) (0.54) (0.04) 9.53
Class A - 12/31/93 10.57 0.56 0.85 (0.56) (0.32) 11.10
Class A - 12/31/92 10.27 0.58 0.45 (0.58) (0.15) 10.57
Class A - 12/31/91 10.02 0.61 0.43 (0.61) (0.18) 10.27
Class A - 12/31/90 10.00 0.64 0.02 (0.64) -- 10.02
Class A - 12/31/89 9.74 0.67 0.32 (0.67) (0.06) 10.00
Class A - 12/31/88 9.43 0.69 0.34 (0.69) (0.03) 9.74
Class A - 12/31/87(a) 9.58 0.49 (0.15) (0.49) -- 9.43
Class C - 12/31/94(a) 10.21 0.29 (0.67) (0.27) (0.03) 9.53
FLORIDA INSURED
Class A - 12/31/94(b) 9.64 0.10 (0.12) (0.09) (0.01) 9.52
Class A - 10/31/94 11.15 0.55 (1.46) (0.54) (0.06) 9.64
Class A - 10/31/93 10.11 0.58 1.12 (0.58) (0.08) 11.15
Class A - 10/31/92(a) 10.00 0.51 0.15 (0.51) (0.04) 10.11
Class B - 12/31/94(b) 9.63 0.09 (0.11) (0.08) (0.01) 9.52
Class B - 10/31/94(a) 10.82 0.31 (1.19) (0.30) (0.01) 9.63
FLORIDA LIMITED TERM
Class A - 12/31/94(a) 10.00 0.18 (0.36) (0.18) -- 9.64
IOWA
Class A - 12/31/94(b) 9.26 0.17 (0.72) (0.15) -- 8.56
Class A - 8/31/94 10.00 0.49 (0.74) (0.49) -- 9.26
KANSAS
Class A - 12/31/94(b) 9.63 0.09 (0.13) (0.09) -- 9.50
Class A - 10/31/94 10.85 0.57 (1.21) (0.57) (0.01) 9.63
Class A - 10/31/93(a) 10.00 0.56 0.85 (0.56) -- 10.85
MINNESOTA TAX FREE
Class A - 12/31/94 12.85 0.63 (1.48) (0.61) (0.06)(g) 11.33
Class A - 12/31/93 12.21 0.64 0.87 (0.64) (0.23) 12.85
Class A - 12/31/92 12.07 0.70 0.23 (0.70) (0.09) 12.21
Class A - 12/31/91 11.67 0.75 0.49 (0.75) (0.09) 12.07
Class A - 12/31/90 11.68 0.77 0.02 (0.77) (0.03) 11.67
Class A - 12/31/89 11.48 0.80 0.22 (0.80) (0.02) 11.68
Class A - 12/31/88 11.16 0.80 0.32 (0.80) -- 11.48
Class A - 12/31/87 11.85 0.81 (0.66) (0.81) (0.03) 11.16
Class A - 12/31/86 11.12 0.86 0.82 (0.86) (0.09) 11.85
Class A - 12/31/85 10.21 0.93 0.91 (0.93) -- 11.12
Class C - 12/31/94(a) 11.96 0.34 (0.61) (0.32) (0.04) 11.33
MINNESOTA INSURED
Class A - 12/31/94 11.02 0.54 (1.39) (0.52) (0.04) 9.61
Class A - 12/31/93 10.27 0.54 0.84 (0.54) (0.09) 11.02
Class A - 12/31/92 10.07 0.59 0.25 (0.59) (0.05) 10.27
Class A - 12/31/91 9.65 0.60 0.48 (0.60) (0.06) 10.07
Class A - 12/31/90 9.64 0.61 0.02 (0.61) (0.01) 9.65
Class A - 12/31/89 9.48 0.63 0.20 (0.63) (0.04) 9.64
Class A - 12/31/88 9.19 0.67 0.29 (0.67) -- 9.48
Class A - 12/31/87(a) 9.51 0.46 (0.32) (0.46) -- 9.19
Class C - 12/31/94(a) 10.23 0.30 (0.62) (0.28) (0.02) 9.61
MINNESOTA LIMITED TERM
Class A - 12/31/94(b) 10.98 0.37 (0.48) (0.37) -- 10.50
Class A - 2/28/94(c) 11.16 0.08 (0.18) (0.08) -- 10.98
Class A - 12/31/93 10.83 0.47 0.37 (0.47) (0.04) 11.16
Class A - 12/31/92 10.69 0.51 0.18 (0.51) (0.04) 10.83
Class A - 12/31/91 10.32 0.55 0.37 (0.55) -- 10.69
Class A - 12/31/90 10.26 0.60 0.06 (0.60) -- 10.32
Class A - 12/31/89 10.21 0.59 0.05 (0.59) -- 10.26
Class A - 12/31/88 10.17 0.53 0.04 (0.53) -- 10.21
Class A - 12/31/87 10.43 0.55 (0.25) (0.55) (0.01) 10.17
Class A - 12/31/86 10.20 0.61 0.24 (0.61) (0.01) 10.43
Class A - 12/31/85(a) 10.00 0.12 0.20 (0.12) -- 10.20
Class C - 12/31/94(a) 10.74 0.24 (0.24) (0.24) -- 10.50
MISSOURI INSURED
Class A - 12/31/94(b) 9.37 0.10 (0.11) (0.09) -- 9.27
Class A - 10/31/94 10.82 0.55 (1.43) (0.54) (0.03) 9.37
Class A - 10/31/93(a) 10.00 0.55 0.89 (0.55) (0.07) 10.82
Class B - 12/31/94(b) 9.37 0.08 (0.10) (0.08) -- 9.27
Class B - 10/31/94(a) 10.50 0.33 (1.14) (0.32) -- 9.37
NEW MEXICO
Class A - 12/31/94(b) 9.77 0.11 (0.20) (0.09) -- 9.59
Class A - 10/31/94 10.92 0.56 (1.16) (0.55) -- 9.77
Class A - 10/31/93 10.00 0.57 0.98 (0.57) (0.06) 10.92
Class A - 10/31/92(a) 10.00 -- -- -- -- 10.00
Class B - 12/31/94(b) 9.77 0.09 (0.19) (0.08) -- 9.59
Class B - 10/31/94(a) 10.76 0.31 (1.00) (0.30) -- 9.77
NORTH DAKOTA
Class A - 12/31/94 11.07 0.56 (1.15) (0.53) (0.10)(i) 9.85
Class A - 12/31/93 10.59 0.58 0.58 (0.58) (0.10) 11.07
Class A - 12/31/92 10.34 0.62 0.34 (0.62) (0.09) 10.59
Class A - 12/31/91(a) 10.00 0.49 0.41 (0.49) (0.07) 10.34
Class B - 12/31/94(a) 10.31 0.30 (0.39) (0.27) (0.10)(i) 9.85
OREGON INSURED
Class A - 12/31/94(b) 9.00 0.09 (0.09) (0.08) -- 8.92
Class A - 10/31/94 10.24 0.50 (1.24) (0.50) -- 9.00
Class A - 10/31/93(a) 10.00 0.13 0.24 (0.13) -- 10.24
Class B - 12/31/94(b) 9.00 0.08 (0.09) (0.07) -- 8.92
Class B - 10/31/94(a) 10.00 0.27 (1.00) (0.27) -- 9.00
UTAH
Class A - 12/31/94(b) 9.94 0.10 (0.15) (0.09) -- 9.80
Class A - 10/31/94 11.07 0.60 (1.07) (0.60) (0.06) 9.94
Class A - 10/31/93 10.00 0.65 1.07 (0.65) -- 11.07
Class A - 10/31/92(a) 10.00 -- -- -- -- 10.00
WASHINGTON INSURED
Class A - 12/31/94(b) 9.37 0.09 (0.16) (0.09) -- 9.21
Class A - 10/31/94 10.67 0.55 (1.26) (0.57) (0.02) 9.37
Class A - 10/31/93(a) 10.00 0.15 0.67 (0.15) -- 10.67
WISCONSIN
Class A - 12/31/94(b) 9.28 0.16 (0.55) (0.15) -- 8.74
Class A - 8/31/94 10.00 0.49 (0.72) (0.49) -- 9.28
NATIONAL INSURED
Class A - 12/31/94 10.67 0.56 (1.34) (0.55) (0.02) 9.32
Class A - 12/31/93 10.14 0.60 0.60 (0.60) (0.07) 10.67
Class A - 12/31/92(a) 10.00 0.57 0.14 (0.57) -- 10.14
Class B - 12/31/94(a) 9.81 0.31 (0.50) (0.29) (0.01) 9.32
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Ratio of
Net Ratio of
Ratio of Investment Expenses to
Total Net Expenses Income Net Assets
Invest- Assets to to Portfolio Assuming No
ment End Average Average Turn- Voluntary
Return of Period Net Net over Waivers and
VOYAGEUR STATE FUNDS (d) (000s) Assets Assets Rate Reimbursement
- ------------------------------------------------------------------------------------
ARIZONA INSURED
<S> <C> <C> <C> <C> <C> <C>
Class A - 12/31/94 (7.41%) $231,736 0.72% 5.20% 25.18% 0.92%
Class A - 12/31/93 12.64 263,312 0.59 5.00 33.80 1.03
Class A - 12/31/92 9.86 124,120 0.35 5.60 40.29 1.16
Class A - 12/31/91(a) 9.98 38,322 --(f) 6.58(e) 177.66 1.24(e)
Class C - 12/31/94(a) (2.38) 326 1.50(e) 4.10(e) 25.18 1.71(e)
CALIFORNIA INSURED
Class A - 12/31/94(b) (0.84) 27,994 0.10(e) 6.30(e) 7.28 1.24(e)
Class A - 10/31/94 (8.97) 27,282 0.20 5.37 18.34 1.25
Class A - 10/31/93 17.29 12,509 -- 5.26 24.19 1.25
Class A - 10/31/92(a) 0.20 2,056 -- -- 7.31 --
Class B - 12/31/94(b) (0.92) 2,219 0.57(e) 5.54(e) 7.28 1.94(e)
Class B - 10/31/94 (7.93) 1,427 0.73(e) 4.82(e) 18.34 1.95(e)
10/31/94(a)
COLORADO TAX FREE
Class A - 12/31/94 (9.12) 354,138 0.66 5.35 69.32 0.72
Class A - 12/31/93 13.72 399,218 0.75 4.97 58.61 0.75
Class A - 12/31/92 10.42 202,165 0.80 5.59 69.72 0.80
Class A - 12/31/91 10.80 104,863 0.82 6.15 92.42 0.82
Class A - 12/31/90 6.81 53,987 1.00 6.38 69.64 1.00
Class A - 12/31/89 10.73 34,625 1.00 6.37 33.06 1.00
Class A - 12/31/88 10.57 19,767 1.00 6.77 56.31 1.00
Class A - 12/31/87(a) 3.27 5,546 1.00(e) 6.49(e) 92.80 1.00
Class C - 12/31/94(a) (3.75) 465 1.80(e) 4.23(e) 69.32 1.81(e)
FLORIDA INSURED
Class A - 12/31/94(b) (0.11) 240,228 0.20(e) 6.24(e) 2.51 1.06(e)
Class A - 10/31/94 (8.38) 259,702 0.44 5.24 49.12 0.96
Class A - 10/31/93 17.27 289,682 0.18 5.18 53.51 1.12
Class A - 10/31/92(a) 6.74 50,666 -- 5.38(e) 208.24 1.25(e)
Class B - 12/31/94(b) (0.03) 1,477 0.59(e) 5.68(e) 2.51 1.81(e)
Class B - 10/31/94(a) (8.10) 1,135 1.00(e) 4.63(e) 49.12 1.28(e)
FLORIDA LIMITED TERM
Class A - 12/31/94(a) (1.55) 592 -- 4.19(e) -- 1.25(e)
IOWA
Class A - 12/31/94(b) (5.86) 32,373 0.11(e) 5.71(e) 7.18 1.25(e)
Class A - 8/31/94 (2.67) 38,669 0.12 4.89 119.35 1.25
KANSAS
Class A - 12/31/94(b) (0.38) 7,355 0.01(e) 5.88(e) -- 1.25(e)
Class A - 10/31/94 (6.10) 6,469 0.06 5.30 38.96 1.25
Class A - 10/31/93(a) 14.49 2,057 -- 5.26(e) 28.87 1.25(e)
MINNESOTA TAX FREE
Class A - 12/31/94 (6.73) 406,497 0.90 5.29 24.26 0.90
Class A - 12/31/93 12.70 458,145 1.02 5.02 31.77 1.02
Class A - 12/31/92 7.97 331,314 0.96 5.73 23.60 1.04
Class A - 12/31/91 11.04 251,594 0.83 6.44 26.40 0.98
Class A - 12/31/90 7.03 197,629 0.82 6.68 20.54 1.02
Class A - 12/31/89 9.11 172,476 0.77 6.85 22.84 0.77
Class A - 12/31/88 10.31 150,031 0.77 7.01 9.56 0.77
Class A - 12/31/87 1.38 124,082 0.78 7.10 13.84 0.78
Class A - 12/31/86 15.68 106,563 0.85 7.45 11.40 0.85
Class A - 12/31/85 18.76 48,755 1.00 8.57 31.00 1.00
Class C - 12/31/94(a) (2.30) 1,061 1.72(e) 4.56(e) 24.26 1.72(e)
MINNESOTA INSURED
Class A - 12/31/94 (7.88) 284,132 0.61 5.29 24.75 0.94
Class A - 12/31/93 13.80 311,187 0.70 4.93 18.25 1.02
Class A - 12/31/92 8.57 162,728 0.37 5.66 14.11 1.06
Class A - 12/31/91 11.59 68,250 0.78 6.13 43.68 1.16
Class A - 12/31/90 6.63 29,394 0.74 6.30 15.12 1.25
Class A - 12/31/89 8.96 8,217 0.78 6.55 28.34 1.00
Class A - 12/31/88 10.70 4,707 0.86 7.08 68.09 1.00
Class A - 12/31/87(a) 1.48 2,759 0.76(e) 7.93(e) 20.66 1.00(e)
Class C - 12/31/94(a) (3.14) 1,525 1.36(e) 4.68(e) 24.75 1.68(e)
MINNESOTA LIMITED TERM
Class A - 12/31/94(b) (0.98) 84,168 0.92(e) 4.20(e) 42.05 0.92(e)
Class A - 2/28/94(c) (0.95) 78,823 0.88(e) 4.02(e) 0.01 0.88(e)
Class A - 12/31/93 7.88 75,374 0.99 4.18 19.13 0.99(e)
Class A - 12/31/92 6.62 48,210 1.09 4.71 25.56 1.09
Class A - 12/31/91 9.24 27,268 1.23 5.35 43.39 1.23
Class A - 12/31/90 6.59 22,526 1.18 5.81 51.47 1.18
Class A - 12/31/89 6.43 21,884 0.84 5.74 68.23 0.84
Class A - 12/31/88 6.02 24,157 0.84 5.15 16.13 0.84
Class A - 12/31/87 2.97 29,063 0.84 5.14 24.79 0.84
Class A - 12/31/86 8.58 20,967 1.00 5.81 30.10 1.00
Class A - 12/31/85(a) 3.24 1,787 1.00(e) 7.04(e) 6.20 1.00(e)
Class C - 12/31/94(a) (0.03) 341 1.71(e) 3.35(e) 42.05 1.71(e)
MISSOURI INSURED
Class A - 12/31/94(b) (0.07) 37,790 0.11(e) 6.00(e) 8.85 1.12(e)
Class A - 10/31/94 (8.28) 37,384 0.15 5.39 32.02 1.13
Class A - 10/31/93(a) 14.74 30,270 -- 4.82(e) 76.51 1.25(e)
Class B - 12/31/94(b) (0.14) 2,742 0.60(e) 5.32(e) 8.85 1.84(e)
Class B - 10/31/94(a) (7.75) 1,701 0.49(e) 4.89(e) 32.02 1.83(e)
NEW MEXICO
Class A - 12/31/94(b) (0.90) 19,706 0.06(e) 6.38(e) 2.21 1.25(e)
Class A - 10/31/94 (5.56) 23,096 0.29 5.26 22.94 1.16
Class A - 10/31/93 15.77 17,302 -- 5.10 30.76 1.25
Class A - 10/31/92(a) -- 361 -- -- -- --
Class B - 12/31/94(b) (0.98) 272 0.75(e) 5.60(e) 2.21 2.00(e)
Class B - 10/31/94(a) (6.40) 264 0.98(e) 4.57(e) 22.94 1.86(e)
NORTH DAKOTA
Class A - 12/31/94 (5.47) 33,829 0.46 5.36 32.60 1.14
Class A - 12/31/93 11.20 34,880 0.59 5.11 27.39 1.25
Class A - 12/31/92 9.70 15,846 0.40 5.78 26.27 1.25
Class A - 12/31/91 9.23 4,914 0.16(e) 6.43(e) 126.37 1.25(e)
Class B - 12/31/94(a) (0.77) 144 0.99(e) 4.97(e) 32.60 1.89(e)
OREGON INSURED
Class A - 12/31/94(b) 0.06 14,650 0.05(e) 5.79(e) -- 1.25(e)
Class A - 10/31/94 (7.35) 14,086 0.03 5.17 48.98 1.25
Class A - 10/31/93(a) 3.64 4,609 -- 4.61(e) 11.08 1.25(e)
Class B - 12/31/94(b) 0.03 1,303 0.60(e) 5.19(e -- 2.00(e)
Class B - 10/31/94(a) (7.21) 1,146 0.75(e) 4.43 48.98 2.00(e)
UTAH
Class A - 12/31/94 (0.41) 3,728 0.11(e) 6.38(e) -- 1.14(e)
Class A - 10/31/94 (4.50) 4,054 0.10 5.64 2.77 1.25
Class A - 10/31/93 17.54 3,913 -- 5.65 44.54 1.25
Class A - 10/31/92(a) -- 19 -- -- -- --
WASHINGTON INSURED
Class A - 12/31/94(b) (0.69) 2,049 0.10(e) 6.18(e) -- 1.25(e)
Class A - 10/31/94 (6.85) 2,118 0.14 5.44 -- 1.25
Class A - 10/31/93(a) 8.05 2,108 -- 5.50(e) 45.14 1.25(e)
WISCONSIN
Class A - 12/31/94(b) (4.12) 20,167 0.08(e) 5.54(e) 20.52 1.25(e)
Class A - 8/31/94 (2.40) 16,093 0.04 4.89 86.26 1.25
NATIONAL INSURED
Class A - 12/31/94 (7.45) 35,305 0.10 5.71 31.25 1.25
Class A - 12/31/93 12.10 25,315 -- 5.29 77.79 1.25
Class A - 12/31/92(a) 7.43 2,919 --(f) 5.85(e) 114.92 1.25(e)
Class B - 12/31/94(a) (1.94) 478 0.48(e) 5.37(e) 31.25 1.99(e)
- ------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS
(a) The information is for the period from each Fund's commencement of
operations to the Fund's year end. The classes of each Voyageur Fund commenced
operations on the following dates:
<TABLE>
<CAPTION>
ARIZONA INSURED TAX FREE FUND MINNESOTA LIMITED TERM TAX FREE FUND
<S> <C> <C> <C>
Class A April 1, 1991 Class A October 27, 1985
Class C April 30, 1994 Class C April 30, 1994
CALIFORNIA INSURED TAX FREE FUND MISSOURI INSURED TAX FREE FUND
Class A October 15, 1992 Class A November 2, 1992
Class B March 1, 1994 Class B March 1, 1994
COLORADO TAX FREE FUND NEW MEXICO TAX FREE FUND
Class A April 23, 1987 Class A October 5, 1992
Class C April 30, 1994 Class B March 1, 1994
FLORIDA INSURED TAX FREE FUND NATIONAL INSURED TAX FREE FUND
Class A January 1, 1992 Class A January 10, 1992
Class B March 1, 1994 Class B April 30, 1994
FLORIDA LIMITED TERM TAX May 1, 1994
FREE FUND NORTH DAKOTA TAX FREE FUND
KANSAS TAX FREE FUND November 30, 1992 Class A April 1, 1991
MINNESOTA TAX FREE FUND Class B April 30, 1994
Class C April 30, 1994 OREGON INSURED TAX FREE FUND
MINNESOTA INSURED FUND Class A August 1, 1993
Class A May 1, 1987 Class B March 1, 1994
Class C April 30, 1994 UTAH TAX FREE FUND October 5, 1992
WASHINGTON INSURED TAX August 1, 1993
FREE FUND
</TABLE>
(b) Effective December 31, 1994, the fund changed its fiscal year end to
December 31.
(c) Effective February 28, 1994, the fund changed its fiscal year end to
February 28.
(d) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(e) Adjusted to an annual basis.
(f) The Adviser also paid $6,364 beyond total fees and expenses for National
Insured Tax Free Fund for the period ended December 31, 1992 and $25,631
for Arizona Insured Tax Free Fund for the period ended December 31, 1991.
(g) (.01) consists of distribitions in excess of net realized gains.
(h) (.06) and (.04) consists of distributions in excess of net realized gains
for Class A and Class C shares, respectively.
(i) (.02) and (.02) consists of distributions in excess of net realized gains
for Class A and Class B shares, respectively.
THE FUNDS
- --------------------------------------------------------------------------------
E ach of the Funds is a separate series of one of the parent corporate or trust
entities described herein under the heading "General Information." The series
which are diversified, as such term is defined in the Investment Company Act of
1940, as amended (the "1940 Act") are designated as such by a footnote on the
cover page of this Prospectus. All other series are non-diversified. Each
non-diversified Fund will be able to invest, subject to certain federal tax
requirements, a relatively higher percentage of its assets in the securities of
a limited number of issuers which may result in such Fund's securities being
more susceptible to any single economic, political or regulatory occurrence than
the securities of a diversified Fund. The investment objectives and policies of
each Fund are described below. Except where noted, an investment objective or
policy description applies to all Funds.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of each Limited Term Tax Free Fund is to provide
investors with preservation of capital and, secondarily, current income exempt
from federal income tax and (except for the National Limited Term Tax Free Fund)
the personal income tax, if any, of the Fund's particular state, by maintaining
a weighted average portfolio maturity of 10 years or less. The investment
objective of each Tax Free Fund and Insured Tax Free Fund is to seek as high a
level of current income exempt from federal income tax and (except for National
Tax Free Fund and National Insured Tax Free Fund) from the personal income tax,
if any, of the Fund's particular state, as is consistent with preservation of
capital. The weighted average maturity of the investment portfolio of each Tax
Free Fund and Insured Tax Free Fund is expected to be approximately 15 to 25
years. Each of Florida Limited Term Tax Free Fund, Florida Tax Free Fund and
Florida Insured Tax Free Fund will seek to select investments that will enable
its shares to be exempt from the Florida intangible personal property tax.
During times of adverse market conditions when a defensive investment
posture is warranted, each Fund may temporarily select investments without
regard to the foregoing policy. There are risks in any investment program, and
there is no assurance that a Fund's investment objective will be achieved. The
value of each Fund's shares will fluctuate with changes in the market value of
its investments. Each Fund's investment objective and certain other investment
policies explicitly designated herein as such are fundamental, which means that
they cannot be changed without the vote of its respective shareholders as
provided in the 1940 Act.
Each Fund anticipates that, in normal market conditions, it will invest
substantially all of its assets in Tax Exempt Obligations (as defined below),
the interest on which is exempt from federal income tax and (for Funds other
than the three "national" funds) from the personal income tax, if any, of its
respective state. Up to 20% of the securities owned by each such Fund may
generate interest that is an item of tax preference for purposes of federal and
state alternative minimum tax ("AMT"), except that the Minnesota Insured Fund
may invest without limit in such securities and the Minnesota Tax Free Fund may
not invest in such AMT securities.
TAX FREE AND LIMITED TERM TAX FREE FUNDS
Each Tax Free Fund and each Limited Term Tax Free Fund may invest without
limitation in securities rated "investment grade," i.e., within the four highest
investment grades, at the time of investment by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Services ("S&P") or, if unrated, judged
by Voyageur to be of comparable quality. Bonds included in the lowest investment
grade rating category involve certain speculative characteristics, and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case for
higher rated bonds. Up to 20% of the Tax Exempt Obligations purchased by the
Funds may be rated lower than investment grade; however, all bonds must be rated
"B" or better by Moody's or S&P (or, if unrated, judged by Voyageur to be of
comparable quality). Such bonds are often referred to as "junk" bonds or "high
yield" bonds. Bonds rated below "BBB" have a greater vulnerability to default
than higher grade bonds. See "Risks and Special Investment Considerations --
General" for a discussion of the risks of investing in lower grade Tax Exempt
Obligations. A description of the ratings assigned by Moody's and S&P is set
forth in Appendix A to the Statement of Additional Information.
The following table sets forth the weighted average percentage of total
investments with respect to the portfolios of certain Funds during the year
ended December 31, 1994.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
MOODY'S RATING Aaa Aa A Baa Ba B Unrated
(S&P EQUIVALENT) (AAA) (AA) (A) (BBB) (BB) (B) Bonds Total
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VOYAGEUR TAX FREE FUNDS
Colorado 49% 19% 20% 11% 1% -- -- 100%
Iowa 16% 1% 83% -- -- -- -- 100%
Kansas 61% 33% 6% -- -- -- -- 100%
Minnesota 51% 19% 22% 3% -- -- 5% 100%
New Mexico 53% 24% 13% 9% -- -- 1% 100%
North Dakota 30% 19% 44% 6% -- -- 1% 100%
Utah 76% 12% 12% -- -- -- -- 100%
Wisconsin 38% 14% 35% 2% -- -- 11% 100%
VOYAGEUR LIMITED TERM
TAX FREE FUNDS
Florida 87% 4% 9% -- -- -- -- 100%
Minnesota 61% 18% 15% 3% -- -- 3% 100%
- ----------------------------------------------------------------------------------------------
</TABLE>
INSURED TAX FREE FUNDS
The Tax Exempt Obligations in each Insured Tax Free Fund's portfolio will
consist of (a) obligations that at all times are fully insured as to scheduled
payments of principal and interest ("insured securities") and (b) "escrow
secured" or "defeased" bonds. Insured securities may consist of bonds covered by
Primary Insurance, Secondary Market Insurance or Portfolio Insurance (as defined
below). All insurers must have a triple A-rated claims paying ability (as
assigned by either or both of Moody's and S&P) at the time of investment.
Securities that are covered by either Primary or Secondary Market Insurance will
carry a triple-A rating at the time of investment by the Fund. However,
securities that are not covered by either Primary or Secondary Market Insurance
at the time of investment (or that are not "escrow secured" or "defeased") must
be covered by Portfolio Insurance immediately after their acquisition. Voyageur
anticipates that such securities, at the time of investment, generally will be
rated investment grade. However, all securities in each Insured Tax Free Fund's
portfolio, after application of insurance, will be rated Aaa by Moody's and/or
AAA by S&P at the time of investment. Pending the investment or reinvestment of
its assets in longer-term Tax Exempt Obligations, each Insured Tax Free Fund may
invest up to 35% of its net assets in short-term tax exempt instruments, without
obtaining insurance, provided such instruments carry an A-l+ or SP-l+ short-term
rating or AAA or Aaa long-term rating by S&P or Moody's, and may invest up to
10% of its net assets in securities of tax exempt money market mutual funds. The
"insured securities" in each Insured Tax Free Fund's investment portfolio are
insured as to the scheduled payment of all installments of principal and
interest as they fall due. The purpose of such insurance is to minimize credit
risks to such Funds and their shareholders associated with defaults in Tax
Exempt Obligations owned by such Funds. Such insurance does not insure against
market risk and therefore does not guarantee the market value of the securities
in an Insured Tax Free Fund's investment portfolio or the value of any Insured
Tax Free Funds' shares.
Certain insurance companies will issue policies guaranteeing the timely
payment of principal of, and interest on, particular Tax Exempt Obligations or
on a portfolio of Tax Exempt Obligations. Insurance may be purchased by the
issuer of a Tax Exempt Obligation or by a third party at the time of issuance of
the Tax Exempt Obligation ("Primary Insurance") or by the Fund or a third party
subsequent to the original issuance of a Tax Exempt Obligation ("Secondary
Market Insurance"). In each case, a single premium is paid to the insurer by the
party purchasing the insurance when the insurance is obtained. Primary Insurance
and Secondary Market Insurance policies are non-cancellable and remain in effect
for so long as the insured Tax Exempt Obligation is outstanding and the insurer
is in business.
The Insured Tax Free Funds may also purchase insurance covering certain Tax
Exempt Obligations which the Insured Tax Free Funds intend to purchase for their
portfolios or which the Insured Tax Free Funds already own ("Portfolio
Insurance"). Portfolio Insurance policies guarantee the timely payment of
principal of, and interest on, covered Tax Exempt Obligations only while they
are owned by the Insured Tax Free Funds. Such policies are non-cancellable and
remain in effect until the Fund terminates, provided the Fund pays the
applicable insurance premiums and the insurer remains in business. Tax Exempt
Obligations in the Insured Tax Free Funds' portfolios covered by a Portfolio
Insurance policy will not be covered by such policy after they are sold by a
Fund unless the Fund elects to obtain some form of Secondary Market Insurance
for them at the time of sale. The Insured Tax Free Funds would obtain such
Secondary Market Insurance only if, in Voyageur's view, it would be economically
advantageous for the Funds to do so. Further information about insurance
(including its limitations) is set forth in the Statement of Additional
Information.
ALL FUNDS
The foregoing policies as to credit quality of portfolio investments will apply
only at the time of the purchase of a security, and the Funds are not required
to dispose of securities in the event that Moody's or S&P downgrades its
assessment of the credit characteristics of a particular issuer or, in the case
of unrated securities, in the event Voyageur reassesses its view with respect to
the credit quality of the issuer thereof. In no event, however, will more than
5% of each Fund's total assets consist of securities that have been downgraded
to a rating lower than the minimum rating in which each Fund is permitted to
invest or, in the case of unrated securities, that Voyageur has determined to
have a quality lower than such minimum rating. With respect to the Insured Tax
Free Funds, up to 35% of each such Fund's total assets may consist of securities
that have been downgraded to AA or Aa subsequent to initial investment in such
securities by an Insured Tax Free Fund.
Each Fund may invest without limitation in short term Tax Exempt
Obligations or in taxable obligations on a temporary, defensive basis due to
market conditions or, with respect to taxable obligations, for liquidity
purposes. Such taxable obligations, whether purchased for liquidity purposes or
on a temporary, defensive basis, may include: obligations of the U.S.
Government, its agencies or instrumentalities; other debt securities rated
within the three highest grades by either Moody's or S&P; commercial paper rated
in the highest grade by either of such rating services (Prime-1 or A-1,
respectively); certificates of deposit and bankers' acceptances of domestic
banks which have capital, surplus and undivided profits of over $100 million;
high-grade taxable municipal bonds; and repurchase agreements with respect to
any of the foregoing investments. Each Fund also may hold its assets in cash and
in securities of tax exempt money market mutual funds.
TAX EXEMPT OBLIGATIONS
As used in this Prospectus, the term "Tax Exempt Obligations" refers to debt
obligations issued by or on behalf of a state or territory or its agencies,
instrumentalities, municipalities and political subdivisions, the interest
payable on which is, in the opinion of bond counsel, excludable from gross
income for purposes of federal income tax and (with respect to Funds other than
the National Fund, National Insured Fund or National Limited Term Fund) from the
personal income tax, if any, of the state specified in the Fund's name. The term
"Tax Exempt Obligations" also includes Derivative Tax Exempt Obligations as
defined below. In certain instances the interest on Tax Exempt Obligations may
be an item of tax preference includable in alternative minimum taxable income
depending upon the shareholder's tax status. See "Distributions to Shareholders
and Taxes -- Taxes."
Tax Exempt Obligations are primarily debt obligations issued to obtain
funds for various public purposes such as constructing public facilities and
making loans to public institutions. The two principal classifications of Tax
Exempt Obligations are general obligation bonds and revenue bonds. General
obligation bonds are generally secured by the full faith and credit of an issuer
possessing general taxing power and are payable from the issuer's general
unrestricted revenues and not from any particular fund or revenue source.
Revenue bonds are payable only from the revenues derived from a particular
source or facility, such as a tax on particular property or revenues derived
from, for example, a municipal water or sewer utility or an airport. Tax Exempt
Obligations that benefit private parties in a manner different than members of
the public generally (so-called private activity bonds or industrial development
bonds) are in most cases revenue bonds, payable solely from specific revenues of
the project to be financed. The credit quality of private activity bonds is
usually directly related to the creditworthiness of the user of the facilities
(or the creditworthiness of a third-party guarantor or other credit enhancement
participant, if any).
Within these principal classifications of Tax Exempt Obligations, there is
a variety of types of municipal securities. Certain Tax Exempt Obligations may
carry variable or floating rates of interest whereby the rate of interest is not
fixed but varies with changes in specified market rates or indexes, such as a
bank prime rate or a tax exempt money market index. Accordingly, the yield on
such obligations can be expected to fluctuate with changes in prevailing
interest rates. Other Tax Exempt Obligations are zero coupon securities, which
are debt obligations which do not entitle the holder to any periodic interest
payments prior to maturity and are issued and traded at a discount from their
face amounts. The market prices of zero coupon securities are generally more
volatile than the market prices of securities that pay interest periodically.
Tax Exempt Obligations also include state or municipal leases and
participation interests therein. The Funds may invest in these types of
obligation without limit. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities such as fire, sanitation or police vehicles or telecommunications
equipment, buildings or other capital assets. Municipal lease obligations,
except in certain circumstances, are considered illiquid by the staff of the
Securities and Exchange Commission. Municipal lease obligations held by a Fund
will be treated as illiquid unless they are determined to be liquid pursuant to
guidelines established by the Fund's Board of Directors. Under these guidelines,
Voyageur will consider factors including, but not limited to (1) whether the
lease can be cancelled, (2) what assurance there is that the assets represented
by the lease can be sold, (3) the municipality's general credit strength (e.g.,
its debt, administrative, economic and financial characteristics), (4) the
likelihood that the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to the
operations of the municipality (e.g., the potential for an "event of
non-appropriation"), and (5) the legal recourse in the event of failure to
appropriate. Additionally, the lack of an established trading market for
municipal lease obligations may make the determination of fair market value more
difficult. See "Investment Policies and Restrictions -- Tax Exempt Obligations"
in the Statement of Additional Information.
Each Fund may also acquire Derivative Tax Exempt Obligations, which are
custodial receipts or certificates underwritten by securities dealers or banks
that evidence ownership of future interest payments, principal payments or both
on certain Tax Exempt Obligations. The underwriter of these certificates or
receipts typically purchases and deposits the securities in an irrevocable trust
or custodial account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured coupon payments
and the final principal payment on the obligations. Although under the terms of
a custodial receipt, a Fund typically would be authorized to assert its rights
directly against the issuer of the underlying obligation, a Fund could be
required to assert through the custodian bank those rights as may exist against
the underlying issuer. Thus, in the event the underlying issuer fails to pay
principal and/or interest when due, a Fund may be subject to delays, expenses
and risks that are greater than those that would have been involved if a Fund
had purchased a direct obligation of the issuer.
In addition, in the event that the trust or custodial account in which
the underlying security had been deposited is determined to be an association
taxable as a corporation, instead of a non taxable entity, it would be subject
to state income tax (but not federal income tax) on the income it earned on the
underlying security, and the yield on the security paid to such Fund and its
shareholders would be reduced by the amount of taxes paid. Furthermore, amounts
paid by the trust or custodial account to a Fund would lose their tax exempt
character and become taxable, for federal and state purposes, in the hands of
the Fund and its shareholders. However, each Fund will only invest in custodial
receipts which are accompanied by a tax opinion stating that interest payable on
the receipts is tax exempt. If a Fund invests in custodial receipts, it is
possible that a portion of the discount at which the Fund purchases the receipts
might have to be accrued as taxable income during the period that the Fund holds
the receipts.
Investments in Derivative Tax Exempt Obligations, when combined with
investments in below investment grade rated securities, will not exceed 20% of
each Fund's total assets. For a discussion of certain risks involved in
investments in Derivative Tax Exempt Obligations, see "Risks and Special
Investment Considerations -- General."
MISCELLANEOUS INVESTMENT PRACTICES
FORWARD COMMITMENTS
New issues of Tax Exempt Obligations and other securities are often purchased on
a "when issued" or delayed delivery basis, with delivery and payment for the
securities normally taking place 15 to 45 days after the date of the
transaction. The payment obligation and the interest rate that will be received
on the securities are each fixed at the time the buyer enters into the
commitment. Each Fund may enter into such "forward commitments" if it holds, and
maintains until the settlement date in a segregated account, cash or high-grade
liquid debt obligations in an amount sufficient to meet the purchase price.
There is no percentage limitation on each Fund's total assets which may be
invested in forward commitments. Tax Exempt Obligations purchased on a
when-issued basis and the securities held in a Fund's portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Tax Exempt Obligations
purchased on a when-issued basis may expose a Fund to risk because they may
experience such fluctuations prior to their actual delivery. Purchasing Tax
Exempt Obligations on a when-issued basis can involve the additional risk that
the yield available in the market when the delivery takes place actually may be
higher than that obtained in the transaction itself. Any significant commitment
by a Fund to the purchase of securities on a when-issued basis may increase the
volatility of the Fund's net asset value. Although each Fund will generally
enter into forward commitments with the intention of acquiring securities for
its portfolio, it may dispose of a commitment prior to settlement if the Fund's
investment manager deems it appropriate to do so. The Funds may realize
short-term profits or losses upon the sale of forward commitments.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with respect to not more than 10%
of its total assets (taken at current value), except when investing for
defensive purposes during times of adverse market conditions. Each Fund may
enter into repurchase agreements with respect to any securities which it may
acquire consistent with its investment policies and restrictions.
A repurchase agreement involves the purchase by a Fund of securities with
the condition that, after a stated period of time, the original seller (a member
bank of the Federal Reserve System or a recognized securities dealer) will buy
back the same securities ("collateral") at a predetermined price or yield.
Repurchase agreements involve certain risks not associated with direct
investments in securities. In the event the original seller defaults on its
obligation to repurchase, as a result of its bankruptcy or otherwise, the Fund
will seek to sell the collateral, which action could involve costs or delays. In
such case, the Fund's ability to dispose of the collateral to recover such
investment may be restricted or delayed. While collateral will at all times be
maintained in an amount equal to the repurchase price under the agreement
(including accrued interest due thereunder), to the extent proceeds from the
sale of collateral were less than the repurchase price, a Fund could suffer a
loss. See "Investment Policies and Restrictions -- Taxable Obligations" in the
Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS
Certain Funds (Arizona Limited Term Tax Free Fund, Arizona Tax Free Fund,
California Limited Term Tax Free Fund, California Tax Free Fund, Colorado
Limited Term Tax Free Fund, Colorado Insured Tax Free Fund, Florida Limited Term
Tax Free Fund, Florida Tax Free Fund, Idaho Tax Free Fund, National Limited Term
Tax Free Fund and National Tax Free Fund) may engage in "reverse repurchase
agreements" with banks and securities dealers with respect to not more than 10%
of its total assets. Reverse repurchase agreements are ordinary repurchase
agreements in which the Fund is the seller of, rather than the investor in,
securities and agrees to repurchase them at an agreed upon time and price. Use
of a reverse repurchase agreement may be preferable to a regular sale and later
repurchase of the securities because it avoids certain market risks and
transaction costs. Because certain of the incidents of ownership of the security
are retained by the Fund, reverse repurchase agreements are considered a form of
borrowing by the Fund from the buyer, collateralized by the security. At the
time a Fund enters into a reverse repurchase agreement, cash, U. S. Government
securities or other liquid high grade debt obligations having a value sufficient
to make payments for the securities to be repurchased will be segregated, and
will be marked to market daily and maintained throughout the period of the
obligation. Reverse repurchase agreements may be used as a means of borrowing
for investment purposes subject to the 10% limitation set forth above. This
speculative technique is referred to as leveraging. Leveraging may exaggerate
the effect on net asset value of any increase or decrease in the market value of
the Fund's portfolio. Money borrowed for leveraging will be subject to interest
costs which may or may not be recovered by income from or appreciation of the
securities purchased. Because the Funds do not currently intend to utilize
reverse repurchase agreements in excess of 10% of total assets, the Funds
believe the risks of leveraging due to use of reverse repurchase agreements to
principal are reduced. Voyageur believes that the limited use of leverage may
facilitate the Fund's ability to provide current income without adversely
affecting the Fund's ability to preserve capital.
OPTIONS AND FUTURES
Each Fund may utilize put and call transactions and certain Funds (see "Futures
Contracts and Options on Futures Contracts" below) may utilize futures
transactions to hedge against market risk and facilitate portfolio management.
See "Investment Policies and Restrictions -- Options and Futures Transactions"
in the Statement of Additional Information. Options and futures may be used to
attempt to protect against possible declines in the market value of a Fund's
portfolio resulting from downward trends in the debt securities markets
(generally due to a rise in interest rates), to protect a Fund's unrealized
gains in the value of its portfolio securities, to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of a Fund's portfolio or to establish a position in the securities markets as a
temporary substitute for purchasing particular securities. The use of options
and futures is a function of market conditions. Other transactions may be used
by the Funds in the future for hedging purposes as they are developed to the
extent deemed appropriate by the Board.
OPTIONS ON SECURITIES
Each Fund may write (i.e., sell) covered put and call options and purchase put
and call options on the securities in which it may invest and on indices of
securities in which it may invest, to the extent such put and call options are
available.
A put option gives the buyer of such option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option on
or before a fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a fixed date, at
a predetermined price.
In purchasing a call option, a Fund would be in a position to realize a
gain if, during the option period, the price of the security increased by an
amount in excess of the premium paid. It would realize a loss if the price of
the security declined or remained the same or did not increase during the period
by more than the amount of the premium. In purchasing a put option, a Fund would
be in a position to realize a gain if, during the option period, the price of
the security declined by an amount in excess of the premium paid. It would
realize a loss if the price of the security increased or remained the same or
did not decrease during that period by more than the amount of the premium. If a
put or call option purchased by a Fund were permitted to expire without being
sold or exercised, its premium would be lost by the Fund.
If a put option written by a Fund were exercised, the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by a Fund were exercised, the Fund would be obligated to sell the
underlying security at the exercise price. The risk involved in writing a put
option is that there could be a decrease in the market value of the underlying
security caused by rising interest rates or other factors. If this occurred, the
option could be exercised and the underlying security would then be sold to the
Fund at a higher price than its current market value. The risk involved in
writing a call option is that there could be an increase in the market value of
the underlying security caused by declining interest rates or other factors. If
this occurred, the option could be exercised and the underlying security would
then be sold by the Fund at a lower price than its current market value. These
risks could be reduced by entering into a closing transaction as described in
Appendix B to the Statement of Additional Information. The Fund retains the
premium received from writing a put or call option whether or not the option is
exercised.
Over-the-counter options are purchased or written by a Fund in privately
negotiated transactions. Such options are illiquid, and it may not be possible
for a Fund to dispose of an option it has purchased or terminate its obligations
under an option it has written at a time when Voyageur believes it would be
advantageous to do so. Over the counter options are subject to each Fund's 15%
illiquid investment limitation. See Appendix B to the Statement of Additional
Information for a further discussion of the general characteristics and risks of
options.
Participation in the options market involves investment risks and
transaction costs to which the Funds would not be subject absent the use of this
strategy. If Voyageur's predictions of movements in the direction of the
securities and interest rate markets are inaccurate, the adverse consequences to
a Fund may leave the Fund in a worse position than if such strategy was not
used. Risks inherent in the use of options include (1) dependence on Voyageur's
ability to predict correctly movements in the direction of interest rates and
securities prices; (2) imperfect correlation between the price of options and
movements in the prices of the securities being hedged; (3) the fact that the
skills needed to use these strategies are different from those needed to select
portfolio securities; (4) the possible absence of a liquid secondary market for
any particular instrument at any time; and (5) the possible need to defer
closing out certain hedged positions to avoid adverse tax consequences. See
"Investment Policies and Restrictions -- Risks of Transactions in Futures
Contracts and Options" in the Statement of Additional Information for further
discussion and see Appendix B for a discussion of closing transactions and other
risks.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Certain Funds (Arizona Limited Term Tax Free Fund, Arizona Tax Free Fund,
California Limited Term Tax Free Fund, California Tax Free Fund, Colorado
Limited Term Tax Free Fund, Colorado Insured Tax Free Fund, Florida Limited Term
Tax Free Fund, Florida Tax Free Fund, Idaho Tax Free Fund, National Limited Term
Tax Free Fund and National Tax Free Fund) may enter into contracts for the
purchase or sale for future delivery of fixed income securities or contracts
based on financial indices including any index of securities in which the Fund
may invest ("futures contracts") and may purchase and write put and call options
to buy or sell futures contracts ("options on futures contracts"). A "sale" of a
futures contract means the acquisition of a contractual obligation to deliver
the securities called for by the contract at a specified price on a specified
date. The purchaser of a futures contract on an index agrees to take or make
delivery of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. Options on futures contracts to be written or purchased by the Fund will
be traded on exchanges or over the counter. The successful use of such
instruments draws upon Voyageur's experience with respect to such instruments
and usually depends upon Voyageur's ability to forecast interest rate movements
correctly. Should interest rates move in an unexpected manner, the Fund may not
achieve the anticipated benefits of futures contracts or options on futures
contracts or may realize losses and would thus be in a worse position than if
such strategies had not been used. In addition, the correlation between
movements in the price of futures contracts or options on futures contracts and
movements in the prices of the securities hedged or used for cover will not be
perfect.
A Fund's use of financial futures and options thereon will in all cases be
consistent with applicable regulatory requirements. To the extent required to
comply with applicable Securities and Exchange Commission releases and staff
positions, when purchasing a futures contract or writing a put option, the Fund
will maintain in a segregated account cash, U. S. Government securities or other
liquid high grade debt securities equal to the value of such contracts, less any
margin on deposit. In addition, the rules and regulations of the Commodity
Futures Trading Commission currently require that, in order to avoid "commodity
pool operator" status, the Fund must use futures and options positions (a) for
"bona fide hedging purposes" (as defined in the regulations) or (b) for other
purposes so long as aggregate initial margins and premiums required in
connection with non hedging positions do not exceed 5% of the liquidation value
of the Fund's portfolio. There are no other numerical limits on the Fund's use
of futures contracts and options on futures contracts. For a discussion of the
tax treatment of futures contracts and options on futures contracts, see "Taxes"
in the Statement of Additional Information. For a further discussion of the
general characteristics and risks of futures, see Appendix B to the Statement of
Additional Information.
CONCENTRATION POLICY
Although each Fund may invest 25% or more of its total assets in revenue bonds,
as a fundamental policy, no Fund will invest 25% or more of its total assets in
revenue bonds payable only from revenues derived from facilities or projects
within a single industry, except that the Funds may invest without limitation,
in circumstances in which other appropriate available investments may be in
limited supply, in housing, health care, and/or utility obligations. In
addition, Arizona Limited Term Tax Free Fund, Arizona Tax Free Fund, California
Limited Term Tax Free Fund, California Tax Free Fund, Colorado Limited Term Tax
Free Fund, Colorado Insured Tax Free Fund, Florida Limited Term Tax Free Fund,
Florida Tax Free Fund, Idaho Tax Free Fund, National Limited Term Tax Free Fund
and National Tax Free Fund may invest in such circumstances in transportation,
education and/or industrial obligations. In such circumstances, economic,
business, political and other changes affecting one bond might also affect other
bonds in the same segment, thereby potentially increasing market or credit risk.
For a discussion of these segments of the municipal bond market, see "Investment
Policies and Restrictions -- Concentration Policy" in the Statement of
Additional Information.
Each Fund's Board may change any of the foregoing policies that are not
specifically designated fundamental. The non-fundamental policy of each Insured
Fund requiring the Tax Exempt Obligations to be insured may not be eliminated
except upon 30 days' advance notice to the shareholders of the applicable
Insured Fund.
RISKS AND SPECIAL INVESTMENT CONSIDERATIONS
- -------------------------------------------------------------------------------
GENERAL
T he yields on Tax Exempt Obligations are dependent on a variety of factors,
including the financial condition of the issuer or other obligor thereon or the
revenue source from which debt service is payable, general economic and monetary
conditions, conditions in the relevant market, the size of a particular issue,
maturity of the obligation and the rating of the issue. Generally, the value of
Tax Exempt Obligations will tend to fall as interest rates rise and will tend to
increase as interest rates decrease. In addition, Tax Exempt Obligations of
longer maturity produce higher current yields than Tax Exempt Obligations with
shorter maturities but are subject to greater price fluctuation due to changes
in interest rates, tax laws and other general market factors. Lower-rated Tax
Exempt Obligations generally produce a higher yield than higher-rated Tax Exempt
Obligations due to the perception of a greater degree of risk as to the payment
of principal and interest. Certain Tax Exempt Obligations held by a Fund may
permit the issuer at its option to "call," or redeem, its securities. If an
issuer were to redeem securities held by a
Fund during a time of declining interest rates, the Fund may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
In normal circumstances, each Fund (except for the Insured Tax Free Funds)
may invest up to 20% of its total assets in Tax Exempt Obligations rated below
investment grade (but not rated lower than B by S&P or Moody's) or in unrated
Tax Exempt Obligations considered by Voyageur to be of comparable quality to
such securities. Investment in such lower grade Tax Exempt Obligations involves
special risks as compared with investment in higher grade Tax Exempt
Obligations. The market for lower grade Tax Exempt Obligations is considered to
be less liquid than the market for investment grade Tax Exempt Obligations,
which may adversely affect the ability of a Fund to dispose of such securities
in a timely manner at a price which reflects the value of such securities in
Voyageur's judgment. The market price for less liquid securities tends to be
more volatile than the market price for more liquid securities. The lower
liquidity of and the absence of readily available market quotations for lower
grade Tax Exempt Obligations may make Voyageur's valuation of such securities
more difficult, and Voyageur's judgment may play a greater role in the valuation
of the Fund's lower grade Tax Exempt Obligations. Periods of economic
uncertainty and changes may have a greater impact on the market price of such
bonds and, therefore, the net asset value of any Fund investing in such
obligations.
Lower grade Tax Exempt Obligations generally involve greater credit risk
than higher grade Tax Exempt Obligations and are more sensitive to adverse
economic changes, significant increases in interest rates and individual issuer
developments. Because issuers of lower grade Tax Exempt Obligations frequently
choose not to seek a rating of such securities, a Fund will rely more heavily on
Voyageur's ability to determine the relative investment quality of such
securities than if such Fund invested exclusively in higher grade Tax Exempt
Obligations. A Fund may, if deemed appropriate by Voyageur, retain a security
whose rating has been downgraded below B by S & P or Moody's, or whose rating
has been withdrawn. In no event, however, will more than 5% of each Fund's total
assets consist of securities that have been downgraded to a rating lower than
the minimum rating in which each Fund is permitted to invest or, in the case of
unrated securities, that have been determined by Voyageur to be of a quality
lower than such minimum rating. Additional information concerning the risks
associated with instruments in lower grade Tax Exempt Obligations is included in
the Fund's Statement of Additional Information.
The principal and interest payments on the Derivative Tax Exempt
Obligations underlying custodial receipts may be allocated in a number of ways.
For example, payments may be allocated such that certain custodial receipts may
have variable or floating interest rates and others may be stripped securities
which pay only the principal or interest due on the underlying Tax Exempt
Obligations. The Funds may also invest in custodial receipts which are "inverse
floating obligations" (also sometimes referred to as "residual interest bonds").
These securities pay interest rates that vary inversely to changes in the
interest rates of specified short term Tax Exempt Obligations or an index of
short term Tax Exempt Obligations. Thus, as market interest rates increase, the
interest rates on inverse floating obligations decrease. Conversely, as market
rates decline, the interest rates on inverse floating obligations increase. Such
securities have the effect of providing a degree of investment leverage, since
the interest rates on such securities will generally change at a rate which is a
multiple of the change in the interest rates of the specified Tax Exempt
Obligations or index. As a result, the market values of inverse floating
obligations will generally be more volatile than the market values of other Tax
Exempt Obligations and investments in these types of obligations will increase
the volatility of the net asset value of shares of the Funds.
STATE CONSIDERATIONS
The value of Tax Exempt Obligations owned by the Funds may be adversely affected
by local political and economic conditions and developments within a particular
state. Adverse conditions in an industry significant to a local economy could
have a correspondingly adverse effect on the financial condition of local
issuers. Other factors that could affect Tax Exempt Obligations include a change
in the local, state or national economy, demographic factors, ecological or
environmental concerns, statutory limitations on the issuer's ability to
increase taxes and other developments generally affecting the revenues of
issuers (for example, legislation or court decisions reducing state aid to local
governments or mandatory additional services). A summary description of certain
factors affecting and statistics describing issuers of Tax Exempt Obligations of
each applicable state is set forth below. Such information has been taken from
publicly available offering documents relating to the relevant state or issuers
located in such state. No Fund or Voyageur has independently verified this
information and no Fund or Voyageur makes any representation regarding such
information. See "Special Factors Affecting the Funds" in the Statement of
Additional Information.
ARIZONA'S primary economic sectors include services, tourism and
manufacturing. Arizona maintained a general fund surplus of $229 million (on
general fund revenues of $4.164 billion) for its 1994 fiscal year. Currently
there are no general obligation ratings for the state. CALIFORNIA'S primary
economic sectors are services, trade and manufacturing. Recently Orange County,
California filed a voluntary petition under the bankruptcy code. It is uncertain
what effect the filing will have on the state's ratings or on issuers located
within Orange County. California projected a general fund deficit for its
1994-95 fiscal year of over $1 billion (on estimated revenues of approximately
$41.891 billion). Currently, California's general obligation bonds are rated A1
by Moody's and A by S&P. COLORADO'S economy is based primarily on services.
Colorado projected a generally balanced budget for its 1994 fiscal year (on
estimated revenues of approximately $3.570 billion). Currently there are no
general obligation ratings for Colorado. FLORIDA'S economy is based primarily on
the services sector and tourism in particular. Florida projected a general fund
surplus of $313 million for its 1994-1995 fiscal year (on estimated revenues of
approximately $14.624 billion). Currently, Florida's general obligation bonds
are rated Aa by Moody's and AA by S&P. IDAHO'S primary economic sectors are
agriculture, manufacturing and mining. Idaho maintained a fiscal year 1993
general fund surplus of approximately $10 million (on revenues of approximately
$1 billion). Currently there are no general obligation ratings for Idaho. IOWA'S
primary economic sectors are services, manufacturing and agriculture. Iowa
projected an unreserved fund balance of approximately $71.5 million (on
estimated revenues of approximately $6.258 billion) for its fiscal year 1994.
Currently there are no general obligation ratings for Iowa. KANSAS' economy is
based primarily on agriculture, manufacturing, and services. Kansas projected a
positive general fund balance for its 1995 fiscal year (on estimated revenues of
approximately $3.702 billion). Currently there are no general obligation ratings
for Kansas. MINNESOTA'S economy is based primarily on agriculture, manufacturing
and services. Minnesota projects a balanced general fund at the end of its 1995
biennium. Currently Minnesota's general obligation bonds are rated Aa1 by
Moody's and AA+ by S&P. MISSOURI'S primary economic sectors are services,
manufacturing and trade. Missouri had a general fund surplus of $260 million for
its 1992 fiscal year (on revenues of approximately $9.352 billion). Currently
Missouri's general obligation bonds are rated Aaa by Moody's and AAA by S&P. NEW
MEXICO'S economy is based primarily on agriculture but also has tourism,
services and mining sectors. New Mexico projected a $150 million general fund
surplus for its 1994 fiscal year (on estimated revenues of approximately $2.56
billion). Currently New Mexico's general obligation bonds are rated Aa1 by
Moody's and AA by S&P. NORTH DAKOTA'S economy is based primarily on agriculture.
North Dakota had a positive fund balance for its 1994 fiscal year (on revenues
of approximately $1.345 billion). Currently North Dakota's general obligation
bonds are rated Aa by Moody's and AA- by S&P. OREGON'S economy is based
primarily on forestry, agriculture and tourism sectors. Oregon projected a
general fund surplus of approximately $102 million for its 1995 biennium (on
estimated revenue of approximately $6.158 billion). Currently Oregon's general
obligation bonds are rated Aa by Moody's and AA-by S&P. UTAH'S economy is based
primarily on agriculture and mining sectors. Utah projected a general fund
surplus of approximately $11 million for its 1994 fiscal year (on estimated
revenues of approximately $3.783 billion). Currently Utah's general obligation
bonds are rated Aaa by Moody's and AAA by S&P. WASHINGTON'S economy is based
primarily on manufacturing and service sectors. Washington projected a general
fund surplus of $270 million for its 1995 biennium (on estimated revenues of
approximately $16.396 billion). Currently Washington's general obligation bonds
are rated Aa by Moody's and AA by S&P. WISCONSIN'S economy is based primarily on
agriculture and manufacturing. Wisconsin projected a general fund surplus of
$233 million for its 1994 fiscal year (on estimated revenues of approximately
$18.260 billion). Currently Wisconsin's general obligation bonds are rated Aa by
Moody's and AA by S&P.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
Each Fund has adopted certain investment restrictions in addition to those set
forth above, which are set forth in their entirety in the Statement of
Additional Information. Certain of these restrictions are fundamental and cannot
be changed without shareholder approval, including the restriction providing
that no Fund may borrow money, except from banks for temporary or emergency
purposes in an amount not exceeding 20% of the value of its total assets (10%
for Colorado Tax Free Fund) (certain Funds may also borrow money in the form of
reverse repurchase agreements up to 10% of total assets). Also, certain Funds
may not, as a matter of fundamental policy invest more than 15% of their net
assets in illiquid securities and pledge, hypothecate, mortgage or otherwise
encumber their assets in excess of 10% of net assets. See "Investment Policies
and Restrictions -- Investment Restrictions" in the Statement of Additional
Information. Each Fund also has a number of non-fundamental investment
restrictions which may be changed by the Fund's Board without the shareholder
approval. These include restrictions providing that no Fund may (i) invest more
than 5% of its total assets in securities of any single investment company or
(ii) invest more than 10% of its total assets in securities of two or more
investment companies. To the extent that a Fund invests in the securities of
other open-end investment companies, Voyageur will take appropriate action to
avoid subjecting such Fund's shareholders to duplicate management and other fees
and expenses.
Any investment restriction or limitation which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or a utilization of assets and such excess results therefrom.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
ALTERNATIVE PURCHASE ARRANGEMENTS
The Funds offer investors the choice among three classes of shares which offer
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances. Page 2 of the Prospectus contains a
summary of these alternative purchase arrangements.
A broker-dealer may receive different levels of compensation depending on
which class of shares is sold. In addition, the Underwriter from time to time
pays certain additional cash incentives of up to $100 and/or non cash incentives
such as vacations or other prizes to its investment executives and other
broker-dealers and financial institutions in consideration of their sales of
Fund shares. In some instances, other incentives may be made available only to
selected broker-dealers and financial institutions, based on objective standards
developed by the Underwriter, to the exclusion of other broker-dealers and
financial institutions. The Underwriter in its discretion may from time to time,
pursuant to objective criteria established by it, pay fees to qualifying
brokers, dealers or financial intermediaries for certain services or activities
which are primarily intended to result in sales of shares of a Fund.
GENERAL PURCHASE INFORMATION
The minimum initial investment in each Fund is $1,000, and the minimum
additional investment is $100. Each Fund's shares may be purchased at the public
offering price from the Underwriter, from other broker-dealers who are members
of the National Association of Securities Dealers, Inc. and who have selling
agreements with the Underwriter, and from certain financial institutions that
have selling agreements with the Underwriter.
When orders are placed for shares of a Fund, the public offering price used
for the purchase will be the net asset value per share next determined, plus the
applicable sales charge, if any. If an order is placed with the Underwriter or
other broker-dealer, the broker-dealer is responsible for promptly transmitting
the order to the Fund. The Fund reserves the right, in its absolute discretion,
to reject any order for the purchase of shares.
Shares of the Funds may be purchased by opening an account either by mail
or by phone. Dividend income begins to accrue as of the opening of the New York
Stock Exchange (the "Exchange") on the day that payment is received. If payment
is made by check, payment is considered received on the day the check is
received if the check is drawn upon a member bank of the Federal Reserve System
within the Ninth Federal Reserve District (Michigan's Upper Peninsula,
Minnesota, Montana, North Dakota, South Dakota and northwestern Wisconsin). In
the case of other checks, payment is considered received when the check is
converted into "Federal Funds," i.e., monies of member banks within the Federal
Reserve System that are on deposit at a Federal Reserve Bank, normally within
two days after receipt.
An investor who may be interested in having shares redeemed shortly after
purchase should consider making unconditional payment by certified check or
other means approved in advance by the Underwriter. Payment of redemption
proceeds will be delayed as long as necessary to verify by expeditious means
that the purchase payment has been or will be collected. Such period of time
typically will not exceed 15 days.
AUTOMATIC INVESTMENT PLAN
Investors may make systematic investments in fixed amounts automatically on a
monthly basis through each Fund's Automatic Investment Plan. Additional
information is available from the Underwriter by calling 800-545-3863.
PURCHASES BY MAIL
To open an account by mail, complete the general authorization form attached to
this Prospectus, designate an investment dealer or other financial institution
on the form, and mail it, along with a check payable to the Fund, to:
NW 9369
P.O. Box 1450
Minneapolis, MN 55485-9369
PURCHASES BY TELEPHONE
To open an account by telephone, call 612-376-7014 or 800-545-3863 to obtain an
account number and instructions. Information concerning the account will be
taken over the phone. The investor must then request a commercial bank with
which he or she has an account and which is a member of the Federal Reserve
System to transmit Federal Funds by wire to the appropriate Fund as follows:
Norwest Bank Minnesota, N.A., ABA #091000019
For Credit of: (insert applicable Fund name)
Checking Account No.: 872-458
Account Number: (assigned by telephone)
Information on how to transmit Federal Funds by wire is available at any
national bank or any state bank that is a member of the Federal Reserve System.
The bank may charge the shareholder for the wire transfer. If the phone order
and Federal Funds are received before the close of trading on the Exchange, the
order will be deemed to become effective at that time. Otherwise, the order will
be deemed to become effective as of the close of trading on the Exchange on the
next day the Exchange is open for trading. The investor will be required to
complete the general authorization form attached to this Prospectus and mail it
to the Fund after making the initial telephone purchase.
CLASS A SHARES -- FRONT END SALES CHARGE ALTERNATIVE
The public offering price of Class A shares of each Fund is the net asset value
of the Fund's shares plus the applicable front end sales charge ("FESC"), which
will vary with the size of the purchase. The Fund receives the net asset value.
The FESC varies depending on the size of the purchase and is allocated between
the Underwriter and other broker-dealers.
The current sales charges are:
<TABLE>
<CAPTION>
Group 1* Funds
- ----------------------------------------------------------------------------------------------
SALES CHARGE SALES CHARGE DEALER DISCOUNT
AS % OF AS % OF AS % OF
AMOUNT OF PURCHASE NET ASSET VALUE OFFERING PRICE OFFERING PRICE(1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but less than $100,000 4.71 4.50 4.00
$100,000 but less than $250,000 3.90 3.75 3.25
$250,000 but less than $500,000 2.83 2.75 2.50
$500,000 but less than $1,000,000 2.30 2.25 2.00
$1,000,000 or more NAV(3) NAV(3) 1.00(2)
- ----------------------------------------------------------------------------------------------
Group 2** Funds
- ----------------------------------------------------------------------------------------------
SALES CHARGE SALES CHARGE DEALER DISCOUNT
AS % OF AS % OF AS % OF
AMOUNT OF PURCHASE NET ASSET VALUE OFFERING PRICE OFFERING PRICE1
- ----------------------------------------------------------------------------------------------
Less than $50,000 3.90% 3.75% 3.00%
$50,000 but less than $100,000 3.63 3.50 3.00
$100,000 but less than $250,000 3.09 3.00 2.50
$250,000 but less than $500,000 2.56 2.50 2.00
$500,000 but less than $1,000,000 2.04 2.00 1.75
$1,000,000 or more NAV(3) NAV(3) 1.00(2)
- ----------------------------------------------------------------------------------------------
Group 3*** Funds
- ----------------------------------------------------------------------------------------------
SALES CHARGE SALES CHARGE DEALER DISCOUNT
AS % OF AS % OF AS % OF
AMOUNT OF PURCHASE NET ASSET VALUE OFFERING PRICE OFFERING PRICE(1)
- ----------------------------------------------------------------------------------------------
Less than $50,000 2.83% 2.75% 2.25%
$50,000 but less than $100,000 2.56 2.50 2.00
$100,000 but less than $250,000 2.04 2.00 1.75
$250,000 but less than $500,000 1.27 1.25 1.00
$500,000 but less than $1,000,000 1.01 1.00 0.75
$1,000,000 or more NAV(3) NAV(3) 0.50(2)
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Brokers and dealers who receive 90% or more of the sales charge may be
considered to be underwriters under the Securities Act of 1933, as amended.
(2) The Underwriter intends to pay its investment executives and other
broker-dealers and banks that sell Fund shares, out of its own assets, a
fee of up to 1% (up to .50% for Group 3 Funds) of the offering price of
sales of $1,000,000 or more, other than on sales not subject to a
contingent deferred sales charge.
(3) Purchases of $1,000,000 or more may be subject to a contingent deferred
sales charge at the time of redemption. See "How to Sell Shares --
Contingent Deferred Sales Charge."
* Group 1 Funds: Arizona Tax Free, Arizona Insured Tax Free, California Tax
Free, California Insured Tax Free, Florida Tax Free, Florida Insured Tax
Free, Missouri Insured Tax Free, National Tax Free, National Insured Tax
Free, Oregon Insured Tax Free, Washington Insured Tax Free, Kansas Tax
Free, Minnesota Tax Free, Minnesota Insured and North Dakota Tax Free.
** Group 2 Funds: Colorado Tax Free, Colorado Insured Tax Free, Iowa Tax Free,
New Mexico Tax Free, Utah Tax Free, Wisconsin Tax Free, Idaho Tax Free
*** Group 3 Funds: Arizona Limited Term Tax Free, Colorado Limited Term Tax
Free, California Limited Term Tax Free, National Limited Term Tax Free,
Minnesota Limited Term Tax Free, Florida Limited Term Tax Free.
In connection with the distribution of the Funds' Class A shares, the
Underwriter is deemed to receive all applicable sales charges. The Underwriter,
in turn, pays its investment executives and other broker-dealers selling such
shares a "dealer discount," as set forth above. In the event that shares are
purchased by a financial institution acting as agent for its customers, the
Underwriter or the broker-dealer with whom such order was placed may pay all or
part of its dealer discount to such financial institution in accordance with
agreements between such parties.
SPECIAL PURCHASE PLANS -- REDUCED SALES CHARGES
Certain investors (or groups of investors) may qualify for reductions in the
sales charges shown above. Investors should contact their broker-dealer or the
Funds for details about the Funds' Combined Purchase Privilege, Cumulative
Quantity Discount and Letter of Intention plans. Descriptions are also included
with the general authorization form and in the Statement of Additional
Information. These special purchase plans may be amended or eliminated at any
time by the Underwriter without notice to existing Fund shareholders.
RULE 12B-1 FEES
Class A shares are subject to a Rule 12b-1 fee payable at an annual rate of .25%
of the average daily net assets of a Fund attributable to Class A shares. All or
a portion of such fees are paid quarterly to financial institutions and service
providers with respect to the average daily net assets attributable to shares
sold or serviced by such institutions and service providers. For additional
information about this fee, see "Management -- Plan of Distribution" below.
CONTINGENT DEFERRED SALES CHARGE
Although there is no initial sales charge on purchases of Class A shares of
$1,000,000 or more, the Underwriter pays investment dealers out of its own
assets, a fee of up to 1% (up to .50% for Group 3 Funds) of the offering price
of such shares. If these shares are redeemed within a certain period of time
after purchase, the redemption proceeds will be reduced by a contingent deferred
sales charge ("CDSC"). For additional information, see "How to Sell Shares --
Contingent Deferred Sales Charge." The CDSC will depend on the number of years
since the purchase was made according to the following table:
<TABLE>
<CAPTION>
CDSC AS A % OF AMOUNT REDEEMED FOR INVESTMENTS OF $1,000,000 OR MORE
- --------------------------------------------------------------------------------------
Group 1 & 2 Funds Group 3 Funds
CDSC Period CDSC CDSC Period CDSC
- --------------------------------------- ------------------------------------
<S> <C> <C> <C>
First year after purchase 1.0% First year after purchase 0.5%
Second year after purchase 0.5 Thereafter 0.0
Thereafter 0.0
- --------------------------------------------------------------------------------------
</TABLE>
WAIVER OF SALES CHARGES
A limited group of institutional and other investors may qualify to purchase
Class A shares at net asset value, with no front end or deferred sales charges.
The investors qualifying to purchase such shares are: (1) officers and directors
of the Funds; (2) officers, directors and full-time employees of Voyageur
Companies, Inc., Voyageur, Voyageur Asset Management Group, Inc., the
Underwriter and Pohlad Companies, and officers, directors and full-time
employees of parents and subsidiaries of the foregoing companies; (3) officers,
directors and full-time employees of investment advisers of other mutual funds
subject to a sales charge and included in any other family of mutual funds that
includes any Voyageur Fund as a member ("Other Load Funds"), and officers,
directors and full-time employees of parents, subsidiaries and corporate
affiliates of such investment advisers; (4) spouses and lineal ancestors and
descendants of the officers, directors/trustees and employees referenced in
clauses (1), (2) and (3), and lineal ancestors and descendants of their spouses;
(5) investment executives and other employees of banks and dealers that have
selling agreements with the Underwriter and parents, spouses and children under
the age of 21 of such investment executives and other employees; (6) trust
companies and bank trust departments for funds held in a fiduciary, agency,
advisory, custodial or similar capacity; (7) any state or any political
subdivision thereof or any instrumentality, department, authority or agency of
any state or political subdivision thereof; (8) partners and full-time employees
of the Funds' general counsel; (9) managed account clients of Voyageur, clients
of investment advisers affiliated with Voyageur and other registered investment
advisers and their clients (the Funds may be available through a broker-dealer
which charges a transaction fee for purchases and sales) and (10) "wrap
accounts" for the benefit of clients of financial planners adhering to certain
standards established by Voyageur.
Class A shares will also be issued at net asset value, without a front end
or deferred sales charge, if the purchase of such shares is funded by the
proceeds from the redemption of shares of any unrelated open-end investment
company that charges a front end sales charge, and, in certain circumstances, a
contingent deferred sales charge. In order to exercise this privilege, the
purchase order must be received by the Fund within 60 days after the redemption
of shares of the unrelated investment company.
CLASS B SHARES -- CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
The public offering price of Class B shares of each Fund is the net asset value
of the Fund's shares. Class B shares are sold without an initial sales charge so
that the Fund receives the full amount of the investor's purchase. However, a
CDSC of up to 4% will be imposed if shares are redeemed within six years of
purchase. For additional information, see "How to Sell Shares -- Contingent
Deferred Sales Charge." In addition, Class B shares are subject to higher Rule
12b-1 fees as described below. The CDSC will depend on the number of years since
the purchase was made according to the following table:
<TABLE>
<CAPTION>
CDSC AS A % OF AMOUNT REDEEMED*
- ----------------------------------------------------------------------------------------------
GROUPS 1 & 2 FUNDS GROUP 3 FUNDS
CDSC AS A % OF CDSC AS A % OF
CDSC PERIOD AMOUNT REDEEMED CDSC PERIOD AMOUNT REDEEMED
- ------------------------------------------ -------------------------------------------
<S> <C> <C> <C>
1st year after purchase 4% 1st year after purchase 3%
2nd year after purchase 4 2nd year after purchase 3
3rd year after purchase 3 3rd year after purchase 2
4th year after purchase 3 4th year after purchase 1
5th year after purchase 2 Thereafter 0
6th year after purchase 1
Thereafter 0
- ----------------------------------------------------------------------------------------------
</TABLE>
* The CDSC will be calculated on an amount equal to the lesser of the net
asset value of the shares at the time of purchase or the net asset value at
the time of redemption.
Proceeds from the CDSC are paid to the Underwriter and are used to defray
expenses of the Underwriter related to providing distribution-related services
to the Funds in connection with the sale of Class B shares, such as the payment
of compensation to selected broker dealers, and for selling Class B shares. The
combination of the CDSC and the Rule 12b-1 fee enables the Funds to sell the
Class B shares without deduction of a sales charge at the time of purchase.
Although Class B shares are sold without an initial sales charge at the time the
shares are sold, the Underwriter pays a sales commission equal to 3% (2.5% for
Group 3) of the amount invested to broker-dealers who sell Class B shares and
pays an ongoing annual servicing fee of .15% (paid quarterly) calculated on the
net assets attributable to sales made by such broker-dealers.
RULE 12B-1 FEES
Class B shares are subject to a Rule 12b-1 fee payable at an annual rate of 1%
of the average daily net assets of a Fund attributable to Class B shares. The
higher 12b-1 fee will cause Class B shares to have a higher expense ratio and to
pay lower dividends than Class A shares. For additional information about this
fee, see "Fees and Expenses" above and "Management -- Plan of Distribution"
below.
CONVERSION FEATURE
On the first business day of the month eight years after the purchase date,
Class B shares will automatically convert to Class A shares and will no longer
be subject to a higher Rule 12b-1 fee. Such conversion will be on the basis of
the relative net asset values of the two classes. Class A shares issued upon
such conversion will not be subject to any FESC or CDSC. Class B shares acquired
by exchange from Class B shares of another Voyageur Fund will convert into Class
A shares based on the time of the initial purchase. Similarly, Class B shares
acquired by exercise of the Reinstatement Privilege will convert into Class A
shares based on the time of the original purchase of Class B shares. See
"Reinstatement Privilege" below. Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date of issuance of
such shares.
CLASS C SHARES -- LEVEL LOAD ALTERNATIVE
The public offering price of Class C shares of each Fund is the net asset value
of the Fund's shares. Class C shares are sold without an initial sales charge or
contingent deferred sales charge so that the Fund receives the full amount of
the investor's purchase. Class C shares are subject to higher annual Rule 12b-1
fees as described below.
RULE 12B-1 FEES
Class C shares are subject to a Rule 12b-1 fee payable at an annual rate of 1%
of the average daily net assets of a Fund attributable to Class C shares. The
higher Rule 12b-1 fee will cause Class C shares to have a higher expense ratio
and to pay lower dividends than Class A shares. For additional information about
this fee, see "Fees and Expenses" above and "Management -- Plan of Distribution"
below.
Proceeds from the Rule 12b-1 fee are paid to the Underwriter and are used
to defray expenses of the Underwriter related to providing distribution-related
services to the Funds in connection with the sale of Class C shares, such as the
payment of compensation to selected broker-dealers, and for selling Class C
shares. The Rule 12b-1 fee enables the Funds to sell the Class C shares without
deduction of a sales charge at the time of purchase. Although Class C shares are
sold without an initial or contingent deferred sales charge, the Underwriter
pays an annual fee of .75% (paid quarterly) of the net asset value of the amount
invested to broker-dealers who sell Class C shares.
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
E ach Fund will redeem its shares in cash at the net asset value next determined
after receipt of a shareholder's written request for redemption in good order
(see below). If shares for which payment has been collected are redeemed,
payment must be made within seven days. Shareholders will not earn any income on
redeemed shares on the redemption date. Each Fund may suspend this right of
redemption and may postpone payment only when the Exchange is closed for other
than customary weekends or holidays, or if permitted by the rules of the
Securities and Exchange Commission during periods when trading on the Exchange
is restricted or during any emergency which makes it impracticable for such Fund
to dispose of its securities or to determine fairly the value of its net assets
or during any other period permitted by order of the Commission for the
protection of investors.
Each Fund reserves the right and currently plans to redeem Fund shares
and mail the proceeds to the shareholder if at any time the value of Fund shares
in the account falls below a specified value, currently set at $250.
Shareholders will be notified and will have 60 days to bring the account up to
the required value before any redemption action will be taken by a Fund.
CONTINGENT DEFERRED SALES CHARGE
The CDSC will be calculated on an amount equal to the lesser of the net asset
value of the shares at the time of purchase or their net asset value at the time
of redemption. No charge will be imposed on increases in net asset value above
the initial purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains distributions.
In determining whether a CDSC is payable with respect to any redemption,
the calculation will be determined in the manner that results in the lowest rate
being charged. Therefore, it will be assumed that shares that are not subject to
the CDSC are redeemed first, shares subject to the lowest level of CDSC are
redeemed next, and so forth. If a shareholder owns Class A and Class B shares,
then absent a shareholder choice to the contrary, Class B shares not subject to
a CDSC, will be redeemed in full prior to any redemption of Class A shares not
subject to a CDSC.
The CDSC does not apply to: (1) redemptions of Class B shares in connection
with the automatic conversion to Class A shares; (2) redemptions of shares when
a Fund exercises its right to liquidate accounts which are less than the minimum
account size; and (3) redemptions in the event of the death or disability of the
shareholder within the meaning of Section 72(m)(7) of the Internal Revenue Code.
If a shareholder exchanges Class A, Class B or Class C shares subject to a
CDSC for Class A, Class B or Class C shares, respectively, of a different
Voyageur Fund, the transaction will not be subject to a CDSC. However, when
shares acquired through the exchange are redeemed, the shareholder will be
treated as if no exchange took place for the purpose of determining the CDSC.
Fund shares are exchangeable for shares of any money market fund available
through Voyageur. No CDSC will be imposed at the time of any such exchange;
however, the shares acquired in any such exchange will remain subject to the
CDSC and the period during which such shares represent shares of the money
market fund will not be included in determining how long the shares have been
held. Any CDSC due upon a redemption of Fund shares will be reduced by the
amount of any Rule 12b-1 payments made by such money market fund with respect to
such shares.
The Underwriter, upon notification, intends to provide, out of its own
assets, a pro rata refund of any CDSC paid in connection with a redemption of
Class A or Class B shares of any Fund (by crediting such refunded CDSC to such
shareholder's account) if, within 90 days of such redemption, all or any portion
of the redemption proceeds are reinvested in shares of the same class in any of
the Voyageur Funds. Any reinvestment within 90 days of a redemption to which the
CDSC was paid will be made without the imposition of a FESC but will be subject
to the same CDSC to which such amount was subject prior to the redemption. The
amount of the CDSC will be calculated from the original investment date.
EXPEDITED REDEMPTIONS
Each Fund offers several expedited redemption procedures, described below, which
allow a shareholder to redeem Fund shares at net asset value determined on the
same day that the shareholder places the request for redemption of those shares.
Pursuant to these expedited redemption procedures, each Fund will redeem its
shares at their net asset value next determined following the Fund's receipt of
the redemption request. Each Fund reserves the right at any time to suspend or
terminate the expedited redemption procedures or to impose a fee for this
service. There is currently no additional charge to the shareholder for use of
the Funds' expedited redemption procedures.
EXPEDITED TELEPHONE REDEMPTION
Shareholders redeeming at least $1,000 and no more than $50,000 (for which
certificates have not been issued) may redeem by telephoning the Fund directly
at 612-376-7014 or 800-545-3863. The applicable section of the general
authorization form must have been completed by the shareholder and filed with
the Fund before the telephone request is received. The proceeds of the
redemption will be paid by check mailed to the shareholder's address of record
or, if requested at the time of redemption, by wire to the bank designated on
the general authorization form. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine, including requiring that
payment be made only to the shareholder's address of record or to the bank
account designated on the authorization form and requiring certain means of
telephonic identification. The Fund's Adviser and Distributor will not be liable
for following instructions which are reasonably believed to be genuine.
EXPEDITED REDEMPTIONS THROUGH CERTAIN BROKER DEALERS
Certain broker-dealers who have sales agreements with the Underwriter may allow
their customers to effect a redemption of shares of a Fund purchased through
such broker-dealer by notifying the broker-dealer of the amount of shares to be
redeemed. The broker-dealer is then responsible for promptly placing the
redemption request with the Fund on the customer's behalf. Payment will be made
to the shareholder by check or wire sent to the broker-dealer. Broker-dealers
offering this service may impose a fee or additional requirements for such
redemptions.
GOOD ORDER
"Good order" means that stock certificates, if issued, must accompany the
written request for redemption and must be duly endorsed for transfer, or must
be accompanied by a duly executed stock power. If no stock certificates have
been issued, a written request to redeem must be made. Stock certificates will
not be issued for Class B or Class C shares. In any case, the shareholder must
execute the redemption request exactly as the shares are registered. If the
redemption proceeds are to be paid to the registered holder(s), a signature
guarantee is not normally required. A signature guarantee is required in certain
other circumstances, for example, to redeem more than $50,000 or to have a check
mailed other than to the shareholder's address of record. See "Other
Information" in the Statement of Additional Information. The Adviser may waive
certain of these redemption requirements at its own risk, but also reserves the
right to require signature guarantees on all redemptions, in contexts perceived
by the Adviser to subject the Fund to an unusual degree of risk.
MONTHLY CASH WITHDRAWAL PLAN
An investor who owns or buys shares of any Fund valued at $10,000 or more at the
current offering price may open a Withdrawal Plan and have a designated sum of
money paid monthly to the investor or another person. Deferred sales charges may
apply to monthly redemptions of Class B shares. See "Monthly Cash Withdrawal
Plan" in the Statement of Additional Information.
REINSTATEMENT PRIVILEGE
- --------------------------------------------------------------------------------
An investor in a Fund whose shares have been redeemed and who has not previously
exercised the Reinstatement Privilege as to such Fund may reinvest the proceeds
of such redemption in shares of the same class of any Voyageur Fund eligible for
sale in the shareholder's state of residence. Reinvestment will be at the net
asset value of Fund shares next determined after the Underwriter receives a
check along with a letter requesting reinstatement. The Underwriter must receive
the letter requesting reinstatement within 365 days following the redemption.
Investors who desire to exercise the Privilege should contact their
broker-dealer or the Fund.
Exercise of the Reinstatement Privilege does not alter the income tax
treatment of any capital gains realized on a sale of shares of a Fund, but to
the extent that any shares are sold at a loss and the proceeds are reinvested
within 30 days in shares of such Fund, some or all of the loss may not be
allowed as a deduction, depending upon the number of shares reacquired.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Except as described below, shareholders may exchange some or all of their Fund
shares for shares of another Voyageur Fund, provided that the shares to be
acquired in the exchange are eligible for sale in the shareholder's state of
residence. Class A shareholders may exchange their shares for Class A shares of
other Voyageur Funds. Class B shareholders may exchange their shares for the
Class B shares of other Voyageur Funds and Class C shareholders may exchange
their shares for the Class C shares of other Voyageur Funds. Shares of each
class may also be exchanged for shares of any money market fund available
through Voyageur.
The minimum amount which may be exchanged is $1,000. The exchange will be
made on the basis of the relative net asset values next determined after receipt
of the exchange request, plus the amount, if any, by which the applicable sales
charge exceeds the sum of all sales charges previously paid in connection with
the prior investment. For a discussion of issues relating to the contingent
deferred sales charge upon such exchanges, see "How to Sell Shares -- Contingent
Deferred Sales Charge." There is no specific limitation on exchange frequency;
however, the Funds are intended for long term investment and not as a trading
vehicle. The Adviser reserves the right to prohibit excessive exchanges (more
than four per quarter). The Adviser also reserves the right, upon 60 days' prior
notice, to restrict the frequency of, or otherwise modify, condition, terminate
or impose charges upon, exchanges. An exchange is considered to be a sale of
shares on which the investor may realize a capital gain or loss for income tax
purposes. Exchange requests may be placed directly with the Fund in which the
investor owns shares, through the Adviser or through other broker-dealers. An
investor considering an exchange should obtain a prospectus of the Fund to be
acquired and should read such prospectus carefully. Contact any of the Funds,
the Adviser or any of such other broker-dealers for further information about
the exchange privilege.
MANAGEMENT
- --------------------------------------------------------------------------------
The Boards of Directors, or Trustees, as the case may be, of the Funds are
responsible for managing the business and affairs of the Funds. The names,
addresses, principal occupations and other affiliations of Directors and
executive officers of the Funds are set forth in the Statement of Additional
Information.
INVESTMENT ADVISER; PORTFOLIO MANAGEMENT
Voyageur has been retained under an investment advisory agreement (the "Advisory
Agreement") to act as each Fund's investment adviser, subject to the authority
of the Board of Directors. Voyageur and the Underwriter are each indirect
wholly-owned subsidiaries of Dougherty Financial Group, Inc. ("DFG"), which is
owned approximately 49% by Michael E. Dougherty, 49% by Pohlad Companies and
less than 1% by certain retirement plans for the benefit of DFG employees. Mr.
Dougherty co-founded the predecessor of Dougherty Dawkins in 1977 and has served
as Dougherty Dawkins' Chairman of the Board and Chief Executive Officer since
inception. Pohlad Companies is a holding company owned in equal parts by each of
James O. Pohlad, Robert C. Pohlad and William M. Pohlad. As of October 1, 1995,
Voyageur served as the manager to six closed-end and ten open-end investment
companies (comprising 26 separate investment portfolios), administered numerous
private accounts and managed approximately $7.65 billion in assets. Voyageur's
principal business address is 90 South Seventh Street, Suite 4400, Minneapolis,
Minnesota 55402.
Each Fund pays Voyageur a monthly investment advisory and management fee
equivalent on an annual basis to .50% of its average daily net assets, except
each Limited Term Tax Free Fund pays .40%, of its average daily net assets.
Andrew M. McCullagh, Jr. has had, since inception, day-to-day portfolio
management responsibility for the Arizona Funds, California Funds, Colorado
Funds, Florida Funds, National Funds, as well as the New Mexico Fund, North
Dakota Fund and Utah Fund. Mr. McCullagh has been a Director of Voyageur and the
Underwriter since 1993 and an Executive Vice President and Senior Tax Exempt
Portfolio Manager for Voyageur since January 1990. He is President of Colorado
Tax Free Fund and is an Executive Vice President of each of the other Voyageur
Funds. From 1978 to 1990, Mr. McCullagh served as a municipal bond trader and a
portfolio manager for Kirchner, Moore & Company. Mr. McCullagh currently has
over 23 years' experience in municipal bond trading, underwriting and portfolio
management.
Elizabeth H. Howell has had, since 1991, day-to-day portfolio management
responsibility for the Minnesota Funds, as well as, since inception, the Idaho,
Iowa, Kansas, Missouri, Oregon, Washington and Wisconsin Funds. Ms. Howell is a
Vice President and Senior Tax Exempt Portfolio Manager for Voyageur, where she
has been employed since 1991 and is a Vice President of the Voyageur Funds.
Prior to being employed by Voyageur, Ms. Howell had been a portfolio manager for
Windsor Financial Group in Minneapolis, Minnesota from March 1988. Ms. Howell
has over ten years' experience as a securities analyst and portfolio manager.
PLAN OF DISTRIBUTION
Each Fund has adopted a Plan of Distribution under the 1940 Act (the "Plan") and
has entered into a Distribution Agreement with Voyageur Fund Distributors, Inc.
(the "Underwriter"). Pursuant to each Fund's Plan, the Fund pays the Underwriter
a Rule 12b-1 fee, at an annual rate of .25% of the Fund's average daily net
assets attributable to Class A shares and 1% of the Fund's average daily net
assets attributable to each of Class B and Class C shares for servicing of
shareholder accounts and distribution related services. Payments made under the
Plan are not tied exclusively to expenses actually incurred by the Underwriter
and may exceed or be less than expenses actually incurred by the Underwriter.
Please see the "Fees and Expenses" table at the beginning of this Prospectus for
information with respect to fee waivers, if any.
All of the Rule 12b-1 fee attributable to Class A shares, and a portion of
the fee equal to .25% of the average daily net assets of the Fund attributable
to each of Class B shares and Class C shares constitutes a shareholder servicing
fee designed to compensate the Underwriter for the provision of certain services
to the shareholders. The services provided may include personal services
provided to shareholders, such as answering shareholder inquiries regarding the
Funds and providing reports and other information, and services related to the
maintenance of shareholder accounts. The Underwriter may use such Rule 12b-1 fee
or portion thereof to make payments to qualifying broker-dealers and financial
institutions that provide such services.
That portion of the Rule 12b-1 fee equal to .75% of the average daily net
assets of the Fund attributable to Class B shares and Class C shares,
respectively, constitutes a distribution fee designed to compensate the
Underwriter for advertising, marketing and distributing the Class B shares and
Class C shares of each Fund. In connection therewith, the Underwriter may
provide initial and ongoing sales compensation to its investment executives and
other broker-dealers for sales of Class B shares and Class C shares and may pay
for other advertising and promotional expenses in connection with the
distribution of Class B shares and Class C shares. The distribution fee
attributable to Class B shares and Class C shares is designed to permit an
investor to purchase such shares through investment executives of the
Underwriter and other broker-dealers without the assessment of an initial sales
charge and at the same time to permit the Underwriter to compensate its
investment executives and other broker-dealers in connection with the sale of
such shares.
CUSTODIAN; DIVIDEND DISBURSING, TRANSFER, ADMINISTRATIVE AND ACCOUNT SERVICES
AGENT
Norwest Bank Minnesota, N.A. serves as the custodian of each Fund's portfolio
securities and cash.
Voyageur acts as each Fund's dividend disbursing, transfer, administrative
and accounting services agent to perform dividend-paying functions, to calculate
each Fund's daily share price, to maintain shareholder records and to perform
certain regulatory and compliance related services for the Funds. The fees paid
for these services are based on each Fund's assets and include reimbursement of
out-of-pocket expenses. Voyageur receives a monthly fee from each Fund equal to
the sum of (1) $1.33 per shareholder account per month, (2) a monthly fee
ranging from $1,000 to $1,500 based on the average daily net assets of the Fund
and (3) a percentage of average daily net assets which ranges from 0.11% to
0.02% based on the average daily net assets of the Fund. See "The Investment
Adviser and Underwriter -- Expenses of the Funds" in the Statement of Additional
Information.
Certain institutions may act as sub-administrators for one or more of the
Funds pursuant to contracts with Voyageur, whereby the institutions will provide
shareholder services to their customers. Voyageur will pay the
sub-administrators' fees out of its own assets. The fee paid by Voyageur to any
sub-administrator will be a matter of negotiation between the institution and
Voyageur based on the extent and quality of the services provided.
EXPENSES OF THE FUNDS
Voyageur is contractually obligated to pay the operating expenses (excluding
interest expense, taxes, brokerage fees, commissions and Rule 12b-1 fees and,
with respect to the Insured Funds, premiums with respect to Portfolio Insurance
or Secondary Market Insurance) of each Fund which exceed 1% of such Fund's
average daily net assets on an annual basis up to certain limits as set forth in
detail in the Statement of Additional Information. In addition, Voyageur and the
Underwriter reserve the right to voluntarily waive their fees in whole or part
and to voluntarily absorb certain other of the Funds' expenses. Voyageur and the
Underwriter have agreed to waive fees or absorb expenses for the fiscal year
ending December 31, 1995 in such a manner as will result in the Funds being
charged fees and expenses that approximate those set forth in the section "Fees
and Expenses" except Voyageur and the Underwriter are not waiving fees with
respect to Minnesota Tax Free Fund and Minnesota Limited Term Tax Free Fund.
After December 31, 1995, such voluntary fee and expense waivers may be
discontinued or modified by Voyageur and the Underwriter in their sole
discretion.
Each Fund's expenses include, among others, fees of directors, expenses of
directors' and shareholders' meetings, insurance premiums, expenses of
redemption of shares, expenses of the issue and sale of shares (to the extent
not otherwise borne by the Underwriter), expenses of printing and mailing stock
certificates and shareholder statements, association membership dues, charges of
such Fund's custodian, bookkeeping, auditing and legal expenses, the fees and
expenses of registering such Fund and its shares with the Securities and
Exchange Commission and registering or qualifying its shares under state
securities laws and expenses of preparing and mailing prospectuses and reports
to existing shareholders.
PORTFOLIO TRANSACTIONS
No Fund will effect any brokerage transactions in its portfolio securities with
any broker-dealer affiliated directly or indirectly with Voyageur unless such
transactions, including the frequency thereof, the receipt of commissions
payable in connection therewith and the selection of the affiliated
broker-dealer effecting such transactions, are not unfair or unreasonable to the
shareholders of such Fund. It is not anticipated that any Fund will effect any
brokerage transactions with any affiliated broker-dealer, including the
Underwriter, unless such use would be to such Fund's advantage. Voyageur may
consider sales of shares of the Funds as a factor in the selection of
broker-dealers to execute the Funds' securities transactions.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value of Fund shares is determined once daily, Monday through
Friday, as of 3:00 p.m. Minneapolis time (the primary close of trading on the
Exchange) on each business day the Exchange is open for trading.
For each Fund, the net asset value per share of each class is determined by
dividing the value of the securities, cash and other assets of the Fund
attributable to such class less all liabilities attributable to such class by
the total number of shares of such class outstanding. For purposes of
determining the net assets of each Fund, tax exempt securities are stated on the
basis of valuations provided by a pricing service, approved by the Board of
Directors, which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities and
various relationships between securities in determining value. Market quotations
are used when available. Non-tax exempt securities for which market quotations
are readily available are stated at market value which is currently determined
using the last reported sale price, or, if no sales are reported, as in the case
of most securities traded over-the-counter, the last reported bid price, except
that U.S. Government securities are stated at the mean between the last reported
bid and asked prices. Short-term notes having remaining maturities of 60 days or
less are stated at amortized cost which approximates market. All other
securities and other assets are valued in good faith at fair value by Voyageur
in accordance with procedures adopted by the Board of Directors.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
- --------------------------------------------------------------------------------
DISTRIBUTIONS
The present policy of each Fund is to declare a distribution from net investment
income on each day that the Fund is open for business. Net investment income
consists of interest accrued on portfolio investments of a Fund, less accrued
expenses. Distributions of net investment income are paid monthly. Short-term
capital gains distributions are taxable to shareholders as ordinary income. Net
realized long term capital gains, if any, are distributed annually, after
utilization of any available capital loss carryovers. Distributions paid by the
Funds, if any, with respect to Class A, Class B and Class C shares will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount, except that the higher Rule 12b-1 fees applicable to Class B
and Class C shares will be borne exclusively by such shares. The per share
distributions on Class B and Class C shares will be lower than the per share
distributions on Class A shares as a result of the higher Rule 12b-1 fees
applicable to Class B and Class C shares.
Shareholders receive distributions from investment income and capital gains
in additional shares of the Fund and class owned by such shareholders at net
asset value, without any sales charge, unless they elect otherwise. Each Fund
sends to its shareholders no less than quarterly statements with details of any
reinvested dividends.
TAXES
FEDERAL INCOME TAXATION
Each Fund is treated as a separate entity for federal income tax purposes. Each
Fund (other than Funds which have not yet completed their first fiscal period)
qualified during its last taxable year and each Fund intends to qualify during
its current taxable year as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"). Each Fund also intends to take
all other action required to ensure that no
federal income taxes will be payable by the Fund and that the Fund can pay
exempt-interest dividends.
Distributions of net interest income from tax exempt obligations that are
designated by a Fund as exempt-interest dividends are excludable from the gross
income of the Fund's shareholders. Distributions paid from other interest income
and from any net realized short-term capital gains are taxable to shareholders
as ordinary income, whether received in cash or in additional shares.
Distributions paid from long-term capital gains (and designated as such) are
taxable as long-term capital gains for federal income tax purposes, whether
received in cash or shares, regardless of how long a shareholder has held shares
in a Fund.
Exempt-interest dividends attributable to interest income on certain tax
exempt obligations issued after August 7, 1986 to finance private activities are
treated as an item of tax preference for purposes of computing the alternative
minimum tax for individuals, estates and trusts. Each Fund may invest up to 20%
of its total assets in securities which generate interest which is treated as an
item of tax preference and subject to federal and state AMT, except that
Minnesota Insured Fund may invest without limit in such securities and Minnesota
Tax Free Fund may not invest in obligations which generate interest subject to
federal and state AMT.
The following is a summary of certain information regarding state taxation.
See "Taxes" in the Statement of Additional Information.
ARIZONA STATE TAXATION
The portion of exempt-interest dividends that is derived from interest income on
Arizona Tax Exempt Obligations is excluded from the Arizona taxable income of
individuals, estates, trusts, and corporations. Dividends qualifying for federal
income tax purposes as capital gain dividends are to be treated by shareholders
as long-term capital gains under Arizona law.
CALIFORNIA STATE TAXATION
Individual shareholders of the California Funds who are subject to California
personal income taxation will not be required to include in their California
gross income that portion of their federally tax exempt dividends which a Fund
clearly identifies as directly attributable to interest earned on California
state or municipal obligations, and dividends which a Fund clearly identifies as
directly attributable to interest earned on obligations of the United States,
the interest on which is exempt from California personal income tax pursuant to
federal law, provided that at least 50% of the value of the Fund's total assets
consists of obligations the interest on which is exempt from California personal
income taxation pursuant to federal or California law. Distributions to
individual shareholders derived from interest on state or municipal obligations
issued by governmental authorities in states other than California, short term
capital gains and other taxable income will be taxed as dividends for purposes
of California personal income taxation. Each Fund's long term capital gains for
federal income tax purposes will be taxed as long term capital gains to
individual shareholders of the Fund for purposes of California personal income
taxation. Gain or loss, if any, resulting from an exchange or redemption of
shares will be recognized in the year of the change or redemption.
COLORADO STATE TAXATION
To the extent that dividends are derived from interest income on Colorado Tax
Exempt Obligations, such dividends will also be exempt from Colorado income
taxes for individuals, trusts, estates, and corporations. Dividends qualifying
for federal income tax purposes as capital gain dividends are to be treated by
shareholders as long-term capital gains under Colorado law.
FLORIDA STATE TAXATION
Florida does not currently impose a tax on the income of individuals, and
individual shareholders of the Florida Funds will thus not be subject to income
tax in Florida on distributions from the Florida Funds or upon the sale of
shares held in such Funds. Florida does, however, impose a tax on intangible
personal property held by individuals as of the first day of each calendar year.
Under a rule promulgated by the Florida Department of Revenue, shares in the
Florida Funds will not be subject to the intangible property tax so long as, on
the last business day of each calendar year, all of the assets of each Fund
consist of obligations of the U. S. government and its agencies,
instrumentalities and territories, and the State of Florida and its political
subdivisions and agencies. If any Florida Fund holds any other types of assets
on that date, then the entire value of the shares in such Fund (except for the
portion of the value of the shares attributable to U. S. government obligations)
will be subject to the intangible property tax. Each Florida Fund must sell any
non exempt assets held in its portfolio during the year and reinvest the
proceeds in exempt assets prior to December 31. Transaction costs involved in
converting the portfolio's assets to such exempt assets would likely reduce the
Florida Funds' investment return and might, in extraordinary circumstances,
exceed any increased investment return such Fund's achieved by investing in non
exempt assets during the year. Corporate shareholders in the Florida Funds may
be subject to the Florida income tax imposed on corporations, depending upon the
domicile of the corporation and upon the extent to which income received from
such Fund constitutes "nonbusiness income" as defined by applicable Florida law.
IDAHO STATE TAXATION
The Idaho Fund has received a ruling from the Idaho Department of Revenue that
provides that dividends paid by the Idaho Fund that are attributable to (i)
interest earned on bonds issued by the State of Idaho, its cities and political
subdivisions, and (ii) interest earned on obligations of the U.S. government or
its territories and possessions will not be included in the income of Fund
shareholders subject to either the Idaho personal income tax or the Idaho
corporate franchise tax. All other dividends paid by the Idaho Fund will be
subject to the Idaho personal or corporate income tax. Capital gain dividends
qualifying as long term capital gains for federal tax purposes will be treated
as long term capital gains for Idaho income tax purposes. Idaho taxes long term
capital gains at the same rates as ordinary income, while imposing limitations
on the deductibility of capital losses similar to those under federal law.
IOWA STATE TAXATION
The Iowa Fund has received a ruling from the Iowa Department of Revenue and
Finance dated May 21, 1993 to the effect that dividends paid by the Iowa Fund
that are attributable to (1) interest earned on bonds issued by the State of
Iowa, its political subdivisions, agencies and instrumentalities, the interest
on which is exempt from taxation by Iowa statute, and (2) interest earned on
obligations of the U.S. government or its territories and possessions will not
be included in the income of the Fund shareholders subject to either the Iowa
personal or the Iowa corporate income tax, except in the case of shareholders
that are financial institutions subject to the tax imposed by Iowa Code ss.
422.60. All other dividends paid by the Iowa Fund will be subject to the Iowa
personal or corporate income tax. Capital gain dividends qualifying as long term
capital gains for federal tax purposes will be treated as long term capital
gains for Iowa income tax purposes.
KANSAS STATE TAXATION
Individuals, trusts, estates and corporations will not be subject to Kansas
income tax on the portion of dividends derived from interest on obligations of
Kansas and its political subdivisions issued after December 31, 1987, and
interest on specified obligations of Kansas and its political subdivisions
issued before January 1, 1988. The Fund intends to invest only in Kansas
obligations the interest on which is excludable from Kansas taxable income. All
remaining dividends (except for dividends, if any, derived from interest paid on
obligations of the United States, its territories and possessions), including
dividends derived from capital gains, will be includable in the taxable income
of individuals, trusts, estates, and corporations. Dividends qualifying for
federal income tax purposes as capital gain dividends are to be treated by
shareholders as long term capital gains. Kansas taxes long term capital gains at
the same rates as ordinary income, while restricting the deductibility of
capital losses. Dividends received by shareholders will be exempt from the tax
on intangibles imposed by certain counties, cities and townships.
MINNESOTA STATE TAXATION
Minnesota taxable net income is based generally on federal taxable income. The
portion of exempt-interest dividends that is derived from interest income on
Minnesota Tax Exempt Obligations is excluded from the Minnesota taxable net
income of individuals, estates and trusts, provided that the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders
represents 95 percent or more of the exempt-interest dividends paid by the
respective Fund. Exempt-interest dividends are not excluded from the Minnesota
taxable income of corporations and financial institutions. Dividends qualifying
for federal income tax purposes as capital gain dividends are to be treated by
shareholders as long-term capital gains. Minnesota has repealed the favorable
treatment of long term capital gains, while retaining restrictions on the
deductibility of capital losses. Exempt interest dividends subject to the
federal alternative minimum tax will also be subject to the Minnesota
alternative minimum tax imposed on individuals, estates and trusts.
MISSOURI STATE TAXATION
The portion of exempt interest dividends that is derived from interest on
Missouri Tax Exempt Obligations is excluded from the taxable income of
individuals, trusts, and estates and of corporations subject to the Missouri
corporate income tax. All remaining dividends (except dividends attributable to
interest on obligations of the United States, its territories and possessions),
including dividends derived from capital gains, will be includable in the
taxable income of individuals, trusts, estates and corporations. Dividends
qualifying for federal income tax purposes as capital gain dividends are to be
treated by shareholders as long term capital gains. Missouri taxes long term
capital gains at the same rates as ordinary income, while restricting the
deductibility of capital losses.
NEW MEXICO STATE TAXATION
The portion of exempt interest dividends that is derived from interest on New
Mexico Tax Exempt Obligations is excluded from the taxable income of
individuals, trusts, and estates, and of corporations subject to the New Mexico
corporate income tax. The Fund will provide shareholders with an annual
statement identifying income paid to shareholders by source. All remaining
dividends (except for dividends, if any, derived from interest paid on
obligations of the United States, its territories and possessions), including
dividends derived from capital gains, will be includable in the taxable income
of individuals, trusts, estates and corporations. Dividends qualifying for
federal income tax purposes as capital gain dividends are to be treated by
shareholders as long term capital gains. New Mexico taxes long term capital
gains at the same rates as ordinary income, while restricting the deductibility
of capital losses.
NORTH DAKOTA STATE TAXATION
North Dakota taxable income is based generally on federal taxable income. The
portion of exempt interest dividends that is derived from interest income on
North Dakota Tax Exempt Obligations is excluded from the North Dakota taxable
income of individuals, estates, trusts and corporations. Exempt interest
dividends are not excluded from the North Dakota taxable income of banks.
Dividends qualifying for federal income tax purposes as capital gain dividends
are to be treated by shareholders as long term capital gains under North Dakota
law.
OREGON STATE TAXATION
The portion of exempt interest dividends that is derived from interest on Oregon
Tax Exempt Obligations is excluded from the taxable income of individuals,
trusts and estates. All remaining dividends (except for dividends, if any,
derived from interest paid on obligations of the United States, its territories
and possessions), including dividends derived from capital gains, will be
includable in the taxable income of individuals, trusts and estates.
Furthermore, all dividends, including exempt interest dividends, will be
includable in the taxable income of corporations subject to the Oregon
corporation excise tax. Dividends qualifying for federal income tax purposes as
capital gain dividends are to be treated by shareholders as long term capital
gains. Oregon taxes long term capital gains at the same rates as ordinary
income, while restricting the deductibility of capital losses.
UTAH STATE TAXATION
All exempt interest dividends, whether derived from interest on Utah Tax Exempt
Obligations or the Tax Exempt Obligations of any other state, are excluded from
the taxable income of individuals, trusts, and estates. Any remaining dividends
(except for dividends, if any, derived from interest paid on obligations of the
United States, its territories and possessions), including dividends derived
from capital gains, will be includable in the taxable income of individuals,
trusts, and estates. Furthermore, all dividends, including exempt interest
dividends, will be includable in the taxable income of corporations subject to
the Utah corporate franchise tax. Dividends qualifying for federal income tax
purposes as capital gain dividends are to be treated by shareholders as long
term capital gains. Utah taxes long term capital gains at the same rates as
ordinary income, while restricting the deductibility of capital losses.
WASHINGTON STATE TAXATION
Washington does not currently impose an income tax on individuals or
corporations. Therefore, dividends paid to shareholders will not be subject to
tax in Washington.
WISCONSIN STATE TAXATION
The Wisconsin Fund has received a ruling from the Wisconsin Department of
Revenue dated July 7, 1993 to the effect that dividends paid by the Wisconsin
Fund that are attributable to (1) interest earned on certain higher education
bonds issued by the State of Wisconsin, certain bonds issued by the Wisconsin
Housing and Economic Development authority, Wisconsin Housing Finance Authority
bonds, and public housing authority bonds and redevelopment authority bonds
issued by Wisconsin municipalities, the interest on which is exempt from
taxation by Wisconsin statute, and (2) interest earned on obligations of the U.
S. government or its territories and possessions will not be included in the
income of the Fund shareholders subject to the Wisconsin personal income tax.
Capital gain dividends qualifying as long term capital gains for federal tax
purposes will be treated as long term capital gains for Wisconsin income tax
purposes.
The foregoing discussion relates to federal and state taxation as of the
date of the Prospectus. See "Taxes" in the Statement of Additional Information.
Distributions from the Funds, including exempt-interest dividends, may be
subject to tax in other states. This discussion is not intended as a substitute
for careful tax planning. You are urged to consult your tax adviser with
specific reference to your own tax situation.
INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
Advertisements and other sales literature for the Funds may refer to "yield,"
"taxable equivalent yield," "average annual total return" and "cumulative total
return" and may compare such performance quotations with published indices and
comparable quotations of other funds. Performance quotations are computed
separately for Class A, Class B and Class C shares of the Funds. When a Fund
advertises any performance information, it also will advertise its average
annual total return as required by the rules of the Securities and Exchange
Commission and will include performance data for Class A, Class B and Class C
shares. All such figures are based on historical earnings and performance and
are not intended to be indicative of future performance. Additionally,
performance information may not provide a basis for comparison with other
investments or other mutual funds using a different method of calculating
performance. The investment return on and principal value of an investment in
any of the Funds will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
The advertised yield of each Fund will be based on a 30-day period stated
in the advertisement. Yield is calculated by dividing the net investment income
per share deemed earned during the period by the maximum offering price per
share on the last day of the period. The result is then annualized using a
formula that provides for semiannual compounding of income.
Taxable equivalent yield is calculated by applying the stated income tax
rate only to that portion of the yield that is exempt from taxation. The tax
exempt portion of the yield is divided by the number 1 minus the stated income
tax rate (e.g., 1-28% = 72%). The result is then added to that portion of the
yield, if any, that is not tax exempt.
Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. In calculating average annual total return, the maximum sales charge is
deducted from the hypothetical investment and all dividends and distributions
are assumed to be reinvested.
Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to the Fund from the ending redeemable value of such payment (at the end
of the relevant advertised period), dividing such difference by $1,000 and
multiplying the quotient by 100. In calculating ending redeemable value, all
income and capital gain distributions are assumed to be reinvested in additional
Fund shares and the maximum sales load is deducted.
In addition to advertising total return and yield, comparative performance
information may be used from time to time in advertising the Funds' shares,
including data from Lipper Analytical Services, Inc. and Morningstar.
For Fund performance information and daily net asset value quotations,
investors may call 612-376-7010 or 800-525-6584. For additional information
regarding the calculation of a Fund's yield, taxable equivalent yield, average
annual total return and cumulative total return, see "Calculation of Performance
Data" in the Statement of Additional Information.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Each Fund sends to its shareholders six-month unaudited and annual audited
financial statements.
The shares of the Funds constitute separate series of the parent entities
listed below. Certain of these parent entities are organized as Minnesota
corporations, and the shares of the series thereof are transferable common
stock, $.01 par value per share, of such corporations. Other parent entities are
organized as business trusts under the laws of the Commonwealth of
Massachusetts, and the shares of the series thereof represent transferable
common shares of beneficial interest. All shares of each corporation and,
subject to the statement below regarding shareholder liability, of each trust,
are non assessable and fully transferable when issued and paid for in accordance
with the terms thereof and possess no cumulative voting, preemptive or
conversion rights. The Board of each corporation and trust is empowered to issue
other series of common stock or common shares of beneficial interest without
shareholder approval. Set forth below is a listing of the parent entities and
constituent series, form of organization and date of organization of the parent.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PARENT FORM OF ORGANIZATION DATE ORGANIZED
- ------------------------------------------------------------------------------------------
<S> <C> <C>
VOYAGEUR TAX FREE FUNDS, INC. Minnesota Corporation November 10, 1993
Minnesota Tax Free
North Dakota Tax Free
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC. Minnesota Corporation July 11, 1985
Arizona Limited Term Tax Free
California Limited Term Tax Free
Colorado Limited Term Tax Free
Minnesota Limited Term Tax Free
National Limited Term Tax Free
VOYAGEUR INSURED FUNDS, INC. Minnesota Corporation January 6, 1987
Arizona Insured Tax Free
Colorado Insured Tax Free
Minnesota Insured
National Insured Tax Free
VOYAGEUR INVESTMENT TRUST Massachusetts Business Trust November 16, 1993
California Insured Tax Free
Florida Insured Tax Free
Florida Tax Free
Kansas Tax Free
Missouri Insured Tax Free
New Mexico Tax Free
Oregon Insured Tax Free
Utah Tax Free
Washington Insured Tax Free
VOYAGEUR INVESTMENT TRUST II Massachusetts Business Trust November 16, 1993
Florida Limited Term Tax Free
VOYAGEUR MUTUAL FUNDS, INC. Minnesota Corporation April 14, 1993
Arizona Tax Free
California Tax Free
Idaho Tax Free
Iowa Tax Free
Wisconsin Tax Free
National Tax Free
VOYAGEUR MUTUAL FUNDS II, INC. Minnesota Corporation January 13, 1987
Colorado Tax Free
- ------------------------------------------------------------------------------------------
</TABLE>
The Funds currently offer their shares in multiple classes, each with
different sales arrangements and bearing different expenses. Class A, Class B
and Class C shares each represent interests in the assets of the respective
Funds and have identical voting, dividend, liquidation and other rights on the
same terms and conditions except that expenses related to the distribution of
each class are borne solely by such class and each class of shares has exclusive
voting rights with respect to provisions of a Fund's Rule 12b-1 distribution
plan which pertain to a particular class and other matters for which separate
class voting is appropriate under applicable law.
Fund shares are freely transferable, subject to applicable securities laws,
are entitled to dividends as declared by the Board, and, in liquidation of a
Fund, are entitled to receive the net assets, if any, of such Fund. The Funds do
not generally hold annual meetings of shareholders and will do so only when
required by law. Shareholders may remove Board members from office by votes cast
in person or by proxy at a meeting of shareholders or by written consent and, in
accordance with Section 16 of the 1940 Act, the Board shall promptly call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Board member when requested to do so by the record holders of not less
than 10% of the outstanding shares. Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Funds organized as Massachusetts business trusts. However, each Declaration
of Trust contains an express disclaimer of shareholder liability for acts or
obligations of such Funds and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by such
Funds or the trustees. The Declaration of Trust further provides for
indemnification out of the assets and property of a Fund for all loss and
expense of any shareholder held personally liable for the obligations of such
Fund. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund would be
unable to meet its obligations. Each Fund organized as a series of a
Massachusetts business trust believes that the likelihood of such circumstances
is remote.
Each share of a series has one vote irrespective of the relative net asset
value of the shares. On some issues, such as the election of Board members, all
shares of a corporation or trust vote together as one series of such corporation
or trust. On an issue affecting only a particular series or class, the shares of
the affected series or class vote as a separate series or class. An example of
such an issue would be a fundamental investment restriction pertaining to only
one series. In voting on the Investment Advisory Agreements, approval by the
shareholders of a particular series is necessary to make such agreement
effective as to that series.
The assets received by a corporation or trust for the issue or sale of
shares of each series or class thereof, and all income, earnings, profits and
proceeds thereof, subject only to the rights of creditors, are allocated to such
series, and in the case of a class, allocated to such class, and constitute the
underlying assets of such series or class. The underlying assets of each series
or class thereof, are required to be segregated on the books of account, and are
to be charged with the expenses in respect to such series or class thereof, and
with a share of the general expenses of such corporation or trust. Any general
expenses of a corporation or trust not readily identifiable as belonging to a
particular series or class shall be allocated among the series or classes
thereof, based upon the relative net assets of the series or class at the time
such expenses were accrued. Each corporation's Articles of Incorporation and
trust's Declaration of Trust limit the liability of the respective Board members
to the fullest extent permitted by law. For a further discussion of the above
matters, see "Additional Information" in the Statement of Additional
Information.
In the opinion of the staff of the Securities and Exchange Commission, the
use of this combined Prospectus may possibly subject all of the Funds to a
certain amount of liability for any losses arising out of any statement or
omission in this Prospectus regarding a particular Fund. In the opinion of the
Funds' executive officers, however, the risk of such liability is not materially
increased by the use of a combined Prospectus.
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS (AND/OR IN THE STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE
COVER PAGE OF THIS PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR VOYAGEUR FUND DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN THE STATE IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
