NORTH DAKOTA TAX FREE FUND
ANNNUAL REPORT
Dated December 31, 1995
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds
as your objectives or market conditions change.
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur WISCONSIN Tax Free Fund
Voyageur KANSAS Tax Free Fund
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
Voyageur ARIZONA Insured Voyageur MISSOURI Insured
Tax Free Fund Tax Free Fund
Voyageur CALIFORNIA Insured Voyageur NATIONAL Insured
Tax Free Fund Tax Free Fund
Voyageur FLORIDA Voyageur OREGON
Tax Free Fund Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON
Tax Free Fund
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited
Voyageur MINNESOTA Limited Term Tax Free Fund Term Tax Free Fund
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
Dear Shareholder:
1995 was an excellent year for municipal bond fund investors and I am pleased to
report that your Fund did extremely
well.
As you may recall, the previous year, 1994, represented one of the most
difficult years for fixed income investors since the 1920s. Voyageur's
investment strategy, however, emphasizes total return over the long term.
Shareholders who maintained a long term outlook through 1994 are to be
congratulated for their patience. This patience was rewarded
in 1995.
Two of the major factors contributing to the resurgence of the municipal bond
market this past year were:
* Progressively lower interest rates throughout the year. (Falling
interest rates directly increases the value of your Fund's portfolio,
and hence your shares.)
* A narrowing "spread" between yields on higher quality bonds versus
lower quality bonds. (Your Fund benefited from maintaining a large
position in quality bonds.)
In the following pages, Beth Howell, the Fund's portfolio manager will elaborate
on these and other points of interest regarding the municipal bond market in
1995. Beth will also share Voyageur's economic outlook for the next fiscal
year.
Finally, I'd like to apprise you of the amount of capital appreciation and
current income generated by the Fund on your
behalf in 1995.
VOYAGEUR NORTH DAKOTA TAX FREE FUND
<TABLE>
<CAPTION>
TOTAL NET
NET ASSET NET ASSET ASSETS
VALUE VALUE DIVIDENDS END OF
BEGINNING END PAID PER PERIOD
OF PERIOD OF PERIOD SHARE (000'S)
--------- --------- ----- -------
PERIOD
- ------
Period ended December 31, 1995:
<S> <C> <C> <C> <C>
Class A Shares $9.85 $11.00 $0.57 $36,096
Class B Shares 9.85 11.00 0.51 375
Class C Shares 10.51* 11.00 0.18 20
___________________________________
*Net asset value at July 29, 1995 (commencement of operations)
</TABLE>
I will be reporting to you again in August, 1996 to review the first half of the
coming year. In the interim, if you have any questions or comments about your
Fund, please call Voyageur's Shareholder Services Department at (800)545-3863 or
your financial advisor.
Thank you for investing with Voyageur.
Sincerely,
John G. Taft
President
Voyageur North Dakota Tax Free Fund
FUND INVESTMENT OBJECTIVE AND STRATEGY
The primary objective of the Voyageur North Dakota Tax Free Fund is to seek as
high a level of current income exempt from federal income tax and from state
income tax as is consistent with preservation of capital.
The North Dakota Tax Free Fund generally invests in long-term, quality bonds.
The Fund is exempt from federal income tax and North Dakota state income tax. We
believe that investment grade bonds for the North Dakota Tax Free
Fund offer the best value in today's interest rate environment.
DISCUSSION OF FUNDS PERFORMANCE
by Elizabeth H. Howell
MS. HOWELL IS A SENIOR VICE PRESIDENT AND TAX EXEMPT PORTFOLIO MANAGER FOR
VOYAGEUR FUND MANAGERS, AND PORTFOLIO MANAGER FOR THE VOYAGEUR NORTH DAKOTA TAX
FREE FUND.
We at Voyageur are pleased to report the 1995 performance results of the
Voyageur North Dakota Tax Free Fund. For the fiscal year ending December 31,
1995, only the Class 'A' and 'B' shares of the Fund were in operation for the
entire year. The Fund achieved a total return of +17.8% (for Class 'A' shares,
assuming purchase of shares at net asset value and reinvestment of dividend and
capital gains) and +17.2% (for Class 'B' shares, assuming reinvestment of
dividends and capital gains). For additional information about total returns
achieved by the Fund over other timeframes and including the effect of sales
charges, please refer to the chart on page 7.
FACTORS AFFECTING FUND PERFORMANCE IN 1995
As previously discussed, a general downward trend in prevailing interest rates
had a positive impact on the net asset value of Fund shares in 1995. The falling
interest rates also favored longer duration securities. Your Fund was able to
capture significant capital appreciation through duration management. Longer
duration funds experience wider fluctuations in market prices that shorter
duration funds. The Voyageur North Dakota Tax Free Fund started 1995 with an
average weighted duration of nearly 9 years which allowed for a significant
increase in net asset value. After having captured this market rally, the
duration of the Fund was systematically reduced, closing the year at
approximately 6.1 years.
The Voyageur North Dakota Tax Free Fund also benefited from relative changes in
value between high quality bonds and lower quality bonds. As interest rate
spreads between these two classes of municipal bonds narrowed, high quality
bonds (which had been dramatically oversold during the 1994 bear market) gained
significant relative value. The Fund's asset quality throughout 1995 remained
high. As of December 31, 1995 the Fund was comprised of 51% AAA and/or Aaa
bonds; 99% of the Fund was held in investment grade securities.
Finally, supply and demand trends of North Dakota municipal bonds benefited Fund
shareholders. North Dakota's new issuance of municipal bonds remained low. A
lower level of supply of North Dakota bonds favors existing bond holders,
particularly large institutional buyers, such as mutual funds.
OUTLOOK FOR 1996
Our outlook for the municipal bond market remains bullish. However, we do not
anticipate as significant levels of total return in the upcoming year as was
achieved in 1995.
Our 1996 economic outlook calls for:
* CONTINUED LOW RATES OF INFLATION. We expect a Consumer Price Index (CPI)
increase of from 2.5% to 2.8%.
* SLOWING OF ECONOMIC GROWTH. In 1995 U.S. Gross Domestic Product (GDP)
climbed about 3%. Voyageur's 1996 projection for GDP calls for an increase
of about 2.4%.
* STABLE TO SLIGHTLY DECLINING INTEREST RATES. During 1995 the Federal
Reserve Board encouraged lower interest rates by reducing the Federal Funds
Rate by a total of .5%. (Rates were subsequently lowered by an additional
.25% in February 1996.) We expect further reductions of .5% to .75%, which
will likely occur well in advance of the
November elections.
In conclusion, Voyageur believes the municipal bond market will have a good year
in 1996. However, we advise against expectations of total return levels achieved
in 1995.
PURSUANT TO RULE 232.304 (a) OF REGULATION S-T THE FOLLOWING IS A TABULAR
REPRESENTATION OF A LINE GRAPH FOR VOYAGEUR NORTH DAKOTA TAX FREE FUND PORTFOLIO
ABSTRACT FOR THE PERIOD ENDED DECEMBER 31, 1995. THE DATA REPRESENTS THE
CUMULATIVE TOTAL RETURN OF A HYPOTHETICAL INVESTMENT IN CLASS A SHARES OF
$10,000 MADE ON THE DATE THE FUND COMMENCED OPERATIONS THROUGH DECEMBER 31,
1995.
ENDING VALUE ENDEING VALUE ENDING VALUE
WITH SALES WITHOUT SALES LEHMAN BROS.
DATE CHARGE CHARGE BOND INDEX
- ---- ------ ------ ----------
Apr-91 9525 10000 10000
Apr-91 9626.59 10106.66 10145
May-91 9720.75 10205.51 10250.51
Jun-91 9783.56 10271.46 10220.78
Jul-91 9887.79 10380.88 10370
Aug-91 9984.04 10481.93 10508.96
Sep-91 10118.17 10622.75 10651.88
Oct-91 10167.63 10674.68 10756.27
Nov-91 10225.44 10735.38 10773.48
Dec-91 10402.42 10921.17 11002.96
Jan-92 10421.35 10941.05 11026.06
Feb-92 10430.01 10950.14 11030.48
Mar-92 10448.61 10969.67 11056.95
Apr-92 10559.21 11085.78 11160.88
May-92 10660.13 11191.74 11307.09
Jun-92 10813 11352.23 11515.14
Jul-92 11133.68 11688.9 11927.38
Aug-92 10974.77 11522.07 11778.29
Sep-92 11014.01 11563.26 11837.18
Oct-92 10958.15 11504.61 11669.09
Nov-92 11326.86 11891.72 11965.49
Dec-92 11411.08 11980.14 12122.24
Jan-93 11516.01 12090.29 12251.95
Feb-93 11858.52 12449.89 12771.43
Mar-93 11853.23 12444.34 12660.32
Apr-93 11955.44 12551.64 12819.84
May-93 12015.06 12614.23 12926.24
Jun-93 12184.45 12792.07 13164.08
Jul-93 12277.76 12890.04 13179.88
Aug-93 12504.09 13127.66 13494.88
Sep-93 12529.17 13153.99 13664.92
Oct-93 12587.96 13215.71 13689.51
Nov-93 12452.82 13073.83 13538.93
Dec-93 12688.85 13321.62 13865.22
Jan-94 12940.1 13585.4 14039.92
Feb-94 12685.9 13318.53 13622.93
Mar-94 12232.88 12842.92 12905
Apr-94 12034 12634.12 13010.83
May-94 12101.59 12705.08 13164.35
Jun-94 12109.66 12713.56 13032.71
Jul-94 12342.12 12957.6 13331.16
Aug-94 12374.29 12991.38 13368.49
Sep-94 12228.09 12837.89 13101.12
Oct-94 12009.59 12608.49 12755.25
Nov-94 11718.38 12302.76 12456.77
Dec-94 11994.93 12593.1 12847.92
Jan-95 12332.59 12947.6 13350.27
Feb-95 12745.3 13380.89 13834.88
Mar-95 12852.32 13493.24 13992.6
Apr-95 12872.86 13514.81 13989.8
May-95 13229.37 13889.11 14517.22
Jun-95 13125.43 13779.98 14293.65
Jul-95 13209.54 13868.29 14367.98
Aug-95 13382.34 14049.7 14564.82
Sep-95 13530.43 14205.17 14679.88
Oct-95 13780.55 14467.77 14992.57
Nov-95 13993.71 14691.56 15323.9
Dec-95 14130.66 14835.34 15538.44
VOYAGEUR NORTH DAKOTA TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS A SHARES)
----------------
1 SINCE
YEAR 4/1/91**
---- --------
Without Sales Charge 17.81% 8.65%
With Sales Charge* 12.21% 7.55%
Lehman Bros. 20 20.94% 9.72%
Year Municipal
Bond Index
VOYAGEUR NORTH DAKOTA TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS B SHARES)
----------------
SINCE
1 YEAR 5/10/94**
------ ---------
Without Contingent
Deferred Sales Charge 17.24% 10.17%
With Contingent
Deferred Sales Charge*** 13.24% 7.87%
VOYAGEUR NORTH DAKOTA TAX FREE FUND
TOTAL RETURNS
(CLASS C SHARES)
----------------
SINCE
7/29/95**
---------
6.47%
* Average annual total returns include the maximum 4.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1995.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Tax Free Funds, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of Voyageur North Dakota
Tax Free Fund (a fund within Voyageur Tax Free Funds, Inc.) as of December 31,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended December 31, 1995 and the financial highlights for each of the years in
the four-year period ended December 31, 1995 and for the period from April 1,
1991, commencement of operations, to December 31, 1991. These financial
statements and the financial highlights are the responsibility of Fund
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody are confirmed to us by the custodian. As to securities sold but
not delivered, we request confirmations from brokers, and where replies are not
received, we carry out other appropriate auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Voyageur North Dakota Tax
Free Fund at December 31, 1995 and the results of its operations for the year
then ended, the changes in its net assets for each of the years in the two-year
period ended December 31, 1995 and the financial highlights for the periods
stated in the first paragraph above, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 9, 1996
<TABLE>
<CAPTION>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at market value (note 1)
(identified cost: $35,958,657)............................................... $37,179,596
Accrued interest receivable..................................................... 503,290
Receivable for investment securities sold....................................... 5,000
Receivable for Fund shares sold................................................. 673
Organizational costs (note 1)................................................... 989
-----------
Total assets................................................................. 37,689,548
-----------
LIABILITIES
Bank overdraft.................................................................. 1,012,636
Dividends payable to shareholders............................................... 155,727
Distribution fees payable....................................................... 895
Other accrued expenses.......................................................... 28,947
-----------
Total liabilities............................................................ 1,198,205
-----------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK.............................. $36,491,343
===========
Represented by:
Capital Stock - $.01 par value (note 1)...................................... $ 33,170
Additional paid-in capital................................................... 35,386,261
Undistributed net investment income.......................................... 6,208
Accumulated net realized loss on investments................................. (155,235)
Unrealized appreciation of investments....................................... 1,220,939
-----------
TOTAL NET ASSETS........................................................... $36,491,343
===========
Net assets applicable to outstanding Class A Shares............................. $36,096,088
===========
Net assets applicable to outstanding Class B Shares............................. 374,954
===========
Net assets applicable to outstanding Class C Shares............................. 20,301
===========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of Capital Stock outstanding: 3,281,055 (note 4)........... $11.00
======
Class B - Shares of Capital Stock outstanding: 34,078 (note 4).............. $11.00
======
Class C - Shares of Capital Stock outstanding: 1,846 (note 4)............... $11.00
======
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest................................................................ $2,094,284
----------
Expenses (note 3):
Investment advisory and management fee.................................. 179,121
Dividend-disbursing, administrative and accounting services fees........ 75,910
Printing, postage and supplies.......................................... 4,835
Audit and accounting fees............................................... 8,573
Legal fees.............................................................. 783
Distribution fees - Class A............................................. 88,956
Distribution fees - Class B............................................. 2,317
Distribution fees - Class C............................................. 168
Directors' fees......................................................... 1,616
Registration fees....................................................... 1,244
Custodian fees.......................................................... 10,167
Amortization of organizational costs.................................... 3,451
Other ................................................................ 226
----------
Total expenses........................................................ 377,367
Less: Expenses waived or absorbed by the distributor................... (86,608)
----------
Net expenses before earnings credits on uninvested cash................. 290,759
Less: Earnings credits on uninvested cash.............................. (9,786)
----------
Total net expenses.................................................... 280,973
----------
Investment income - net............................................... 1,813,311
----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions (note 2)......................... (87,044)
Net change in unrealized appreciation or depreciation of investments.... 4,122,617
----------
Net gain on investments............................................... 4,035,573
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $5,848,884
==========
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
Operations: 1995 1994
------------- -------------
<S> <C> <C>
Investment income - net........................................... $ 1,813,311 $ 1,935,876
Realized gain (loss) on investments - net......................... (87,044) 283,858
Net change in unrealized appreciation or depreciation of investments 4,122,617 (4,311,228)
------------- -------------
Net increase (decrease) in net assets resulting from operations. 5,848,884 (2,091,494)
------------- -------------
Distributions to shareholders from:
Investment income - net:
Class A......................................................... (1,912,391) (1,816,356)
Class B......................................................... (10,940) (2,596)
Class C......................................................... (696) N/A
Net realized gain on investments:
Class A......................................................... -- (282,927)
Class B......................................................... -- (931)
Excess distributions of net realized gains:
Class A......................................................... -- (67,967)
Class B......................................................... -- (224)
------------- ------------
Total distributions........................................... (1,924,027) (2,171,001)
------------- ------------
Capital share transactions (note 4): Proceeds from sale of shares:
Class A (note 3)................................................ 3,442,030 7,013,267
Class B......................................................... 248,571 148,507
Class C......................................................... 62,010 N/A
Net asset value of shares issued in reinvestment of net investment income and
realized gain distributions:
Class A....................................................... 1,297,310 1,276,264
Class B....................................................... 8,279 1,955
Class C....................................................... 611 N/A
Payments for redemption of shares:
Class A......................................................... (6,371,759) (5,084,626)
Class B (note 3)................................................ (49,862) --
Class C......................................................... (44,010) N/A
------------- ------------
Increase (decrease) in net assets from share transactions......... (1,406,820) 3,355,367
------------- ------------
Total increase (decrease) in net assets......................... 2,518,037 (907,128)
Net assets at beginning of period.................................... 33,973,306 34,880,434
------------- ------------
Net assets at end of period (including undistributed net
investment income of $6,208, and $116,924, respectively).......... $36,491,343 $33,973,306
============= ============
</TABLE>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur North Dakota Tax Free Fund (the Fund), a fund within Voyageur Tax
Free Funds, Inc., is registered under the Investment Company Act of 1940 (as
amended) as a non-diversified, open-end management investment company. The Fund
seeks high current income free from both federal and state income taxes by
investing in investment grade municipal bonds.
The Fund offers Class A, Class B and Class C Shares. Class A Shares are
sold with a front-end sales charge. Class B Shares may be subject to a
contingent deferred sales charge and such shares automatically convert to Class
A after eight years. Class C Shares (first offered in 1995) are not subject to a
front-end sales charge or contingent deferred sales charge and have no
conversion feature. Each class of shares has identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
level of distribution fees charged differs between classes. Income, expenses
(other than expenses incurred under each class' Distribution Agreement) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
Pursuant to its amended articles of incorporation, Voyageur Tax Free Funds,
Inc. has 10 trillion shares of authorized capital stock that may be issued in
one or more series.
The significant accounting policies followed by the Funds are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of net increase (decrease) in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
INVESTMENTS IN SECURITIES
Securities are valued at fair value as determined by the Board of
Directors. Determination of fair value involves, among other things, using
pricing services or prices quoted by independent brokers. Short-term securities
are valued at amortized cost which approximates market value.
Security transactions are accounted for on the trade date. Securities gains
and losses are calculated on the identified-cost basis. Interest income,
including level- yield amortization of premium and original issue discount, is
accrued daily.
The Fund concentrates its investments in a single state, and therefore may
have more credit risk related to the economic conditions of the state of North
Dakota than a portfolio with broader geographical diversification.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund
on a forward commitment or when-issued basis can take place up to a month or
more after the transaction date. During this period, such securities are subject
to market fluctuations and the portfolio maintains, in a segregated account with
its custodian, assets with a market value equal to or greater than the amount of
its purchase commitments.
ORGANIZATIONAL COSTS
Organizational costs are being amortized over 60 months on an inverse
acceleration (sum of the years' digits) basis.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to shareholders in amounts that will avoid or minimize
federal income or excise taxes for the Fund. Net investment income and net
realized gains (losses) for the Fund may differ for financial statement and tax
purposes primarily because of losses deferred for tax purposes due to "wash
sale" transactions. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. The effect on dividend
distributions on certain book-to-tax differences is reflected as excess
distributions of net realized gains in the statement of changes in net assets.
Also, due to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or realized
gains (losses) were recorded by the Fund.
For federal income tax purposes, as of December 31, 1995, the Fund had a
capital loss carryover of $122,540 that will expire in 2003 and 2004 if not
offset by subsequent capital gains. It is unlikely that the Board of Directors
will authorize a distribution of any net realized capital gains until the
available capital loss carryover has been offset or expires.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends declared daily from net investment income are payable monthly in
cash or reinvested in additional shares of the Fund. Net short-term realized
capital gains, if any, may be paid throughout the year and net long-term
realized capital gains, when available, are distributed annually.
(2) SECURITIES TRANSACTIONS
Purchase cost and proceeds from sales of securities other than short-term
securities aggregated $15,942,252 and $16,594,098 during the year ended December
31, 1995, respectively.
(3) EXPENSES
The Fund has an investment advisory and management agreement with Voyageur
Fund Managers, Inc. (Voyageur) under which Voyageur manages the Fund's assets
and provides other specified services. The fee for investment management and
advisory services is paid monthly and is based on the average daily net assets
of the Fund at the annual rate of .50%. In addition, the Fund will pay most
other operating expenses including directors' fees, registration fees, printing
of shareholder reports, legal and auditing services and other miscellaneous
expenses. Voyageur is obligated to pay all expenses of the Fund (excluding
distribution fees, insurance premiums on portfolio securities, taxes, interest
and brokerage commissions) which exceed 1% of average daily net assets, on an
annual basis.
The Fund will also pay a fee to Voyageur for acting as the Fund's dividend
disbursing, administrative and accounting services agent. The fee is paid
monthly and is equal to the sum of $1.33 per shareholder account per month, a
fixed monthly fee ranging from $1,000 to $1,500 based on the level of the Fund's
average daily net assets and an annualized percentage of average daily net
assets at reducing rates from .11% to .02%. The Fund is also responsible for
reimbursing Voyageur's out-of-pocket expense in connection with the performance
of dividend-disbursing, administrative and accounting services.
Each class of shares has a Distribution Agreement under Rule 12b-1 of the
Investment Company Act of 1940 with Voyageur Fund Distributors, Inc. (Fund
Distributors). Under these plans the Fund is obligated to pay Fund Distributors
a monthly distribution fee at an annual rate of .25% of average daily net assets
of the Class A Shares and 1.00% of average daily net assets of the Class B and
Class C Shares. Fund Distributors may waive all or part of its distribution fee
at its sole discretion. During the year ended December 31, 1995, Fund
Distributors voluntarily waived Class A distribution fees of $85,447 and Class B
distribution fees of $1,161. The Fund earned $9,786 in credits on uninvested
cash balances held by the Fund at the custodian during the year ended December
31, 1995. These credits were used to reduce certain fees for various custodial,
pricing and accounting services provided by the custodian bank
Sales charges paid by Class A shareholders were $63,571. Of this amount,
Fund Distributors received $8,965. Contingent deferred sales charges paid by
Class B Shareholders were $1,995.
(4) SHARE TRANSACTIONS
Transactions in shares of capital stock during the periods ended December 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
-------------------- ----------------
<S> <C> <C>
Shares sold.......................................... 325,541 657,610
Shares issued for reinvested distributions........... 124,904 121,738
Shares redeemed...................................... (604,981) (495,792)
------------ ------------
Increase (decrease) in shares outstanding............ (154,536) 283,556
============ ===========
CLASS B
----------------------------------------
YEAR PERIOD FROM
ENDED MAY 10, 1994*
DECEMBER 31, TO DECEMBER 31,
1995 1994
-------------------- ---------------
Shares sold.......................................... 23,246 14,434
Shares issued for reinvested distributions........... 792 193
Shares redeemed...................................... (4,587) --
------------ ----------
Increase in shares outstanding....................... 19,451 14,627
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS C
---------------
PERIOD FROM
JULY 29, 1995*
TO DECEMBER 31,
---------------
1995
<S> <C>
Shares sold.......................................... 5,855
Shares issued for reinvested distributions........... 57
Shares redeemed...................................... (4,066)
---------
Increase in shares outstanding....................... 1,846
=========
__________________________________
* Commencement of operations.
</TABLE>
(5) FINANCIAL HIGHLIGHTS
Per share data (rounded to the nearest cent) for a share of capital stock
outstanding and selected information for each period are as follows:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
PERIOD FROM
APRIL 1, 1991(d)
YEAR ENDED DECEMBER 31, TO DECEMBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period...................... $ 9.85 $11.07 $10.59 $10.34 $10.00
------ ------ ------ ------ ------
Operations:
Net investment income.................... .54 .56 .58 .62 .49
Net realized and unrealized
gain (loss) on investments............. 1.18 (1.15) .58 .34 .41
------ ------- ------ ------ ------
Total from operations................ 1.72 (.59) 1.16 .96 .90
------ ------- ------ ------ ------
Distributions to shareholders:
From net investment income (a)........... (.57) (.53) (.58) (.62) (.49)
From net realized gains.................. -- (.08) (.10) (.09) (.07)
In excess of net realized gains.......... -- (.02) -- -- --
------ ------- ------ ------ ------
Total distributions.................... (.57) (.63) (.68) (.71) (.56)
------ ------- ------ ------ ------
Net asset value:
End of period............................ $11.00 $9.85 $11.07 $10.59 $10.34
====== ===== ====== ====== ======
Total investment return (b)................. 17.81% (5.47)% 11.20% 9.70% 9.23%
Net assets at end of period (000's omitted). $36,096 $33,829 $34,880 $15,846 $4,914
Ratios:
Ratio of expenses to
average daily net assets (f)........... .81% .46% .59% .40% .16%(e)
Ratio of net investment income
to average daily net assets............ 5.07% 5.36% 5.11% 5.78% 6.43%(e)
Assuming no voluntary waivers and
reimbursements:
Expenses (c)..................... 1.05% 1.14% 1.25% 1.25% 1.25%(e)
Net investment income............ 4.83% 4.68% 4.45% 4.93% 5.34%(e)
Portfolio turnover rate (excluding
short-term securities)................... 45.34% 32.60% 27.39% 26.27% 126.37%
See accompanying notes to Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B CLASS C
-------------------------------------- ----------------
YEAR PERIOD FROM PERIOD FROM
ENDED MAY 10, 1994(d) JULY 29, 1995(d)
DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
1995 1994 1995
---------------------------------------------------------
<S> <C> <C> <C>
Net asset value:
Beginning of period............................... $ 9.85 $10.31 $10.51
------ ------ ------
Operations:
Net investment income............................. .48 .30 .17
Net realized and unrealized
gain (loss) on investments...................... 1.18 (.39) .50
------ ------ ------
Total from operations......................... 1.66 (.09) .67
------ ------ ------
Distributions to shareholders:
From net investment income (a).................... (.51) (.27) (.18)
From net realized gains........................... -- (.08) --
In excess of net realized gains................... -- (.02) --
------ ------ ------
Total distributions............................. (.51) (.37) (.18)
------ ------ ------
Net asset value:
End of period..................................... $11.00 $9.85 $11.00
====== ===== ======
Total investment return (b).......................... 17.24% (0.77)% 6.47%
Net assets at end of period (000's omitted).......... $375 $144 $20
Ratios:
Ratio of expenses to
average daily net assets (f).................... 1.29% .99%(e) 1.73%(e)
Ratio of net investment income
to average daily net assets..................... 4.56% 4.97%(e) 4.00%(e)
Assuming no voluntary waivers and
reimbursements:
Expenses (c).............................. 1.79% 1.89%(e) 1.73%(e)
Net investment income..................... 4.06% 4.07%(e) 4.00%(e)
Portfolio turnover rate (excluding
short-term securities)............................ 45.34% 32.60% 45.34%
See accompanying notes to Financial Highlights.
</TABLE>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
NOTES TO FINANCIAL HIGHLIGHTS
(a) For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from federal
income tax. For the period ended December 31, 1991 $.01 per share of the
distribution from net investment income was subject to state income tax.
(b) 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.
(c) Voyageur Fund Distributors voluntarily waived or reimbursed expenses during
the periods presented. The annual contractual expenses limit for the Fund
(excluding distribution fees, insurance premiums on portfolio securities,
taxes, interest and brokerage commissions) is 1% of average daily net
assets. The maximum distribution fee is .25% of the Fund's average daily
net assets for Class A Shares and 1.00% of the Fund's average daily net
assets for Class B and Class C Shares.
(d) Commencement of operations.
(e) Annualized.
(f) Beginning in the year ended December 31, 1995, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Fund. Prior period expense ratios have not
been adjusted.
<TABLE>
<CAPTION>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
INVESTMENTS IN SECURITIES DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (C) RATE MATURITY VALUE (A)
- -------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
NORTH DAKOTA MUNICIPAL BONDS (101.9%):
PRE-REFUNDED/ESCROWED TO MATURITY (0.6%):
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 200 Fargo Park District Revenue............................................ 7.25% 11-01-00 $ 217,944
---------
GENERAL OBLIGATION (12.0%):
------------------------------------------------------------------------------------------------------
210 Bismarck Tax Increment GO.............................................. 5.70 05-01-07 213,190
110 Devils Lake............................................................ 5.75 05-01-10 111,204
100 Devils Lake Public School District #1.................................. 6.80 05-01-11 104,122
490 Fargo Public School District #1 (MBIA Insured)......................... 5.55 06-01-09 502,074
625 Fargo Public School District #1 (MBIA Insured)......................... 5.75 05-01-10 641,487
650 Fargo Public School District #1 (MBIA Insured)......................... 5.75 05-01-12 663,546
1,090 Fargo Refunding Bonds 1995-B........................................... 5.30 05-01-14 1,085,237
155 Grand Forks Highway Unlimited Tax...................................... 6.00 12-01-10 162,514
165 Grand Forks Highway Unlimited Tax ..................................... 6.00 12-01-11 172,531
170 Grand Forks Highway Unlimited Tax...................................... 6.00 12-01-12 177,259
270 Grand Forks Sewer Reserve.............................................. 6.70 06-01-07 290,443
250 North Dakota State Real Estate......................................... 6.00 09-01-96(b) 254,630
---------
4,378,237
---------
UTILITIES (8.5%):
-------------------------------------------------------------------------------------------------------
145 Grand Forks Water Revenue.............................................. 5.70 06-01-11 147,665
155 Grand Forks Water Revenue.............................................. 5.75 06-01-12 157,967
165 Grand Forks Water Revenue.............................................. 5.80 06-01-13 168,516
175 Grand Forks Water Revenue.............................................. 5.85 06-01-14 179,081
190 Grand Forks Water Revenue.............................................. 5.85 06-01-15 194,081
2,200 Mercer County Pollution Control - Special Utility (MBIA Insured)....... 5.85 06-01-23 2,263,976
---------
3,111,286
---------
INDUSTRIAL (15.8%):
------------------------------------------------------------------------------------------------------
1,000 Fargo Trollwood Village................................................ 5.13 11-01-16 1,002,010
500 Mercer Pollution Control Otter Tail Power.............................. 6.90 02-01-19 541,900
500 Mercer Pollution Control (FGIC Insured)................................ 6.65 06-01-22 543,110
1,000 Mercer Pollution Control Revenue Basin Electric (AMBAC Insured)........ 6.05 01-01-19 1,053,180
2,250 Morton County Pollution Control Revenue (FGIC Insured)................. 6.65 06-01-22 2,443,995
180 Oliver County Pollution Control Revenue................................ 7.00 12-31-10 180,196
----------
5,764,391
----------
HEALTH CARE (17.2%):
------------------------------------------------------------------------------------------------------
500 Bismarck Hospital Alexius Medical Center (AMBAC Insured)............... 6.90 05-01-06 553,805
250 Bismarck Hospital Medical Center (BIG Insured)......................... 7.50 05-01-13 273,125
500 Carrington Health Facility Revenue..................................... 6.25 11-15-15 516,570
1,000 Cass County Health Facility Catholic Health Corp., Villa Nazareth
Project............................................................. 6.25 11-15-14 1,050,050
1,000 Fargo Hospital Facility St. Luke's Hospital, Series 1992............... 6.50 06-01-15 1,070,350
225 Grand Forks Health Care (MBIA Insured)................................. 6.13 12-01-14 239,926
250 Grand Forks Health Care Revenue (MBIA Insured)......................... 6.25 12-01-19 268,613
500 Ward County Health Care Facility....................................... 7.50 07-01-21 559,375
1,750 Williston Hospital Revenue (MBIA Insured)............................. 5.50 11-15-14 1,744,785
---------
6,276,599
---------
HOUSING REVENUE (22.0%):
------------------------------------------------------------------------------------------------------
305 Grand Forks Multifamily Housing Authority Revenue - Ryan House Sec. 8.. 6.30 03-01-22 313,955
360 Minot Single Family Mortgage........................................... 7.70 08-01-10 402,563
1,000 North Dakota Housing Finance Authority Single Family Mortgage.......... 6.00(e) 07-01-15 1,002,610
210 North Dakota State Housing Finance Agency Single Family Mortgage Series A
(FHA Insured)....................................................... 6.75 07-01-12 221,928
420 North Dakota State Housing Finance Agency Single Family Mortgage
Series A............................................................. 6.95 07-01-12 449,013
1,960 North Dakota State Housing Finance Agency Single Family Mortgage
Series B............................................................. 5.80 07-01-25 1,946,300
985 North Dakota State Housing Finance Agency Single Family Mortgage
Series E............................................................. 6.30 01-01-15 1,015,486
500 North Dakota State Housing Finance Agency Revenue (FNMA Insured)....... 6.13 12-01-15 514,455
1,300 North Dakota State Housing Finance Agency Revenue Multifamily (FNMA
Insured)............................................................. 6.15 12-01-17 1,339,780
810 North Dakota State Housing Finance Authority Multifamily (MBIA
Insured)............................................................. 5.75 07-01-23 810,915
---------
8,017,005
EDUCATION (3.7%):
------------------------------------------------------------------------------------------------------
250 Burleigh County University Facilities Mary PJ Bank Qualified........... 7.13 12-01-11 265,755
250 North Dakota State University Housing and Auxiliary Facility........... 6.30 04-01-07 268,265
500 North Dakota State University Housing and Auxiliary Facility........... 6.50 04-01-12 533,785
300 University of North Dakota State Board of Higher Education............. 5.25 04-01-13 293,223
---------
1,361,028
---------
OTHER REVENUE (22.1%):
------------------------------------------------------------------------------------------------------
500 Fargo Refunding Improvement ........................................... 5.90 05-01-07 525,765
500 Fargo Sales Tax Revenue (AMBAC Insured)................................ 5.20 07-01-08 502,975
1,295 Fargo Sales Tax Revenue (AMBAC Insured)................................ 5.20 01-01-09 1,297,111
1,310 North Dakota Building Authority Revenue (CGIC Insured)................. 6.00 12-01-14 1,371,531
1,480 North Dakota Building Authority Revenue (CGIC Insured)................. 6.10 12-01-16 1,559,683
450 North Dakota Muni Bond Bank............................................ 6.25 12-01-11 464,503
2,000 North Dakota Muni Bond Bank............................................ 6.25 10-01-14 2,115,940
200 North Dakota Student Loan (AMBAC Insured).............................. 7.00 07-01-05 215,598
---------
8,053,106
---------
TOTAL INVESTMENT IN SECURITIES (cost: $35,958,657) (d) $37,179,596
===========
See accompanying notes to investments in securities.
</TABLE>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
NOTES TO INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) The maturity dates for these issues represent mandatory puts or dates on
which, in the opinion of the Fund's investment advisor, the issue is likely
to be called.
(c) Investments in bonds, by rating category (unaudited) as a percentage of
total bonds, are as follows:
AAA/AAA AA/AA A/A NR/NR TOTAL
------- ----- --- ----- -----
51% 23% 25% 1% 100%
(d) The cost of securities for federal income tax purposes is $35,991,352 and
the aggregate gross unrealized appreciation and depreciation of securities
based on this cost are as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION (DEPRECIATION) APPRECIATION
------------ -------------- ------------
$1,238,357 $(50,113) $1,188,244
(e) Security subject to the Alternative Minimum Tax.
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions for the year ended December
31, 1995 shown below. Exempt interest dividends are exempt from federal income
tax and should not be included in shareholder's gross income, but need to be
reported on the income tax return for informational purposes. Each shareholder
should consult a tax adviser about reporting this income for state and local
purposes. In January 1996, the Fund separately provided each shareholder with
tax information for calendar year 1995.
<TABLE>
<CAPTION>
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------------ ------------ ---------------
YEAR YEAR PERIOD FROM
ENDED ENDED JULY 29, 1995
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1995 1995
------------ ------------ ---------------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)............................. $.5653 $.5140 $.1844
------ ------ ------
Total Distribution................................ $.5653 $.5140 $.1844
====== ====== ======
</TABLE>
For federal income tax purposes, 99.92% of the above net investment income
distributions were derived from interest
on securities exempt from federal income tax.
