[LOGO]
VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
NORTH DAKOTA TAX FREE FUND
SEMI-ANNUAL REPORT
DATED JUNE 30, 1996
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 HIGH YIELD FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in medium and
lower grade municipal bonds.
Voyageur MINNESOTA High Yield Municipal Bond Fund
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.
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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
</TABLE>
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.
<TABLE>
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Voyageur ARIZONA Insured Tax Free Fund Voyageur MISSOURI Insured Tax Free Fund
Voyageur CALIFORNIA Insured Tax Free Fund Voyageur NATIONAL Insured Tax Free Fund
Voyageur FLORIDA Insured Tax Free Fund Voyageur OREGON Insured Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON Insured Tax Free Fund
</TABLE>
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.
<TABLE>
<S> <C>
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited Term Tax Free Fund
Voyageur MINNESOTA Limited Term Tax Free Fund
</TABLE>
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
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Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
</TABLE>
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.
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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
</TABLE>
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).
LETTER FROM THE PRESIDENT
[PHOTO] JOHN G. TAFT
PRESIDENT
Dear Shareholder:
Since our last report, the headline story in the municipal bond market has been
the demise of a radical tax reform. One of the best ways to illustrate this
demise is to look at how municipal bonds have traded in relation to Treasury
securities. At the height of the tax reform scare -- when Steve Forbes was
campaigning on his Flat Tax platform in January 1996 -- long municipal
securities were trading at a very cheap 90% of Treasuries. At the time of this
report, market fears have abated and municipal bonds are trading at a more
traditional 81%.
We believe the issue of reforming the tax code is far from thoroughly closed.
And it is likely -- in this a U.S. presidential election year -- that we may see
renewed discussions about less radical tax reforms. However, as is often the
case in the financial markets, we believe these times of short-term volatility
and uncertainty represent good opportunities for long-term investors.
At Voyageur, we continue to stress the importance of maintaining a long-term
view -- in both the investment horizons of our shareholders and in our approach
to purchasing securities for the Voyageur Tax Free Funds. In order to select the
best long-term securities for the funds, we favor purchasing negotiated new
municipal issues over those in the secondary or competitive market.
Unlike the taxable bond market where the structure of new bond issues are
frequently predetermined and fixed, we have more flexibility and negotiating
power in determining how a municipal bond issue will be structured. In many
cases, our credit research analysts -- who are experienced experts in the area
of municipal bond transactions -- work closely with municipal bond issuers to
determine the appropriate structure for new bond issues. Our analysts' intimate
knowledge of what's in the market and their ability to actually dissect
individual municipal securities helps us to determine appropriate prices that
accurately reflect an issuer's strength and value while assisting us in
protecting our shareholders' interests. They also help us pinpoint rising and
falling stars -- bonds whose credits may be upgraded or downgraded -- in the
municipal market.
We remain committed to providing our clients with the best investment products
and services available in today's financial markets. The Voyageur Tax Free Funds
allow you access to a wide variety of national and state-specific municipal
bonds funds, all of which are actively managed to meet their individual fund
objectives.
As part of our commitment to you, we have also redesigned our shareholder
reports to provide you with more in-depth information about your Voyageur fund
investments in an easier-to-read format. We welcome any comments you may have
about these changes and encourage you to call our voyageur Shareholder Services
at 800.543.3863.
If at any time you have questions about your Voyageur fund investments, please
contact your personal financial advisor or Voyageur Shareholder Services. Our
Voyageur Shareholder Services 800 number -- known as Voyageur On Call (TM) --
allows you 24-hour access, seven days a week to an automated voice response
service with shareholder services representatives available from 8 a.m. to 5
p.m. Central Standard Time.
We appreciate your continued patronage of Voyageur Funds and look forward to
working with you and your financial advisors in creating products and services
designed to bring you closer to your investment goals.
Sincerely,
/s/ John G. Taft
John G. Taft
President
Voyageur North Dakota Tax Free Fund
VOYAGEUR NORTH DAKOTA TAX FREE FUND
[PHOTO] ELIZABETH H. HOWELL IS THE
SENIOR MUNICIPAL BOND
MANAGER FOR THE VOYAGEUR
NORTH DAKOTA TAX FREE
FUND. MS. HOWELL HAS MORE
THAN 10 YEARS OF INVESTMENT
INDUSTRY EXPERIENCE.
For the six months ended June 30, 1996, the total return at net asset value
(NAV) for the Voyageur North Dakota Tax Free Fund's Class A shares was -0.85%.*
Within the portfolio, we remained committed to purchasing municipal bonds with
high credit ratings, emphasizing securities in the general obligation and
housing sectors.
AREAS OF OPPORTUNITY
During the past six months, we continued to search for areas or sectors where we
could add value to the Fund. One such area has been to include investments that
have added income to the Fund portfolio. Although we still maintain our
commitment to total return, we believe this addition of income to the portfolio
will help dampen the effects of market volatility while allowing our
shareholders to benefit from higher income streams.
Also, since our last report, our stringent credit review made us to believe that
one of the Fund's municipal bond holdings, Trinity Hospital, was in danger of
being downgraded. Due to our research, we sold our holdings in Trinity Hospital,
which was downgraded to a BBB rating shortly after.
In order to attempt to protect our shareholders' current income level over the
long term, we have continued to take advantage of opportunities to extend the
Fund's call protection. This emphasis has led to the Fund having an average call
protection of approximately nine years.
OUTLOOK FOR THE MUNICIPAL MARKET
In the U.S. economy, we are still showing signs of moderate growth with moderate
inflation -- a trend we expect to see continue for the remainder of the year.
Our outlook for the municipal market continues to be favorable, and we expect
interest rates to decline over the long term. This has caused us to position the
Fund to take advantage of this trend.
*Past performance is no guarantee of future results.
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VOYAGEUR NORTH DAKOTA TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 1996
- ---------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at market value (note 1)
(identified cost: $33,794,213) ................................... $ 34,280,656
Accrued interest receivable ......................................... 581,328
Receivable for investment securities sold ........................... 5,000
Receivable for Fund shares sold ..................................... 3,299
------------
Total assets ..................................................... 34,870,283
------------
LIABILITIES
Bank overdraft ...................................................... 161,937
Dividends payable to shareholders ................................... 36,873
Payable for Fund shares redeemed .................................... 34,728
Other accrued expenses .............................................. 16,188
------------
Total liabilities ................................................ 249,726
------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK .................. $ 34,620,557
============
Represented by:
Capital Stock - $.01 par value (note 1) .......................... $ 32,536
Additional paid-in capital ....................................... 34,721,005
Distributions in excess of net investment income ................. (28,419)
Accumulated net realized loss on investments ..................... (591,008)
Unrealized appreciation of investments ........................... 486,443
------------
TOTAL NET ASSETS ............................................... $ 34,620,557
============
Net assets applicable to outstanding Class A Shares ................. $ 34,056,093
============
Net assets applicable to outstanding Class B Shares ................. $ 546,743
============
Net assets applicable to outstanding Class C Shares ................. $ 17,721
============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of Capital Stock outstanding: 3,200,515 (note 4) $ 10.64
============
Class B - Shares of Capital Stock outstanding: 51,369 (note 4) .. $ 10.64
============
Class C - Shares of Capital Stock outstanding: 1,666 (note 4) ... $ 10.64
============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
STATEMENT OF OPERATIONS (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest ........................................................... $ 1,035,026
-----------
Expenses (note 3):
Investment advisory and management fee ............................. 88,418
Dividend-disbursing, administrative and accounting services fees ... 37,265
Printing, postage and supplies ..................................... 2,405
Audit and accounting fees .......................................... 4,286
Legal fees ......................................................... 245
Distribution fees - Class A ........................................ 43,561
Distribution fees - Class B ........................................ 2,446
Distribution fees - Class C ........................................ 89
Directors' fees .................................................... 885
Registration fees .................................................. 254
Custodian fees ..................................................... 8,500
Amortization of organizational costs ............................... 989
Other .............................................................. 116
-----------
Total expenses ................................................. 189,459
Less: Expenses waived or absorbed by the distributor .............. (36,780)
-----------
Total net expenses ............................................. 152,679
-----------
Investment income - net ........................................ 882,347
-----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions (note 2) .................... (435,773)
Net change in unrealized appreciation or depreciation of investments (734,496)
-----------
Net loss on investments ........................................ (1,170,269)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... $ (287,922)
===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
Operations: (UNAUDITED) 1995
------------ ------------
<S> <C> <C>
Investment income - net ..................................................... $ 882,347 $ 1,813,311
Realized loss on investments - net .......................................... (435,773) (87,044)
Net change in unrealized appreciation or depreciation of investments ........ (734,496) 4,122,617
------------ ------------
Net increase (decrease) in net assets resulting from operations ........... (287,922) 5,848,884
------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A ................................................................... (877,050) (1,912,391)
Class B ................................................................... (11,139) (10,940)
Class C ................................................................... (366) (696)
Distributions in excess of net investment income:
Class A ................................................................... (28,193) --
Class B ................................................................... (193) --
Class C ................................................................... (33) --
------------ ------------
Total distributions ..................................................... (916,974) (1,924,027)
------------ ------------
Capital share transactions (note 4):
Proceeds from sale of shares:
Class A (note 3) .......................................................... 965,152 3,442,030
Class B ................................................................... 179,261 248,571
Class C ................................................................... -- 62,010
Net asset value of shares issued in reinvestment of net investment income
distributions:
Class A ................................................................. 652,418 1,297,310
Class B ................................................................. 9,158 8,279
Class C ................................................................. 467 611
Payments for redemption of shares:
Class A ................................................................... (2,469,946) (6,371,759)
Class B ................................................................... -- (49,862)
Class C ................................................................... (2,400) (44,010)
------------ ------------
Decrease in net assets from share transactions .............................. (665,890) (1,406,820)
------------ ------------
Total increase (decrease) in net assets ................................... (1,870,786) 2,518,037
Net assets at beginning of period .............................................. 36,491,343 33,973,306
------------ ------------
Net assets at end of period (including undistributed or (distributions in excess
of) net investment income of $(28,419) and $6,208, respectively) ............ $ 34,620,557 $ 36,491,343
============ ============
See accompanying notes to financial statements.
</TABLE>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(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 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 limited geographical areas, and
therefore may have more credit risk related to the economic conditions of these
areas 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 a straight line
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 $12,509,490 and $14,238,161 during the six months ended
June 30, 1996, 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 six months ended June 30, 1996, Fund
Distributors voluntarily waived Class A distribution fees of $35,619 and Class B
distribution fees of $1,161.
Sales charges paid by Class A shareholders were $29,041. Of this amount,
Fund Distributors received $4,152.
(4) SHARE TRANSACTIONS
Transactions in shares of capital stock during each period were as
follows:
CLASS A
-------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
-------- --------
Shares sold .............................. 89,077 325,541
Shares issued for reinvested distributions 60,491 124,904
Shares redeemed .......................... (230,108) (604,981)
-------- --------
Decrease in shares outstanding ........... (80,540) (154,536)
======== ========
CLASS B
-------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
-------- --------
Shares sold .............................. 16,439 23,246
Shares issued for reinvested distributions 852 792
Shares redeemed .......................... -- (4,587)
-------- --------
Increase in shares outstanding ........... 17,291 19,451
======== ========
CLASS C
-------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
-------- --------
Shares sold .............................. -- 5,855
Shares issued for reinvested distributions 43 57
Shares redeemed .......................... (223) (4,066)
-------- --------
Increase (decrease) in shares outstanding (180) 1,846
======== ========
* Commencement of operations.
(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
----------------------------------------------------------------------
SIX MONTHS PERIOD FROM
ENDED APRIL 1, 1991(D)
JUNE 30, 1996 YEAR ENDED DECEMBER 31, TO DECEMBER 31,
(UNAUDITED) 1995 1994 1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period...................... $11.00 $ 9.85 $11.07 $10.59 $10.34 $10.00
------ ------ ------ ------ ------ ------
Operations:
Net investment income.................... .27 .54 .56 .58 .62 .49
Net realized and unrealized
gain (loss) on investments........... (.35) 1.18 (1.15) .58 .34 .41
------ ------ ------ ------ ------ ------
Total from operations............ (.08) 1.72 (.59) 1.16 .96 .90
------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income (a)........... (.27) (.57) (.53) (.58) (.62) (.49)
In excess of net investment income....... (.01) -- -- -- -- --
From net realized gains.................. -- -- (.08) (.10) (.09) (.07)
In excess of net realized gains.......... -- -- (.02) -- -- --
------ ------ ------ ------ ------ ------
Total distributions.................. (.28) (.57) (.63) (.68) (.71) (.56)
------ ------ ------ ------ ------ ------
Net asset value:
End of period............................ $10.64 $11.00 $ 9.85 $11.07 $10.59 $10.34
====== ====== ====== ====== ====== ======
Total investment return (b)................. (.85)% 17.81% (5.47)% 11.20% 9.70% 9.23%
Net assets at end of period (000's omitted). $34,056 $36,096 $33,829 $34,880 $15,846 $4,914
Ratios:
Ratio of expenses to
average daily net assets (f)......... .86%(e) .81% .46% .59% .40% .16%(e)
Ratio of net investment income
to average daily net assets.......... 5.00%(e) 5.07% 5.36% 5.11% 5.78% 6.43%(e)
Assuming no voluntary waivers and
reimbursements:
Expenses (c)............... 1.06%(e) 1.05% 1.14% 1.25% 1.25% 1.25%(e)
Net investment income...... 4.80%(e) 4.83% 4.68% 4.45% 4.93% 5.34%(e)
Portfolio turnover rate (excluding
short-term securities)................... 35.74% 45.34% 32.60% 27.39% 26.27% 126.37%
See accompanying notes to Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------- ------------------------------
SIX MONTHS YEAR PERIOD FROM SIX MONTHS PERIOD FROM
ENDED ENDED MAY 10, 1994(d) ENDED JULY 29, 1995(d)
JUNE 30, 1996 DECEMBER 31, TO DECEMBER 31, JUNE 30, 1996 TO DECEMBER 31,
(UNAUDITED) 1995 1994 (UNAUDITED) 1995
------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.................. $11.00 $ 9.85 $10.31 $11.00 $10.51
------ ------ ------ ------ ------
Operations:
Net investment income................ .25 .48 .30 .21 .17
Net realized and unrealized
gain (loss) on investments........ (.36) 1.18 (.39) (.35) .50
------ ------ ------ ------ ------
Total from operations.......... (.11) 1.66 (.09) (.14) .67
------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income (a)....... (.25) (.51) (.27) (.21) (.18)
In excess of net investment income... -- -- -- (.01) --
From net realized gains.............. -- -- (.08) -- --
In excess of net realized gains...... -- -- (.02) -- --
------ ------ ------ ------ ------
Total distributions............... (.25) (.51) (.37) (.22) (.18)
------ ------ ------ ------ ------
Net asset value:
End of period........................ $10.64 $11.00 $ 9.85 $10.64 $11.00
====== ====== ====== ====== ======
Total investment return (b).............. (1.09)% 17.24% (0.77)% (1.32)% 6.47%
Net assets at end of period (000's omitted) $547 $375 $144 $18 $20
Ratios:
Ratio of expenses to
average daily net assets (f)...... 1.34%(e) 1.29% .99%(e) 1.75%(e) 1.73%(e)
Ratio of net investment income
to average daily net assets....... 4.52%(e) 4.56% 4.97%(e) 4.11%(e) 4.00%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)............ 1.81%(e) 1.79% 1.89%(e) 1.81%(e) 1.73%(e)
Net investment income... 4.05%(e) 4.06% 4.07%(e) 4.05%(e) 4.00%(e)
Portfolio turnover rate (excluding
short-term securities)............... 35.74% 45.34% 32.60% 35.74% 45.34%
See accompanying notes to Financial Highlights.
</TABLE>
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 (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (c) RATE MATURITY VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
MUNICIPAL BONDS (99.0%):
PRE-REFUNDED/ESCROWED TO MATURITY (0.9%):
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 200 Fargo Park District Revenue.......................................... 7.25% 11-01-00 $ 219,662
100 Devils Lake Public School District #1................................ 6.80 05-01-11 105,565
-----------
325,227
-----------
GENERAL OBLIGATION (7.9 %):
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210 Bismarck Tax Increment ............................................. 5.70 05-01-07 211,079
110 Devils Lake......................................................... 5.75 05-01-10 109,369
490 Fargo Public School District #1 (MBIA Insured)...................... 5.55 06-01-09 489,392
155 Grand Forks Highway Revenue......................................... 6.00 12-01-10 157,750
165 Grand Forks Highway Revenue ........................................ 6.00 12-01-11 167,440
170 Grand Forks Highway Revenue ........................................ 6.00 12-01-12 172,061
270 Grand Forks Sewer Reserve .......................................... 6.70 06-01-07 284,947
250 North Dakota State Real Estate ..................................... 6.00 09-01-96(b) 251,130
1,000 Puerto Rico Aqueduct & Sewer Authority.............................. 5.00 07-01-15 890,670
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2,733,838
-----------
UTILITIES (20.1 %):
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145 Grand Forks Water Revenue........................................... 5.70 06-01-11 144,129
155 Grand Forks Water Revenue........................................... 5.75 06-01-12 154,033
165 Grand Forks Water Revenue........................................... 5.80 06-01-13 163,937
175 Grand Forks Water Revenue........................................... 5.85 06-01-14 173,838
190 Grand Forks Water Revenue........................................... 5.85 06-01-15 188,700
3,750 Mercer County Pollution Control Revenue Basin Electric Revenue
(AMBAC Insured).................................................. 6.05 01-01-19 3,751,987
500 Mercer County Pollution Control Revenue Montana/Dakota
(FGIC Insured)................................................... 6.65 06-01-22 527,145
750 Morton Pollution Control Revenue-Montana/Dakota Utilities
(FGIC Insured).................................................. 6.65 06-01-22 787,710
175 Oliver County Pollution Control Revenue, Sq. Butte Electric Co-op... 7.00 12-31-10 175,548
1,000 Puerto Rico Electric Power Authority................................ 5.25 07-01-21 903,160
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6,970,187
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INDUSTRIAL (1.5%):
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500 Mercer Pollution Control Otter Tail Power.......................... 6.90 02-01-19 529,855
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HEALTH CARE (16.0%):
-------------------------------------------------------------------------------------------------------
500 Bismarck Hospital Alexius Medical Center (AMBAC Insured)........... 6.90 05-01-06 542,965
250 Bismarck Hospital Medical Center One Inc.(BIG Insured)............. 7.50 05-01-13 270,000
500 Carrington Health Facility Revenue................................. 6.25 11-15-15 498,840
1,000 Cass County Health Facility Catholic Health Corp.,
Villa Nazareth Project.......................................... 6.25 11-15-15 1,011,580
1,000 Fargo Hospital Facility St. Luke's Hospital, Series 1992........... 6.50 06-01-15 1,036,850
225 Grand Forks United Hospital (MBIA Insured)........................ 6.13 12-01-14 228,532
250 Grand Forks United Hospital (MBIA Insured)......................... 6.25 12-01-19 255,548
1,750 Williston Hospital Revenue (MBIA Insured)....................... 5.50 11-15-14 1,670,112
-----------
5,514,427
-----------
HOUSING REVENUE (22.7%):
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305 Grand Forks Multifamily Housing Authority Revenue - Ryan House
Section 8..................................................... 6.30 03-01-22 307,349
320 Minot Single Family Mortgage..................................... 7.70 08-01-10 347,264
415 North Dakota Housing Finance Authority Single Family
Mortgage Series A............................................. 6.95 07-01-12 431,920
2,000 North Dakota Housing Finance Authority Single Family Mortgage
Series A...................................................... 6.30(e) 07-01-16 1,995,940
205 North Dakota State Housing Finance Agency Single Family
Mortgage Series A (FHA Insured)............................... 6.75 07-01-12 211,923
970 North Dakota State Housing Finance Agency Single Family
Mortgage Series E............................................. 6.30 07-01-15 980,883
1,000 North Dakota State Housing Finance Agency Single Family
Mortgage Series F............................................. 6.00(e) 01-01-15 974,050
500 North Dakota State Housing Finance Agency Revenue
(FNMA Insured)................................................ 6.13 12-01-15 504,050
1,300 North Dakota State Housing Finance Agency Revenue Multifamily
(FNMA Insured)................................................ 6.15 12-01-17 1,309,243
810 North Dakota State Housing Finance Authority Multifamily
Section 8 (MBIA Insured)...................................... 5.75 07-01-23 780,476
-----------
7,844,098
-----------
EDUCATION (3.0%):
-------------------------------------------------------------------------------------------------------
250 Burleigh County University Facilities Mary PJ Bank Qualified..... 7.13 12-01-11 259,740
250 North Dakota State University Housing and Auxiliary Facility..... 6.30 04-01-07 262,438
500 North Dakota State University Housing and Auxiliary Facility..... 6.50 04-01-12 520,440
-----------
1,042,618
------------
TRANSPORTATION (8.8%):
-------------------------------------------------------------------------------------------------------
3,250 Puerto Rico Commonwealth Highway and Transportation.............. 5.50 07-01-26 3,040,505
-----------
OTHER REVENUE (18.1%):
-------------------------------------------------------------------------------------------------------
500 Fargo Refunding Improvement ..................................... 5.90 05-01-07 515,160
1,295 Fargo Sales Tax Revenue (AMBAC Insured).......................... 5.20 01-01-09 1,259,077
1,310 North Dakota Building Authority Revenue (FSA Insured)............ 6.00 12-01-14 1,318,502
1,480 North Dakota Building Authority Revenue (FSA Insured)............ 6.10 12-01-16 1,499,314
450 North Dakota Muni Bond Bank...................................... 6.25 12-01-11 456,782
1,000 North Dakota Muni Bond Bank...................................... 6.25 10-01-14 1,019,560
200 North Dakota Student Loan (AMBAC Insured)........................ 7.00 07-01-05 212,506
-----------
6,280,901
TOTAL INVESTMENTS IN SECURITIES (cost: $33,794,213) (d) $34,280,656
===========
See accompanying notes to investments in securities.
</TABLE>
VOYAGEUR NORTH DAKOTA TAX FREE FUND
NOTES TO INVESTMENTS IN SECURITIES (UNAUDITED)
- --------------------------------------------------------------------------------
(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 Baa/BBB NR/NR Total
------- ----- --- ------- ----- -----
45% 21% 18% 15% 1% 100%
(d) The cost of securities for federal income tax purposes is $33,826,908 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
------------ -------------- ------------
$611,682 $(157,934) $453,748
(e) Security subject to the Alternative Minimum Tax.
INVESTMENT ADVISER, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND
ACCOUNTING SERVICES AGENT
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
UNDERWRITER
Voyageur Fund Distributors, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55479
GENERAL COUNSEL
Dorsey & Whitney P.L.L.P.
Minneapolis, MN 55402
AUDITORS
KPMG Peat Marwick LLP
Minneapolis, MN 55402
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