Annual Report
VOYAGEUR INVESTMENTS
Your tax sensitive investment manager
GROWTH AND INCOME FUND
Dated April 30, 1997
<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
The one-year reporting period ended April 30, 1997, witnessed the stock market's
continued prosperity. The equity market overshadowed other asset classes, as has
been the case throughout this calendar year. The excitement generated by the
stock market's relatively steady climb has not been diminished by occasional
market downturns or inflation fears. Although we cannot predict when the stock
market will undergo a significant correction, we believe it will experience some
type of adjustment. However, a well-planned investment strategy that includes
taking a long-term approach and maintaining a diverse portfolio, can help
investors temper market downturns over time.
At Voyageur, we are committed to providing our shareholders with the best
investment products and services available in today's financial markets. The
Voyageur Growth and Income Fund is actively managed by monitoring current market
activities and expectations in order to find opportunities where we can add
value for shareholders.
In the pages that follow the Fund's manager, Ralph M. Segall of Segall, Bryant &
Hamill Investment Counsel, will discuss some points of interest related to the
Fund. Mr. Segall will discuss the portfolio's make up and how he has structured
the portfolio against undue market risk. He will also discuss some individual
holdings within the portfolio and how they fit into the stock selection
philosophy.
If at any time you have questions about the Voyageur Growth and Income Fund,
contact your financial advisor or Voyageur at 1-800-277-3862. Thank you for
investing with Voyageur Asset Management.
Sincerely,
/s/ John G. Taft
John G. Taft
President
VAM Institutional Funds, Inc.
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
For the fiscal year ended April 30, 1997, the Voyageur Growth and Income Fund's
total return at NAV was 10.89* percent for class A shares. This compares to the
performance of the S&P 500 Index of 25.13 percent for the same time period. *
TAKING ADVANTAGE OF THE RISING STOCK MARKET
Over the last year, the Fund's equity exposure increased to take advantage of
rising equity markets. Currently, the Fund has approximately 84 percent of total
portfolio assets invested in equity securities.
Although our equity exposure has increased, we are concerned by the recent surge
in prices. We continue to believe current price valuations for stocks are overly
expensive -- especially in the large-capitalization sector of the market. Due to
these valuation levels, we are finding it difficult to justify adding new
large-capitalization stocks to the Fund's portfolio. Instead, we have utilized
our all-capitalization approach to add more mid-capitalization stocks -- stocks
from companies with market capitalizations ranging from $1 billion to $5
billion. Although midcap stocks have underperformed large caps during recent
periods, we believe there is more value in mid-capitalization stocks at this
time.
In addition, we have structured the Fund's portfolio to take on less risk than
the market. Currently, the Fund has a beta of 0.85, which means the Fund is 85%
as volatile as the S&P500.
Due to our all-capitalization approach, we use the S&P900 Index as an internal
measure to gauge the Fund's performance. Unlike the S&P 500 which is a purely
large cap index, the S&P 900 includes the 500 large-capitalization stocks in the
S&P 500 as well as the stocks in the S&P 400 midcap index. Because of the
current mix of the fund, we feel this is a more accurate way to gauge fund
performance. For the year ended April 30, 1997, the S&P 900 Index was up 16.70
percent compared to the 10.89* percent for the Voyageur Growth and Income Fund
(at NAV and class A shares), although the gap has narrowed significantly in the
last six months. In this interim period, the Index is up 10.4% vs. 9.43% for the
Fund.
STOCK SELECTION
We take a growth IN income approach in stock selection for the Voyageur Growth
and Income Fund. Our philosophy for selecting stocks in the Fund is to invest in
companies that we believe will achieve above-average growth in earnings and
dividends.We use our in-depth research and analysis to identify companies that
are committed to building long-term shareholder value through the effective use
of corporate assets. We search for companies that have demonstrated strong or
improving return on investment (ROI) over an extended period of time. ROI is
calculated by dividing a company's total capital -- its common and preferred
stock equity plus its long-term funded debt -- into earnings before interest,
taxes and dividends are paid. As a measure of a company's management,
operational efficiency and profitability, we believe companies with superior ROI
will, over time, demonstrate above average growth, thereby leading to an
appreciation in their stock prices.
SEGALL, BRYANT & HAMILL INVESTMENT COUNSEL IS SUB-ADVISOR TO AND HAS DAY-TO-DAY
PORTFOLIO MANAGEMENT RESPONSIBILITY FOR THE VOYAGEUR GROWTH AND INCOME FUND.
RALPH M. SEGALL IS THE PORTFOLIO MANAGER FOR THE VOYAGEUR GROWTH AND INCOME
FUND.
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE.
<PAGE>
Two examples of recent purchases may help illustrate our approach to stock
selection. Dentsply is a leading manufacturer of dental products that we
recently added to the Fund's portfolio. The dental supply business is a steadily
growing part of the health care market. As one of the industry's leaders, we
believe Dentsply has significant opportunities to expand, especially important
in a fragmented market, served by a number of smaller competitors. Dentsply is a
$1.4 billion market capitalization company whose returns on investment fall in
the top 20 percent of all companies in our universe. It has very high margins,
which help generate strong, positive cash flow. We believe earnings may grow at
a 13-15 percent rate. The shares presently trade at 15-16 times earnings.
Another company we recently added to the portfolio is Danka Business Systems.
Danka is a leading distributor of office equipment which acquired Kodak's office
imaging business at the end of last year. As a result of this purchase, we
expect to see Danka's margins and returns increase dramatically over the next
few years. This acquisition has nearly doubled the size of the company and
allows for expansion into new markets and significant cost-cutting. Currently,
the stock is trading at 21 times our estimate of this year's earnings number and
around 15 times our estimate of profits next year.
We remain confident that our selection process will lead to above-average
results over time. In coming months, there will undoubtedly be tests of
investor's enthusiasm for stocks, which could produce greater volatility in
prices. Under these circumstances, we believe that the stocks we are emphasizing
will prove to be ones toward which investors will gravitate. In addition, our
move away from large cap stocks, which appear overpriced, should benefit
shareholders as midcap stock returns move toward more historical valuation
levels.
We appreciate your continued support.
VOYAGEUR GROWTH AND INCOME FUND PLOT POINTS
[GRAPH]
9525 10000 10000
"Sept-95" 9525 10000 10000
9505 9980 10320
9420 9890 10284
9829 10320 10736
10232 10743 10935
10261 10773 11311
10309 10823 11420
10461 10983 11529
10729 11264 11699
11025 11574 12001
"Apr-96" 10843 11384 12047
10347 10863 11514
10595 11123 11757
10977 11524 12419
10872 11414 12762
11531 12106 13726
11482 12055 13454
11986 12584 14295
11927 12522 14407
11611 12190 13815
"Apr-97" 11848 12439 14640
VOYAGEUR GROWTH AND INCOME FUND
<TABLE>
TOTAL RETURNS
- ---------------------------------------------------------------------------------------------------------------
Class A Shares Class B Shares
1 Year Since 9/7/95** 1 Year Since 12/28/95**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Without Sales Charge 10.89% 14.44% 10.10% 11.69%
With Sales Charge 5.62%* 11.11%* 6.10%*** 8.81%***
</TABLE>
The performance of separate classes will vary based on the differences in sales
loads and distribution fees paid by shareholders investing in the different
classes. Performance quoted represents past performance and is not indicative of
future results.
*Total return includes the maximum 4.75% sales charge.
**Commencement of operations.
***Assumes redemption on April 30, 1997.
The Standard and Poor's 500 Index is an unmanaged, market value weighted index
of 500 widely held common stocks. The index includes industrial, utility,
financial and transportation stocks primarily, but not exclusively, traded on
the New York Stock Exchange. The S & P 500 represents approximately 77% of the
NYSE market capitalization. The index assumes that no operating expenses,
transaction fees or sales charges are incurred by a hypothetical investor who
directly owns the securities maintained in the index. In order to outperform the
index over any specific time frame, a fund must return to investors an amount
greater than that provided by the index plus total operating expenses.
<PAGE>
GROWTH AND INCOME FUND
ANNUAL REPORT
Dated April 30, 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Mutual Funds III, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of Voyageur Growth and
Income Fund (a fund within Voyageur Mutual Funds III, Inc.) as of April 30,
1997, and the related statement of operations for the year then ended, and the
statements of changes in net assets and the financial highlights for the year
ended April 30, 1997 and the period from September 7, 1995 (commencement of
operations) to April 30, 1996 . 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 financial highlights based
on our audit.
We conducted our audit 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 and the financial
highlights. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all respects, the financial position of Voyageur Growth and Income
Fund at April 30, 1997 and the results of its operations, changes in its net
assets 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
June 13, 1997
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1997
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at market value (note 1)
(identified cost: $4,417,321 ) ................................ $4,929,172
Cash in bank on demand deposit ................................... 60,657
Dividends and interest receivable ................................ 9,373
Receivable for investment securities sold ........................ 159,352
Due from adviser ................................................. 10,228
Organizational costs (note 1) .................................... 21,270
----------
Total assets .................................................. 5,190,052
----------
LIABILITIES
Accrued expenses ................................................. 12,523
----------
Total liabilities ............................................. 12,523
----------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK ............... $5,177,529
==========
Represented by:
Capital Stock - $.01 par value (note 1) ...................... $ 4,298
Additional paid-in capital .................................... 4,446,475
Undistributed net investment income ........................... 23,030
Accumulated net realized gain on investments .................. 191,875
Unrealized appreciation on investments ........................ 511,851
----------
TOTAL NET ASSETS ............................................ $5,177,529
==========
Net assets applicable to outstanding Class A shares .............. $4,965,102
==========
Net assets applicable to outstanding Class B shares .............. $ 212,427
==========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of capital stock outstanding: 412,065 (note 4) $ 12.05
==========
Class B - Shares of capital stock outstanding: 17,765 (note 4) $ 11.96
==========
See accompanying notes to financial statements.
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1997
- -------------------------------------------------------------------------------
Investment income:
Dividends ...................................................... $ 49,343
Interest ....................................................... 69,167
---------
Total investment income ...................................... 118,510
---------
Expenses (note 2):
Investment advisory and management fee ......................... 35,373
Dividend disbursing, administrative and accounting services fees 27,545
Distribution fee - Class A ..................................... 11,406
Distribution fee - Class B ..................................... 1,543
Printing, postage and supplies ................................. 3,531
Legal fees ..................................................... 299
Custodian fees ................................................. 5,525
Compensation of directors ...................................... 308
Audit and accounting fees ...................................... 6,152
Registration fees .............................................. 24,407
Amortization of organizational costs ........................... 6,381
Other expenses ................................................. 750
---------
Total expenses ............................................... 123,220
Less (note 2):
Expenses waived or absorbed .................................... (34,000)
Earnings credits on uninvested cash ............................ (5,525)
---------
Total net expenses ........................................... 83,695
---------
Investment income - net ...................................... 34,815
---------
Realized and unrealized gain on investments:
Net realized gain on investments ............................. 260,524
Net increase in unrealized appreciation or depreciation of
investments ................................................ 209,479
---------
Net gain on investments ...................................... 470,003
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $ 504,818
=========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
VOYAGEUR GROWTH AND INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
YEAR PERIOD FROM
ENDED SEPTEMBER 7, 1995*
APRIL 30, TO APRIL 30,
1997 1996
----------- ------------
Operations:
<S> <C> <C>
Investment income gain - net........................... $ 34,815 $ 6,939
Realized gain on investments - net..................... 260,524 78,430
Net change in unrealized appreciation or depreciation
of investments....................................... 209,479 302,372
----------- ------------
Net increase in net assets resulting from operations... 504,818 387,741
----------- ------------
Distributions to shareholders from:
Investment income - net:
Class A............................................ (22,265) (6,699)
Class B.............................................. (395) --
Net realized gain on investments:
Class A............................................. (141,429) --
Class B............................................. (5,650) --
----------- ------------
Total distributions................................ (169,739) (6,699)
----------- ------------
Capital share transactions (note 4):
Proceeds from sale of shares (note 2):
Class A.............................................. 1,247,582 3,798,090
Class B.............................................. 212,813 10,581
Net asset value of shares issued in reinvestment of net
investment income and net realized gain
distributions:
Class A.......................................... 153,267 6,288
Class B......................................... 3,486 --
Payments for redemption of shares:
Class A.............................................. (723,029) (222,445)
Class B.............................................. (25,225) --
----------- ------------
Increase in net assets from capital share transactions. 868,894 3,592,514
----------- ------------
Total increase in net assets......................... 1,203,973 3,973,556
Net assets at beginning of period......................... 3,973,556 --
----------- ------------
Net assets at end of period (including undistributed
net investment income of $23,030, and $4,494,
respectively)........................................ $ 5,177,529 $ 3,973,556
=========== ============
- -----------------------------------------
* Commencement of operations
See accompanying notes to financial statements.
</TABLE>
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Voyageur Growth and Income Fund (the Fund), a series within Voyageur
Mutual Funds III, Inc., is registered under the Investment Company Act of 1940
(as amended) as a diversified open-end management investment company. The Fund's
investment objective is growth of capital. The Fund's secondary objective is
current income. The Fund seeks to achieve these objectives by investing in a
diversified portfolio of securities including common stock, preferred stock,
bonds, convertible securities, and warrants and rights to purchase common stock.
On April 30, 1997 the Fund consummated a reorganization by which it transferred
substantially all of its assets and liabilities to the Segall, Bryant and Hamill
Growth and Income Fund, a series of VAM Institutional Funds, Inc. No changes in
the Fund's investment policies or objectives occurred in the reorganization.
During the period ended April 30, 1997, the Fund offered Class A, Class B and
Class C Shares. In the future it is anticipated the Fund will offer only one
class of shares on a "no-load" basis. As of April 30, 1997, there were no
outstanding 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
may be subject to a 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 articles of incorporation, Voyageur
Mutual Funds III, Inc. has 10 trillion shares of authorized capital stock that
may be issued.
The significant accounting policies followed by the Fund is 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 increases (decreases) in net assets resulting from
operations during the reporting period. Actual results could differ from those
estimates.
INVESTMENTS IN SECURITIES
Investments in securities traded on national or international securities
exchanges are valued at the last sales price on that exchange; securities traded
in the over-the-counter market and listed securities for which no sale was
reported on the valuation date are valued on the basis of the last current bid
price. The values of fixed income securities are determined by using pricing
services or prices quoted by independent brokers. When market quotations are not
readily available, or in certain other circumstances, securities are valued at
fair value according to methods selected in good faith by the Board of
Directors. Investments in short-term securities with maturities of more than 60
days from the valuation date are valued at the last bid price or at fair value
as determined by a pricing service approved by the Board of Directors.
Short-term securities with maturities of less than 60 days are valued at
amortized cost which approximates market value.
Security transactions are accounted for on trade date. Realized gains and
losses are calculated on the identified cost basis. Dividend income is
recognized on the ex- dividend date. Interest income, including level-yield
amortization of premium and discount, is accrued daily.
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 (loss) and net realized gains (losses) 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. Also, due
to the timing of dividend distributions, the fiscal year in which amounts are
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
distributed may differ from the year that the income or realized gains (losses)
were recorded by the Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, reclassification entries have been made to increase
undistributed net investment income and decrease additional paid-in capital by
$6,381.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income, if any, are
declared and paid annually. Net realized capital gains, if any, are also
distributed annually. All distributions are payable in cash or reinvested in
additional shares of each Fund.
ORGANIZATIONAL COSTS
Organizational costs of the Fund are being amortized over 60 months on a
straight line basis.
(2) EXPENSES AND SALES CHARGES
Through April 30, 1997, the Fund had an investment advisory agreement with
Voyageur Fund Managers, Inc. (Voyageur). Under the investment advisory
agreement, Voyageur provided the Fund with office facilities, equipment and
personnel, and monitored the performance of various organizations performing
services for the Fund. The investment advisory agreement provided for the
payment on a monthly basis of a fee equal to an annual rate of .75% of the
Fund's average daily net assets. Investment decisions for the Fund are made and
executed by Segall Bryant and Hamill, the Fund's sub-adviser. Voyageur pays
Segall Bryant and Hamill for their services a sub-advisory fee equal to .75% of
average daily net assets. The Fund paid no direct fees to the sub-advisor.
The Fund also pays a fee to Voyageur for acting as the Fund's transfer agent,
dividend-disbursing and accounting services agent. The fee for the Fund is equal
to the sum of $1.25 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 .035%. The Fund is also responsible for reimbursing
Voyageur's out-of-pocket expenses in connection with the performance of transfer
agency, dividend disbursing and accounting services.
In addition to the advisory fee and the transfer agency, dividend disbursing
and accounting services fees, the Fund is responsible for paying most other
operating expenses including outside directors' fees and expenses, custodian
fees, registration fees, printing and shareholder reports, legal and auditing
fees and other miscellaneous expenses.
The Fund had a distribution agreement under Rule 12b-1 of the Investment
Company Act of 1940 with Voyageur Fund Distributors, Inc. (Fund Distributors).
Under these plans each Fund pays Fund Distributors a monthly distribution fee at
an annual rate of .25% of the Fund's average daily net assets of the Class A
Shares and 1.00% of each Fund's average daily net assets of the Class B and
Class C Shares.
Voyageur has voluntarily agreed to pay all expenses (excluding fees paid
indirectly, stock transfer fees, taxes, interest and brokerage commissions)
which exceed 1.75% of average daily Class A net assets and 2.50% of average
daily Class B and Class C net assets for the Fund. During the year ended April
30, 1997, Voyageur voluntarily absorbed $34,000 for the Fund. The Fund earned
credits on uninvested cash balances held at the custodian. The credits earned
for the year ended April 30, 1997 were $23,702. Of these credits $5,525 were
used to reduce certain fees for various custodial, pricing and accounting
services provided by the custodian bank. The remaining $18,177 is included in
interest income.
Sales charges paid by Class A shareholders during the year ended April 30,
1997 were $5,638. Of these amounts, Fund Distributors received $773.
(3) INVESTMENT SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (other
than short-term securities) aggregated $5,763,490 and $4,512,799 for the Fund
during the year ended April 30, 1997.
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(4) CAPITAL STOCK Transactions in shares during the periods shown were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -------------------------
YEAR PERIOD FROM YEAR PERIOD FROM
ENDED SEPTEMBER 7, 1995* ENDED DECEMBER 28, 1995*
APRIL 30, TO APRIL 30, APRIL 30, TO APRIL 30,
1997 1996 1997 1996
---------- ---------- -------- ------
<S> <C> <C> <C> <C>
Shares sold.......................... 107,367 372,622 18,645 994
Shares reinvested.................... 13,179 587 301 --
Shares redeemed...................... (61,006) (20,684) (2,175) --
---------- ---------- -------- ------
Increase in shares outstanding....... 59,540 352,525 16,771 994
========== ========== ======== ======
*Commencement of operations
</TABLE>
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(5) FINANCIAL HIGHLIGHTS
Per share data (rounded to the next cent) for a share of capital stock
outstanding and selected information for each period are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------- -------------------------
YEAR PERIOD FROM YEAR PERIOD FROM
ENDED SEPTEMBER 7, 1995* ENDED DECEMBER 28, 1995*
APRIL 30, TO APRIL 30, APRIL 30, TO APRIL 30
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period.................... $11.24 $10.00 $11.21 $10.64
------ ------ ------ ------
Operations:
Net investment income (loss)........... .08 .02 .04 (.01)
Net realized and unrealized gain on
investments.......................... 1.13 1.24 1.08 .58
------ ------ ------ ------
Total from operations.............. 1.21 1.26 1.12 .57
------ ------ ------ ------
Distributions to shareholders:
From net investment income............. (.05) (.02) (.02) --
From net realized gains................ (.35) -- (.35) --
------ ------ ------ ------
Total from operations.............. (.40) (.02) (.37) --
------ ------ ------ ------
Net asset value:
End of period.......................... $12.05 $11.24 $11.96 $11.21
====== ====== ====== ======
Total investment return (c)............... 10.89% 12.64% 10.10% 5.36%
Net assets at end of
period (000's omitted)................. $4,965 $3,962 $212 $11
Ratios:
Expenses to average net assets (d)..... 1.86% 1.98%(a) 2.60% 2.68%(a)
Expenses to average net assets
(net of expenses paid indirectly).... 1.75% 1.75%(a) 2.48% 2.45%(a)
Net investment income (loss) to
average net assets................... .76% .36%(a) .10% (.37)%(a)
Assuming no voluntary waivers and
reimbursements and expense
reductions: (e)
Expenses................ 2.58% 2.97%(a) 3.32% 3.50%(a)
Net investment income
(loss)............... .04% (.63)%(a) (.62)% (1.19)%(a)
Portfolio turnover rate (excluding
short-term securities)................. 108.0% 56.1% 108.0% 56.1%
Average commission rate (b)............... $0.05 N/A $0.05 N/A
* Commencement of operations
</TABLE>
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
Notes to Financial Highlights
(a) Adjusted to an annual basis.
(b) Begining in the year ended April 30, 1997, the average commission rate paid
per share for security transactions is a required disclosure.
(c) 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.
(d) The expense ratio reflects the effect of gross expenses attributable to
earnings credits on uninvested cash balances received by the Fund.
(e) Prior to the year ended April 30, 1997, the ratios reflect the most
restrictive state limitation in effect.
<PAGE>
<TABLE>
<CAPTION>
VOYAGEUR GROWTH AND INCOME FUND
INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER NUMBER OF SHARES VALUE(a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Percentages of each investment category relate to total net assets)
COMMON STOCKS (84.5%):
BASIC MATERIALS (2.2%):
- -------------------------------------------------------------------------------------------------------------------
Dole Food Company 2,800 $ 114,100
-----------
CAPITAL GOODS (20.7%):
- -------------------------------------------------------------------------------------------------------------------
Corning Incorporated 3,000 144,750
First Data Corporation 4,100 141,450
General Electric 1,000 110,875
Illinois Tool Works 1,500 137,063
Littelfuse Incorporated 3,200(c) 148,000
Molex Incorporated 4,125 119,625
Oea Incorporated 4,500 161,438
Raychem Corporation 1,700 109,650
---------
1,072,851
---------
COMMERCIAL SERVICES (2.2%):
- -------------------------------------------------------------------------------------------------------------------
Interpublic Group Company 2,000 113,250
-------
CONSUMER CYCLICAL (6.5%):
- -------------------------------------------------------------------------------------------------------------------
Dollar General 4,250 134,406
Hasbro Incorporated 3,750 93,750
Sony Corporation ADR 1,500 110,063
-------
338,219
-------
CONSUMER NON-DURABLE (11.7%):
- -------------------------------------------------------------------------------------------------------------------
Dentsply International 3,500 173,250
Gillette Company 1,500 127,500
Home Depot 1,000 58,000
Quality Food Centers 2,500(c) 100,313
Walt Disney 1,800 147,600
-------
606,663
-------
ENERGY (5.4%):
- -------------------------------------------------------------------------------------------------------------------
Camco International Incorporated 3,600 159,750
Enron Corporation 3,200 120,400
-------
280,150
-------
See accompanying notes to investments in securities.
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER NUMBER OF SHARES VALUE(a)
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL (16.1%):
- -------------------------------------------------------------------------------------------------------------------
Allstate Corporation 2,200 $ 144,100
Banco Latinoamericano de Export 1,500 68,810
Chase Manhattan 600 55,575
First Union Corporation 1,000 84,000
Norwest Corporation 2,200 109,725
Protective Life Corporation 4,000 177,000
Republic New York 1,000 91,625
Security Cap Industries Trust 5,000 100,625
-------
831,460
-------
HEALTHCARE (5.8%):
- -------------------------------------------------------------------------------------------------------------------
Abbott Labs 1,500 91,500
Johnson & Johnson 1,400 85,750
Merck 700 63,350
Pfizer Incorporated 600 57,600
-------
298,200
-------
TECHNOLOGY (13.9%):
- -------------------------------------------------------------------------------------------------------------------
Amphenol Corporation 7,000(c) 177,625
Danka Business Systems - ADR 3,050 93,216
Intel Corporation 1,300 199,063
Microsoft Corporation 1,000(c) 121,500
National Service Industry 3,000 126,375
-------
717,779
-------
TOTAL INVESTMENTS IN COMMON STOCK (cost: $3,863,874) 4,372,672
---------
CONVERTIBLE PREFERRED STOCKS (0.4%):
CONSUMER NON-DURABLE (0.4%):
- -------------------------------------------------------------------------------------------------------------------
Corning Dell LP $3.00 250 19,000
------
TOTAL INVESTMENTS IN CONVERTIBLE PREFERRED STOCKS (cost: $12,956)
See accompanying notes to investments in securities.
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------
MARKET
ISSUER PRINCIPAL AMOUNT VALUE(a)
- -------------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS (2.0%):
FINANCIAL (2.0%):
- -------------------------------------------------------------------------------------------------------------------
Mitsubishi Bank International Finance, 3.00% due 11/30/02 $100,000 $ 101,625
----------
TOTAL INVESTMENTS IN CONVERTIBLE CORPORATE BONDS (cost: $108,500) 101,625
-----------
NONCONVERTIBLE CORPORATE BONDS (2.5%):
FINANCIAL (2.5%):
- -------------------------------------------------------------------------------------------------------------------
Rockefeller Center, 12.3% due 12/31/00 (e) 200,000 131,000
-----------
TOTAL INVESTMENTS IN NONCONVERTIBLE CORPORATE BONDS (cost: $130,549) 131,000
-----------
U.S. AGENCY OBLIGATIONS (5.9%)
- -------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Inverse Floater Structured Note,
9.07% due 11/18/97 (d) 300,000 304,875
------------
TOTAL INVESTMENTS IN U.S. AGENCY OBLIGATIONS (cost: $301,442) 304,875
------------
TOTAL INVESTMENTS IN SECURITIES (cost: $4,417,321)(b) $4,929,172
==========
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
VOYAGEUR GROWTH AND INCOME FUND
NOTES TO INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) The cost of securities for federal income tax purposes for the Fund is
$4,419,259. The aggregate gross unrealized appreciation and depreciation on
investments based on this cost is:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation (Depreciation) Appreciation
------------ -------------- ------------
$613,956 $(104,043) $509,913
(c) Presently non-income producing security.
(d) Inverse floater, represents a security that pays interest at rates that
increase (decrease) with a decline (increase) in a specified index, DM
LIBOR-Deutschemark London InterBank Offered Rate. Interest rate disclosed
is the rate in effect on April 30, 1997.
(e) Zero coupon security. Interest rate disclosed is the effective yield as of
the date of acquisition.
<PAGE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions for the periods ended April
30, 1997 shown below. Each shareholder should consult a tax adviser about
reporting this income for state and local purposes. In January 1997, the Fund
separately provided each shareholder with tax information for calendar year
1996.
<TABLE>
<CAPTION>
VOYAGEUR GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
PER CLASS PER CLASS
A SHARE B SHARE
------- -------
YEAR YEAR
ENDED ENDED
APRIL 30, APRIL 30,
1997 1997
------- -------
<S> <C> <C>
Net investment income distribution..................... $.0544 $.0242
Short-term capital gain distribution................... $.3453 $.3453
-------- --------
Total distributions................................. $.3997 $.3695
======== ========
</TABLE>
The short-term capital gain distributions above are taxable as ordinary income
to shareholders for federal and state income tax purposes.
<PAGE>
VOYAGEUR INVESTMENTS
Your tax sensitive investment manager
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402-4115
