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VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
ARIZONA TAX FREE FUND
ARIZONA INSURED TAX FREE FUND
S E M I - A N N U A L R E P O R T
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.
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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.
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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 Arizona Tax Free Funds
VOYAGEUR ARIZONA TAX FREE FUNDS
[PHOTO] ANDREW M. McCULLAGH, JR. IS
THE SENIOR MUNICIPAL BOND
MANAGER FOR THE VOYAGEUR
ARIZONA INSURED TAX FREE
FUND AND THE VOYAGEUR
ARIZONA TAX FREE FUND. MR.
McCULLAGH HAS MORE THAN 23
YEARS OF INVESTMENT INDUSTRY
EXPERIENCE.
During the six months ended June 30, 1996, the total return at net asset value
(NAV) for the Class A shares of the Voyageur Arizona Tax Free Funds were as
follows: Voyageur Arizona Insured Tax Free Fund -0.87% and Voyageur Arizona Tax
Free Fund -0.18%.*
The Voyageur Arizona Tax Free Funds have had strong performance relative to
comparable Arizona municipal bond funds, in part due to shorter durations in the
Voyageur Funds. During the six month period, the Funds outperformed their
benchmark -- the Lehman Brothers Municipal 20 Year Index -- which had a return
of -1.13%*.
In both Funds, we have been able to buy attractively priced negotiated municipal
bond issues that contributed to the Funds' overall performance. Also the
Voyageur Arizona Tax Free Fund's performance benefited from our ability to
purchase insurance for one of our larger holdings -- the Gilbert School. This
insurance upgraded the Gilbert School bond, increasing the value of the bond
dramatically.
AREAS OF OPPORTUNITY
Within the Funds, we remained committed to purchasing municipal bonds with high
credit ratings -- with the Voyageur Arizona Insured Tax Free Fund only invested
in insured municipal securities.** When possible we also emphasize investing in
general obligation bonds -- bonds that are backed by the full faith and credit
of the municipality.
Since our last report, we continued to search for areas or sectors where we
could add value to the Funds' portfolios. One such area has been to include
investments that have added income to the portfolios. Although we still maintain
our commitment to total return, we believe this addition of income will assist
us in dampening the effects of market volatility while allowing our shareholders
to benefit from higher income streams.
In order to attempt to protect our shareholders' current income level for a
longer period of time, we have continued to take advantage of opportunities to
to extend the Funds' call protection. Due to this focus, both of the funds' now
have an average call protection of more than nine years.
OUTLOOK FOR THE MUNICIPAL MARKET
In Arizona, general obligation (GO) bonds comprise approximately 75% of the
municipal debt that comes to market -- with the majority of those GOs issued for
school districts. The reason: Arizona's rapid economic and population growth
during the past few years has put a strain on the existing school facilities,
increasing the need for updating and building larger facilities.
In the United States, we expect to see the moderate growth with moderate
inflation economic environment to continue through 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
Funds to take advantage of this trend -- staggering the length of duration in
each of the individual Funds in order to maintain our cover the yield curve
strategy.
*Past performance is no guarantee of future results.
**Insurance pertains only to the timely payment of principal and interest by the
securities in the Fund's portfolio. The value of the insured securities and the
Fund itself will fluctuate due to changing market conditions. No representation
is made as to any insurer's ability to meet its commitment.
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THE VOYAGEUR FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 1996
- -------------------------------------------------------------------------------------------------------------------
VOYAGEUR VOYAGEUR
ARIZONA ARIZONA
TAX FREE INSURED
FUND TAX FREE FUND
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ASSETS
Investments in securities, at market value (note 1)
(identified cost: $11,281,482 and $228,219,332, respectively) ........... $ 11,362,741 $ 232,810,881
Cash in bank on demand deposit ............................................. 927 --
Accrued interest receivable ................................................ 232,024 5,401,604
Receivable for Fund shares sold ............................................ 77,102 14,437
Receivable for investment securities sold .................................. -- 3,370,764
------------- -------------
Total assets ............................................................ 11,672,794 241,597,686
------------- -------------
LIABILITIES
Bank overdraft ............................................................. -- 412,883
Dividends payable to shareholders .......................................... 12,356 230,386
Payable for Fund shares redeemed ........................................... -- 204,607
Payable for investment securities purchased ................................ 298,233 21,055,925
Other accrued expenses ..................................................... 22,234 25,836
------------- -------------
Total liabilities ....................................................... 332,823 21,929,637
------------- -------------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES ................................ $ 11,339,971 $ 219,668,049
============= =============
Represented by:
Capital Stock - $.01 par value (note 1) ................................. $ 10,864 $ 203,634
Additional paid-in capital .............................................. 11,323,292 221,480,665
Distributions in excess of net investment income ........................ (13,440) (191,822)
Accumulated net realized loss on investments ............................ (62,004) (6,415,977)
Unrealized appreciation of investments .................................. 81,259 4,591,549
------------- -------------
TOTAL NET ASSETS ...................................................... $ 11,339,971 $ 219,668,049
============= =============
Net assets applicable to outstanding Class A Shares ........................ $ 8,443,545 $ 216,567,843
============= =============
Net assets applicable to outstanding Class B Shares ........................ $ 2,872,664 $ 2,549,025
============= =============
Net assets applicable to outstanding Class C Shares ........................ $ 23,762 $ 551,181
============= =============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE Class A -
Shares of Capital Stock outstanding:
808,728 and 20,075,905, respectively (note 4) ......................... $ 10.44 $ 10.79
============= =============
Class B - Shares of Capital Stock outstanding:
275,352 and 236,412, respectively (note 4) ............................ $ 10.43 $ 10.78
============= =============
Class C - Shares of Capital Stock outstanding:
2,274 and 51,091, respectively (note 4) ............................... $ 10.45 $ 10.79
============= =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
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THE VOYAGEUR FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1996
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VOYAGEUR VOYAGEUR
ARIZONA ARIZONA
TAX FREE INSURED
FUND TAX FREE FUND
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Investment income:
Interest ................................................... $ 281,687 $ 6,455,055
----------- -----------
Expenses (note 3):
Investment advisory and management fee ..................... 24,067 572,165
Dividend-disbursing, administrative and
accounting services fees ................................. 15,146 140,148
Printing, postage and supplies ............................. 1,900 18,011
Audit and accounting fees .................................. 3,988 10,021
Legal fees ................................................. 366 1,102
Distribution fees - Class A ................................ 9,406 282,491
Distribution fees - Class B ................................ 10,420 11,024
Distribution fees - Class C ................................ 122 2,804
Directors' fees ............................................ 630 4,006
Registration fees .......................................... 9,986 1,148
Custodian fees ............................................. 7,078 24,168
Amortization of organizational costs ....................... -- 989
Other ...................................................... 276 1,232
----------- -----------
Total expenses ........................................... 83,385 1,069,309
Less: Expenses waived or absorbed ......................... (57,180) (209,116)
----------- -----------
Net expenses before earnings credits on uninvested cash .... 26,205 860,193
Less: Earnings credits on uninvested cash ................. (83) --
----------- -----------
Total net expenses ....................................... 26,122 860,193
----------- -----------
Investment income - net .................................. 255,565 5,594,862
----------- -----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions (note 2) ............ (62,004) (586,593)
Net change in unrealized appreciation or
depreciation of investments .............................. (175,735) (6,990,934)
----------- -----------
Net loss on investments ................................ (237,739) (7,577,527)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 17,826 $(1,982,665)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
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THE VOYAGEUR FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
VOYAGEUR ARIZONA VOYAGEUR ARIZONA
TAX FREE FUND INSURED TAX FREE FUND
--------------------------------- ------------------------------
SIX MONTHS PERIOD FROM SIX MONTHS YEAR
ENDED MARCH 2, 1995* TO ENDED ENDED
JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
------------- ------------- ------------- -------------
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Operations:
Investment income - net ............................ $ 255,565 $ 147,142 $ 5,594,862 $ 12,394,266
Realized gain (loss) on investments - net .......... (62,004) 63,613 (586,593) (4,354,009)
Net change in unrealized appreciation or
depreciation of investments ...................... (175,735) 256,994 (6,990,934) 34,718,495
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations .............................. 17,826 467,749 (1,982,665) 42,758,752
------------- ------------- ------------- -------------
Distributions to shareholders from:
Investment income - net:
Class A .......................................... (204,665) (128,887) (5,536,880) (12,708,693)
Class B .......................................... (51,045) (16,909) (47,181) (27,389)
Class C .......................................... (569) (632) (11,254) (18,214)
Excess distributions of net investment income:
Class A .......................................... (11,094) -- (191,760) --
Class B .......................................... (2,309) -- -- --
Class C .......................................... (37) -- (178) --
Net realized gain on investments:
Class A .......................................... -- (50,072) -- --
Class B .......................................... -- (13,321) -- --
Class C .......................................... -- (220) -- --
------------- ------------- ------------- -------------
Total distributions ............................ (269,719) (210,041) (5,787,253) (12,754,296)
------------- ------------- ------------- -------------
Capital share transactions (note 4):
Proceeds from sale of shares:
Class A (note 3) ................................. 2,637,821 8,960,629 8,240,005 26,364,916
Class B .......................................... 1,294,702 1,591,690 559,659 2,091,045
Class C .......................................... 1,991 25,000 344,515 209,435
Net asset value of shares issued in reinvestment of
net investment income and realized gain
distributions:
Class A ...................................... 151,634 61,500 2,547,514 5,516,791
Class B ...................................... 39,385 4,786 34,934 17,097
Class C ...................................... 908 508 11,168 15,604
Payments for redemption of shares:
Class A .......................................... (363,660) (3,011,550) (24,652,209) (55,399,770)
Class B .......................................... (47,000) (8,880) (24,587) (120,225)
Class C .......................................... (5,308) -- (325,576) (58,336)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from capital
share transactions .............................. 3,710,473 7,623,683 (13,264,577) (21,363,443)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ........ 3,458,580 7,881,391 (21,034,495) 8,641,013
Net assets at beginning of period ..................... 7,881,391 -- 240,702,544 232,061,531
------------- ------------- ------------- -------------
Net assets at end of period (including undistributed or
(distributions in excess of) net investment income
of $(13,440), $714, $(191,822) and $569,
respectively) .................................. $ 11,339,971 $ 7,881,391 $ 219,668,049 $ 240,702,544
============= ============= ============= =============
</TABLE>
* Commencement of operations.
See accompanying notes to financial statements.
THE VOYAGEUR FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur Arizona Tax Free Fund (Arizona Tax Free Fund), a series of Voyageur
Mutual Funds, Inc. is registered under the Investment Company Act of 1940 (as
amended) as a non-diversified, open-end management investment company. Voyageur
Arizona Insured Tax Free Fund (Arizona Insured Tax Free Fund), a series of
Voyageur Insured Funds, Inc. is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company.
Arizona Tax Free Fund seeks high current income free from both federal and state
income taxes by investing in investment grade municipal bonds. Arizona Insured
Tax Free Fund seeks high current income free from both federal and state income
taxes with the added safety of an insured portfolio by investing insured
municipal bonds.
Arizona Tax Free Fund and Arizona Insured Tax Free Fund (the Funds) offer
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 automatically convert to Class A Shares after eight years. Class C
Shares may be subject to a contingent deferred sales charge for Arizona Insured
Tax Free Fund and are not subject to a contingent deferred sales charge or a
front-end sales charge for Arizona Tax Free Fund. Class C Shares 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 Insured Funds,
Inc. has 10 trillion shares of authorized capital stock that may be issued in
one or more series. Pursuant to its articles of incorporation, Voyageur Mutual
Funds, Inc. has 10 trillion shares of authorized capital stock that may be
issued.
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 increases (decreases) 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.
Each of the Funds concentrates its investments in a single state, and
therefore may have more credit risk related to the economic conditions of the
state of Arizona 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 Funds 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 for Arizona Insured Tax Free Fund.
FEDERAL TAXES
Each 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 Funds. Net investment income and net
realized gains (losses) for each 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 each Fund.
For federal income tax purposes, at December 31, 1995, the Arizona Insured
Tax Free Fund had a capital loss carryover of $5,829,384 that will expire in
2003 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 each 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 $7,343,487 and $3,426,642 for Arizona Tax Free Fund and
$55,719,548 and $50,623,311 for Arizona Insured Tax Free Fund, respectively,
during the six months ended June 30, 1996.
(3) EXPENSES
Each Fund has an investment advisory and management agreement with Voyageur
Fund Managers, Inc. (Voyageur) under which Voyageur manages the Funds' 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 each Fund at the annual rate of .50%. In addition, each Fund will pay most
other operating expenses including directors' fees, registration fees, printing
of shareholder reports, legal and auditing services and other miscellaneous
expenses. There was no portfolio insurance expense for Arizona Insured Tax Free
Fund during the six months ended June 30, 1996. Portfolio insurance expense, if
any, is recognized over the premium period. Voyageur is obligated to pay all
expenses of each 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. During the six months ended
June 30, 1996 Voyageur absorbed $15,209 pursuant to the contractual 1% expense
limitation and, excluding waiver of distribution fees, voluntarily absorbed
$39,791 for Arizona Tax Free Fund.
Each 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 each
Fund's average daily net assets and an annualized percentage of average daily
net assets at reducing rates from .11% to .02%. Each 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 each 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 B distribution fees of $2,180 for Arizona
Tax Free Fund and Class A distribution fees of $206,771 and Class B distribution
fees of $2,345 and for Arizona Insured Tax Free Fund. During the six months
ended June 30, 1996 Arizona Tax Free Fund earned $83 in credits on uninvested
cash balances held by the Fund at the custodian. These were used to reduce
expenses for various custodial, pricing and accounting services provided by the
custodial bank
During the six months ended June 30, 1996, sales charges paid by Class A
shareholders were $80,674 for Arizona Tax Free Fund and $254,759 for Arizona
Insured Tax Free Fund. Of theses amounts, Fund Distributors received $10,255 for
Arizona Tax Free Fund and $34,041 from Arizona Insured Tax Free Fund. Contingent
deferred sales charges paid by Class B shareholders of Arizona Insured Tax Free
fund were $776.
(4) SHARE TRANSACTIONS
Transactions in shares of capital stock during each period were as follows:
<TABLE>
<CAPTION>
ARIZONA TAX FREE FUND
------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------ ------------------------------ --------------------------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED MARCH 2, 1995* ENDED JUNE 29, 1995* ENDED MAY 13, 1995* TO
JUNE 30, 1996 TO DECEMBER 31, JUNE 30, 1996 TO DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ................ 250,228 868,565 124,534 152,007 190 2,456
Shares issued for
reinvested distributions 14,359 5,912 3,735 456 86 49
Shares redeemed ............ (34,753) (295,583) (4,524) (856) (507) --
-------- -------- -------- -------- -------- --------
Increase (decrease) in
shares outstanding ...... 229,834 578,894 123,745 151,607 (231) 2,505
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ARIZONA INSURED TAX FREE FUND
-------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------ ------------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS PERIOD FROM SIX MONTHS YEAR
ENDED ENDED ENDED MARCH 10, 1995* ENDED ENDED
JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 TO DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ................ 748,448 2,484,170 51,695 192,986 30,988 19,460
Shares issued for
reinvested distributions 232,910 524,615 3,200 1,576 1,022 1,476
Shares redeemed ............ (2,257,073) (5,164,094) (2,227) (10,818) (29,443) (5,464)
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in
shares outstanding ...... (1,275,715) (2,155,309) 52,668 183,744 2,567 15,472
========== ========== ========== ========== ========== ==========
</TABLE>
* 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>
ARIZONA TAX FREE FUND
----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------ ---------------------- --------------------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED MARCH 2, ENDED JUNE 29, ENDED MAY 13,
JUNE 30, 1995(d) TO JUNE 30, 1995(d) TO JUNE 30, 1995(d) TO
1996 DECEMBER 31, 1996 DECEMBER 31, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period................. $10.75 $10.00 $10.74 $10.30 $10.76 $10.20
------ ------ ------ ------ ------ ------
Operations:
Net investment income............... .29 .46 .26 .26 .24 .30
Net realized and unrealized
gain (loss) on investments........ (.30) .84 (.30) .53 (.29) .65
------ ------ ------ ------ ------ ------
Total from operations........... (.01) 1.30 (.04) .79 (.05) .95
------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income (a)...... (.29) (.46) (.26) (.26) (.24) (.30)
In excess of net investment income.. (.01) -- (.01) -- (.02) --
From net realized gains............. -- (.09) -- (.09) -- (.09)
------ ------ ------ ------ ------ ------
Total distributions............... (.30) (.55) (.27) (.35) (.26) (.39)
------ ------ ------ ------ ------ ------
Net asset value:
End of period....................... $10.44 $10.75 $10.43 $10.74 $10.45 $10.76
====== ====== ====== ====== ====== ======
Total investment return (b)............ (.18)% 13.27% (.45)% 7.74% (.55)% 9.43%
Net assets at end of
period (000's omitted).............. $8,444 $6,225 $2,873 $1,629 $24 $27
Ratios:
Ratio of expenses to
average daily net assets (f)...... .42%(e) .52%(e) .97%(e) .99% 1.17%(e) 1.20%(e)
Ratio of net investment income
to average daily net assets.......5.42%(e) 5.19%(e) 4.86%(e) 4.60% 4.67%(e) 4.65%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)................1.25%(e) 1.25%(e) 2.00%(e) 2.00% 2.00%(e) 2.00%(e)
Net investment income.......4.59%(e) 4.46%(e) 3.83%(e) 3.59% 3.84%(e) 3.85%(e)
Portfolio turnover rate (excluding
short-term securities)............ 36.57% 38.05% 36.57% 38.05% 36.57% 38.05%
</TABLE>
See accompanying notes to Financial Highlights.
<TABLE>
<CAPTION>
ARIZONA INSURED TAX FREE FUND
--------------------------------------------------------------
CLASS A
--------------------------------------------------------------
PERIOD FROM
SIX MONTHS APRIL 1, 1991 (d)
ENDED YEAR ENDED DECEMBER 31, TO DECEMBER 31,
JUNE 30, 1996 -----------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period...................... $11.15 $9.86 $11.31 $10.71 $10.39 $10.00
------ ------ ----- ------ ------ ------
Operations:
Net investment income.................... .26 .54 .55 .58 .61 .50
Net realized and unrealized
gain (loss) on investments............. (.35) 1.31 (1.37) .74 .38 .47
------ ------ ----- ------ ------ ------
Total from operations................ (.09) 1.85 (.82) 1.32 .99 .97
------ ------ ----- ------ ------ ------
Distributions to shareholders:
From net investment income (a)........... (.26) (.56) (.53) (.58) (.61) (.50)
In excess of net investment income....... (.01) -- -- -- -- --
From net realized gains.................. -- -- (.04) (.14) (.06) (.08)
In excess of net realized gains.......... -- -- (.06) -- -- --
------ ------ ----- ------ ------ ------
Total distributions.................... (.27) (.56) (.63) (.72) (.67) (.58)
------ ------ ----- ------ ------ ------
Net asset value:
End of period............................ $10.79 $11.15 $9.86 $11.31 $10.71 $10.39
====== ====== ===== ====== ====== ======
Total investment return (b)................. (.87)% 19.10% (7.41)% 12.64% 9.86% 9.98%
Net assets at end of
period (000's omitted)................... $216,568 $238,114 $231,736 $263,312 $124,120 $38,322
Ratios:
Ratio of expenses to average daily net
assets (g)............................. .74%(e) .69% .72% .59% .35% --%
Ratio of net investment income
to average daily net assets............ 4.90%(e) 5.07% 5.20% 5.00% 5.60% 6.58%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)..................... .93%(e) .95% .92% 1.03% 1.16% 1.24%(e)
Net investment income............ 4.71%(e) 4.81% 5.00% 4.56% 4.79% 5.34%(e)
Portfolio turnover rate (excluding
short-term securities)................. 21.94% 42.96% 25.18% 33.80% 40.29% 177.66%
</TABLE>
See accompanying notes to Financial Highlights.
<TABLE>
<CAPTION>
ARIZONA INSURED TAX FREE FUND
---------------------------------------------------------------
CLASS B CLASS C
------------------------- ------------------------------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED MARCH 10, ENDED YEAR MAY 26,
JUNE 30, 1995(d) TO JUNE 30, ENDED 1994(d) TO
1996 DECEMBER 31, 1996 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period................... $11.14 $10.44 $11.15 $9.86 $10.48
------ ------ ------ ------ -----
Operations:
Net investment income................. .22 .38 .22 .45 .27
Net realized and unrealized
gain (loss) on investments.......... (.35) .69 (.36) 1.31 (.56)
------ ------ ------ ------ -----
Total from operations............. (.13) 1.07 (.14) 1.76 (.29)
------ ------ ------ ------ -----
Distributions to shareholders:
From net investment income (a)........ (.23) (.37) (.22) (.47) (.25)
From net realized gains............... -- -- -- -- (.04)
In excess of net realized gains....... -- -- -- -- (.04)
------ ------ ------ ------ -----
Total distributions................. (.23) (.37) (.22) (.47) (.33)
------ ------ ------ ------ -----
Net asset value:
End of period......................... $10.78 $11.14 $10.79 $11.15 $9.86
====== ====== ====== ====== =====
Total investment return (b).............. (1.22)% 10.36% (1.33)% 18.10% (2.84)%
Net assets at end of
period (000's omitted)................ $2,549 $2,048 $551 $541 $326
Ratios:
Ratio of expenses to
average daily net assets (g)........ 1.46%(e) 1.33%(e) 1.67%(e) 1.54% 1.50%(e)
Ratio of net investment income
to average daily net assets......... 4.16%(e) 4.08%(e) 3.95%(e) 4.18% 4.10%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c).................. 1.67%(e) 1.60%(e) 1.67%(e) 1.69% 1.71%(e)
Net investment income......... 3.95%(e) 3.81%(e) 3.95%(e) 4.03% 3.89%(e)
Portfolio turnover rate (excluding
short-term securities)................ 21.94% 42.96% 21.94% 42.96% 25.18%
</TABLE>
See accompanying notes to Financial Highlights.
NOTES TO FINANCIAL HIGHLIGHTS
(a) For the periods ended December 31, 1995, 1994, 1993 and 1992 all of the
distributions from net investment income were derived from interest on
securities exempt from federal income tax. For the period ended December
31, 1991, $.02 per share of the distributions from net investment income
were subject to federal income tax. For the year ended December 31, 1992,
$.01 per share of the distributions from net investment income were 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) For the periods ended June 30, 1996, December 31, 1995, 1994, 1993, 1992
and 1991, the advisor and distributor voluntarily absorbed various fees and
expenses for the Funds. The advisor also paid $25,631 beyond total fees and
expenses for Arizona Insured Tax Free Fund for the period ended December
31, 1991. The annual contractual expense limit for each 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 each Fund's average daily net assets
for Class A Shares and 1.00% of each Fund's average daily net assets for
Class B and Class C Shares.
(d) Commencement of operations.
(e) Annualized.
(f) All of the distributions from net investment income were derived from
interest on securities exempt from federal income tax. For the period ended
December 31, 1995, $.01 per share of the distributions from net investment
income were subject to state income tax for Class A, Class B and Class C.
(g) Beginning in the period ended December 31, 1995, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Funds. Prior period expense ratios have not
been adjusted.
<TABLE>
<CAPTION>
VOYAGEUR ARIZONA TAX FREE FUND
INVESTMENTS IN SECURITIES (UNAUDITED) JUNE 30, 1996
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (b) RATE MATURITY VALUE (a)
- -----------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
ARIZONA MUNICIPAL BONDS (98.9%):
GENERAL OBLIGATION (36.4%):
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100 Maricopa County Unified School District #80 Chandler
(FGIC Insured).................................................. 6.00% 07-01-13 $ 102,016
1,250 Maricopa County Unified School District #41 Gilbert (FSA Insured).. 6.25 07-01-15 1,285,063
500 Maricopa County Unified School District #40 Glendale............... 6.30 07-01-11 504,335
325 Maricopa County Unified School District #38 Madison
(FGIC Insured).................................................. 5.00 07-01-14 296,059
300 Maricopa County Unified School District #8 Osborn
(FGIC Insured).................................................. 5.88(e) 07-01-14 300,636
100 Maricopa County Unified School District #40 Tempe (FGIC Insured)... 6.00 07-01-11 102,683
500 Maricopa County Unified School District #68 Alhambra
(AMBAC Insured)................................................. 5.63 07-01-13 499,215
500 Pima County Unified School District #8, Flowing Wells.............. 5.90 07-01-13 497,875
100 Santa Cruz City Unified School District #1 Nogales (FSA Insured)... 5.80 07-01-13 100,145
250 Tucson Arizona GO.................................................. 5.38 07-01-20 231,605
200 Yavapai County Unified School District #22 Humboldt
(FGIC Insured)................................................. 5.95 07-01-14 202,412
-----------
4,122,044
-----------
HEALTH CARE (16.9%):
----------------------------------------------------------------------------------------------------
175 Arizona Samaritan Health System (MBIA Insured)................... 5.63 12-01-15 170,655
300 Maricopa County Catholic Health Care (MBIA Insured).............. 6.00 07-01-21 294,969
200 Maricopa County Industrial Development Authority Baptist Hospital
(MBIA Insured)................................................ 5.50 09-01-16 191,988
500 Mohave County Industrial Development Authority Baptist Hospital
(MBIA Insured)................................................ 5.75 09-01-26 487,380
500 Mohave County Industrial Development Authority, Chris/Silver
Ridge (GNMA Insured).......................................... 6.25 11-01-16 504,120
200 Scottsdale Industrial Development Authority Scottsdale Memorial
Hospital (AMBAC Insured)...................................... 5.25 09-01-18 184,302
100 University of Arizona Medical Center (MBIA Insured).............. 5.00 07-01-21 87,136
-----------
1,920,550
-----------
HOUSING (32.7%):
----------------------------------------------------------------------------------------------------
310 Chandler Industrial Development Authority Multifamily Finance
Housing (GNMA Insured)........................................ 5.90 07-20-15 307,365
1,750 Maricopa County Industrial Development Authority Multifamily
Series A...................................................... 6.63 07-01-26 1,771,945
500 Peoria Casa Del Rio Multifamily Finance Housing (GNMA Insured)... 7.30 02-20-28 532,950
125 Phoenix Industrial Development Authority Chris Ridge
(FHA Insured)................................................. 6.80 11-01-25 129,380
725 Pima County Industrial Development Authority Revenue Series A
(MBIA Insured)................................................ 7.25 07-01-25 764,875
200 Tempe Multifamily Mortgage Revenue IDA (FHA Insured)............. 6.13 06-01-10 203,654
----------
3,710,169
----------
LEASE/CERTIFICATE OF PARTICIPATION (0.9%):
----------------------------------------------------------------------------------------------------
100 University of Arizona Certificate of Participation (MBIA Insured) 6.00 07-15-23 100,244
----------
TRANSPORTATION (2.2%):
----------------------------------------------------------------------------------------------------
250 Tuscon Airport Authority Revenue (MBIA Insured).................. 5.70 06-01-13 247,977
----------
UTILITIES (6.9%):
----------------------------------------------------------------------------------------------------
100 Arizona Power Authority Hoover Uprating (MBIA Insured)........... 5.25 10-01-17 93,346
100 Gilbert Waste Water Revenue (FGIC Insured)....................... 6.50 07-01-22 105,441
100 Salt River Project Series C...................................... 5.50 01-01-28 92,908
500 Tucson Water (AMBAC Insured)..................................... 5.75 07-01-18 491,430
----------
783,125
----------
OTHER REVENUE (2.9%):
----------------------------------------------------------------------------------------------------
235 Oro Valley Municipal Property Corporation (MBIA Insured)......... 5.60 07-01-19 228,984
100 Scottsdale Municipal Property Corporation Lease (FGIC Insured)... 6.25 11-01-14 102,648
----------
331,632
----------
TOTAL MUNICIPAL BONDS (cost: $11,134,482) 11,215,741
----------
SHORT-TERM SECURITIES (1.3%):
----------------------------------------------------------------------------------------------------
147 Dreyfus Tax-Exempt Money Market Fund (cost: $147,000)............ 3.13(d) 147,000
----------
TOTAL INVESTMENTS IN SECURITIES (cost: $11,281,482) (c) $11,362,741
===========
</TABLE>
See accompanying notes to investments in securities.
<TABLE>
<CAPTION>
VOYAGEUR ARIZONA INSURED TAX FREE FUND
INVESTMENTS IN SECURITIES (UNAUDITED) JUNE 30, 1996
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (b) RATE MATURITY VALUE (a)
- -----------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET SSETS.)
ARIZONA MUNICIPAL BONDS (105.7%):
ESCROWED WITH U.S. GOVERNMENT BONDS (1.7%):
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000 Phoenix Street & Highway Pre-Refunded............................ 6.50% 01-01-02 $ 2,202,100
1,380 Pima County Sewer Revenue Pre-Refunded........................... 6.75 07-01-01 1,511,707
------------
3,713,807
------------
GENERAL OBLIGATION (72.9%):
----------------------------------------------------------------------------------------------------
1,000 Chandler Refunding G.O. (FGIC Insured)........................... 7.00 07-01-12 1,088,750
1,100 Cochise County Douglas Unified School District #27
(AMBAC Insured)............................................... 5.40 07-01-08 1,100,627
1,000 Cochise County Douglas Unified School District #27
(AMBAC Insured)............................................... 5.50 07-01-09 1,000,570
500 Cochise County Douglas Unified School District #27
(AMBAC Insured)............................................... 5.60 07-01-10 501,220
1,000 Cochise County Unified School District #68 (FGIC Insured)........ 7.50 07-01-10 1,202,190
1,185 Gila County Unified School District #10 Payson (AMBAC Insured)... 5.50 07-01-07 1,205,963
1,000 Gila County Unified School District #10 Payson (AMBAC Insured)... 5.60 07-01-08 1,017,610
1,000 Gila County Unified School District #10 Payson (AMBAC Insured)... 5.75 07-01-09 1,020,250
1,095 Glendale G.O. (FGIC Insured)..................................... 5.45 07-01-06 1,118,696
2,600 Glendale High Unified School District #205 Inverse Floater
(FGIC Insured).............................................. 7.07(f) 07-01-11 2,526,966
6,250 Glendale Unified School District #205 G.O. (FGIC Insured)........ 5.70 07-01-14 6,222,125
1,655 Maricopa Alahambra Unified School District #68 (AMBAC Insured)
Zero Coupon................................................... 5.01(g) 07-01-06 970,724
1,500 Maricopa County Cave County Unified School District # 93 Inverse
Floater (FGIC Insured)....................................... 6.87(f) 07-01-11 1,413,015
2,000 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)................................................ 6.40 07-01-10 2,099,360
1,200 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)............................................... 5.80 07-01-08 1,236,696
1,000 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)................................................ 5.80 07-01-09 1,022,020
1,700 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)................................................ 5.90 07-01-10 1,741,446
910 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)................................................ 6.25 07-01-11 988,715
1,000 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)................................................ 5.80 07-01-12 1,007,840
2,200 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)................................................ 5.85 07-01-13 2,217,204
2,400 Maricopa County Chandler Unified School District #80 G.O.
(FGIC Insured)................................................ 6.00 07-01-13 2,448,384
4,000 Maricopa County Gilbert Unified School District #41 G.O.
(FGIC Insured)................................................ 5.50 07-01-12 3,920,880
5,500 Maricopa County Hospital District #1 (FGIC Insured).............. 6.13 06-01-15 5,632,990
2,000 Maricopa County Kyrene Unified School District #28 (FGIC Insured) 5.90 07-01-10 2,031,800
500 Maricopa County Kyrene Unfied School District #28 Zero Coupon.... 5.30(g) 01-01-07 284,090
2,775 Maricopa County Madison Unified School District #38 G.O.
(FGIC Insured)................................................ 5.40 07-01-11 2,721,942
2,750 Maricopa County Madison Unified School District #38 G.O.
(FGIC Insured)................................................ 5.00 07-01-12 2,551,367
2,250 Maricopa County Madison Unified School District #38 G.O.
(FGIC Insured)................................................ 5.00 07-01-13 2,068,740
2,250 Maricopa County Madison Unified School District #38 G.O.
(FGIC Insured)................................................ 5.00 07-01-14 2,049,638
2,000 Maricopa County Mesa Unified School District #4 (FGIC Insured)... 5.50 07-01-09 2,001,140
2,000 Maricopa County Mesa Unified School District #4 (FGIC Insured)... 5.55 07-01-10 2,000,800
1,000 Maricopa County Peoria Unified School District #11 (MBIA Insured) 7.00 07-01-10 1,086,250
1,790 Maricopa County Tempe Unified School District #40 (FGIC Insured). 6.00 07-01-11 1,838,026
1,000 Maricopa County Tempe Unified School District #3 (FGIC Insured).. 5.40 07-01-12 974,920
675 Maricopa County Tolleson Unified School District #17
(AMBAC Insured)............................................... 5.60 07-01-07 688,324
775 Maricopa County Tolleson Unified School District #17
(AMBAC Insured)............................................... 5.70 07-01-08 790,229
750 Maricopa County Tolleson Unified School District #214
(FGIC Insured)................................................ 5.75 07-01-14 750,300
1,240 Maricopa County Unified School District #98 G.O.
(AMBAC Insured)............................................... 5.50 07-01-08 1,248,134
3,000 Maricopa County Unified School District # 1 Phoenix
(MBIA Insured)................................................ 5.50 07-01-09 2,986,230
2,000 Maricopa County Unified School District # 5 ISAAC (FGIC Insured). 5.00 07-01-10 1,877,620
2,500 Maricopa County Unified School District #8 Isborn (FGIC Insured). 5.63 07-01-10 2,500,000
3,400 Maricopa County Unified School District #8 Isborn (FGIC Insured). 5.88 07-01-14 3,407,208
1,000 Maricopa County Unified School District #98 G.O.
(AMBAC Insured)............................................... 5.75 07-01-12 1,004,770
4,440 Maricopa County Unified School District #95 (AMBAC Insured)...... 5.70 07-01-14 4,420,198
1,000 Maricopa Creighton Elementary #14 (FGIC Insured)................. 6.50 07-01-08 1,106,830
1,000 Maricopa Fountain Hills Unified School District #98 (FGIC Insured) 6.63 07-01-10 1,059,760
3,000 Maricopa Paradise Valley #69 (MBIA Insured)...................... 6.40 07-01-10 3,167,820
2,000 Maricopa Peoria Unified School District #11 (AMBAC Insured)...... 6.10 07-01-10 2,087,100
575 Mohave County Unified School District #1 Lake Havasu
(FGIC Insured)................................................ 5.70 07-01-09 579,968
650 Mohave County Unified School District #1 Lake Havasu
(FGIC Insured)................................................ 5.75 07-01-10 655,603
600 Mohave County Unified School District #1 Lake Havasu
(FGIC Insured)................................................ 5.80 07-01-11 605,154
5,000 Mohave County Unified School District #1 Lake Havasu
(FGIC Insured)................................................ 5.90 07-01-15 5,021,300
1,100 Navajo County Blue Ridge Unified School District #32 G.O.
(FSA Insured)................................................. 5.40 07-01-11 1,078,968
1,000 Peoria (MBIA Insured)............................................ 5.70 07-01-11 1,004,110
2,000 Phoenix Secondary Market (MBIA Insured) ......................... 6.38 07-01-13 2,099,320
3,000 Pima County School District #1 Inverse Floater (FGIC Insured).... 6.87(f) 07-01-13 2,749,020
525 Pima County Catalina Unified School District #16 (AMBAC Insured) 7.25 07-01-07 618,613
1,150 Pima County Catalina Unified School District #16 (AMBAC Insured) 5.60 07-01-09 1,158,636
725 Pima County Catalina Unified School District #16 (AMBAC Insured) 5.70 07-01-10 728,465
1,000 Pima County Community College District (AMBAC Insured)........... 6.40 07-01-07 1,059,470
1,260 Pima County Marana Unified School District #6 95A
(AMBAC Insured)............................................... 5.40 07-01-08 1,260,718
1,000 Pima County Marana Unified School District #6 95A
(AMBAC Insured)............................................... 5.50 07-01-10 996,140
6,350 Pima County Marana Unified School District #6 (FGIC Insured)..... 5.75 07-01-12 6,376,035
1,000 Pima County Sunnyside Unified School District #12 G.O.
(AMBAC Insured)............................................... 5.60 07-01-09 1,005,930
500 Pima County Sunnyside Unified School District #12 G.O.
(AMBAC Insured)............................................... 5.70 07-01-10 503,940
500 Pima County Sunnyside Unified School District #12 G.O.
(AMBAC Insured)............................................... 5.70 07-01-11 502,230
1,000 Pima County Sunnyside Unified School District #12 (MBIA Insured). 5.50 07-01-09 1,000,530
1,585 Pima County Sunnyside Unified School District #12 (MBIA Insured). 5.50 07-01-10 1,578,882
1,325 Pima County Sunnyside Unified School District #12 (MBIA Insured). 5.50 07-01-11 1,312,995
2,650 Pima County Tucson Unified School District #1 (MBIA Insured)..... 5.00 07-01-09 2,526,218
2,875 Pima County Tucson Unified School District #1 (MBIA Insured)..... 5.00 07-01-10 2,715,035
7,000 Pima County Tucson Unified School District #1 (FGIC Insured) .... 6.10 07-01-11 7,226,240
500 Pima County Tucson Unified School District #1 (FGIC Insured) .... 5.40 07-01-13 484,335
500 Pinal County Apache Unified School District 43-A (FGIC Insured).. 6.80(e) 07-01-08 563,100
1,875 Pinal County Apache Unified School District 43-A (FGIC Insured).. 5.75(e) 07-01-10 1,891,819
1,000 Pinal County Apache Junction Unified School District #43
(FGIC Insured)................................................ 5.80(e) 07-01-11 1,008,950
2,000 Pinal County Apache Junction Unified School District #43
(FGIC Insured)................................................ 5.85(e) 07-01-15 2,005,120
1,000 Pinal County Casa Grande Unified School District #82
(AMBAC Insured)............................................... 5.38 07-01-09 989,410
1,300 Pinal County Casa Grande Unified School District #82
(AMBAC Insured)............................................... 5.40 07-01-10 1,282,437
1,205 Santa Cruz County Nogales Unified School District #1
(FSA Insured)................................................. 5.80 07-01-13 1,206,747
1,250 Santa Cruz County Nogales Unified School District #1
(AMBAC Insured)............................................... 6.10 07-01-14 1,337,150
2,200 Tempe Union High School District G.O. (FGIC Insured)............. 7.00 07-01-08 2,537,326
5,030 Tucson (FGIC Insured)............................................ 6.10 07-01-12 5,210,577
3,800 Tucson G.O. (FGIC Insured)....................................... 5.54(g) 07-01-13 1,423,936
1,000 Tucson G.O. (MBIA Insured)....................................... 5.38 07-01-18 948,150
1,000 Yavapai County Community College (FGIC Insured).................. 5.40 07-01-10 986,490
725 Yavapai County Humboldt Unified School District #22
(MBIA Insured)................................................ 5.75 07-01-07 757,328
715 Yavapai County Humboldt Unified School District #22
(FGIC Insured)................................................ 5.75 07-01-10 723,716
3,000 Yuma (AMBAC Insured)............................................. 6.13 07-01-12 3,097,680
------------
160,225,268
------------
UTILITIES (5.9%):
----------------------------------------------------------------------------------------------------
1,870 Arizona State Power Authority Revenue (MBIA Insured) ........... 5.40 10-01-08 1,870,767
1,000 Chandler Water and Sewer Revenue (FGIC Insured).................. 7.00 07-01-12 1,088,750
1,000 Gilbert Water and Waste Water Revenue (FGIC Insured)............. 6.50 07-01-12 1,070,330
2,650 Gilbert Water and Waste Water Revenue (FGIC Insured)............. 6.50 07-01-22 2,794,187
1,000 Pima County Special Water Improvement District (FGIC Insured).... 6.20 01-01-11 1,043,380
2,000 Salt River Agricultural Improvement & Power Project
(AMBAC Insured).............................................. 6.25 01-01-19 2,049,200
2,000 Salt River Agricultural Improvement & Power Project
(AMBAC Insured).............................................. 6.50 01-01-22 2,081,220
1,000 Salt River Agricultural Project Revenue (MBIA Insured)........... 5.25 01-01-11 965,220
------------
12,963,054
------------
TRANSPORTATION (5.4%):
----------------------------------------------------------------------------------------------------
1,000 Chandler Street & Highway Revenue Inverse Floater (MBIA Insured) 6.32(f) 07-01-15 835,670
610 Phoenix Airport Revenue (MBIA Insured)........................... 6.20 07-01-10 639,817
3,000 Phoenix Civic Improvement & Airport (MBIA Insured)............... 5.75 07-01-02 3,140,580
4,750 Tucson Airport Authority Revenue (MBIA Insured).................. 5.70 06-01-13 4,711,572
2,500 Tucson Street & Highway User Revenue (MBIA Insured).............. 5.50 07-01-12 2,450,550
------------
11,778,189
------------
INDUSTRIAL (2.0%):
----------------------------------------------------------------------------------------------------
2,000 Maricopa County Stadium District (MBIA Insured).................. 5.50 07-01-13 1,942,000
2,750 Peoria MDA Revenue Inverse Floater (MBIA Insured)................ 6.47(f) 07-01-10 2,528,185
------------
4,470,185
------------
HEALTH CARE (8.2%):
----------------------------------------------------------------------------------------------------
2,000 Arizona Health Facility Authority Phoenix Baptist Hospital and
Medical Center (MBIA Insured) ................................ 6.25 09-01-11 2,074,920
3,380 Maricopa County Industrial Development Authority Baptist Hospital
(MBIA Insured)............................................... 5.50 09-01-13 3,273,969
1,000 Maricopa County Industrial Development Authority Baptist Hospital
(MBIA Insured)................................................ 5.50 09-01-16 959,940
2,000 Mohave County Industrial Development Authority Baptist Hospital
(MBIA Insured)................................................ 5.50 09-01-21 1,888,140
1,100 Mohave County Industrial Development Authority Baptist Hospital
(MBIA Insured)................................................ 5.75 09-01-26 1,072,236
1,300 Mohave County Industrial Development Authority,
Chris/Silver Ridge, (GNMA Insured)............................ 6.38 11-01-31 1,312,558
1,300 Navapache Hospital District Refunding Series 1993 (FGIC Insured). 5.40 06-01-12 1,260,805
1,000 Pima County Tucson Medical Center (MBIA Insured)................. 6.38 04-01-12 1,045,940
1,500 Pima County Tucson Medical Center (MBIA Insured)................. 5.00 04-01-15 1,347,360
1,000 Pima Individual Health Care (MBIA Insured)....................... 6.75 07-01-10 1,068,290
1,250 Scottsdale Industrial Development Authority Hospital
Revenue Inverse Floater (AMBAC Insured)...................... 7.07(f) 09-01-12 1,200,025
1,445 University of Arizona Medical Center (MBIA Insured).............. 6.25 07-01-10 1,508,840
------------
18,013,023
------------
HOUSING (0.8%):
----------------------------------------------------------------------------------------------------
750 Chandler Industrial Development Authority Multifamily Housing
(GNMA Backed)................................................ 5.90 07-20-15 743,625
1,000 Pima County Industrial Development Authority Revenue Series A
(MBIA Insured)................................................ 7.25 07-01-25 1,055,000
------------
1,798,625
------------
EDUCATION (3.5%):
----------------------------------------------------------------------------------------------------
1,500 Arizona State University System (MBIA Insured)................... 6.13 07-01-15 1,527,705
750 Glendale Industrial Development Authority G.O.
(Connie Lee Insured).......................................... 6.75 07-01-09 819,863
1,000 Glendale Industrial Development Authority G.O.
(Connie Lee Insured).......................................... 7.00 07-01-14 1,097,270
1,000 Resh-Elliot Park State University (MBIA Insured)................. 6.75 07-01-11 1,071,920
3,000 University of Arizona (AMBAC Insured)............................ 6.25 06-01-11 3,141,420
------------
7,658,178
------------
OTHER REVENUE (5.3%):
----------------------------------------------------------------------------------------------------
3,000 Glendale IDA, Thunderbird (Connie Lee Insured)................... 5.88 07-01-15 2,973,240
2,000 Glendale IDA, Thunderbird (Connie Lee Insured)................... 5.63 07-01-20 1,910,880
1,000 Oro Valley, Municipal Property Corporation (MBIA Insured)........ 5.38 07-01-26 933,600
1,750 Phoenix Arizona Street & Highway Revenue (FGIC Insured).......... 6.10 07-01-11 1,806,560
3,900 Scottsdale Municipal Property Corporation Lease (FGIC Insured)... 6.25 11-01-14 4,003,272
------------
11,627,552
------------
TOTAL MUNICIPAL BONDS (cost: $227,656,332) 232,247,881
------------
SHORT-TERM SECURITIES (0.3%):
----------------------------------------------------------------------------------------------------
130 Dreyfus Investment Tax-Exempt Money Market Fund.................. 3.13(d) 130,000
433 Nuveen Investment Tax Free Fund.................................. 3.10(d) 433,000
------------
TOTAL SHORT-TERM SECURITIES (cost: $563,000) 563,000
------------
TOTAL INVESTMENTS IN SECURITIES (cost: $228,219,332) (c) $232,810,881
============
</TABLE>
See accompanying notes to investments in securities.
VOYAGEUR ARIZONA TAX FREE FUND
VOYAGEUR ARIZONA INSURED TAX FREE FUND
NOTES TO INVESTMENTS IN SECURITIES (UNAUDITED)
- --------------------------------------------------------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) Investments in bonds, by rating category (unaudited) as a percentage of
total bonds, are as follows:
<TABLE>
<CAPTION>
Aaa/AAA Aa/AA A/A Total
------- ----- --- -----
<S> <C> <C> <C> <C>
Arizona Tax Free Fund.................. 72% 1% 27% 100%
Arizona Insured Tax Free Fund.......... 100% -- -- 100%
</TABLE>
(c) Also represents the cost of securities for federal income tax purposes and
the aggregate gross unrealized appreciation and depreciation of securities
based on this cost were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
------------ ------------ ------------
<S> <C> <C> <C>
Arizona Tax Free Fund.................. $ 126,869 $ (45,610) $ 81,259
Arizona Insured Tax Free Fund.......... 5,363,669 (772,120) 4,591,549
</TABLE>
(d) Dividend yields change daily to reflect current market conditions. Rate
shown is the quoted yield as of June 30, 1996. (e) At June 30, 1996, the
cost of securities purchased on a when-issued basis was $297,450 for
Arizona Tax Free Fund and 5,418,755 for Arizona Insured Tax Free Fund.
(f) Inverse floater, represents a security that pays interest at rates that
increase (decrease) with a decline (increase) in a general money market
index. Interest rate disclosed is the rate in effect on June 30, 1996.
(g) The interest rate for zero coupon issues represents the effective yield on
the date of acquisition.
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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800.545.3863
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On Call (TM) (800.545.3863). The system is designed to give you information
about the Fund(s) in your account. It can also provide price and yield
information for the Fund(s). 24-hour access available to Touch Tone telephones
only.
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Your tax sensitive investment manager
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402-4115
