ARIZONA TAX FREE FUND
ARIZONA INSURED TAX FREE FUND
ANNUAL REPORT
Dated December 31, 1995
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds
as your objectives or market conditions change.
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur WISCONSIN Tax Free Fund
Voyageur KANSAS Tax Free Fund
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
Voyageur ARIZONA Insured Voyageur MISSOURI Insured
Tax Free Fund Tax Free Fund
Voyageur CALIFORNIA Insured Voyageur NATIONAL Insured
Tax Free Fund Tax Free Fund
Voyageur FLORIDA Voyageur OREGON
Tax Free Fund Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON
Tax Free Fund
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited
Voyageur MINNESOTA Limited Term Tax Free Fund Term Tax Free Fund
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
Dear Shareholder:
1995 was an excellent year for municipal bond fund investors and I am pleased to
report that your Funds did extremely well.
As you may recall, the previous year, 1994, represented one of the most
difficult years for fixed income investors since the 1920s. Voyageur's
investment strategy, however, emphasizes total return over the long term.
Shareholders who maintained a long term outlook through 1994 are to be
congratulated for their patience. This patience was rewarded in 1995.
Two of the major factors contributing to the resurgence of the municipal bond
market this past year were:
* Progressively lower interest rates throughout the year. (Falling interest
rates directly increases the value of your Fund's portfolio, and hence,
your shares.)
* A narrowing "spread" between yields on higher quality bonds versus lower
quality bonds. (Your Funds benefited from maintaining a large position in
quality bonds.)
In the following pages, Drew McCullagh, the Funds' portfolio manager, will
elaborate on these and other points of interest regarding the municipal bond
market in 1995 and will also share Voyageur's economic outlook for the next
fiscal year.
Finally, I'd like to apprise you of the amount of capital appreciation and
current income generated by the Funds on your behalf in 1995.
<TABLE>
<CAPTION>
VOYAGEUR ARIZONA TAX FREE FUND
TOTAL NET
NET ASSET NET ASSET ASSETS
VALUE VALUE DIVIDENDS END OF
BEGINNING END PAID PER PERIOD
OF PERIOD OF PERIOD SHARE (000'S)
--------- --------- ----- -------
PERIOD
- ------
Period ended December 31, 1995:
<S> <C> <C> <C> <C>
Class A Shares $10.00* $10.75 $0.55 $6,225
Class B Shares 10.30** 10.74 0.35 1,629
Class C Shares 10.20*** 10.76 0.39 27
_________________________________
* Net asset value at March 2, 1995 (commencement of operations)
** Net asset value at June 29, 1995 (commencement of operations)
*** Net asset value at May 13, 1995 (commencement of operations)
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR ARIZONA INSURED TAX FREE FUND
TOTAL NET
NET ASSET NET ASSET ASSETS
VALUE VALUE DIVIDENDS END OF
BEGINNING END PAID PER PERIOD
OF PERIOD OF PERIOD SHARE (000'S)
--------- --------- ----- -------
PERIOD
- ------
Period ended December 31, 1995:
<S> <C> <C> <C> <C>
Class A Shares $9.86 $11.15 $0.56 $238,114
Class B Shares 10.44* 11.14 0.37 2,048
Class C Shares 9.86 11.15 0.47 541
_________________________________
*Net asset value at March 10, 1995 (commencement of operations)
</TABLE>
I will be reporting to you again in August, 1996 to review the first half of the
coming year. In the interim, if you have any questions or comments about your
Funds, please call Voyageur's Shareholder Services Department at (800)545- 3863
or your financial advisor.
Thank you for investing with Voyageur.
Sincerely,
John G. Taft
President
Voyageur Arizona Tax Free Fund
Voyageur Arizona Insured Tax Free Fund
FUND INVESTMENT OBJECTIVES AND STRATEGIES
The primary objective of the Voyageur Arizona Tax Free Fund is to seek as high a
level of current income free from both federal income taxes and state income
taxes as is consistent with preservation of capital.
The primary objective of the Voyageur Arizona Insured Tax Free Fund is to seek
as high a level of current income free from both federal income taxes and state
income taxes as is consistent with preservation of capital, with the added
safety of an insured portfolio. The Voyageur Arizona Insured Tax Free Fund
adopted a modification of an investment policy which will permit this Fund to
retain insured municipal bonds in its portfolio the rating of which is not lower
than AA by Standard & Poor's Ratings Service or Aa by Moody's Investor Service
so long as such AA or Aa insured municipal bonds do not exceed 35% of the Fund's
total assets. Such bonds must still have a AAA or Aaa rating at the time of
initial investment by the Fund.
The Arizona Tax Free Fund generally invests in long-term investment grade
municipal bonds; the Arizona Insured Tax Free Fund generally invests in
long-term insured municipal bonds. The distributions from each Fund are
generally exempt from federal income tax and Arizona state income tax.
DISCUSSION OF FUND PERFORMANCE
by Andrew M. McCullagh, Jr.
MR. MCCULLAGH IS THE PORTFOLIO MANAGER OF THE VOYAGEUR ARIZONA TAX FREE FUNDS AS
WELL AS A SENIOR VICE PRESIDENT FOR VOYAGEUR FUND MANAGERS. HE HAS MANAGED THE
FUNDS SINCE THEIR INCEPTIONS.
We are pleased to report the 1995 performance results of the Voyageur Arizona
Tax Free Funds for the fiscal year ending December 31, 1995. The Voyageur
Arizona Insured Fund's Class 'A' and 'C' shares have been in operation for the
entire fiscal year. The Voyageur Arizona Tax Free Fund's Class 'A', 'B', and 'C'
shares commenced in 1995.
* The Voyageur Arizona Insured Fund achieved a total return of +19.10% in
1995 for Class 'A' shares (assuming purchase at net asset value and
reinvestment of dividends and capital gains). Class 'C' shares achieved a
+18.10% total return.
* The Voyageur Arizona Tax Free Fund achieved a total return of +13.27% for
Class 'A' shares since the Fund's commencement (assuming purchase at net
asset value and reinvestment of dividends and capital gains).
For information pertaining to total returns, relative performance, and inception
dates for other share classes, as well as information about the Funds'
performance over additional timeframes and including the effect of sales
charges, please refer to the charts on pages 8 and 9.
FACTORS AFFECTING FUND PERFORMANCE IN 1995
As discussed in John Taft's introduction, a general downward trend in prevailing
interest rates had a positive impact on the net asset value of Fund shares in
1995. The Voyageur Arizona Insured Tax Free Fund had relative performance for
the fiscal year that beat the average return of all Arizona municipal bond funds
according to Lipper Analytical Services. As a group, these 31 funds achieved an
average one year total return of +17.52%. The Voyageur Arizona Insured Tax Free
Fund's performance bested this figure by over 1.5%. According to Lipper, the
Voyageur Arizona Insured Tax Free Fund (Class 'A' shares) was ranked #4 of 31
Arizona municipal bond funds for one year total return. Keep in mind, however,
that past performance does not guarantee future results. (Once again, please
refer to the charts on pages 8 and 9 for additional performance information.)
The Funds were able to capture significant capital appreciation through duration
management. Longer duration funds experience wider fluctuations in market prices
than shorter duration funds. For example, early in 1995, the duration of the
Voyageur Arizona Insured Tax Free Fund was over 11 years which allowed for a
significant increase in net asset value. After having captured this market
rally, the duration of the Fund was systematically reduced, closing the year at
approximated 7.3 years. As of December 31, 1995, the duration for the Voyageur
Arizona Tax Free Fund was 8.2 years.
The Funds also benefited from relative changes in value between high quality
bonds and lower quality bonds. As interest rate spreads between these two
classes of municipal bonds narrowed, high quality bonds (which had been
dramatically oversold during the 1994 bear market) gained significant relative
value. The Voyageur Arizona Insured Tax Free Fund is comprised exclusively of
bonds rated Aaa and/or AAA by Moody's Investors Service and/or Standard & Poor's
Ratings Service. 74% of the Voyageur Arizona Tax Free Fund's portfolio was
comprised of bonds rated Aaa/AAA, and 100% of the Fund's portfolio was held in
investment grade securities. As you can see, throughout 1995, asset quality
remained high in the Voyageur Arizona Tax Free Funds.
OUTLOOK FOR 1996
Our outlook for the Arizona municipal bond market remains bullish. However, we
do not anticipate as significant levels of total return in the upcoming year as
was achieved in 1995.
Our 1996 economic outlook calls for:
* CONTINUED LOW RATES OF INFLATION. We expect a Consumer Price Index (CPI)
increase of from 2.5% to 2.8%.
* SLOWING OF ECONOMIC GROWTH. In 1995, U.S. Gross Domestic Product (GDP)
climbed about 3%. Voyageur's 1996 projection for GDP calls for an increase
of about 2.4%.
* STABLE TO SLIGHTLY DECLINING INTEREST RATES. During 1995, the Federal
Reserve Board encouraged lower interest rates by reducing the Federal Funds
Rate by a total of .5%. (Rates were subsequently lowered by an additional
.25% in February 1996.) We expect further reductions of .5% to .75%, which
will likely occur well in advance of the November elections.
In conclusion, Voyageur believes the municipal bond market will have a good year
in 1996. However, we advise against expectations of total return levels achieved
in 1995.
PURSUANT TO RULE 232.304(a) OF REGULATION S-T THE FOLLOWING IS A TABULAR
REPRESENTATION OF A LINE GRAPH FOR VOYAGEUR ARIZONA TAX FREE FUND PORTFOLIO
ABSTRACT FOR THE PERIOD ENDED DECEMBER 31, 1995. THE DATA REPRESENTS THE
CUMULATIVE TOTAL RETURN OF A HYPOTHETICAL INVESTMENT IN CLASS A SHARES OF
$10,000 MADE ON THE DATE THE FUND COMMENCED OPERATIONS THROUGH DECEMBER 31,
1995.
ENDING VALUE ENDING VALUE ENDING VALUE
WITH SALES WITHOUT SALES LEHMAN BROS.
DATE CHARGE CHARGE BOND INDEX
- ---- ------ ------ ----------
Mar-95 9525 10000 10000
Mar-95 9603.66 10082.59 10110.3
Apr-95 9618.9 10098.58 10108.28
May-95 10010.08 10509.28 10489.36
Jun-95 9872.32 10364.64 10327.83
Jul-95 9900 10393.7 10381.53
Aug-95 10045.5 10546.46 10523.76
Sep-95 10220.8 10730.5 10606.9
Oct-95 10495.37 11018.76 10832.82
Nov-95 10682.25 11214.96 11072.23
Dec-95 10788.62 11326.64 11227.24
VOYAGEUR ARIZONA TAX FREE FUND
TOTAL RETURNS
(CLASS A SHARES)
----------------
SINCE
3/2/95**
--------
Without Sales Charge 13.27%
With Sales Charge* 7.89%
Lehman Bros. 20 12.27%
Year Municipal
Bond Index
VOYAGEUR ARIZONA TAX FREE FUND
TOTAL RETURNS
(CLASS B SHARES)
----------------
SINCE
6/29/95**
---------
Without Contingent
Deferred Sales Charge 7.74%
With Contingent 3.74%
Deferred Sales Charge***
VOYAGEUR ARIZONA TAX FREE FUND
TOTAL RETURNS
(CLASS C SHARES)
----------------
SINCE
5/13/95**
---------
9.43%
* Average annual total returns include the maximum 4.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1995.
PURSUANT TO RULE 232.304(a) OF REGULATION S-T THE FOLLOWING IS A TABULAR
REPRESENTATION OF A LINE GRAPH FOR VOYAGEUR ARIZONA INSURED TAX FREE FUND
PORTFOLIO ABSTRACT FOR THE PERIOD ENDED DECEMBER 31, 1995. THE DATA REPRESENTS
THE CUMULATIVE TOTAL RETURN OF A HYPOTHETICAL INVESTMENT IN CLASS A SHARES OF
$10,000 MADE ON THE DATE THE FUND COMMENCED OPERATIONS THROUGH DECEMBER 31,
1995.
ENDING VALUE ENDING VALUE ENDING VALUE
WITH SALES WITHOUT SALES LEHMAN BROS.
DATE CHARGE CHARGE BOND INDEX
- ---- ------ ------ ----------
Apr-91 9525 10000 10000
Apr-91 9617.89 10097.53 10137
May-91 9751.43 10237.73 10236.34
Jun-91 9741.55 10227.34 10212.8
Jul-91 9866.92 10358.97 10340.46
Aug-91 9983.66 10481.53 10479.02
Sep-91 10189.35 10697.82 10619.44
Oct-91 10288.3 10801.7 10719.26
Nov-91 10337.4 10853.26 10734.27
Dec-91 10416.06 10935.84 10979.01
Dec-91 10474.79 10997.51 10979.01
Jan-92 10492.67 11016.27 11011.95
Feb-92 10488.78 11012.19 11008.64
Mar-92 10504.61 11028.82 11008.65
Apr-92 10581.99 11110.06 11105.52
May-92 10742.23 11278.29 11236.57
Jun-92 10914.56 11459.22 11438.83
Jul-92 11254.39 11816.01 11834.61
Aug-92 11083.42 11636.5 11686.68
Sep-92 11172.39 11729.91 11743.94
Oct-92 11092.09 11645.6 11608.89
Nov-92 11372.52 11940.03 11874.73
Dec-92 11450.6 12022.01 12002.98
Dec-92 11507.17 12081.41 12002.98
Jan-93 11609.13 12188.45 12136.21
Feb-93 11993.24 12591.72 12628.94
Mar-93 11997.69 12596.4 12476.13
Apr-93 12143.22 12749.2 12622.1
May-93 12179.98 12787.79 12704.14
Jun-93 12426.28 13046.38 12918.84
Jul-93 12508.12 13132.31 12945.97
Aug-93 12757.11 13393.72 13224.31
Sep-93 12828.34 13467.55 13379.04
Oct-93 12876.48 13518.09 13396.43
Nov-93 12720.52 13354.36 13270.5
Dec-93 12904.6 13547.62 13566.44
Dec-93 12962.05 13607.92 13566.44
Jan-94 13214.02 13872.45 13723.81
Feb-94 12869.08 13510.32 13340.91
Mar-94 12301.32 12914.27 12715.22
Apr-94 12172.59 12779.13 12844.92
May-94 12310.96 12924.39 12969.51
Jun-94 12238.41 12848.22 12873.54
Jul-94 12472.48 13093.96 13142.6
Aug-94 12494.41 13116.99 13159.68
Sep-94 12266.31 12877.52 12942.55
Oct-94 12001.05 12599.04 12679.81
Nov-94 11674.12 12255.82 12450.31
Dec-94 11943.75 12538.88 12755.34
Dec-94 12001.17 12599.17 12755.34
Jan-95 12412.4 13030.89 13178.82
Feb-95 12911.15 13554.49 13584.73
Mar-95 13041.88 13691.73 13735.52
Apr-95 13049.12 13699.33 13747.88
May-95 13466.53 14137.54 14211.18
Jun-95 13349.26 14014.43 14054.86
Jul-95 13419.92 14088.61 14167.3
Aug-95 13591.71 14268.96 14358.56
Sep-95 13751.43 14436.64 14457.63
Oct-95 13936.95 14631.4 14703.41
Nov-95 14172.14 14878.31 14968.07
Dec-95 14293.07 15005.26 15122.24
VOYAGEUR ARIZONA INSURED TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS A SHARES)
----------------
SINCE
1 Year 4/1/91**
------ --------
Without Sales Charge 19.10% 8.91%
With Sales Charge* 13.44% 7.80%
Lehman Bros. Long Insured 18.56% 9.10%
Minicipal Bond Index
VOYAGEUR ARIZONA INSURED TAX FREE FUND
TOTAL RETURNS
(CLASS B SHARES)
----------------
SINCE
3/10/95**
---------
Without Contingent 10.36%
Deferred Sales Charge
With Contingent 6.36%
Deferred Sales Charge***
VOYAGEUR ARIZONA INSURED TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS C SHARES)
----------------
SINCE
1 Year 5/26/94**
------ ---------
18.10% 8.96%
* Average annual total returns include the maximum 4.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1995.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Mutual Funds, Inc.
Voyageur Insured Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of Voyageur Arizona Tax
Free Fund (a fund within Voyageur Mutual Funds, Inc.) and Voyageur Arizona
Insured Tax Free Fund (a fund within Voyageur Insured Funds, Inc.) as of
December 31, 1995, and the related statements of operations for the period from
March 2, 1995, commencement of operations, to December 31, 1995 for Voyageur
Arizona Tax Free Fund and for the year ended December 31, 1995 for Voyageur
Arizona Insured Tax Free Fund, the statements of changes in net assets for the
period from March 2, 1995 to December 31, 1995 for Voyageur Arizona Tax Free
Fund and for each of the years in the two-year period ended December 31, 1995
for Voyageur Arizona Insured Tax Free Fund and the financial highlights for the
period from March 2, 1995 to December 31, 1995 for Voyageur Arizona Tax Free
Fund and for each of the years in the four-year period ended December 31, 1995
and the period from April 1, 1991, commencement of operations, to December 31,
1991 for Voyaguer Arizona Insured Tax Free Fund. These financial statements and
the financial highlights are the responsibility of Fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody are confirmed to us by the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Voyageur Arizona Tax Free
Fund and Voyageur Arizona Insured Tax Free Fund at December 31, 1995 and the
results of their operations, the changes in their 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
February 9, 1996
<TABLE>
<CAPTION>
THE VOYAGEUR FUNDS
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------
VOYAGEUR VOYAGEUR
ARIZONA ARIZONA
TAX FREE INSURED
FUND TAX FREE FUND
ASSETS ---------- ------------
<S> <C> <C>
Investments in securities, at market value (note 1)
(identified cost: $7,557,641 and $223,725,688, respectively)... $7,814,635 $235,308,171
Cash in bank on demand deposit.................................... 76 18
Accrued interest receivable....................................... 176,137 6,418,416
Receivable for Fund shares sold................................... -- 128,843
Organizational costs (note 1)..................................... -- 989
----------- ------------
Total assets................................................... 7,990,848 241,856,437
----------- ------------
LIABILITIES
Dividends payable to shareholders................................. 95,501 963,679
Payable for Fund shares redeemed.................................. -- 137,670
Distribution fees payable......................................... 4,998 9,525
Other accrued expenses............................................ 8,958 43,019
----------- ------------
Total liabilities.............................................. 109,457 1,153,893
----------- ------------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES....................... $7,881,391 $240,702,544
========== ============
Represented by:
Capital Stock - $.01 par value (note 1)........................ $ 7,330 $ 215,839
Additional paid-in capital..................................... 7,616,353 234,733,037
Undistributed net investment income............................ 714 569
Accumulated net realized loss on investments................... -- (5,829,384)
Unrealized appreciation of investments......................... 256,994 11,582,483
----------- ------------
TOTAL NET ASSETS............................................. $7,881,391 $240,702,544
========== ============
Net assets applicable to outstanding Class A Shares............... $6,225,483 $238,113,646
========== ============
Net assets applicable to outstanding Class B Shares............... $1,628,962 $ 2,047,794
========== ============
Net assets applicable to outstanding Class C Shares............... $ 26,946 $ 541,104
========== ============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE Class A - Shares of Capital
Stock outstanding:
578,894 and 21,351,620, respectively (note 4)................ $10.75 $11.15
====== ======
Class B - Shares of Capital Stock outstanding:
151,607 and 183,744, respectively (note 4)................... $10.74 $11.14
====== ======
Class C - Shares of Capital Stock outstanding:
2,505 and 48,524, respectively (note 4)...................... $10.76 $11.15
====== ======
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
THE VOYAGEUR FUNDS
STATEMENTS OF OPERATIONS PERIOD ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------
VOYAGEUR VOYAGEUR
ARIZONA ARIZONA
TAX FREE INSURED
FUND* TAX FREE FUND
Investment income: -------- --------------
<S> <C> <C>
Interest....................................................... $163,327 $14,023,608
-------- -----------
Expenses (note 3):
Investment advisory and management fee......................... 14,301 1,223,121
Dividend-disbursing, administrative and accounting services fees 15,541 299,757
Printing, postage and supplies................................. 959 55,224
Audit and accounting fees...................................... 3,742 21,230
Legal fees..................................................... 1,040 7,271
Distribution fees - Class A.................................... 6,184 608,790
Distribution fees - Class B.................................... 3,765 7,062
Distribution fees - Class C.................................... 121 4,263
Directors' fees................................................ 638 13,770
Registration fees.............................................. 1,966 2,498
Custodian fees................................................. 3,130 47,208
Amortization of organizational costs........................... -- 3,451
Other ......................................................... 1,298 28,041
-------- -----------
Total expenses............................................... 52,685 2,321,686
Less: Expenses waived or absorbed............................. (35,975) (645,136)
-------- -----------
Net expenses before earnings credits on uninvested cash........ 16,710 1,676,550
Less: Earnings credits on uninvested cash..................... (525) (47,208)
-------- -----------
Total net expenses........................................... 16,185 1,629,342
-------- -----------
Investment income - net...................................... 147,142 12,394,266
-------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) on security transactions (note 2)......... 63,613 (4,354,009)
Net change in unrealized appreciation or
depreciation of investments.................................. 256,994 34,718,495
-------- -----------
Net gain on investments.................................... 320,607 30,364,486
-------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $467,749 $42,758,752
======== ===========
_________________________________
* Period from March 2, 1995 (commencement of operations) to December 31, 1995
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
THE VOYAGEUR FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
VOYAGEUR ARIZONA VOYAGEUR ARIZONA
TAX FREE FUND INSURED TAX FREE FUND
---------------- --------------------------
PERIOD FROM YEAR YEAR
MARCH 2, 1995* TO ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1994
----------------- ------------ ------------
Operations:
<S> <C> <C> <C>
Investment income - net....................................... $ 147,142 $ 12,394,266 $ 13,506,683
Realized gain (loss) on investments - net..................... 63,613 (4,354,009) 253,754
Net change in unrealized appreciation or depreciation of investments 256,994 34,718,495 (34,753,086)
---------- ------------ ------------
Net increase (decrease) in net assets resulting from operations 467,749 42,758,752 (20,992,649)
---------- ------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A..................................................... (128,887) (12,708,693) (13,140,123)
Class B..................................................... (16,909) (27,389) N/A
Class C..................................................... (632) (18,214) (5,961)
Net realized gain on investments:
Class A..................................................... (50,072) -- (854,428)
Class B..................................................... (13,321) -- N/A
Class C..................................................... (220) -- (839)
Excess distributions of net realized gains:
Class A..................................................... -- -- (1,473,927)
Class C..................................................... -- -- (1,448)
---------- ------------ ------------
Total distributions....................................... (210,041) (12,754,296) (15,476,726)
---------- ------------ ------------
Capital share transactions (note 4):
Proceeds from sale of shares:
Class A (note 3)............................................ 8,960,629 26,364,916 55,499,026
Class B..................................................... 1,591,690 2,091,045 N/A
Class C..................................................... 25,000 209,435 1,059,908
Net asset value of shares issued in reinvestment of
net investment income and realized gain distributions:
Class A................................................... 61,500 5,516,791 6,633,159
Class B................................................... 4,786 17,097 N/A
Class C................................................... 508 15,604 4,997
Payments for redemption of shares:
Class A..................................................... (3,011,550) (55,399,770) (57,253,847)
Class B (note 3)............................................ (8,880) (120,225) N/A
Class C (note 3)............................................ -- (58,336) (724,444)
---------- ------------ ------------
Increase (decrease) in net assets from capital share transactions 7,623,683 (21,363,443) 5,218,799
---------- ------------ ------------
Total increase (decrease) in net assets..................... 7,881,391 8,641,013 (31,250,576)
Net assets at beginning of year.................................. -- 232,061,531 263,312,107
---------- ------------ ------------
Net assets at end of year (including undistributed net investment
income of $714, $569 and $360,599, respectively).............. $7,881,391 $240,702,544 $232,061,531
========== ============ ============
_________________________________
* Commencement of operations.
See accompanying notes to financial statements.
</TABLE>
THE VOYAGEUR FUNDS
THE VOYAGEUR FUNDS
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur Arizona Tax Free Fund (Arizona Tax Free Fund), a fund within
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 fund
within 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 (first offered by the Funds in 1995) may be subject
to a contingent deferred sales charge and automatically convert to Class A
Shares after eight years. Class C Shares (first offered in 1995 in Arizona Tax
Free Fund) 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 an inverse
acceleration (sum of the years' digits) 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 $8,573,909 and $1,357,881 for Arizona Tax Free Fund and
$104,667,846 and $132,625,822 for Arizona Insured Tax Free Fund, respectively,
during the period ended December 31, 1995.
(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 year ended December 31, 1995. 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 period ended
December 31, 1995 Voyageur absorbed $13,826 for Arizona Tax Free Fund pursuant
to the contractual 1% expense limitation and, excluding waiver of distribution
fees, voluntarily absorbed $21,174 for Arizona Tax Free Fund and $60,000 for
Arizona Insured 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 period ended December 31, 1995, Fund
Distributors voluntarily waived Class B distribution fees of $975 for Arizona
Tax Free Fund and Class A distribution fees of $582,768, Class B distribution
fees of $1,807, and Class C distribution fees of $561 for Arizona Insured Tax
Free Fund. During the period ended December 31, 1995 Arizona Tax Free Fund
earned $561 and Arizona Insured Tax Free Fund earned $49,590 in credits on
uninvested cash balances held by each Fund at the custodian. Of these credits
$525 and $47,208, respectively, were used to reduce expenses for various
custodial, pricing and accounting services provided by the custodial bank and
the remaining $2,382 in credits are included in interest income for Arizona
Insured Tax Free Fund.
During the period ended December 31, 1995 sales charges paid by Class A
shareholders were $20,987 for Arizona Tax Free Fund and $804,017 for Arizona
Insured Tax Free Fund. Of theses amounts, Fund Distributors received $2,901 for
Arizona Tax Free Fund and $102,802 from Arizona Insured Tax Free Fund.
Contingent deferred sales charges paid were $206 and $160 for Class B and Class
C shareholders, respectively, for Arizona Insured Tax Free Fund.
(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
------------------ ------------------ ---------------
PERIOD FROM PERIOD FROM PERIOD FROM
MARCH 2, 1995* TO JUNE 29, 1995* TO MAY 13, 1995* TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1995
------------------ ------------------ ---------------
<S> <C> <C> <C>
Shares sold.................... 868,565 152,007 2,456
Shares issued for reinvested
distributions............... 5,912 456 49
Shares redeemed................ (295,583) (856) --
----------- --------- --------
Increase in shares outstanding. 578,894 151,607 2,505
=========== ========= ========
</TABLE>
<TABLE>
<CAPTION>
ARIZONA INSURED TAX FREE FUND
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
---------------------------- ---------------- ------------------------------
YEAR YEAR PERIOD FROM YEAR PERIOD FROM
ENDED ENDED MARCH 10, 1995* ENDED MAY 26, 1994*
DECEMBER 31, DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1994 1995 1995 1994
------------ ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Shares sold.................... 2,484,170 5,184,153 192,986 19,460 102,174
Shares issued for reinvested
distributions............... 524,615 621,420 1,576 1,476 494
Shares redeemed................ (5,164,094) (5,571,684) (10,818) (5,464) (69,616)
------------ ----------- ------------ --------- ----------
Increase (decrease) in
shares outstanding.......... (2,155,309) 233,889 183,744 15,472 33,052
============ ========== ========== ========= ==========
_________________________________
* Commencement of operations.
</TABLE>
(5) FINANCIAL HIGHLIGHTS
Per share data (rounded to the nearest cent) for a share of capital stock
outstanding and selected information for each period are as follows:
<TABLE>
<CAPTION>
ARIZONA TAX FREE FUND
----------------------------------------------------------
CLASS A CLASS B CLASS C
----------------- --------------- ---------------
PERIOD FROM PERIOD FROM PERIOD FROM
MARCH 2, 1995 (d) JUNE 29, 1995(d) MAY 13, 1995(d)
TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
1995 1995 1995
----------------- --------------- ---------------
Net asset value:
<S> <C> <C> <C>
Beginning of period............................. $10.00 $10.30 $10.20
------ ------ ------
Operations:
Net investment income........................... .46 .26 .30
Net realized and unrealized
gain on investments........................... .84 .53 .65
------ ------ ------
Total from operations....................... 1.30 .79 .95
------ ------ ------
Distributions to shareholders:
From net investment income (f).................. (.46) (.26) (.30)
From net realized gains......................... (.09) (.09) (.09)
------ ------ ------
Total distributions........................... (.55) (.35) (.39)
------ ------ ------
Net asset value:
End of period................................... $10.75 $10.74 $10.76
====== ====== ======
Total investment return (b)........................ 13.27% 7.74% 9.43%
Net assets at end of period (000's omitted)........ $6,225 $1,629 $27
Ratios:
Ratio of expenses to
average daily net assets (g).................. .52%(e) .99%(e) 1.20%(e)
Ratio of net investment income
to average daily net assets................... 5.19%(e) 4.60%(e) 4.65%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)............................ 1.25%(e) 2.00%(e) 2.00%(e)
Net investment income................... 4.46%(e) 3.59%(e) 3.85%(e)
Portfolio turnover rate (excluding
short-term securities).......................... 38.05% 38.05% 38.05%
See accompanying notes to Financial Highlights.
</TABLE>
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
ARIZONA INSURED TAX FREE FUND
-------------------------------------------------------------
CLASS A
-------------------------------------------------------------
PERIOD FROM
APRIL 1, 1991(d)
YEAR ENDED DECEMBER 31, TO DECEMBER 31,
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Net asset value:
<S> <C> <C> <C> <C> <C>
Beginning of period............................ $ 9.86 $11.31 $10.71 $10.39 $10.00
------ ------ ------ ------ ------
Operations:
Net investment income.......................... .54 .55 .58 .61 .50
Net realized and unrealized
gain (loss) on investments................... 1.31 (1.37) .74 .38 .47
------ ------ ------ ------ ------
Total from operations...................... 1.85 (.82) 1.32 .99 .97
------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income (a)................. (.56) (.53) (.58) (.61) (.50)
From net realized gains........................ -- (.04) (.14) (.06) (.08)
In excess of net realized gains................ -- (.06) -- -- --
------ ------ ------ ------ ------
Total distributions.......................... (.56) (.63) (.72) (.67) (.58)
------ ------ ------ ------ ------
Net asset value:
End of period.................................. $11.15 $9.86 $11.31 $10.71 $10.39
====== ===== ====== ====== ======
Total investment return (b)....................... 19.10% (7.41)% 12.64% 9.86% 9.98%
Net assets at end of period (000's omitted)....... $238,114 $231,736 $263,312 $124,120 $38,322
Ratios:
Ratio of expenses to average daily net assets (g) .69% .72% .59% .35% --%
Ratio of net investment income
to average daily net assets.................. 5.07% 5.20% 5.00% 5.60% 6.58%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)........................... .95% .92% 1.03% 1.16% 1.24%(e)
Net investment income.................. 4.81% 5.00% 4.56% 4.79% 5.34%(e)
Portfolio turnover rate (excluding
short-term securities)....................... 42.96% 25.18% 33.80% 40.29% 177.66%
See accompanying notes to Financial Highlights.
</TABLE>
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
ARIZONA INSURED TAX FREE FUND
--------------------------------------------------------
CLASS B CLASS C
----------------- --------------------------------
PERIOD FROM YEAR PERIOD FROM
MARCH 10, 1995(d) ENDED MAY 26, 1994(d)
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1995 1994
----------------- ------------ ---------------
Net asset value:
<S> <C> <C> <C>
Beginning of period............................. $10.44 $9.86 $10.48
------ ----- ------
Operations:
Net investment income........................... .38 .45 .27
Net realized and unrealized
gain (loss) on investments.................... .69 1.31 (.56)
------ ----- ------
Total from operations....................... 1.07 1.76 (.29)
------ ----- ------
Distributions to shareholders:
From net investment income (a).................. (.37) (.47) (.25)
From net realized gains......................... -- -- (.04)
In excess of net realized gains................. -- -- (.04)
------ ----- ------
Total distributions........................... (.37) (.47) (.33)
------ ----- ------
Net asset value:
End of period................................... $11.14 $11.15 $9.86
====== ====== =====
Total investment return (b)........................ 10.36% 18.10% (2.84)%
Net assets at end of period (000's omitted)........ $2,048 $541 $326
Ratios:
Ratio of expenses to
average daily net assets (g).................. 1.33%(e) 1.54% 1.50%(e)
Ratio of net investment income
to average daily net assets................... 4.08%(e) 4.18% 4.10%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)............................ 1.60%(e) 1.69% 1.71%(e)
Net investment income................... 3.81%(e) 4.03% 3.89%(e)
Portfolio turnover rate (excluding
short-term securities).......................... 42.96% 42.96% 25.18%
See accompanying notes to Financial Highlights.
</TABLE>
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
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 December 31, 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 DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
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 (95.6%):
GENERAL OBLIGATION (39.4%):
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 100 Maricopa County Chandler Unified School District #80 (FGIC Insured).... 6.00% 07-01-13 $ 106,516
1,250 Maricopa County Gilbert Unified School District #41.................... 6.25 07-01-15 1,294,988
500 Maricopa County Glendale Unified School District #40................... 6.30 07-01-11 513,785
325 Maricopa County Madison Unified School District #38 (FGIC Insured)..... 5.00 07-01-14 315,832
200 Maricopa County Unified School District #68 Alhambra G.O. (AMBAC Insured)5.63 07-01-13 204,588
100 Maricopa County Tempe School District #40 (FGIC Insured)............... 6.00 07-01-11 107,024
250 Navajo County Blue Ridge Unified School District #32 (Capital Guaranty) 5.40 07-01-11 252,432
100 Santa Cruz City Nogales Unified School District #1 (FSA Insured)....... 5.80 07-01-13 102,661
200 Yavapai County Humboldt Unified School District #22 (FGIC Insured)..... 5.95 07-01-14 211,660
----------
3,109,486
----------
HEALTH CARE (16.2%):
------------------------------------------------------------------------------------------------------
175 Arizona Samaritan Health System (MBIA Insured)......................... 5.63 12-01-15 176,911
300 Maricopa County Catholic W Health Care (MBIA Insured).................. 6.00 07-01-21 309,861
300 Maricopa County Industrial Development Authority Baptist Hospital
(MBIA Insured)....................................................... 5.50 09-01-13 301,515
200 Maricopa County Industrial Development Authority Baptist Hospital
(MBIA Insured)....................................................... 5.50 09-01-16 200,274
200 Scottsdale Memorial Hospital Industrial Development Authority
(AMBAC Insured)...................................................... 5.25 09-01-18 196,476
100 University Medical Center of Arizona (MBIA Insured).................... 5.00 07-01-21 94,629
----------
1,279,666
----------
HOUSING (25.9%):
------------------------------------------------------------------------------------------------------
730 Peoria Casa Del Rio Multifamily Finance Housing (GNMA Insured)......... 7.30 02-20-28 803,971
125 Phoenix Industrial Development Authority Chris Ridge (FHA Insured)..... 6.80 11-01-25 136,109
725 Pima County Industrial Development Authority Revenue Series A
(MBIA Insured)...................................................... 7.25 07-01-25 783,000
100 Scottsdale Municipal Corporate Lease................................... 6.25 11-01-14 105,607
200 Tempe Multifamily Mortgage Revenue IDA (FHA Insured)................... 6.13 06-01-10 208,328
----------
2,037,015
----------
INDUSTRIAL (1.3%):
------------------------------------------------------------------------------------------------------
100 Greenlee County Industrial Development Revenue......................... 5.45 06-01-09 100,278
----------
LEASE/CERTIFICATE OF PARTICIPATION (1.3%):
------------------------------------------------------------------------------------------------------
100 University of Arizona Certificate of Participation (MBIA Insured)...... 6.00 07-15-23 104,761
----------
TRANSPORTATION (3.2%):
------------------------------------------------------------------------------------------------------
250 Tuscon Airport Authority Revenue (MBIA Insured)........................ 5.70 06-01-13 255,425
----------
UTILITIES (8.3%):
------------------------------------------------------------------------------------------------------
100 Arizona Power Authority Hoover Uprating (MBIA Insured)................. 5.25 10-01-17 98,969
100 Gilbert Waste Water Revenue (FGIC Insured)............................. 6.50 07-01-22 109,191
100 Phoenix Civic Water Improvement (AMBAC Insured)........................ 5.50 07-01-21 100,753
250 Pima County Sewer Revenue (FGIC Insured)............................... 6.75 07-01-15 242,132
100 Salt River Project Series C............................................ 5.50 01-01-28 98,959
----------
650,004
----------
TOTAL MUNICIPAL BONDS (cost: $7,279,641) 7,536,635
----------
SHORT-TERM SECURITIES (3.5%):
------------------------------------------------------------------------------------------------------
181 Dreyfus Tax-Exempt Money Market Fund...................................4.37 (d) 181,000
97 Nuveen Investment Tax Free Fund........................................4.56 (d) 97,000
----------
TOTAL SHORT-TERM SECURITIES (cost: $278,000) 278,000
----------
TOTAL INVESTMENTS IN SECURITIES (cost: $7,557,641) (c) $7,814,635
==========
See accompanying notes to investments in securities.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR ARIZONA INSURED TAX FREE FUND
INVESTMENTS IN SECURITIES DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
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 (97.5%):
ESCROWED WITH U.S. GOVERNMENT BONDS (1.6%):
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$2,000 Phoenix Street & Highway Pre-Refunded.................................. 6.50% 07-01-02 $ 2,255,400
1,380 Pima County Sewer Revenue Pre-Refunded................................. 6.75 07-01-01 1,552,583
------------
3,807,983
------------
GENERAL OBLIGATION (67.2%):
------------------------------------------------------------------------------------------------------
1,000 Chandler Refunding G.O. (FGIC Insured)................................. 7.00 07-01-12 1,107,500
1,100 Cochise County Douglas Unified School District #27 (AMBAC Insured)..... 5.40 07-01-08 1,128,138
1,000 Cochise County Douglas Unified School District #27 (AMBAC Insured)..... 5.50 07-01-09 1,028,320
500 Cochise County Douglas Unified School District #27 (AMBAC Insured)..... 5.60 07-01-10 516,175
1,000 Cochise County Unified School District #68 (FGIC Insured).............. 7.50 07-01-10 1,243,750
1,185 Gila County Unified School District #10 Payson (AMBAC Insured)......... 5.50 07-01-07 1,239,995
1,000 Gila County Unified School District #10 Payson (AMBAC Insured)......... 5.60 07-01-08 1,046,190
1,000 Gila County Unified School District #10 Payson (AMBAC Insured)......... 5.75 07-01-09 1,054,110
1,095 Glendale G.O. (FGIC Insured)........................................... 5.45 07-01-06 1,152,575
5,200 Glendale Unified School District #25 G.O. (FGIC Insured)............... 5.50 07-01-11 5,297,604
6,250 Glendale Unified School District #25 G.O. (FGIC Insured)............... 5.70 07-01-14 6,435,938
1,000 Maricopa County Alhambra Unified School District #68 (AMBAC Insured)... 5.10 07-01-11 987,350
2,300 Maricopa County Alhambra Unified School District #68 (AMBAC Insured)... 5.63 07-01-13 2,352,762
3,000 Maricopa County Cave Creek Unified School District #93 (FGIC Insured).. 5.40 07-01-11 3,027,030
2,000 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 6.40 07-01-10 2,142,300
1,200 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 5.80 07-01-08 1,277,760
1,000 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 5.80 07-01-09 1,059,200
1,700 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 5.90 07-01-10 1,811,333
910 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 6.25 07-01-11 1,020,137
1,000 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 5.80 07-01-12 1,043,730
2,200 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 5.85 07-01-13 2,302,894
2,400 Maricopa County Chandler Unified School District #80 G.O. (FGIC Insured) 6.00 07-01-13 2,556,384
5,000 Maricopa County Deer Valley Unified School District #97 (FGIC Insured). 5.20 07-01-07 5,080,850
4,000 Maricopa County Gilbert Unified School District #41 G.O. (FGIC Insured) 5.50 07-01-12 4,039,080
5,500 Maricopa County Hospital District #1 (FGIC Insured).................... 6.13 06-01-15 5,871,030
2,000 Maricopa County Kyrene Unified School District #28 (FGIC Insured)...... 5.90 07-01-10 2,108,580
1,000 Maricopa County Littleton Unified School District #65A (FGIC Insured).. 5.30 07-01-13 1,048,450
2,775 Maricopa County Madison Unified School District #38 G.O. (FGIC Insured) 5.40 07-01-11 2,803,888
2,750 Maricopa County Madison Unified School District #38 G.O. (FGIC Insured) 5.00 07-01-12 2,682,432
2,250 Maricopa County Madison Unified School District #38 G.O. (FGIC Insured) 5.00 07-01-13 2,190,645
2,250 Maricopa County Madison Unified School District #38 G.O. (FGIC Insured) 5.00 07-01-14 2,186,527
2,000 Maricopa County Mesa Unified School District #4 (FGIC Insured)......... 5.35 07-01-08 2,043,060
2,000 Maricopa County Mesa Unified School District #4 (FGIC Insured)......... 5.50 07-01-09 2,056,640
2,000 Maricopa County Mesa Unified School District #4 (FGIC Insured)......... 5.50 07-01-10 2,054,220
1,000 Maricopa County Peoria Unified School District #11 (MBIA Insured)...... 7.00 07-01-10 1,105,000
1,790 Maricopa County Tempe #40 (FGIC Insured)............................... 6.00 07-01-11 1,915,730
1,000 Maricopa County Tempe Unified School District #3 (FGIC Insured)........ 5.40 07-01-12 1,006,340
675 Maricopa County Tolleson Unified School District #17 (AMBAC Insured)... 5.60 07-01-07 707,251
775 Maricopa County Tolleson Unified School District #17 (AMBAC Insured)... 5.70 07-01-08 811,874
1,360 Maricopa County Tolleson Unified School District #17 (AMBAC Insured)... 5.75 07-01-14 1,408,606
1,240 Maricopa County Unified School District #98 G.O. (AMBAC Insured)....... 5.50 07-01-08 1,282,619
1,000 Maricopa County Unified School District #98 G.O. (AMBAC Insured)....... 5.75 07-01-12 1,040,630
4,400 Maricopa County Unified School District #95 (AMBAC Insured)............ 5.70 07-01-14 4,572,090
1,000 Maricopa Creighton Elementary #14 (FGIC Insured)....................... 6.50 07-01-08 1,137,370
1,000 Maricopa Fountain Hills Unified School District #98 (FGIC Insured)..... 6.63 07-01-10 1,081,820
3,000 Maricopa Paradise Valley #69 (MBIA Insured)............................ 6.40 07-01-10 3,236,250
2,000 Maricopa Peoria Unified School District #11 (AMBAC Insured)............ 6.10 07-01-10 2,155,220
1,280 Navajo County Blue Ridge Unified School District #32 G.O.
(Capital Guaranty)................................................... 5.38 07-01-10 1,293,798
1,100 Navajo County Blue Ridge Unified School District #32 G.O.
(Capital Guaranty)................................................... 5.40 07-01-11 1,110,703
1,115 Navajo County Blue Ridge Unified School District #32 G.O.
(Capital Guaranty)................................................... 5.50 07-01-12 1,130,967
1,000 Peoria (MBIA Insured).................................................. 5.70 07-01-11 1,034,200
2,000 Phoenix Secondary Market (MBIA Insured) ............................... 6.38 07-01-13 2,161,340
525 Pima County Catalina Unified School District #16 (AMBAC Insured)....... 7.25 07-01-07 638,117
1,150 Pima County Catalina Unified School District #16 (AMBAC Insured)....... 5.60 07-01-09 1,193,045
725 Pima County Catalina Unified School District #16 (AMBAC Insured)....... 5.70 07-01-10 752,753
1,000 Pima County Community College District (AMBAC Insured)................. 6.40 07-01-07 1,079,620
1,260 Pima County Marana Unified School District #6 95A (AMBAC Insured)...... 5.40 07-01-08 1,292,231
1,000 Pima County Marana Unified School District #6 95A (AMBAC Insured)...... 5.50 07-01-10 1,022,400
6,350 Pima County Marana Unified School District (FGIC Insured).............. 5.75 07-01-12 6,573,393
1,000 Pima County Sunnyside Independent School District #12 G.O.
(AMBAC Insured)...................................................... 5.60 07-01-09 1,036,200
500 Pima County Sunnyside Independent School District #12 G.O.
(AMBAC Insured)...................................................... 5.70 07-01-10 520,840
500 Pima County Sunnyside Independent School District #12 G.O.
(AMBAC Insured)...................................................... 5.70 07-01-11 518,460
2,650 Pima County Tucson Unified School District #1 (MBIA Insured)........... 5.00 07-01-09 2,616,743
2,875 Pima County Tucson Unified School District #1 (MBIA Insured)........... 5.00 07-01-10 2,822,704
1,500 Pima County Tucson Unified School District #1 (FGIC Insured)........... 7.50 07-01-10 1,865,625
7,000 Pima County Tucson Unified School District #1 (FGIC Insured) .......... 6.10 07-01-11 7,475,580
6,500 Pima County Tucson Unified School District #1 (FGIC Insured) .......... 5.40 07-01-13 6,532,565
1,440 Pinal County Casa Grande Unified School District #82 (AMBAC Insured)... 5.10 07-01-07 1,452,470
1,350 Pinal County Casa Grande Unified School District #82 (AMBAC Insured)... 5.25 07-01-08 1,367,442
1,000 Pinal County Casa Grande Unified School District #83 (AMBAC Insured)... 5.38 07-01-09 1,017,070
1,300 Pinal County Casa Grande Unified School District #82 (AMBAC Insured)... 5.40 07-01-10 1,317,784
1,205 Santa Cruz County Nogales Unified School District #1 (FSA Insured)..... 5.80 07-01-13 1,237,065
1,250 Santa Cruz County Nogales Unified School District (AMBAC Insured)...... 6.10 07-01-14 1,382,425
2,200 Tempe Union High School District G.O. (FGIC Insured)................... 7.00 07-01-08 2,604,250
5,030 Tucson (FGIC Insured).................................................. 6.10 07-01-12 5,362,584
1,000 Tucson G.O. (MBIA Insured)............................................. 5.38 07-01-17 1,001,860
1,000 Tucson G.O. (MBIA Insured)............................................. 5.38 07-01-18 1,001,690
1,000 Yavapai County Community College (FGIC Insured)........................ 5.40 07-01-10 1,011,840
715 Yavapai County Humboldt Unified School District #22 (FGIC Insured)..... 5.75 07-01-10 751,022
3,000 Yuma (AMBAC Insured)................................................... 6.13 07-01-12 3,200,970
------------
161,837,133
------------
UTILITIES (5.9%):
------------------------------------------------------------------------------------------------------
1,870 Arizona Power Authority Hoover Uprating (MBIA Insured)................. 5.40 10-01-08 1,912,056
1,000 Chandler Water and Sewer Revenue (FGIC Insured)........................ 7.00 07-01-12 1,107,500
1,000 Gilbert Water and Waste Water Revenue (FGIC Insured)................... 6.50 07-01-12 1,099,130
2,650 Gilbert Water and Waste Water Revenue (FGIC Insured)................... 6.50 07-01-22 2,893,562
1,000 Pima County Sewer Revenue Series 1994A (FGIC Insured).................. 5.00 07-01-15 968,530
1,000 Pima County Special Water Improvement District (FGIC Insured).......... 6.20 01-01-11 1,071,040
2,000 Salt River Agricultural Impt & Power Project (AMBAC Insured)........... 6.25 01-01-19 2,133,200
2,000 Salt River Agricultural Impt & Power Project (AMBAC Insured)........... 6.50 01-01-22 2,140,320
1,000 Salt River Agricultural Project Revenue (MBIA Insured)................. 5.25 11-01-11 1,001,060
------------
14,326,398
------------
TRANSPORTATION (4.7%):
------------------------------------------------------------------------------------------------------
610 Phoenix Airport Revenue (MBIA Insured)................................. 6.20 07-01-10 661,929
3,000 Phoenix Civic Improvement & Airport (MBIA Insured)..................... 5.75 07-01-02 3,205,590
4,750 Tucson Airport Authority Revenue (MBIA Insured)........................ 5.70 06-01-13 4,853,075
2,500 Tucson Street & Highway User Revenue (MBIA Insured).................... 5.50 07-01-12 2,533,175
------------
11,253,769
------------
INDUSTRIAL (3.1%):
------------------------------------------------------------------------------------------------------
2,000 Maricopa County Stadium District (MBIA Insured)........................ 5.50 07-01-13 2,011,740
5,500 Peoria Municipal Development Facility Revenue (MBIA Insured)........... 5.20 07-01-10 5,504,070
------------
7,515,810
------------
HEALTH CARE (7.9%):
------------------------------------------------------------------------------------------------------
2,000 Arizona Health Facility Authority Phoenix Baptist Hospital and Medical Center
(MBIA Insured) ..................................................... 6.25 09-01-11 2,131,100
3,380 Maricopa County Industrial Development Authority Baptist Hospital
(MBIA Insured)....................................................... 5.50 09-01-13 3,397,069
1,000 Maricopa County Industrial Development Authority Baptist Hospital
(MBIA Insured)....................................................... 5.50 09-01-16 1,001,370
1,300 Navapache Hospital District Refunding Series 1993 (FGIC Insured)....... 5.40 06-01-12 1,308,788
1,505 Pima County Carondelet Healthcare (MBIA Insured)....................... 5.25 07-01-12 1,495,157
1,500 Pima County Carondelet Healthcare (MBIA Insured)....................... 5.25 07-01-13 1,486,455
1,000 Pima County Tucson Medical Center (MBIA Insured)....................... 6.38 04-01-12 1,074,140
2,000 Pima County Tucson Medical Center (MBIA Insured)....................... 5.00 04-01-15 1,914,060
1,000 Pima Individual Health Care (MBIA Insured)............................. 6.75 07-01-10 1,090,310
2,500 Scottsdale Memorial Hospital Industrial Development Authority
(AMBAC Insured)...................................................... 5.50 09-01-12 2,549,125
1,445 University of Arizona Medical Center (MBIA Insured).................... 6.25 07-01-10 1,551,713
------------
18,999,287
------------
HOUSING (2.8%):
------------------------------------------------------------------------------------------------------
1,060 Chandler Industrial Development Authority Multifamily Housing
(GNMA Backed)....................................................... 5.90 07-20-15 1,073,844
1,000 Pima County Industrial Development Authority Revenue Series A
(MBIA Insured)...................................................... 7.25 07-01-25 1,080,000
4,300 Scottsdale Municipal Property (FGIC Insured)........................... 6.25 11-01-14 4,541,101
------------
6,694,945
------------
EDUCATION (3.3%):
------------------------------------------------------------------------------------------------------
1,500 Arizona State University System (MBIA Insured)......................... 6.13 07-01-15 1,583,370
750 Glendale Industrial Development Authority G.O. (Connie Lee Insured).... 6.75 07-01-09 843,832
1,000 Glendale Industrial Development Authority G.O. (Connie Lee Insured).... 7.00 07-01-14 1,133,210
1,000 Resh-Elliot Park State University (MBIA Insured)....................... 6.75 07-01-11 1,093,330
3,000 University of Arizona (AMBAC Insured).................................. 6.25 06-01-11 3,229,860
------------
7,883,602
------------
OTHER REVENUE (1.0%):
------------------------------------------------------------------------------------------------------
525 Douglas Municipal Facility Excise Tax Revenue (MBIA Insured)........... 5.75 07-01-15 541,349
1,750 Phoenix Arizona Street & Highway Revenue (FGIC Insured)................ 6.10 07-01-11 1,868,895
------------
2,410,244
------------
TOTAL MUNICIPAL BONDS (cost: $223,146,688) 234,729,171
------------
SHORT-TERM SECURITIES (0.2%):
------------------------------------------------------------------------------------------------------
239 Dreyfus Investment Tax-Exempt Money Market Fund........................4.37 (d) 239,000
340 Nuveen Investment Tax Free Fund........................................4.56 (d) 340,000
------------
TOTAL SHORT-TERM SECURITIES (cost: $579,000) 579,000
------------
TOTAL INVESTMENTS IN SECURITIES (cost: $223,725,688) (c) $235,308,171
============
See accompanying notes to investments in securities.
</TABLE>
VOYAGEUR ARIZONA TAX FREE FUND
VOYAGEUR ARIZONA INSURED TAX FREE FUND
NOTES TO INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
(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 BAA/BBB TOTAL
------- ----- --- ------- -----
<S> <C> <C> <C> <C> <C>
Arizona Tax Free Fund.................. 74% 1% 8% 17% 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.................. $ 258,374 $ (1,380) $ 256,994
Arizona Insured Tax Free Fund.......... 11,613,060 (30,577) 11,582,483
</TABLE>
(d) Dividend yields change daily to reflect current market conditions. Rate
shown is the quoted yield as of December 31, 1995.
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
December 31, 1995 shown below. Exempt interest dividends are exempt from federal
income tax and should not be included in shareholder's gross income, but need to
be reported on the income tax return for informational purposes. Each
shareholder should consult a tax adviser about reporting this income for state
and local purposes. In January 1996, the Fund separately provided each
shareholder with tax information for calendar year 1995.
<TABLE>
<CAPTION>
VOYAGEUR ARIZONA TAX FREE FUND
---------------------------------------------------------
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------- ------- -------
PERIOD FROM PERIOD FROM PERIOD FROM
MARCH 2, 1995 JUNE 29, 1995 MAY 13, 1995
TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
1995 1995 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)............................. $.4588 $.2576 $.2984
Short-term capital gain distribution................. .0879 .0879 .0879
------ ------ ------
Total Distribution................................ $.5467 $.3455 $.3863
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR ARIZONA INSURED TAX FREE FUND
-------------------------------------------------------
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------- ------- -------
YEAR PERIOD FROM YEAR
ENDED MARCH 10, 1995 ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31,
1995 1995 1995
------------ --------------- ------------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)............................. $.5562 $.3657 $.4661
====== ====== ======
</TABLE>
The short-term capital gain distributions above are taxable as ordinary income
to shareholders for federal and state income tax purposes.
For federal income tax purposes, of the above net investment income
distributions, 99.60% for Voyageur Arizona Tax Free Fund and 99.90% for Voyageur
Arizona Insured Tax Free Fund were derived from interest on securities exempt
from federal income tax.
