<PAGE>
For Tax-Exempt Income
DELAWARE-VOYAGEUR
Tax-Free Arizona Funds
1997
professional management
Semi-Annual
service and guidance
Report
goals
Tax-Free Arizona Fund
Tax-Free Arizona Insured Fund
DELAWARE
GROUP
========
<PAGE>
JULY 22, 1997
Dear Shareholder:
I AM PLEASED TO PRESENT THE FIRST SHAREHOLDER REPORT OF THE Tax-Free Arizona
Funds since the Voyageur funds joined the Delaware family on April 30, 1997.
On behalf of all of us here in Philadelphia, I welcome you to an
organization of experienced financial professionals dedicated to helping you
reach your investment goals. Delaware has managed municipal bond investments
for more than 20 years and pioneered the concept of single-state, tax-exempt
funds.
I am delighted to report that during this transition period, both
Arizona Funds provided returns competitive with their respective unmanaged
benchmarks, as shown on page 8. Andrew M. McCullagh Jr., the Funds' portfolio
manager under Voyageur, continues to
oversee both Funds from his office in
Colorado.
We view the municipal bond
market's long-term prospects as very
IN THE COMING YEARS, WE BELIEVE IT attractive, particularly in a state with
WILL BECOME MORE IMPORTANT THAN an economy as robust as Arizona. The
EVER TO CONSIDER THE IMPACT OF TAXES state's population growth rate in the
ON THE PERFORMANCE OF AN INVESTMENT 1990s has been three times the national
PORTFOLIO. average, according to the Cato
Institute. Municipal bond prices have
generally been stronger than U.S.
Treasuries* during 1997, despite federal
tax changes in Washington and a modest
tightening of monetary policy by the
Federal Reserve Board.
As our nation's leaders grapple with tax issues and states take on a
greater fiscal responsibility for managing social and public works programs, we
believe it will become more important than ever to consider the impact of taxes
on the performance of an investment portfolio.
*THE PRINCIPAL AND INTEREST OF U.S. TREASURY SECURITIES ARE GUARANTEED BY THE
U.S. GOVERNMENT. ARIZONA MUNICIPAL BONDS MAY OR MAY NOT BE GUARANTEED BY THE
STATE, A PRIVATE INSURER OR LOCAL GOVERNMENT ENTITY.
2 1997 semi-annual report
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When Delaware offered its first municipal bond fund in 1977, federal
taxpayers were able to take many more deductions on their tax returns than they
can take today. Among these were:
* Interest on student and consumer loans,
* More extensive job-related moving expenses,
* Sales and gasoline taxes; and,
* A portion of dividend income.
In our opinion, the income from municipal bonds and the potential
tax-free compounding of such income over time may help investors reach their
financial goals more quickly.
On the pages that follow, Mr. McCullagh reviews each Fund's
performance and outlines his approach for the coming months. We look forward
to reporting to you again in 1998 and serving your needs for many years to
come.
Sincerely,
/s/ Wayne A. Stork
- --------------------------
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Your Funds' Portfolio Manager
- --------------------- ANDREW M. MCCULLAGH JR. HAS MORE THAN 23
YEARS OF EXPERIENCE IN MUNICIPAL BOND
[PICTURE] TRADING, UNDERWRITING AND PORTFOLIO
MANAGEMENT. HE HOLDS A GRADUATE
CERTIFICATE IN PUBLIC FINANCE FROM THE
UNIVERSITY OF MICHIGAN AND A BACHELOR'S
DEGREE IN ECONOMICS FROM WASHINGTON
COLLEGE IN MARYLAND.
- ----------------------
ANDREW M. MCCULLAGH JR.
1997 semi-annual report 3
<PAGE>
Performance Review
Delaware-Voyageur's Arizona municipal bond funds provided relatively
attractive total returns during the first half of fiscal 1997 despite
substantial interest rate volatility and renewed efforts in Washington to cut
income taxes.
Nationwide, our country's output of goods and services grew at a robust
pace in the first quarter. This prompted the Federal Reserve to raise its target
for short-term interest rates by a modest 25 basis points (0.25%) to 5.5% in an
effort to forestall inflation.
As the second calendar quarter of 1997 progressed, the bond market
welcomed news of possible slower U.S. economic growth. By the end of June,
long-term U.S. Treasury bonds yielded 6.78%, compared to more than 7% just a few
months earlier.
In managing each Fund's portfolio, we seek to achieve good structure
- - a prudent combination of average coupon, call date and effective maturity
that represent the mathematical underpinnings of the portfolio. By managing
duration as market conditions warranted, we sought to maximize each Fund's
income and total return potential.
Of the two Funds, Tax-Free Arizona Insured was by far the larger in
terms of net assets as of June 30. In part this reflects the fact that generally
most municipal bonds issued in Arizona are protected by private insurance
guaranteeing the payment of principal and interest when due.
Since December, the supply of new municipal bonds in Arizona has grown
at an annual pace of 17% to
TAX-FREE ARIZONA FUND
PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION
- -------------------------------------------------------------------------------
June 30, 1997
Tax-Free Arizona Plot Points
Certificates of Participation 0.7%
Housing 36.4%
General Obligation 20.5%
Water/Sewer 11.5%
Industrial Development 13.3%
Other Revenue Bonds 2.8%
Hospitals 11.0%
Cash 3.8%
- -----------------------------------------------------------------------
Average Effective Maturity 11.0 years
Average Effective Duration 7.4 years
Average Quality AA
Thirty-Day Current SEC Yield* 5.38%
*FOR A CLASS SHARES BASED ON SECURITIES AND EXCHANGE COMMISSION GUIDELINES.
SEC YIELDS FOR B AND C CLASSES WERE 4.85% AND 4.79% RESPECTIVELY.
APPROXIMATELY 17.2% OF THE INCOME GENERATED BY TAX-FREE ARIZONA FUND FOR THE
SIX MONTHS ENDED JUNE 30, 1997, WAS SUBJECT TO THE ALTERNATIVE MINIMUM TAX.
4 1997 semi-annual report
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$1.6 billion, according to THE BOND BUYER, a trade publication. With a
population just over 3.7 million and a per capita income that's growing at an
annualized rate of 4.4%, Arizona exhibited characteristics attractive to
income-oriented investors.
Arizona residents have enjoyed considerable tax relief in the 1990s.
More than $1.5 billion in tax cuts have been enacted in recent years. The top
marginal state tax rate on income has fallen from 7% in 1991 to 5.6% in 1996,
according to the Cato Institute. The state's finances, meanwhile, are
healthy. Arizona maintained a $400 million budget surplus in fiscal 1996 on
revenues of $4.7 billion.
TAX-FREE ARIZONA FUND
STRATEGIC POSITIONING
AND OUTLOOK
For the first half of fiscal 1997, Tax-Free Arizona Fund outperformed its
unmanaged benchmark, the Lehman Brothers Municipal Bond Index. The Fund
provided a total return of +3.65% for the six months ended June 30 (capital
change for A Class shares plus reinvested dividends at net asset value).
HOUSING BONDS MADE UP THE LARGEST COMPONENT OF YOUR FUND'S NET ASSETS AT
MID-YEAR.
Housing bonds made up the largest component of your Fund's net assets
at mid-year, followed by general obligation bonds. Housing bonds, because of
the risk of prepayment from underlying mortgages, tend to yield more than
bonds with similar ratings and maturities from other sectors. Your Fund has
benefited from a relatively low level of prepayment activity since December.
By focusing on higher yielding mortgage securities, we provided most of
the income available from the longest term municipal bonds with much less
interest rate risk. Arizona's population tends to be a bit more mobile than
other states, so our focus has tended to be on multi-family and apartment bonds.
Arizona bonds of moderate quality (A and BBB) have generally
outperformed the highest rated bonds since December. Although Tax-Free
Arizona Fund continues to invest primarily in higher-rated investment grade
bonds, during the first half of fiscal 1997 average quality declined
modestly, from AA+ to AA, and the Fund benefited as a result. By purchasing a
limited amount of bonds rated BBB- and some unrated credits during the
period, we were able to provide a superior total return and increase the
Fund's yield.
In addition to maintaining a strong weighting in housing bonds, we
expect our strategy for the coming months will include purchasing bonds
selling at less than their face value (discount bonds), bonds with good call
protection
1997 semi-annual report 5
<PAGE>
features and longer maturities. In our opinion this combination helped us to do
well relative to both our benchmark and our peers despite a volatile interest
rate environment since December.
TAX-FREE ARIZONA INSURED FUND STRATEGIC POSITIONING
AND OUTLOOK
Tax-Free Arizona Insured Fund provided a total return of +3.11% for the six
months ended June 30, 1997, (capital change for Class A shares plus reinvested
dividends at net asset value).
To help preserve principal, the Fund invests exclusively in bonds that
are insured by municipal bond insurance companies and are rated AAA by Moody's
and/or Standard & Poor's rating agencies. As of June 30, more than half of your
Fund's net assets were invested in general obligation (G.O.) bonds - bonds
backed by the full faith and credit of the issuing municipality.
In Arizona, G.O.s comprise 75% of the municipal debt that comes to
market, with the majority of bonds issued for school districts, according to
THE BOND BUYER. One reason: Arizona's economic growth and expanding,
ethnically diverse population has put a strain on existing school facilities,
increasing the need for updating and building larger facilities.
Since December our emphasis has been on bonds with discount coupons,
good call protection, and longer maturities. We believe pursuing this
strategy allowed the fund to perform well, on a risk-adjusted basis, despite
1997's volatile interest rate environment. We manage the Fund with both total
return and dividend yield in mind.
TAX-FREE ARIZONA INSURED FUND
PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION
- -------------------------------------------------------------------------------
June 30, 1997
Tax-Free Arizona Insured Fund Plot Points
Power Authority 2.2%
Hospitals 12.9%
Industrial Development 4.7%
Pre-Refunded 1.9%
Cash 0.4%
General Obligation 52.6%
Housing 6.9%
Transportation 2.9%
Higher Education 7.4%
Water/Sewer 4.3%
Other Revenue Bonds 0.7%
Certificate of Participation 3.1%
APPROXIMATELY 4.2% OF THE INCOME GENERATED BY TAX-FREE ARIZONA INSURED FUND
FOR THE SIX MONTHS ENDED JUNE 30, 1997, WAS SUBJECT TO THE ALTERNATIVE
MINIMUM TAX.
- -------------------------------------------------
Average Effective Maturity 10.3 years
Average Effective Duration 7.6 years
Average Quality AAA
Thirty-Day Current SEC Yield* 4.44%
*FOR A CLASS SHARES BASED ON SECURITIES AND EXCHANGE COMMISSION GUIDELINES
SEC YIELDS FOR B AND C CLASSES WERE 3.74% AND 3.75% RESPECTIVELY.
6 1997 semi-annual report
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To augment the Fund's income potential, we have been selling lower yield
bonds with limited call protection and replacing them with bonds rated AAA that
also have longer call protection. In our opinion, this may help the Fund pay a
higher dividend over a longer period of time while maintaining the highest level
of quality.
OUTLOOK
We are optimistic that demand for Arizona securities among high tax bracket
investors will remain stable in the coming months. Across the U.S., inflation
appears to be benign. Despite a strong U.S. economy, the Federal Reserve
Board has been able to effectively control consumer price increases. Should
interest rates remain stable or decline for the balance of 1997, we believe
municipal bond investments could potentially provide an attractive real rate
of return.
In our opinion, the long-term outlook for Arizona's economy and bond
market is bright. During the past five years, the state has added some
380,000 jobs and ranked second in the nation in employment growth. State
officials estimate that Arizona's population will grow by another 2.4 million
residents through 2010.
Municipalities will continue to need capital from private investors
to meet the needs of this growing, diverse population, presenting investors
with many income opportunities. As Arizona enters the 21st Century, we believe
the state will continue to be a leader in attracting business relocations
and expansions, especially in high-technology industries such as semiconductor
and electronics manufacturing.
ANDREW M. MCCULLAGH JR.
VICE PRESIDENT
SENIOR PORTFOLIO MANAGER
July 22, 1997
AS ARIZONA ENTERS THE 21ST CENTURY, WE BELIEVE THE STATE WILL CONTINUE TO BE A
LEADER IN ATTRACTING BUSINESS RELOCATIONS AND EXPANSIONS.
outlook
1997 semi-annual report 7
<PAGE>
ARIZONA AT A GLANCE
- --------------------------------------------------------------
Data as of June 30, 1997
- --------------------------------------------------------------
Budget Surplus $400 million
Per Capita Income $20,989
Population 3.7 million
Range of Individual Income Tax Rates 3% to 5.6%
Top Tax Bracket $150,000
Unemployment Rate 4.7%
SOURCES: BLOOMBERG BUSINESS NEWS, CATO INSTITUTE
Performance Summary
COMPARATIVE RETURNS FOR THE SIX
MONTHS ENDED JUNE 30, 1997
- --------------------------------------------------------------
Tax-Free Arizona Fund A +3.65%
Lehman Brothers Municipal Bond Index +3.20%
Tax-Free Arizona Insured Fund A +3.11%
Lehman Brothers Insured Municipal Bond Index +3.12%
**TOTAL RETURN IS BASED ON CHANGE IN NET ASSET VALUE WITH DISTRIBUTIONS
REINVESTED. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE
OF OTHER FUND CLASSES VARIES DUE TO DIFFERENT CHARGES AND EXPENSES. SEE
PAGES 17 AND 19 FOR SIX-MONTH RETURNS FOR B AND C CLASSES. THE UNMANAGED
INDEXES SHOWN ABOVE INCLUDE TAX-EXEMPT BONDS FROM MANY STATES AND ASSUME
NO MANAGEMENT FEES OR EXPENSES.
8 1997 semi-annual report
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TAX-FREE ARIZONA FUND
-------------------------------------------------------------------------------
Average Annual Return Through June 30, 1997
LIFETIME ONE YEAR
-------------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +9.60% +9.40%
Including Sales Charge +7.82% +5.27%
-------------------------------------------------------------------------------
Class B (Est. 6/29/95)
Excluding Sales Charge +7.97% +8.62%
Including Sales Charge +6.58% +4.62%
-------------------------------------------------------------------------------
Class C (Est. 5/13/95)
Excluding Sales Charge +8.19% +8.68%
Including Sales Charge +8.19% +7.68%
TAX-FREE ARIZONA INSURED FUND
-------------------------------------------------------------------------------
Average Annual Return Through June 30, 1997
LIFETIME FIVE YEARS ONE YEAR
-------------------------------------------------------------------------------
Class A (Est. 4/1/91)
Excluding Sales Charge +7.92% +7.03% +8.26%
Including Sales Charge +7.26% +6.21% +4.20%
-------------------------------------------------------------------------------
Class B (Est. 3/10/95)
Excluding Sales Charge +7.10% +7.48%
Including Sales Charge +5.90% +3.48%
-------------------------------------------------------------------------------
Class C (Est. 5/26/94)
Excluding Sales Charge +6.50% +7.35%
Including Sales Charge +6.50% +6.35%
ALL PERFORMANCE INCLUDES REINVESTMENT OF DISTRIBUTIONS AND APPLICABLE SALES
CHARGES AS DESCRIBED BELOW. RETURN AND SHARE VALUE WILL FLUCTUATE SO THAT SHARES
WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PAST PERFORMANCE
IS NOT A GUARANTEE OF FUTURE RESULTS. PERFORMANCE FOR CLASS B AND C SHARES
"EXCLUDING SALES CHARGE" ASSUMES THE INVESTMENT WAS NOT REDEEMED. RETURN REFLECT
A VOLUNTARY EXPENSE LIMITATION IN EFFECT AT THE TIME. RETURNS WOULD HAVE BEEN
LOWER WITHOUT THE LIMITATION.
CLASS A SHARES HAVE A 3.75% MAXIMUM FRONT-END SALES CHARGE. BOTH FUNDS HAVE A
12B-1 FEE.
CLASS B SHARES DO NOT CARRY A FRONT-END SALES CHARGE, BUT ARE SUBJECT TO A 1%
ANNUAL DISTRIBUTION AND SERVICE FEE. THEY ARE ALSO SUBJECT TO A DEFERRED
SALES CHARGE OF UP TO 4% IF REDEEMED BEFORE THE END OF THE SIXTH YEAR.
CLASS C SHARES HAVE A 1% ANNUAL DISTRIBUTION AND SERVICE FEE. IF SHARES ARE
REDEEMED WITHIN 12 MONTHS, A 1% CONTINGENT DEFERRED SALES CHARGE APPLIES.
1997 semi-annual report 9
<PAGE>
Financial Statements
DELAWARE-VOYAGEUR TAX FREE ARIZONA FUND --
STATEMENT OF NET ASSETS
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
----------------------
MUNICIPAL BONDS - 96.30%
GENERAL OBLIGATION BONDS - 20.54%
Eagle Mountain Community Facility District
6.50% 07/01/21 ............................ $1,010,000 $1,073,287
Maricopa County Chandler Unified School
District #80 6.00% 07/01/13 (FGIC) ........ 100,000 105,372
Maricopa County Osborn Unified School
District #8 5.88% 07/01/14 (FGIC) ......... 300,000 312,456
Maricopa County Tempe Unified School
District #40 6.00% 07/01/11 (FGIC) ........ 100,000 106,353
Maricopa County U.S.D. #40 - Glendale
6.30% 07/01/11 ............................ 500,000 525,190
Pima County Flowing Wells U.S.D. #8
5.90% 07/01/13 ............................ 500,000 516,770
Tucson Arizona 5.38% 07/01/20 .............. 250,000 243,720
---------
2,883,148
---------
HOUSING REVENUE BONDS - 36.38%
Maricopa County IDA 6.20% 01/20/39 ......... 1,000,000 1,021,460
Maricopa County, IDA - Muliti Family Housing
6.63% 07/01/26 ............................ 1,750,000 1,810,043
Peoria Casa Del Rio Multi Family Housing
7.30% 02/20/28 ............................ 500,000 545,365
Phoenix Industrial Development Authority
Chris Ridge 6.80% 11/01/25 ................ 125,000 129,938
Pima County Arizona IDA Revenue Series A
7.25% 07/01/25 ............................ 725,000 778,114
Tempe Multifamily Mortgage Revenue IDA
6.13% 06/01/10 ............................ 200,000 207,530
Tucson Industrial Development Authority
Los Portales Apartment
5.90% 12/20/31 (GNMA) ..................... 600,000 613,416
---------
5,105,866
---------
HOSPITAL REVENUE BONDS - 11.02%
Arizona Samaritan Health System
5.63% 12/01/15 (MBIA) ..................... 175,000 175,395
Maricopa County, Arizona Hospital Revenue
(Sun Health Corp.) 6.13% 04/01/18 ......... 600,000 610,745
Pima County Tucson Medical Center
5.00% 04/01/15 ............................ 500,000 475,115
Scottsdale Memorial Hospital IDA
5.25% 09/01/18 ............................ 200,000 192,565
University Of Arizona Medical Center
5.00% 07/01/21 ............................ 100,000 92,504
---------
1,546,324
---------
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PRINCIPAL MARKET
AMOUNT VALUE
----------------------
MUNICIPAL BONDS (CONTINUED)
INDUSTRIAL DEVELOPMENT
REVENUE BONDS - 13.25%
Chandler Solid Waste System Rev
5.38% 07/01/16 ................................... $ 600,000 $ 587,766
Coconimo Cnty PCR Nevada Power Co.
6.38% 10/01/3 .................................... 1,250,000 1,271,413
----------
1,859,179
----------
LEASE/CERTIFICATE OF
PARTICIPATION - 0.74%
University Of Arizona Certificate Of Participation
6.00% 07/15/23 ................................... 100,000 103,304
----------
103,304
POWER AUTHORITY ----------
REVENUE BONDS - 0.70%
Salt River Project Series C 5.50% 01/01/28 ........ 100,000 97,972
----------
97,972
WATER AND SEWER ----------
REVENUE BONDS - 11.53%
Gilbert Water And Waste Water Revenue
6.50% 07/01/22 (FGIC) ............................ 100,000 107,995
Gilbert Water & Wastewater System
Revenue-Connection Development Fee
6.88% 04/01/16 ................................... 1,000,000 1,006,780
Tucson Water Revenue Refunding Series A
5.75% 07/01/18 ................................... 500,000 503,425
----------
1,618,200
----------
OTHER REVENUE BONDS - 2.14%
Scottsdale Municipal Property Corporation Lease
6.25% 11/01/14 (FGIC) ............................ 100,000 104,917
Phoenix Municipal Facilities Excise Tax Revenue
5.25% 07/01/15 (MBIA) ............................ 200,000 195,896
----------
300,813
----------
Total Municipal Bonds (cost of $13,106,242) ....... 13,514,806
----------
SHORT TERM INVESTMENTS - 0.35%
Norwest Advantage Municipal Money Market
Fund 3.60% ....................................... 49,305 49,305
----------
Total Short Term Investments
(cost $49,305) ................................... 49,305
----------
10 1 9 9 7 s e m i - a n n u a l r e p o r t
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DELAWARE-VOYAGER TAX-FREE ARIZONA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- ---------------------------------------------------------------------------
MARKET
VALUE
------------
MUNICIPAL BONDS (CONTINUED)
TOTAL MARKET VALUE OF SECURITIES OWNED - 96.65%
(cost of $13,155,547)** .......................... $13,564,111
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 3.35% ....................... 470,082
-----------
NET ASSETS APPLICABLE TO 1,302,163 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ........... $14,034,193
===========
NET ASSET VALUE - TAX FREE ARIZONA A CLASS
($10,319,541 / 957,352 shares) ................... $10.78
======
NET ASSET VALUE - TAX FREE ARIZONA B CLASS
($3,444,107 / 319,737 shares) .................... $10.77
======
NET ASSET VALUE - TAX FREE ARIZONA C CLASS
($270,545 / 25,074 shares) ....................... $10.79
- -------- ======
** Also cost for federal tax purposes.
FGIC - Insured by the Financial Guaranty Insurance Company
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT JUNE 30, 1997:
Common Stock, $.01 par value, 100,000,000,000 shares
authorized to the Fund with 10,000,000,000 shares
allocated to Tax Free Arizona Fund A Class
10,000,000,000 shares allocated to Tax Free Arizona
Fund B Class 10,000,000,000 shares allocated to
Tax Free Arizona Fund C Class ............................. $13,622,916
Accumulated overdistributed net investment income .......... (13,592)
Accumulated net realized gain on investments ............... 16,305
Net unrealized gain on investments ......................... 408,564
------------
Total Net Assets ........................................... $14,034,193
============
See accompanying notes
<PAGE>
DELAWARE-VOYAGEUR
TAX FREE ARIZONA INSURED FUND --
STATEMENT OF NET ASSETS
JUNE 30, 1997
(UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
----------------------
MUNICIPAL BONDS - 99.71%
GENERAL OBLIGATION BONDS - 52.64%
Chandler Refunding 7.00% 07/01/12 (FGIC) .......... $1,000,000 $1,095,000
Cochise County Unified School District
7.50% 07/01/10 (FGIC). . . . . ................... 1,000,000 1,215,300
Glendale Unified School District #205,
Inverse Floater 6.37% 07/01/11 ................... 2,600,000 2,667,808
Maricopa County Chandler Refunding #80 GO
6.40% 07/01/10 (FGIC). . . . . ................... 2,000,000 2,127,100
Maricopa County Chandler Refunding #80 GO
5.80% 07/01/12 (FGIC). . . . . ................... 1,000,000 1,037,570
Maricopa County Chandler Refunding #80 GO
5.85% 07/01/13 (FGIC). . . . . ................... 2,200,000 2,282,478
Maricopa County Chandler Unified School
District #80 5.90% 07/01/10 (FGIC) ............... 1,700,000 1,792,854
Maricopa County Chandler Unified School
District #80 6.00% 07/01/13 (FGIC) ............... 2,400,000 2,528,928
Maricopa County Fountain Hills Unified School
District #98 6.63% 07/01/10 (AMBAC) .............. 1,000,000 1,073,510
Maricopa County Gilbert Unified School District #41
6.25% 07/01/15 (FSA). . . . . . .................. 1,250,000 1,335,088
Maricopa County Hospital District #1
6.13% 06/01/15 (FGIC). . . . . ................... 5,500,000 5,745,795
Maricopa County Kyrene Unified School District #28
5.90% 07/01/10 (FGIC). . . . . ................... 2,000,000 2,068,180
Maricopa County Madison Unified School
District #38 5.80% 07/01/15 (MBIA) ............... 3,150,000 3,248,154
Maricopa County Osborn Unified School
District #8 5.88% 07/01/14 (FGIC) ................ 3,500,000 3,645,320
Maricopa County Paradise Valley Elementary School
District #69 6.40% 07/01/10 (MBIA) ............... 3,000,000 3,272,640
Maricopa County Peoria Unified School
District #11 7.00% 07/01/10 (AMBAC) .............. 1,000,000 1,092,320
Maricopa County Peoria Unified School
District #11 6.10% 07/01/10 (AMBAC) .............. 2,000,000 2,153,700
Maricopa County Queens Creek Unified School
District #95 5.70% 07/01/14 (AMBAC) .............. 4,440,000 4,552,154
Maricopa County Tolleson Unified School
District #214 5.75% 07/01/14 (FGIC) .............. 750,000 771,818
Maricopa County Unified School District #93, Inverse
Floater 6.97% 07/01/11 (FGIC) .................... 1,500,000 1,510,860
Maricopa County Washington Elementary School
District #6 5.00% 07/01/15 (AMBAC) ............... 1,250,000 1,190,125
Maricopa Creighton Elementary Unified School
District #114 Series 91
6.50% 07/01/08 (FGIC) ............................ 1,000,000 1,133,840
Mesa Arizona Utility Systems Revenue
5.25% 07/01/16 (FGIC). . . . . 21,480,000 21,100,019
Mohave County Unified School District #1
Lake Havasu 5.80% 07/01/11 (FGIC) .................. 600,000 627,618
1 9 9 7 s e m i - a n n u a l r e p o r t 11
<PAGE>
DELAWARE-VOYAGER TAX-FREE ARIZONA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
----------------------
Mohave County Unified School District #1
Lake Havasu 5.90% 07/01/15 (FGIC) .................. $5,000,000 $5,217,850
Peoria 5.70% 07/01/11 (MBIA) ........................ 1,000,000 1,033,020
Phoenix Arizona 6.38% 07/01/13 (MBIA) ............... 2,000,000 2,131,320
Pima County Community College District
6.40% 07/01/07 (AMBAC). . . . ...................... 1,000,000 1,063,930
Pima County Marana Unified School District #6
5.75% 07/01/12 (FGIC). . . . . ..................... 6,350,000 6,530,023
Pima County Tucson Unified School District #1,
Inverse Floater 6.97% 07/01/13 (FGIC) .............. 3,000,000 3,006,660
Pinal County Apache Junction Unified School
District #43 5.75% 07/01/10 (FGIC) ................. 1,875,000 1,968,413
Pinal County Apache Junction Unified School
District #43 5.80% 07/01/11 (FGIC) ................. 1,000,000 1,049,700
Pinal County Apache Junction Unified School
District #43 5.85% 07/01/15 (FGIC) ................. 2,000,000 2,073,880
Santa Cruz County Nogales Unified School
District #1 6.10% 07/01/14 (AMBAC) ................. 1,250,000 1,360,275
Tuscon 6.10% 07/01/12 (FGIC) ........................ 5,030,000 5,319,728
Yuma 6.13% 07/01/12 (AMBAC) ......................... 3,000,000 3,182,460
------------
$103,205,438
------------
HIGHER EDUCATION
REVENUE BONDS - 7.40%
Arizona State University System
6.13% 07/01/15 (MBIA) .............................. 1,500,000 1,570,665
Glendale Educational Facilities American Graduate
School 6.75% 07/01/09 (Connie Lee) ................. 750,000 856,110
Glendale Educational Facilities American Graduate
School 7.00% 07/01/14 (Connie Lee) ................. 1,000,000 1,157,980
Glendale Industrial Development Authority
Midwestern University Series A
6.00% 05/15/26 (Connie Lee) ........................ 2,700,000 2,780,163
Northern Arizona University Revenue Bonds
5.00% 06/01/17 ..................................... 2,500,000 2,352,625
Resh-Elliot Park State University
6.75% 07/01/11 (MBIA) .............................. 1,000,000 1,103,580
University Of Arizona
6.25% 06/01/11 (AMBAC) ............................. 3,000,000 3,185,460
Yuma County, Arizona Elementary School
District #001 5.50% 07/01/14 ....................... 1,500,000 1,505,220
----------
14,511,803
----------
HOSPITAL REVENUE BONDS - 12.91%
Arizona Health Facility Authority Hospital Revenue
5.25% 10/01/26 (MBIA) .............................. 1,750,000 1,676,763
Arizona Health Facility Authority Phoenix Baptist
Hospital and Medical Center
6.25% 09/01/11 (MBIA) .............................. 2,000,000 2,161,780
Maricopa County Industrial Development Authority
Baptist Hospital 5.50% 09/01/13 (MBIA) ............. 3,080,000 3,096,416
Maricopa County Industrial Development Authority
Baptist Hospital 5.50% 09/01/16 (MBIA) ............. 1,000,000 998,740
Mohave County Industrial Development Authority
Baptist Hospital 5.75% 09/01/26 (MBIA) .............. 1,100,000 1,109,823
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
----------------------
MUNICIPAL BONDS (Continued)
HOSPITAL REVENUE BONDS (Continued)
Mohave County Industrial Development Authority,
Chris/Silver Ridge
6.38% 11/01/31 (GNMA) .............................. $1,300,000 $1,369,277
Phoenix, Arizona Industrial Development Authority
Hospital Revenue-John C. Lincoln Health-Series B
5.75% 12/01/16 ..................................... 4,110,000 4,116,946
Phoenix, Arizona Industrial Development Authority
Hospital Revenue-John C. Lincoln-Series B
5.60% 12/01/11 ..................................... 1,520,000 1,554,048
Phoenix, Arizona Industrial Development Authority
Hospital Revenue-John C. Lincoln Health-Series B
5.65% 12/01/12 ..................................... 1,120,000 1,121,915
Pima County, Arizona Development Authority
Revenue (Healthpartners-Series A)
5.63% 04/01/14 ..................................... 1,000,000 1,013,200
Pima County Tucson Medical Center
6.38% 04/01/12 (MBIA) .............................. 1,000,000 1,070,090
Pima Individual Health Care
6.75% 07/01/10 (MBIA) .............................. 1,000,000 1,081,340
Scottsdale Industrial Development Authority
Hospital Revenue, Inverse Floater
6.87% 09/01/12 (AMBAC) ............................. 1,250,000 1,292,775
Scottsdale, Arizona Industrial Development
Authority Hospital Revenue-Scottsdale Memorial
Hospital-Series A 6.00% 09/01/12 ................... 2,000,000 2,116,780
University of Arizona Medical Center
6.25% 07/01/10 (MBIA) .............................. 1,445,000 1,538,607
----------
25,318,500
----------
HOUSING REVENUE BONDS - 6.92%
Chandler Industrial Development Authority
Multifamily Housing
5.90% 07/20/15 (GNMA)............................... 1,060,000 1,069,402
Maricopa County Arizona Indl Dev
6.20% 01/20/39 ..................................... 5,800,000 5,924,468
Maricopa County Industrial Development Authority
Grove Apartments 6.15% 07/20/28 (GNMA) ............. 1,700,000 1,743,741
Pima County Arizona IDA Revenue Series A
7.25% 07/01/25 ..................................... 1,000,000 1,073,260
Tucson Industrial Development Authority Los
Portales Apartment
5.90% 12/20/31 (GNMA) .............................. 3,670,000 3,752,061
----------
13,562,932
----------
INDUSTRIAL DEVELOPMENT
REVENUE BONDS - 4.72%
Glendale Industrial Development Authority G.O.
5.88% 07/01/15 (Connie Lee) ........................ 3,000,000 3,055,560
Glendale Industrial Development Authority G.O.
5.63% 07/01/20 (Connie Lee) ........................ 1,500,000 1,489,470
Maricopa County Stadium District
5.50% 07/01/13 (MBIA) .............................. 2,000,000 2,006,400
Peoria Municipal Development Facility Revenue,
Inverse Floater 6.37% 07/01/10 (MBIA) .............. 2,750,000 2,702,178
----------
9,253,608
----------
12 1 9 9 7 s e m i - a n n u a l r e p o r t
<PAGE>
DELAWARE-VOYAGER TAX-FREE ARIZONA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
----------------------
MUNICIPAL BONDS (CONTINUED)
LEASE/CERTIFICATES OF
PARTICIPATION - 3.14%
Oro Valley Common Trust Funds Partnership
5.75% 07/01/11 (MBIA) .............................. $1,000,000 $1,034,560
Oro Valley Common Trust Funds Partnership
5.75% 07/01/17 (MBIA) .............................. 1,000,000 1,020,560
Scottsdale Municipal Property Corporation Lease
6.25% 11/01/14 (FGIC) .............................. 3,900,000 4,091,763
-----------
6,146,883
-----------
POWER AUTHORITY
REVENUE BONDS - 2.15%
Salt River Agricultural Improvement & Power
Project 6.50% 01/01/22 (AMBAC) ..................... 2,000,000 2,120,140
Salt River Agricultural Improvement & Power
Project 6.25% 01/01/19 (FGIC) ...................... 2,000,000 2,099,880
-----------
4,220,020
*PRE-REFUNDED BONDS - 1.90% -----------
Phoenix Arizona Street & Highway Revenue 6.50%
07/01/09 (FGIC) (Escrowed to maturity) ............ 2,000,000 2,212,960
Pima County Sewer Revenue
6.75% 07/1/2015-01 ................................. 1,380,000 1,511,321
-----------
3,724,281
-----------
SCHOOL AUTHORITY/DISTRICT
REVENUE BONDS - 0.74%
Maricopa County School District #066
5.25% 07/01/17 ..................................... 1,500,000 1,460,160
-----------
1,460,160
-----------
TRANSPORTATION
REVENUE BONDS - 2.93%
Chandler Street & Highway Revenue, Inverse Floater
5.62% 07/01/15 (MBIA) .............................. 1,000,000 909,040
Tucson Airport Authority Revenue
5.70% 06/01/13 (MBIA) .............................. 4,750,000 4,825,192
-----------
5,734,232
-----------
WATER AND SEWER
REVENUE BONDS - 4.26%
Apache Junction, Arizona Water Utilities-Series A
5.80% 07/01/17 ..................................... 1,215,000 1,243,660
Chandler Water and Sewer Revenue
5.50% 07/01/15 (MBIA) .............................. 1,000,000 1,004,090
Chandler Water and Sewer Revenue
7.00% 07/01/12 (FGIC) .............................. 1,000,000 1,095,000
Gilbert Water And Waste Water Revenue
6.50% 07/01/12 (FGIC) .............................. 1,000,000 1,090,370
Gilbert Water And Waste Water Revenue
6.50% 07/01/22 (FGIC) .............................. 2,650,000 2,861,868
Pima County Special Water Improvement District
6.20% 01/01/11 (FGIC) .............................. 1,000,000 1,054,800
-----------
8,349,788
-----------
Total Municipal Bonds
(cost of $186,608,409) 195,487,645
-----------
<PAGE>
MARKET
VALUE
------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 99.71%
(cost of $186,608,409)** ........................... $195,487,645
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.29% 560,551
------------
NET ASSETS APPLICABLE TO 17,625,886 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ............. $196,048,196
============
NET ASSET VALUE - TAX FREE ARIZONA INSURED A CLASS
($191,864,030 / 17,249,582 shares). ................ $11.12
======
NET ASSET VALUE - TAX FREE ARIZONA INSURED B CLASS
($3,754,308 / 337,660 shares)....................... $11.12
======
NET ASSET VALUE - TAX FREE ARIZONA INSURED C CLASS
($429,858) / 38,644 shares)......................... $11.12
======
* For Pre-Refunded Bonds, the stated maturity is followed by the year in
which each bond is pre-refunded.
** Also cost for federal tax purposes.
AMBAC - Insured by the AMBAC Indemnity Corporation
Connie Lee - Insured by the College Construction Insurance Association
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT JUNE 30, 1997:
Common Stock, $.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares allocated
to Tax Free Arizona Insured Fund A Class 1,000,000,000
shares allocated to Tax Free Arizona Insured Fund B Class
1,000,000,000 shares allocated to Tax Free Arizona Insured
Fund C Class ................................................. $191,645,366
Accumulated undistributed net investment income ............... 39,581
Accumulated net realized loss on investments .................. (4,515,987)
Net unrealized gain on investments. ........................... 8,879,236
------------
Total Net Assets .............................................. $196,048,196
============
See accompanying notes
1 9 9 7 s e m i - a n n u a l r e p o r t 13
<PAGE>
THE DELAWARE-VOYAGEUR FUNDS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
- ------------------------------------------------------------------------------
TAX-FREE TAX-FREE
ARIZONA ARIZONA
FUND INSURED FUND
----------------------
INVESTMENT INCOME:
Interest ............................................ $402,000 $5,945,601
-------- ----------
402,000 5,945,601
-------- ----------
EXPENSES:
Management fees ..................................... 33,574 505,839
Dividend disbursing, transfer agent
and custodian fees and expenses .................... 14,315 161,251
Distribution expense ................................ 30,639 267,608
Registration fees ................................... 7,819 5,566
Reports and statements to shareholders .............. 2,066 20,693
Accounting fees and salaries ........................ 1,503 18,869
Professional fees ................................... 1,595 10,489
Directors' fees ..................................... 339 3,196
Other ............................................... 224 3,535
-------- ----------
92,074 997,046
Less expenses waived or absorbed .................... (46,413) (140,495)
-------- ----------
Total Net Expenses .................................. 45,661 856,551
-------- ----------
NET INVESTMENT INCOME ............................... 356,339 5,089,050
-------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments: ................... 16,305 1,303,091
Net change in unrealized appreciation of investments: 103,177 (213,599)
-------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ..... 119,482 1,089,492
-------- ----------
NET increase in net assets resulting from operations. 475,821 $6,178,542
======== ==========
See accompanying notes
14 1 9 9 7 s e m i - a n n u a l r e p o r t
<PAGE>
THE DELAWARE-VOYAGEUR FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Free Arizona Fund Tax-Free Arizona Insured Fund
----------------------------------------------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
6/30/97 12/31/96 6/30/97 12/31/96
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ......................... $356,339 $585,918 $5,089,050 $10,932,538
Net realized gain on investments .............. 16,305 43,350 1,303,091 10,306
Net change in unrealized appreciation
of investments ............................... 103,177 48,393 (213,599) (2,489,648)
----------- ----------- ------------ ------------
Net increase in net assets
resulting from operations .................... 475,821 677,661 6,178,542 8,453,196
----------- ----------- ------------ ------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
A Class ...................................... (279,801) (458,456) (5,085,746) (10,689,424)
B Class ...................................... (89,217) (126,098) (71,884) (104,095)
C Class ...................................... (1,851) (1,140) (9,614) (21,813)
Net realized gain from security transactions:
A Class ...................................... 0 (32,110) 0 0
B Class ...................................... 0 (11,166) 0 0
C Class ...................................... 0 (74) 0 0
----------- ----------- ------------ ------------
(370,869) (629,044) (5,167,244) (10,815,332)
----------- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ...................................... 1,122,025 4,078,229 4,093,825 12,580,493
B Class ...................................... 848,826 1,938,750 1,088,404 1,108,948
C Class ...................................... 244,389 1,991 33,700 369,065
Net asset value of shares issued upon reinvestment
of dividends from net investment income and net
realized gain on security transactions:
A Class ...................................... 177,554 255,437 2,227,134 4,229,553
B Class ...................................... 53,421 71,011 40,840 60,679
C Class ...................................... 704 1,371 8,280 19,176
----------- ----------- ------------ ------------
2,446,919 6,346,789 7,492,183 18,367,914
----------- ----------- ------------ ------------
Cost of shares repurchased:
A Class ...................................... (807,589) (821,165) (24,697,178) (43,310,737)
B Class ...................................... (978,520) (179,787) (512,779) (107,429)
C Class ...................................... 0 (7,414) (167,691) (367,793)
----------- ----------- ------------ ------------
(1,786,109) (1,008,366) (25,377,648) (43,785,959)
----------- ----------- ------------ ------------
Increase (decrease) in net assets
derived from capital
share transactions ........................... 660,810 5,338,423 (17,885,465) (25,418,045)
----------- ----------- ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ......... 765,762 5,387,040 (16,874,167) (27,780,181)
NET ASSETS:
Beginning of period ........................... 13,268,431 7,881,391 212,922,363 240,702,544
----------- ----------- ------------ ------------
End of period ................................. $14,034,193 $13,268,431 $196,048,196 $212,922,363
=========== =========== ============ ============
</TABLE>
See accompanying notes
1 9 9 7 s e m i - a n n u a l r e p o r t 15
<PAGE>
THE DELAWARE-VOYAGEUR TAX-FREE ARIZONA FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
Tax-Free Arizona Fund - Class A
-----------------------------------------------
Six Months Year Period From
Ended Ended 3/2/95(1)
6/30/97 12/31/96 to 12/31/95
(Unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $10.70 $10.75 $10.00
Income from investment operations:
Net investment income ................................... 0.28 0.58 0.46
Net realized and unrealized gain (loss) from investments 0.09 (0.01) 0.84
------ ------ ------
Net increase in net assets from investment operations ... 0.37 0.57 1.30
------ ------ ------
Less dividends and distributions:
Dividends from net investment income(2) ................. (0.29) (0.58) (0.46)
Distributions from net realized gain on security
transactions - (0.04) (0.09)
------ ------ ------
Total dividends and distributions ....................... (0.29) (0.62) (0.55)
------ ------ ------
Net asset value, end of period ........................... $10.78 $10.70 $10.75
====== ====== ======
Total Return(3) 3.65% 5.48% 13.27%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $10,320 $9,755 $6,225
Ratio of expenses to average net assets(4) .............. 0.47%(5) 0.46% 0.52%(5)
Ratio of expenses to average net assets prior to
expense limitation ..................................... 1.16%(5) 1.25% 1.25%(5)
Ratio of net investment income to average net assets .... 5.51%(5) 5.43% 5.19%(5)
Ratio of net investment income to average net assets prior
to expense limitation .................................. 4.82%(5) 4.64% 4.46%(5)
Portfolio turnover ...................................... 30.69%(5) 70.14% 38.05%
</TABLE>
____________________
1 Commencement of operations.
2 For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from federal
income tax. For the period ended December 31, 1995, $.01 per share of the
distributions from net investment income were subject to state income tax.
3 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.
4 For the years ended December 31, 1995 and 1996, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Fund. Prior period expense ratios have not been
adjusted.
5 Annualized.
16 1 9 9 7 s e m i - a n n u a l r e p o r t
<PAGE>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
Tax-Free Arizona Fund - Class B Tax-Free Arizona Fund - Class C
-------------------------------------- -------------------------------------
Six Months Year Period From Six Months Year Period From
Ended Ended 6/29/95(1) Ended Ended 5/13/95(1)
6/30/97 12/31/96 to 12/31/95 6/30/97 12/31/96 to 12/31/95
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $10.69 $10.74 $10.30 $10.71 $10.76 $10.20
Income from investment operations:
Net investment income ....................... 0.24 0.51 0.26 0.26 0.50 0.30
Net realized and unrealized gain
(loss) from investments .................... 0.09 (0.01) 0.53 0.07 (0.01) 0.65
------ ------ ------ ------ ------ ------
Net increase in net assets from
investment operations. ..................... 0.33 0.50 0.79 0.33 0.49 0.95
------ ------ ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income(2) ..... (0.25) (0.51) (0.26) (0.25) (0.50) (0.30)
Distributions from net realized gain
on security transactions ................... - (0.04) (0.09) - (0.04) (0.09)
------ ------ ------ ------ ------ ------
Total dividends and distributions ........... (0.25) (0.55) (0.35) (0.25) (0.54) (0.39)
------ ------ ------ ------ ------ ------
Net asset value, end of period ............... $10.77 $10.69 $10.74 $10.79 $10.71 $10.76
====== ====== ====== ====== ====== ======
Total Return(3) .............................. 3.25% 4.84% 7.74% 3.24% 4.70% 9.43%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) .............................. $3,444 $3,491 $1,629 $271 $23 $27
Ratio of expenses to average
net assets(4) .............................. 1.22%(5) 1.11% 0.99%(5) 1.22%(5) 1.21% 1.20%(5)
Ratio of expenses to average net
assets prior to expense limitation ......... 1.91%(5) 2.00% 2.00%(5) 1.92%(5) 2.00% 2.00%(5)
Ratio of net investment income to
average net assets ......................... 4.76%(5) 4.77% 4.60%(5) 4.76%(5) 4.68% 4.65%(5)
Ratio of net investment income to
average net assets prior
to expense limitation. ..................... 4.07%(5) 3.88% 3.59%(5) 4.07%(5) 3.89% 3.85%(5)
Portfolio turnover .......................... 30.69%(5) 70.14% 38.05% 30.69%(5) 70.14% 38.05%
</TABLE>
_______________
1 Commencement of operations.
2 For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from federal
income tax. For the period ended December 31, 1995, $.01 per share of the
distributions from net investment income were subject to state income tax.
3 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.
4 For the years ended December 31, 1995 and 1996, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Fund. Prior period expense ratios have not been
adjusted.
5 Annualized.
1 9 9 7 s e m i - a n n u a l r e p o r t 17
<PAGE>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
Tax-Free Arizona Insured Fund - Class A
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
6/30/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 11.06 $ 11.15 $ 9.86 $ 11.31 $ 10.71 $ 10.39
Income from investment operations:
Net investment income. ......................... 0.26 0.53 0.54 0.55 0.58 0.61
Net realized and unrealized gain (loss)
from investments .............................. 0.07 (0.09) 1.31 (1.37) 0.74 0.38
------- ------- ------ ------- ------- -------
Net increase (decrease) in net assets
from investment operations .................... 0.33 0.44 1.85 (0.82) 1.32 0.99
------- ------- ------ ------- ------- -------
Less dividends and distributions:
Dividends from net
investment income(2) .......................... (0.27) (0.53) (0.56) (0.53) (0.58) (0.61)
Distributions from net realized
gain on security transactions ................. - - - (0.04) (0.14) (0.06)
In excess of net realized gains ................ - - - (0.06) - -
------- ------- ------ ------- ------- -------
Total dividends and distributions .............. (0.27) (0.53) (0.56) (0.63) (0.72) (0.67)
------- ------- ------ ------- ------- -------
Net asset value, end of period .................. $ 11.12 $ 11.06 $ 11.15 $ 9.86 $ 11.31 $10.71
======= ======= ======= ====== ======= ======
Total Return(3) ................................. 3.11% 4.09% 19.10% (7.41%) 12.64% 9.86%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ................................. $191,864 $209,258 $238,114 $231,736 $263,312 $124,120
Ratio of expenses to average
net assets(4) ................................. 0.83%(5) 0.82% 0.69% 0.72% 0.59% 0.35%
Ratio of expenses to average
net assets prior to expense limitation ........ 0.97%(5) 0.95% 0.95% 0.92% 1.03% 1.16%
Ratio of net investment income to
average net assets ............................ 5.04%(5) 4.89% 5.07% 5.20% 5.00% 5.60%
Ratio of net investment income to
average net assets prior to
expense limitation ............................ 4.90%(5) 4.76% 4.81% 5.00% 4.56% 4.79%
Portfolio turnover ............................. 52.94%(5) 42.76% 42.96% 25.18% 33.80% 40.29%
</TABLE>
_________________
1 Commencement of operations.
2 For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from federal
income tax. For the period ended December 31, 1992, $.01 per share of the
distributions from net investment income were subject to state income tax.
3 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.
4 For the years ended December 31, 1995 and 1996, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Fund. Prior period expense ratios have not been
adjusted.
5 Annualized.
18 1 9 9 7 s e m i - a n n u a l r e p o r t
<PAGE>
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
Tax-Free Arizona Fund - Class B Tax-Free Arizona Fund - Class C
-------------------------------------- -------------------------------------
Six Months Year Period From Six Months Year Year Period From
Ended Ended 6/29/95(1) Ended Ended Ended 5/13/94(1)
6/30/97 12/31/96 to 12/31/95 6/30/97 12/31/96 12//31/95 to 12/31/94
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .. $11.05 $11.14 $10.44 $11.06 $11.15 $ 9.86 $10.48
Income from investment operations:
Net investment income ................ 0.22 0.45 0.38 0.22 0.43 0.45 0.27
Net realized and unrealized gain
(loss) from investments ............. 0.07 (0.09) 0.69 0.06 (0.09) 1.31 (0.56)
------ ------ ------ ------ ------ ------ ------
Net increase (decrease) in net assets
from investment operations .......... 0.29 0.36 1.07 0.28 0.34 1.76 (0.29)
------ ------ ------ ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income(2) (0.22) (0.45) (0.37) (0.22) (0.43) (0.47) (0.25)
Distributions from net realized gain
on security transactions ............ - - - - - - (0.04)
In excess of net realized gains ...... - - - - - - (0.04)
------ ------ ------ ------ ------ ------ ------
Total dividends and distributions .... (0.22) (0.45) (0.37) (0.22) (0.43) (0.47) (0.33)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period ........ $11.12 $11.05 $11.14 $11.12 $11.06 $11.15 $9.86
====== ====== ====== ====== ====== ====== =====
Total Return(3) ....................... 2.75% 3.32% 10.36% 2.65% 3.18% 18.10% (2.84%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $3,754 $3,110 $2,048 $430 $554 $541 $326
Ratio of expenses to average net
assets(4) ........................... 1.59%(5) 1.59% 1.33% 1.59%(5) 1.70% 1.54% 1.50%(5)
Ratio of expenses to average
net assets prior to expense limitation 1.72%(5) 1.70% 1.60% 1.72%(5) 1.70% 1.69% 1.71%(5)
Ratio of net investment income
to average net assets ............... 4.28%(5) 4.11% 4.08%(5) 4.28%(5) 4.01% 4.18% 4.1%(5)
Ratio of net investment income to
average net assets prior to
expense limitation .................. 4.15%(5) 4.00% 3.81%(5) 4.15%(5) 4.01% 4.03% 3.89%(5)
Portfolio turnover 52.94%(5) 42.76% 42.96% 52.94%(5) 42.76% 42.96% 25.18%
</TABLE>
1 Commencement of operations.
2 For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from federal
income tax. For the period ended December 31, 1992, $.01 per share of the
distributions from net investment income were subject to state income tax.
3 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.
4 For the years ended December 31, 1995 and 1996, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Fund. Prior period expense ratios have not been
adjusted.
5 Annualized.
1 9 9 7 s e m i - a n n u a l r e p o r t 19
<PAGE>
THE DELAWARE-VOYAGEUR FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Delaware-Voyageur Tax-Free Arizona Fund (formerly Voyageur Arizona Tax Free
Fund) ("Tax-Free Arizona Fund"), a series of the Voyageur Mutual Funds, Inc.
is registered under the Investment Company Act of 1940 (as amended) as a
non-diversified, open-end management investment company. Delaware-Voyageur
Tax-Free Arizona Insured Fund (formerly Arizona Insured Tax Free Fund)
("Tax-Free Arizona Insured Fund"), a series of the Voyageur Insured Funds,
Inc. is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. Tax-Free Arizona Fund
seeks high current income free from both federal and state income taxes by
investing in investment grade municipal bonds. Tax-Free Arizona Insured Fund
seeks high current income free from both federal and state income taxes with
the added safety of an insured portfolio by investing in insured municipal
bonds. Tax-Free Arizona Fund and Tax-Free Arizona Insured Fund (each referred
to as a "Fund" or collectively as the "Funds") each offer 3 classes of
shares.
1. Fund Reorganization
On April 30, 1997, Lincoln National Corporation ("LNC" ) acquired Voyageur
Fund Manager Inc.'s ("Voyageur" ) parent, Dougherty Financial Group, Inc.
("DFG" ) pursuant to an agreement and plan of merger dated January 15, 1997,
in which LNC would acquire DFG including the mutual fund investment advisory
business of DFG conducted by Voyageur. Upon completion of the acquisition,
Delaware Management Company, Inc. ("DMC") became the investment adviser to
the Funds, Delaware Distributors, L.P. ("DDLP") became the distributor for
the Funds, Delaware Service Company, Inc. ("DSC") became the transfer,
dividend-disbursing, shareholder servicing agent and accounting service agent
for the Funds.
2. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of
such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost which approximates market value. Other
securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
Federal Income Taxes - Each Fund intends to continue to qualify as a
regulated investment company and make the requisite distributions to
shareholders. Accordingly, no provision for federal income taxes has been
made in the financial statements. Income and capital gain distributions are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Funds on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.
Other - Expenses common to all Funds within the Delaware-Voyageur Funds are
allocated amongst the Funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale
of investment securities are those of the
<PAGE>
specific securities sold. Interest income is recorded on the accrual basis.
Original issue discounts are accreted to interest income over the lives of
the respective securities. The Funds declare dividends from net investment
income daily and pay them monthly. Capital gains are distributed annually.
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 at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
3. Investment Management and Other Transactions with Affiliates
Commencing May 1, 1997, and in accordance with the terms of the Investment
Management Agreement, the Fund pays DMC the Investment Manager of each Fund,
an annual fee, which is calculated daily on the average daily net assets of
each Fund. The management fee rates are as follows:
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------ ----------------
Management fee as a
percentage of average
daily net assets
(per annum)..................... 0.50% 0.50%
DMC has elected to waive their fees and reimburse each Fund to the extent
that annual operating expenses exclusive of taxes, interest, brokerage
commissions and extraordinary expenses and 12b-1 fees, exceed .022% and 0.59%
of average daily net assets for Tax-Free Arizona Fund and Tax-Free Arizona
Insured Fund, respectively, through December 31, 1997. Total expenses
absorbed by DMC for the two month period ended June 30, 1997, are as follows:
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------ ----------------
Total expenses
absorbed by DMC................. $11,988 $0
Prior to May 1, 1997, the Funds had an investment advisory and management
agreement with Voyageur. Voyageur received a fee for its investment advisory
and management services based on the average daily net assets of each Fund at
an annual rate of .50%. During the period January 1, 1997 to April 30, 1997,
Voyageur waived $34,425, and $29,417 of the Tax-Free Arizona Fund and
Tax-Free Arizona Insured Fund, respectively.
20 1 9 9 7 s e m i - a n n u a l r e p o r t
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Commencing May 1, 1997, the Funds have engaged DSC, an affiliate of DMC, to
serve as dividend disbursing, transfer agent and accounting services agent
for the Fund. For the two month period ended June 30, 1997, the amounts
expensed for each Fund were as follows:
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------ ----------------
Dividend disbursing,
transfer agent fees and
other expenses.................. $4,512 $66,850
Accounting fees.................. $ 903 $12,869
Prior to May 1, 1997, the Funds paid a fee to Voyageur for acting as the
Fund's dividend disbursing, administrative and accounting services agent.
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.
On June 30, 1997, the Funds had payables to affiliates as follows:
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------ ----------------
Investment Management fee
payable to DMC.................. $5,774 $82,325
Dividend disbursing, transfer
agent fees, accounting fees
and other expenses
payable to DSC.................. $ 962 $13,570
Other expenses payable to
DMC and affiliates.............. $2,709 $ 9,262
Commencing May 1, 1997, and pursuant to the Distribution Agreement, the Funds
pay DDLP, the Distributor and an affiliate of DMC, an annual fee not to exceed
0.25% of the average daily net assets of the A Class and 1.00% of the average
daily net assets of the B and C Class for each Series. For the period May 1,
1997, to June 30, 1997, DDLP voluntarily waived $0, $0, $0, for the Tax-Free
Arizona Fund Class A, Class B and Class C Shares, respectively, and $34,144, $0,
$0, for the Tax-Free Arizona Insured Fund Class A, Class B and Class C Shares,
respectively. For the two month period ended June 30, 1997, DDLP earned
commissions on sales of the Fund A Class shares for each Fund as follows:
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------ ----------------
$4,223 $11,535
<PAGE>
Prior to May 1, 1997, each class of shares had a Distribution Agreement with
Voyageur Fund Distributors, Inc. ("VFD"). Under the plan the Funds paid VFD
a fee at an annual rate of 0.25% of the average daily net assets of the Class
A Shares and 1.00% of the average daily net assets of the Class B and C
Shares. For the period January 1, 1997,
to April 30, 1997, VFD voluntarily waived $0, $0, $0, for the Tax-Free
Arizona Fund Class A, Class B and Class C Shares, respectively, and $76,933,
$0, $0, for the Tax-Free Arizona Insured Fund Class A, Class B and Class C
Shares, respectively.
Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Fund. These officers, directors and employees are paid no
compensation by the Fund.
4. Investments
During the period ended June 30, 1997, the Fund made purchases and sales of
investment securities other than U.S. government securities and temporary
cash investments for each Fund as follows:
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------ ----------------
Purchases....................... $2,400,373 $52,068,279
Sales........................... $1,987,963 $69,764,703
At June 30, 1997, the aggregate unrealized appreciation (depreciation) of
securities for federal income tax purposes for each Fund were as follows:
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------ ----------------
Aggregate unrealized
appreciation.................... $408,564 $8,926,696
Aggregate unrealized
depreciation.................... $ 0 $ 47,460
Net unrealized
appreciation.................... $408,564 $8,879,236
For federal income tax purposes, the Tax-Free California Insured Fund had a
capital loss carryover at December 31, 1996, of $5,819,078 that will expire
in 2003.
1 9 9 7 s e m i - a n n u a l r e p o r t 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. Capital Stock
<TABLE>
<CAPTION>
TAX-FREE ARIZONA FUND TAX- FREE ARIZONA INSURED FUND
Six Months Year Six Months Year
Ended Ended Ended Ended
6/30/97 12/31/96 6/30/97 12/31/96
(Unaudited) (Unaudited)
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Shares sold:
A Class..................................... 104,818 $386,538 372,333 1,146,036
B Class..................................... 79,793 185,353 99,282 101,877
C Class..................................... 22,888 192 3,017 33,261
Shares issued upon reinvestment of
dividends from net investment income
and net realized gains from
security transactions:
A Class..................................... 16,612 24,151 201,814 386,959
B Class..................................... 5,004 6,721 3,704 5,559
C Class..................................... 66 129 750 1,756
------- ------- ---------- ----------
229,181 603,084 680,900 1,675,448
------- ------- ---------- ----------
Shares repurchased:
A Class..................................... (75,770) (77,891) (2,248,427) (3,960,753)
B Class..................................... (91,599) (17,142) (46,783) (9,723)
C Class..................................... -- (706) (15,247) (33,417)
------- ------- ---------- ----------
(167,369) (95,739) (2,310,457) (4,003,893)
------- ------- ---------- ----------
Net Increase (Decrease)...................... 61,812 507,345 (1,629,557) (2,328,445)
======= ======= ========== ==========
</TABLE>
6. Concentration of Credit Risk
The Funds concentrated their investments in securities mainly issued by
Arizona municipalities. The value of these investments may be adversely
affected by new legislation within the state, regional or local economic
conditions, and differing levels of supply and demand for municipal bonds.
Many municipalities insure repayment for their obligations. Although bond
insurance reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that market value may fluctuate for other reasons
and there is no assurance that the insurance company will meet its
obligations. These securities have been identified in the Statement of Net
Assets.
The Funds may invest up to 15% of its total assets in illiquid securities
which may include securities with contractual restrictions on resale,
securities exempt from registration under Rule 144A of the Securities Act of
1933, as amended, and other securities which may not be readily marketable.
The relative illiquidity of some of these securities may adversely affect the
Fund's ability to dispose of such securities in a timely manner and at a fair
price when it is necessary to liquidate such securities. These securities, if
any, have been denoted in the Statement of Net Assets.
22 1 9 9 7 s e m i - a n n u a l r e p o r t
<PAGE>
VOYAGEUR FUNDS
SHAREHOLDER MEETING RESULTS
- --------------------------------------------------------------------------------
A meeting of the funds' shareholders was held on April 11, 1997. The matters
submitted to a vote of shareholders were the election of new directors and
the approval of a new investment management agreement. Whenever there is a
change in control of an investment manager, the Investment Company Act of
1940 requires shareholders to vote on a new investment management agreement.
TAX-FREE ARIZONA FUND
<TABLE>
<CAPTION>
NUMBER OF VOTES
--------------------------------------------------
FOR AGAINST / WITHHELD ABSTENTIONS
--------------------------------------------------
<S> <C> <C> <C>
Walter P. Babich...................................... 1,057,166 11,251 --
Anthony D. Knerr...................................... 1,057,166 11,251 --
Ann R. Leven.......................................... 1,057,166 11,251 --
W. Thacher Longstreth................................. 1,057,166 11,251 --
Thomas F. Madison..................................... 1,057,166 11,251 --
Jeffrey J. Nick....................................... 1,057,166 11,251 --
Charles E. Peck....................................... 1,057,166 11,251 --
Wayne A. Stork........................................ 1,057,166 11,251 --
Approval of New Investment Management Agreement........ 1,024,181 18,408 25,828
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF VOTES
--------------------------------------------------
FOR AGAINST / WITHHELD ABSTENTIONS
--------------------------------------------------
<S> <C> <C> <C>
Walter P. Babich...................................... 13,415,915 108,858 --
Anthony D. Knerr...................................... 13,422,746 102,027 --
Ann R. Leven.......................................... 13,416,561 108,212 --
W. Thacher Longstreth................................. 13,416,854 107.919 --
Thomas F. Madison..................................... 13,412,554 112,219 --
Jeffrey J. Nick....................................... 13,421,466 103,307 --
Charles E. Peck....................................... 13,418,134 106,639 --
Wayne A. Stork........................................ 13,420,527 104,246 --
Approval of New Investment Management Agreement........ 11,682,989 398,467 1,443,317
</TABLE>
1 9 9 7 s e m i - a n n u a l r e p o r t 23
<PAGE>
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF TAX-FREE ARIZONA FUNDS'
SHAREHOLDERS, BUT IT MAY BE USED WITH PROSPECTIVE INVESTORS WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS FOR TAX-FREE ARIZONA FUNDS, WHICH SETS FORTH
DETAILS ABOUT CHARGES, EXPENSES, INVESTMENT OBJECTIVES AND OPERATING POLICIES OF
THE FUNDS. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. SUMMARY
INVESTMENT RESULTS ARE DOCUMENTED IN THE FUNDS' CURRENT STATEMENT OF ADDITIONAL
INFORMATION. THE FIGURES IN THIS REPORT REPRESENT PAST RESULTS WHICH ARE NOT A
GUARANTEE OF FUTURE RESULTS. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUNDS WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING AND
TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS
REPRESENTATIVES
1.800.659.2265
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan: however, shares of the Funds are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Funds are not bank or credit union deposits.
(Copyright) Delaware Distributors, L.P.
DELAWARE
GROUP
=====================
Philadelphia o London
Printed in the USA on
recycled paper
(158)
SA-VOYAZ [6/97] PP8/97
