<PAGE>
For Tax-exempt Income
Tax-Free Arizona Funds
Tax-Free California Funds
Tax-Free Colorado Fund
Tax-Free New Mexico Fund
Tax-Free Utah Fund
(various photos demonstrating service and
guidance, professional management and goals)
service and guidance
professional management
goals
1998
Annual
Report
Tax-Free Arizona Fund
Tax-Free Arizona Insured Fund
Tax-Free California Fund
Tax-Free California Insured Fund
DELAWARE
INVESTMENTS
=====================
Philadelphia o London
<PAGE>
A TRADITION OF SOUND INVESTING
commitment
Delaware Investments has a money management tradition that dates back to
1929. We have a long and distinguished history of helping individuals reach
their financial goals through a full range of investment opportunities that
include municipal bond mutual funds.
Headquartered in Philadelphia with an international affiliate in
London, the Delaware organization is one of the nation's leading municipal
bond fund managers.
Delaware Investments manages more than $40 billion in mutual fund
assets and institutional advisory accounts. We offer a wide variety of
tax-advantaged equity and fixed-income investments, retirement plan accounts,
IRAs, investment accounts for single and multi-manager variable annuities and
closed-end funds.
Delaware's Tax-Advantaged Investment Line-up
* Tax-Efficient Equity Fund
* Municipal Bond Funds in 19 States
* Four National Tax-Exempt Bond Funds
* Tax-Free Money Fund
Complete information on any fund offered by Delaware Investments can be found
in each fund's current prospectus. Prospectuses for all funds offered by
Delaware Investments are available from your financial adviser. Please read
the prospectus carefully before you invest or send money.
A Commitment
To Our Investors
(photo of keyboard)
(photo of illustration
from tax-exempt
income brochures)
Fund Objectives
Each Tax-Free Fund and Insured Fund seeks as high a level of current income
exempt from federal income tax and from the personal income tax, if any, of
a Fund's particular state, as is consistent with preservation of capital.
Table of Contents
Letter to Shareholders Page 1
Portfolio Manager's Review Page 3
Tax-Free Arizona Funds Page 4
Tax-Free California Funds Page 6
Tax-Free Colorado Fund Page 8
Tax-Free New Mexico Fund Page 9
Tax-Free Utah Fund Page 11
Statements of Net Assets Page 18
Financial Highlights Page 36
<PAGE>
for tax-exempt
income
1
September 11, 1998
Dear Shareholder:
It gives us great pleasure to let you know that each of Delaware Investments'
western state municipal bond funds provided exceptional results for fiscal 1998.
In fact, three funds - Tax-Free Arizona Fund, Tax-Free California Fund
and Tax-Free Colorado Fund - led their respective peer groups for the 12-month
period ended August 31, 1998, according to Lipper Analytical Services (for Class
A shares at net asset value with distributions reinvested as shown on page 2).
You may be wondering why you are receiving another report so soon after
the June 30 semi-annual report. We have changed each Fund's fiscal year end from
December 31 to August 31 to match the fiscal year of Delaware Investments' other
municipal bond funds. We believe this change may yield long run operational
efficiencies. From now on, you will receive an annual report by early November
and a semi-annual report by early May.
In fiscal 1998, most parts of the U.S. benefited from the nation's
robust economy, but none more so than western states. From San Jose to Santa Fe,
job growth and technology-related business expansion during the past 12 months
boosted state tax revenues.
In many western states, including Arizona, California and Utah,
municipalities took advantage of historically low interest rates to bring more
tax-exempt bonds to market
FROM SAN JOSE TO
SANTA FE, JOB
GROWTH AND
TECHNOLOGY-RELATED
BUSINESS EXPANSION
DURING THE PAST 12
MONTHS BOOSTED STATE
TAX REVENUES.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
January 1, 1998 12 Months Ended
to August 31, 1998 August 31, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax-Free Arizona Fund A Class +4.99% +9.46%
Tax-Free Arizona Insured Fund A Class +3.88% +7.89%
Lipper Arizona Municipal Debt Fund Average (39 Funds) +3.97% +7.87%
- -------------------------------------------------------------------------------------------------------
Tax-Free California Fund A Class +5.07% +10.60%
Lipper California Municipal Debt Fund Average (104 Funds) +4.20% +8.51%
- -------------------------------------------------------------------------------------------------------
Tax-Free California Insured Fund A Class +4.58% +8.88%
Lipper California Insured Fund Average (26 Funds) +4.07% +8.11%
- -------------------------------------------------------------------------------------------------------
Tax-Free Colorado Fund A Class +4.51% +9.77%
Lipper Colorado Municipal Debt Fund Average (26 Funds) +4.01% +8.25%
- -------------------------------------------------------------------------------------------------------
Tax-Free New Mexico Fund A Class +4.81% +9.05%
Tax-Free Utah Fund A Class +4.30% +9.04%
Lipper Other States Municipal Debt Fund Average (74 Funds) +3.89% +7.74%
- -------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +4.54% +8.65%
Lehman Brothers Insured Municipal Bond Index +4.70% +9.19%
- -------------------------------------------------------------------------------------------------------
</TABLE>
All results shown above are based on net asset value and assume reinvestment of
distributions. For complete performance for all Classes, see pages 12 to 17. The
Lehman Brothers Municipal Bond Index and Lehman Brothers Insured Municipal Bond
Index are unmanaged and include no management fees or expenses. Performance of
other Fund Classes varies due to different fees and expenses. Past performance
does not guarantee future results.
<PAGE>
for tax-exempt
income
2
and refinance old debt. In Colorado and New Mexico, however, fewer bonds were
issued in the first eight months of 1998 compared to the same period a year
earlier. Both states issued a large amount of bonds in 1997.
Since the summer of 1997, increased demand for U.S. Treasuries,
especially from international investors, has led to higher bond prices.
Municipal bonds have participated in the rally to a lesser extent than U.S.
government securities because foreigners generally do not buy America's state
and local debt. Income from municipal bonds is generally not tax-exempt for
non-U.S. citizens.
Domestic investor interest in municipal bonds has been accelerating in
recent months, especially as the U.S. equity market has become more volatile. In
our view, municipal bonds are currently trading at their most attractive levels
since the flat-tax debate a few years ago. Long-term municip al bonds offered
93.8% of the income offered by 30-year Treasury bonds as of August 31.
On the following pages, the Funds' portfolio manager, Andrew M.
McCullagh, Jr., provides a detailed explanation of each Fund's strategy and
results during fiscal 1998. Mr. McCullagh, who is based in Denver, has 24 years
of investment experience.
Given today's dynamic investment environment, we strongly encourage you
to meet with your financial adviser to update your mutual fund portfolio. We
appreciate the confidence you have shown in Delaware Investments.
Sincerely,
/s/ Wayne A. Stork
- -------------------------------------
Wayne A. Stork
Chairman
/s/ Jeffrey J. Nick
- -------------------------------------
Jeffrey J. Nick
President and Chief Executive Officer
discipline
Total Return Rankings: Among The Best In The West
Period Ending August 31, 1998
(Peer Group Rankings Among Respective State Municipal Debt Funds)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One-Year Three-Year Lifetime
Tax-Free Arizona Fund A Class (Est. 3/2/95) 1st of 39 1st of 33 1st of 29
Tax-Free California Fund A Class (Est. 3/2/95) 1st of 104 1st of 90 3rd of 85
- ------------------------------------------------------------------------------------------------
One-Year Five-Year Lifetime
Tax-Free Colorado Fund A Class (Est. 4/23/87) 1st of 26 4th of 11 1st of 6
Tax-Free New Mexico Fund A Class (Est. 10/5/92) 6th of 74 2nd of 24 3rd of 19
Tax-Free Utah Fund A Class (Est. 10/5/92) 7th of 74 1st of 24 1st of 19
</TABLE>
Rankings are based on total return at net asset value. Expense limitations
were in effect for the periods shown. Tax-Free Colorado Fund ranked 1st of
six Colorado funds for the 10-year period ended 8/31/98. Returns and rankings
would have been lower without the limitations. Past performance does not
guarantee future results. Source: Lipper Analytical Services.
<PAGE>
for tax-exempt
income
3
Portfolio Manager's Review
By Andrew M. McCullagh
Vice President/Senior Portfolio Manager
September 11, 1998
U.S. industrial expansion and low interest rates provided a nearly ideal
financial climate for municipal bond financing in fiscal 1998. Many
municipalities refinanced old issues and rushed to obtain funding for new
projects.
Selected high technology companies provided a catalyst for growth in the
western third of the U.S. this past year. Corporate relocations and expansions
enabled Southwestern states such as Arizona, Utah and New Mexico to build
broader-based economies.
In many areas, economic and population growth has created demand for
more roads, schools and homes. We believe this bodes well for each state's
municipal bond market. In our view, each state's tax base is likely to grow as
its economy expands.
We expect each of the five states discussed in this report to post a
budget surplus for its current fiscal year. This added to the attractiveness of
each state's municipal bond market by demonstrating that state governments were
committed to a consistent application of conservative fiscal policies.
We approach each state's municipal bond market by applying a bottom-up
research-intensive strategy. This means we start by evaluating specific bonds
rather than general bond sectors. Then we employ a value-oriented focus to
determine whether specific bonds are selling below their fair market value. We
believe this approach has the potential to maximize each Fund's total return
potential and current income stream.
WESTERN STATE GOVERNMENTS
APPEAR COMMITTED TO A
CONSISTENT APPLICATION OF
CONSERVATIVE FISCAL POLICIES.
overview
Municipal Bond Funds vs. U.S. Treasuries
Income Potential After Taxes (bar chart) August 31, 1998
Current 30-Day SEC Yield
30-Year U.S. Treasuries After Taxes 3.13%
Tax-Free Arizona Fund A Class 4.58%
Tax-Free Arizona Insured Fund A Class 3.71%
Tax-Free California Fund A Class 4.67%
Tax-Free California Insured Fund A Class 3.76%
Tax Free Colorado Fund A Class 4.09%
Tax-Free New Mexico Fund A Class 4.19%
Tax-Free Utah Fund A Class 4.02%
Current 30-day SEC yields for B and C Class as of 8/31/98 were: Tax-Free Arizona
Fund Class B 4.01%, Class C 4.00%, Tax-Free Arizona Insured Fund Class B and C
3.11%, Tax-Free California Fund Class B 4.09%, Class C 4.11%, Tax-Free
California Insured Fund Class B 3.16%, Class C 3.17%, Tax-Free Colorado Fund
Class B and C 3.50%, Tax-Free New Mexico Fund Class B and C 3.60%, Tax-Free Utah
Fund Class B 3.43%. Unlike U.S. Treasuries, Fund principal and interest payments
are not guaranteed by the U.S. government. Yields fluctuate and are not
guaranteed. Treasury yields after taxes are calculated using the 39.6% federal
income tax bracket.
<PAGE>
for tax-exempt
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4
Bond investor concerns as of August 31, 1998 were quite different from
that of a year earlier, when strong economic growth fueled fear of inflation and
higher interest rates. Prolonged declines in the prices of many commodities and
financial problems in Asia and Russia during fiscal 1998 have suggested possible
global deflation, or falling consumer prices. We believe this is likely.
During a speech in early September, Federal Reserve Board Chairman Alan
Greenspan said he no longer saw inflation as a threat to the U.S. economy. We
believe that the Fed will continue to reduce interest rates this year.
Tax-Free Arizona Fund
Tax-Free Arizona Fund's total return ranked 1st out of 39 funds* investing in
Arizona securities for the 12 months ended August 31, 1998. The Fund provided
robust results of +9.46% (for Class A shares with distributions reinvested) and
significantly outperformed its benchmark - the Lehman Brothers Municipal Bond
Index, as shown on page 1.
Our research-intensive approach to Arizona's municipal bond market
indicated that select housing bonds offered attractive total return prospects.
We increased the Fund's position in housing bonds during fiscal 1998 by five
percentage points to 20.3% of net assets as of August 31, 1998.
We took care not to let mortgage prepayments - spurred by low interest
rates - negatively affect your Fund's performance. Most of the Fund's housing
bonds had call protection that prevented them from being refinanced.
As of August 31, the Fund's duration (a measure of a bond's sensitivity
to interest rates) was 7.4 years - slightly longer than a year ago to
potentially benefit from the bond market's total return potential. With
inflation negligible, we believed the Federal Reserve Board would maintain
rather than raise interest rates.
OUR RESEARCH-INTENSIVE
APPROACH TO YOUR STATE'S
MUNICIPAL BOND MARKET
INDICATED THAT SELECT
HOUSING BONDS OFFERED
ATTRACTIVE TOTAL RETURN
PROSPECTS.
tax-free
arizona
Portfolio Highlights
August 31, 1998
<TABLE>
<CAPTION>
Average Average AMT
Maturity Duration Income+
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax-Free Arizona Fund 10.0 years 7.4 years 9.1%
Tax-Free Arizona Insured Fund 7.2 years 5.6 years 0.5%
Tax-Free California Fund 11.6 years 8.3 years 16.0%
Tax-Free California Insured Fund 4.5 years 6.5 years 20.2%
Tax-Free Colorado Fund 8.5 years 6.1 years 0%
Tax-Free New Mexico Fund 13.2 years 8.2 years 10.0%
Tax-Free Utah Fund 8.0 years 6.1 years 12.5%
- ------------------------------------------------------------------------------------------
</TABLE>
+ Percentage of income generated for the eight months ended August 31, 1998 that
was subject to the federal alternative minimum tax.
*Tax-Free Arizona Fund A Class shares ranked 1st out of 33 mutual funds and 1st
out of 29 mutual funds for the three-year and lifetime periods ended 8/31/98,
according to Lipper Analytical Services. Rankings are based on total return at
net asset value. An expense limitation was in effect for the periods shown.
Returns and rankings would have been lower without the limitation. Past
performance does not guarantee future results.
<PAGE>
for tax-exempt
income
5
(photo of family on beach)
We slightly lowered the Fund's average credit quality from AA at the
beginning of the fiscal year to AA- as of August 31. This boosted both total
return and yield with only a modest increase in risk.
Arizona's strong economic growth is expected to continue through the
year 2000, according to a report by the U.S. Commerce Department this past
summer. The agency said personal income, jobs and population are likely to grow
faster in Arizona and Nevada than anywhere else in the U.S. through the end of
the millennium.
We believe Arizona's expanding tax base, along with an increasing need
for schools, roads and housing bodes well for your state's municipal bond
market.
Tax-Free Arizona Insured Fund
Tax-Free Arizona Insured Fund provided a total return of +7.89% for the 12
months ended August 31, 1998 (for Class A shares at net asset value with
distributions reinvested). The Fund's results outpaced that of its Lipper peer
group average as shown on page 1.
By investing in many relatively higher yielding insured bonds issued
with call protection, we believe we were able to strike a balance between total
return and income during the 1998 fiscal year.
Many older insured bonds commanded premium prices in fiscal 1998 as
interest rates fell. This diminished the opportunities to employ our
value-oriented strategy and maximize total return. Also, low interest rates
caused many municipalities to issue bonds at lower yields - presenting few new
opportunities to maximize income.
Arizona issued over 50% more bonds during the first eight months of 1998
than in the same period in 1997, according to The Bond Buyer, a trade
publication. We believe a further decline in interest rates could spur even more
issuance. In our view, Arizona's municipal bond market may become volatile if an
increase in municipal bond issuance is not met with a corresponding increase in
demand. We have therefore lowered your Fund's duration (a measurement of a
bond's sensitivity to interest rate changes) by a full year from the beginning
of the fiscal period to 5.6 years as of August 31. We
ARIZONA ISSUED OVER 50%
MORE BONDS DURING THE
FIRST EIGHT MONTHS OF
1998 THAN IN THE SAME
PERIOD IN 1997.
tax-free arizona
insured
Arizona Funds' Credit Quality
August 31, 1998
<TABLE>
<CAPTION>
Tax-Free Arizona Fund Tax-Free Arizona Insured Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
AAA 43.6% 100%
AA 13.5% 0%
A 16.9% 0%
BBB 15.7% 0%
BB & Unrated 10.3% 0%
</TABLE>
<PAGE>
for tax-exempt
income
6
accomplished this partly by selling your Fund's position in certificates of
participation.
We also slightly reduced your Fund's position in hospital bonds from the
summer of 1997 to 12.9% as of August 31, 1998. The value of Arizona's hospital
bonds has risen considerably in recent years because of consolidation in the
health care industry. In our view, merger activity is starting to slow. We
decided to sell hospital bonds that had done well but which we believed had
limited additional total return potential.
The strength of Arizona's economy allowed us to maintain a large
position in general obligation bonds with just over 36% of the Fund's net assets
allocated to this type of municipal bond as of August 31. We believe Arizona's
robust economy can cause further improvements to credit quality over the coming
months.
While many U.S. investors recognize Arizona's economic potential, the
state is also attracting the attention of the international business community.
In the April 1998 issue of Capital, a German business magazine, Phoenix was
ranked the #1 location in the U.S. to conduct business.
Tax-Free California Fund
Tax-Free California Fund's total return for the 12 months ended August 31, 1998
ranked 1st out of 104 mutual funds* investing in California municipal bonds. The
Fund provided strong results of +10.60% for the period (for Class A shares at
net asset value with distributions reinvested).
The Fund's total return was 209 basis points (2.09%) higher than its
Lipper peer group average and 195 basis points (1.95%) above the Fund's
benchmark - the Lehman Brothers Municipal Bond Index.
We attribute the Fund's performance to our diversification across
California's municipal bond sectors. This allowed us to employ a value-oriented
investment strategy rather than concentrating on specific sectors.
A booming economy and low interest rates spurred California to issue 64%
more bonds during the first eight months of the 1998 calendar year than in the
same period last year. Fortunately, increased issuance was met with strong
investor demand. Stringent fiscal discipline in California over the past few
years has enhanced the credit
tax-free
california
STATES AT A GLANCE
AUGUST 31, 1998
Per-Capita Unemployment Existing Single Family
Income Rate Home Sales+
- --------------------------------------------------------------------------------
Arizona $22,364 4.2% -4.3%
California 26,570 5.8% +4.3%
Colorado 27,051 3.3% +6.5%
New Mexico 19,587 6.4% +4.7%
Utah 20,432 3.5% +4.6%
- --------------------------------------------------------------------------------
+2nd quarter change from 1st quarter 1998
Source: Bloomberg Business News
*Tax-Free California Fund A Class shares ranked 1st out of 90 mutual funds and
3rd out of 85 mutual funds in Lipper's California municipal debt category for
the three-year and lifetime periods ended 8/31/98, according to Lipper
Analytical Services. Rankings are based on total return at net asset value. An
expense limitation was in effect for the periods shown. Returns and rankings
would have been lower without the limitation. Past performance does not
guarantee future results.
<PAGE>
for tax-exempt
income
7
quality of the state's municipal bonds. Gone are the days when a lack of candor
in the financial reporting of some municipalities concerned investors.
During fiscal 1998, we added a position (12.6% of net assets as of
August 31) in power authority bonds. These issues provided strong total returns
as California began to deregulate its utility industry. We especially favor
hydroelectric utilities. In our view, this relatively non-polluting energy
source has bright earnings prospects given Southern California's challenges in
meeting federally mandated clean air standards.
Since January, we have reduced the Fund's position in industrial
development bonds. We have concerns about credit quality of some recently issued
bonds in this sector that appear to be the product of politics rather than
economic need. In our opinion, this sector's default risks have increased.
This past year, Asia's financial problems began to affect the economic
climate in California - North America's gateway to the Pacific Rim. To some
degree, increased exports to Europe, Mexico and Canada are helping to offset
lost business in Asia. Overall, we believe the state is well-positioned to
successfully weather the effect of recession along the Pacific Rim.
Tax-Free California
Insured Fund
Tax-Free California Insured Fund provided a total return of +8.88% (for Class A
shares at net asset value with distributions reinvested) for the 12 months ended
August 31, 1998. The Fund's results outpaced its Lipper peer group average for
the fiscal period, as shown on page 1.
The Fund's strong performance resulted mainly from our efforts to
maximize income and preserve principal. We invested primarily in bonds rated AAA
- - the highest credit quality available according to Standard & Poor's that were
issued with a higher coupon than the average yield for California insured bonds.
Our strategy enabled the Fund to distribute a steady, attractive stream
of monthly income throughout the year. We
STRINGENT FISCAL
DISCIPLINE IN
CALIFORNIA OVER
THE PAST FEW YEARS
HAS ENHANCED THE
CREDIT QUALITY OF
THE STATE'S BONDS.
tax-free california
insured
TAX-FREE CALIFORNIA FUNDS' CREDIT QUALITY
AUGUST 31, 1998
Tax-Free California Fund Tax-Free California Insured Fund
- --------------------------------------------------------------------------------
AAA 51.3% 100%
AA 3.4% 0%
A 18.4% 0%
BBB 8.9% 0%
BB & Unrated 18.1% 0%
<PAGE>
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8
took a defensive stance against potential bond market volatility in 1998 by
shortening the Fund's duration (a measurement of a bond's sensitivity to
interest rates) by almost half a year. On August 31, Tax-Free California Insured
Fund's duration stood at 6.5 years - about a year lower than the Fund's
benchmark - the Lehman Brothers Insured Municipal Bond Index.
Tax-Free California Insured Fund's lower duration has the potential to
help preserve principal during periods of bond market volatility. We believe a
further decline in interest rates may lead to increased bond issuance by
California - possibly upsetting the supply/demand dynamics of the state's
municipal market.
This past summer, a coalition of California business leaders requested
the state issue more municipal bonds. The California Business Roundtable lobbied
the state legislature to finance a 10-year construction program to rebuild roads
and make other improvements. The coalition wants the program to be funded by
$23.5 billion in municipal bonds, according to The Bond Buyer.
At year's end, the Fund's second largest component was housing bonds -
representing 22.9% of net assets. This sector benefited from increased consumer
confidence and purchasing power throughout the year. A strong economy fueled
housing demand throughout California - the nation's most populous state. It
appears that California's real estate market has fully recovered from the early
1990s recession.
Last spring we added a position in power authority bonds - 9.8% of your
Fund's net assets as of August 31. California's state legislature deregulated
the state's utility sector, allowing utility companies to compete in a more
market-oriented environment.
We believe deregulation bodes well for the state's power authority bonds
- - especially for companies seeking alternatives to traditional energy sources to
comply with federal and state clean air laws.
Tax-Free Colorado Fund
Tax-Free Colorado Fund's results ranked 1st out of 26 mutual funds* investing in
Colorado securities for the 12 months ended August 31, 1998.
The Fund provided a total return of +9.77% (for Class A shares at net
asset value with distributions reinvested) for fiscal 1998. This outpaced both
the Fund's Lipper peer group average and benchmark by wide margins, as shown on
page 1.
We attribute the Fund's solid performance to a large position in
hospital
TAX-FREE CALIFORNIA
INSURED FUND'S STRONG
PERFORMANCE IN FISCAL
1998 RESULTED MAINLY
FROM OUR EFFORTS TO
MAXIMIZE INCOME AND
PRESERVE PRINCIPAL.
tax-free
colorado
*Tax-Free Colorado Fund A Class shares ranked 1st out of 26 mutual funds, 4th
out of 11 mutual funds, 1st of six mutual funds and 1st out of six mutual funds
in Lipper's Colorado municipal debt category for the one-year, five-year,
ten-year and lifetime periods ended 8/31/98, according to Lipper Analytical
Services. Rankings are based on total return at net asset value. An expense
limitation was in effect for the periods shown. Returns and rankings would have
been lower without the limitation. Past performance does not guarantee future
results.
<PAGE>
for tax-exempt
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9
(photo of keyboard)
bonds. As of August 31, hospital bonds made up 26% of your Fund's net assets - a
six percentage point increase from a year ago. Many hospital bonds we held
benefited from health care industry consolidation.
Colorado is a regional medical services hub that serves neighboring
states as well as its own population. Given the rapidly changing financial
dynamics of the industry, we expect further hospital consolidation in the year
ahead, and in our view this could lead to credit upgrades among selected bonds
during fiscal 1999.
We slightly lowered the Fund's average maturity this past year. A low
interest rate environment reduced the additional income potential available from
owning the longest term bonds. As of August 31, the Fund's average maturity was
8.5 years. By investing in this range of the maturity spectrum, we believe
Tax-Free Colorado Fund provided much of the income potential offered by longer
term bonds but with much less price volatility.
The Fund's holdings of housing bonds continued to perform well and made
up approximately 24% of the Fund's net assets as of August 31. Colorado has one
of the strongest housing markets in the West because many professionals are
moving to the state from other parts of the country as well as from overseas.
Colorado businesses have generated many high paying jobs in engineering, law and
architecture in the 1990s.
The Colorado State Demography Office reported last summer that
Colorado's population has grown at a relatively rapid annual rate of 2.5% since
1990. Some 33% of Colorado's residents are college graduates compared to a
national average of 23%. We believe this bodes well for continued long-term
economic growth and state tax revenues.
Tax-Free
New Mexico Fund
Tax-Free New Mexico Fund provided a total return of +9.05% (for Class A shares
with distributions reinvested at net asset value) for the 12 months ended August
31, 1998. The Fund's performance ranked in the top 10% of its Lipper peer group*
for the
GIVEN THE RAPIDLY
CHANGING FINANCIAL
DYNAMICS OF THE
INDUSTRY, WE EXPECT
FURTHER HOSPITAL
CONSOLIDATION IN THE
YEAR AHEAD, AND IN OUR
VIEW THIS COULD LEAD TO
CREDIT UPGRADES AMONG
SELECTED BONDS DURING
FISCAL 1999.
tax-free
new mexico
TAX-FREE COLORADO FUND'S CREDIT QUALITY
AUGUST 31, 1998
- --------------------------------------------------------------------------------
AAA 17.9%
AA 16.3%
A 16.6%
BBB 29.2%
BB & Unrated 20.0%
*Tax-Free New Mexico Fund A Class shares ranked 6th out of 74 mutual funds, 2nd
out of 24 mutual funds and 3rd out of 19 mutual funds in Lipper's Other States
Municipal Debt category for the one-year, five-year and lifetime periods ended
8/31/98, according to Lipper Analytical Services. Rankings are based on total
return at net asset value. An expense limitation was in effect for the periods
shown. Returns and rankings would have been lower without the limitation. Past
performance does not guarantee future results.
<PAGE>
for tax-exempt
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10
period. Tax-Free New Mexico Fund also outperformed its benchmark - the unmanaged
Lehman Brothers Municipal Bond Index, as shown on page 1.
We believe Tax-Free New Mexico Fund's focus on bonds of slightly lower
credit quality allowed us to maximize total return and income potential.
New Mexico's general obligation bonds enjoy a relatively high credit
rating of AA+. We believe this helped boost the performance of the state's bonds
this past year. When Standard & Poor's affirmed the state's credit rating this
past summer, the ratings agency said New Mexico benefits from a diversified
economy, stable financial operations and moderately low debt.
We lengthened the Fund's average effective duration (a measurement of a
bond's sensitivity to interest rates) by half a year during fiscal 1998 to
maximize the Fund's income and total return potential. As of August 31, 1998,
the Fund's average maturity and average duration were 13.2 years and 8.2 years,
respectively.
Tax-Free New Mexico Fund's largest sector weighting as of August 31 was
housing bonds - comprising 31.1% of net assets. We also concentrated on higher
yielding mortgage securities with good call protection. We believe call
protection helped the Fund weather an increase in mortgage refinancing in fiscal
1998.
A new addition to Tax-Free New Mexico Fund has been a position in
environmental services bonds. As of August 31, about 9% of your Fund's net
assets were allocated to pollution control bonds. We believe this is an
undervalued sector of the bond market. Environmental services businesses are
consolidating and reducing debt, helping to stabilize pricing for services suc h
as garbage removal and hazardous waste cleanup.
WHEN STANDARD &
POOR'S AFFIRMED NEW
MEXICO'S CREDIT RATING
THIS PAST SUMMER, THE
RATINGS AGENCY SAID
THE STATE BENEFITS FROM
A DIVERSIFIED ECONOMY,
STABLE FINANCIAL
OPERATIONS AND
MODERATELY LOW DEBT.
tax-free
new mexico
TAX-FREE NEW MEXICO AND UTAH FUNDS' CREDIT QUALITY
AUGUST 31, 1998
Tax-Free New Mexico Fund Tax-Free Utah Fund
AAA 39.9% 55.2%
AA 13.7% 11.3%
A 28.4% 16.4%
BBB 4.7% 4.8%
BB & Unrated 13.3% 12.3%
<PAGE>
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11
TAX-FREE UTAH FUND
Tax-Free Utah Fund provided a total return of +9.04% (for Class A shares at net
asset value with distributions reinvested) for the 12 months ended August 31,
1998.
The Fund outperformed its Lipper peer group average by 130 basis points
(1.30%) for the period. We are pleased to report that the Fund's total return
for the five-year period ended August 31 ranked 1st among its peers.*
We attribute Tax-Free Utah Fund's robust performance in fiscal 1998 to a
large position in higher education bonds. As of August 31, a quarter of the
Fund's net assets were allocated to this sector. Utah's higher education bonds
offer attractive total return prospects, in our opinion, because of the value
residents place on education. The state enjoys the highest literacy rate in the
nation, according to the Utah Department of Community and Economic Development.
Utah has a growing number of children and a relatively young demographic
mix of voters, spurred by the second highest birth rate in the nation (after
Alaska). While this can place more demands on the state's schools, Utah
officials generally can more easily meet education funding requirements than
officials in states where the elderly make up a high proportion of registered
voters.
Adding to the attractiveness of Utah's municipal bonds is the state's
high credit standing. As of August 31, Utah was one of only eight states to have
a AAA general obligation bond rating, the highest rating available.
Utah took advantage of historically low borrowing rates and issued
almost 40% more bonds during the first eight months of the 1998 calendar year
than during the same period in 1997. We believe that a further decline in
interest rates could lead to even more issuance in the months ahead.
Such an increase may contribute to volatility in Utah's municipal bond
market if there is not a comparable increase in demand. Therefore, we lowered
duration (a measurement of a bond's sensitivity to interest rate changes) by a
full year to 6.1 years as of August 31, 1998.
AS OF AUGUST 31,
UTAH WAS ONE OF ONLY
EIGHT STATES TO HAVE A
AAA GENERAL
OBLIGATION BOND
RATING, THE HIGHEST
RATING AVAILABLE.
tax-free
utah
(photo of glasses, pen and keyboard)
*Tax-Free Utah Fund A Class shares ranked 7th out of 74 mutual funds, 1st out of
24 mutual funds and 1st out of 19 mutual funds in Lipper's Other States
Municipal Debt category for the one-year, five-year and lifetime periods ended
8/31/98, according to Lipper Analytical Services. Rankings are based on total
return at net asset value. An expense limitation was in effect for the periods
shown. Returns and rankings would have been lower without the limitation. Past
performance does not guarantee future results.
<PAGE>
for tax-exempt
income
12
Performance Summary
TAX FREE ARIZONA FUND
GROWTH OF A $10,000 INVESTMENT
MARCH 2, 1995 TO AUGUST 31, 1998
Tax-Free Arizona Lehman Brothers Lipper Arizona Municipal
Fund A Class: Municipal Bond Index: Debt Fund Average (29 funds)
Mar. '95 $ 9,625 $10,000 $10,000
May. '95 $10,115 $10,331 $10,317
Aug. '95 $10,151 $10,469 $10,372
Nov. '95 $10,794 $10,866 $10,826
Feb. '96 $10,867 $10,978 $10,900
May. '96 $10,769 $10,803 $10,688
Aug. '96 $11,045 $11,017 $10,899
Nov. '96 $11,527 $11,505 $11,354
Feb. '97 $11,587 $11,584 $11,417
May. '97 $11,725 $11,699 $11,518
Aug. '97 $12,084 $12,036 $11,836
Nov. '97 $12,394 $12,329 $12,097
Feb. '98 $12,812 $12,642 $12,396
May. '98 $12,971 $12,795 $12,523
Aug. '98 $13,228 $13,083 $12,767
Chart assumes a $10,000 investment on March 2, 1995, a 3.75% front-end sales
charge and reinvestment of distributions. Performance of other Fund classes
differs because of different charges and expenses. Past performance does not
guarantee future results.
TAX-FREE ARIZONA FUND
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +9.65% +9.46%
Including Sales Charge +8.46% +5.39%
- --------------------------------------------------------------------------------
Class B (Est. 6/29/95)
Excluding Sales Charge +8.33% +8.66%
Including Sales Charge +7.53% +4.66%
- --------------------------------------------------------------------------------
Class C (Est. 5/13/95)
Excluding Sales Charge +8.47% +8.73%
Including Sales Charge +8.47% +7.73%
All performance includes reinvestment of distributions and applicable sales
charge 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 either the investment was not redeemed or that
contingent sales charges did not apply. Returns 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. All Funds have a
12b-1 fee. Class B shares do not have 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.
<PAGE>
for tax-exempt
income
13
Tax-Free Arizona Insured Fund
Growth of a $10,000 Investment
April 1, 1991 To August 31, 1998
<TABLE>
<CAPTION>
Tax-Free Arizona Insured Lehman Brothers Insured Lipper Arizona Municipal
Fund A Class: Municipal Bond Index: Debt Fund Average (12 funds)
<S> <C> <C> <C>
Apr. '91 $ 9,625 $10,000 $10,000
Aug. '91 $10,088 $10,337 $10,323
Aug. '92 $11,199 $11,529 $11,524
Aug. '93 $12,902 $13,046 $13,018
Aug. '94 $12,628 $12,982 $12,894
Aug. '95 $13,737 $14,165 $13,898
Aug. '96 $14,491 $14,933 $14,603
Aug. '97 $15,758 $16,338 $15,859
Aug. '98 $17,007 $17,840 $17,106
</TABLE>
Chart assumes a $10,000 investment on April 1, 1991, a 3.75% front-end sales
charge and reinvestment of distributions. Performance of other Fund classes
differs because of different charges and expenses. Past performance does not
guarantee future results.
TAX-FREE ARIZONA INSURED FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
Lifetime Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 4/1/91)
Excluding Sales Charge +7.98% +5.69% +7.89%
Including Sales Charge +7.42% +4.90% +3.82%
- --------------------------------------------------------------------------------
Class B (Est. 3/10/95)
Excluding Sales Charge +7.22% +7.09%
Including Sales Charge +6.49% +3.09%
- --------------------------------------------------------------------------------
Class C (Est. 5/26/94)
Excluding Sales Charge +6.79% +7.18%
Including Sales Charge +6.79% +6.18%
Please turn to page 12 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as described
on page 12. Past performance is not a guarantee of future results.
<PAGE>
for tax-exempt
income
14
Tax-Free California Fund
Growth of a $10,000 Investment
March 2, 1995 To August 31, 1998
Tax-Free California Lehman Brothers Lipper California Municipal
Fund A Class: Municipal Bond Index: Debt Fund Average (85 funds)
Mar. '95 $ 9,625 $10,000 $10,000
May. '95 $10,038 $10,331 $10,341
Aug. '95 $ 9,989 $10,469 $10,345
Nov. '95 $10,598 $10,866 $10,836
Feb. '96 $10,746 $10,978 $10,930
May. '96 $10,477 $10,803 $10,703
Aug. '96 $10,711 $11,017 $10,937
Nov. '96 $11,251 $11,505 $11,434
Feb. '97 $11,294 $11,584 $11,457
May. '97 $11,536 $11,699 $11,577
Aug. '97 $11,921 $12,036 $11,927
Nov. '97 $12,328 $12,329 $12,230
Feb. '98 $12,694 $12,642 $12,533
May. '98 $12,857 $12,795 $12,658
Aug. '98 $13,187 $13,083 $12,942
Chart assumes a $10,000 investment on March 2, 1995, a 3.75% front-end sales
charge and reinvestment of distributions. Performance of other Fund classes
differs because of different charges and expenses. Past performance does not
guarantee future results.
TAX-FREE CALIFORNIA FUND
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
- --------------------------------------------------------------------------------
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +9.60% +10.60%
Including Sales Charge +8.41% +6.43%
- --------------------------------------------------------------------------------
Class B (Est. 8/23/95)
Excluding Sales Charge +9.91% +9.74%
Including Sales Charge +9.08% +5.74%
- --------------------------------------------------------------------------------
Class C (Est. 4/9/96)
Excluding Sales Charge +10.02% +9.77%
Including Sales Charge +10.02% +8.77%
Please turn to page 12 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as described
on page 12. Past performance is not a guarantee of future results.
<PAGE>
for tax-exempt
income
15
TAX-FREE CALIFORNIA INSURED FUND
GROWTH OF A $10,000 INVESTMENT
OCTOBER 15, 1992 TO AUGUST 31, 1998
<TABLE>
<CAPTION>
Tax-Free California Insured Lehman Brothers Lipper California Municipal
Fund A Class: Municipal Bond Index: Debt Fund Average (11 funds)
<S> <C> <C> <C>
Oct. '92 $ 9,625 $10,000 $10,000
Aug. '93 $11,128 $11,392 $11,546
Aug. '94 $10,787 $11,336 $11,271
Aug. '95 $11,535 $12,369 $12,059
Aug. '96 $12,224 $13,040 $12,765
Aug. '97 $13,431 $14,267 $13,884
Aug. '98 $14,622 $15,578 $15,011
</TABLE>
Chart assumes a $10,000 investment on October 15, 1992, a 3.75% front-end sales
charge and reinvestment of distributions. Performance of other Fund classes
differs because of different charges and expenses. Past performance does not
guarantee future results.
TAX-FREE CALIFORNIA INSURED FUND
AVERAGE ANNUAL RETURNS THROUGH AUGUST 31, 1998
Lifetime Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 10/15/92)
Excluding Sales Charge +7.40% +5.62% +8.88%
Including Sales Charge +6.70% +4.82% +4.77%
- --------------------------------------------------------------------------------
Class B (Est. 3/1/94)
Excluding Sales Charge +5.71% +8.07%
Including Sales Charge +5.34% +4.07%
- --------------------------------------------------------------------------------
Class C (Est. 4/12/95)
Excluding Sales Charge +6.87% +8.11%
Including Sales Charge +6.87% +7.11%
Please turn to page 12 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as described
on page 12. Past performance is not a guarantee of future results.
<PAGE>
for tax-exempt
income
16
TAX-FREE COLORADO FUND
GROWTH OF A $10,000 INVESTMENT
SEPTEMBER 1, 1988 TO AUGUST 31, 1998
<TABLE>
<CAPTION>
Tax-Free Colorado Lehman Brothers Lipper Colorado Municipal
Fund A Class Municipal Bond Index Debt Fund Average (6 funds)
<S> <C> <C> <C>
Aug. '88 $ 9,629 $10,000 $10,000
Aug. '89 $10,722 $11,098 $11,074
Aug. '90 $11,411 $11,812 $11,584
Aug. '91 $12,562 $13,205 $12,758
Aug. '92 $13,866 $14,679 $14,036
Aug. '93 $15,956 $16,470 $15,822
Aug. '94 $15,631 $16,493 $15,720
Aug. '95 $16,936 $17,955 $16,891
Aug. '96 $17,990 $18,896 $17,775
Aug. '97 $19,789 $20,642 $19,369
Aug. '98 $21,726 $22,428 $20,958
Chart assumes a $10,000 investment on September 1, 1988, a 3.75% front-end
sales charge and reinvestment of distributions. Performance of other Fund
classes differs because of different charges and expenses. Past performance
does not guarantee future results.
TAX-FREE COLORADO FUND
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
</TABLE>
<TABLE>
<CAPTION>
Lifetime Ten Years Five Years One Year
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 4/23/87)
Excluding Sales Charge +8.37% +8.50% +6.39% +9.77%
Including Sales Charge +8.01% +8.09% +5.58% +5.65%
- ------------------------------------------------------------------------------------
Class B (Est. 3/22/95)
Excluding Sales Charge +7.99% +8.95%
Including Sales Charge +7.26% +4.95%
- ------------------------------------------------------------------------------------
Class C (Est. 5/6/94)
Excluding Sales Charge +7.44% +9.05%
Including Sales Charge +7.44% +8.05%
</TABLE>
Please turn to page 12 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as described
on page 12. Past performance is not a guarantee of future results.
<PAGE>
for tax-exempt
income
17
Tax-Free New Mexico Fund
Tax-Free Utah Fund
Growth of a $10,000 Investment
October 5, 1992 To August 31, 1998
<TABLE>
<CAPTION>
Tax-Free New Mexico Tax-Free Utah Lehman Brothers Lipper Other States Municipal
Fund A Class Fund A Class Municipal Bond Index Debt Fund Index (20 funds)
<S> <C> <C> <C> <C>
Oct. '92 $ 9,625 $ 9,625 $10,000 $10,000
Aug. '93 $11,020 $11,145 $11,258 $11,281
Aug. '94 $11,032 $11,191 $11,274 $11,200
Aug. '95 $11,790 $12,020 $12,273 $11,980
Aug. '96 $12,505 $12,749 $12,916 $12,577
Aug. '97 $13,715 $13,879 $14,110 $13,633
Aug. '98 $14,961 $15,137 $15,292 $14,691
</TABLE>
Chart assumes a $10,000 investment on October 5, 1992, a 3.75% front-end sales
charge and reinvestment of distributions. Performance of other Fund classes
differs because of different charges and expenses. Past performance does not
guarantee future results.
TAX-FREE NEW MEXICO FUND
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
Lifetime Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 10/5/92)
Excluding Sales Charge +7.78% +6.31% +9.05%
Including Sales Charge +7.08% +5.51% +4.96%
- --------------------------------------------------------------------------------
Class B (Est. 3/3/94)
Excluding Sales Charge +6.09% +8.33%
Including Sales Charge +5.72% +4.33%
- --------------------------------------------------------------------------------
Class C (Est. 5/7/96)
Excluding Sales Charge +8.56% +8.33%
Including Sales Charge +8.56% +7.33%
TAX-FREE UTAH FUND
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
Lifetime Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 10/5/92)
Excluding Sales Charge +8.03% +6.38% +9.04%
Including Sales Charge +7.34% +5.57% +4.95%
- --------------------------------------------------------------------------------
Class B (Est. 5/27/95)
Excluding Sales Charge +6.80% +8.23%
Including Sales Charge +6.00% +4.23%
Please turn to page 12 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as described
on page 12. Past performance is not a guarantee of future results.
<PAGE>
18 for tax-exempt income
Financial Statements
VOYAGEUR MUTUAL FUNDS, INC.
DELAWARE-VOYAGEUR TAX-FREE ARIZONA FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
--------- -------
MUNICIPAL BONDS - 97.28%
GENERAL OBLIGATION BONDS - 17.00%
Eagle Mountain Community Facility District
6.50% 7/1/21 ..................................... $1,010,000 $1,119,451
Maricopa County Chandler Unified School District
#80 (FGIC) 6.00% 7/1/13 .......................... 100,000 109,588
Maricopa County Osborn Unified School District #8
(FGIC) 5.875% 7/1/14 ............................. 300,000 328,434
Maricopa County Tempe Unified School District #40
(FGIC) 6.00% 7/1/11 .............................. 100,000 109,936
Maricopa County Unified School District #40 -
Glendale 6.30% 7/1/11............................. 500,000 549,865
Pima County Flowing Wells Unified School District #8
5.90% 7/1/13 ..................................... 500,000 544,755
Tucson, Arizona 5.375% 7/1/20 ....................... 250,000 258,048
----------
3,020,077
----------
HIGHER EDUCATION REVENUE BONDS - 4.20%
University of Arizona Revenue 4.875% 6/1/16 ......... 750,000 745,103
----------
745,103
----------
HOSPITALS REVENUE BONDS - 18.59%
Maricopa County, Arizona Hospital Revenue
(Sun Health Corp.) 6.125% 4/1/18 ................. 600,000 644,688
Maricopa County, Arizona Industrial Development
Authority Hospital Facilities Revenue, Mayo
Clinic Hospital 5.25% 11/15/37 ................... 750,000 756,473
Pima County, Arizona Development Authority
Revenue (Healthpartners-Series A)
5.625% 4/1/14 .................................... 500,000 539,480
Show Low Arizona Industrial Development Authority
Hospital Revenue - Navapache Regional
Medical Center Series A 5.50% 12/1/17 ............ 750,000 772,133
Yavapai County, Arizona Industrial Development
Authority - Residential Care Facilities -
Margaret T Morris Center - A (GNMA)
5.40% 2/20/38 .................................... 585,000 589,370
----------
3,302,144
----------
HOUSING REVENUE BONDS - 20.27%
Maricopa County, Arizona Industrial Development
Authority - Multifamily Family Housing Revenue
Pines at Camelback Apartments Project A
5.45% 5/1/28 ..................................... 750,000 759,638
Peoria Casa Del Rio Multifamily Housing
7.30% 2/20/28 .................................... 500,000 555,865
Phoenix Industrial Development Authority - Chris
Ridge 6.80% 11/1/25 .............................. 125,000 132,290
Pima County, Arizona IDA Revenue Series A
7.25% 7/1/25 ..................................... 725,000 795,854
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (Continued)
HOUSING REVENUE BONDS (CONTINUED)
Pima County, Arizona Multifamily Revenue -
Willowick Apartments Project 5.50% 3/1/28 ........ $ 500,000 $ 508,655
Tempe Multifamily Mortgage Revenue IDA
6.125% 6/1/10 .................................... 200,000 213,684
Tucson Industrial Development Authority Los Portales
Apartment (GNMA) 5.90% 12/20/31 .................. 600,000 634,086
----------
3,600,072
----------
LEASE/CERTIFICATE OF PARTICIPATION - 1.22%
Scottsdale Municipal Property Corporation Lease
(FGIC) 6.25% 11/1/14 ............................. 100,000 108,142
University of Arizona Certificate of Participation
6.00% 7/15/23 .................................... 100,000 107,687
----------
215,829
----------
POLLUTION CONTROL REVENUE BONDS - 12.05%
Coconimo County, Arizona PCR Nevada Power Co.
6.375% 10/1/36 ................................... 1,250,000 1,364,925
Maricopa County, Arizona Pollution Control
5.75% 11/1/22 .................................... 750,000 774,630
----------
2,139,555
----------
POWER AUTHORITY REVENUE BONDS - 4.58%
Puerto Rico Electric Power Authority Power Revenue
Series DD (FSA) 4.50% 7/1/19 ..................... 750,000 712,005
Salt River Project Series C 5.50% 1/1/28 ............ 100,000 101,569
----------
813,574
----------
TRANSPORTATION REVENUE BONDS - 5.64%
Phoenix, Arizona Civic Improvement Airport Revenue
Senior Lien - Series A 5.00% 7/1/25 .............. 1,000,000 1,001,700
----------
1,001,700
----------
WATER & SEWER REVENUE BONDS - 9.45%
Gilbert Water & Waste Water System
Revenue - Connection Development Fee
6.875% 4/1/16 .................................... 1,000,000 1,044,390
Gilbert Water & Waste Water Revenue (FGIC)
6.50% 7/1/22 ..................................... 100,000 110,971
Tucson Water Revenue Refunding Series A
5.75% 7/1/18 ..................................... 500,000 522,830
----------
1,678,191
----------
OTHER REVENUE BONDS - 4.28%
Virgin Islands Public Finance Authority Revenue
Senior Lien Series A
5.50% 10/1/22 .................................... 750,000 760,545
----------
760,545
----------
Total Municipal Bonds (cost $16,442,612) ............ 17,276,790
----------
<PAGE>
for tax-exempt income 19
TAX-FREE ARIZONA FUND
STATEMENT OF NET ASSETS (CONTINUED)
NUMBER OF MARKET
SHARES VALUE
---------- ------
SHORT TERM INVESTMENTS - 0.75%
Norwest Advantage Municipal
Money Market Fund ................................ 133,159 $ 133,159
-----------
Total Short Term Investments (cost $133,159) ........ 133,159
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 98.03%
(COST $16,575,771) ......................................... $17,409,949
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.97% ....... 350,580
-----------
NET ASSETS APPLICABLE TO 1,584,694 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ..................... $17,760,529
===========
NET ASSET VALUE - TAX-FREE ARIZONA FUND A CLASS
($12,176,793 / 1,086,363 SHARES) ................................. $11.21
======
NET ASSET VALUE - TAX-FREE ARIZONA FUND B CLASS
($4,951,787 / 442,040 SHARES) .................................... $11.20
======
NET ASSET VALUE - TAX-FREE ARIZONA FUND C CLASS
($631,949 / 56,291 SHARES) ....................................... $11.23
======
- ----------------------
Summary of Abbreviations:
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by the Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
COMPONENTS OF NET ASSETS AT AUGUST 31,1998:
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 and 10,000,000,000
shares allocated to Tax-Free Arizona Fund C Class ............. $16,771,917
Accumulated net realized gain on investments ..................... 154,434
Net unrealized appreciation of investments ....................... 834,178
-----------
Total net assets ................................................. $17,760,529
===========
NET ASSET VALUE AND OFFERING PRICE FOR
TAX-FREE ARIZONA FUND A CLASS
Net asset value A Class (A) .......................................... $11.21
Sales charge (3.75% of offering price or 3.93% of amount
invested per share (B) ............................................ 0.44
------
Offering Price ....................................................... $11.65
======
- ----------------------
(A) Net asset value per share illustrated is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free Arizona Fund Class A.
See accompanying notes
<PAGE>
VOYAGEUR INSURED FUNDS, INC.
DELAWARE-VOYAGEUR
TAX-FREE ARIZONA INSURED FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS - 99.36%
GENERAL OBLIGATION BONDS - 36.04%
Chandler Refunding (FGIC) 7.00% 7/1/12 ............... $1,000,000 $1,084,410
Cochise County Unified School District (FGIC)
7.50% 7/1/10 ...................................... 1,000,000 1,286,610
Glendale, Arizona High School District #205
5.483% 7/1/11 ..................................... 5,200,000 5,525,884
Maricopa County, Arizona School District
#93 Cave Creek (FGIC) 5.383% 7/1/11 ............... 3,000,000 3,144,510
Maricopa County Chandler Unified School District
#80 (FGIC) 5.80% 7/1/12 ........................... 635,000 682,435
Maricopa County Chandler Unified School District
#80 (FGIC) 5.85% 7/1/13 ........................... 1,380,000 1,486,591
Maricopa County Chandler Unified School
District #80 Chandler Projects of 1995 -
Series E (FGIC) 5.00% 7/1/13 ...................... 1,020,000 1,044,664
Maricopa County Chandler Unified School District
#80 (FGIC) 6.00% 7/1/13 ........................... 2,400,000 2,630,112
Maricopa County Fountain Hills Unified School
District #98 (FGIC) 6.625% 7/1/10 ................. 365,000 393,309
Maricopa County Gilbert Unified School District
#41 (FSA) 6.25% 7/1/15 ............................ 1,250,000 1,419,975
Maricopa County Kyrene Unified School District #28
(FGIC) 5.90% 7/1/10 ............................... 2,000,000 2,149,420
Maricopa County Madison Unified School District
#38 (MBIA) 5.80% 7/1/15 ........................... 3,150,000 3,402,851
Maricopa County Osborn Unified School District #8
(FGIC) 5.875% 7/1/14 .............................. 3,500,000 3,831,730
Maricopa County Peoria Unified School District #11
(AMBAC) 7.00% 7/1/10 .............................. 1,000,000 1,086,090
Maricopa County Peoria Unified School District #11
(AMBAC) 6.10% 7/1/10 .............................. 2,000,000 2,196,060
Maricopa County Queens Creek Unified School
District #95 (AMBAC) 5.70% 7/1/14 ................. 4,440,000 4,761,012
Maricopa Creighton Elementary Unified School
District #114 Series 91 (FGIC)
6.50% 7/1/08 ...................................... 1,000,000 1,176,510
Mohave County Unified School District #1 Lake
Havasu (FGIC) 5.90% 7/1/15 ........................ 5,000,000 5,451,000
Peoria, Arizona (MBIA) 5.70% 7/1/11 .................. 1,000,000 1,062,680
Phoenix, Arizona (MBIA) 6.375% 7/1/13 ................ 2,000,000 2,191,540
Pima County, Arizona Unified School District (FGIC)
5.383% 7/1/13 ..................................... 6,000,000 6,298,020
Pima County Marana Unified School District #6
(FGIC) 5.75% 7/1/12 ............................... 6,350,000 6,790,246
Pinal County Apache Junction Unified School
District #43 (FGIC) 5.85% 7/1/15 .................. 2,000,000 2,173,900
Tucson, Arizona (FGIC) 6.10% 7/1/12 .................. 4,890,000 5,293,034
------------
66,562,593
------------
<PAGE>
20 for tax-exempt income
TAX-FREE ARIZONA INSURED FUND
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
HIGHER EDUCATION REVENUE BONDS - 6.83%
Arizona State University System (MBIA)
6.125% 7/1/15 ..................................... $1,500,000 $1,594,515
Glendale, Arizona Development Authority
Educational Facilities - American Graduate
School International (Connie Lee)
5.875% 7/1/15 ..................................... 3,000,000 3,249,270
Glendale, Arizona Development Authority Educational
Facilities - American Graduate School
International (Connie Lee) 5.625% 7/1/20 .......... 1,500,000 1,577,070
Glendale Industrial Development Authority
Midwestern University Series A (Connie Lee)
6.00% 5/15/26 ..................................... 2,700,000 2,929,203
University of Arizona (AMBAC) 6.25% 6/1/11 ........... 3,000,000 3,273,090
-----------
12,623,148
-----------
HOSPITAL REVENUE BONDS - 12.90%
Maricopa County Hospital District #1 (FGIC)
6.125% 6/1/15 ..................................... 5,500,000 5,990,160
Maricopa County Industrial Development Authority -
Baptist Hospital (MBIA) 5.50% 9/1/13 .............. 3,080,000 3,242,039
Maricopa County Industrial Development Authority -
Baptist Hospital (MBIA) 5.50% 9/1/16 .............. 1,000,000 1,044,710
Mohave County Industrial Development Authority -
Baptist Hospital (MBIA) 5.75% 9/1/26 .............. 1,100,000 1,174,085
Mohave County Industrial Development Authority -
Chris/Silver Ridge (GNMA) 6.375% 11/1/31 .......... 1,300,000 1,435,655
Phoenix, Arizona Industrial Development Authority -
Hospital Revenue - John C. Lincoln Health-Series B
(Connie Lee) 5.75% 12/1/16 ........................ 4,110,000 4,460,789
Pima County Tucson Medical Center (MBIA)
6.375% 4/1/12 ..................................... 1,000,000 1,085,960
Pima Individual Health Care (MBIA) 6.75% 7/1/10 ...... 1,000,000 1,089,240
Scottsdale, Arizona Industrial Development
Authority - Scottsdale Memorial Hospital
(AMBAC) 5.483% 9/1/12 ............................. 2,500,000 2,726,475
University of Arizona Medical Center (MBIA)
6.25% 7/1/10 ...................................... 1,445,000 1,575,975
-----------
23,825,088
-----------
HOUSING REVENUE BONDS - 5.00%
Chandler Industrial Development Authority
Multifamily Housing (GNMA) 5.90% 7/20/15 .......... 1,060,000 1,108,622
Maricopa County, Arizona Industrial Development
Authority - Multifamily Housing Revenue - Villas
De Merced Apartment Project (GNMA)
5.45% 12/20/27 .................................... 535,000 540,580
Maricopa County, Arizona Industrial Development
Authority - Multifamily Housing Revenue - Villas
De Merced Apartments Project (GNMA)
5.50% 12/20/37 .................................... 570,000 576,407
Pima County, Arizona IDA Revenue Series A (MBIA)
7.25% 7/1/25 ...................................... 1,000,000 1,097,730
Tucson Industrial Development Authority
Los Portales Apartment (GNMA)
5.90% 12/20/31 .................................... 3,670,000 3,878,493
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
Yuma, Arizona Industrial Development Authority -
Multifamily Revenue Government National
Mortgage Association Regency Apartments A
(GNMA) 5.50% 12/20/32 ............................. $2,000,000 $2,032,140
-----------
9,233,972
-----------
LEASE/CERTIFICATES OF PARTICIPATION - 7.13%
Oro Valley Common Trust Funds Partnership (MBIA)
5.75% 7/1/11 ...................................... 1,000,000 1,097,020
Oro Valley Common Trust Funds Partnership (MBIA)
5.75% 7/1/17 ...................................... 1,000,000 1,079,080
Peoria, Arizona Municipal Development Authority -
Municipal Securities Trust (MBIA)
5.183% 7/1/10 ..................................... 5,500,000 5,717,305
Pima County Community College District (AMBAC)
6.40% 7/1/07 ...................................... 1,000,000 1,066,350
Scottsdale Municipal Property Corporation Lease
(FGIC) 6.25% 11/1/14 .............................. 3,900,000 4,217,538
-----------
13,177,293
-----------
POWER AUTHORITY REVENUE BONDS - 2.57%
Puerto Rico Electric Power Authority Power Revenue
Series DD (FSA) 4.50% 7/1/19 ...................... 2,750,000 2,610,685
Salt River Agricultural Improvement & Power
Project (FGIC) 6.25% 1/1/19 ....................... 2,000,000 2,144,620
-----------
4,755,305
-----------
*PRE-REFUNDED/ESCROWED TO MATURITY
BONDS - 11.54%
Arizona Health Facility Authority Phoenix Baptist
Hospital and Medical Center-Escrowed to
Maturity (MBIA) 6.25% 9/1/11 ...................... 2,000,000 2,188,640
Glendale Educational Facilities-American Graduate
School (Connie Lee) 6.75% 7/1/09-05 ............... 750,000 872,947
Glendale Educational Facilities-American Graduate
School (Connie Lee) 7.00% 7/1/14-05 ............... 1,000,000 1,178,690
Maricopa County Paradise Valley Elementary School
District #69 (MBIA) 6.40% 7/1/10-01 ............... 3,000,000 3,263,550
Maricopa County, Arizona Unified School District
#80 (FGIC) 5.80% 7/1/12-06 ........................ 365,000 403,595
Maricopa County, Arizona Unified School District
#80 (FGIC) 5.85% 7/1/13-06 ........................ 820,000 909,412
Maricopa County Fountain Hills Unified School
District #98 (FGIC) 6.625% 7/1/10-01 .............. 635,000 684,251
Phoenix, Arizona Street & Highway Revenue (FGIC)
6.50% 7/1/09-02 ................................... 2,000,000 2,212,320
Pima County Sewer Revenue (FGIC)
6.75% 7/1/15-01 ................................... 1,380,000 1,499,715
Resh-Elliot Park State University (MBIA)
6.75% 7/1/11-01 ................................... 1,000,000 1,097,150
Salt River Agricultural Improvement & Power
Project (AMBAC) 6.50% 1/1/22-01 ................... 2,000,000 2,159,460
Santa Cruz County Nogales Unified School District
#1 (AMBAC) 6.10% 7/1/14-04 ........................ 1,250,000 1,385,175
Tucson, Arizona (FGIC) 6.10% 7/1/12-02 ............... 140,000 151,539
<PAGE>
for tax-exempt income 21
TAX-FREE ARIZONA INSURED FUND
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
*PRE-REFUNDED/ESCROWED TO MATURITY
BONDS (CONTINUED)
Yuma, Arizona (AMBAC) 6.125% 7/1/12-03 ............... $3,000,000 $ 3,308,880
------------
21,315,324
------------
Transportation Revenue Bonds - 4.93%
Chandler, Arizona Streets and Highways (MBIA)
5.113% 7/1/15 ..................................... 2,000,000 2,049,120
Phoenix, Arizona Civic Improvement Airport Revenue
Senior Lien - Series A (FSA) 5.00% 7/1/25 ......... 2,000,000 2,003,400
Tucson Airport Authority Revenue (MBIA)
5.70% 6/1/13 ...................................... 4,750,000 5,050,818
------------
9,103,338
------------
Utility Revenue Bonds - 6.67%
Mesa, Arizona Utility Systems Revenue (FGIC)
5.25% 7/1/16 ...................................... 12,000,000 12,328,440
------------
12,328,440
------------
Water & Sewer Revenue Bonds - 4.61%
Apache Junction, Arizona Water Utilities-Series A
(FSA) 5.80% 7/1/17 ................................ 1,215,000 1,315,140
Chandler Water & Sewer Revenue (FGIC)
7.00% 7/1/12 ...................................... 1,000,000 1,084,410
Gilbert Water & Waste Water Revenue
(FGIC) 6.50% 7/1/12 ............................... 1,000,000 1,120,620
Gilbert Water & Waste Water Revenue
(FGIC) 6.50% 7/1/22 ............................... 2,650,000 2,940,730
Pima County Special Water Improvement District
(FGIC) 6.20% 1/1/11 ............................... 1,000,000 1,088,750
Sedona, Arizona Wastewater Municipal Property
Excise Tax Revenue (MBIA) 4.75% 7/1/27 ............ 1,000,000 964,930
------------
8,514,580
------------
Other Revenue Bonds - 1.14%
Maricopa County Stadium District (MBIA)
5.50% 7/1/13 ...................................... 2,000,000 2,098,340
------------
2,098,340
------------
Total Municipal Bonds (cost $169,077,292) ............ 183,537,421
------------
Total Market Value of Securities Owned - 99.36%
(cost $169,077,292) .......................................... $183,537,421
Receivables and Other Assets Net Of Liabilities - 0.64% ......... 1,177,694
------------
Net Assets Applicable To 15,986,707 Shares
($.01 Par Value) Outstanding - 100.00% ....................... $184,715,115
============
<PAGE>
NET ASSET VALUE - TAX-FREE ARIZONA INSURED A CLASS
($179,305,810 / 15,518,442 SHARES) ................................. $11.55
======
NET ASSET VALUE - TAX-FREE ARIZONA INSURED B CLASS
($4,782,210 / 413,999 SHARES) ...................................... $11.55
======
NET ASSET VALUE - TAX-FREE ARIZONA INSURED C CLASS
($627,095 / 54,266 SHARES) ......................................... $11.56
======
COMPONENTS OF NET ASSETS AT AUGUST 31, 1998:
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
and 1,000,000,000 shares allocated to Tax-Free Arizona
Insured Fund C Class ......................................... $173,001,419
Undistributed net investment income ............................. 224
Accumulated net realized loss on investments .................... (2,746,657)
Net unrealized appreciation of investments ...................... 14,460,129
------------
Total Net Assets ................................................ $184,715,115
============
- ----------------------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
- ----------------------
Summary of Abbreviations:
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
NET ASSET VALUE AND OFFERING PRICE FOR
TAX-FREE ARIZONA INSURED FUND A CLASS
Net asset value A class (A) ........................................... $11.55
Sales charge (3.75% of offering price or 3.90% of amount invested
per share) (B) ..................................................... 0.45
------
Offering price ........................................................ $12.00
======
- ----------------------
(A) Net asset value per share illustrated is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free Arizona Insured Fund Class A.
See accompanying notes
<PAGE>
22 for tax-exempt income
VOYAGEUR MUTUAL FUNDS, INC.
DELAWARE-VOYAGEUR TAX-FREE CALIFORNIA FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS - 106.04%
GENERAL OBLIGATIONS - 3.32%
Burlingame, California School District
5.60% 7/15/21 ....................................... $230,000 $243,425
Coast, California School District High School
Project 5.00% 8/1/23 ................................ 250,000 247,877
California State Veterans Bonds - Series BH (FSA)
5.40% 12/1/15 ....................................... 150,000 153,674
Tulare Earlimart Elementary School District
(AMBAC) 6.70% 8/1/21 ................................ 50,000 62,707
----------
707,683
----------
HIGHER EDUCATION REVENUE BONDS - 3.32%
California Public Works Board Lease Revenue
5.625% 3/1/19 ....................................... 190,000 200,358
Community Colleges - Hayward Foundation Auxillary
Organization (MBIA) 5.25% 8/1/25 .................... 500,000 508,285
----------
708,643
----------
HOSPITAL REVENUE BONDS - 16.09%
Antelope Valley, California Health Care District
Series A 5.20% 1/1/17 ............................... 300,000 305,121
California Health Facilities - Valleycare Hospital
5.50% 5/1/20 ........................................ 250,000 255,238
California Health Facilities Finance Authority
Revenue - Northern California Presbyterian
5.40% 7/1/28 ........................................ 500,000 505,660
California Health Facilities Finance Authority
Revenue - Sacramento Medical A (CMI)
5.25% 5/1/16 ........................................ 745,000 751,608
Fresno, California Health Facilities Holy Cross
Health Systems Revenue
5.00% 12/1/18 ....................................... 500,000 499,330
Mendocino Coast Health Care District
5.875% 2/1/20 ....................................... 100,000 105,348
North Kern-South Tulare,California Hospital
District Health Facility Revenue
6.00% 4/1/20 ........................................ 250,000 261,545
Rancho Mirage Joint Power Financing Authority -
Eisenhower Medical Center (MBIA)
5.375% 7/1/22 ....................................... 100,000 102,678
Sierra View Local Health Care District
California Revenue 5.25% 7/1/18 ..................... 500,000 497,525
Stockton, California Health Facilities-
Dameron Hospital Association-Series A
5.70% 12/1/14 ....................................... 100,000 104,642
Valleycare Hospital California Health Facilities
Finance Authority Revenue
6.75% 6/1/15 ........................................ 40,000 43,640
----------
3,432,335
----------
HOUSING REVENUE BONDS - 9.73%
California Housing Finance Agency Single Family
(MBIA) 6.00% 8/1/20 ................................. 100,000 106,695
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
California Housing Financing Agency Home Mortgage
Revenue Series 96H (FHA) 6.25% 8/1/27 .............. $ 95,000 $ 102,568
California Housing Financing Agency Home Mortgage
Revenue Series 96K (MBIA) 6.15% 8/1/16 ............. 450,000 484,929
California Statewide Communities Development
Authority 5.25% 5/15/25 ............................ 750,000 764,565
Fresno, California Multifamily Housing Revenue -
Woodlands Apartments Project-A (GNMA)
6.65% 5/20/17 ...................................... 100,000 112,635
Los Angeles, California Housing Authority -
Multifamily Housing Revenue - The Palms
Apartments Series E 5.30% 7/1/18 ................... 500,000 504,780
----------
2,076,172
----------
LEASE/CERTIFICATES OF PARTICIPATION - 9.26%
Alameda City Hall Redevelopment 6.20% 5/1/25 .......... 50,000 53,022
Bakersfield, California Certificates of Participation
Convention Center Expansion Project
(MBIA) 5.80% 4/1/17 ................................ 350,000 377,969
California State Public Works-California State
University-Series C 5.40% 10/1/22 .................. 300,000 303,981
Hayward Civic Center Project (MBIA)
5.25% 8/1/26 ....................................... 100,000 101,540
Kern, California Community College Certificates of
Participation (MBIA) 4.30% 1/1/08 .................. 500,000 502,265
Moreno Valley, California School District -
5.60% 3/1/17 ....................................... 100,000 104,816
San Jose Convention Center Finance Authority
Revenue 6.375% 9/1/13 .............................. 100,000 107,269
Santa Monica Parking Authority Lease Revenue
6.375% 7/1/16 ...................................... 100,000 109,018
Shafter Powers Finance Lease Revenue
6.05% 1/1/17 ....................................... 100,000 106,679
West Basin, California Municipal Water District
Revenue - Certificate of Participation Refunding -
1992 Series A 5.50% 8/1/22 ......................... 200,000 209,132
----------
1,975,691
----------
POLLUTION CONTROL REVENUE BONDS - 2.41%
California Pollution Control Authority Facilities
Revenue - Mobil Oil Project 5.50% 12/1/29 .......... 500,000 514,555
----------
514,555
----------
POWER AUTHORITY REVENUE BONDS - 12.57%
Northern California Power Agency Public Power
Revenue - Hydroelectric Project Number 1 -
Series A 5.00% 7/1/28 .............................. 500,000 493,855
Pasadena, California Electric 5.25% 8/1/07 ............ 1,000,000 1,081,980
Sacramento Municipal Utility District K Defeasable
(AMBAC) 5.25% 7/1/24 ............................... 100,000 105,241
*Southern California Public Power Authority Revenue -
Palo Verde Project 2.25% 7/1/17 .................... 1,000,000 1,000,000
----------
2,681,076
----------
<PAGE>
for tax-exempt income 23
TAX-FREE CALIFORNIA FUND
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (Continued)
**PRE-REFUNDED BONDS - .79%
California State Public Works
6.375% 10/1/19-04 .................................. $ 50,000 $ 56,990
Berkeley Alta Bates Healthcare
6.55% 12/1/22-02 ................................... 100,000 112,090
----------
169,080
----------
TRANSPORTATION REVENUE BONDS - 1.93%
Foothill/Eastern Transportation Corridor Agency
California Toll Road Revenue Series 95A
6.00% 1/1/34 ....................................... 100,000 106,876
San Joaquin Hills, California Transportation
Corridor Agency Toll Road Revenue
5.25% 1/15/30 ...................................... 300,000 304,776
----------
411,652
----------
WATER & SEWER REVENUE BONDS - 1.22%
San Jacinto, California Water Improvement
Project Authority 5.50% 10/1/18 .................... 250,000 261,207
----------
261,207
----------
OTHER REVENUE BONDS - 45.40%
Carson Redevelopment Agency Revenue
6.375% 10/1/16 ..................................... 100,000 106,914
Davis Unified School District Community Facilities
District - Special Tax (MBIA)
5.50% 8/15/26 ...................................... 100,000 103,569
Dixon Redevelopment Agency 6.00% 9/1/24 ............... 50,000 51,673
Escondido, California Improvement Bond Act of 1915
5.625% 9/2/18 ...................................... 500,000 514,275
La Mirada, California Redevelopment Agency Special
Tax - Community Facilities District Number 89-1
5.70% 10/1/20 ...................................... 500,000 507,045
La Quinta, California Redevelopment Agency Tax
Allocation - Redevelopment Area Project
Number 1 (AMBAC) 5.20% 9/1/28 ...................... 500,000 504,165
Long Beach, California Harbor Revenue
5.375% 5/15/20 ..................................... 250,000 253,885
Los Alamitos Unified School District Series Certified
Facilities District No. 90-1 6.25% 8/15/23 ......... 50,000 53,058
*Los Angeles County, California Pension Obligation -
A 2.25% 6/30/07 .................................... 1,000,000 1,000,000
Ontario, California Community Facilities District -
No. 5 Special Tax Freeway Interchange Project
6.375% 9/1/17 ...................................... 250,000 269,840
Puerto Rico Public Buildings Authority Revenue -
Guaranteed Government Facilities-Series B
5.25% 7/1/21 ....................................... 250,000 253,488
Rancho Cucamonga Redevelopment Housing
Set Aside 5.25% 9/1/26 ............................. 100,000 101,554
Rancho Mirage, California Improvement Board
6.10% 9/2/11 ....................................... 495,000 512,528
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
OTHER REVENUE BONDS (CONTINUED)
Sacramento County, California Special Tax -
Community Facilities District Number 1
5.70% 12/1/20 ...................................... $ 500,000 $ 510,780
San Marcos, California Redevelopment Agency
Tax Allocation Affordable Housing Project -
Series A 5.65% 10/1/28 ............................. 500,000 507,380
San Marcos, California Redevelopment Agency Tax
Allocation Affordable Housing Project-Series A
6.00% 10/1/27 ...................................... 530,000 557,130
Santa Clara Housing Authority 4.50% 10/1/09 ........... 1,435,000 1,435,000
Santa Ana, California Financing Authority
Revenue - Inner City Commuter Series 7C
5.60% 9/1/19 ....................................... 600,000 608,376
Santa Ana, California Financing Authority
Revenue - Mainplace Project 5.05% 9/1/07 ........... 725,000 725,515
South Gate, California Public Finance Authority -
Tax Allocation Housing Redevelopment Project
5.00% 9/1/19 ....................................... 500,000 499,355
Suisun City, California Public Financing Authority
Tax Allocation, Suisun City Redevelopment Project
Series A 5.20% 10/1/28 ............................. 105,000 104,363
Whittier, California Redevelopment Agency
5.75% 11/1/28 ...................................... 500,000 507,420
----------
9,687,313
----------
Total Municipal Bonds (cost $21,952,292) .............. 22,625,407
----------
NUMBER OF
SHARES
---------
SHORT-TERM INVESTMENTS - 9.95%
Dreyfus Tax-Exempt Cash Management, Inc. .............. 1,055,663 1,055,663
Norwest Advantage Municipal Money Market Fund ......... 1,065,890 1,065,890
----------
Total Short Term Investments (cost $2,121,553) .................... 2,121,553
----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 115.99%
(COST $24,073,845) ............................................. $24,746,960
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (15.99%)*** ..... (3,410,907)
-----------
NET ASSETS APPLICABLE TO 1,898,531 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ......................... $21,336,053
===========
NET ASSET VALUE - TAX-FREE CALIFORNIA FUND A CLASS
($11,599,541 / 1,033,406 SHARES) ................................... $11.22
======
NET ASSET VALUE - TAX-FREE CALIFORNIA FUND B CLASS
($8,962,468 / 796,173 SHARES) ...................................... $11.26
======
NET ASSET VALUE - TAX-FREE CALIFORNIA FUND C CLASS
($774,044 / 68,952 SHARES) ......................................... $11.23
======
<PAGE>
24 for tax-exempt income
TAX-FREE CALIFORNIA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- ----------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
CMI - Insured by California Mortgage Insurance
FHA - Insured by the Federal Housing Authority
FSA - Insured by the Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT AUGUST 31,1998:
Common stock, $.01 par value, 100,000,000,000 shares
authorized to the Fund with 10,000,000,000 shares allocated
to Tax-Free California Fund A Class 10,000,000,000 shares
allocated to Tax-Free California Fund B Class and 10,000,000,000
shares allocated to Tax-Free California Fund C Class ........... $20,636,508
Distributions in excess of net investment income .................. ($1,134)
Accumulated net realized gain of investments ...................... 27,564
Net unrealized appreciation of investments ........................ 673,115
------------
Total Net Assets .................................................. $21,336,053
============
- ----------------------
* Variable Rate Demand Notes - The interest rate shown is the rate as of
August 31, 1998 and the maturity shown is the longer of the next interest
readjustment date or the date the principal amount shown can be recovered
through demand.
** For Pre-Refunded Bonds, the stated maturity is followed by the year in
which each bond is prefunded.
*** Of this amount, $3,740,542 represents payables for securities purchased at
August 31, 1998.
NET ASSET VALUE AND OFFERING PRICE FOR TAX-FREE CALIFORNIA FUND
A CLASS
Net asset value A Class (A) ........................................... $11.22
Sales charge (3.75% of offering price or 3.92% of amount invested
per share) (B) ..................................................... 0.44
------
Offering price ........................................................ $11.66
======
- ----------------------
(A) Net asset value per share illustrated is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free California Class A.
See accompanying notes
<PAGE>
VOYAGEUR INVESTMENT TRUST
DELAWARE-VOYAGEUR
TAX-FREE CALIFORNIA INSURED FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS - 98.05%
GENERAL OBLIGATION BONDS - 6.47%
Redwood City, California Elementary School District
(FGIC) 5.00% 8/1/16 ............................... $1,000,000 $1,029,890
Walnut Valley, California School District Series A
(MBIA) 7.20% 2/1/16 ............................... 1,000,000 1,273,330
----------
2,303,220
----------
HOSPITAL REVENUE BONDS - 6.13%
California Health Facilities - Catholic Healthcare
West (MBIA) 6.00% 7/1/17 .......................... 1,000,000 1,098,840
California Health Facilities - San Diego Hospital
(MBIA) 6.20% 8/1/12 ............................... 1,000,000 1,084,240
----------
2,183,080
----------
HOUSING REVENUE BONDS - 22.94%
California Housing Finance Agency 1994 Series E
(MBIA) 6.75% 8/1/26 ............................... 1,000,000 1,093,330
California Housing Finance Agency Home Mortgage
Revenue Series 96E (MBIA) 6.05% 8/1/16 ............ 1,000,000 1,070,260
California Housing Financing Agency Home Mortgage
Revenue Series 96K (MBIA) 6.15% 8/1/16 ............ 1,100,000 1,185,382
California Housing Finance Agency Revenue Series F
(MBIA) 6.00% 8/1/17 ............................... 1,000,000 1,070,410
California Housing Finance Agency-Single Family
(MBIA) 6.00% 8/1/20 ............................... 995,000 1,061,615
California Rural Home Mortgage Finance Authority -
Single Family Mortgage Revenue (AMBAC)
7.95% 12/1/24 ..................................... 1,355,000 1,565,852
Fresno, California Multifamily Housing Revenue -
Woodlands Apartments Project-A (GNMA)
6.65% 5/20/17 ..................................... 1,000,000 1,126,350
----------
8,173,199
----------
LEASE/CERTIFICATE OF PARTICIPATION - 23.65%
Bakersfield, California-Certificates of
Participation Convention Center Expansion Project
(MBIA) 5.80% 4/1/17 ............................... 1,000,000 1,079,910
Calaveras County, California Water District Revenue
(AMBAC) 6.125% 9/1/17 ............................. 1,000,000 1,108,690
Inland Empire Solid Waste Authority (FSA)
6.00% 8/1/16 ...................................... 1,500,000 1,632,675
Ontario Redevelopment Cimarron Project (MBIA)
6.25% 8/1/15 ...................................... 1,000,000 1,080,170
San Luis Obispo, California Capital Revenue (AMBAC)
6.375% 6/1/14 ..................................... 1,000,000 1,109,140
Santa Barbara, California Water Revenue (AMBAC)
6.70% 4/1/27 ...................................... 1,000,000 1,096,290
Santa Clara, California Finance Authority (AMBAC)
7.75% 11/15/11 .................................... 1,000,000 1,319,550
----------
8,426,425
----------
<PAGE>
for tax-exempt income 25
TAX-FREE CALIFORNIA INSURED FUND
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
POWER REVENUE BONDS - 9.79%
Northern California Power Agency Public Power
Revenue - Hydroelectric Project Number 1 -
Series A (MBIA) 5.00% 7/1/28 ..................... $ 500,000 $ 493,855
Pasadena, California Electric Revenue (MBIA)
6.00% 8/1/08 ..................................... 2,625,000 2,995,571
----------
3,489,426
----------
*PRE-REFUNDED/ESCROWED TO MATURITY
BONDS - 15.69%
California State University Auxiliary Revenue
(MBIA) 6.25% 8/1/20-04 ........................... 1,000,000 1,133,190
Fairfield Public Finance Authority Revenue
(FGIC) 6.25% 7/1/14-02 ........................... 1,000,000 1,103,010
Los Angeles County, California Transportation
Commission Sales Tax Revenue (MBIA)
6.25% 7/1/13-02 .................................. 1,000,000 1,103,010
San Francisco City & County Redevelopment Agency
Hotel Tax Revenue (FSA) 6.75% 7/1/25-04 .......... 1,000,000 1,138,420
University of California Board of Regents
(MBIA) 6.375% 9/1/24-02 .......................... 1,000,000 1,111,020
----------
5,588,650
----------
TRANSPORTATION REVENUE BONDS - 5.91%
San Francisco City & County International Airport
Revenue (FGIC) 6.00% 5/1/14 ...................... 1,000,000 1,091,880
San Francisco, California City & County
International Airport Revenue, AMT Special
Facilities Lease-SFO Fuel-A (AMBAC)
5.25% 1/1/21 ..................................... 1,000,000 1,012,710
----------
2,104,590
----------
WATER & SEWER REVENUE BONDS - 3.08%
Rancho, California Water District Finance Revenue
(FGIC) 5.90% 11/1/15 ............................. 1,000,000 1,096,140
----------
1,096,140
----------
OTHER REVENUE BONDS - 4.39%
Groveland/Tuolumne Financing Authority
California Revenue - Groveland Capital
Facilities (FSA) 5.00% 4/1/26 .................... 500,000 495,545
Santa Clara, California Bayshore North Project
(AMBAC) 5.75% 7/1/14 ............................. 1,000,000 1,069,070
----------
1,564,615
----------
Total Municipal Bonds (cost $32,145,677) ............ 32,145,677
----------
NUMBER
OF SHARES
---------
SHORT TERM INVESTMENTS - 9.44%
Dreyfus Tax Exempt Cash Management Inc. ............. 1,581,443 1,581,443
Norwest Advantage Municipal Money Market Fund ....... 1,780,841 1,780,841
----------
Total Short Term Investments
(cost of $3,362,284 ) ............................ 3,362,284
----------
<PAGE>
TOTAL MARKET VALUE OF SECURITIES OWNED - 107.49%
(COST $35,507,961) ............................................ $38,291,629
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (7.49%)** .................................. (2,666,827)
------------
NET ASSETS APPLICABLE TO 3,200,242 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ........................ $35,624,802
============
NET ASSET VALUE - TAX-FREE CALIFORNIA INSURED FUND A CLASS
($28,576,668 / 2,567,045 SHARES) ................................... $11.13
======
NET ASSET VALUE - TAX-FREE CALIFORNIA INSURED FUND B CLASS
($6,587,572 / 591,668 SHARES) ...................................... $11.13
======
NET ASSET VALUE - TAX-FREE CALIFORNIA INSURED FUND C CLASS
($460,562 / 41,529 SHARES) ......................................... $11.09
======
COMPONENTS OF NET ASSETS AT AUGUST 31, 1998:
Common stock, $.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares allocated
to Tax-Free California Insured Fund A Class, 1,000,000,000
shares allocated to Tax-Free California Insured Fund B Class
and 1,000,000,000 shares allocated to Tax-Free California
Insured Fund C Class .......................................... $33,262,827
Accumulated net realized loss on investments ..................... (421,693)
Net unrealized appreciation of investments ....................... 2,783,668
------------
Total Net Assets ................................................. $35,624,802
============
- ----------------------
* For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
** Of this amount, $3,226,608 represents payables for securities purchased at
August 31, 1998.
- ----------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Bonds subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
NET ASSET VALUE AND OFFERING PRICE FOR TAX-FREE
CALIFORNIA INSURED FUND A CLASS
Net asset value A class (A) ........................................... $11.13
Sales charge (3.75% of offering price or 3.86% of amount invested
per share) (B) ..................................................... 0.43
------
Offering price ........................................................ $11.56
======
- ----------------------
(A) Net asset value per share illustrated is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free California Insured Fund Class A.
See accompanying notes
<PAGE>
26 for tax-exempt income
VOYAGEUR MUTUAL FUNDS II, INC.
DELAWARE-VOYAGEUR TAX-FREE COLORADO FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS - 98.89%
GENERAL OBLIGATION BONDS - 19.95%
Arapahoe County, Colorado School District
Municipal Securities Trust 5.133% 12/15/15 ....... $ 6,000,000 $ 6,163,080
Arapahoe, Colorado Water & Sanitation
Series 1995A 6.00% 12/1/15 ....................... 8,010,000 8,480,588
Arapahoe, Colorado Water & Sanitation
Series 1995A 6.15% 12/1/19 ....................... 10,075,000 10,696,728
Boulder Valley School District #RE-2
Series A 6.30% 12/1/13 ........................... 3,000,000 3,383,430
Boulder Valley School District #RE-2
Series A 6.30% 12/1/14 ........................... 5,000,000 5,639,050
Eagles Nest Metropolitan District Limited Tax
6.50% 11/15/17 ................................... 6,575,000 6,998,956
El Paso County, Colorado School District Number 20
5.533% 12/15/14 .................................. 2,500,000 2,634,325
G V R Metropolitan District Series A
6.00% 12/1/15 .................................... 7,075,000 7,560,557
G V R Metropolitan District Series A
6.125% 12/1/19 ................................... 4,725,000 5,035,905
Highlands Ranch Metropolitan District Number 2
4.983% 6/15/16 ................................... 3,700,000 3,756,610
Interstate South Metropolitan District
6.00% 12/1/20 .................................... 8,755,000 9,242,741
Jefferson County Metropolitan District-Section 14,
Series A 6.20% 12/1/13 ........................... 2,250,000 2,459,880
Montezuma County School District #RE 4A - Delores
7.00% 12/1/19 .................................... 1,500,000 1,737,390
-----------
73,789,240
-----------
HIGHER EDUCATION REVENUE BONDS - 1.92%
Colorado Post Secondary Educational Facilities
Combo Certificates-Municipal Securities Trust
5.983% 3/1/16 .................................... 6,700,000 7,104,278
-----------
7,104,278
-----------
HOSPITALS REVENUE BONDS - 26.01%
Boulder County, Colorado Hospital Revenue
Development-Longmont UTD Hospital
5.60% 12/1/27 .................................... 6,765,000 6,928,916
Boulder County Hospital Revenue - Longmont United
Project 5.875% 12/1/20 ........................... 3,250,000 3,384,713
National Jewish Medical & Research Center
5.375% 1/1/16 .................................... 1,000,000 1,000,340
Colorado Health Facilities Authority -
National Jewish Medical & Research Center
5.375% 1/1/23 .................................... 6,945,000 6,902,497
Colorado Health Facilities Authority -
National Jewish Medical & Research Center
5.375% 1/1/28 .................................... 3,230,000 3,199,154
Colorado Health Facilities Authority -
Parkview Hospital 6.00% 9/1/16 ................... 4,000,000 4,301,920
Colorado Health Facilities Authority -
Parkview Hospital 6.125% 9/1/25 .................. 7,750,000 8,364,265
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- -------
MUNICIPAL BONDS (CONTINUED)
HOSPITALS REVENUE BONDS (CONTINUED)
Colorado Health Facilities Authority Revenue -
Combination Certificate Municipal Securities
Trust 5.233% 10/1/26 ............................ $ 6,750,000 $ 6,860,768
Colorado Health Facilities Authority Revenue -
Hospital - Steamboat Springs Health
5.75% 9/15/22 ................................... 5,000,000 5,114,700
Colorado Health Facilities Authority - Rocky
Mountain Adventist Healthcare
6.625% 2/1/13 ................................... 13,000,000 13,965,770
Colorado Health Facilities Authority - Rocky
Mountain Adventist Healthcare
6.625% 2/1/22 ................................... 5,885,000 6,322,197
Colorado Health Facilities Authority - Vail Valley
Medical Center Revenue
6.50% 1/15/13 ................................... 2,400,000 2,632,200
Colorado Health Facilities Authority - Vail Valley
Medical Center Revenue
6.60% 1/15/20 ................................... 6,500,000 7,160,400
Colorado Springs Memorial Hospital (MBIA)
6.00% 12/15/24 .................................. 8,000,000 8,774,640
Denver, Colorado Health & Hospital
5.375% 12/1/18 .................................. 1,000,000 1,005,360
Denver, Colorado Health & Hospital
5.375% 12/1/28 .................................. 5,000,000 5,005,850
Gunnison Valley Hospital
5.625% 7/1/23 ................................... 850,000 847,110
University of Colorado Hospital
(AMBAC) 6.40% 11/15/22 .......................... 4,000,000 4,448,400
------------
96,219,200
------------
HOUSING REVENUE BONDS - 23.53%
Adams County, Colorado Housing Authority Mortgage
Revenue - Aztec Villa Apartments Project
5.85% 12/1/27 ................................... 1,825,000 1,912,199
Adams County Housing Authority Greenbriar Project
6.75% 7/1/21 .................................... 1,730,000 1,882,724
Aurora Single Family Mortgage Revenue
7.30% 5/1/10 .................................... 7,660,000 8,338,140
Colorado Health Facilities Authority Revenue -
Baptist Home Association Series A
6.375% 8/15/24 .................................. 3,250,000 3,498,105
Colorado Health Facilities Authority - Covenant
Retirement 6.75% 12/1/15 ........................ 1,750,000 1,975,645
Colorado Health Facilities Authority - Covenant
Retirement 6.75% 12/1/25 ........................ 4,150,000 4,682,362
Colorado Health Facilities Authority Revenue -
National Benevolent Association -
A 5.20% 1/1/18 .................................. 530,000 522,336
Colorado Health Facilities Authority Revenue -
National Benevolent Association -
A 5.25% 1/1/27 .................................. 1,330,000 1,297,349
<PAGE>
for tax-exempt income 27
TAX-FREE COLORADO FUND
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- -------
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE BONDS (CONTINUED)
Colorado Health Facilities Authority Revenue -
National Benevolent Association
5.25% 2/1/28 ..................................... $3,700,000 $ 3,607,833
Colorado Health Facilities Authority -
National Benevolent Series A 6.90% 6/1/15 ........ 1,085,000 1,227,254
Colorado Housing Finance Authority - Multifamily
Housing Mortgage - B-3 5.65% 10/1/28 ............. 3,880,000 4,049,401
Colorado Housing Finance Authority - Multifamily
Industrial Mortgage - C-3 5.70% 10/1/21 .......... 3,205,000 3,283,683
Colorado Housing Finance Authority - Multifamily
Series A-3 6.25% 10/1/26 ......................... 8,530,000 9,228,181
Colorado Housing Finance Authority - Multifamily
Series A-3 (FHA) 5.85% 10/1/28 ................... 4,000,000 4,256,200
Colorado Housing Finance Authority - Multifamily
Series C-3 6.10% 10/1/28 ......................... 4,120,000 4,434,603
Colorado Housing Finance Authority - Single Family
Housing Series A-2 7.15% 11/1/14 ................. 1,510,000 1,727,365
Colorado Housing Finance Authority - Single Family
Housing Series A-3 7.45% 11/1/27 ................. 2,500,000 2,834,975
Colorado Housing Finance Authority - Single Family
Housing Series C-2 7.10% 5/1/15 .................. 1,260,000 1,435,720
Colorado Housing Finance Authority - Single Family
Housing Project Series C-2 7.45% 6/1/17 .......... 780,000 860,644
Colorado Housing Finance Authority - Single Family
Mortgage (FHA) 7.50% 11/1/24 ..................... 2,365,000 2,595,540
Colorado State-Single Family Housing Authority
Senior Revenue 7.10% 6/1/14 ...................... 920,000 1,045,230
Eaglebend, Colorado Affordable Housing Corporate
Multifamily Revenue Housing Project
Series A 6.20% 7/1/12 ............................ 1,000,000 1,064,850
Eaglebend, Colorado Affordable Housing Corporate
Multifamily Revenue Housing Project
Series A 6.40% 7/1/17 ............................ 1,000,000 1,069,230
Eaglebend, Colorado Affordable Housing Corporate
Multifamily Revenue Housing Project
Series A 6.45% 7/1/21 ............................ 1,000,000 1,069,060
Englewood Multifamily Marks Apartments Series B
6.00% 12/15/18 ................................... 8,950,000 9,263,698
Englewood Multifamily Marks Apartments Series 96
6.65% 12/1/26 .................................... 5,700,000 6,217,959
Pueblo County Single Family Mortgage Revenue Series
1994A (GNMA) 7.05% 11/1/27 ....................... 3,320,000 3,671,654
------------
87,051,940
------------
LEASE/CERTIFICATE OF PARTICIPATION - 6.43%
Avon, Colorado Certificates of Participation
5.00% 12/1/18 .................................... 1,700,000 1,701,326
Colorado Post Secondary Education Auraria Fund
Project (FGIC) 6.00% 9/1/15 ...................... 1,000,000 1,085,410
Conejos & Alamosa Counties, Colorado School
District Certificates of Participation
6.50% 4/1/11 ..................................... 1,780,000 1,877,918
Greeley Building Authority 6.10% 8/15/16 ............ 2,600,000 2,806,206
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- -------
MUNICIPAL BONDS (CONTINUED)
LEASE/CERTIFICATE OF PARTICIPATION (CONTINUED)
Jefferson County, Colorado Certificates of
Participation 5.233% 12/1/09 ..................... $10,000,000 $10,630,300
Larimer County, Colorado School District
Number R1 Poudre Certificates of Participation
5.00% 12/1/17 .................................... 250,000 249,368
Moffat County, Colorado Certificates of Participation
Public Safety Center Project 5.125% 6/1/23 ....... 750,000 755,183
Pueblo County School District
Pueblo Certificate of Participation
5.358% 12/1/10 ................................... 4,440,000 4,691,215
------------
23,796,926
------------
POWER AUTHORITY REVENUE BONDS - 3.11%
Platte River Power Authority Series BB
6.125% 6/1/14 .................................... 5,000,000 5,302,550
Puerto Rico Electric Power Authority Series EE
4.75% 7/1/24 ..................................... 6,500,000 6,219,915
------------
11,522,465
------------
*PRE-REFUNDED BONDS - 0.49%
Auraria Higher Education Center Fee(AMBAC)
6.50% 5/1/12-01 .................................. 1,680,000 1,813,946
------------
1,813,946
------------
TRANSPORTATION REVENUE BONDS - 6.46%
Arapahoe County Capital Improvement E-470
7.00% 8/31/26 .................................... 10,000,000 11,973,900
Arapahoe County Vehicle Reg E-470 (MBIA)
6.15% 8/31/26 .................................... 8,530,000 9,499,264
Denver City & County Airport Revenue
(MBIA) 5.60% 11/15/20 ............................ 2,300,000 2,407,502
------------
23,880,666
------------
WATER & SEWER REVENUE BONDS - 1.49%
Centennial County Water & Sanitary District Revenue
6.00% 12/1/15 (LOC - Swiss Bank) ................. 4,000,000 4,396,080
Westminster Water & Sewer Utility Revenue
(AMBAC) 6.25% 12/1/14 ............................ 1,000,000 1,098,830
------------
5,494,910
------------
OTHER REVENUE BONDS - 9.50%
Aurora Saddle Rock Golf Course 6.20% 12/1/15 ........ 2,000,000 2,132,920
Colorado Post Secondary Education Ocean Journey
Project 8.375% 12/1/26 ........................... 8,000,000 9,370,160
Lowry, Colorado Economic Redevelopment Authority
7.50% 12/1/10 .................................... 13,700,000 15,601,560
Lowry, Colorado Economic Redevelopment Authority
Revenue Series A 7.00% 12/1/10 ................... 1,400,000 1,417,248
Pueblo Urban Renewal Authority Jr Lien
6.625% 12/1/19 ................................... 2,155,000 2,351,019
Pueblo Urban Renewal Authority Revenue
(AMBAC) 6.15% 12/1/19 ............................ 1,685,000 1,810,460
South Suburban District Golf and Ice Arena
Facility 6.00% 11/1/15 ........................... 2,330,000 2,467,820
------------
35,151,187
------------
Total Municipal Bonds (cost $337,354,973) ........... 365,824,758
------------
<PAGE>
28 for tax-exempt income
TAX-FREE COLORADO FUND
STATEMENT OF NET ASSETS (CONTINUED)
TOTAL MARKET VALUE OF SECURITIES OWNED - 98.89%
(COST $337,354,973) ........................................... $365,824,758
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.11% .......... 4,096,633
------------
NET ASSETS APPLICABLE TO 32,132,851 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ........................ $369,921,391
============
NET ASSET VALUE - TAX-FREE COLORADO FUND A CLASS
($357,126,876 / 31,021,686 SHARES) ................................. $11.51
======
NET ASSET VALUE - TAX-FREE COLORADO FUND B CLASS
($10,726,213 / 931,564 SHARES) ..................................... $11.51
======
NET ASSET VALUE - TAX-FREE COLORADO FUND C CLASS
($2,068,302 / 179,601 SHARES) ...................................... $11.52
======
- ----------------------
* For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
- ----------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Authority
GNMA - Insured by the Government National Mortgage Association
LOC - Swiss Bank - Letter of Credit by Swiss Bank of New York
MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT AUGUST 31, 1998:
Common stock, $.01 par value, 10,000,000,000 shares authorized
to the Fund with 1,000,000,000 shares allocated to Tax-Free
Colorado Fund A Class, 1,000,000,000 shares allocated to
Tax-Free Colorado Fund B Class, and 1,000,000,000 shares
allocated to Tax-Free Colorado Fund C Class ................... $344,585,493
Accumulated net realized loss on investments ..................... (3,133,887)
Net unrealized appreciation of investments ....................... 28,469,785
------------
Total Net Assets ................................................. $369,921,391
============
NET ASSET VALUE AND OFFERING PRICE FOR
TAX-FREE COLORADO FUND A CLASS
Net asset value A class (A) ............................................ $11.51
Sales charge (3.75% of offering price or 3.91% of amount invested
per share) (B) ...................................................... 0.45
------
Offering price ......................................................... $11.96
======
- ----------------------
(A) Net asset value per share illustrated is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free Colorado Fund Class A.
See accompanying notes
<PAGE>
VOYAGEUR INVESTMENT TRUST
DELAWARE-VOYAGEUR TAX-FREE NEW MEXICO FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
--------- -------
MUNICIPAL BONDS - 98.88%
GENERAL OBLIGATION BONDS - 3.96%
Puerto Rico Commonwealth Public Improvement
4.50% 7/1/23 ...................................... $1,000,000 $ 923,930
-----------
923,930
-----------
HIGHER EDUCATION REVENUE BONDS - 0.43%
New Mexico State University Refunding &
Improvement 5.00% 4/1/17 .......................... 100,000 100,374
-----------
100,374
-----------
HOSPITAL REVENUE BONDS - 4.73%
State Hospital Equipment Memorial Medical Center
Project 6.40% 6/1/16 .............................. 1,000,000 1,102,530
-----------
1,102,530
-----------
HOUSING REVENUE BONDS - 31.10%
Carlsbad, New Mexico Housing Multifamily Revenue -
Colonial Hillcrest 7.375% 8/1/27 .................. 1,000,000 1,068,480
New Mexico Mortgage Finance Authority
Series 1994B 6.75% 7/1/25 ......................... 1,000,000 1,152,440
New Mexico Mortgage Finance Authority
Series 1994F 6.95% 1/1/26 ......................... 1,000,000 1,153,560
New Mexico Mortgage Finance Authority
Series 1996G 6.85% 1/1/21 ......................... 1,500,000 1,743,450
Santa Fe Single Family Mortgage Revenue
6.20% 11/1/16 ..................................... 1,000,000 1,072,360
Southeastern New Mexico Affordable Housing
- Housing-Casa Hermosa Apartments
7.25% 12/1/27 ..................................... 1,000,000 1,065,510
-----------
7,255,800
-----------
POLLUTION CONTROL REVENUE BOND - 9.44%
Farmington, New Mexico Pollution Control
Public Service Company Project ACA-CBI
6.375% 4/1/22 ..................................... 1,000,000 1,108,750
Lordsburg Pollution Control 6.50% 4/1/13 ............. 1,000,000 1,093,820
-----------
2,202,570
-----------
*PRE-REFUNDED BONDS - 4.83%
University of New Mexico Technical Development
Lease Revenue 6.55% 8/15/25-04 .................... 1,000,000 1,128,010
-----------
1,128,010
-----------
UTILITY REVENUE BONDS - 4.68%
Los Alamos Utility System Revenue 1994A
(FSA) 6.00% 7/1/15 ................................ 1,000,000 1,091,500
-----------
1,091,500
-----------
WATER & SEWER REVENUE BONDS - 4.63%
Rio Rancho Water & Wastewater Revenue
(FSA) 6.00% 5/15/22 .................................. 1,000,000 1,081,080
-----------
1,081,080
-----------
OTHER REVENUE BONDS - 35.08%
Albuquerque Special Assessment #223
6.45% 1/1/15 ...................................... 780,000 781,560
Bernalillo County, New Mexico Gross Receipts
Tax Revenue Series B 5.00% 4/1/13 ................. 1,000,000 1,034,570
Bernalillo County, New Mexico Gross Receipts
Tax Revenue 5.25% 4/1/27 .......................... 1,000,000 1,055,070
Dona Ana County Tax Refunding & Improvement
6.00% 6/1/19 ...................................... 1,000,000 1,099,870
<PAGE>
for tax-exempt income 29
TAX-FREE NEW MEXICO FUND
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
OTHER REVENUE BONDS (CONTINUED)
Las Cruses Solid Waste Authority 6.00% 6/1/16 .........$ 500,000 $ 529,160
New Mexico Education Assistance Foundation
6.65% 11/1/25 ...................................... 1,000,000 1,080,430
Puerto Rico Municipal Finance Agency Series A
5.50% 7/1/21 ....................................... 500,000 527,090
Santa Fe, New Mexico Municipal Record Complex
Net Revenue 5.625% 12/1/23 ......................... 1,000,000 988,610
Truth Or Consequences Gross Tax Receipts
6.30% 7/1/16 ....................................... 1,000,000 1,088,000
-----------
8,184,360
-----------
Total Municipal Bonds (cost $21,266,469) .............. 23,070,154
-----------
NUMBER OF
SHARES
---------
SHORT-TERM INVESTMENTS - 0.13%
Norwest Advantage Municipal Money Market Fund ......... 30,107 30,107
-----------
Total Short-Term Investments (cost $30,107) ........... 30,107
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED
(COST OF $21,296,576) - 99.01% ..................... $23,100,261
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.99% 231,062
-----------
NET ASSETS APPLICABLE TO 2,036,725 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ............. $23,331,323
===========
NET ASSET VALUE - TAX-FREE NEW MEXICO FUND A CLASS
($21,155,297 / 1,846,906 SHARES) ................... $11.45
======
NET ASSET VALUE - TAX-FREE NEW MEXICO FUND B CLASS
($1,782,138 / 155,445 SHARES) ...................... $11.46
======
NET ASSET VALUE - TAX-FREE NEW MEXICO FUND C CLASS
($393,888 / 34,374 SHARES) ......................... $11.46
======
- ----------------------
* For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
- ----------------------
Summary of Abbreviations:
FSA - Insured by the Financial Security Assurance
COMPONENTS OF NET ASSETS AT JUNE 30, 1998:
Common stock, $.01 par value, unlimited shares authorized
to Tax-free New Mexico Fund .................................... $22,068,316
Accumulated net realized loss on investments ...................... (540,678)
Net unrealized appreciation of investments ........................ 1,803,685
-----------
Total net assets .................................................. $23,331,323
===========
NET ASSET VALUE AND OFFERING PRICE FOR TAX-FREE NEW MEXICO FUND A CLASS
Net asset value per share (A) ......................................... $11.45
Sales charge (3.75% of offering price or 3.93% of amount invested
per share) (B) ..................................................... 0.45
------
Offering Price ........................................................ $11.90
======
- ----------------------
(A) Net asset value per share illustrated is the estimate amount which would
be paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free New Mexico Fund Class A.
See accompanying notes
<PAGE>
VOYAGEUR INVESTMENT TRUST
DELAWARE-VOYAGEUR TAX-FREE UTAH FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS - 98.20%
GENERAL OBLIGATION BONDS - 7.18%
Puerto Rico Commonwealth Public Improvement
4.50% 7/1/23 ....................................... $150,000 $138,590
Salt Lake County Service Area #1
6.00% 12/15/12 ..................................... 100,000 106,348
--------
244,938
--------
HIGHER EDUCATION REVENUE BONDS - 25.17%
Salt Lake County, Utah College - Westminster
College Project 5.75% 10/1/27 ...................... 160,000 164,176
Southern Utah University Board of Regents
(AMBAC) 6.35% 5/1/10 ............................... 150,000 166,445
Southern Utah University Pavilion Student Fee
6.30% 6/1/16 ....................................... 390,000 420,681
Utah State Board of Regents (MBIA)
5.875% 7/1/21 ...................................... 100,000 107,276
--------
858,578
--------
HOUSING REVENUE BONDS - 25.57%
Clearfield City, Utah-Multifamily Revenue
Federal Housing Authority
Oakstone Apartments-A 5.75% 11/1/27 ................ 150,000 153,840
Salt Lake City Multifamily Housing Authority
6.00% 4/1/25 ....................................... 100,000 103,984
Salt Lake County Housing Authority Multifamily
Bridgeside (FHA) 6.30% 11/1/28 ..................... 270,000 289,224
Utah Housing Finance Authority Single Family
Mortgage Revenue Series 1992D-1
6.70% 7/1/12 ....................................... 85,000 90,814
Utah Housing Finance Authority Single Family
Mortgage Revenue Series 1994C
6.30% 7/1/16 ....................................... 20,000 21,483
Utah Housing Finance Multifamily Cottonwood
Project (FNMA) 6.30% 7/1/15 ........................ 200,000 213,030
--------
872,375
--------
LEASE/CERTIFICATE OF PARTICIPATION - 8.50%
Weber County, Utah Municipal Building Authority
Lease Revenue 5.75% 12/15/19 ....................... 175,000 183,194
West Valley City, Utah Municipal Building Authority
Lease Revenue 6.00% 1/15/10 ........................ 100,000 106,779
--------
289,973
--------
*PRE-REFUNDED - 22.53%
Iron County School District (MBIA)
6.50% 1/15/13-05 ................................... 100,000 113,024
Nebo, Utah School District 6.00% 6/15/18-06 ........... 200,000 218,540
Provo, Utah City School District
6.25% 6/15/13-02 ................................... 100,000 109,838
Salt Lake City Municipal Building Authority Lease
Revenue Series A 6.375% 10/1/12-02 ................. 100,000 109,820
Utah State Board of Regents (AMBAC)
6.30% 6/1/12-02 .................................... 100,000 109,254
<PAGE>
30 for tax-exempt income
TAX-FREE UTAH FUND
STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
*PRE-REFUNDED (CONTINUED)
Weber State University Board of Regents
(MBIA) 6.25% 4/1/10-02 ............................. $100,000 $ 107,877
---------
768,353
---------
WATER & SEWER REVENUE BONDS - 9.25%
Puerto Rico Aqueduct & Sewer Authority
5.00% 7/1/15 ....................................... 100,000 100,532
White City Water District Revenue 5.90% 2/1/22 ........ 200,000 214,852
---------
315,384
---------
Total Municipal Bonds (cost $3,110,915) 3,349,601
---------
NUMBER
OF SHARES
---------
SHORT TERM INVESTMENTS - 0.62%
Norwest Advantage Municipal Money Market Fund ......... 21,259 21,259
---------
Total Short Term Investments (cost $21,259 ) .......... 21,259
---------
TOTAL MARKET VALUE OF SECURITIES - 98.82%
(COST $3,132,174) .............................................. $3,370,860
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.18% ..................................... 40,262
----------
NET ASSETS APPLICABLE TO 298,036 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% ......................... $3,411,122
==========
NET ASSET VALUE - TAX-FREE UTAH FUND A CLASS
($2,803,139 / 244,926 SHARES) ...................................... $11.44
======
NET ASSET VALUE - TAX-FREE UTAH FUND B CLASS
($607,983 / 53,110 SHARES) ......................................... $11.45
======
<PAGE>
COMPONENTS OF NET ASSETS AT AUGUST 31,1998:
Common stock, $.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares allocated
to Tax-Free Utah Fund A Class and 1,000,000,000
shares allocated to Tax-Free Utah Fund B Class .................. $3,175,729
Accumulated net realized loss on investments ....................... (3,293)
Net unrealized appreciation of investments ......................... 238,686
----------
Total Net Assets ................................................... $3,411,122
==========
- ----------------------
* For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
- ----------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FHA - Insured by the Federal Housing Administration
FNMA - Insured by the Federal National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
NET ASSET VALUE AND OFFERING PRICE FOR
TAX-FREE UTAH FUND A CLASS
Net asset value A class (A) ............................................ $11.44
Sales charge (3.75% of offering price or 3.93% of amount invested
per share) (B) ...................................................... 0.45
------
Offering price ......................................................... $11.89
======
- ----------------------
(A) Net asset value per share illustrated is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more for Tax-Free Utah Fund Class A.
See accompanying notes
<PAGE>
for tax-exempt income 31
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC. VOYAGEUR INSURED FUNDS, INC.
TAX-FREE TAX-FREE ARIZONA
ARIZONA FUND INSURED FUND
------------------------------ -------------------------------
EIGHT MONTHS YEAR EIGHT MONTHS YEAR
ENDED ENDED ENDED ENDED
8/31/98 12/31/97 8/31/98 12/31/97
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest ......................................... $583,818 $832,937 $6,845,631 $11,446,838
-------- -------- ---------- -----------
EXPENSES:
Management fees 53,250 70,527 619,756 993,505
Dividend disbursing and transfer agent fees
and expenses ................................. 8,762 13,100 59,920 161,643
Distribution expense ............................ 49,193 64,168 334,137 378,964
Registration fees ............................... 6,166 9,125 5,720 8,373
Reports and statements to shareholders .......... 3,394 3,700 36,400 35,611
Accounting and administration ................... 5,124 5,467 48,400 73,936
Professional fees ............................... 2,024 10,203 11,066 18,997
Custodian fees and expenses ..................... 2,384 3,265 5,880 46,359
Directors' fees ................................. 474 806 5,200 6,746
Taxes (other than taxes on income) .............. 790 -- 14,096 --
Other ........................................... 3,729 -- 7,313 68,964
-------- -------- ---------- -----------
135,290 180,361 1,147,888 1,793,098
Less expenses absorbed or waived ................ (61,175) (84,332) (84,110) (97,576)
-------- -------- ---------- -----------
Total operating expenses
(before interest expense) .................... 74,115 96,029 1,063,778 1,695,522
-------- -------- ---------- -----------
Interest expense ................................ -- -- 1,094 --
-------- -------- ---------- -----------
Total expenses .................................. 74,115 96,029 1,064,872 1,695,522
-------- -------- ---------- -----------
NET INVESTMENT INCOME ........................... 509,703 736,908 5,780,759 9,751,316
-------- -------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment transactions .... 155,402 174,893 881,946 2,190,476
Net change in unrealized
appreciation/depreciation of investments ..... 90,918 437,873 506,964 4,860,331
-------- -------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................... 246,320 612,766 1,388,910 7,050,807
-------- -------- ---------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................. $756,023 $1,349,674 $7,169,669 $16,802,123
======== ========== ========== ===========
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC. VOYAGEUR INVESTMENT TRUST
TAX-FREE TAX-FREE CALIFORNIA
CALIFORNIA FUND INSURED FUND
------------------------------ -------------------------------
EIGHT MONTHS YEAR EIGHT MONTHS YEAR
ENDED ENDED ENDED ENDED
8/31/98 12/31/97 8/31/98 12/31/97
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $469,232 $278,329 $1,231,313 $2,043,743
-------- -------- ---------- ----------
EXPENSES:
Management fees ................................. 44,783 25,285 109,350 174,890
Dividend disbursing and transfer agent fees
and expenses ................................. 8,450 7,466 11,600 39,072
Distribution expense ............................ 60,727 31,550 89,706 122,935
Registration fees ............................... 4,195 1,941 2,290 4,499
Reports and statements to shareholders .......... 5,973 1,624 12,720 20,532
Accounting and administration ................... 3,498 2,387 8,800 11,984
Professional fees ............................... 1,705 7,974 2,064 12,009
Custodian fees and expenses ..................... 2,300 1,549 2,250 6,042
Directors' fees ................................. 422 542 1,720 1,083
Taxes (other than taxes on income) .............. 695 -- 605 --
Other ........................................... 2,563 -- 310 --
-------- -------- ---------- ----------
135,311 80,318 241,415 393,046
Less expenses absorbed or waived ................ (76,468) (53,667) (1,086) (9,546)
-------- -------- ---------- ----------
Total operating expenses
(before interest expense) .................... 58,843 26,651 240,329 383,500
-------- -------- ---------- ----------
Interest expense ................................ -- -- 93 --
-------- -------- ---------- ----------
Total expenses .................................. 58,843 26,651 240,422 383,500
-------- -------- ---------- ----------
NET INVESTMENT INCOME ........................... 410,389 251,678 990,891 1,660,243
-------- -------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment transactions .... 29,399 28,148 161,093 654,098
Net change in unrealized
appreciation/depreciation of investments ..... 252,698 362,074 306,484 902,169
-------- -------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................... 282,097 390,222 467,577 1,556,267
-------- -------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................. $692,486 $641,900 $1,458,468 $3,216,510
======== ======== ========== ==========
</TABLE>
See accompanying notes
<PAGE>
32 for tax-exempt income
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS II, INC. VOYAGEUR INVESTMENT TRUST
TAX-FREE TAX-FREE
COLORADO FUND NEW MEXICO FUND
------------------------------ --------------------------
EIGHT MONTHS YEAR EIGHT MONTHS YEAR
ENDED ENDED ENDED ENDED
8/31/98 12/31/97 8/31/98 12/31/97
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest ............................................................ $14,068,465 $21,727,112 $853,093 $1,234,337
----------- ----------- ---------- ----------
EXPENSES:
Management fees ..................................................... 1,229,144 1,787,177 73,889 102,892
Dividend disbursing and transfer agent fees and expenses ............ 186,968 273,346 13,639 22,501
Distribution expense ................................................ 664,649 690,596 45,131 39,860
Registration fees ................................................... 4,286 13,322 7,550 4,203
Reports and statements to shareholders .............................. 16,648 80,191 7,897 13,493
Accounting and administration ....................................... 102,524 128,741 5,766 7,726
Professional fees ................................................... 13,293 30,009 3,215 14,271
Custodian fees and expenses ......................................... 5,595 44,372 4,488 10,106
Directors' fees ..................................................... 6,486 12,074 501 705
Taxes (other than taxes on income) .................................. 17,000 -- 2,000 --
Other ............................................................... 53,112 94,264 11,980 6,782
----------- ----------- ---------- ----------
2,299,705 3,154,092 176,056 222,539
Less expenses absorbed or waived .................................... (225,825) (178,191) (20,885) (9,442)
----------- ----------- ---------- ----------
Total operating expenses (before interest expense) .................. 2,073,880 2,975,901 155,171 213,097
----------- ----------- ---------- ----------
Interest expense .................................................... -- -- -- --
----------- ----------- ---------- ----------
Total expenses ...................................................... 2,073,880 2,975,901 155,171 213,097
----------- ----------- ---------- ----------
NET INVESTMENT INCOME ............................................... 11,994,585 18,751,211 697,922 1,021,240
----------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions ........................ 1,633,238 4,504,945 77,783 272,561
Net change in unrealized appreciation/depreciation of investments ... 2,760,702 15,302,638 261,566 651,320
----------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ..................... 4,393,940 19,807,583 339,349 923,881
----------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $16,388,525 $38,558,794 $1,037,271 $1,945,121
=========== =========== ========== ==========
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE
UTAH FUND
---------------------------
EIGHT MONTHS YEAR
ENDED ENDED
8/31/98 12/31/97
<S> <C> <C>
INVESTMENT INCOME:
Interest ............................................................ $137,033 $228,407
-------- --------
EXPENSES:
Management fees ..................................................... 12,120 19,497
Dividend disbursing and transfer agent fees and expenses ............ 5,076 35,071
Distribution expense ................................................ 8,982 8,553
Registration fees ................................................... 1,785 30,523
Reports and statements to shareholders .............................. 295 9,679
Accounting and administration ....................................... 1,070 1,292
Professional fees ................................................... 440 17,237
Custodian fees and expenses ......................................... 1,017 2,088
Directors' fees ..................................................... 483 1,653
Taxes (other than taxes on income) .................................. 142 --
Other ............................................................... -- --
-------- --------
31,410 125,593
Less expenses absorbed or waived .................................... (9,998) (94,656)
-------- --------
Total operating expenses (before interest expense) .................. 21,412 30,937
-------- --------
Interest expense .................................................... -- --
-------- --------
Total expenses ...................................................... 21,412 30,937
-------- --------
NET INVESTMENT INCOME ............................................... 115,621 197,470
-------- --------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions ........................ 33,973 57,047
Net change in unrealized appreciation/depreciation of investments ... 270 111,041
-------- --------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ..................... 34,243 168,088
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $149,864 $365,558
======== ========
</TABLE>
See accompanying notes
<PAGE>
for tax-exempt income 33
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE
ARIZONA FUND
-------------------------------------------------
EIGHT MONTHS YEAR YEAR
ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .......................................................... $509,703 $736,908 $585,918
Net realized gain (loss) on investment transactions ............................ 155,402 174,893 43,350
Net change in unrealized appreciation/depreciation of investments .............. 90,918 437,873 48,393
----------- ----------- -----------
Net increase in net assets resulting from operations ........................... 756,023 1,349,674 677,661
----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ..................................................................... (379,267) (558,716) (458,456)
B Class ..................................................................... (115,992) (170,145) (126,098)
C Class ..................................................................... (14,444) (8,986) (1,140)
Net realized gain on investment transactions:
A Class ..................................................................... (107,048) (14,835) (32,110)
B Class ..................................................................... (42,698) (5,249) (11,166)
C Class ..................................................................... (5,585) (446) (74)
----------- ----------- -----------
(665,034) (758,377) (629,044)
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ..................................................................... 2,294,187 1,713,483 4,078,229
B Class ..................................................................... 1,591,094 1,398,191 1,938,750
C Class ..................................................................... 289,341 294,389 1,991
Net asset value of shares issued upon reinvestment of dividends from net
investment income and net realized gain on investment transactions:
A Class ..................................................................... 263,816 318,925 255,437
B Class ..................................................................... 82,739 93,785 71,011
C Class ..................................................................... 7,823 1,725 1,371
----------- ----------- -----------
4,529,000 3,820,498 6,346,789
----------- ----------- -----------
Cost of shares repurchased:
A Class ..................................................................... (1,364,588) (1,297,760) (821,165)
B Class ..................................................................... (453,826) (1,423,141) (179,787)
C Class ..................................................................... (371) -- (7,414)
----------- ----------- -----------
(1,818,785) (2,720,901) (1,008,366)
----------- ----------- -----------
Increase (decrease) in net assets derived from capital share transactions ...... 2,710,215 1,099,597 5,338,423
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS .......................................... 2,801,204 1,690,894 5,387,040
NET ASSETS:
Beginning of period ............................................................ 14,959,325 13,268,431 7,881,391
----------- ----------- -----------
End of period .................................................................. $17,760,529 $14,959,325 $13,268,431
=========== =========== ===========
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
VOYAGEUR INSURED FUNDS, INC.
TAX-FREE ARIZONA
INSURED FUND
--------------------------------------------
EIGHT MONTHS YEAR YEAR
ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .......................................................... $5,780,759 $9,751,316 $10,932,538
Net realized gain (loss) on investment transactions ............................ 881,946 2,190,476 10,306
Net change in unrealized appreciation/depreciation of investments .............. 506,964 4,860,331 (2,489,648)
----------- ------------ ------------
Net increase in net assets resulting from operations ........................... 7,169,669 16,802,123 8,453,196
----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ..................................................................... (5,658,934) (9,694,062) (10,689,424)
B Class ..................................................................... (109,233) (146,915) (104,095)
C Class ..................................................................... (17,906) (22,575) (21,813)
Net realized gain on investment transactions:
A Class ..................................................................... -- -- --
B Class ..................................................................... -- -- --
C Class ..................................................................... -- -- --
----------- ------------ ------------
(5,786,073) (9,863,552) (10,815,332)
----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ..................................................................... 5,611,502 8,703,489 12,580,493
B Class ..................................................................... 1,473,923 1,626,775 1,108,948
C Class ..................................................................... 109,022 260,791 369,065
Net asset value of shares issued upon reinvestment of dividends from net
investment income and net realized gain on investment transactions:
A Class ..................................................................... 2,372,653 4,127,147 4,229,553
B Class ..................................................................... 59,207 80,590 60,679
C Class ..................................................................... 10,470 14,987 19,176
----------- ------------ ------------
9,636,777 14,813,779 18,367,914
----------- ------------ ------------
Cost of shares repurchased:
A Class ..................................................................... (16,505,481) (42,377,224) (43,310,737)
B Class ..................................................................... (444,337) (1,306,416) (107,429)
C Class ..................................................................... (173,611) (172,902) (367,793)
----------- ------------ ------------
(17,123,429) (43,856,542) (43,785,959)
----------- ------------ ------------
Increase (decrease) in net assets derived from capital share transactions ...... (7,486,652) (29,042,763) (25,418,045)
----------- ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS .......................................... (6,103,056) (22,104,192) (27,780,181)
NET ASSETS:
Beginning of period ............................................................ 190,818,171 212,922,363 240,702,544
----------- ------------ ------------
End of period .................................................................. 184,715,115 $190,818,171 $212,922,363
=========== ============ ============
</TABLE>
See accompanying notes
<PAGE>
34 for tax-exempt income
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE
CALIFORNIA FUND
-------------------------------------------------
EIGHT MONTHS YEAR YEAR
ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .......................................................... $410,389 $251,678 $82,955
Net realized gain (loss) on investment transactions ............................ 29,399 28,148 6,790
Net change in unrealized appreciation/depreciation of investments .............. 252,698 362,074 (5,178)
----------- ----------- ----------
Net increase in net assets resulting from operations ........................... 692,486 641,900 84,567
----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ..................................................................... (185,500) (114,672) (65,255)
B Class ..................................................................... (216,553) (132,136) (15,447)
C Class ..................................................................... (9,470) (5,490) (2,008)
Net realized gain on investment transactions:
A Class ..................................................................... -- (11,448) (4,321)
B Class ..................................................................... -- (17,988) (2,191)
C Class ..................................................................... -- (547) (278)
----------- ----------- ----------
(411,523) (282,281) (89,500)
----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ..................................................................... 7,665,910 3,495,750 1,024,962
B Class ..................................................................... 3,442,847 4,742,287 525,960
C Class ..................................................................... 647,866 88,101 90,000
Net asset value of shares issued upon reinvestment of dividends from net
investment income and net realized gain on investment transactions:
A Class ..................................................................... 123,356 83,762 52,929
B Class ..................................................................... 59,437 41,269 427
C Class ..................................................................... 6,823 6,496 1,646
----------- ----------- ----------
11,946,239 8,457,665 1,695,924
----------- ----------- ----------
Cost of shares repurchased:
A Class ..................................................................... (716,972) (553,808) (858,534)
B Class ..................................................................... (244,052) (79,383) --
C Class ..................................................................... -- (86,695) --
----------- ----------- ----------
(961,024) (719,886) (858,534)
----------- ----------- ----------
Increase (decrease) in net assets derived from capital share transactions ...... 10,985,215 7,737,779 837,390
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS .......................................... 11,266,178 8,097,398 832,457
NET ASSETS:
Beginning of period ............................................................ 10,069,875 1,972,477 1,140,020
----------- ----------- ----------
End of period .................................................................. $21,336,053 $10,069,875 $1,972,477
=========== =========== ==========
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE CALIFORNIA
INSURED FUND
------------------------------------------------
EIGHT MONTHS YEAR YEAR
ENDED ENDED ENDED
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .......................................................... $990,891 $1,660,243 $1,911,564
Net realized gain (loss) on investment transactions ............................ 161,093 654,098 (58,669)
Net change in unrealized appreciation/depreciation of investments .............. 306,484 902,169 (562,705)
----------- ----------- -----------
Net increase in net assets resulting from operations ........................... 1,458,468 3,216,510 1,290,190
----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ..................................................................... (806,070) (1,392,469) (1,598,282)
B Class ..................................................................... (172,316) (281,777) (292,092)
C Class ..................................................................... (12,505) (4,187) (3,096)
Net realized gain on investment transactions:
A Class ..................................................................... -- -- --
B Class ..................................................................... -- -- --
C Class ..................................................................... -- -- --
----------- ----------- -----------
(990,891) (1,678,433) (1,893,470)
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ..................................................................... 4,379,503 1,433,773 4,431,420
B Class ..................................................................... 436,113 663,450 1,008,305
C Class ..................................................................... 112,596 411,903 601,996
Net asset value of shares issued upon reinvestment of dividends from net
investment income and net realized gain on investment transactions:
A Class ..................................................................... 333,066 600,374 618,501
B Class ..................................................................... 59,832 115,298 101,866
C Class ..................................................................... 2,457 3,770 2,265
----------- ----------- -----------
5,323,567 3,228,568 6,764,353
----------- ----------- -----------
Cost of shares repurchased:
A Class ..................................................................... (3,431,124) (6,896,123) (7,836,755)
B Class ..................................................................... (626,734) (1,165,654) (336,230)
C Class ..................................................................... (136,546) -- (607,218)
----------- ----------- -----------
(4,194,404) (8,061,777) (8,780,203)
----------- ----------- -----------
Increase (decrease) in net assets derived from capital share transactions ...... 1,129,163 (4,833,209) (2,015,850)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS .......................................... 1,596,740 (3,295,132) (2,619,130)
NET ASSETS:
Beginning of period ............................................................ 34,028,062 37,323,194 39,942,324
----------- ----------- -----------
End of period .................................................................. $35,624,802 $34,028,062 $37,323,194
=========== =========== ===========
</TABLE>
See accompanying notes
<PAGE>
for tax-exempt income 35
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Voyageur Mutual Funds II, Inc. Voyageur Investment Trust
Tax-Free Colorado Fund Tax-Free New Mexico Fund
------------------------------------------ ----------------------------------------
Eight Months Year Year Eight Months Year Year
Ended Ended Ended Ended Ended Ended
8/31/98 12/31/97 12/31/96 8/31/98 12/31/97 12/31/96
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS:
Net investment income ................... $11,994,585 $18,751,211 $19,646,268 $697,922 $1,021,240 $1,084,569
Net realized gain (loss) on
investment transactions .............. 1,633,238 4,504,945 133,826 77,783 272,561 (6,878)
Net change in unrealized
appreciation/depreciation
of investments ....................... 2,760,702 15,302,638 (5,488,422) 261,566 651,320 (241,314)
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net assets
resulting from operations ............ 16,388,525 38,558,794 14,291,672 1,037,271 1,945,121 836,377
------------ ------------ ------------ ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income:
A Class .............................. (11,694,571) (18,996,568) (18,915,160) (651,989) (994,922) (1,036,927)
B Class .............................. (248,074) (263,048) (109,036) (36,725) (38,815) (27,156)
C Class .............................. (51,940) (73,064) (59,059) (9,208) (12,451) (5,150)
Net realized gain on
investment transactions:
A Class .............................. -- -- -- -- -- --
B Class .............................. -- -- -- -- -- --
C Class .............................. -- -- -- -- -- --
------------ ------------ ------------ ----------- ----------- -----------
(11,994,585) (19,332,680) (19,083,255) (697,922) (1,046,188) (1,069,233)
------------ ------------ ------------ ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .............................. 20,124,058 24,861,682 21,914,760 2,755,802 1,142,996 2,700,528
B Class .............................. 2,827,447 3,577,245 3,017,003 672,097 316,181 362,012
C Class .............................. 653,282 556,067 784,158 65,066 96,958 344,523
Net asset value of shares issued upon
reinvestment of dividends from
net investment income and net
realized gain on investment
transactions:
A Class .............................. 7,480,101 12,735,946 12,151,368 348,247 546,725 424,981
B Class .............................. 187,098 223,373 68,715 21,510 22,585 14,983
C Class .............................. 45,159 68,964 49,099 8,588 12,667 4,197
------------ ------------ ------------ ----------- ----------- -----------
31,317,145 42,023,277 37,985,103 3,871,310 2,138,112 3,851,224
------------ ------------ ------------ ----------- ----------- -----------
Cost of shares repurchased:
A Class .............................. (32,727,131) (56,711,281) (63,749,843) (1,217,766) (3,709,704) (4,156,051)
B Class .............................. (200,239) (535,127) (567,194) (6) (109,361) (186,300)
C Class .............................. (350,446) (537,497) (354,884) -- (148,298) (15,000)
------------ ------------ ------------ ----------- ----------- -----------
(33,277,816) (57,783,905) (64,671,921) (1,217,772) (3,967,363) (4,357,351)
------------ ------------ ------------ ----------- ----------- -----------
Increase (decrease) in net assets
derived from capital
share transactions ................... (1,960,671) (15,760,628) (26,686,818) 2,653,538 (1,829,251) (506,127)
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS ........................ 2,433,269 3,465,486 (31,478,401) 2,992,887 (930,318) (738,983)
NET ASSETS:
Beginning of period ..................... 367,488,122 364,022,636 395,501,037 20,338,436 21,268,754 22,007,737
------------ ------------ ------------ ----------- ----------- -----------
End of period ........................... $369,921,391 $367,488,122 $364,022,636 $23,331,323 $20,338,436 $21,268,754
============ ============ ============ =========== =========== ===========
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Voyageur Investment Trust
Tax-Free Utah Fund
---------------------------------------
Eight Months Year Year
Ended Ended Ended
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS FROM OPERATIONS:
Net investment income ................... $115,621 $197,470 $222,176
Net realized gain (loss) on
investment transactions .............. 33,973 57,047 (22,702)
Net change in unrealized
appreciation/depreciation
of investments ....................... 270 111,041 (61,332)
---------- ---------- ----------
Net increase in net assets
resulting from operations ............ 149,864 365,558 138,142
---------- ---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income:
A Class .............................. (99,545) (178,847) (206,175)
B Class .............................. (16,076) (20,903) (16,604)
C Class .............................. -- -- --
Net realized gain on
investment transactions:
A Class .............................. -- -- --
B Class .............................. -- -- --
C Class .............................. -- -- --
---------- ---------- ----------
(115,621) (199,750) (222,779)
---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .............................. 114,506 199,784 181,975
B Class .............................. 32,104 133,701 25,000
C Class .............................. -- -- --
Net asset value of shares issued upon
reinvestment of dividends from
net investment income and net
realized gain on investment
transactions:
A Class .............................. 30,175 61,141 86,770
B Class .............................. 11,858 18,642 16,214
C Class .............................. -- -- --
---------- ---------- ----------
188,643 413,268 309,959
---------- ---------- ----------
Cost of shares repurchased:
A Class .............................. (592,413) (1,040,871) (471,420)
B Class .............................. -- (15,563) --
C Class .............................. -- -- --
---------- ---------- ----------
(592,413) (1,056,434) (471,420)
---------- ---------- ----------
Increase (decrease) in net assets
derived from capital
share transactions ................... (403,770) (643,166) (161,461)
---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS ........................ (369,527) (477,358) (246,098)
NET ASSETS:
Beginning of period ..................... 3,780,649 4,258,007 4,504,105
---------- ---------- ----------
End of period ........................... $3,411,122 $3,780,649 $4,258,007
========== ========== ==========
</TABLE>
See accompanying notes
<PAGE>
36 for tax-exempt income
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE ARIZONA FUND -- A CLASS
-----------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 3/2/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............................................. $11.140 $10.700 $10.750 $10.000
Income from investment operations:
Net investment income .......................................................... 0.376 0.589 0.580 0.460
Net realized and unrealized gain (loss) from investments ....................... 0.170 0.455 (0.010) 0.840
------- ------- ------- -------
Total from investment operations ............................................... 0.546 1.044 0.570 1.300
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ........................................... (0.376) (0.589) (0.580) (0.460)
Distributions from net realized gain on investment transactions ................ (0.100) (0.015) (0.040) (0.090)
------- ------- ------- -------
Total dividends and distributions .............................................. (0.476) (0.604) (0.620) (0.550)
------- ------- ------- -------
Net asset value, end of period .................................................... $11.210 $11.140 $10.700 $10.750
======= ======= ======= =======
Total Return(3).................................................................... 4.99% 10.07% 5.48% 13.27%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........................................ $12,177 $10,916 $9,755 $6,225
Ratio of expenses to average net assets ........................................ 0.49% 0.48% 0.46% 0.52%(4)
Ratio of expenses to average net assets prior to expense limitation ............ 1.07% 1.08% 1.25% 1.25%(4)
Ratio of net investment income to average net assets ........................... 5.03% 5.42% 5.43% 5.19%(4)
Ratio of net investment income to average net assets prior to expense limitation 4.45% 4.82% 4.64% 4.46%(4)
Portfolio turnover ............................................................. 96% 39% 70% 38%
</TABLE>
(1) Ratios have been annualized and the total returns have not been annualized.
(2) Commencement of operations.
(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) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 37
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE ARIZONA FUND -- B CLASS
-----------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 6/29/95(2)
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................ $11.140 $10.690 $10.740 $10.300
Income from investment operations:
Net investment income ............................................ 0.319 0.502 0.510 0.260
Net realized and unrealized gain (loss) from investments ......... 0.160 0.469 (0.010) 0.530
------- ------- ------- -------
Total from investment operations ................................. 0.479 0.971 0.500 0.790
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................. (0.319) (0.506) (0.510) (0.260)
Distributions from net realized gain on investment transactions .. (0.100) (0.015) (0.040) (0.090)
------- ------- ------- -------
Total dividends and distributions ................................ (0.419) (0.521) (0.550) (0.350)
------- ------- ------- -------
Net asset value, end of period ...................................... $11.200 $11.140 $10.690 $10.740
======= ======= ======= =======
Total Return(3) ..................................................... 4.38% 9.34% 4.84% 7.74%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................... $4,952 $3,711 $3,491 $1,629
Ratio of expenses to average net assets .......................... 1.23% 1.22% 1.11% 0.99%(4)
Ratio of expenses to average net assets prior to
expense limitation ............................................. 1.81% 1.82% 2.00% 2.00%(4)
Ratio of net investment income to average net assets ............. 4.29% 4.68% 4.77% 4.60%(4)
Ratio of net investment income to average net assets prior
to expense limitation .......................................... 3.71% 4.08% 3.88% 3.59%(4)
Portfolio turnover ............................................... 96% 39% 70% 38%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE ARIZONA FUND-- C CLASS
-----------------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 5/13/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................ $11.160 $10.710 $10.760 $10.200
Income from investment operations:
Net investment income ............................................ 0.313 0.534 0.500 0.300
Net realized and unrealized gain (loss) from investments ......... 0.176 0.437 (0.010) 0.650
------- ------- ------- -------
Total from investment operations ................................. 0.489 0.971 0.490 0.950
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................. (0.319) (0.506) (0.500) (0.300)
Distributions from net realized gain on investment transactions .. (0.100) (0.015) (0.040) (0.090)
------- ------- ------- -------
Total dividends and distributions ................................ (0.419) (0.521) (0.540) (0.390)
------- ------- ------- -------
Net asset value, end of period ...................................... $11.230 $11.160 $10.710 $10.760
======= ======= ======= =======
Total Return(3) ..................................................... 4.46% 9.32% 4.70% 9.43%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................... $632 $332 $23 $27
Ratio of expenses to average net assets .......................... 1.23% 1.23% 1.21% 1.20%(4)
Ratio of expenses to average net assets prior to
expense limitation ............................................. 1.81% 1.83% 2.00% 2.00%(4)
Ratio of net investment income to average net assets ............. 4.29% 4.67% 4.68% 4.65%(4)
Ratio of net investment income to average net assets prior
to expense limitation .......................................... 3.71% 4.07% 3.89% 3.85%(4)
Portfolio turnover ............................................... 96% 39% 70% 38%
</TABLE>
- -------
(1) Ratios have been annualized and the total returns have not been annualized.
(2) Commencement of operations.
(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) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
38 for tax-exempt income
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR INSURED FUNDS, INC.
TAX-FREE ARIZONA INSURED FUND -- A CLASS
-----------------------------------------------------------------------
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $11.470 $11.060 $11.150 $9.860 $11.310 $10.710
Income from investment operations:
Net investment income ................................... 0.358 0.548 0.530 0.540 0.550 0.580
Net realized and unrealized gain (loss) from investments 0.080 0.416 (0.090) 1.310 (1.370) 0.740
------- ------- ------- ------- ------ -------
Total from investment operations ........................ 0.438 0.964 0.440 1.850 (0.820) 1.320
------- ------- ------- ------- ------ -------
Less dividends and distributions:
Dividends from net investment income .................... (0.358) (0.554) (0.530) (0.560) (0.530) (0.580)
Distributions from net realized gain on investment
transactions ......................................... -- -- -- -- (0.040) (0.140)
In excess of net realized gains ......................... -- -- -- -- (0.060) --
------- ------- ------- ------- ------ -------
Total dividends and distributions ....................... (0.358) (0.554) (0.530) (0.560) (0.630) (0.720)
------- ------- ------- ------- ------ -------
Net asset value, end of period ............................. $11.550 $11.470 $11.060 $11.150 $9.860 $11.310
======= ======= ======= ======= ====== =======
Total Return(2) ............................................ 3.88% 8.96% 4.09% 19.10% (7.41%) 12.64%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $179,306 $186,485 $209,258 $238,114 $231,736 $263,312
Ratio of expenses to average net assets ................. 0.84% 0.84% 0.82% 0.69% 0.72% 0.59%
Ratio of expenses to average net assets prior to
expense limitation .................................... 0.91% 0.89% 0.95% 0.95% 0.92% 1.03%
Ratio of net investment income to average net assets .... 4.68% 4.92% 4.89% 5.07% 5.20% 5.00%
Ratio of net investment income to average net assets
prior to expense limitation ........................... 4.61% 4.87% 4.76% 4.81% 5.00% 4.56%
Portfolio turnover ...................................... 21% 42% 42% 42% 25% 34%
</TABLE>
- ------
(1) Ratios have been annualized and the total returns have not been annualized.
(2) 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.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 39
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR INSURED FUNDS, INC.
TAX-FREE ARIZONA INSURED FUND -- B CLASS
--------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 3/10/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $11.460 $11.050 $11.140 $10.440
Income from investment operations:
Net investment income .................................. 0.300 0.455 0.450 0.380
Net realized and unrealized gain (loss)
from investments ..................................... 0.091 0.414 (0.090) 0.690
------- ------- ------- -------
Total from investment operations ....................... 0.391 0.869 0.360 1.070
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... (0.301) (0.459) (0.450) (0.370)
Distributions from net realized gain on
investment transactions .............................. -- -- -- --
In excess of net realized gains ........................ -- -- -- --
------- ------- ------- -------
Total dividends and distributions ...................... (0.301) (0.459) (0.450) (0.370)
------- ------- ------- -------
Net asset value, end of period ............................ $11.550 $11.460 $11.050 $11.140
======= ======= ======= =======
Total Return(3) ........................................... 3.46% 8.06% 3.32% 10.36%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $4,782 $3,657 $3,110 $2,048
Ratio of expenses to average net assets ................ 1.59% 1.65% 1.59% 1.33%(4)
Ratio of expenses to average net assets prior to
expense limitation ................................... 1.66% 1.70% 1.70% 1.60%(4)
Ratio of net investment income to average
net assets ........................................... 3.93% 4.11% 4.11% 4.08%(4)
Ratio of net investment income to average
net assets prior to expense limitation ............... 3.86% 4.06% 4.00% 3.81%(4)
Portfolio turnover ..................................... 21% 42% 42% 42%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
VOYAGEUR INSURED FUNDS, INC.
TAX-FREE ARIZONA INSURED FUND -- C CLASS
---------------------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR YEAR FROM
ENDED ENDED ENDED ENDED 5/26/94(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $11.470 $11.060 $11.150 $9.860 $10.480
Income from investment operations:
Net investment income .................................. 0.301 0.456 0.430 0.450 0.270
Net realized and unrealized gain (loss)
from investments ..................................... 0.090 0.414 (0.090) 1.310 (0.560)
------- ------- ------- ------- ------
Total from investment operations ....................... 0.391 0.870 0.340 1.760 (0.290)
------- ------- ------- ------- ------
Less dividends and distributions:
Dividends from net investment income ................... (0.301) (0.460) (0.430) (0.470) (0.250)
Distributions from net realized gain on
investment transactions .............................. -- -- -- -- (0.040)
In excess of net realized gains ........................ -- -- -- -- (0.040)
------- ------- ------- ------- ------
Total dividends and distributions ...................... (0.301) (0.460) (0.430) (0.470) (0.330)
------- ------- ------- ------- ------
Net asset value, end of period ............................ $11.560 $11.470 $11.060 $11.150 $9.860
======= ======= ======= ======= ======
Total Return(3) ........................................... 3.46% 8.05% 3.18% 18.10% (2.84%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $627 $675 $554 $541 $326
Ratio of expenses to average net assets ................ 1.59% 1.65% 1.70% 1.54% 1.50%(4)
Ratio of expenses to average net assets prior to
expense limitation ................................... 1.66% 1.70% 1.70% 1.69% 1.71%(4)
Ratio of net investment income to average
net assets ........................................... 3.93% 4.11% 4.01% 4.18% 4.10%(4)
Ratio of net investment income to average
net assets prior to expense limitation ............... 3.86% 4.06% 4.01% 4.03% 3.89%(4)
Portfolio turnover ..................................... 21% 42% 42% 42% 25%
</TABLE>
- ------
(1) Ratios have been annualized and the total returns have not been annualized.
(2) Commencement of operations.
(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) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
40 for tax-exempt income
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE CALIFORNIA FUND -- A CLASS
------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 3/2/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............................................. $11.050 $10.430 $10.640 $10.000
Income from investment operations:
Net investment income .......................................................... 0.387 0.590 0.600 0.470
Net realized and unrealized gain (loss) from investments ....................... 0.163 0.665 (0.180) 0.700
------- ------- ------- -------
Total from investment operations ............................................... 0.550 1.255 0.420 1.170
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ........................................... (0.380) (0.595) (0.600) (0.470)
Distributions from net realized gain on investment transactions ................ -- (0.040) (0.030) (0.060)
------- ------- ------- -------
Total dividends and distributions .............................................. (0.380) (0.635) (0.630) (0.530)
------- ------- ------- -------
Net asset value, end of period .................................................... $11.220 $11.050 $10.430 $10.640
======= ======= ======= =======
Total Return(3).................................................................... 5.07% 12.43% 4.21% 11.97%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........................................ $11,600 $4,385 $1,218 $1,012
Ratio of expenses to average net assets ........................................ 0.22% 0.13% 0.27% 0.46%(4)
Ratio of expenses to average net assets prior to expense limitation ............ 1.07% 1.19% 1.25% 1.22%(4)
Ratio of net investment income to average net assets ........................... 5.00% 5.32% 5.71% 5.57%(4)
Ratio of net investment income to average net assets prior to expense limitation 4.15% 4.26% 4.73% 4.81%(4)
Portfolio turnover ............................................................. 62% 17% 8% 40%
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE CALIFORNIA FUND -- B CLASS
-------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 8/23/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................ $11.080 $10.440 $10.650 $9.960
Income from investment operations:
Net investment income ............................................ 0.319 0.520 0.560 0.200
Net realized and unrealized gain (loss) from investments ......... 0.186 0.688 (0.180) 0.740
------- ------- ------- -------
Total from investment operations ................................. 0.505 1.208 0.380 0.940
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................. (0.325) (0.528) (0.560) (0.190)
Distributions from net realized gain on investment
transactions ................................................... -- (0.040) (0.030) (0.060)
------- ------- ------- -------
Total dividends and distributions ................................ (0.325) (0.568) (0.590) (0.250)
------- ------- ------- -------
Net asset value, end of period ...................................... $11.260 $11.080 $10.440 $10.650
======= ======= ======= =======
Total Return(3) ..................................................... 4.62% 11.91% 3.77% 9.52%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................... $8,962 $5,576 $660 $128
Ratio of expenses to average net assets .......................... 0.97% 0.80% 0.50% 0.60%(4)
Ratio of expenses to average net assets prior to
expense limitation ............................................. 1.82% 1.86% 2.00% 1.93%(4)
Ratio of net investment income to average net assets ............. 4.27% 4.65% 5.34% 5.33%(4)
Ratio of net investment income to average net assets prior
to expense limitation .......................................... 3.42% 3.59% 3.84% 4.00%(4)
Portfolio turnover ............................................... 62% 17% 8% 40%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS, INC.
TAX-FREE CALIFORNIA FUND -- C CLASS
------------------------------------
EIGHT PERIOD
MONTHS YEAR FROM
ENDED ENDED 4/9/96(2) TO
8/31/98(1) 12/31/97(5) 12/31/96
<S> <C> <C> <C>
Net asset value, beginning of period ................................ $11.050 $10.420 $10.070
Income from investment operations:
Net investment income ............................................ 0.335 0.487 0.370
Net realized and unrealized gain (loss) from investments ......... 0.170 0.696 0.380
------- ------- -------
Total from investment operations ................................. 0.505 1.183 0.750
------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................. (0.325) (0.513) (0.370)
Distributions from net realized gain on investment
transactions ................................................... -- (0.040) (0.030)
------- ------- -------
Total dividends and distributions ................................ (0.325) (0.553) (0.400)
------- ------- -------
Net asset value, end of period ...................................... $11.230 $11.050 $10.420
======= ======= =======
Total Return(3) ..................................................... 4.64% 11.69% 7.58%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................... $774 $109 $94
Ratio of expenses to average net assets .......................... 0.97% 0.87% 0.78%(4)
Ratio of expenses to average net assets prior to
expense limitation ............................................. 1.82% 1.93% 2.00%(4)
Ratio of net investment income to average net assets ............. 4.27% 4.58% 5.13%(4)
Ratio of net investment income to average net assets prior
to expense limitation .......................................... 3.42% 3.52% 3.91%(4)
Portfolio turnover ............................................... 62% 17% 8%
</TABLE>
- ------
(1) Ratios have been annualized and the total returns have not been annualized.
(2) Commencement of operations.
(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) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 41
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE CALIFORNIA INSURED FUND -- A CLASS
-----------------------------------------------------------------------------------
EIGHT TWO
MONTHS YEAR YEAR YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98(1) 12/31/97(4) 12/31/96 12/31/95 12/31/94 10/31/94 10/31/93
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $10.980 $10.500 $10.650 $9.330 $9.510 $11.080 $10.020
Income from investment operations:
Net investment income ...................... 0.345 0.513 0.520 0.530 0.100 0.550 0.600
Net realized and unrealized gain (loss)
from investments ......................... 0.150 0.486 (0.150) 1.340 (0.180) (1.520) 1.110
------- ------- ------- ------- ------- ------- -------
Total from investment operations ........... 0.495 0.999 0.370 1.870 (0.080) (0.970) 1.710
------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.345) (0.519) (0.520) (0.550) (0.090) (0.540) (0.600)
Distributions from net realized gain on
investment transactions .................. -- -- -- -- (0.010) (0.060) (0.050)
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions .......... (0.345) (0.519) (0.520) (0.550) (0.100) (0.600) (0.650)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ................ $11.130 $10.980 $10.500 $10.650 $9.330 $9.510 $11.080
======= ======= ======= ======= ======= ======= =======
Total Return(2)................................ 4.58% 9.78% 3.63% 20.51% (0.84%) (8.97%) 17.29%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $28,577 $26,923 $30,551 $33,860 $27,994 $27,282 $12,509
Ratio of expenses to average net assets .... 0.94% 0.99% 0.82% 0.70% 0.10%(3) 0.20% 0.00%
Ratio of expenses to average net assets
prior to expense limitation .............. 0.94% 1.02% 1.01% 1.02% 1.24%(3) 1.25% 1.25%
Ratio of net investment income to average
net assets .............................. 4.69% 4.85% 5.05% 5.23% 6.30%(3) 5.37% 5.26%
Ratio of net investment income to average net
assets prior to expense limitation ....... 4.69% 4.82% 4.86% 4.91% 5.16%(3) 4.32% 4.01%
Portfolio turnover ......................... 44% 63% 55% 107% 7% 18% 24%
</TABLE>
- ------
(1) Ratios have been annualized and the total returns have not been annualized.
(2) 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.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
42 for tax-exempt income
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE CALIFORNIA INSURED FUND -- B CLASS
--------------------------------------------------------------------------
EIGHT TWO PERIOD
MONTHS YEAR YEAR YEAR MONTHS FROM
ENDED ENDED ENDED ENDED ENDED 3/1/94(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95 12/31/94 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $10.990 $10.500 $10.650 $9.330 $9.510 $10.680
Income from investment operations:
Net investment income ........................ 0.290 0.457 0.480 0.500 0.080 0.310
Net realized and unrealized gain
(loss) from investments .................... 0.140 0.495 (0.150) 1.330 (0.170) (1.160)
------- ------- ------- ------ ------ -------
Total from investment operations ............... 0.430 0.952 0.330 1.830 (0.090) (0.850)
------- ------- ------- ------ ------ -------
Less dividends and distributions:
Dividends from net
investment income .......................... (0.290) (0.462) (0.480) (0.510) (0.080) (0.300)
Distributions from net realized gain on
investment transactions .................... -- -- -- -- (0.010) (0.020)
------- ------- ------- ------ ------ -------
Total dividends and distributions ............ (0.290) (0.462) (0.480) (0.510) (0.090) (0.320)
------- ------- ------- ------ ------ -------
Net asset value, end of period .................. $11.130 $10.990 $10.500 $10.650 $9.330 $9.510
======= ======= ======= ======= ====== ======
Total Return(3).................................. 3.96% 9.29% 3.22% 20.01% (0.92%) (7.93%)
Ratios and supplemental data:
Net assets, end of period
(000 omitted) .............................. $6,588 $6,629 $6,717 $6,029 $2,219 $1,427
Ratio of expenses to average
net assets ................................. 1.69% 1.53% 1.21% 1.10% 0.57%(4) 0.73%(4)
Ratio of expenses to average net assets
prior to expense limitation ................ 1.69% 1.56% 1.76% 1.75% 1.94%(4) 1.95%(4)
Ratio of net investment income to
average net assets ......................... 3.94% 4.31% 4.64% 4.75% 5.54%(4) 4.82%(4)
Ratio of net investment income to
average net assets prior
to expense limitation ...................... 3.94% 4.28% 4.09% 4.10% 4.17%(4) 3.60%(4)
Portfolio turnover ........................... 44% 63% 55% 107% 7% 18%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE CALIFORNIA INSURED FUND - C CLASS
-----------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 4/12/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............ $10.940 $10.460 $10.650 $10.190
Income from investment operations:
Net investment income ........................ 0.289 0.485 0.440 0.250
Net realized and unrealized gain
(loss) from investments .................... 0.151 0.432 (0.190) 0.530
------- ------- ------- -------
Total from investment operations ............... 0.440 0.917 0.250 0.780
------- ------- ------- -------
Less dividends and distributions:
Dividends from net
investment income .......................... (0.290) (0.437) (0.440) (0.320)
Distributions from net realized gain on
investment transactions .................... -- -- -- --
------- ------- ------- -------
Total dividends and distributions ............ (0.290) (0.437) (0.440) (0.320)
------- ------- ------- -------
Net asset value, end of period .................. $11.090 $10.940 $10.460 $10.650
======= ======= ======= =======
Total Return(3).................................. 4.08% 8.98% 2.47% 7.77%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) .............................. $461 $476 $55 $53
Ratio of expenses to average
net assets ................................. 1.69% 1.71% 1.58% 1.53%(4)
Ratio of expenses to average net assets
prior to expense limitation ................ 1.69% 1.74% 1.77% 1.77%(4)
Ratio of net investment income to
average net assets ......................... 3.94% 4.13% 4.02% 4.25%(4)
Ratio of net investment income to
average net assets prior
to expense limitation ...................... 3.94% 4.10% 3.83% 4.01%(4)
Portfolio turnover ........................... 44% 63% 55% 107%
</TABLE>
- ----------------------
1 Ratios have been annualized and the total returns have not been annualized.
2 Commencement of operations.
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 Annualized.
5 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 43
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS II, INC.
TAX-FREE COLORADO FUND -- A CLASS
------------------------------------------------------------------------------
EIGHT
MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98(1) 12/31/97(3) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.380 $10.780 $10.900 $9.530 $11.100 $10.570
Income from investment operations:
Net investment income 0.376 0.574 0.560 0.540 0.550 0.560
Net realized and unrealized gain (loss)
from investments 0.130 0.618 (0.130) 1.380 (1.540) 0.850
-------- -------- -------- -------- -------- --------
Total from investment operations 0.506 1.192 0.430 1.920 (0.990) 1.410
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income (0.376) (0.592) (0.550) (0.550) (0.540) (0.560)
Distributions from net realized gain on
investment transactions -- -- -- -- (0.040) (0.320)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (0.376) (0.592) (0.550) (0.550) (0.580) (0.880)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $11.510 $11.380 $10.780 $10.900 $9.530 $11.100
======== ======== ======== ======== ======== ========
Total Return(2) 4.51% 11.40% 4.08% 20.54% (9.12%) 13.72%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $357,127 $357,993 $358,328 $392,815 $354,138 $399,218
Ratio of expenses to average net assets 0.83% 0.81% 0.78% 0.76% 0.66% 0.75%
Ratio of expenses to average net assets
prior to expense limitation 0.92% 0.86% 0.91% 0.93% 0.72% 0.75%
Ratio of net investment income to
average net assets 4.93% 5.25% 5.27% 5.18% 5.35% 4.97%
Ratio of net investment income to
average net assets prior to
expense limitation 4.84% 5.20% 5.14% 5.01% 5.29% 4.97%
Portfolio turnover 36% 54% 40% 82% 69% 59%
</TABLE>
- ----------------------
1 Ratios have been annualized and the total returns have not been annualized.
2 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.
3 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
44 for tax-exempt income
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS II, INC.
TAX-FREE COLORADO FUND - B CLASS
-----------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 3/22/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period ....... $11.380 $10.780 $10.900 $10.250
Income from investment operations:
Net investment income ................... 0.319 0.483 0.470 0.350
Net realized and unrealized gain (loss)
from investments ...................... 0.130 0.616 (0.130) 0.650
------- ------- ------- -------
Total from investment operations ........ 0.449 1.099 0.340 1.000
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .... (0.319) (0.499) (0.460) (0.350)
Distributions from net realized gain on
investment transactions ............... -- -- -- --
------- ------- ------- -------
Total dividends and distributions ....... (0.319) (0.499) (0.460) (0.350)
------- ------- ------- -------
Net asset value, end of period ............. $11.510 $11.380 $10.780 $10.900
======= ======= ======= =======
Total Return(3)............................. 3.99% 10.47% 3.25% 9.96%
Ratios and supplemental data:
Net assets, end of period (000 omitted) . $10,726 $7,798 $4,172 $1,643
Ratio of expenses to average net assets . 1.58% 1.62% 1.58% 1.39%(4)
Ratio of expenses to average net assets
prior to expense limitation ........... 1.67% 1.67% 1.65% 1.60%(4)
Ratio of net investment income to average
net assets ............................ 4.18% 4.44% 4.45% 3.96%(4)
Ratio of net investment income to average
net assets prior to expense limitation. 4.09% 4.39% 4.38% 3.75%(4)
Portfolio turnover ...................... 36% 54% 40% 82%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VOYAGEUR MUTUAL FUNDS II, INC.
TAX-FREE COLORADO FUND - C CLASS
------------------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR YEAR FROM
ENDED ENDED ENDED ENDED 5/6/94(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $11.380 $10.780 $10.900 $9.530 $10.210
Income from investment operations:
Net investment income ................... 0.319 0.484 0.460 0.450 0.290
Net realized and unrealized gain (loss)
from investments ...................... 0.140 0.615 (0.130) 1.370 (0.670)
------- ------- ------- ------ -------
Total from investment operations ........ 0.459 1.099 0.330 1.820 (0.380)
------- ------- ------- ------ -------
Less dividends and distributions:
Dividends from net investment income .... (0.319) (0.499) (0.450) (0.450) (0.270)
Distributions from net realized gain on
investment transactions ............... -- -- -- -- (0.030)
------- ------- ------- ------ -------
Total dividends and distributions ....... (0.319) (0.499) (0.450) (0.450) (0.300)
------- ------- ------- ------ -------
Net asset value, end of period ............. $11.520 $11.380 $10.780 $10.900 $9.530
======= ======= ======= ======= =======
Total Return(3)............................. 4.08% 10.47% 3.17% 19.44% (3.75%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) . $2,068 $1,697 $1,522 $1,042 $465
Ratio of expenses to average net assets . 1.58% 1.64% 1.66% 1.66% 1.80%(4)
Ratio of expenses to average net assets
prior to expense limitation ........... 1.67% 1.69% 1.66% 1.66% 1.81%(4)
Ratio of net investment income to average
net assets ............................ 4.18% 4.42% 4.40% 4.20% 4.23%(4)
Ratio of net investment income to average
net assets prior to expense limitation. 4.09% 4.37% 4.40% 4.20% 4.22%(4)
Portfolio turnover ...................... 36% 54% 40% 82% 69%
</TABLE>
- ----------------------
1 Ratios have been annualized and the total returns have not been annualized.
2 Commencement of operations.
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 Annualized.
5 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 45
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE NEW MEXICO FUND - A CLASS
-----------------------------------------------------------------------------------
EIGHT TWO
MONTHS YEAR YEAR YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98(1) 12/31/97(4) 12/31/96 12/31/95 12/31/94 10/31/94 10/31/93
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $11.280 $10.790 $10.890 $9.590 $9.770 $10.920 $10.000
Income from investment operations:
Net investment income .................... 0.364 0.547 0.540 0.520 0.110 0.560 0.570
Net realized and unrealized gain
(loss) from investments ............... 0.171 0.503 (0.110) 1.330 (0.200) (1.160) 0.980
------- ------- ------- ------ ------ ------- -------
Total from investment operations ......... 0.535 1.050 0.430 1.850 (0.090) (0.600) 1.550
------- ------- ------- ------ ------ ------- -------
Less dividends and distributions:
Dividends from net investment income ..... (0.365) (0.560) (0.530) (0.550) (0.090) (0.550) (0.570)
Distributions from net realized gain
on investment transactions ........... -- -- -- -- -- -- (0.060)
------- ------- ------- ------ ------ ------- -------
Total dividends and distributions ........ (0.365) (0.560) (0.530) (0.550) (0.090) (0.550) (0.630)
------- ------- ------- ------ ------ ------- -------
Net asset value, end of period .............. $11.450 $11.280 $10.790 $10.890 $9.590 $9.770 $10.920
======= ======= ======= ======= ====== ======= =======
Total Return(2) ............................. 4.81% 10.01% 4.13% 19.64% (0.90%) (5.56%) 15.77%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .. $21,155 $18,959 $20,133 $21,402 $19,706 $23,096 $17,302
Ratio of expenses to average net assets .. 1.00% 0.99% 0.88% 0.87% 0.06%(3) 0.29% 0.00%
Ratio of expenses to average net assets
prior to expense limitation .......... 1.15% 1.04% 1.07% 1.09% 1.25%(3) 1.16% 1.25%
Ratio of net investment income to
average net assets ................... 4.81% 5.00% 5.06% 5.07% 6.38%(3) 5.26% 5.10%
Ratio of net investment income to average
net assets prior to expense limitation 4.66% 4.95% 4.87% 4.85% 5.19%(3) 4.39% 3.85%
Portfolio turnover ....................... 20% 28% 42% 55% 2% 23% 31%
</TABLE>
- ----------------------
1 Ratios have been annualized and the total returns have not been annualized.
2 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.
3 Annualized
4 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
46 for tax-exempt income
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE NEW MEXICO FUND - B CLASS
-----------------------------------------------------------------------------
EIGHT TWO PERIOD
MONTHS YEAR YEAR YEAR MONTHS FROM
ENDED ENDED ENDED ENDED ENDED 3/3/94(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95 12/31/94 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $11.290 $10.790 $10.890 $9.590 $9.770 $10.690
Income from investment operations:
Net investment income .......................... 0.309 0.465 0.460 0.460 0.090 0.310
Net realized and unrealized gain (loss)
from investments ............................. 0.169 0.508 (0.110) 1.320 (0.190) (0.930)
------- ------- ------- ------ ------ -------
Total from investment operations ............... 0.478 0.973 0.350 1.780 (0.100) (0.620)
------- ------- ------- ------ ------ -------
Less dividends and distributions:
Dividends from net investment income ........... (0.308) (0.473) (0.450) (0.480) (0.080) (0.300)
Distributions from net realized gain on
investment transactions ...................... -- -- -- -- -- --
------- ------- ------- ------ ------ -------
Total dividends and distributions .............. (0.308) (0.473) (0.450) (0.480) (0.080) (0.300)
------- ------- ------- ------ ------ -------
Net asset value, end of period .................... $11.460 $11.290 $10.790 $10.890 $9.590 $9.770
======= ======= ======= ====== ====== =======
Total Return(3).................................... 4.29% 9.24% 3.39% 18.84% (0.98%) (5.84%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........ $1,782 $1,065 $794 $605 $272 $264
Ratio of expenses to average net assets ........ 1.75% 1.76% 1.61% 1.53% 0.75%(4) 0.98%(4)
Ratio of expenses to average net assets prior to
expense limitation ........................... 1.90% 1.81% 1.82% 1.83% 2.00%(4) 1.86%(4)
Ratio of net investment income to average
net assets ................................... 4.06% 4.23% 4.31% 4.33% 5.60%(4) 4.57%(4)
Ratio of net investment income to average
net assets prior to expense limitation ....... 3.91% 4.18% 4.10% 4.03% 4.35%(4) 3.69%(4)
Portfolio turnover ............................. 20% 28% 42% 55% 2% 23%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE NEW MEXICO FUND - C CLASS
---------------------------------------
EIGHT PERIOD
MONTHS YEAR FROM
ENDED ENDED 5/7/96(2) TO
8/31/98(1) 12/31/97(5) 12/31/96
<S> <C> <C> <C>
Net asset value, beginning of period .............. $11.280 $10.790 $10.410
Income from investment operations:
Net investment income .......................... 0.305 0.459 0.280
Net realized and unrealized gain (loss)
from investments ............................. 0.183 0.495 0.370
------- ------- -------
Total from investment operations ............... 0.488 0.954 0.650
------- ------- -------
Less dividends and distributions:
Dividends from net investment income ........... (0.308) (0.464) (0.270)
Distributions from net realized gain on
investment transactions ...................... -- -- --
------- ------- -------
Total dividends and distributions .............. (0.308) (0.464) (0.270)
------- ------- -------
Net asset value, end of period .................... $11.460 $11.280 $10.790
======= ======= =======
Total Return(3).................................... 4.38% 9.06% 6.30%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........ $394 $315 $341
Ratio of expenses to average net assets ........ 1.75% 1.84% 1.74%(4)
Ratio of expenses to average net assets prior to
expense limitation ........................... 1.90% 1.89% 1.83%(4)
Ratio of net investment income to average
net assets ................................... 4.06% 4.15% 4.21%(4)
Ratio of net investment income to average
net assets prior to expense limitation ....... 3.91% 4.10% 4.12%(4)
Portfolio turnover ............................. 20% 28% 42%
</TABLE>
- ----------------------
1 Ratios have been annualized and the total returns have not been annualized.
2 Commencement of operations.
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 Annualized.
5 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
for tax-exempt income 47
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE UTAH FUND - A CLASS
------------------------------------------------------------------------------------
EIGHT TWO
MONTHS YEAR YEAR YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95 12/31/94 10/31/94 10/31/93
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $11.330 $10.840 $11.040 $9.800 $9.940 $11.070 $10.000
Income from investment operations:
Net investment income ................... 0.372 0.565 0.550 0.590 0.100 0.600 0.650
Net realized and unrealized gain (loss)
from investments ..................... 0.110 0.495 (0.200) 1.240 (0.150) (1.070) 1.070
------- ------- ------- ------ ------ ------- -------
Total from investment operations ........ 0.482 1.060 0.350 1.830 (0.050) (0.470) 1.720
------- ------- ------- ------ ------ ------- -------
Less dividends and distributions:
Dividends from net investment income .... (0.372) (0.570) (0.550) (0.590) (0.090) (0.600) (0.650)
Distributions from net realized gain on
investment transactions .............. -- -- -- -- -- (0.060) --
------- ------- ------- ------ ------ ------- -------
Total dividends and distributions ....... (0.372) (0.570) (0.550) (0.590) (0.090) (0.660) (0.650)
------- ------- ------- ------ ------ ------- -------
Net asset value, end of period ............. $11.440 $11.330 $10.840 $11.040 $9.800 $9.940 $11.070
======= ======= ======= ======= ====== ======== =======
Total Return(3)............................. 4.30% 10.08% 3.35% 19.06% (0.41%) (4.50%) 17.54%
Ratios and supplemental data:
Net assets, end of period (000 omitted) . $2,803 $3,223 $3,861 $4,142 $3,728 $4,054 $3,913
Ratio of expenses to average net assets . 0.76% 0.69% 0.68% 0.38% 0.11%(4) 0.10% 0.00%
Ratio of expenses to average net assets
prior to expense limitation .......... 1.17% 3.12% 1.25% 1.25% 1.14%(4) 1.25% 1.25%
Ratio of net investment income to average
net assets .......................... 4.89% 5.10% 5.14% 5.51% 6.38%(4) 5.64% 5.65%
Ratio of net investment income to average
net assets prior to expense limitation 4.48% 2.67% 4.57% 4.64% 5.35%(4) 4.49% 4.40%
Portfolio turnover ...................... 84% 39% 39% 35% 0% 2% 44%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VOYAGEUR INVESTMENT TRUST
TAX-FREE UTAH FUND - B CLASS
---------------------------------------------------------------------
EIGHT PERIOD
MONTHS YEAR YEAR FROM
ENDED ENDED ENDED 5/27/95(2) TO
8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................. $11.330 $10.830 $11.040 $10.630
Income from investment operations:
Net investment income .............................. 0.313 0.464 0.470 0.300
Net realized and unrealized gain
(loss) from investments ......................... 0.120 0.515 (0.210) 0.390
-------- -------- -------- --------
Total from investment operations ................... 0.433 0.979 0.260 0.690
-------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income ............... (0.313) (0.479) (0.470) (0.280)
Distributions from net realized gain
on investment transactions ...................... -- -- -- --
-------- -------- -------- --------
Total dividends and distributions .................. (0.313) (0.479) (0.470) (0.280)
-------- -------- -------- --------
Net asset value, end of period ........................ $11.450 $11.330 $10.830 $11.040
======== ======== ======== ========
Total Return(3 )....................................... 3.87% 9.28% 2.47% 6.60%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............ $608 $558 $397 $363
Ratio of expenses to average net assets ............ 1.51% 1.50% 1.46% 0.92%(4)
Ratio of expenses to average net assets prior to
expense limitation .............................. 1.92% 3.93% 2.00% 2.00%(4)
Ratio of net investment income to average net assets 4.14% 4.29% 4.34% 4.74%(4)
Ratio of net investment income to average net assets
prior to expense limitation ..................... 3.73% 1.86% 1.86% 3.66%(4)
Portfolio turnover ................................. 84% 39% 39% 35%
</TABLE>
- ----------------------
1 Ratios have been annualized and the total returns have not been annualized.
2 Commencement of operations.
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 Annualized.
5 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
<PAGE>
48 for tax-exempt income
Notes To Financial Statements
August 31, 1998
Delaware-Voyageur Tax-Free Arizona ("Tax-Free Arizona Fund") and
Delaware-Voyageur Tax-Free California Fund ("Tax-Free California Fund"), series
of Voyageur Mutual Funds, Inc., Delaware-Voyageur Tax-Free Arizona Insured Fund
("Tax-Free Arizona Insured Fund"), a series of Voyageur Insured Funds, Inc., and
Delaware-Voyageur Tax-Free Colorado Fund ("Tax-Free Colorado Fund"), a series of
Voyageur Mutual Funds II, Inc., are registered under the Investment Company Act
of 1940 (as amended) as open-end management investment companies. Tax-Free
Arizona Insured Fund and Tax-Free Colorado Fund are registered as diversified.
Tax-Free Arizona Fund and Tax- Free California Fund are registered as
non-diversified. Delaware-Voyageur Tax-Free California Insured Fund ("Tax-Free
California Insured Fund"), Delaware-Voyageur Tax-Free New Mexico Fund ("Tax-Free
New Mexico Fund"), and Delaware-Voyageur Tax-Free Utah Fund ("Tax-Free Utah
Fund"), series of Voyageur Investment Trust, are Massachusetts business trusts
registered under the Investment Company Act of 1940 (as amended) as open-end
management investment companies. Tax-Free New Mexico Fund and Tax-Free Utah Fund
are registered as diversified. Tax-Free California Insured Fund is registered as
non-diversified.
Tax-Free Arizona Fund, Tax-Free Arizona Insured Fund, Tax-Free California Fund,
Tax-Free California Insured Fund, Tax-Free Colorado Fund, Tax-Free New Mexico
Fund and Tax-Free Utah Fund, (referred to separately as "Fund" or collectively
as "Funds") seek a high level of current income free from both federal and state
income taxes by investing in investment grade municipal bonds. The Funds each
offer 3 classes of shares. The A class carries a front-end sales charge of
3.75%. The B class carries a back-end deferred sales charge. The C class carries
a level load deferred sales charge.
The Funds have changed their fiscal year ends from December 31 to August 31 to
match the fiscal year of Delaware Investments' national municipal bond funds.
1. Fund Reorganization
On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur Fund
Managers, Inc.'s ("Voyageur") parent, Dougherty Financial Group, Inc. ("DFG")
pursuant to an agreement and plan of merger dated January 15, 1997, in which LNC
acquired DFG including the mutual fund investment advisory business of DFG
conducted by Voyageur. Upon completion of the acquisition, Delaware Management
Company ("DMC") became the investment adviser to the Funds, Delaware
Distributors, L.P. ("DDLP") became the distributor for the Funds, and Delaware
Service Company, Inc. ("DSC") became the transfer, dividend-disbursing,
shareholder servicing and accounting service agent for the Funds. DMC, DDLP and
DSC assumed these services under substantially similar fee structures that were
in effect prior to the acquisition.
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 Funds' 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 gaindistributions 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.
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.
Other - Expenses common to all funds within the Delaware Investments Family of
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 specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts and
market premiums are amortized 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, if any, are distributed annually.
<PAGE>
Certain expenses of the Funds are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of each Fund's average
daily net assets.
3. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
pay DMC, the Investment Manager of each Fund, an annual fee, which is calculated
daily on the net assets of each Fund.
DMC has elected to waive its fees and reimburse each Fund to the extent that
annual operating expenses exclusive of distribution expenses, taxes, interest,
brokerage commissions and extraordinary expenses, do not exceed the following
percentages of average daily net assets through December 31, 1998. The
management fee rates and operating expense limits for each fund are as follows:
Management Operating Expense
fee as a Limitation as a
percentage of percentage of
average daily average daily
net assets net assets
(per annum) (per annum)
----------- -----------
Tax-Free Arizona Fund ................... 0.50% 0.25%*
Tax-Free Arizona Insured Fund............ 0.50% 0.66%*
Tax-Free California Fund ................ 0.50% 0.00%
Tax-Free California Insured Fund ........ 0.50% 0.74%*
Tax-Free Colorado Fund .................. 0.50% 0.62%*
Tax-Free New Mexico Fund ............... 0.50% 0.75%
Tax-Free Utah Fund ...................... 0.50% 0.60%*
* Prior to May 1, 1998, such expenses were limited to 0.22%, 0.59%, 0.73%,
0.56% and 0.43% for Tax-Free Arizona Fund, Tax-Free Arizona Insured Fund,
Tax-Free California Insured Fund, Tax-Free Colorado Fund and Tax-Free Utah Fund,
respectively.
<PAGE>
for tax-exempt income 49
Note to Financial Statements (Continued)
3. Investment Management and Other Transactions with Affiliates (Continued)
The Funds have engaged DSC, an affiliate of DMC, to provide dividend disbursing,
transfer agent and accounting services for each Fund. Each fund pays DSC a
monthly fee based on number of shareholder accounts, shareholder transactions
and average net assets, subject to certain minimums.
On August 31, 1998, the Funds had payables to affiliates as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona California California Colorado New Mexico Utah
Fund Insured Fund Fund Insured Fund Fund Fund Fund
---- ------------ ---- ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Management fee
payable to DMC ................... $-- $102,591 $-- $14,660 $65,813 $13,328 $--
Dividend disbursing, transfer agent
fees, accounting fees
and other expenses
payable to DSC.................... 1,458 15,159 1,588 2,869 32,035 2,069 293
Other expenses payable to DMC
and affiliates ................... -- 47,320 -- 13,127 85,282 6,195 --
</TABLE>
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
Classes for each Fund.
DDLP earned commissions on sales of the Fund A Class shares for each Fund as
follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona California California Colorado New Mexico Utah
Fund Insured Fund Fund Insured Fund Fund Fund Fund
---- ------------ ---- ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Eight months ended 8/31/98 ...... $5,377 $18,977 $3,880 $4,563 $52,239 $8,164 $567
Eight months ended 12/31/97...... 3,917 13,360 1,158 3,205 43,189 2,764 247
</TABLE>
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Funds. These officers, directors and employees are paid no compensation
by the Funds.
4. Investments
During the eight months ended August 31, 1998, the Funds made purchases and
sales of investment securities other than U.S. government securities and
temporary cash investments for each Fund as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona California California Colorado New Mexico Utah
Fund Insured Fund Fund Insured Fund Fund Fund Fund
---- ------------ ---- ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases .................... $12,218,850 $25,222,307 $19,760,360 $11,052,521 $87,619,295 $5,554,580 $1,999,489
Sales ........................ 9,910,092 34,006,929 5,569,023 9,705,213 88,816,205 2,835,575 3,458,342
</TABLE>
<PAGE>
At August 31, 1998, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona California California Colorado New Mexico Utah
Fund Insured Fund Fund Insured Fund Fund Fund Fund
---- ------------ ---- ------------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of Investments ................ $16,575,771 $169,077,292 $24,073,845 $36,142,998 $337,366,222 $21,296,576 $3,132,174
=========== =========== =========== =========== =========== =========== ===========
Aggregate unrealized appreciation .. $834,178 $14,460,129 $673,752 $2,783,668 $28,458,536 $1,803,685 $238,686
Aggregate unrealized depreciation .. -- -- (637) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation ........ $834,178 $14,460,129 $673,115 $2,783,668 $28,458,536 $1,803,685 $238,686
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
For federal income tax purposes, as of August 31, 1998, Tax-Free Arizona Insured
Fund had a capital loss carryover of $2,746,656 that will expire in 2003 through
2004, Tax-Free California Insured Fund had a capital loss carryover of $421,693
that will expire in 2003, Tax-Free Colorado Fund had a capital loss carryover of
$3,076,014 that will expire in 2003 through 2004, Tax-Free New Mexico Fund had a
capital loss carryover of $540,677 that will expire in 2002 through 2004, and
Tax-Free Utah Fund had a capital loss carryover of $3,293 that will expire in
2004.
<PAGE>
50 for tax-exempt income
Notes to Financial Statements (Continued)
5. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Tax-Free Arizona Fund Tax-Free Arizona Insured Fund
----------------------------------- ----------------------------------
Eight Months Year Year Eight Months Year Year
Ended Ended Ended Ended Ended Ended
8/31/98 12/31/97 12/31/96 8/31/98 12/31/97 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
A Class .................................... 204,834 158,751 386,538 489,440 778,637 1,146,036
B Class .................................... 142,024 130,063 185,353 128,628 146,974 101,877
C Class .................................... 25,868 27,479 192 9,588 23,129 33,261
Shares issued upon reinvestment of dividends
from net investment income and net
realized gains from investment transactions:
A Class .................................... 23,556 29,507 24,151 206,605 369,681 386,959
B Class .................................... 7,389 8,686 6,721 5,160 7,217 5,559
C Class .................................... 698 159 129 912 1,342 1,756
----------- -------- -------- --------- ---------- ---------
404,369 354,645 603,084 840,333 1,326,980 1,675,448
----------- -------- -------- --------- ---------- ---------
Shares repurchased:
A Class .................................... (121,649) (120,327) (77,891) (1,438,707) (3,811,075) (3,960,753)
B Class .................................... (40,602) (132,059) (17,142) (38,808) (116,629) (9,723)
C Class .................................... (33) -- (706) (15,119) (15,711) (33,417)
----------- -------- -------- --------- ---------- ---------
(162,284) (252,386) (95,739) (1,492,634) (3,943,415) (4,003,893)
----------- -------- -------- --------- ---------- ---------
Net Increase (Decrease) ....................... 242,085 102,259 507,345 (652,301) (2,616,435) (2,328,445)
=========== ======== ======== ========= ========== =========
Tax-Free California Fund Tax-Free California Insured Fund
----------------------------------- ----------------------------------
Eight Months Year Year Eight Months Year Year
Ended Ended Ended Ended Ended Ended
8/31/98 12/31/97 12/31/96 8/31/98 12/31/97 12/31/96
Shares sold:
A Class .................................... 689,801 325,158 100,004 396,502 135,140 425,361
B Class .................................... 309,443 443,601 51,200 39,549 62,442 96,511
C Class .................................... 58,498 8,190 8,843* 10,226 37,910 58,503
Shares issued upon reinvestment of dividends
from net investment income and net
realized gains from investment transactions:
A Class .................................... 11,126 7,845 5,108 30,176 56,507 59,647
B Class .................................... 5,345 3,798 41 5,418 10,856 9,821
C Class .................................... 615 611 160* 223 355 219
--------- -------- -------- -------- ------- --------
1,074,828 789,203 165,356 482,094 303,210 650,062
--------- -------- -------- -------- ------- --------
Shares repurchased:
A Class .................................... (64,555) (52,777) (83,419) (310,834) (650,095) (754,776)
B Class .................................... (21,844) (7,430) -- (56,776) (109,515) (32,711)
C Class .................................... -- (7,965) -- (12,424) -- (58,503)
--------- -------- -------- -------- ------- --------
(86,399) (68,172) (83,419) (380,034) (759,610) (845,990)
--------- -------- -------- -------- ------- --------
Net Increase (Decrease) ....................... 988,429 721,031 81,937 102,060 (456,400) (195,928)
========= ======= ======= ======= ======== ========
</TABLE>
- ----------------------
* For the period from April 9, 1996 (commencement of operations) to December 31,
1996.
<PAGE>
for tax-exempt income 51
Notes to Financial Statements (Continued)
5. Capital Stock (Continued)
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Tax-Free Colorado Fund Tax-Free New Mexico Fund
---------------------------------------- -----------------------------------
Eight Eight
Months Year Year Months Year Year
Ended Ended Ended Ended Ended Ended
8/31/98 12/31/97 12/31/96 8/31/98 12/31/97 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
A Class ....................... 1,760,189 2,280,831 2,051,210 242,673 104,678 251,813
B Class ....................... 247,293 326,460 282,979 59,162 28,562 34,046
C Class ....................... 57,114 50,877 74,401 5,720 8,900 32,608*
Shares issued upon reinvestment of
dividends from net investment
income and net realized gains
from investment transactions:
A Class ....................... 653,195 1,164,027 1,139,876 30,674 49,974 39,919
B Class ....................... 16,342 20,340 6,461 1,892 2,060 1,406
C Class ....................... 3,944 6,297 4,619 756 1,159 394*
---------- ---------- ---------- ---------- ---------- ----------
2,738,077 3,848,832 3,559,546 340,877 195,333 360,186
---------- ---------- ---------- ---------- ---------- ----------
Shares repurchased:
A Class ....................... (2,861,037) (5,214,040) (5,983,150) (107,432) (339,101) (392,056)
B Class ....................... (17,487) (48,522) (53,076) (1) (9,814) (17,472)
C Class ....................... (30,633) (49,216) (33,412) -- (13,780) (1,383)*
---------- ---------- ---------- ---------- ---------- ----------
(2,909,157) (5,311,778) (6,069,638) (107,433) (362,695) (410,911)
---------- ---------- ---------- ---------- ---------- ----------
Net Increase (Decrease) .......... (171,080) (1,462,946) (2,510,092) 233,444 (167,362) (50,725)
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Utah Fund
-----------------------------------
Eight
Months Year Year
Ended Ended Ended
8/31/98 12/31/97 12/31/96
<S> <C> <C> <C>
Shares sold:
A Class ....................... 10,066 18,541 17,149
B Class ....................... 2,835 12,225 2,314
C Class ....................... -- -- --
Shares issued upon reinvestment of
dividends from net investment
income and net realized gains
from investment transactions:
A Class ....................... 2,657 5,592 8,069
B Class ....................... 1,044 1,701 1,507
C Class ....................... -- -- --
----------- ---------- ----------
16,602 38,059 29,039
----------- ---------- ----------
Shares repurchased:
A Class ....................... (52,281) (95,952) (44,175)
B Class ....................... -- (1,374) --
C Class ....................... -- -- --
----------- ---------- ----------
(52,281) (97,326) (44,175)
----------- ---------- ----------
Net Increase (Decrease) .......... (35,679) (59,267) (15,136)
=========== ========== ==========
</TABLE>
* For the period from May 7, 1996 (commencement of operations) to
December 31, 1996.
<PAGE>
- ----------------------
6. Lines of Credit
The Funds have committed lines of credit for the following amounts:
Tax-Free Arizona Fund .......................... $ 800,000
Tax-Free Arizona Insured Fund .................. 9,900,000
Tax-Free California Fund ........................ 500,000
Tax-Free California Insured Fund ................ 1,800,000
Tax-Free Colorado Fund ......................... 18,500,000
Tax-Free New Mexico Fund ........................ 1,000,000
Tax-Free Utah Fund .............................. 200,000
No amounts were outstanding at August 31, 1998, or at anytime during the period.
7. Credit and Market Risk
The Funds concentrate their investments in securities mainly issued by each
specific state's 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 Statements of Net Assets.
<PAGE>
52 for tax-exempt income
Report of Independent Auditors
To the Shareholders and Board of Directors
Voyageur Mutual Funds, Inc. - Delaware-Voyageur Tax-Free Arizona Fund
Voyageur Insured Funds, Inc. - Delaware-Voyageur Tax-Free Arizona Insured Fund
Voyageur Mutual Funds, Inc. - Delaware-Voyageur Tax-Free California Fund
Voyageur Investment Trust - Delaware-Voyageur Tax-Free California Insured Fund
Voyageur Mutual Funds II, Inc. - Delaware-Voyageur Tax-Free Colorado Fund
Voyageur Investment Trust - Delaware-Voyageur Tax-Free New Mexico Fund
Voyageur Investment Trust - Delaware-Voyageur Tax-Free Utah Fund
We have audited the accompanying statements of net assets of Tax-Free Arizona
Fund, Tax-Free Arizona Insured Fund, Tax-Free California Fund, Tax-Free
California Insured Fund, Tax-Free Colorado Fund, Tax-Free New Mexico Fund and
Tax-Free Utah Fund (the "Funds") as of August 31, 1998, and the related
statements of operations, statements of changes in net assets and financial
highlights for the period January 1, 1998 through August 31, 1998 and for the
year ended December 31, 1997. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The statements of changes in net assets for the year ended
December 31, 1996 and the financial highlights for the periods presented through
December 31, 1996 were audited by other auditors whose reports thereon dated
February 14, 1997 expressed unqualified opinions on those statements and
financial highlights.
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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1998, by correspondence with the custodian and
brokers. 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at August 31, 1998, and the results of their operations,
the changes in their net assets and their financial highlights for the period
January 1, 1998 through August 31, 1998 and for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
------------------------------
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
October 5, 1998
<PAGE>
This annual report is for the information of Tax-Free Arizona Fund, Tax-Free
Arizona Insured Fund, Tax-Free California Fund, Tax-Free California Insured
Fund, Tax-Free Colorado Fund, Tax-Free New Mexico Fund, and Tax-Free Utah Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for each Fund, which sets forth details
about charges, expenses, investment objectives and operating policies of each
Fund. You should read the prospectus carefully before you invest. Summary
investment results are documented in each Fund's 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
each Fund will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost.
Board of Directors
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Jeffrey J. Nick
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
John H. Durham
Partner, Complete Care Services
Horsham, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC
W. Thacher Longstreth
City Councilman
Philadelphia, PA
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Charles E. Peck
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
Affiliated Officers
David K. Downes
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Investments Family of Funds
Philadelphia, PA
George M. Chamberlain, Jr.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
(photo of globes)
<PAGE>
directors
& officers
Investment Manager
Delaware Management Company
Philadelphia, Pennsylvania
International Affiliate
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
(photo of globes)
When used with prospective investors, this report must be preceded or
accompanied by a current Tax-Free Arizona Fund, Tax-Free Arizona Insured
Fund, Tax-Free California Fund, Tax-Free California Insured Fund, Tax-Free
Colorado Fund, Tax-Free New Mexico Fund, and Tax-Free Utah Fund Prospectus
and the Delaware Investments Performance Update for the most recently
completed calendar quarter. For a prospectus of any other mutual fund from
Delaware Investments, contact your financial adviser or Delaware.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
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.
(C) Delaware Distributors, L.P.
DELAWARE
INVESTMENTS
=====================
Philadelphia o London
Printed in the USA
on recycled paper
(1131)
AR-ACCNU[8/98]TKO10/98
