VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
COLORADO TAX FREE FUND
A N N U A L R E P O R T
DATED DECEMBER 31, 1996
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds as your objectives or market
conditions change.
VOYAGEUR HIGH YIELD FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in medium and
lower grade municipal bonds.
Voyageur MINNESOTA High Yield Municipal Bond Fund
Voyageur NATIONAL High Yield Municipal Bond Fund
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
<TABLE>
<S> <C>
Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NEW YORK Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur KANSAS Tax Free Fund Voyageur WISCONSIN Tax Free Fund
</TABLE>
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
<TABLE>
<S> <C> <C>
Voyageur ARIZONA Insured Tax Free Fund Voyageur MISSOURI Insured Tax Free Fund
Voyageur CALIFORNIA Insured Tax Free Fund Voyageur NATIONAL Insured Tax Free Fund
Voyageur FLORIDA Insured Tax Free Fund Voyageur OREGON Insured Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON Insured Tax Free Fund
</TABLE>
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
<TABLE>
<S> <C> <C>
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited Term Tax Free Fund
Voyageur MINNESOTA Limited Term Tax Free Fund
</TABLE>
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
<TABLE>
<S> <C> <C>
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
</TABLE>
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
<TABLE>
<S> <C> <C>
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
</TABLE>
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
LETTER FROM THE PRESIDENT
[PHOTO]
ANDREW M. McCULLAGH, JR.
PRESIDENT
Dear Shareholder:
The year 1996 was marked with mixed economic events. During the first half of
the year, interest rates rose steadily, propelled by market fears that faster
Gross Domestic Product (GDP) growth would ignite inflation. Once these fears
abated in June, interest rates began a descent that lasted throughout most of
the remainder of the year.
In comparison to their peer group of funds, the overall performance of the
Voyageur Tax Free Funds was excellent in 1996. The main reason for this strong
performance was Voyageur portfolio managers' subtle shift toward adding income
to the portfolios. This additional income allowed us to better position the
Funds during the first half of the year when interest rates were rising and
municipal bond prices were falling. Within all of our Tax Free Funds, we
continued to extend call protection, where possible, in order to better provide
for income for longer periods of time.
In January 1997, Lincoln National Corporation (NYSE: LNC) announced that it
planned to acquire the parent company of Voyageur Fund Managers, Inc. -- the
investment adviser for the Voyageur Tax Free Funds. LNC, with headquarters in
Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. Delaware Management Company, Inc. (DMC), an indirect wholly owned
subsidiary of LNC, and its affiliate, Delaware International Advisers Ltd.,
serve as the investment advisers to the investment companies in the Delaware
Group of Funds (the Delaware Group), which currently includes 16 open-end funds
and two closed-end funds (comprising 48 separate investment portfolios). DMC
through its Delaware Investment Advisers division, Delaware International
Advisers Ltd. and certain other subsidiaries of Delaware Management Holdings,
Inc. (DMH) also provides investment advice with respect to separately managed
accounts of institutional and other clients. DMH, through its subsidiaries, is
responsible for the management of approximately $32 billion. Voyageur Fund
shareholders should benefit from this acquisition by being able to select from a
wider variety of mutual funds in the expanded Delaware-Voyageur fund family.
Delaware Management, like Voyageur, has a conservative, long-term investment
philosophy. The continuity in the Voyageur Tax Free Funds' management styles
should also be further maintained since Elizabeth Howell and I, two of the
senior municipal bond portfolio managers for the Voyageur Tax Free Funds, will
continue to play a key role in the management of the Voyageur Tax Free Funds
after the transition.
We appreciate your patronage and confidence in Voyageur Fund Managers. If at any
time you have questions about your Voyageur fund investment, I urge you to
contact your personal financial adviser or Voyageur Client Service
representatives are available from 7 a.m. to 6 p.m. (Central Standard Time) to
answer any questions you may have concerning this transaction or your Voyageur
fund investment.
Sincerely,
/s/ Andrew M. McCullagh, Jr.
Andrew M. McCullagh, Jr.
President
Voyageur Colorado Tax Free Fund
VOYAGEUR COLORADO TAX FREE FUND
[PHOTO]
ANDREW M. McCULLAGH, JR. IS THE SENIOR MUNICIPAL BOND MANAGER FOR THE VOYAGEUR
COLORADO TAX FREE FUND. MR. McCULLAGH HAS MORE THAN 23 YEARS OF INVESTMENT
INDUSTRY EXPERIENCE.
For the year ended December 31, 1996, the total return at net asset value (NAV)
for the class A shares of the Voyageur Colorado Tax Free Fund was 4.08%.*
Throughout 1996, the major management thrust in the Voyageur Colorado Tax Free
Fund has been to increase shareholders' tax-exempt income and extend call
protection. In order to increase our dividend income, we made a significant
number of trades into higher yielding bonds, slightly lowering the overall
credit quality of the Fund. Since higher yielding bonds are more attractive to
investors, they tend to appreciate in price over time -- thereby increasing the
value of the portfolio.
To protect the income stream for as long as possible, we are extending call
protection by selling bonds that can be called in the nearer term and replacing
them with bonds that have longer call features. We believe these changes will
better provide for your income stream further into the future. This is
especially important if, as we anticipate, the U.S. economy slows in the first
half of 1997 and interest rates decline. During 1996, several positions in the
Fund were consolidated by selling some of the smaller positions in favor of
larger holdings. Consequently, there are fewer items in the portfolio to
monitor. Further consolidation will likely continue in 1997.
OUTLOOK
The U.S. economy is still showing signs of moderate growth with moderate
inflation. Our outlook for the municipal market continues to be favorable, and
we expect interest rates to decline over the long term.
Colorado's economy continues to be one of the strongest in the United States.
Although its growth is showing some signs of slowing, there are still signs of
strength in the state. Colorado has a much more broad-based economy than it had
in the past -- due to a strong influx of people and businesses from the state of
California. This broad-based economy should dampen the effects of any future
economic recession.
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
VOYAGEUR COLORADO TAX FREE FUND
Portfolio Abstract
For the Period Ended December 31, 1996
CLASS A SHARES
<TABLE>
<CAPTION>
CO Tax Free CO Tax Free Lehman Bros. 20
Without Sales Charge With Sales Charge Year Municipal Bond Index
<S> <C> <C> <C>
Apr-87 10000 9625 10000
9980.9 9606.61 9845
9976.41 9602.29 9771
10127.2 9747.44 10048
10208.1 9825.3 10143
10289.5 9903.61 10187
9963.47 9589.84 9841
9898.13 9526.95 9850
10166.2 9784.95 10105
Dec-87 10327.3 9940.01 10255
10601.2 10203.6 10705
10739.9 10337.2 10847
10604.4 10206.7 10652
10710.5 10308.9 10743
10708.4 10306.8 10741
10952.2 10541.5 10950
11016.6 10603.5 11043
11024.4 10610.9 11058
11216.6 10793.1 11317
11405.5 10977.8 11570
11328 10903.1 11477
Dec-88 11414.5 10986.4 11629
11603.7 11168.6 11928
11603.9 11168.8 11784
11646.3 11209.6 11757
11794.6 11352.3 12080
12042.5 11590.9 12368
12234.6 11775.8 12527
12404.3 11939.1 12701
12275.1 11814.8 12567
12208.3 11750.5 12474
12385.7 11921.2 12667
12511.9 12042.7 12899
Dec-89 12639.8 12165.8 12992
12585.4 12113.5 12885
12684.3 12208.6 13013
12727 12249.7 13040
12690.9 12215 12915
12891.4 12408 13245
12999.7 12512.2 13351
13198 12703.1 13574
13065.9 12575.9 13299
13033.6 12544.9 13283
13145.2 12652.3 13527
13374.8 12873.2 13849
Dec-90 13502.1 12995.7 13917
13629.1 13118 14085
13776.1 13259.5 14201
13779.3 13262.6 14212
13862.3 13342.5 14418
14032.4 13506.1 14568
14009.1 13483.8 14526
14210.5 13677.6 14738
14383.7 13844.3 14936
14541.8 13996.4 15139
14677.3 14126.9 15287
14726.1 14173.8 15312
Dec-91 14956.6 14395.7 15638
14989.7 14427.5 15671
15036.6 14472.7 15677
15068.8 14503.7 15715
15204.6 14634.5 15862
15371.3 14794.9 16070
15569.1 14985.2 16366
16083.7 15480.5 16952
15877.9 15282.4 16740
15943.2 15345.3 16823
15779.4 15187.6 16585
16304.4 15693 17006
Dec-92 16511.6 15892.4 17229
16704.2 16077.8 17413
17212.2 16566.7 18151
17152.8 16509.5 17993
17329.4 16679.6 18220
17444 16789.9 18371
17783.3 17116.4 18709
17914.2 17242.4 18732
18271.8 17586.6 19180
18534.7 17839.7 19421
18717.8 18015.8 19456
18525.3 17830.7 19242
Dec-93 18774.7 18070.6 19706
19029.3 18315.7 19954
18554.5 17858.7 19362
17802.3 17134.7 18341
17595.6 16935.7 18492
17764.6 17098.4 18710
17621.7 16960.9 18523
17931.4 17259 18947
17910.2 17238.5 19000
17572.2 16913.2 18620
17161.2 16517.7 18128
16676.8 16051.4 17704
Dec-94 17062.7 16422.9 18260
17684 17020.8 18974
18380.2 17691 19663
18570.3 17874 19887
18633.6 17934.9 19883
19300.5 18576.7 20633
19144.3 18426.4 20315
19209.5 18489.1 20420
19404.8 18677.1 20700
19637.8 18901.3 20864
20002 19251.9 21308
20331 19568.5 21779
Dec-95 20566.7 19795.5 22084
20728.5 19951.2 22197
20528.3 19758.5 21944
20175.7 19419.2 21592
20127.3 19372.5 21506
20155.4 19399.6 21532
20359.8 19596.3 21836
20544.8 19774.4 22050
20613.1 19840.1 22014
20897.7 20114.1 22459
21144.4 20351.5 22728
21472.5 20667.3 23203
Dec-96 21406.2 20603.5 23067
</TABLE>
Voyageur Colorado Tax Free Fund Without Sales Charge - Ending Value $21,406
Voyageur Colorado Tax Free Fund With Sales Charge - Ending Value $20,604
Lehman Bros. 20 Year Municipal Bond Index - Ending Value $23,067
The Lehman Bros. 20 Year Municipal Bond Index is a broad, unmanaged index of
securities of United States Municipalities. The index assumes that no operating
expenses, transaction fees or sales loads are incurred by a hypothetical
investor who directly owns the securities maintained in the index. In order to
outperform an index over any specific time frame, a fund must return to
investors an amount greater than that provided by the index plus total operating
expenses. For this reason, few fixed income funds are able to outperform broad
market indices over the long term. The chart above is comprised of data that
represents the cumulative total return of a hypothetical investment in Class A
Shares of $10,000 made on the date the Fund commenced operations through
December 31, 1996.
The performance of separate classes will vary based on the differences
in sales loads and distribution fees paid by shareholders investing in
the different classes. Performance quoted represents past performance
and is not indicative of future results.
* Average annual total returns include the maximum 3.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1996
Voyageur Colorado Tax Free Fund
Average Annual Total Returns
(Class A Shares)
Since
1 Year 5 Year 4/23/87**
Without Sales Charge 4.08% 7.42% 8.16%
With Sales Charge* 0.18% 6.60% 7.74%
Lehman Bros. 4.45% 8.08% 9.01%
20 Year Municipal
Bond Index
Voyageur Colorado Tax Free Fund
Average Annual Total Returns
(Class B Shares)
Since
1 Year 3/22/95**
Without Contingent 3.25% 7.34%
Deferred Sales Charge
With Contingent (1.75%) 5.20%
Deferred Sales Charge***
Voyageur Colorado Tax Free Fund
Average Annual Total Returns
(Class C Shares)
Since
1 Year 5/6/94**
3.17% 6.62%
Quality Breakdown
[PIE CHART]
NR/NR 4%
A/A 19%
Aa/AA 21%
Baa/BBB 24%
Aaa/AAA 32%
Sector Breakdown
(shown as % of total net assets)
Health Care 21.4%
General Obligation 20.4%
Housing 18.7%
Transportation 13.0%
Other 9.8%
Utilities 4.6%
Education 3.1%
Lease/C.O.P. 2.5%
Industrial 2.4%
Pre-Refunded/Escrow 0.9%
Statistics
Average Maturity 12.4 Years
Average Coupon 6.36%
Portfolio Duration 8.0 Years
Average Quality A/A
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Mutual Funds II, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of Voyageur Colorado Tax
Free Fund (a fund within Voyageur Mutual Funds II, Inc.) as of December 31,
1996, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended December 31, 1996 and the financial highlights for each of the years in
the five-year period ended December 31, 1996. These financial statements and the
financial highlights are the responsibility of Fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody are confirmed to us by the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Voyageur Colorado Tax Free Fund at December 31, 1996 and the results of its
operations for the year then ended, changes in its net assets for each of the
years in the two-year period ended December 31, 1996 and the financial
highlights for each of the years in the five-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 14, 1997
<TABLE>
<CAPTION>
VOYAGEUR COLORADO TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996
- -------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at market value (note 1)
(identified cost: $351,624,252) .................................. $ 362,030,697
Cash in bank on demand deposit ...................................... 646
Accrued interest receivable ......................................... 3,732,699
Receivable for Fund shares sold ..................................... 30,031
-------------
Total assets ..................................................... 365,794,073
-------------
LIABILITIES
Dividends payable to shareholders ................................... 1,554,665
Payable for Fund shares redeemed .................................... 174,683
Other accrued expenses .............................................. 42,089
-------------
Total liabilities ................................................ 1,771,437
-------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK .................. $ 364,022,636
=============
Represented by:
Capital Stock - $.001 par value (note 1) ......................... $ 33,767
Additional paid-in capital ....................................... 362,273,026
Undistributed net investment income .............................. 581,469
Accumulated net realized loss on investments ..................... (9,272,071)
Unrealized appreciation of investments ........................... 10,406,445
-------------
TOTAL NET ASSETS ............................................... $ 364,022,636
=============
Net assets applicable to outstanding Class A shares ................. $ 358,328,150
=============
Net assets applicable to outstanding Class B shares ................. $ 4,172,133
=============
Net assets applicable to outstanding Class C shares ................. $ 1,522,353
=============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of Capital Stock outstanding: 33,238,520 (note 5) $ 10.78
=============
Class B - Shares of Capital Stock outstanding: 387,138 (note 5) .. $ 10.78
=============
Class C - Shares of Capital Stock outstanding: 141,218 (note 5) .. $ 10.78
=============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR COLORADO TAX FREE FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest ........................................................... $ 22,579,184
------------
Expenses (note 3):
Investment advisory and management fee ............................. 1,865,515
Dividend-disbursing, administrative and accounting services fees ... 426,237
Printing, postage and supplies ..................................... 48,838
Audit and accounting fees .......................................... 26,779
Legal fees ......................................................... 10,821
Distribution fees - Class A ........................................ 922,540
Distribution fees - Class B ........................................ 26,004
Distribution fees - Class C ........................................ 14,080
Directors' fees .................................................... 24,147
Registration fees .................................................. 1,086
Custodian fees ..................................................... 42,992
Other .............................................................. 24,748
------------
Total expenses ................................................... 3,433,787
Less: Expenses waived or absorbed by the distributor .............. (500,871)
------------
Total net expenses ............................................... 2,932,916
------------
Investment income - net .......................................... 19,646,268
------------
Realized and unrealized gain (loss) on investments:
Realized gain on security transactions (note 2) .................... 133,826
Net change in unrealized appreciation or depreciation of investments (5,488,422)
------------
Net loss on investments .......................................... (5,354,596)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 14,291,672
============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR COLORADO TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
Operations: 1996 1995
------------- -------------
<S> <C> <C>
Investment income - net ............................................. $ 19,646,268 $ 20,124,536
Realized gain (loss) on security transactions ....................... 133,826 (9,220,493)
Net change in unrealized appreciation or
depreciation of investments ...................................... (5,488,422) 61,036,568
------------- -------------
Net increase in net assets resulting from operations .......... 14,291,672 71,940,611
------------- -------------
Distributions to shareholders from:
Investment income - net:
Class A .......................................................... (18,915,160) (20,437,593)
Class B .......................................................... (109,036) (20,541)
Class C .......................................................... (59,059) (33,262)
------------- -------------
Total distributions ........................................... (19,083,255) (20,491,396)
------------- -------------
Capital share transactions (note 5): Proceeds from sale of shares:
Class A (note 3) ................................................. 21,914,760 37,603,482
Class B .......................................................... 3,017,003 1,630,345
Class C .......................................................... 784,158 570,571
Netasset value of shares issued in reinvestment of net investment income
distributions:
Class A .......................................................... 12,151,368 13,311,806
Class B .......................................................... 68,715 12,329
Class C .......................................................... 49,099 27,040
Payments for redemption of shares:
Class A .......................................................... (63,749,843) (63,543,450)
Class B (note 3) ................................................. (567,194) (49,987)
Class C (note 3) ................................................. (354,884) (112,717)
------------- -------------
Decrease in net assets from capital share transactions .............. (26,686,818) (10,550,581)
------------- -------------
Total increase (decrease) in net assets .......................... (31,478,401) 40,898,634
Net assets at beginning of period ...................................... 395,501,037 354,602,403
------------- -------------
Net assets at end of period (including undistributed net investment
income of $581,469 and $18,456, respectively) ..................... $ 364,022,636 $ 395,501,037
============= =============
See accompanying notes to financial statements.
</TABLE>
VOYAGEUR COLORADO TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur Colorado Tax Free Fund (the Fund), a series of Voyageur Mutual Funds
II, Inc., is registered under the Investment Company Act of 1940 (as amended) as
a diversified, open-end management investment company. The Fund seeks high
current income free from both federal and state income taxes by investing in
investment grade municipal bonds.
The Fund offers Class A, Class B and Class C Shares. Class A Shares are sold
with a front-end sales charge. Class B Shares may be subject to a contingent
deferred sales charge and such shares automatically convert to Class A after
eight years. Class C Shares may be subject to a contingent deferred sales charge
and have no conversion feature. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that the level of distribution fees charged differs between classes. Income,
expenses (other than expenses incurred under each class' Distribution Agreement)
and realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
Pursuant to its amended articles of incorporation, Voyageur Mutual Funds II,
Inc. has 10 trillion shares of authorized capital stock that may be issued in
one or more series.
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of net increase (decrease) in net assets resulting from
operations during the reporting period. Actual results could differ from those
estimates.
INVESTMENTS IN SECURITIES
The values of fixed income securities are determined using pricing services
or prices quoted by independent brokers. When market quotations are not readily
available, or in certain other circumstances, securities are valued at fair
value according to methods selected in good faith by the Board of Directors.
Short-term securities are valued at amortized cost which approximates market
value.
Security transactions are accounted for on the trade date. Securities gains
and losses are calculated on the identified-cost basis. Interest income,
including level-yield amortization of premium and original issue discount, is
accrued daily.
The Fund concentrates its investments in a single state, and therefore may
have more credit risk related to the economic conditions of the state of
Colorado than a portfolio with broader geographical diversification.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund
on a forward commitment or when-issued basis can take place up to a month or
more after the transaction date. During this period, such securities are subject
to market fluctuations and the portfolio maintains, in a segregated account with
its custodian, assets with a market value equal to or greater than the amount of
its purchase commitments.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders in amounts that will avoid or minimize federal
income or excise taxes for the Fund. Net investment income and net realized
gains (losses) for the Fund may differ for financial statement and tax purposes
primarily because of losses deferred for tax purposes due to "wash sale"
transactions. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
For federal income tax purposes, Colorado Tax Free Fund had a capital loss
carryover at December 31, 1996, of $9,191,755 that will expire in 2003 and 2004
if not offset by subsequent capital gains. It is unlikely the Board of Directors
will authorize a distribution of any net realized capital gains until the
available capital loss carryover has been offset or expires.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends declared daily from net investment income are payable monthly in
cash or reinvested in additional shares of the Fund. Net short-term realized
capital gains, if any, may be distributed throughout the year and net long-term
realized capital gains, when available, are distributed annually.
ILLIQUID SECURITIES
At December 31, 1996, investments in securities for the Fund include issues
that are illiquid. The Fund currently limits investments in illiquid securities
to 15% of net assets, at market value, at the date of purchase. The aggregate
value of such securities at December 31, 1996, was $33,228,278 which represents
9.1% of net assets.
(2) SECURITIES TRANSACTIONS
Purchase cost and proceeds from sales of securities other than short-term
securities aggregated $149,326,610 and $188,811,961, respectively, for the year
ended December 31, 1996.
(3) EXPENSES
The Fund has an investment advisory and management agreement with Voyageur
Fund Managers, Inc. (Voyageur) under which Voyageur manages the Fund's assets
and provides other specified services. The fee for investment management and
advisory services is paid monthly and is based on the average daily net assets
of the Fund at the annual rate of .50%. In addition, the Fund will pay most
other operating expenses including directors' fees, registration fees, printing
of shareholder reports, legal and auditing services and other miscellaneous
expenses. Voyageur is obligated to pay all expenses of the Fund (excluding
distribution fees, insurance premiums on portfolio securities, taxes, interest
and brokerage commissions) which exceed 1% of average daily net assets, on an
annual basis.
The Fund will also pay a fee to Voyageur for acting as the Fund's dividend
disbursing, administrative and accounting services agent. The fee is paid
monthly and is equal to the sum of $1.33 per shareholder account per month, a
fixed monthly fee ranging from $1,000 to $1,500 based on the level of the Fund's
average daily net assets and an annualized percentage of average daily net
assets at reducing rates from .11% to .02%. The Fund is also responsible for
reimbursing Voyageur's out-of-pocket expense in connection with the performance
of dividend-disbursing, administrative and accounting services.
Each class of shares has a Distribution Agreement under Rule 12b-1 of the
Investment Company Act of 1940 with Voyageur Fund Distributors, Inc. (Fund
Distributors). Under these plans the Fund is obligated to pay Fund Distributors
a monthly distribution fee at an annual rate of .25% of average daily net assets
of the Class A Shares and 1.00% of average daily net assets of the Class B and
Class C Shares. Fund Distributors may waive all or part of its distribution fees
at its sole discretion. During the year ended December 31, 1996, Fund
Distributors voluntarily waived Class A distribution fees of $499,145 and Class
B distribution fees of $1,726.
Sales charges paid by Class A shareholders were $525,069. Of this amount,
Fund Distributors received $68,666. Contingent deferred sales charges for the
year ended December 31, 1996 were $12,013 for Class B shareholders and $384 for
Class C shareholders.
(4) PLANNED FUND REORGANIZATION
On January 15, 1997 Voyageur's parent, Dougherty Financial Group, Inc.
("DFG"), executed an Agreement and plan of merger with Lincoln National
Corporation ("LNC") pursuant to which LNC would acquire DFG, including the
mutual fund investment advisory business of DFG conducted by Voyageur. This
merger is subject to approval of the Fund's Board of Directors and shareholders.
(5) SHARE TRANSACTIONS
Transactions in shares of capital stock during the periods ended December 31,
1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------- ---------------------------
YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED MARCH 22, 1995*
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1996 1995 1996 1995
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Shares sold ................ 2,051,210 3,671,995 282,979 154,321
Shares issued for reinvested
distributions ......... 1,139,876 1,293,858 6,461 1,168
Shares redeemed ............ (5,983,150) (6,106,138) (53,076) (4,715)
---------- ---------- -------- --------
Increase (decrease) in
shares outstanding .... (2,792,064) (1,140,285) 236,364 150,774
========== ========== ======== ========
</TABLE>
CLASS C
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
Shares sold .................. 74,401 54,821
Shares issued for reinvested
distributions ........... 4,619 2,607
Shares redeemed .............. (33,412) (10,608)
------- -------
Increase in shares outstanding 45,608 46,820
======= =======
- ------------------------------
* Commencement of operations.
(6) FINANCIAL HIGHLIGHTS
Per share data (rounded to the nearest cent) for a share of capital stock
outstanding and selected information for each period are as follows:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period ................... $ 10.90 $ 9.53 $ 11.10 $ 10.57 $ 10.27
----------- ----------- ----------- ----------- -----------
Operations:
Net investment income ................. .56 .54 .55 .56 .58
Net realized and unrealized
gain (loss) on investments ......... (.13) 1.38 (1.54) .85 .45
----------- ----------- ----------- ----------- -----------
Total from operations ................. .43 1.92 (.99) 1.41 1.03
----------- ----------- ----------- ----------- -----------
Distributions to shareholders:
From net investment income (a) ........ (.55) (.55) (.54) (.56) (.58)
From net realized gains ............... -- -- (.04) (.32) (.15)
----------- ----------- ----------- ----------- -----------
Total distributions ................ (.55) (.55) (.58) (.88) (.73)
----------- ----------- ----------- ----------- -----------
Net asset value:
End of period ......................... $ 10.78 $ 10.90 $ 9.53 $ 11.10 $ 10.57
=========== =========== =========== =========== ===========
Total investment return (b) ............... 4.08% 20.54% (9.12)% 13.72% 10.42%
Net assets at end of
period (000's omitted) ................ $ 358,328 $ 392,815 $ 354,138 $ 399,218 $ 202,165
Ratios:
Ratio of expenses to
average daily net assets (f) ....... .78% .76% .66% .75% .80%
Ratio of net investment income
to average daily net assets ........ 5.27% 5.18% 5.35% 4.97% 5.59%
Assuming no voluntary waivers and
reimbursements:
Expenses (c) ............. .91% .93% .72% .75% .80%
Net investment income .... 5.14% 5.01% 5.29% 4.97% 5.59%
Portfolio turnover rate (excluding
short-term securities) ................ 40.35% 82.83% 69.32% 58.61% 69.72%
See accompanying notes to Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------- -------
YEAR PERIOD FROM YEAR YEAR PERIOD FROM
ENDED MARCH 22, 1995(d) ENDED ENDED MAY 6, 1994(d)
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1996 1995 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period ............... $ 10.90 $ 10.25 $ 10.90 $ 9.53 $ 10.21
--------- --------- --------- --------- ---------
Operations:
Net investment income ............. .47 .35 .46 .45 .29
Net realized and unrealized
gain (loss) on investments ..... (.13) .65 (.13) 1.37 (.67)
--------- --------- --------- --------- ---------
Total from operations ....... .34 1.00 .33 1.82 (.38)
--------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income (a) .... (.46) (.35) (.45) (.45) (.27)
From net realized gains ........... -- -- -- -- (.03)
--------- --------- --------- --------- ---------
Total distributions ............ (.46) (.35) (.45) (.45) (.30)
--------- --------- --------- --------- ---------
Net asset value:
End of period ..................... $ 10.78 $ 10.90 $ 10.78 $ 10.90 $ 9.53
========= ========= ========= ========= =========
Total investment return (b) ........... 3.25% 9.96% 3.17% 19.44% (3.75)%
Net assets at end of
period (000's omitted) ............ $ 4,172 $ 1,643 $ 1,522 $ 1,042 $ 465
Ratios:
Ratio of expenses to
average daily net assets (f) ... 1.58% 1.39%(e) 1.66% 1.66% 1.80%(e)
Ratio of net investment income
to average daily net assets .... 4.45% 3.96%(e) 4.40% 4.20% 4.23%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c) ......... 1.65% 1.60%(e) 1.66% 1.66% 1.81%(e)
Net investment income 4.38% 3.75%(e) 4.40% 4.20% 4.22%(e)
Portfolio turnover rate (excluding
short-term securities) ............ 40.35% 82.83% 40.35% 82.83% 69.32%
See accompanying notes to Financial Highlights.
</TABLE>
Notes to Financial Highlights
(a) For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from
federal income tax. For Class A Shares for the years ended December 31,
1993 and 1992, $.01 per share of the distributions from net investment
income were subject to state income tax.
(b) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(c) For the periods ended December 31, 1996, 1995 and 1994, Fund Distributors
voluntarily waived a portion of their distribution fees. The annual
contractual expense limit for the Fund (excluding distribution fees,
insurance premiums on portfolio securities, taxes, interest and brokerage
commissions) is 1% of average daily net assets. The maximum distribution
fee is .25% of the Fund's average daily net assets for Class A Shares and
1.00% of the Fund's average daily net assets for Class B and Class C
Shares.
(d) Commencement of operations.
(e) Annualized.
(f) Beginning in the year ended December 31, 1995, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on
uninvested cash balances received by the Fund. Prior period expense
ratios have not been adjusted.
<TABLE>
<CAPTION>
VOYAGEUR COLORADO TAX FREE FUND
INVESTMENTS IN SECURITIES DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER(B) RATE MATURITY VALUE(A)
- ----------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
COLORADO MUNICIPAL BONDS (96.8%):
ESCROWED WITH U.S. GOVERNMENT BONDS (0.9%):
---------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
$ 1,785 Auraria Higher Education Center Fee (AMBAC Insured)................ 6.50% 05-01-12 $1,909,450
1,070 Douglas County School District No. 1............................... 6.50 12-15-04 1,200,765
-----------
3,110,215
-----------
GENERAL OBLIGATION (20.4%):
---------------------------------------------------------------------------------------------------------
3,000 Adams & Weld County Brighton School District #275.................. 5.50 12-01-16 2,985,450
3,000 Arapahoe County School District Inverse Floater................... 5.67(e) 12-15-15 2,802,540
8,010 Arapahoe County Water & Sanitation Series 1995A.................... 6.00 12-01-15 8,128,788
10,075 Arapahoe County Water & Sanitation Series 1995A.................... 6.15 12-01-19 10,284,157
3,000 Boulder Valley School District #RE-2 Series A...................... 6.30 12-01-13 3,199,290
6,250 Boulder Valley School District #RE-2 Series A...................... 6.30 12-01-14 6,652,750
1,000 Eagle County School District #RE50J (FGIC Insured)................. 6.30 12-01-12 1,081,020
6,575 Eagles Nest Metropolitan District Limited Tax...................... 6.50 11-15-17 6,662,382
1,250 El Paso County School District #20, Inverse Floater................ 6.47(e) 12-15-14 1,260,388
2,300 El Paso County School District #3 Widefield........................ 5.65 12-15-21 2,294,710
1,850 Highlands Ranch Metropolitan School District #4, Inverse Floater... 5.37(e) 06-15-16 1,626,446
4,200 Highlands Ranch Metropolitan School District #4
(LOC - Swiss Bank Insured)...................................... 6.00 12-01-15 4,399,122
6,170 Interstate South Metropolitan District............................. 6.00 12-01-20 6,192,335
11,350 Jefferson County School District #R-001 (AMBAC Insured)............ 6.00 12-15-12 11,786,180
2,250 Jefferson County Met Dist.-Section 14, Series A.................... 6.20 12-01-13 2,363,963
1,000 Jefferson County Met Dist.-Section 14, Series A.................... 6.20 06-01-14 1,048,230
1,500 Montezuma County School District #RE 4A - Delores.................. 7.00 12-01-19 1,658,730
------------
74,426,481
------------
UTILITIES (4.6%):
---------------------------------------------------------------------------------------------------------
1,600 Centennial County Water and Sanitary District Revenue
(LOC - Swiss Bank Insured)..................................... 5.75 06-15-12 1,626,768
4,000 Centennial County Water and Sanitary District Revenue
(LOC - Swiss Bank Insured)..................................... 6.00 12-01-15 4,138,880
3,000 Centennial County Water and Sanitary District Revenue
(LOC - Swiss Bank Insured).................................... 5.75 06-15-15 3,037,530
5,000 Platte River Power Authority Series BB............................. 6.13 06-01-14 5,244,900
1,500 Westminster Water & Sewer Utility Revenue (AMBAC Insured).......... 6.00 12-01-09 1,586,820
1,000 Westminster Water & Sewer Utility Revenue (AMBAC Insured).......... 6.25 12-01-14 1,063,950
------------
16,698,848
------------
TRANSPORTATION (13.0%):
---------------------------------------------------------------------------------------------------------
8,530 Arapahoe County Vehicle Reg E-470 (MBIA Insured)................... 6.15 08-31-26 8,934,066
10,000 Arapahoe County Capital Improvement E-470.......................... 7.00 08-31-26 10,642,300
10,900 Denver City & County Airport Revenue (MBIA Insured)................ 5.60 11-15-20 10,763,750
13,575 Denver City & County Airport Revenue (MBIA Insured)................ 5.70 11-15-25 13,490,156
3,550 Denver City & County Airport Revenue (MBIA Insured)................ 5.50 11-15-25 3,447,938
------------
47,278,210
------------
HEALTH CARE (21.4%):
---------------------------------------------------------------------------------------------------------
3,250 Boulder County Hospital Revenue Longmont United Project............ 5.88 12-01-20 3,135,860
1,750 Colorado Health Facilities Authority Covenant Retirement........... 6.75 12-01-15 1,856,663
4,150 Colorado Health Facilities Authority Covenant Retirement........... 6.75 12-01-25 4,338,659
3,970 Colorado Health Facilities Authority Craig Hospital................ 5.50 12-01-21 3,760,384
3,135 Colorado Health Facilities Authority Craig Hospital................ 5.38 12-01-13 3,007,155
1,085 Colorado Health Facilities Authority National Benev.
Series A........................................................ 6.90 06-01-15 1,157,077
7,750 Colorado Health Facilities Authority Parkview Hospital............. 6.13 09-01-25 7,530,365
4,000 Colorado Health Facilities Authority Parkview Hospital............. 6.00 09-01-16 3,923,240
13,000 Colorado Health Facilities Authority Rocky Mountain Adventist
Healthcare...................................................... 6.63 02-01-13 13,392,470
5,885 Colorado Health Facilities Authority Rocky Mountain Adventist
Healthcare...................................................... 6.63 02-01-22 6,046,071
6,500 Colorado Health Facilities Authority Vail Valley Medical
Center Revenue.................................................. 6.60 01-15-20 6,714,370
2,500 Colorado Health Facilities Authority Vail Valley Medical
Center Revenue.................................................. 6.50 01-15-13 2,584,350
3,375 Colorado Health Facility Authority Revenue, Inverse Floater
(MBIA Insured).................................................. 5.87(e) 10-01-26 3,034,159
11,850 Colorado Springs Memorial Hospital (MBIA Insured).................. 6.00 12-15-24 12,200,167
1,165 Eagle County Vail Valley Medical Development....................... 5.63 01-15-19 1,121,184
4,000 University of Colorado Hospital Revenue (AMBAC Insured)............ 6.40 11-15-22 4,180,680
------------
77,982,854
------------
HOUSING (18.7%):
---------------------------------------------------------------------------------------------------------
1,730 Adams County Housing Authority Greenbrias Project.................. 6.75 07-01-21 1,679,847
10,555 Aurora Single Family Mortgage Revenue.............................. 7.30 05-01-10 11,227,881
1,520 Colorado Housing Financial Authority............................... 7.15 11-01-14 1,658,700
8,530 Colorado Housing Finance Authority Multifamily Series A-3.......... 6.25 10-01-26 8,707,083
2,060 Colorado Housing Finance Authority Multifamily Series C-3.......... 6.10 10-01-28 2,071,783
4,535 Colorado Housing Finance Authority Single Family Access Series 94C 7.90 12-01-24 5,090,538
975 Colorado Housing Finance Authority Single Family Housing
Project Series C2............................................... 7.45 06-01-17 1,081,031
2,500 Colorado Housing Finance Authority Single Family Housing Series B-2 7.45 11-01-27 2,765,625
1,260 Colorado Housing Finance Authority Single Family Housing Series C-2 7.10 05-01-15 1,379,700
3,080 Colorado Housing Finance Authority Single Family Mortgage.......... 7.50 11-01-24 3,391,850
3,755 Colorado Housing Finance Authority 1994 Series D II Revenue........ 8.13 06-01-25 4,182,131
4,200 Colorado Housing Finance Authority Single Family Mortgage Revenue 8.00 12-01-24 4,672,500
1,000 Colorado State Single Family Housing Authority Senior Revenue...... 7.10 06-01-14 1,086,250
8,950 Englewood Multifamily Marks Apartments Series B.................... 6.00% 12-15-18 8,938,723
5,700 Englewood Multifamily Marks Apartments Series 96................... 6.65 12-01-26 5,759,280
4,000 Pueblo County Single Family Mortgage Revenue
Series 1994A (GNMA Insured)..................................... 7.05 11-01-27 4,274,120
------------
67,967,042
------------
EDUCATION (3.1%):
---------------------------------------------------------------------------------------------------------
4,420 Aurora Educational Development (Connie Lee Insured)................ 7.37 10-15-15 4,568,645
3,350 Colorado State Post Secondary Education Faculty Revenue
Inverse Floater................................................. 8.02(e) 03-01-16 3,562,725
2,000 Colorado Education Facility Authority University of Denver
(Connie Lee Insured)............................................ 6.00 03-01-16 2,052,940
1,000 Colorado Post Secondary Education Auraria Fund Project
(FGIC Insured)................................................. 6.00 09-01-15 1,034,670
50 Douglas County School District No. Re 1............................ 6.50 12-15-16 56,110
-------------
11,275,090
------------
OTHER REVENUE (9.8%):
---------------------------------------------------------------------------------------------------------
2,000 Aurora Saddle Rock Golf Course..................................... 6.20 12-01-15 2,017,540
7,075 Governor Metropolitan District Colorado Series 95A Revenue......... 6.00 12-01-15 7,185,582
4,725 Governor Metropolitan District Colorado Series 95A Revenue......... 6.13 12-01-19 4,820,918
13,700 Lowry Colorado Economic Redevelopment Authority.................... 7.50(f) 12-01-10 13,768,500
1,600 Park County Jail Facility.......................................... 5.30 12-01-15 1,574,592
1,685 Pueblo Urban Renewal Authority Revenue (AMBAC Insured)............. 6.15 12-01-19 1,764,768
2,200 Pueblo Urban Renewal Authority JR Lien............................. 6.63 12-01-19 2,184,446
2,330 South Suburban District Golf and Ice Arena Facility................ 6.00 11-01-15 2,316,253
------------
35,632,599
------------
CERTIFICATE OF PARTICIPATION (2.5%):
---------------------------------------------------------------------------------------------------------
2,000 El Paso County School District #20................................. 5.70 12-15-15 2,008,200
5,000 Jefferson County, Inverse Floater (MBIA Insured)................... 5.87(e) 12-01-09 4,967,950
2,220 Pueblo County Colorado School District #60, Inverse Floater
(MBIA Insured).................................................. 6.12(e) 12-01-10 2,205,570
------------
9,181,720
------------
INDUSTRIAL (2.4%):
---------------------------------------------------------------------------------------------------------
8,750 Fort Collins PCR Anheuser-Busch Project.......................... 6.00 09-01-31 8,817,638
------------
TOTAL MUNICIPAL BONDS (cost: $341,964,252) 352,370,697
------------
SHORT-TERM SECURITIES (2.7%)
---------------------------------------------------------------------------------------------------------
9,660 Dreyfus Investment Tax-Exempt Money Market Fund
(Cost: $9,660,000)............................................ 3.69(d) 9,660,000
------------
TOTAL INVESTMENTS IN SECURITIES (cost: 351,624,252) (c) $ 362,030,697
=============
See accompanying notes to investments in securities.
</TABLE>
VOYAGEUR COLORADO TAX FREE FUND
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued in accordance with procedures described in note 1
to the financial statements.
(b) Investments in bonds, by rating category (unaudited) as a percentage of
total bonds, are as follows:
Aaa/AAA Aa/AA A/A Baa/BBB NR/NR Total
------- ----- --- ------- ----- -----
32% 21% 19% 24% 4% 100%
(c) The cost of securities for federal income tax purposes is $351,704,568.
The aggregate gross unrealized appreciation and depreciation in
securities based on this cost are as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
------------ ------------ ------------
$10,853,708 $(527,579) $10,326,129
(d) Dividend yields change daily to reflect current market conditions. Rate
shown is quoted yield as of December 31, 1996.
(e) Inverse floater, represents a security that pays interest at rates that
increase (decrease) with a decline (increase) in a general money market
index. Interest rate disclosed is the rate in effect on December 31,
1996. At December 31, 1996, the total of such securities is equal to
5.35% of the Fund's net assets. Inverse floaters are considered illiquid
securities.
(f) Security deemed illiquid by Fund management. Such determinations are
reviewed from time to time by Fund management and are subject to change.
As of December 31, 1996, the illiquid security is equal to 3.78% of the
Fund's total net assets.
FEDERAL INCOME TAX INFORMATION
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions for the year ended December
31, 1996 shown below. Exempt interest dividends are exempt from federal income
tax and should not be included in shareholder's gross income, but need to be
reported on the income tax return for informational purposes. Each shareholder
should consult a tax adviser about reporting this income for state and local
purposes. In January 1997, the Fund separately provided each shareholder with
tax information for calendar year 1996.
<TABLE>
<CAPTION>
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------- ------- -------
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996
------------------ ------------------ -----------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)............................. $.5451 $.4597 $.4508
====== ====== ======
</TABLE>
For federal income tax purposes, 99.83% of the above net investment income
distributions were derived from interest on securities exempt from federal
income tax.
VOYAGEUR ON CALL (TM)
[Line Drawing of a telephone]
800.545.3863
We invite you to use the Voyaguer interactive voice response system, Voyageur On
Call (TM) (800.545.3863). The system is designed to give you information about
the Fund(s) in your account. It can also provide price and yield information
for the Fund(s). 24-hour access available to Touch Tone telephones only.
VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402-4115
VOY-COAR 3/97
