[LOGO]
VOYAGEUR
YOUR TAX SENSITVE INVESTMENT MANAGER
U.S. GOVERNMENT SECURITIES FUND
A N N U A L R E P O R T
DATED JUNE 30, 1996
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds as your objectives or market
conditions change.
VOYAGEUR HIGH YIELD FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in medium and
lower grade municipal bonds.
Voyageur MINNESOTA High Yield Municipal Bond Fund
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
<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 NORTH DAKOTA Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur WISCONSIN Tax Free Fund
Voyageur KANSAS Tax Free Fund
</TABLE>
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
<TABLE>
<S> <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>
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>
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>
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
</TABLE>
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
LETTER FROM THE PRESIDENT
[PHOTO] JOHN G. TAFT
PRESIDENT
Dear Shareholder:
In light of today's stock market craze, the fixed income market has taken a
seemingly less than glamorous second place in the financial market race. But the
fact of the matter is there's significant value -- both fundamentally and
strategically -- in allocating a portion of your assets in fixed income.
In comparison to the stock market where values are becoming harder to find and
volatility is picking up, the environment for bonds are favorable -- with long
bonds now offering a 7% return. When compared to the stock market's historical
10.5% return from 1926 to 1995, this 7% return is very attractive -- especially
when you consider the additional risk and volatility that stock investors had to
weather in order to reap their 10.5% return. (1)
At Voyageur, we remain committed to providing our clients with the best
investment products and services available in today's financial markets. The
Voyageur U.S. Government Securities Fund is just one of the many Voyageur Funds
designed to allow you a complete spectrum of investment options. This Fund has
historically provided consistent, competitive investment results.
Also, as part of our commitment to you, we have redesigned our shareholder
reports to provide you with more in-depth information about your Voyageur fund
investments in an easier-to-read format. We welcome any comments you may have
about these changes and encourage you to call Voyageur Shareholder Serivces at
800.543.3863
If at any time you have questions about your Voyageur fund investment, please
contact your personal financial advisor or Voyageur Shareholder Services. Our
Voyageur Shareholder Services 800 number -- known as Voyageur On Call(TM) --
allows you 24-hour access, seven days a week to an automated voice response
service with shareholder services representatives available from 8 a.m. to 5
p.m. Central Standard Time.
We appreciate your continued patronage of Voyageur Funds and look forward to
working with you and your financial advisor in offering products and services
designed to bring you closer to your investment goals.
Sincerely,
/s/ John G. Taft
John G. Taft
President
(1) STOCKS, BONDS, BILLS AND
INFLATION 1996
YEARBOOK, Ibbotson
Associates, Inc.
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
[PHOTO] JANE M. WYATT IS THE SENIOR
PORTFOLIO MANAGER FOR THE
VOYAGEUR U.S. GOVERNMENT
SECURITIES FUND AS WELL AS
VOYAGEUR'S CHIEF INVESTMENT
OFFICER. JANE HAS 20 YEARS OF
EXPERIENCE IN THE INVESTMENT
INDUSTRY.
For the fiscal year ended June 30, 1996, the Voyageur U.S. Government Securities
Fund's total return at NAV was 3.88%.* The fund continues to be invested
entirely in U.S. Treasury securities and GNMAs -- securities that are backed by
the full faith and credit of the U.S. government and that are known for
generating consistent income streams. During the Fund's fiscal year, we pared
down our emphasis in GNMA mortgage bonds so that these securities now reflect
55% of the Fund's total assets.
In spite of market volatility last year, we maintained the Fund's duration
between 5.5 and 6 years. Although long in comparison to the Fund's benchmark --
the Lehman Brothers Government Index -- this duration positions the Fund in an
area we believe offers the best risk-adjusted returns for long-term,
conservative investors -- the intermediate part of the yield curve. If we were
to position the Fund with shorter durations, we believe we would be giving up
too much income while the longer end could subject our shareholders to an
unnecessary amount of price risk and volatility.
TAKING ADVANTAGE OF SEASONED BOND SALES
At times in the fixed income market when mortgage issuance significantly tapers
off, market participants may be willing to pay premium prices for slightly
"seasoned" 30-year mortgages -- mortgages that were issued in the past few
years. During the Fund's fiscal year, we have been able to take advantage of
just such an environment by selling almost all of our two-year seasoned 30-year
GNMA mortgages. Since these bonds were selling at a premium, it allowed us to
capitalize on the excess return and reinvest in higher yielding securities,
thereby improving the income of the Fund.
Once cheaply priced in the market, mortgages are now showing signs that their
heyday may be coming to an end. As these bonds move from fairly valued to
overvalued, we will reduce the Fund's mortgage allocation replacing those
holdings with Treasuries.
FINDING VALUE IN THE FIXED INCOME MARKET
We believe now is a good time for fixed income investing. Prices are cheap, and
real rates of returns -- total returns adjusted for inflation -- are generous by
historical standards.
The Fed continues to be vigilant and determined to keep inflation under control.
And, in spite of outbreaks of recession fears, all signs seem to indicate that
the economy will continue its moderate pace for the remainder of the year.
*Past performance is no guarantee of future results. Investment return and
principal value will fluctuate.
[Graphs]
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND -- CLASS A SHARES
The growth of a $10,000 investment
Voyageur U.S. Government Securities Fund with sales charge --
Ending value $19,814
Voyageur U.S. Government Securities Fund without sales charge --
Ending balance $20,802
Lehman Brothers Government Index -- Ending value $20,767
<TABLE>
<CAPTION>
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND -- AVERAGE ANNUAL TOTAL RETURNS
Insitutional Shares Class A Shares
------------------------ ---------------------------------------
1 year Since 6/7/94* 1 year 5 years Since 11/2/87*
------ ------------- ------ ------- --------------
<S> <C> <C> <C> <C> <C>
Without sales charge 3.88% 6.92% 3.88% 8.21% 8.82%
With sales charge n/a n/a (1.05%)** 7.16%** 8.21%**
Lehman Brothers
Government Index 4,50% 7.86% 4.50% 8.21% 8.80%
Class B Shares Class C Shares
------------------------ ------------------------
1 year Since 6/7/94* 1 year Since 11/2/87*
------ ------------- ------ --------------
Without contingent
deferred sales charge 3.32% 6.32% 3.11% 10.74%
With contingent
deferred sales (0.68%) 4.95% 2.11% 10.74%
charge***
Lehman Brothers
Government Index 4.50% 7.86% 4.50% 10.51%
</TABLE>
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.
* Commencement of operations.
** Total return includes in the maximum 4.75% sales charge.
*** Total return assumes redemtpion on June 30, 1996.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Funds, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of Voyageur U.S. Government
Securities Fund, a portfolio within Voyageur Funds, Inc., as of June 30, 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 June
30, 1996 and the financial highlights for each of the years in the five-year
period ended June 30, 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 and the 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. 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 the financial highlights
referred to above present fairly, in all material respects, the financial
position of Voyageur U.S. Government Securities Fund at June 30, 1996 and the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period ended June 30, 1996, and the
financial highlights for the periods stated in the first paragraph above, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 2, 1996
<TABLE>
<CAPTION>
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996
- ----------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at market value (note 1)
(identified cost: $110,508,629) .................................. $ 111,393,565
Cash in bank on demand deposit ...................................... 13,322
Accrued interest receivable ......................................... 1,003,717
Receivable for Fund shares sold ..................................... 2,192
-------------
Total assets ..................................................... 112,412,796
-------------
LIABILITIES
Dividends payable to shareholders ................................... 149,843
Payable for Fund shares redeemed .................................... 23,387
Distribution fees payable ........................................... 73,321
Other accrued expenses .............................................. 32,705
-------------
Total liabilities ................................................ 279,256
-------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK .................. $ 112,133,540
=============
Represented by:
Capital stock - authorized 10,000,000,000 shares of $.01 par value $ 110,361
Additional paid-in capital ....................................... 118,397,243
Undistributed net investment income .............................. 219,689
Accumulated net realized loss from investments ................... (7,478,689)
Unrealized appreciation of investments ........................... 884,936
-------------
TOTAL NET ASSETS ............................................... $ 112,133,540
=============
Net assets applicable to outstanding Class A Shares ................. $ 68,441,534
=============
Net assets applicable to outstanding Class B Shares ................. $ 1,780,037
=============
Net assets applicable to outstanding Class C Shares ................. $ 223,880
=============
Net assets applicable to outstanding Institutional Class Shares ..... $ 41,688,089
=============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A Shares (6,737,203 shares outstanding) (note 4) ........... $ 10.16
=============
Class B Shares (175,030 shares outstanding) (note 4) ............. $ 10.17
=============
Class C Shares (22,054 shares outstanding) (note 4) .............. $ 10.15
=============
Institutional Class Shares (4,101,857 shares outstanding) (note 4) $ 10.16
=============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1996
- ----------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest ........................................................... $ 8,556,433
-----------
Expenses (note 3):
Investment advisory and management fee ............................. 609,965
Dividend disbursing, administrative and accounting services fees ... 166,715
Distribution fees (Class A) ........................................ 182,881
Distribution fees (Class B) ........................................ 9,201
Distribution fees (Class C) ........................................ 2,690
Distribution fees (Institutional Class) ............................ 119,138
Printing, postage and supplies ..................................... 17,829
Audit fees ......................................................... 17,632
Legal fees ......................................................... 7,941
Custodian fees ..................................................... 18,700
Directors' fees .................................................... 6,659
Registration fees .................................................. 21,476
Other .............................................................. 13,085
-----------
Total expenses ................................................... 1,193,912
Less: Expenses waived or absorbed by the distributor ............... (1,606)
-----------
Net expenses before earnings credits on uninvested cash balances ... 1,192,306
Less: Earnings credits on uninvested cash balances ................. (10,549)
-----------
Total net expenses ............................................... 1,181,757
-----------
Investment income - net .......................................... 7,374,676
-----------
Realized and unrealized gain (loss) on investments (note 2):
Realized gain on security transactions ............................. 2,285,055
Net change in unrealized appreciation or depreciation of investments (4,503,029)
-----------
Net loss on investments .......................................... (2,217,974)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 5,156,702
===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
Operations:
Investment income - net ..................................................... $ 7,374,676 $ 8,267,737
Net realized gain (loss) on investments ..................................... 2,285,055 (9,763,744)
Net change in unrealized appreciation or depreciation of investments ........ (4,503,029) 18,185,818
------------- -------------
Net increase in net assets resulting from operations ...................... 5,156,702 16,689,811
------------- -------------
Distributions to shareholders from:
Investment income - net:
Class A ................................................................... (4,281,883) (4,919,889)
Class B ................................................................... (48,064) (2,497)
Class C ................................................................... (13,726) (1,136)
Institutional Class ....................................................... (2,789,781) (3,344,215)
Distributions in excess of net investment income:
Class A ................................................................... -- (12,813)
Class B ................................................................... -- (7)
Class C ................................................................... -- (3)
Institutional Class ....................................................... -- (8,710)
Net realized gain on investments:
Class A ................................................................... -- (160,578)
Class B ................................................................... -- (36)
Institutional Class ....................................................... -- (100,354)
------------- -------------
Total distributions ..................................................... (7,133,454) (8,550,238)
------------- -------------
Share transactions: (note 4)
Proceeds from sale of shares:
Class A (note 3) .......................................................... 7,330,164 9,513,749
Class B ................................................................... 1,769,115 130,370
Class C ................................................................... 91,380 218,517
Institutional Class ....................................................... 15,417,147 17,648,013
Net asset value of shares issued in reinvestment of net investment income and
net realized gain distributions:
Class A ................................................................. 2,859,623 3,394,023
Class B ................................................................. 16,287 952
Class C ................................................................. 5,275 564
Institutional Class ..................................................... 1,796,765 1,908,755
Payments for redemption of shares:
Class A ................................................................... (16,187,295) (26,146,449)
Class B (note 3) .......................................................... (105,794) (22,398)
Class C (note 3) .......................................................... (85,799) (10)
Institutional Class ....................................................... (29,486,507) (18,678,004)
------------- -------------
Decrease in net assets from share transactions .............................. (16,579,639) (12,031,918)
------------- -------------
Total decrease in net assets .............................................. (18,556,391) (3,892,345)
Net assets at beginning of year ................................................ 130,689,931 134,582,276
------------- -------------
Net assets at end of year (including undistributed (distributions in excess of)
net investment income of $219,689 and $(21,533), respectively) .............. $ 112,133,540 $ 130,689,931
============= =============
See accompanying notes to financial statements.
</TABLE>
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur U. S. Government Securities Fund (the Fund) is a portfolio within
Voyageur Funds, Inc. which 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 from investments issued, guaranteed or otherwise
backed by the full faith and credit of the U.S. Government. The Fund offers
Class A, Class B, Class C and Institutional Class 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 are sold subject to a contingent deferred
sales charge and have no conversion feature. Institutional Class Shares are sold
without a front-end sales charge and are not subject to a contingent deferred
sales charge. 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.
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
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 discount, is accrued daily.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
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, at June 30, 1996, the Fund had a capital
loss carryover of $7,391,649 that will expire in the years 2003 through 2005 if
not offset by subsequent capital gains. It is unlikely that the Board of
Directors will authorize a distribution of any net realized capital gains until
the available capital loss carryover has been offset or expires.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends declared daily from net investment income are payable monthly in
cash or may be reinvested in additional shares of the Fund at net asset value.
Net realized short-term capital gains, when available, may be distributed
throughout the year. Net realized long-term capital gains, when available, are
distributed annually.
REPURCHASE AGREEMENTS
Securities pledged as collateral for repurchase agreements are held by the
Fund's custodian bank until maturity of the repurchase agreement. Procedures for
all agreements ensure that the daily market value of the collateral is in excess
of the repurchase agreement in the event of default.
(2) INVESTMENT SECURITIES TRANSACTIONS
Purchase cost and proceeds of sales of investment securities, other than
short-term securities, aggregated $176,165,246 and $191,929,438, respectively,
for the year ended June 30, 1996.
(3) EXPENSES
The Fund has an investment advisory agreement with Voyageur Fund Managers,
Inc. (Voyageur), under which Voyageur manages the Fund's assets and furnishes
related office facilities, equipment, research and personnel. The Fund pays a
monthly fee to Voyageur equal to an annual rate of .50% of the Fund's average
daily net assets.
The Fund also has Distribution Agreements under Rule 12b-1 of the
Investment Company Act of 1940 with Voyageur Fund Distributors, Inc. (Fund
Distributors). The Fund is obligated to pay Fund Distributors a monthly
distribution fee at an annual rate of .25% of the average daily net assets of
the Class A and Institutional Class Shares and 1.00% of the average daily net
assets of the Class B and Class C Shares. Fund Distributors may waive all or
part of its distribution fee at its sole discretion. During the year ended June
30, 1996, Fund Distributors voluntarily waived Class B distribution fees of
$1,606.
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 expenses in connection with the performance
of dividend disbursing, administrative and accounting services.
In addition to the fees above, the Fund is responsible for paying most
other operating expenses including directors' fees, registration fees, printing
of shareholder reports, legal and auditing services, and other miscellaneous
expenses. Under the investment advisory agreement, Voyageur is obligated to pay
all expenses and fees (excluding distribution fees, interest, taxes and
brokerage commission) which exceed 1.00% of the Fund's average daily net assets,
on an annual basis. During the year ended June 30, 1996 the Fund earned $10,549
in credits on uninvested cash balances held by the Fund at the custodian which
were used to reduce fees for custodial services provided by the custodian bank.
Sales charges paid by Class A shareholders were $137,755 during the year
ended June 30, 1996. Of this amount, Fund Distributors received $17,499.
Contingent deferred sales charges paid by Class B and Class C shareholders were
$1,047 and $2 during the year ended June 30, 1996, respectively.
(4) SHARE TRANSACTIONS
Transactions in shares for the periods ended June 30, 1996 and June 30, 1995
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------- ------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold ................. 701,265 987,529 170,138 13,081
Shares issued for
reinvested distributions . 275,527 347,009 1,571 95
Shares redeemed ............. (1,556,383) (2,693,318) (10,038) (2,323)
---------- ---------- ---------- ----------
Increase (decrease) in shares
outstanding .............. (579,591) (1,358,780) 161,671 10,853
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL
CLASS C CLASS
------------------------------- ------------------------------
YEAR PERIOD FROM YEAR YEAR
ENDED JANUARY 10, 1995* ENDED ENDED
JUNE 30, 1996 TO JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold ................. 8,796 21,237 1,475,063 1,832,690
Shares issued for
reinvested distributions . 506 56 173,176 194,552
Shares redeemed ............. (8,540) (1) (2,794,116) (1,895,210)
---------- ---------- ---------- ----------
Increase (decrease) in shares
outstanding .............. 762 21,292 (1,145,877) 132,032
========== ========== ========== ==========
* Commencement of operations.
</TABLE>
(5) FINANCIAL HIGHLIGHTS
Per share data (rounded to the nearest cent) for a share of capital stock
outstanding and selected information for each period are as follows:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period............................ $10.37 $9.76 $10.99 $10.46 $ 9.99
------ ------ ------ ------ ------
Operations:
Net investment income.......................... .63 .62 .55 .61 .67
Net realized and unrealized
gain (loss) on investments................... (.23) .63 (.94) .83 .76
------ ------ ------ ------ ------
Total from operations...................... .40 1.25 (.39) 1.44 1.43
------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income...................... (.61) (.62) (.55) (.61) (.67)
From net realized gains........................ -- (.02) (.29) (.30) (.29)
------ ------ ------ ------ ------
Total distributions........................... (.61) (.64) (.84) (.91) (.96)
------ ------ ------ ------ ------
Net asset value:
End of period................................... $10.16 $10.37 $ 9.76 $10.99 $10.46
====== ====== ====== ====== ======
Total investment return (d)........................ 3.88% 13.45% (3.95)% 14.25% 14.68%
Net assets at end of
period (000's omitted).......................... $68,442 $75,886 $84,660 $112,604 $53,332
Ratios:
Ratio of expenses to
average daily net assets (f).................. .97% .95% .96% 1.10% 1.00%
Ratio of net investment income
to average daily net assets................... 6.07% 6.38% 5.10% 5.61% 6.60%
Assuming no voluntary waivers and reimbursements:
Expenses (b).................................. .97% .95% .96% 1.14% 1.25%
Net investment income......................... 6.07% 6.38% 5.10% 5.57% 6.35%
Portfolio turnover rate (excluding
short-term securities)........................ 145.35% 144.39% 124.38% 175.02% 198.54%
</TABLE>
See accompanying notes to Financial Highlights.
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------ --------------------------
YEAR YEAR PERIOD FROM YEAR PERIOD FROM
ENDED ENDED JUNE 7, ENDED JANUARY 10,
JUNE 30, JUNE 30, 1994(c) TO JUNE 30, 1995(c) TO
1996 1995 JUNE 30, 1994 1996 JUNE 30, 1995
------------------------------------------ --------------------------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period................ $10.38 $9.75 $10.05 $10.36 $9.48
------ ------ ------ ------ ------
Operations:
Net investment income.............. .57 .56 .01 .55 .27
Net realized and unrealized
gain (loss) on investments....... (.23) .65 (.28) (.23) .88
------ ------ ----- ------ ------
Total from operations.......... .34 1.21 (.27) .32 1.15
------ ------ ----- ------ ------
Distributions to shareholders:
From net investment income......... (.55) (.56) (.01) (.53) (.27)
From net realized gains............ -- (.02) (.02) -- --
------ ------ ----- ------ ------
Total distributions.............. (.55) (.58) (.03) (.53) (.27)
------ ------ ----- ------ ------
Net asset value:
End of period...................... $10.17 $10.38 $9.75 $10.15 $10.36
====== ====== ===== ====== ======
Total investment return (d)........... 3.32% 12.90% (2.68)% 3.11% 12.73%
Net assets at end of
period (000's omitted)............. $1,780 $139 $24 $224 $221
Ratios:
Ratio of expenses to
average daily net assets (f)..... 1.46% 1.54% .30%(a) 1.70% 1.62%(e)
Ratio of net investment income
to average daily net assets...... 5.55% 5.56% .11%(a) 5.33% 5.10%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (b)..................... 1.63% 1.69% .30%(a) 1.70% 1.65%
Net investment income............ 5.38% 5.41% .11%(a) 5.33% 5.07%
Portfolio turnover rate (excluding
short-term securities)........... 145.35% 144.39% 124.38% 145.35% 144.39%
See accompanying notes to Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
------------------------------------------------------
YEAR YEAR PERIOD FROM
ENDED ENDED JUNE 7, 1994(c)
JUNE 30, JUNE 30, TO JUNE 30,
1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C>
Net asset value:
Beginning of period......................... $10.37 $9.75 $10.05
------ ------ -----
Operations:
Net investment income....................... .63 .62 .01
Net realized and unrealized
gain (loss) on investments................ (.23) .64 (.28)
------ ------ -----
Total from operations................... .40 1.26 (.27)
------ ------ -----
Distributions to shareholders:
From net investment income.................. (.61) (.62) (.01)
From net realized gains..................... -- (.02) (.02)
------ ------ -----
Total distributions....................... (.61) (.64) (.03)
------ ------ -----
Net asset value:
End of period............................... $10.16 $10.37 $9.75
====== ====== =====
Total investment return (d).................... 3.88% 13.57% (2.64)%
Net assets at end of
period (000's omitted)...................... $41,688 $54,445 $49,898
Ratios:
Ratio of expenses to
average daily net assets (f).............. .97% .94% .25%(a)
Ratio of net investment income
to average daily net assets............... 6.07% 6.39% .16%(a)
Assuming no voluntary waivers and reimbursements:
Expenses (b).............................. .97% .94% .25%(a)
Net investment income..................... 6.07% 6.39% .16%(a)
Portfolio turnover rate (excluding
short-term securities).................... 145.35% 144.39% 124.38%
See accompanying notes to Financial Highlights.
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS
(a) Ratios presented for the period from June 7, 1994 to June 30, 1994 are not
annualized as they are not indicative of anticipated annual results.
(b) Voyageur and Fund Distributors voluntarily waived or reimbursed a portion
of expenses during the periods presented. The annual contractual expense
limit for the Fund (excluding distribution fees) is 1% of average daily net
assets. The maximum distribution fee is .25% of the Fund's average daily
net assets for Class A and Institutional Class Shares and 1.00% of the
Fund's average daily net assets for Class B and Class C Shares.
(c) Commencement of investment operations.
(d) 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.
(e) Annualized.
(f) Beginning in the year ended June 30, 1996, the expense ratio reflects the
effect of gross expense attributable to earnings credits on uninvested cash
balances received by the Fund. Prior period expense ratios have not been
adjusted.
<TABLE>
<CAPTION>
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
INVESTMENTS IN SECURITIES JUNE 30, 1996
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
NAME OF ISSUER AMOUNT VALUE(a)
- -------------------------------------------------------------------------------------------------------------------
(Percentage of each investment category relates to total net assets)
BONDS (99.3%):
U.S. GOVERNMENT AGENCY OBLIGATIONS (53.3%):
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Government National Mortgage Association
Mortgage-Backed Pass-Thru Certificates
10.00% due 12/20/02 $ 79,450 $ 83,243
10.00% due 03/15/16 81,057 88,565
8.00% due 01/15/17 51,002 52,176
7.00% due 05/15/23 819,669 790,546
7.00% due 06/15/23 2,383,959 2,299,257
7.00% due 07/15/23 3,688,913 3,557,846
6.50% due 10/15/23 940,628 882,516
7.00% due 11/15/23 1,031,352 993,738
7.00% due 01/15/24 1,768,797 1,705,153
7.00% due 02/15/24 9,062,106 8,734,255
6.50% due 03/15/24 986,456 925,513
7.00% due 03/15/24 2,910,701 2,804,548
7.00% due 04/15/24 3,015,363 2,905,393
6.50% due 05/15/24 5,905,669 5,535,325
7.00% due 05/15/24 8,912,303 8,587,272
7.00% due 06/15/24 3,853,995 3,713,439
7.00% due 09/15/25 1,925,252 1,847,221
6.50% due 01/15/26 1,000,015 931,354
7.00% due 02/15/26 4,883,126 4,685,213
7.00% due 03/15/26 1,294,798 1,242,319
6.50% due 05/20/26 8,065,337 7,461,163
------------
59,826,055
------------
U.S. TREASURY ISSUES (46.0%):
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes
6.125% due 03/31/98 1,000,000 1,000,780
6.00% due 05/31/98 2,000,000 1,995,620
8.00% due 08/15/99 500,000 522,810
6.75% due 04/30/00 1,000,000 1,010,470
8.875% due 05/15/00 1,000,000 1,083,120
5.75% due 10/31/00 10,000,000 9,740,600
5.625% due 11/30/00 6,000,000 5,811,540
7.50% due 05/15/02 1,150,000 1,203,900
6.375% due 08/15/02 2,000,000 1,984,060
5.75% due 08/15/03 1,500,000 1,428,510
7.25% due 08/15/04 5,000,000 5,178,900
6.50% due 05/15/05 1,000,000 986,870
10.00% due 05/15/10 15,500,000 18,713,770
6.25% due 08/15/23 1,000,000 906,560
------------
51,567,510
------------
TOTAL INVESTMENTS IN SECURITIES (cost: $110,508,629) (b) $111,393,565
============
</TABLE>
See accompanying notes to investments in securities.
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) The cost of securities for federal income tax purposes was $110,595,669 and
the aggregate gross unrealized appreciation and depreciation based on this
cost was:
Gross unrealized appreciation...... $ 2,387,285
Gross unrealized depreciation...... (1,589,389)
------------
Net unrealized appreciation...... $ 797,896
===========
INVESTMENT ADVISER, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND
ACCOUNTING SERVICES AGENT
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
UNDERWRITER
Voyageur Fund Distributors, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55479
GENERAL COUNSEL
Dorsey & Whitney P.L.L.P.
Minneapolis, MN 55402
AUDITORS
KPMG Peat Marwick LLP
Minneapolis, MN 55402
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