CALIFORNIA TAX FREE FUND
CALIFORNIA INSURED TAX FREE FUND
ANNNUAL REPORT
Dated December 31, 1995
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds
as your objectives or market conditions change.
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur WISCONSIN Tax Free Fund
Voyageur KANSAS Tax Free Fund
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
Voyageur ARIZONA Insured Voyageur MISSOURI Insured
Tax Free Fund Tax Free Fund
Voyageur CALIFORNIA Insured Voyageur NATIONAL Insured
Tax Free Fund Tax Free Fund
Voyageur FLORIDA Voyageur OREGON
Tax Free Fund Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON
Tax Free Fund
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited
Voyageur MINNESOTA Limited Term Tax Free Fund Term Tax Free Fund
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
Dear Shareholder:
1995 was an excellent year for municipal bond fund investors and I am pleased to
report that your Funds did extremely well.
As you may recall, the previous year, 1994, represented one of the most
difficult years for fixed income investors since the 1920s. Voyageur's
investment strategy, however, emphasizes total return over the long term.
Shareholders who maintained a long term outlook through 1994 are to be
congratulated for their patience. This patience was rewarded in 1995.
Two of the major factors contributing to the resurgence of the municipal bond
market this past year were:
* Progressively lower interest rates throughout the year. (Falling interest
rates directly increases the value of your Fund's portfolio, and hence,
your shares.)
* A narrowing "spread" between yields on higher quality bonds versus lower
quality bonds. (Your Funds benefited from maintaining a large position in
quality bonds.)
In the following pages, Drew McCullagh, the Funds' portfolio manager, will
elaborate on these and other points of interest regarding the municipal bond
market in 1995 and will also share Voyageur's economic outlook for the next
fiscal year.
Finally, I'd like to apprise you of the amount of capital appreciation and
current income generated by the Funds on your behalf in 1995.
<TABLE>
<CAPTION>
VOYAGEUR CALIFORNIA TAX FREE FUND
TOTAL NET
NET ASSET NET ASSET ASSETS
VALUE VALUE DIVIDENDS END OF
BEGINNING END PAID PER PERIOD
OF PERIOD OF PERIOD SHARE (000'S)
--------- --------- ----- -------
PERIOD
- ------
Period ended December 31, 1995:
<S> <C> <C> <C> <C>
Class A Shares $10.00* $10.64 $0.53 $1,012
Class B Shares 9.96** 10.65 0.25 128
_________________________________
* Net asset value at March 3, 1995 (commencement of operations)
** Net asset value at August 23, 1995 (commencement of operations)
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR CALIFORNIA INSURED TAX FREE FUND
TOTAL NET
NET ASSET NET ASSET ASSETS
VALUE VALUE DIVIDENDS END OF
BEGINNING END PAID PER PERIOD
OF PERIOD OF PERIOD SHARE (000'S)
--------- --------- ----- -------
PERIOD
- ------
Period ended December 31, 1995:
<S> <C> <C> <C> <C>
Class A Shares $9.33 $10.65 $0.55 $33,860
Class B Shares 9.33 10.65 0.51 6,029
Class C Shares 10.19* 10.65 0.32 53
_________________________________
* Net asset value at April 12, 1995 (commencement of operations)
</TABLE>
I will be reporting to you again in August, 1996 to review the first half of the
coming year. In the interim, if you have any questions or comments about your
Funds, please call Voyageur's Shareholder Services Department at (800)545- 3863
or your financial advisor.
Thank you for investing with Voyageur.
Sincerely,
John G. Taft
President
Voyageur California Tax Free Fund
Voyageur California Insured Tax Free Fund
FUND INVESTMENT OBJECTIVES AND STRATEGIES
The primary objective of the Voyageur California Tax Free Fund is to seek as
high a level of current income free from both federal income taxes and state
income taxes as is consistent with preservation of capital.
The primary objective of the Voyageur California Insured Fund is to seek as high
a level of current income free from both federal income taxes and state income
taxes as is consistent with preservation of capital, with the added safety of an
insured portfolio. The Voyageur California Insured Tax Free Fund adopted a
modification of an investment policy which will permit this Fund to retain
insured municipal bonds in its portfolio the rating of which is not lower than
AA by Standard & Poor's Ratings Service or Aa by Moody's Investor Service so
long as such AA or Aa insured municipal bonds do not exceed 35% of the Fund's
total assets. Such bonds must still have a AAA or Aaa rating at the time of
initial investment by the Fund.
The California Tax Free Fund generally invests in long-term investment grade
municipal bonds; the California Insured Tax Free Fund generally invests in
long-term insured municipal bonds. The distributions from each Fund are
generally exempt from federal income tax and California state income tax.
DISCUSSION OF FUND PERFORMANCE
by Andrew M. McCullagh, Jr.
MR. MCCULLAGH IS THE PORTFOLIO MANAGER OF THE VOYAGEUR CALIFORNIA TAX FREE FUNDS
AS WELL AS A SENIOR VICE PRESIDENT FOR VOYAGEUR FUND MANAGERS. HE HAS MANAGED
THE FUNDS SINCE THEIR INCEPTIONS.
We are pleased to report the 1995 performance results of the Voyageur California
Tax Free Funds for the fiscal year ending December 31, 1995. The Voyageur
California Insured Tax Free Fund's Class 'A' and 'B' shares have been in
operation for the entire fiscal year. The Voyageur California Tax Free Fund's
Class 'A', 'B', and 'C' shares commenced in 1995.
* The Voyageur California Insured Tax Free Fund achieved a total return of
+20.51% in 1995 for Class 'A' shares (assuming purchase at net asset value
and reinvestment of dividends and capital gains). Class 'B' shares achieved
a +20.01% total return.
* The Voyageur California Tax Free Fund achieved a total return of +11.97%
for Class 'A' shares since the Fund's commencement on March 3, 1995
(assuming purchase at net asset value and reinvestment of dividends and
capital gains).
For information pertaining to total returns, relative performance, and inception
dates for other share classes, as well as information about the Funds'
performance over additional timeframes and including the effect of sales
charges, please refer to the charts on pages 8 and 9.
FACTORS AFFECTING FUND PERFORMANCE IN 1995
As discussed in John Taft's introduction, a general downward trend in prevailing
interest rates had a positive impact on the net asset value of Fund shares in
1995. The Voyageur California Insured Tax Free Fund had relative performance for
the fiscal year that beat the average return achieved by all California
municipal bond funds according to Lipper Analytical Services. As a group, these
26 funds achieved an average one year total return of +19.21%. The Voyageur
California Insured Tax Free Fund's performance bested this figure by over 1%.
According to Lipper, the Voyageur California Insured Tax Free Fund (Class 'A'
shares) was ranked #5 of 26 California municipal bond funds for one year total
return. Keep in mind, however, that past performance does not guarantee future
results. (Once again, please refer to the charts on pages 8 and 9 for additional
performance information.)
The Funds were able to capture significant capital appreciation through duration
management. Longer duration funds experience wider fluctuations in market prices
than shorter duration funds. For example, early in 1995, the duration of the
Voyageur California Insured Tax Free Fund was over 11.8 years which allowed for
a significant increase in net asset value. After having captured this market
rally, the duration of the Fund was systematically reduced, closing the year at
approximated 7.6 years. As of December 31, 1995, the duration for the Voyageur
California Tax Free Fund was 8.1 years.
The Funds also benefited from relative changes in value between high quality
bonds and lower quality bonds. As interest rate spreads between these two
classes of municipal bonds narrowed, high quality bonds (which had been
dramatically oversold during the 1994 bear market) gained significant relative
value. The Voyageur California Insured Tax Free Fund is comprised exclusively of
bonds rated Aaa and/or AAA by Moody's Investors Service and/or Standard & Poor's
Ratings Service. The Voyageur California Tax Free Fund's portfolio was comprised
100% of investment grade securities. As you can see, throughout 1995, asset
quality remained high in the Voyageur California Tax Free Funds.
OUTLOOK FOR 1996
Our outlook for the California municipal bond market remains bullish. However,
we do not anticipate as significant levels of total return in the upcoming year
as was achieved in 1995.
Our 1996 economic outlook calls for:
* CONTINUED LOW RATES OF INFLATION. We expect a Consumer Price Index (CPI)
increase of from 2.5% to 2.8%.
* SLOWING OF ECONOMIC GROWTH. In 1995, U.S. Gross Domestic Product (GDP)
climbed about 3%. Voyageur's 1996 projection for GDP calls for an increase
of about 2.4%.
* STABLE TO SLIGHTLY DECLINING INTEREST RATES. During 1995, the Federal
Reserve Board encouraged lower interest rates by reducing the Federal Funds
Rate by a total of .5%. (Rates were subsequently lowered by an additional
.25% in February 1996.) We expect further reductions of .5% to .75%, which
will likely occur well in advance of the November elections.
In conclusion, Voyageur believes the municipal bond market will have a good year
in 1996. However, we advise against expectations of total return levels achieved
in 1995.
PURSUANT TO RULE 232.304(a) OF REGULATION S-T THE FOLLOWING IS A TABULAR
REPRESENTATION OF A LINE GRAPH FOR VOYAGEUR CALIFORNIA INSURED TAX FREE FUND
PORTFOLIO ABSTRACT FOR THE PERIOD ENDED DECEMBER 31, 1995. THE DATA REPRESENTS
THE CUMULATIVE TOTAL RETURN OF A HYPOTHETICAL INVESTMENT IN CLASS A SHARES OF
$10,000 MADE ON THE DATE THE FUND COMMENCED OPERATIONS THROUGH DECEMBER 31,
1995.
ENDING VALUE ENDING VALUE ENDING VALUE
WITH SALES WITHOUT SALES LEHMAN BROS.
DATE CHARGE CHARGE BOND INDEX
- ---- ------ ------ ----------
Oct-92 9525 10000 10000
Oct-92 9544.05 10020 9936.7708
Nov-92 9889.81 10383 10164.323
Dec-92 10018.24 10517.84 10274.098
Jan-93 10119.75 10624.41 10388.14
Feb-93 10444.56 10965.41 10809.898
Mar-93 10477.77 11000.28 10679.099
Apr-93 10596.85 11125.3 10804.044
May-93 10638.49 11169.02 10874.27
Jun-93 10788.62 11326.63 11058.046
Jul-93 10801.61 11340.28 11081.268
Aug-93 11012.84 11562.03 11319.515
Sep-93 11164.19 11720.94 11451.953
Oct-93 11194.68 11752.94 11466.841
Nov-93 11094.22 11647.48 11359.052
Dec-93 11160.29 11716.84 11612.359
Jan-94 11384.49 11952.22 11747.063
Feb-94 11065.57 11617.39 11419.32
Mar-94 10609.68 11138.78 10883.753
Apr-94 10317.95 10832.49 10994.768
May-94 10461.47 10983.17 11101.417
Jun-94 10395.85 10914.28 11019.267
Jul-94 10635.5 11165.88 11249.569
Aug-94 10675.37 11207.74 11264.194
Sep-94 10460.39 10982.04 11078.334
Oct-94 10190.92 10699.12 10853.444
Nov-94 9898.68 10392.32 10656.997
Dec-94 10105.79 10609.75 10918.093
Jan-95 10525.82 11050.72 11280.574
Feb-95 10991.17 11539.29 11628.016
Mar-95 11095.94 11649.28 11757.087
Apr-95 11079.65 11632.18 11767.668
May-95 11461.83 12033.42 12164.238
Jun-95 11256.87 11818.24 12030.432
Jul-95 11296.81 11860.17 12126.675
Aug-95 11415.68 11984.97 12290.385
Sep-95 11591.14 12169.18 12375.189
Oct-95 11767.25 12354.06 12585.567
Nov-95 12012.49 12611.54 12812.107
Dec-95 12178.7 12786.04 12944.072
VOYAGEUR CALIFORNIA INSURED TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS A SHARES)
----------------
SINCE
1 Year 10/15/92**
------ ----------
Without Sales Charge 20.51% 7.95%
With Sales Charge* 14.79% 6.33%
Lehman Bros. Long 18.56% 8.36%
Insured Municipal
Bond Index
VOYAGEUR CALIFORNIA INSURED TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS B SHARES)
----------------
Since
1 Year 3/1/94**
------ --------
Without Contingent 20.01% 5.05%
Deferred Sales Charge
With Contingent 16.01% 2.95%
Deferred Sales Charge***
VOYAGEUR CALIFORNIA INSURED TAX FREE FUND
TOTAL RETURNS
(CLASS C SHARES)
----------------
SINCE
4/12/95**
---------
7.77%
* Average annual total returns include the maximum 4.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1995.
PURSUANT TO RULE 232.304(a) OF REGULATION S-T THE FOLLOWING IS A TABULAR
REPRESENTATION OF A LINE GRAPH FOR VOYAGEUR CALIFORNIA TAX FREE FUND PORTFOLIO
ABSTRACT FOR THE PERIOD ENDED DECEMBER 31, 1995. THE DATA REPRESENTS THE
CUMULATIVE TOTAL RETURN OF A HYPOTHETICAL INVESTMENT IN CLASS A SHARES OF
$10,000 MADE ON THE DATE THE FUND COMMENCED OPERATIONS THROUGH DECEMBER 31,
1995.
ENDING VALUE ENDING VALUE ENDING VALUE
WITH SALES WITHOUT SALES LEHMAN BROS.
DATE CHARGE CHARGE BOND INDEX
- ---- ------ ------ ----------
Mar-95 9525 10000 10000
Mar-95 9630.26 10110.51 10110.3024
Apr-95 9627.69 10107.81 10108.2803
May-95 9933.79 10429.17 10489.3625
Jun-95 9778.04 10265.66 10327.8263
Jul-95 9768.34 10255.48 10381.531
Aug-95 9886.06 10379.07 10523.758
Sep-95 10013.91 10513.29 10606.8957
Oct-95 10230.56 10740.74 10832.8225
Nov-95 10488.42 11011.47 11072.2279
Dec-95 10665.43 11197.3 11227.2391
VOYAGEUR CALIFORNIA TAX FREE FUND
TOTAL RETURNS
(CLASS A SHARES)
----------------
SINCE
-----
3/2/95**
Without Sales Charge 11.97%
With Sales Charge* 6.65%
Lehman Bros. 20 12.27%
Year Municipal
Bond Index
VOYAGEUR CALIFORNIA TAX FREE FUND
TOTAL RETURNS
(CLASS B SHARES)
----------------
SINCE
8/23/95**
---------
Without Contingent 9.52%
Deferred Sales Charge
With Contingent
Deferred Sales Charge*** 5.52%
* Average annual total returns include the maximum 4.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1995.
INDEPENDENT AUDITORS' REPORT
The Board of Directors, Trustees and Shareholders
Voyageur Mutual Funds, Inc.
Voyageur Investment Trust:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of Voyageur California Tax
Free Fund (a fund within Voyageur Mutual Funds, Inc.) and Voyageur California
Insured Tax Free Fund (a fund within Voyageur Investment Trust) as of December
31, 1995, the related statements of operations for the period from March 3,
1995, commencement of operations, to December 31, 1995 for Voyageur California
Tax Free Fund and for the year ended December 31, 1995 for Voyageur California
Insured Tax Free Fund, the statements of changes in net assets for the period
from March 3, 1995 to December 31, 1995 for Voyageur California Tax Free Fund
and for the year ended December 31, 1995, the two-month period ended December
31, 1994 and the year ended October 31, 1994 for Voyageur California Insured Tax
Free Fund and the financial highlights for the period from March 3, 1995 to
December 31, 1995 for Voyageur California Tax Free Fund and for the year ended
December 31, 1995, the two-month period ended December 31, 1994, the years ended
October 31, 1994 and 1993 and for the period from October 15, 1992, commencement
of operations, to October 31, 1992 for Voyageur California Insured Tax Free
Fund. These financial statements and the financial highlights are the
responsibility of Fund management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 California Tax Free Fund and Voyageur California Insured
Tax Free Fund as of December 31, 1995, and the results of their operations,
changes in their net assets and the financial highlights for the periods stated
in the first paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 9, 1996
<TABLE>
<CAPTION>
THE VOYAGEUR FUNDS
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------------
VOYAGEUR VOYAGEUR
CALIFORNIA CALIFORNIA
TAX FREE INSURED
FUND TAX FREE FUND
ASSETS ---------- -----------
<S> <C> <C>
Investments in securities, at market value (note 1)
(identified cost: $1,074,590 and $37,358,529, respectively)............. $1,138,111 $39,496,249
Cash in bank on demand deposit............................................. 1,799 --
Accrued interest receivable................................................ 20,150 746,433
Receivable for Fund shares sold............................................ -- 35,010
---------- -----------
Total assets............................................................ 1,160,060 40,277,692
---------- -----------
LIABILITIES
Bank overdraft............................................................. -- 112,861
Dividends payable to shareholders.......................................... 11,527 169,930
Distribution fees payable.................................................. 898 13,640
Other accrued expenses..................................................... 7,615 38,937
---------- -----------
Total liabilities....................................................... 20,040 335,368
---------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES................................ $1,140,020 $39,942,324
========== ===========
Represented by:
Capital stock - $.01 par value (note 1)................................. $ 1,072 --
Additional paid-in capital (note 1)..................................... 1,075,052 $38,982,723
Undistributed net investment income..................................... 375 96
Accumulated net realized loss on investments (note 1)................... -- (1,178,215)
Unrealized appreciation of investments.................................. 63,521 2,137,720
---------- -----------
TOTAL NET ASSETS...................................................... $1,140,020 $39,942,324
========== ===========
Net assets applicable to outstanding Class A Shares........................ $1,012,062 $33,860,198
========== ===========
Net assets applicable to outstanding Class B Shares........................ $ 127,958 $ 6,028,655
========== ===========
Net assets applicable to outstanding Class C Shares........................ N/A $ 53,471
=========== ===========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE Class A - Shares outstanding:
95,115 and 3,179,418, respectively (note 4)........................... $10.64 $10.65
====== ======
Class B - Shares outstanding:
12,019 and 566,073, respectively (note 4)............................. $10.65 $10.65
====== ======
Class C - Shares outstanding:
N/A and 5,020, respectively (note 4).................................. N/A $10.65
====== ======
</TABLE>
<TABLE>
<CAPTION>
THE VOYAGEUR FUNDS
STATEMENTS OF OPERATIONS PERIOD ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------
VOYAGEUR VOYAGEUR
CALIFORNIA CALIFORNIA
TAX FREE INSURED
FUND* TAX FREE FUND
-------- ------------
<S> <C> <C>
Investment income:
Interest................................................................ $ 53,865 $2,164,590
-------- ------------
Expenses (note 3):
Investment advisory and management fee.................................. 4,468 184,315
Dividend-disbursing, administrative and accounting services fees........ 13,974 67,135
Printing, postage and supplies.......................................... 324 388
Audit and accounting fees............................................... 4,231 8,327
Legal fees.............................................................. 59 273
Distribution fees - Class A............................................. 2,145 80,709
Distribution fees - Class B............................................. 390 44,275
Distribution fees - Class C............................................. N/A 1,792
Directors' fees......................................................... 92 831
Registration fees....................................................... 325 193
Custodian fees.......................................................... 2,958 20,080
Other................................................................... 321 118
-------- ------------
Total expenses........................................................ 29,287 408,436
Less: Expenses waived or absorbed....................................... (25,184) (131,707)
-------- ------------
Net expenses before earnings credits on uninvested cash................. 4,103 276,729
Less: Earnings credits on uninvested cash.............................. (112) (20,079)
-------- ------------
Total net expenses.................................................... 3,991 256,650
-------- ------------
Investment income - net............................................... 49,874 1,907,940
-------- ------------
Realized and unrealized gain (loss) on investments (note 2):
Realized gain (loss) on security transactions........................... 6,156 (855,703)
Net change in unrealized appreciation or depreciation of investments.... 63,521 5,542,753
-------- ------------
Net gain on investments............................................... 69,677 4,687,050
-------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $119,551 $6,594,990
======== ==========
_________________________________
* Period from March 3, 1995 (commencement of operations) to December 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
THE VOYAGEUR FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
VOYAGEUR CALIFORNIA VOYAGEUR CALIFORNIA
TAX FREE FUND INSURED TAX FREE FUND
--------------- -----------------------------------------
PERIOD FROM YEAR TWO MONTHS YEAR
MARCH 3, 1995* ENDED ENDED ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31, OCTOBER 31,
Operations: 1995 1995 1994 (NOTE 1) 1994
--------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Investment income - net........................... $ 49,874 $ 1,907,940 $ 296,783 $ 1,197,457
Realized gain (loss) on investments - net......... 6,156 (855,703) (322,512) 75,043
Net change in unrealized appreciation or
depreciation of investments..................... 63,521 5,542,753 (234,318) (3,524,372)
---------- ------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................. 119,551 6,594,990 (260,047) (2,251,872)
---------- ------------ ----------- -----------
Distributions to shareholders from:
Investment income - net:
Class A......................................... (47,483) (1,751,957) (256,547) (1,136,833)
Class B......................................... (2,016) (214,794) (13,896) (20,067)
Class C......................................... N/A (7,990) N/A N/A
Net realized gain on investments:
Class A......................................... (5,465) -- (15,454) (111,226)
Class B......................................... (691) -- (1,005) (1,473)
---------- ------------ ----------- -----------
Total distributions............................... (55,655) (1,974,741) (286,902) (1,269,599)
---------- ------------ ----------- -----------
Share transactions (note 4):
Proceeds from sale of shares:
Class A (note 3)................................ 3,041,904 7,560,978 3,083,933 20,862,225
Class B......................................... 121,092 3,571,318 815,667 1,506,088
Class C......................................... N/A 400,031 N/A N/A
Net asset value of shares issued in reinvestment of
net investment income and realized gain distributions:
Class A....................................... 39,348 658,965 50,616 463,656
Class B....................................... -- 81,555 2,614 8,705
Class C....................................... N/A 1,317 N/A N/A
Payments for redemption of shares:
Class A (note 3)................................ (2,126,220) (6,465,617) (1,900,798) (3,099,467)
Class B (note 3)................................ -- (342,995) (379) (19,694)
Class C......................................... N/A (357,029) N/A N/A
---------- ------------ ----------- -----------
Increase in net assets from share transactions.... 1,076,124 5,108,523 2,051,653 19,721,513
---------- ------------ ----------- -----------
Total increase in net assets.................... 1,140,020 9,728,772 1,504,704 16,200,042
Net assets at beginning of period.................... -- 30,213,552 28,708,848 12,508,806
---------- ------------ ----------- -----------
Net assets at end of period (including undistributed
net investment income of $375, $96, $66,897
and $40,557, respectively)...................... $1,140,020 $39,942,324 $30,213,552 $28,708,848
========== =========== =========== ===========
_________________________________
* Commencement of operations.
</TABLE>
THE VOYAGEUR FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur California Tax Free Fund (California Tax Free Fund) is one of a
series of funds within Voyageur Mutual Funds, Inc. which is registered under the
Investment Company Act of 1940 (as amended) as an open-end management investment
company with 10 trillion shares of authorized capital stock that may be issued.
Voyageur California Insured Tax Free Fund (California Insured Tax Free Fund) is
one of a series of funds within the Voyageur Investment Trust, a Massachusetts
business trust registered under the Investment Company Act of 1940 (as amended)
as an open-end management investment company with an unlimited number of
authorized shares of beneficial interest. California Tax Free Fund is registered
as a non-diversified fund and California Insured Tax Free Fund is registered as
a diversified fund. California Tax Free Fund seeks high current income free from
federal and state income taxes by investing in investment grade municipal bonds.
California Insured Tax Free Fund seeks high current income free from federal and
state income taxes with the added safety of an insured portfolio by investing in
insured municipal bonds.
California Tax Free Fund and California Insured Tax Free Fund (the Funds)
offer Class A, Class B and Class C Shares. Class A Shares are sold with a
front-end sales charge. Class B shares, first offered by California Tax Free
Fund in 1995, may be subject to a contingent deferred sales charge and such
shares automatically convert to Class A after eight years. Class C Shares, first
offered by the Funds in 1995, are not subject to a contingent deferred sales
charge or a front-end sales charge and have no conversion feature. As of
December 31, 1995, California Tax Free Fund had no Class C Shares outstanding.
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.
Effective December 31, 1994, California Insured Tax Free Fund changed its
fiscal year end from October 31 to December 31.
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
Securities are valued at fair value as determined by the Board of
Directors/Trustees. Determination of fair value involves, among other things,
using pricing services or prices quoted by independent brokers. Short-term
securities are valued at amortized cost which approximates market value.
Security transactions are accounted for on the trade date. Securities gains
and losses are calculated on the identified-cost basis. Interest income,
including level-yield amortization of premium and original issue discount, is
accrued daily.
Each Fund concentrates its investments in a single state and therefore, may
have more credit risk related to the economic conditions of the state of
California than a portfolio with broader geographical diversification.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by each 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
Each Fund's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute its
income to shareholders in amounts that will avoid or minimize federal income or
excise taxes for each Fund. Net investment income and net realized gains
(losses) for the Funds may differ for financial statement and tax purposes
primarily because of losses deferred for tax purposes due to "wash sale"
transactions. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. The effect on dividend
distributions on certain book-to-tax differences is reflected as excess
distributions of net realized gains in the statement of changes in net assets.
Also, due to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or realized
gains (losses) were recorded by the Funds. For federal income tax purposes, at
December 31, 1995 California Insured Tax Free Fund had a capital loss carryover
of $1,178,215 that will expire in 2003 if not offset by subsequent capital
gains. It is unlikely that the Board of Trustees will authorize a distribution
of any net realized capital gains until the available capital loss carryover has
been offset or expires.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends declared daily from net investment income are payable monthly in
cash or reinvested in additional shares of each Fund. Net short-term realized
capital gains, if any, may be distributed throughout the year and net long-term
realized capital gains, when available, are distributed annually.
(2) INVESTMENT SECURITIES TRANSACTIONS
Purchase cost and proceeds of sales of investment securities other than
short-term securities aggregated $1,462,339 and $393,905 for California Tax Free
Fund and $44,996,291 and $38,742,752 for California Insured Tax Free Fund,
respectively, during the period ended December 31, 1995.
(3) EXPENSES
Each Fund has an investment advisory and management fee agreement with
Voyageur Fund Managers, Inc. (Voyageur) under which Voyageur manages each Fund's
assets and provides other specified services. The fee for investment management
and advisory services is payable monthly and is based on the average daily net
assets of each Fund at the annual rate of .50%. In addition, each Fund will pay
most other operating expenses including directors' fees, registration fees,
printing of shareholder reports, legal and auditing services and other
miscellaneous expenses. There was no portfolio insurance expense for the
California Insured Tax Free Fund. Portfolio insurance expense, if any, is
recognized over the premium period. Voyageur is obligated to pay all expenses of
each Fund (excluding distribution fees, insurance premiums on portfolio
securities, taxes, interest and brokerage commissions) which exceed 1% of
average daily net assets, on an annual basis. During the period ended December
31, 1995 Voyageur absorbed $17,940 pursuant to the contractual 1% expense
limitation for California Tax Free Fund and, excluding waiver of distribution
fees and expense reductions, voluntarily absorbed fees and expenses of $7,067
for California Tax Free Fund and $90,000 for California Insured Tax Free Fund.
Each Fund will also pay a fee to Voyageur for acting as the Funds
dividend-disbursing, administrative and accounting services agent. The fee is
paid monthly and is equal to the sum of $1.33 per shareholder account per month,
a fixed monthly fee ranging from $1,000 to $1,500 based on the level of each
Fund's average daily net assets and an annualized percentage of average daily
net assets at reducing rates from .11% to .02%. Each Fund is also responsible
for reimbursing Voyageur's out-of-pocket expense in connection with the
performance of dividend-disbursing, administrative and accounting services.
All classes of shares have a Distribution Agreement under Rule 12b-1 of the
Investment Company Act of 1940 with Voyageur Fund Distributors, Inc. (Fund
Distributors). Under this plan each Fund is obligated to pay Fund Distributors a
monthly distribution fee at an annual rate of .25% of each Fund's average daily
net assets of the Class A Shares and 1.00% of each Fund's average daily net
assets of the Class B and Class C Shares. Fund Distributors may waive all or
part of its distribution fee at its sole discretion. During the period ended
December 31, 1995 Fund Distributors voluntarily waived Class A distribution fees
of $23,803 for California Insured Tax Free Fund and Class B distribution fees of
$177 for California Tax Free Fund and $17,904 for California Insured Tax Free
Fund. During the period ended December 31, 1995, California Tax Free Fund earned
$112 and California Insured Tax Free fund earned $20,079 in credits on
uninvested cash balances held by each Fund at the custodian. These credits were
used to reduce certain fees for various custodial, pricing and accounting
services provided by the custodian bank.
Sales charges paid by Class A shareholders for the period ended December
31, 1995 were $19,639 for California Tax Free Fund and $226,966 for California
Insured Tax Free Fund. Of these amounts, Fund Distributors received $2,554 from
California Tax Free Fund and $29,464 from California Insured Tax Free Fund.
Contingent deferred sales charges paid by Class A and Class B shareholders for
California Insured Tax Free Fund were $200 and $4,513, respectively.
(4) SHARE TRANSACTIONS
Transactions in shares during each period were as follows:
<TABLE>
<CAPTION>
CALIFORNIA TAX FREE FUND
----------------------------------------
CLASS A CLASS B
--------------- ----------------
PERIOD FROM PERIOD FROM
MARCH 3, 1995* AUGUST 23, 1995*
TO DECEMBER 31, TO DECEMBER 31,
1995 1995
--------------- ----------------
<S> <C> <C>
Shares sold............................. 299,412 12,019
Shares issued for reinvested
distributions...................... 3,855 --
Shares redeemed......................... (208,152) --
----------- --------
Increase in shares outstanding.......... 95,115 12,019
=========== =========
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA INSURED TAX FREE FUND
---------------------------------------------------
CLASS A
---------------------------------------------------
YEAR TWO MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 31,
1995 1994 1994
------------ ------------ -----------
<S> <C> <C> <C>
Shares sold............................. 750,296 333,061 1,999,735
Shares issued for reinvested
distributions........................ 65,485 5,545 45,643
Shares redeemed......................... (636,784) (206,469) (305,934)
---------- ----------- ------------
Increase in shares outstanding.......... 178,997 132,137 1,739,444
========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA INSURED TAX FREE FUND
----------------------------------------------------------------------
CLASS B CLASS C
------------------------------------------------- ---------------
YEAR TWO MONTHS PERIOD FROM PERIOD FROM
ENDED ENDED MARCH 1, 1994* APRIL 12, 1995*
DECEMBER 31, DECEMBER 31, TO OCTOBER 31, TO DECEMBER 31,
1995 1994 1994 1995
------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
Shares sold............................. 353,417 87,607 151,159 39,140
Shares issued for reinvested
distributions........................ 8,055 287 887 128
Shares redeemed......................... (33,284) (42) (2,013) (34,248)
---------- -------- ---------- ----------
Increase in shares outstanding.......... 328,188 87,852 150,033 5,020
========== ======== ========== ==========
_________________________________
* 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>
CALIFORNIA TAX FREE FUND
---------------------------------------
CLASS A CLASS B
---------------- ------------------
PERIOD FROM PERIOD FROM
MARCH 3, 1995(d) AUGUST 23, 1995(d)
TO DECEMBER 31, TO DECEMBER 31,
1995 1995
---------------- ------------------
<S> <C> <C>
Net asset value:
Beginning of period........................................ $10.00 $9.96
------ -----
Operations:
Net investment income...................................... .47 .20
Net realized and unrealized gain on investments............ .70 .74
------ -----
Total from operations.................................... 1.17 .94
------ -----
Distributions to shareholders:
From net investment income (f)............................. (.47) (.19)
From net realized gains.................................... (.06) (.06)
------ -----
Total distributions...................................... (.53) (.25)
------ -----
Net asset value:
End of period.............................................. $10.64 $10.65
====== ======
Total investment return (b)................................... 11.97% 9.52%
Net assets at end of period (000's omitted)................... $1,012 $128
Ratios:
Ratio of expenses to
average daily net assets (g)............................. .46%(e) .60%(e)
Ratio of net investment income.............................
to average daily net assets.............................. 5.57%(e) 5.33%(e)
Assuming no voluntary waivers and
reimbursements:
Expenses (c)....................................... 1.22%(e) 1.93%(e)
Net investment income.............................. 4.81%(e) 4.00%(e)
Portfolio turnover rate (excluding
short-term securities)..................................... 39.51% 39.51%
See accompanying notes to Financial Highlights.
</TABLE>
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
Per share data (rounded to the nearest cent) for a share of beneficial
interest outstanding and selected information for each period are as follows:
<TABLE>
<CAPTION>
CALIFORNIA INSURED TAX FREE FUND
-----------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------
YEAR TWO MONTHS PERIOD FROM
ENDED ENDED OCTOBER 15, 1992(d)
DECEMBER 31, DECEMBER 31, YEAR ENDED OCTOBER 31, TO OCTOBER 31,
1995 1994 1994 1993 1992
----------- ------------ ---------------------- -------------------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.................. $ 9.33 $9.51 $11.08 $10.02 $10.00
------ ----- ------ ------ ------
Operations:
Net investment income................ .53 .10 .55 .60 --
Net realized and unrealized
gain (loss) on investments ....... 1.34 (.18) (1.52) 1.11 .02
------ ----- ------ ------ ------
Total from operations............ 1.87 (.08) (.97) 1.71 .02
------ ----- ------ ------ ------
Distributions to shareholders:
From net investment income (a)....... (.55) (.09) (.54) (.60) --
From net realized gains.............. -- (.01) (.06) (.05) --
------ ----- ------ ------ ------
Total distributions................ (.55) (.10) (.60) (.65) --
-------- ------- --------- --------- -----------
Net asset value:
End of period........................ $10.65 $9.33 $9.51 $11.08 $10.02
====== ===== ===== ====== ======
Total investment return (b)............. 20.51% (0.84)% (8.97)% 17.29% 0.20%
Net assets at end of period
(000's omitted)...................... $33,860 $27,994 $27,282 $12,509 $2,056
Ratios:
Ratio of expenses to
average daily net assets (g)....... .70% .10%(e) .20% --% --%
Ratio of net investment income
to average daily net assets........ 5.23% 6.30%(e) 5.37% 5.26% --%
Assuming no voluntary waivers
and reimbursements:
Expenses (c)................. 1.02% 1.24%(e) 1.25% 1.25% --%
Net investment income........ 4.91% 5.16%(e) 4.32% 4.01% --%
Portfolio turnover rate (excluding
short-term securities)............... 107.45% 7.28% 18.34% 24.19% 7.31%
See accompanying notes to Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
CALIFORNIA INSURED TAX FREE FUND
---------------------------------------------------------------------
CLASS B CLASS C
---------------------------------------------- -----------------
YEAR TWO MONTHS PERIOD FROM PERIOD FROM
ENDED ENDED MARCH 1, 1994(d) APRIL 12, 1995(d)
DECEMBER 31, DECEMBER 31, TO OCTOBER 31, TO DECEMBER 31,
1995 1994 1994 1995
------------ ----------- --------------- -----------------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period.................... $9.33 $9.51 $10.68 $10.19
------ ----- ------ ------
Operations:
Net investment income.................. .50 .08 .31 .25
Net realized and unrealized
gain (loss) on investments ......... 1.33 (.17) (1.16) .53
------ ----- ------ ------
Total from operations.............. 1.83 (.09) (.85) .78
------ ----- ------ ------
Distributions to shareholders:
From net investment income (a)......... (.51) (.08) (.30) (.32)
From net realized gains................ -- (.01) (.02) --
------ ----- ------ ------
Total distributions.................. (.51) (.09) (.32) (.32)
------ ----- ------ ------
Net asset value:
End of period.......................... $10.65 $9.33 $ 9.51 $10.65
====== ===== ====== ======
Total investment return (b)............... 20.01% (0.92)% (7.93)% 7.77%
Net assets at end of period
(000's omitted)........................ $6,029 $2,219 $1,427 $53
Ratios:
Ratio of expenses to
average daily net assets (g)......... 1.10% .57%(e) .73%(e) 1.53%(e)
Ratio of net investment income
to average daily net assets.......... 4.75% 5.54%(e) 4.82%(e) 4.25%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)................... 1.75% 1.94%(e) 1.95%(e) 1.77%(e)
Net investment income.......... 4.10% 4.17%(e) 3.60%(e) 4.01%(e)
Portfolio turnover rate (excluding
short-term securities)................. 107.45% 7.28% 18.34% 107.45%
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 the year ended October 31, 1993, $.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) Voyageur and Fund Distributors voluntarily waived or reimbursed a portion
of expenses during several periods presented. The annual contractual
expense limit for the Funds (excluding distribution fees, insurance
premiums on portfolio securities, taxes, interest and brokerage
commissions) is 1% of average daily net assets. The maximum distribution
fee is .25% of each Fund's average daily net assets for Class A Shares and
1.00% of each Fund's average daily net assets for Class B and Class C
Shares.
(d) Commencement of operations.
(e) Adjusted to an annual basis.
(f) For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from federal
income tax. For the period ended December 31, 1995, $.01 per Class A Share
of the distributions from net investment income were subject to state
income tax.
(g) Beginning in the period ended December 31, 1995, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Funds. Prior period expense ratios have not
been adjusted.
<TABLE>
<CAPTION>
VOYAGEUR CALIFORNIA TAX FREE FUND
INVESTMENTS IN SECURITIES (CONTINUED) DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (b) RATE MATURITY VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
CALIFORNIA MUNICIPAL BONDS (99.8%):
GENERAL OBLIGATION (9.8%):
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 50 California State....................................................... 6.00% 05-01-18 $ 51,667
50 Tulare Earlimart Elementary (AMBAC Insured)............................ 6.70 08-01-21 60,138
----------
111,805
----------
UTILITIES (4.5%):
------------------------------------------------------------------------------------------------------
50 San Diego IDR Gas & Electricity........................................ 5.90 06-01-18 50,881
----------
TRANSPORTATION (8.7%):
------------------------------------------------------------------------------------------------------
100 Foothills Eastern Transportation Toll Road Revenue (AMBAC Insured)..... 6.00 01-01-34 98,965
----------
HEALTH CARE (18.2%):
------------------------------------------------------------------------------------------------------
100 Berkeley Alta Bates Healthcare......................................... 6.55 12-01-22 101,405
50 California Health Facilities Revenue Centinela Hospital (MBIA Insured). 6.25 09-01-15 53,010
50 California Health Facilities Revenue Presbyterian (MBIA Insured)....... 6.75 06-01-15 52,585
----------
207,000
----------
EDUCATION (4.4%):
------------------------------------------------------------------------------------------------------
50 Los Alamitos Series 90-1............................................... 6.25 08-15-23 50,571
----------
CERTIFICATE OF PARTICIPATION (36.6%):
------------------------------------------------------------------------------------------------------
50 Alameda City Hall Redevelopment........................................ 6.20 05-01-25 51,106
50 California State Public Works.......................................... 6.38 10-01-19 52,514
50 Chino School District (FSA Insured).................................... 6.13 09-01-26 52,365
50 Los Angeles County Redevelopment....................................... 6.50 03-01-23 52,404
100 San Jose Convention Center Finance Authority Revenue................... 6.38 09-01-13 104,669
100 Santa Monica Parking Lease Revenue..................................... 6.38 07-01-16 104,651
----------
417,709
----------
OTHER REVENUE (17.6%):
------------------------------------------------------------------------------------------------------
100 Carson Redevelopment Revenue........................................... 6.38 10-01-16 101,290
50 Dixon Redevelopment Agency............................................. 6.00 09-01-24 49,123
50 San Barnadino Joint Power Financing Authority Revenue.................. 5.75 10-01-25 50,767
----------
201,180
----------
TOTAL INVESTMENTS IN SECURITIES (cost: $1,074,590) (c) $1,138,111
==========
See accompanying notes to investments in securities.
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
VOYAGEUR CALIFORNIA INSURED TAX FREE FUND
INVESTMENTS IN SECURITIES (CONTINUED) DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (b) RATE MATURITY VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
CALIFORNIA MUNICIPAL BONDS (98.9%):
GENERAL OBLIGATION (11.6%):
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$2,000 California State (FSA Insured)......................................... 5.50% 03-01-20 $ 2,000,460
1,000 Fairfield Public Finance Authority Revenue G.O. (FGIC Insured)......... 6.25 07-01-14 1,067,800
1,500 Industry California (FGIC Insured)..................................... 5.85 07-01-20 1,557,525
-----------
4,625,785
-----------
UTILITIES (8.1%):
------------------------------------------------------------------------------------------------------
1,000 Burbank Wastewater Treatment Revenue (FGIC Insured).................... 5.50 06-01-15 1,004,320
1,000 Calaveras County Water District Revenue (AMBAC Insured)................ 6.13 09-01-17 1,064,980
1,150 Contra Costa Water District Revenue (MBIA Insured)..................... 5.75 10-01-14 1,182,373
-----------
3,251,673
-----------
TRANSPORTATION (12.7%):
------------------------------------------------------------------------------------------------------
1,500 Los Angeles Airport Revenue (FGIC Insured)............................. 5.50 05-15-10 1,514,025
1,000 San Francisco Bay Area Rapid Transit Sales Tax Revenue (FGIC Insured).. 5.50 07-01-15 1,004,110
1,190 San Francisco Bay Area Rapid Transit Sales Tax Revenue (FGIC Insured).. 6.00 07-01-20 1,193,189
1,300 San Francisco City & County Airports Series 2 (FGIC Insured)........... 6.00 05-01-14 1,355,978
-----------
5,067,302
-----------
HEALTH CARE (8.4%):
------------------------------------------------------------------------------------------------------
1,200 California Health Facilities Centinela Hospital (MBIA Insured)......... 6.25 09-01-15 1,272,252
1,000 California Health Facilities Revenue - San Diego Hospital (MBIA Insured) 6.20 08-01-12 1,060,620
1,000 California State Health Catholic (AMBAC Insured)....................... 5.75 07-01-15 1,018,690
-----------
3,351,562
-----------
HOUSING (5.2%):
------------------------------------------------------------------------------------------------------
1,000 California Housing Finance Agency 1994 Series E (MBIA Insured)......... 6.75 08-01-26 1,055,020
1,000 California Housing Finance Agency Home Mortgage Revenue Series F
(MBIA Insured)....................................................... 6.00 08-01-17 1,012,430
-----------
2,067,450
-----------
EDUCATION (9.4%):
------------------------------------------------------------------------------------------------------
1,000 California State University Auxiliary Revenue (MBIA Insured)........... 6.25 08-01-20 1,072,090
1,500 California State University Revenue (FGIC Insured)..................... 6.00 11-01-10 1,597,695
1,000 University of California Board of Regents (MBIA Insured)............... 6.38 09-01-24 1,071,600
-----------
3,741,385
-----------
CERTIFICATES OF PARTICIPATION (25.5%):
------------------------------------------------------------------------------------------------------
$1,000 Alameda County Revenue (MBIA Insured).................................. 5.38% 06-01-09$ 1,009,380
1,390 Oceanside Civic Center Project (MBIA Insured).......................... 5.50 08-01-09 1,420,663
1,000 Ontario Redevelopment Cimarron Project (MBIA Insured).................. 6.25 08-01-15 1,058,340
1,000 San Barnadino Medical Center Project (MBIA Insured).................... 5.50 08-01-15 996,630
2,000 San Francisco Courthouse Certificate of Participation Revenue
(CGIC Insured)....................................................... 5.60 04-01-16 2,010,580
1,250 San Luis Obispo Capital Revenue (AMBAC Insured)........................ 6.38 06-01-14 1,349,438
1,000 Santa Barbara Water Revenue Certificate of Participation (AMBAC Insured) 6.70 04-01-27 1,085,000
1,000 Santa Clara Finance Authority (AMBAC Insured).......................... 7.75 11-15-11 1,273,090
-----------
10,203,121
-----------
OTHER REVENUE (18.0%):
------------------------------------------------------------------------------------------------------
1,000 Indian Wells Redevelopment Revenue (MBIA Insured)...................... 6.00 12-01-14 1,043,370
1,000 Los Angeles County Transportation Sales Tax (MBIA Insured)............. 6.25 07-01-13 1,063,580
1,900 North City West School Facility Finance Authority Special Tax
(CGIC Insured)....................................................... 5.25 09-01-09 1,902,641
1,000 Rancho Water District Finance Revenue (FGIC Insured)................... 5.90 11-01-15 1,046,760
1,000 San Francisco City and County Redevelopment Agency Hotel Tax Revenue
(CGIC Insured)...................................................... 6.75 07-01-25 1,080,040
1,000 Santa Clara North Bayshore (AMBAC Insured)............................. 5.75 07-01-14 1,023,580
-----------
7,187,971
-----------
TOTAL INVESTMENTS IN SECURITIES (cost: $37,358,529) (c) $39,496,249
===========
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES
- ----------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) Investments in bonds, by rating category (unaudited) as a percentage of
total bonds, are as follows:
<TABLE>
<CAPTION>
AAA/AAA A/A BAA/BBB TOTAL
------- --- ------- -----
<S> <C> <C> <C> <C>
California Tax Free Fund............... 19% 41% 40% 100%
California Insured Tax Free Fund....... 100% -- -- 100%
</TABLE>
(c) Also represents the cost of securities for federal income tax purposes and
the aggregate gross unrealized appreciation and depreciation of securities
based on this cost were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
<S> <C> <C> <C>
California Tax Free Fund............... $ 64,399 $(878) $ 63,521
California Insured Tax Free Fund....... 2,137,720 -- 2,137,720
</TABLE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions for the periods ended
December 31, 1995 shown below. Exempt interest dividends are exempt from federal
income tax and should not be included in shareholder's gross income, but need to
be reported on the income tax return for informational purposes. Each
shareholder should consult a tax adviser about reporting this income for state
and local purposes. In January 1996, the Fund separately provided each
shareholder with tax information for calendar year 1995.
<TABLE>
<CAPTION>
VOYAGEUR CALIFORNIA TAX FREE FUND
---------------------------------------
PER CLASS PER CLASS
A SHARE B SHARE
-------------- ---------------
PERIOD FROM PERIOD FROM
MARCH 3, 1995 AUGUST 23, 1995
TO DECEMBER 31, TO DECEMBER 31,
1995 1995
--------------- ---------------
<S> <C> <C>
Net investment income distributions (none qualifying for
corporate dividend received deduction)......................... $.4699 $.1937
Short-term capital gain distribution.............................. .0575 .0575
------ ------
Total Distribution............................................. $.5274 $.2512
====== ======
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR CALIFORNIA INSURED TAX FREE FUND
------------------------------------------------------
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------------ ----------- ---------------
YEAR YEAR PERIOD FROM
ENDED ENDED APRIL 12, 1995
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1995 1995
------------ ------------ ---------------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)............................... $.5535 $.5108 $.3171
------ ------ ------
Total Distribution.................................. $.5535 $.5108 $.3171
====== ====== ======
</TABLE>
The short-term capital gain distributions above are taxable as ordinary income
to shareholders for federal and state income tax purposes.
For federal income tax purposes, 100.00% and 99.89% of the above net investment
income distributions were derived from interest on securities exempt from
federal income tax for Voyageur California Tax Free Fund and Voyageur California
Insured Tax Free Fund, respectively.
