WASHINGTON INSURED TAX FREE FUND
ANNUAL 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 Fund 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 Fund benefited from maintaining a large position in
quality bonds.)
In the following pages, Beth Howell, the Portfolio Manager, will elaborate on
these and other points of interest regarding the municipal bond market in 1995.
She 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 Fund on your behalf in 1995.
<TABLE>
<CAPTION>
TOTAL NET
NET ASSET NET ASSET ASSETS
VALUE VALUE DIVIDENDS END OF
BEGINNING END PAID PER PERIOD
PERIOD OF PERIOD OF PERIOD SHARE (000'S)
- ------ ----------- --------- ----------- ---------
Period ended December 31, 1995:
<S> <C> <C> <C> <C>
Class A Shares $9.21 $10.44 $0.57 $2,099
Class B Shares 10.18* 10.44 0.08 15
Class C Shares 9.94** 10.43 0.30 19
_________________________________
* Net asset value at October 24, 1995 (commencement of operations).
** Net asset value at April 21, 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
Fund, 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 Washington Insured Tax Free Fund
FUND INVESTMENT OBJECTIVE AND STRATEGY
The primary objective of the Voyageur Washington Insured Tax Free Fund is to
seek as high a level of current income exempt from federal income tax as is
consistent with preservation of capital.
The Washington Insured Tax Free Fund generally invests in long-term, quality
bonds. The Fund is exempt from federal income tax. We believe that high quality
bonds for the Washington Insured Tax Free Fund offer the best value in today's
interest rate environment. The Voyageur Washington Insured Tax Free Fund adopted
a modification of an investment policy which will permit the 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.
DISCUSSION OF FUNDS PERFORMANCE
by Elizabeth H. Howell
MS. HOWELL IS A SENIOR VICE PRESIDENT AND TAX EXEMPT PORTFOLIO MANAGER FOR
VOYAGEUR FUND MANAGERS.. SHE HAS MANAGED THE VOYAGEUR WASHINGTON INSURED TAX
FREE FUND SINCE ITS INCEPTION.
We at Voyageur are pleased to report the 1995 performance results of the
Voyageur Washington Insured Tax Free Fund. For the fiscal year ending December
31, 1995 only Class A Shares were in operation for the entire year. The Fund
achieved a total return of +19.94% (for Class 'A' shares, assuming purchase of
shares at net asset value and reinvestment of dividend and capital gains). For
additional information about total returns achieved by the Fund over other time
frames and including the effect of sales charges, please refer to the chart on
page 7.
FACTORS AFFECTING FUND PERFORMANCE IN 1995
As previously discussed, a general downward trend in prevailing interest rates
had a positive impact on the net asset value of Fund shares in 1995. The Fund
was able to achieve an excellent total return relative to other Washington state
tax free funds during this period. (According to Lipper Analytical Services,
your Fund was ranked #3 of 9 Washington state municipal bond funds for total
return in 1995. The Lipper Washington group's total return averaged +19.62%
during this period.) Keep in mind, however, that past performance does not
guarantee future results.
Your Fund was able to capture significant capital appreciation through duration
management. Longer duration funds experience wider fluctuations in market prices
than shorter duration funds. The Voyageur Washington Insured Tax Free Fund
started 1995 with an average weighted duration of over 9.1 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
approximately 7.4 years.
The Voyageur Washington Insured Tax Free Fund 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. As of December 31, 1995 the Fund was comprised of
100% AAA and/or Aaa bonds.
Finally, supply and demand trends of Washington municipal bonds benefited Fund
shareholders. New issuance of municipal bonds remained low. A lower level of
supply of Washington bonds favors existing bond holders, particularly large
institutional buyers, such as mutual funds.
OUTLOOK FOR 1996
Our outlook for the Washington 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 WASHINGTON 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
- ---- ------ ------ ----------
Aug-93 9525 10000 10000
Aug-93 9998.23 10496.83 10239
Sep-93 10226.39 10736.36 10368.01
Oct-93 10292.12 10805.38 10386.67
Nov-93 10155.74 10662.2 10272.42
Dec-93 10301.1 10814.81 10519.99
Jan-94 10416.72 10936.18 10652.54
Feb-94 10209.52 10718.66 10336.16
Mar-94 9852.6 10343.94 9791.44
Apr-94 9840.07 10330.79 9871.73
May-94 9867.02 10359.08 9988.22
Jun-94 9763.99 10250.9 9888.34
Jul-94 9952.02 10448.32 10114.78
Aug-94 9979.52 10477.19 10143.1
Sep-94 9814.41 10303.84 9940.24
Oct-94 9587.44 10065.56 9677.82
Nov-94 9329.06 9794.29 9451.35
Dec-94 9521.46 9996.29 9748.13
Jan-95 9849.66 10340.85 10129.28
Feb-95 10262.69 10774.48 10496.97
Mar-95 10322.23 10836.98 10616.64
Apr-95 10329.01 10844.11 10614.51
May-95 10737.56 11273.03 11014.68
Jun-95 10596.06 11124.47 10845.06
Jul-95 10635.65 11166.03 10901.45
Aug-95 10718.29 11252.79 11050.8
Sep-95 10865.72 11407.58 11138.1
Oct-95 11056.94 11608.34 11375.34
Nov-95 11281.96 11844.58 11626.74
Dec-95 11420.44 11989.97 11789.51
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS A SHARES)
----------------
Since
1 Year 8/1/93**
------ --------
Without Sales Charge 19.94% 7.79%
With Sales Charge* 14.25% 5.64%
Lehman Bros. Long 18.56% 7.05%
Insured Municipal
Bond Index
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
TOTAL RETURNS
(CLASS B SHARES)
----------------
SINCE
10/24/95**
----------
Without Contingent Deferred 3.30%
Sales Charge
With Contingent Deferred (0.70%)
Sales Charge***
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
TOTAL RETURNS
(CLASS C SHARES)
SINCE
4/21/95**
---------
8.13%
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Voyageur Investment Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of Voyageur Washington
Insured Tax Free Fund (a fund within Voyageur Investment Trust) as of December
31, 1995, the related statement of operations for the year ended December 31,
1995, the statements of changes in net assets for the year ended December 31,
1995, the two-month period ended December 31, 1994 and the year ended October
31, 1994 and the financial highlights for the year ended December 31, 1995, the
two-month period ended December 31, 1994, the year ended October 31, 1994 and
the period from August 1, 1993, commencement of operations, to October 31, 1993.
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. As to securities purchased but not received, we request confirmations
from brokers, and where replies are not received, we carry out other appropriate
auditing procedures. 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 Washington Insured Tax Free Fund as of December 31, 1995,
and the results of its operations, changes in its 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>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at market value (note 1)
(identified cost, $2,112,491)................................................. $2,218,062
Cash in bank on demand deposit................................................... 226
Accrued interest receivable...................................................... 32,549
----------
Total assets.................................................................. 2,250,837
----------
LIABILITIES
Dividends payable to shareholders................................................ 9,231
Payable for investment securities purchased...................................... 97,809
Other accrued expenses........................................................... 10,402
----------
Total liabilities............................................................. 117,442
----------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES...................................... $2,133,395
==========
Represented by:
Paid-in capital (note 1)...................................................... $2,105,746
Undistributed net investment income........................................... 65
Accumulated net realized loss on investments.................................. (77,987)
Unrealized appreciation of investments........................................ 105,571
----------
TOTAL NET ASSETS............................................................ $2,133,395
==========
Net assets applicable to outstanding Class A shares.............................. $2,099,207
==========
Net assets applicable to outstanding Class B shares.............................. $ 15,441
==========
Net assets applicable to outstanding Class C shares.............................. $ 18,747
==========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of beneficial interest outstanding: 201,131 (note 4)......... $10.44
======
Class B - Shares of beneficial interest outstanding: 1,479 (note 4)........... $10.44
======
Class C - Shares of beneficial interest outstanding: 1,797 (note 4)........... $10.43
======
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------
Investment income:
<S> <C>
Interest.................................................................. $118,889
--------
Expenses (note 3):
Investment advisory and management fee.................................... 10,374
Dividend-disbursing, administrative and accounting services fee........... 12,752
Printing, postage and supplies............................................ 554
Audit and accounting fees................................................. 3,056
Legal fees................................................................ 348
Distribution fees - Class A............................................... 5,154
Distribution fees - Class B............................................... 29
Distribution fees - Class C............................................... 123
Directors' fees........................................................... 100
Registration fees......................................................... 81
Custodian fees............................................................ 3,031
Other..................................................................... 54
--------
Total expenses.......................................................... 35,656
Less: Expenses waived or absorbed........................................ (29,725)
--------
Net expenses before earnings credits on uninvested cash................... 5,931
Less: Earnings credits on uninvested cash................................ (2,529)
--------
Total net expenses...................................................... 3,402
--------
Investment income - net................................................. 115,487
---------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions.................................... (77,987)
Net change in unrealized appreciation or depreciation of investments...... 315,135
---------
Net gain on investments................................................. 237,148
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $352,635
========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
YEAR TWO MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 31,
Operations: 1995 1994 (NOTE 1) 1994
---------- ---------- -----------
<S> <C> <C> <C>
Investment income - net............................. $ 115,487 $ 17,586 $ 82,291
Realized loss on investments - net.................. (77,987) -- --
Net change in unrealized appreciation or
depreciation of investments....................... 315,135 (33,311) (199,539)
---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations..................... 352,635 (15,725) (117,248)
---------- ---------- -----------
Distributions to shareholders from:
Investment income - net:
Class A........................................... (116,096) (16,502) (82,061)
Class B........................................... (111) N/A N/A
Class C........................................... (529) N/A N/A
Realized gain on investment - net:
Class A. ........................................... -- -- (2,857)
Class B. ........................................... -- -- N/A
Class C. ........................................... -- -- N/A
---------- ---------- -----------
Total distributions............................... (116,736) (16,502) (84,918)
---------- ---------- -----------
Share transactions (note 5):
Proceeds from sale of shares:
Class A (note 3).................................. 773,432 418,797 5,462,825
Class B........................................... 15,069 N/A N/A
Class C........................................... 17,830 N/A N/A
Net asset value of shares issued in reinvestment
of net investment income distributions:
Class A......................................... 40,538 2,584 21,163
Class B......................................... -- N/A N/A
Class C......................................... -- N/A N/A
Payments for redemption of shares:
Class A........................................... (998,281) (458,296) (5,271,305)
Class B........................................... (10) N/A N/A
Class C........................................... (10) N/A N/A
---------- ---------- -----------
Decrease in net assets from share transactions...... (151,432) (36,915) 212,683
---------- ---------- -----------
Total increase (decrease) in net assets........... 84,467 (69,142) 10,517
Net assets at beginning of year........................ 2,048,928 2,118,070 2,107,553
---------- ---------- -----------
Net assets at end of year (including undistributed net
investment income of $65, $1,314 and $230, respectively) $2,133,395 $2,048,928 $2,118,070
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur Washington Insured Tax Free Fund (the 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. The Fund seeks high current income free from federal income
tax with the added safety of an insured portfolio by investing in insured
municipal bonds.
The Fund offers Class A, Class B and Class C Shares. Class A Shares are
sold with a front-end sales charge. Class B Shares, which the Fund began
offering 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, which
the Fund began offering in 1995, are not subject to a front-end sales charge or
a contingent deferred sales charge and have no conversion feature. All classes
of shares have identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that the level of distribution fees charged
differs between classes. Income, expenses (other than expenses incurred under
each class' Distribution Agreement) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets. The Fund is registered as a non-diversified Fund. Effective December 31,
1994, the Fund changed its fiscal year 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 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.
The Fund concentrates its investments in a single state and therefore, may
have more credit risk related to the economic conditions of the state of
Washington than a portfolio with broader geographical diversification.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund
on a forward commitment or when-issued basis can take place up to a month or
more after the transaction date. During this period, such securities are subject
to market fluctuations and the portfolio maintains, in a segregated account with
its custodian, assets with a market value equal to or greater than the amount of
its purchase commitments.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its 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, the Fund has a capital loss carryover
at December 31, 1995, of $77,987 that will expire in 2003 if not offset by
subsequent capital gains. It is unlikely 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 the Fund. Net short-term realized
capital gains, if any, may be distributed throughout the year and net long-term
realized capital gains, when available, are distributed annually.
(2) INVESTMENT SECURITIES TRANSACTIONS
Purchase cost and proceeds of sales of investment securities other than
short-term securities aggregated $1,220,627 and $997,338, respectively, during
the year ended December 31, 1995.
(3) EXPENSES
The Fund has an investment advisory and management fee agreement with
Voyageur Fund Managers, Inc. (Voyageur) under which Voyageur manages the Fund's
assets and provides other specified services. The fee for investment management
and advisory services is payable monthly and is based on the average daily net
assets of the Fund at the annual rate of .50%. In addition, the Fund will pay
most other operating expenses including directors' fees, registration fees,
printing of shareholder reports, legal and auditing services and other
miscellaneous expenses. There was no portfolio insurance expense for the Fund.
Portfolio insurance expense, if any, is recognized over the premium period.
Voyageur is obligated to pay all expenses of the Fund (excluding distribution
fees, insurance premiums on portfolio securities, taxes, interest and brokerage
commissions) which exceed 1% of average daily net assets, on an annual basis.
During the year ended December 31, 1995, Voyageur absorbed $9,583 pursuant to
the 1% expense limitation and, excluding waivers of distribution fees and
expense reductions, voluntarily absorbed fees and expenses of $15,417. The Fund
will also pay a fee to Voyageur for acting as the Fund's dividend-disbursing,
administrative and accounting services agent. The fee is paid monthly and is
equal to the sum of $1.33 per shareholder account per month, a fixed monthly fee
ranging from $1,000 to $1,500 based on the level of the Fund's average daily net
assets and an annualized percentage of average daily net assets at reducing
rates from .11% to .02%. The Fund is also responsible for reimbursing Voyageur's
out-of-pocket expense in connection with the performance of dividend-disbursing,
administrative and accounting services. 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, the
Fund is obligated to pay Fund Distributors a monthly distribution fee at an
annual rate of .25% of the Fund's average daily net assets of the Class A Shares
and 1.00% of the 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 year ended December 31, 1995, Fund Distributors
voluntarily waived Class A distribution fees of $4,717 and Class B distribution
fees of $8. The Fund earned $2,529 in credits on uninvested cash balances held
by the 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 year ended December 31,
1995 were $26,941. Of this amount, Fund Distributors received $3,915.
(4) SHARE TRANSACTIONS
Transactions in shares of beneficial interest during each period were as
follows:
<TABLE>
<CAPTION>
A SHARES
--------------------------------------------------
YEAR TWO MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 31,
1995 1994 1994
------------ ----------- -----------
<S> <C> <C> <C>
Shares sold................................. 77,003 45,596 534,308
Shares issued for
reinvested distributions................. 4,085 287 2,137
Shares redeemed............................. (102,395) (49,522) (507,873)
----------- ---------- ----------
Increase (decrease) in shares
outstanding.............................. (21,307) (3,639) 28,572
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
B SHARES C SHARES
----------------- ---------------
PERIOD FROM PERIOD FROM
OCTOBER 24, 1995* APRIL 21, 1995*
TO DECEMBER 31, TO DECEMBER 31,
1995 1995
----------------- ---------------
<S> <C> <C>
Shares sold.................................. 1,480 1,798
Shares redeemed.............................. (1) (1)
-------- --------
Increase in shares outstanding.............. 1,479 1,797
======== ========
_________________________________
* Commencement of operations.
</TABLE>
(5) FINANCIAL HIGHLIGHTS
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>
A SHARES B SHARES C SHARES
-------------------------------------------------- ------------ ------------
PERIOD FROM PERIOD FROM PERIOD FROM
YEAR TWO MONTHS YEAR AUGUST 1, OCTOBER 24, APRIL 21,
ENDED ENDED ENDED 1993(d) TO 1995(d) TO 1995(d) TO
DECEMBER 31, DECEMBER 31, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1994 1993 1995 1995
Net asset value: ------------ ------------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of period............. $9.21 $9.37 $10.67 $10.00 $10.18 $9.94
----- ----- ------ ------ ------ -----
Operations:
Net investment income........... .59 .09 .55 .15 .09 .31
Net realized and unrealized
gain (loss) on investments.... 1.21 (.16) (1.26) .67 .25 .48
----- ----- ------ ------ ------ -----
Total from operations....... 1.80 (.07) (.71) .82 .34 .79
----- ----- ------ ------ ------ -----
Distributions to shareholders:
From net investment income (a).. (.57) (.09) (.57) (.15) (.08) (.30)
From net realized gains......... -- -- (.02) -- -- --
----- ----- ------ ------ ------ -----
Total distributions........... (.57) (.09) (.59) (.15) (.08) (.30)
----- ----- ------ ------ ------ -----
Net asset value:
End of period................... $10.44 $9.21 $ 9.37 $10.67 $10.44 $10.43
====== ===== ======= ====== ====== ======
Total investment return (b)........ 19.94% (0.69)% (6.85)% 8.05% 3.30% 8.13%
Net assets at end of period
(000's omitted)................. $2,099 $2,049 $2,118 $2,108 $15 $19
Ratios:
Ratio of expenses to
average daily net assets (f).. .28% .10% (e) .14% --% 1.04%(e) 1.30%(e)
Ratio of net investment income
to average daily net assets... 5.57% 6.18% (e) 5.44% 5.50%(e) 4.44%(e) 4.45%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)............ 1.25% 1.25% (e) 1.25% 1.25%(e) 2.00%(e) 2.00%(e)
Net investment income... 4.60% 5.03% (e) 4.33% 4.25%(e) 3.48%(e) 3.75%(e)
Portfolio turnover rate (excluding
short-term securities).......... 50.54% --% --% 45.14% 50.54% 50.54%
See accompanying notes to Financial Highlights.
</TABLE>
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
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.
(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 the periods presented. The annual contractual expense
limit for the Fund (excluding distribution fees, insurance premiums on
portfolio securities, taxes, interest and brokerage commissions) is 1% of
average daily net assets. The maximum distribution fee is .25% of the
Fund's average daily net assets for Class A Shares and 1.00% of the Fund's
average daily net assets for Class B and Class C Shares.
(d) Commencement of operations.
(e) Adjusted to an annual basis.
(f) Beginning in the year ended December 31, 1995, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Fund. Prior period expense ratios have not
been adjusted.
<TABLE>
<CAPTION>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
INVESTMENTS IN SECURITIES DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (d) RATE MATURITY VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
WASHINGTON MUNICIPAL BONDS (98.6%):
GENERAL OBLIGATION REVENUE (24.3%):
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$100 Benton County Independent School District #116 G.O. (FGIC Insured)..... 5.80% 12-01-10 $ 104,721
75 Bothell G.O. (AMBAC Insured)........................................... 5.70 12-01-10 77,695
75 Clark County School District G.O. (FGIC Insured)....................... 6.00 12-01-11 79,739
75 King County Kent School District #415 G.O. (MBIA Insured).............. 5.55 12-01-11 77,182
75 Snohomish County G.O. (MBIA Insured)................................... 5.90 12-01-15 77,942
100 Washington State Series 93A UTGO (FGIC Insured)........................ 5.75 10-01-17 102,264
----------
519,543
----------
UTILITIES (46.6%):
-----------------------------------------------------------------------------------------------------
75 Asotin County Water Revenue (AMBAC Insured)............................ 5.60 03-01-12 76,026
100 Centralia Water & Sewer (AMBAC Insured)................................ 5.65 08-01-11 102,537
100 Clark County Public Utility Revenue District #1 G.O. (AMBAC Insured)... 5.50 01-01-15 100,220
75 Covington Water & Sewer Revenue (AMBAC Insured)........................ 6.00 03-01-15 78,730
75 Kent Water & Sewer Revenue (AMBAC Insured)............................. 5.50 11-01-13 75,515
75 Klickitat Washington Public Utility District (FGIC Insured)............ 5.75 10-01-27 76,073
75 Seattle Metropolitan Sewer Revenue (FGIC Insured)...................... 5.70 01-01-14 76,585
100 Seattle Drain & Wastewater (MBIA Insured) ............................. 5.13(c) 12-01-14 97,339
75 Seattle Municipal Light & Power (MBIA Insured)......................... 5.63 09-01-15 76,245
50 Tacoma Sewer Revenue (FGIC Insured).................................... 5.50 12-01-12 50,491
100 Vancouver Water & Sewer Revenue (FGIC Insured)......................... 6.00 06-01-16 105,037
75 Yakima-Tieton Irrigation District (FSA Insured)........................ 6.13 06-01-13 79,814
----------
994,612
----------
EDUCATION (13.9%):
-----------------------------------------------------------------------------------------------------
200 Washington State Housing & Dining System (MBIA Insured)................ 6.38 10-01-18 215,914
75 Western Washington University Housing & Dining System (MBIA Insured)... 6.38 10-01-22 79,865
----------
295,779
----------
INDUSTRIAL (3.8%):
-----------------------------------------------------------------------------------------------------
75 University of Washington Parking Revenue (AMBAC Insured)............... 6.13 11-01-14 79,882
----------
HEALTH CARE (10.0%):
-----------------------------------------------------------------------------------------------------
$200 University of Washington Medical Center (FSA Insured).................. 6.30 08-15-14 213,246
----------
TOTAL MUNICIPAL BONDS (cost: $1,997,491) 2,103,062
----------
SHORT-TERM SECURITIES (5.4%):
----------------------------------------------------------------------------------------------------
65 Dreyfus Investment Tax-Exempt Money Market Fund .......................4.37 (b) 65,000
50 Nuveen Investment Tax-Free Fund .......................................4.56 (b) 50,000
----------
115,000
----------
TOTAL SHORT-TERM SECURITIES (cost: $115,000) 115,000
----------
TOTAL INVESTMENTS IN SECURITIES (cost: $2,112,491)(e) $2,218,062
==========
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES
- ----------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) Dividend yields change daily to reflect current market conditions. Rate
shown is the quoted yield as of December 31, 1995.
(c) At December 31, 1995, the cost of securities purchased on a when-issued
basis was $97,339 for the Fund.
(d) All investments in bonds are rated 100% Aaa/AAA (unaudited).
(e) Also represents the cost of securities for federal income tax purposes and
the aggregate gross unrealized appreciation and depreciation in securities
based on these costs were as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION (DEPRECIATION) APPRECIATION
------------ -------------- ------------
$105,571 -- $105,571
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>
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------------ ---------------- ---------------
YEAR PERIOD FROM PERIOD FROM
ENDED OCTOBER 24, 1995 APRIL 21, 1995
DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
1995 1995 1995
------------ ---------------- ---------------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)........................... $.5658 $.0750 $.3049
====== ====== ======
</TABLE>
For federal income tax purposes, 100% of the above net investment income
distributions were derived from interest on securities exempt from federal
income tax.
