VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
WASHINGTON INSURED TAX FREE FUND
ANNUAL REPORT
DATED DECEMBER 31, 1996
Family of Funds
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds as your objectives or market
conditions change.
VOYAGEUR HIGH YIELD FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in medium and
lower grade municipal bonds.
Voyageur MINNESOTA High Yield Municipal Bond Fund
Voyageur NATIONAL High Yield Municipal Bond Fund
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
<TABLE>
<S> <C>
Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NEW YORK Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur KANSAS Tax Free Fund Voyageur WISCONSIN Tax Free Fund
</TABLE>
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
<TABLE>
<S> <C>
Voyageur ARIZONA Insured Tax Free Fund Voyageur MISSOURI Insured Tax
Free Fund Voyageur CALIFORNIA Insured Tax Free Fund Voyageur NATIONAL
Insured Tax Free Fund Voyageur FLORIDA Insured Tax Free Fund Voyageur
OREGON Insured Tax Free Fund Voyageur MINNESOTA Insured Fund Voyageur
WASHINGTON Insured Tax Free Fund
</TABLE>
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
<TABLE>
<S> <C> <C>
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited Term Tax Free Fund
Voyageur MINNESOTA Limited Term Tax Free Fund
</TABLE>
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
<TABLE>
<S> <C> <C>
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
</TABLE>
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
<TABLE>
<S> <C>
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH
Series Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
</TABLE>
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
LETTER FROM THE PRESIDENT
[PHOTO]
JOHN G. TAFT
PRESIDENT
Dear Shareholder:
The year 1996 was marked with mixed economic events. During the first half of
the year, interest rates rose steadily, propelled by market fears that faster
Gross Domestic Product (GDP) growth would ignite inflation. Once these fears
abated in June, interest rates began a descent that lasted throughout most of
the remainder of the year.
In comparison to their peer group of funds, the overall performance of the
Voyageur Tax Free Funds was excellent in 1996. The main reason for this strong
performance was Voyageur portfolio managers' subtle shift toward adding income
to the portfolios. This additional income allowed us to better position the
Funds during the first half of the year when interest rates were rising and
municipal bond prices were falling. Within all of our Tax Free Funds, we
continued to extend call protection, where possible, in order to better provide
for income for longer periods of time.
In January 1997, Lincoln National Corporation (NYSE: LNC) announced that it
planned to acquire the parent company of Voyageur Fund Managers, Inc. -- the
investment adviser for the Voyageur Tax Free Funds. LNC, with headquarters in
Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. Delaware Management Company, Inc. (DMC), an indirect wholly owned
subsidiary of LNC, and its affiliate, Delaware International Advisers Ltd.,
serve as the investment advisers to the investment companies in the Delaware
Group of Funds (the Delaware Group), which currently includes 16 open-end funds
and two closed-end funds (comprising 48 separate investment portfolios). DMC
through its Delaware Investment Advisers division, Delaware International
Advisers Ltd. and certain other subsidiaries of Delaware Management Holdings,
Inc. (DMH) also provides investment advice with respect to separately managed
accounts of institutional and other clients. DMH, through its subsidiaries, is
responsible for the management of approximately $32 billion. Voyageur Fund
shareholders should benefit from this acquisition by being able to select from a
wider variety of mutual funds in the expanded Delaware-Voyageur fund family.
Delaware Management, like Voyageur, has a conservative, long-term investment
philosophy. The continuity in the Voyageur Tax Free Funds' management styles
should also be further maintained since Andrew M. McCullagh and Elizabeth
Howell, two of the senior municipal bond portfolio managers for the Voyageur Tax
Free Funds, will continue to play a key role in the management of the Voyageur
Tax Free Funds after the transition.
We appreciate your patronage and confidence in Voyageur Fund Managers. If at any
time you have questions about your Voyageur fund investment, I urge you to
contact your personal financial adviser. Voyageur Client Service representatives
are also available from 7 a.m. to 6 p.m. (Central Standard Time) to answer any
questions you may have concerning this transaction or your Voyageur fund
investment.
Sincerely,
/s/ John G. Taft
John G. Taft
President
Voyageur Washington Insured Tax Free Fund
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
[PHOTO]
ELIZABETH H. HOWELL IS THE
SENIOR MUNICIPAL BOND
MANAGER FOR THE VOYAGEUR
WASHINGTON INSURED TAX FREE FUND.
MS. HOWELL HAS MORE
THAN 10 YEARS OF INVESTMENT
INDUSTRY EXPERIENCE.
In the first half of the year, bond prices fell as yields rose. Economic data
during this period showed surprising strength in the domestic economy and raised
the specter of inflation. During the summer, bond yields stabilized as investors
became increasingly confident that Federal Reserve Chairman Alan Greenspan would
monitor and tweak short-term interest rates in order to achieve a moderate
economic growth and low inflation. The flat tax debate, which stimulated a great
deal of discussion and speculation in political and economic circles in 1995 and
early 1996, lost momentum and largely faded away after the election. The
tax-exempt bond market finished the year with modest, positive total returns.
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
For the year ended December 31, 1996, the total returns at net asset value (NAV)
for the class A shares of the Voyageur Washington Insured Tax Free Fund was
3.98%.*
During the year, we made a strategic change in sectors in order to enhance
performance and increase coupon income. We decreased our exposure to water and
sewer bonds from 29% to 12%, and we increased our allocation to housing bonds
from 0% to 14%. Housing bonds are noted for their ability to produce a greater
amount of coupon income for investors.
We continue to maintain guild-edge credit quality and very strong call
protection. The average credit quality rating on the Fund is Aaa/AAA.
OUTLOOK
Overall, the U.S. economy is still showing signs of moderate growth and moderate
inflation. Our outlook for the municipal market continues to be favorable, and
we expect interest rates to decline over the long term.
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
INSURANCE PERTAINS ONLY TO THE TIMELY PAYMENT OF PRINCIPAL AND INTEREST BY THE
SECURITIES IN THE FUND'S PORTFOLIO. THE VALUE OF THE INSURED SECURITIES AND THE
FUND ITSELF WILL FLUCTUATE DUE TO CHANGING MARKET CONDITIONS. NO REPRESENTATION
IS MADE AS TO ANY INSURER'S ABILITY TO MEET ITS COMMITMENT.
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
Portfolio Abstract
For the Period Ended December 31, 1996
[GRAPH]
<TABLE>
<CAPTION>
WA Insured Tax Free WA Insured Tax Free Lehman Bros. Long
Without Sales Charge With Sales Charge Insured Municipal Bond Index
<S> <C> <C> <C>
Aug-93 10000 9625 10000
10496 10103 10239
10736 10333 10368
10805 10400 10386
10662 10262 10272
Dec-93 10814 10409 10519
10936 10525 10652
10718 10316 10336
10343 9955 9791
10330 9943 9871
10358 9970 9988
10250 9866 9888
10448 10056 10114
10477 10084 10143
10303 9917 9940
10065 9688 9677
9794 9426 9451
Dec-94 9996 9621 9748
10340 9952 10129
10774 10370 10496
10836 10430 10616
10844 10437 10614
11272 10850 11014
11124 10707 10845
11165 10747 10901
11252 10830 11050
11407 10979 11138
11608 11172 11375
11844 11400 11626
Dec-95 11989 11540 11789
12055 11603 11875
11968 11519 11780
11729 11290 11608
11700 11261 11569
11716 11276 11563
11827 11384 11698
11950 11502 11806
11967 11518 11801
12163 11707 11974
12312 11850 12116
12521 12052 12354
Dec-96 12466 11999 12290
</TABLE>
Voyageur Washington Insured Tax Free Fund Without Sales Charge - Ending Value
$12,467
Voyageur Washington Insured Tax Free Fund With Sales Charge - Ending Value
$11,999
Lehman Bros. Long Insured Municipal Bond Index - Ending Value $12,291
The Lehman Bros. Long Insured Municipal Bond Index is a broad, unmanaged index
of securities of United States Municipalities. The index assumes that no
operating expenses, transaction fees or sales loads are incurred by a
hypothetical investor who directly owns the securities maintained in the index.
In order to outperform an index over any specific time frame, a fund must return
to investors an amount greater than that provided by the index plus total
operating expenses. For this reason, few fixed income funds are able to
outperform broad market indices over the long term. The chart above is comprised
of data that represents the cumulative total return of a hypothetical investment
in Class A Shares of $10,000 made on the date the Fund commenced operations
through December 31, 1996.
The performance of separate classes will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes.
Performance quoted represents past performance and is not indicative of
future results.
* Average annual total returns include the maximum 3.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1996
Voyageur Washington Insured Tax Free Fund
Average Annual Total Returns
(Class A Shares)
Since
1 Year 8/1/93**
------ ------
Without Sales Charge 3.98% 6.66%
With Sales Charge* 0.08% 5.47%
Lehman Bros. Long 4.25% 6.22%
Insured Municipal
Bond Index
Voyageur Washington Insured Tax Free Fund
Average Annual Total Returns
(Class B Shares)
Since
1 Year 10/24/95**
------ --------
Without Contingent 3.32% 5.62%
Deferred Sales Charge
With Contingent (1.68%) 2.28%
Deferred Sales Charge***
Voyageur Washington Insured Tax Free Fund
Average Annual Total Returns
(Class C Shares)
Since
1 Year 4/21/95**
------ -------
3.12% 6.61%
Sector Breakdown
(shown as % of total net assets)
Utilities 28.5%
General Obligation 24.6%
Education 16.7%
Housing 14.3%
Health Care 13.9%
Industrial 2.7%
Statistics
Average Maturity 13.1 Years
Average Coupon 5.99%
Portfolio Duration 8.4 Years
Average Quality Aaa/AAA
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, 1996, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended December 31, 1996 and the financial highlights for each of the years in
the two-year period ended December 31, 1996, 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. 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, 1996,
and the results of its operations, the 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 14, 1997
<TABLE>
<CAPTION>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996
- --------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at market value (note 1)
(identified cost, $2,846,613) ....................................... $ 2,938,187
Receivable for fund shares sold ........................................ 10,200
Accrued interest receivable ............................................ 36,420
-----------
Total assets ........................................................ 2,984,807
-----------
LIABILITIES
Bank overdraft ......................................................... 47,833
Dividends payable to shareholders ...................................... 12,127
Other accrued expenses ................................................. 7,431
-----------
Total liabilities ................................................... 67,391
-----------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES ............................ $ 2,917,416
===========
Represented by:
Paid-in capital (note 1) ............................................ $ 2,904,840
Undistributed net investment income ................................. 1,780
Accumulated net realized loss on investments (note 1) ............... (80,778)
Unrealized appreciation of investments .............................. 91,574
-----------
TOTAL NET ASSETS .................................................. $ 2,917,416
===========
Net assets applicable to outstanding Class A shares .................... $ 2,382,304
===========
Net assets applicable to outstanding Class B shares .................... $ 515,653
===========
Net assets applicable to outstanding Class C shares .................... $ 19,459
===========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of beneficial interest outstanding: 231,187 (note 5) $ 10.30
===========
Class B - Shares of beneficial interest outstanding: 50,013 (note 5) $ 10.31
===========
Class C - Shares of beneficial interest outstanding: 1,890 (note 5) . $ 10.30
===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
- -----------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest ........................................................... $ 145,023
---------
Expenses (note 3):
Investment advisory and management fee ............................. 12,662
Dividend-disbursing, administrative and accounting services fee .... 21,966
Printing, postage and supplies ..................................... 968
Audit and accounting fees .......................................... 5,368
Legal fees ......................................................... 35
Distribution fees - Class A ........................................ 5,596
Distribution fees - Class B ........................................ 2,775
Distribution fees - Class C ........................................ 188
Directors' fees .................................................... 162
Registration fees .................................................. 936
Custodian fees ..................................................... 1,803
Other .............................................................. 540
---------
Total expenses ................................................... 52,999
Less: Expenses waived or absorbed ................................. (39,501)
---------
Total expenses before earnings credits ........................... 13,498
Less: Earnings credits on uninvested cash balances ................. (45)
---------
Total net expenses ............................................... 13,453
---------
Investment income - net .......................................... 131,570
---------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions ............................. (2,791)
Net change in unrealized appreciation or depreciation of investments (13,997)
---------
Net loss on investments .......................................... (16,788)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $ 114,782
=========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR WASHINGTON INSURED TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
Operations: 1996 1995
----------- -----------
<S> <C> <C>
Investment income - net ................................................. $ 131,570 $ 115,487
Realized loss on security transactions .................................. (2,791) (77,987)
Net change in unrealized appreciation or
depreciation of investments ........................................... (13,997) 315,135
----------- -----------
Net increase in net assets resulting from operations ................ 114,782 352,635
----------- -----------
Distributions to shareholders from:
Investment income - net:
Class A ............................................................... (117,335) (116,096)
Class B ............................................................... (11,708) (111)
Class C ............................................................... (812) (529)
----------- -----------
Total distributions ................................................. (129,855) (116,736)
----------- -----------
Share transactions (note 5):
Proceeds from sale of shares:
Class A (note 3) ...................................................... 512,363 773,432
Class B ............................................................... 512,470 15,069
Class C ............................................................... 947 17,830
Net asset value of shares issued in reinvestment of net investment income
distributions:
Class A ............................................................. 54,645 40,538
Class B ............................................................. 5,371 --
Class C ............................................................. -- --
Payments for redemption of shares:
Class A ............................................................... (260,676) (998,281)
Class B (note 3) ...................................................... (26,026) (10)
Class C ............................................................... -- (10)
----------- -----------
Increase (decrease) in net assets from share transactions ............... 799,094 (151,432)
----------- -----------
Total increase in net assets ........................................ 784,021 84,467
Net assets at beginning of period .......................................... 2,133,395 2,048,928
----------- -----------
Net assets at end of period (including undistributed net
investment income of $1,780 and $65, respectively) ................... $ 2,917,416 $ 2,133,395
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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 that may be issued in one or more series. 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 may be subject to a contingent
deferred sales charge and such shares automatically convert to Class A after
eight years. Class C Shares may be subject to a contingent deferred sales charge
and have no conversion feature. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that the level of distribution fees charged differs between classes. Income,
expenses (other than expenses incurred under each class' Distribution Agreement)
and realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets. The Fund is registered as a
non-diversified Fund.
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of net increase (decrease) in net assets resulting from
operations during the reporting period. Actual results could differ from those
estimates.
INVESTMENTS IN SECURITIES
The values of fixed income securities are determined using pricing services
or prices quoted by independent brokers. When market quotations are not readily
available, or in certain other circumstances, securities are valued at fair
value according to methods selected in good faith by the Board of Trustees.
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 limited geographical areas and
therefore, may have more credit risk related to the economic conditions of these
areas 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, 1996, of $80,778 that will expire in 2003 and 2004 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 $1,682,112 and $830,199, respectively, during
the year ended December 31, 1996.
(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, 1996 Voyageur absorbed $19,093 pursuant to
the 1% expense limitation and, excluding waivers of distribution fees,
voluntarily absorbed fees and expenses of $15,907. During the year ended
December 31, 1996, the Fund earned $45 in credits on uninvested cash balances
held by the Fund at the custodian. These credits were used to reduce certain
fees for various custodial services provided by the custodian bank.
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, 1996, Fund Distributors voluntarily waived Class A distribution
fees of $4,029 and Class B distribution fees of $472.
Sales charges paid by Class A shareholders for the year ended December 31,
1996 were $17,167. Of this amount, Fund Distributors received $2,196. Contingent
deferred sales charges paid by Class B shareholders were $317.
(4) PLANNED FUND REORGANIZATION
On January 15, 1997 Voyageur's parent, Dougherty Financial Group, Inc.
("DFG"), executed an Agreement and Plan of Merger with Lincoln National
Corporation ("LNC") pursuant to which LNC would acquire DFG, including the
mutual fund investment advisory business of DFG conducted by Voyageur. This
merger is subject to approval of the Fund's Board of Trustees and shareholders.
(5) SHARE TRANSACTIONS
Transactions in shares of beneficial interest during each period were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------- ----------------------- --------------------
YEAR YEAR YEAR PERIOD FROM YEAR PERIOD FROM
ENDED ENDED ENDED OCTOBER 24, 1995* ENDED APRIL 21, 1995*
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1996 1995 1996 1995 1996 1995
------- -------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ............... 50,130 77,003 50,610 1,480 93 1,798
Shares issued for
reinvested distributions 5,366 4,085 530 -- -- --
Shares redeemed ........... (25,440) (102,395) (2,606) (1) -- (1)
------- -------- ------- ------ -- ------
Increase (decrease) in
shares outstanding ..... 30,056 (21,307) 48,534 1,479 93 1,797
======= ======== ======= ====== == ======
</TABLE>
- --------------------------------
*Commencement of operations.
(6) 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
------------------------------------------------------------------------------------
PERIOD FROM
YEAR YEAR TWO MONTHS YEAR AUGUST 1,
ENDED ENDED ENDED ENDED 1993(d) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, OCTOBER 31, OCTOBER 31
1996 1995 1994 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period ............. $ 10.44 $ 9.21 $ 9.37 $ 10.67 $ 10.00
--------- --------- --------- --------- ---------
Operations:
Net investment income ........... .54 .59 .09 .55 .15
Net realized and unrealized
gain (loss) on investments .... (.14) 1.21 (.16) (1.26) .67
--------- --------- --------- --------- ---------
Total from operations ....... .40 1.80 (.07) (.71) .82
--------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income (a) .. (.54) (.57) (.09) (.57) (.15)
From net realized gains ......... -- -- -- (.02) --
--------- --------- --------- ---------
Total distributions ........... (.54) (.57) (.09) (.59) (.15)
--------- --------- --------- --------- ---------
Net asset value:
End of period ................... $ 10.30 $ 10.44 $ 9.21 $ 9.37 $ 10.67
========= ========= ========= ========= =========
Total investment return (b) ........ 3.98% 19.94% (0.69)% (6.85)% 8.05%
Net assets at end of period
(000's omitted) ................. $ 2,382 $ 2,099 $ 2,049 $ 2,118 $ 2,108
Ratios:
Ratio of expenses to
average daily net assets (f) .. .44% .28% .10%(e) .14% --%
Ratio of net investment income
to average daily net assets ... 5.29% 5.57% 6.18%(e) 5.44% 5.50%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c) ............ 1.25% 1.25% 1.25%(e) 1.25% 1.25%(e)
Net investment income ... 4.48% 4.60% 5.03%(e) 4.33% 4.25%(e)
Portfolio turnover rate (excluding
short-term securities) .......... 33.30% 50.54% --% --% 45.14%
</TABLE>
<TABLE>
<CAPTION>
B SHARES C SHARES
------------------------------- -----------------------------
YEAR PERIOD FROM YEAR PERIOD FROM
ENDED OCTOBER 24, 1995(d) ENDED APRIL 21, 1995(d)
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period ............. $ 10.44 $ 10.18 $ 10.43 $ 9.94
------- ------- ------- -------
Operations:
Net investment income ........... .47 .09 .45 .31
Net realized and unrealized
gain (loss) on investments .... (.14) .25 (.14) .48
------- ------- ------- -------
Total from operations ....... .33 .34 .31 .79
------- ------- ------- -------
Distributions to shareholders:
From net investment income (a) .. (.46) (.08) (.44) (.30)
------- ------- ------- -------
Total distributions ........... (.46) (.08) (.44) (.30)
------- ------- ------- -------
Net asset value:
End of period ................... $ 10.31 $ 10.44 $ 10.30 $ 10.43
======= ======= ======= =======
Total investment return (b) ........ 3.32% 3.30% 3.12% 8.13%
Net assets at end of period
(000's omitted) ................. $ 516 $ 15 $ 19 $ 19
Ratios:
Ratio of expenses to
average daily net assets (f) .. 1.21% 1.04%(e) 1.37% 1.30%(e)
Ratio of net investment income
to average daily net assets ... 4.47% 4.44%(e) 4.36% 4.45%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c) ............ 2.00% 2.00%(e) 2.00% 2.00%(e)
Net investment income ... 3.68% 3.48%(e) 3.73% 3.75%(e)
Portfolio turnover rate (excluding
short-term securities) .......... 33.30% 50.54% 33.30% 50.54%
</TABLE>
See accompanying notes to Financial Highlights.
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, 1996
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (d) RATE MATURITY VALUE (a)
- --------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
MUNICIPAL BONDS (100.7%):
GENERAL OBLIGATION REVENUE (24.6%):
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$100 Benton County Independent School District #116 (FGIC Insured)...... 5.80% 12-01-10 $ 103,650
75 Bothell (AMBAC Insured)............................................ 5.70 12-01-10 76,943
75 Clark County School District #114 (FGIC Insured)................... 6.00 12-01-11 79,010
100 Kent Washington Series A (MBIA Insured)............................ 6.00 12-01-16 103,638
75 King County Kent School District #415 (MBIA Insured)............... 5.55 12-01-11 76,445
100 Richland County (MBIA Insured)..................................... 5.70 12-01-16 100,294
75 Snohomish County (MBIA Insured).................................... 5.90 12-01-15 76,753
100 Washington State Series 93A UTGO (FGIC Insured).................... 5.75 10-01-17 100,859
----------
717,592
----------
UTILITIES (28.5%):
- --------------------------------------------------------------------------------------------------------------
100 Clark County Public Utility Revenue District #1
(AMBAC Insured)............................................... 5.50 01-01-15 99,435
75 Covington Water & Sewer Revenue (AMBAC Insured).................. 6.00 03-01-15 77,580
100 Grant County Public #2 Wanapum (MBIA Insured).................... 5.88(b) 01-01-26 97,833
100 Kittitas County Public #1 (MBIA Insured)......................... 5.80 12-01-20 100,645
75 Klickitat Washington Public Utility District (FGIC Insured)...... 5.75 10-01-27 75,070
75 Seattle Metropolitan Sewer Revenue (FGIC Insured)................ 5.70 01-01-14 75,910
100 Sunnyside Water and Sewer (FGIC Insured)......................... 5.75 08-01-17 101,021
100 Vancouver Water and Sewer Revenue (FGIC Insured)................. 6.00 06-01-16 103,526
100 Washington State Public Power #1 (MBIA Insured).................. 5.75 07-01-12 100,836
----------
831,856
----------
EDUCATION (16.7%):
- --------------------------------------------------------------------------------------------------------------
200 Washington Higher Education Pacific Lutheran (Connie Lee Insured) 5.70 11-01-26 196,436
200 Washington State Housing and Dining System (MBIA Insured)........ 6.38 10-01-18 213,046
75 Western Washington University Housing and Dining System
(MBIA Insured)................................................ 6.38 10-01-22 78,683
----------
488,165
----------
INDUSTRIAL (2.7%):
- --------------------------------------------------------------------------------------------------------------
75 University of Washington Parking Revenue (AMBAC Insured)......... 6.13 11-01-14 79,007
----------
HOUSING (14.3%):
- --------------------------------------------------------------------------------------------------------------
200 Kitsap County Housing (GNMA Insured)............................. 7.10 02-20-36 216,320
200 State Housing Single Family Mortgage (GNMA Insured).............. 6.20(b) 12-01-22 200,820
----------
417,140
----------
HEALTH CARE (13.9%):
- --------------------------------------------------------------------------------------------------------------
200 University of Washington Medical Center (FSA Insured)............ 6.30 08-15-14 211,350
100 Washington Health Care Facility (Connie Lee Insured)............. 5.25 12-01-20 93,751
100 Washington State Health Care Peace Health (MBIA Insured)......... 5.63 11-15-15 99,326
----------
404,427
----------
TOTAL INVESTMENTS IN SECURITIES (cost: $2,846,613)(c) $2,938,187
==========
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) Security subject to Alternative Minimum Tax. At December 31, 1996, the total
of such securities equals 10.2% of the Fund's net assets.
(c) Also represents the cost of securities for federal income tax purposes. The
aggregate gross unrealized appreciation and depreciation in securities based
on this cost are as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation (Depreciation) Appreciation
------------ -------------- ------------
$92,702 $(1,128) $91,574
(d) All investments in bonds are rated 100% Aaa/AAA (unaudited).
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, 1996 shown below. Exempt interest dividends are exempt from federal
income tax and should not be included in shareholder's gross income, but need to
be reported on the income tax return for informational purposes. Each
shareholder should consult a tax adviser about reporting this income for state
and local purposes. In January 1997, the Fund separately provided each
shareholder with tax information for calendar year 1996.
<TABLE>
<CAPTION>
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------------ ------------ ------------
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)...................... $.5351 $.4608 $.4405
====== ====== ======
</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.
VOYAGEUR ON CALL(TM)
[Line Drawing of a telephone]
800.545.3863
We invite you to use the Voyaguer interactive voice response system, Voyageur On
Call(TM) (800.545.3863). The system is designed to give you information about
the Fund(s) in your account. It can also provide price and yield information for
the Fund(s). 24-hour access available to Touch Tone telephones only.
VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402-4115
VOY-WAAR 3/97
