VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
UTAH TAX FREE FUND
ANNUAL REPORT
DATED DECEMBER 31, 1996
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds as your objectives or market
conditions change.
VOYAGEUR HIGH YIELD FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in medium and
lower grade municipal bonds.
Voyageur MINNESOTA High Yield Municipal Bond Fund
Voyageur NATIONAL High Yield Municipal Bond Fund
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds as your objectives or market
conditions change.
VOYAGEUR HIGH YIELD FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in medium and
lower grade municipal bonds.
Voyageur MINNESOTA High Yield Municipal Bond Fund
Voyageur NATIONAL High Yield Municipal Bond Fund
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
<TABLE>
<S> <C>
Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NEW YORK Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur KANSAS Tax Free Fund Voyageur WISCONSIN Tax Free Fund
</TABLE>
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
<TABLE>
<S> <C> <C>
Voyageur ARIZONA Insured Tax Free Fund Voyageur MISSOURI Insured Tax Free Fund
Voyageur CALIFORNIA Insured Tax Free Fund Voyageur NATIONAL Insured Tax Free Fund
Voyageur FLORIDA Insured Tax Free Fund Voyageur OREGON Insured Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON Insured Tax Free Fund
</TABLE>
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
<TABLE>
<S> <C> <C>
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited Term Tax Free Fund
Voyageur MINNESOTA Limited Term Tax Free Fund
</TABLE>
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
<TABLE>
<S> <C> <C>
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
</TABLE>
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
<TABLE>
<S> <C> <C>
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
</TABLE>
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
LETTER FROM THE PRESIDENT
[PHOTO]
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 concerning this transaction or your Voyageur fund investment.
Sincerely,
/s/ John G. Taft
John G. Taft
President
Voyageur Utah Tax Free Fund
VOYAGEUR UTAH TAX FREE FUND
[PHOTO]
ANDREW M. McCULLAGH, JR. IS THE SENIOR MUNICIPAL BOND MANAGER FOR THE VOYAGEUR
UTAH TAX FREE FUND. MR. McCULLAGH HAS MORE THAN 23 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 UTAH TAX FREE FUND
For the year ended December 31, 1996, the total return at net asset value (NAV)
for the class A shares of the Voyageur Utah Tax Free Fund was 3.35%.*
We continue to manage the Voyageur Utah Tax Free Fund with a dual focus of
generating higher tax-exempt income levels and protecting future income streams.
Adding incremental income to the portfolio was an important objective for the
Voyageur Utah Tax Free Fund in 1996. Our continued focus on the housing sector
helped achieve this objective. Housing bonds made up nearly 21% of the
portfolio. These bonds are known to produce a greater amount of coupon income
than bonds in many other sectors.
Even with our strong commitment to the housing sector, the portfolio remained
well diversified by sector and individual issues. We maintained excellent
average call protection on the Fund (9.3 years). We also had an average credit
quality rating of A/A.
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.
VOYAGEUR UTAH TAX FREE FUND
Portfolio Abstract
For the Period Ended December 31, 1996
Class A Shares
[GRAPH]
<TABLE>
<CAPTION>
UT Tax Free UT Tax Free Lehman Bros. 20
Without Sales Charge With Sales Charge Year Municipal Bond Index
<S> <C> <C> <C>
Oct-92 10000 9625 10000
10000 9625 9876
10332 9945 10127
Dec-92 10477 10084 10259
10614 10216 10369
11006 10593 10809
10970 10559 10715
11087 10671 10850
11122 10705 10940
11302 10878 11141
11368 10942 11154
11580 11146 11421
11688 11249 11565
11753 11312 11586
11627 11191 11458
Dec-93 11942 11494 11734
12190 11733 11882
11921 11474 11529
11507 11076 10922
11376 10950 11011
11508 11076 11141
11430 11001 11030
11640 11204 11282
11662 11225 11314
11472 11041 11088
11224 10803 10795
10906 10497 10542
Dec-94 11177 10758 10873
11530 11098 11299
11942 11494 11709
12044 11592 11842
12053 11601 11840
12447 11981 12286
12317 11855 12097
12374 11910 12160
12526 12056 12327
12679 12203 12424
12903 12419 12689
13141 12648 12969
Dec-95 13308 12809 13151
13379 12877 13218
13264 12767 13067
13053 12563 12858
13035 12546 12806
13030 12541 12822
13136 12643 13003
13242 12745 13130
13286 12788 13109
13431 12927 13374
13576 13067 13534
13785 13268 13817
Dec-96 13754 13238 13736
</TABLE>
Voyageur Utah Tax Free Fund Without Sales Charge - Ending Value $13,755
Voyageur Utah Tax Free Fund With Sales Charge - Ending Value $13,329
Lehman Bros. 20 Year Municipal Bond Index - Ending Value $13,736
The Lehman Bros. 20 Year Municipal Bond Index is a broad, unmanaged index of
securities of United States Municipalities. The index assumes that no operating
expenses, transaction fees or sales loads are incurred by a hypothetical
investor who directly owns the securities maintained in the index. In order to
outperform an index over any specific time frame, a fund must return to
investors an amount greater than that provided by the index plus total operating
expenses. For this reason, few fixed income funds are able to outperform broad
market indices over the long term. The chart above is comprised of data that
represents the cumulative total return of a hypothetical investment in Class A
Shares of $10,000 made on the date the Fund commenced operations through
December 31, 1996.
The performance of separate classes will vary based on the differences in
sales loads and distribution fees paid by shareholders investing in the
different classes. Performance quoted represents past performance and is
not indicative of future results.
* Average annual total returns include the maximum 3.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1996
Voyageur Utah Tax Free Fund
Average Annual Total Returns
(Class A Shares)
Since
1 Year 10/5/92**
Without Sales Charge 3.35% 7.79%
With Sales Charge* (0.52%) 6.82%
Lehman Bros. 20 4.45% 7.78%
Year Municipal
Bond Index
Voyageur Utah Tax Free Fund
Average Annual Total Returns
(Class B Shares)
Since
1 Year 5/27/95**
Without Contingent 2.47% 5.66%
Deferred Sales Charge
With Contingent (2.53%) 3.23%
Deferred Sales Charge***
Quality Breakdown
Baa/BBB 2%
NR/NR 9%
A/A 10%
Aa/AA 11%
Aaa/AAA 68%
Sector Breakdown
(shown as % of total net assets)
Education 25.2%
Housing 20.6%
Lease/C.O.P. 15.6%
General Obligation 14.6%
Utilities 12.9%
Transportation 6.0%
Health Care 4.3%
Statistics
Average Maturity 11.4 Years
Average Coupon 6.05%
Portfolio Duration 7.6 Years
Average Quality Aa/AA
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 Utah 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 years ended October 31, 1994 and 1993 and the period from October 5,
1992, commencement of operations, to October 31, 1992. 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 Utah 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 UTAH TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at market value (note 1)
(identified cost, $4,097,424)................................................ $4,224,799
Cash in bank on demand deposit.................................................. 2,205
Accrued interest receivable..................................................... 60,292
-------------
Total assets................................................................. 4,287,296
-----------
LIABILITIES
Dividends payable to shareholders............................................... 17,920
Other accrued expenses.......................................................... 11,369
-------------
Total liabilities............................................................ 29,289
-------------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES..................................... $4,258,007
==========
Represented by:
Paid-in capital (note 1)..................................................... $4,222,664
Undistributed net investment income.......................................... 2,281
Accumulated net realized loss on investments (note 1)........................ (94,313)
Unrealized appreciation of investments....................................... 127,375
------------
TOTAL NET ASSETS........................................................... $4,258,007
==========
Net assets applicable to outstanding Class A Shares............................. $3,860,621
==========
Net assets applicable to outstanding Class B Shares............................. $ 397,386
===========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of beneficial interest outstanding: 356,303 (note 5)........ $10.84
======
Class B - Shares of beneficial interest outstanding: 36,679 (note 5)......... $10.83
======
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR UTAH TAX FREE FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest..................................................................... $ 255,038
---------
Expenses (note 3):
Investment advisory and management fee....................................... 21,935
Dividend-disbursing, administrative and accounting services fee.............. 25,695
Printing, postage and supplies............................................... 1,810
Audit and accounting fees.................................................... 5,879
Legal fees................................................................... 63
Distribution fees - Class A.................................................. 10,009
Distribution fees - Class B.................................................. 3,821
Directors' fees.............................................................. 189
Registration fees............................................................ 348
Custodian fees............................................................... 2,256
Other........................................................................ 414
-------------
Total expenses............................................................. 72,419
Less: Expenses waived or absorbed........................................... (39,557)
-----------
Total net expenses......................................................... 32,862
-----------
Investment income - net.................................................... 222,176
----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions (note 2).............................. (22,702)
Net change in unrealized appreciation or depreciation of investments......... (61,332)
-----------
Net loss on investments.................................................... (84,034)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 138,142
=========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR UTAH TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
Operations:
Investment income - net ................................................. $ 222,176 $ 228,032
Realized loss on security transactions .................................. (22,702) (59,790)
Net change in unrealized appreciation or
depreciation of investments ........................................... (61,332) 547,395
----------- -----------
Net increase in net assets resulting from operations ................ 138,142 715,367
----------- -----------
Distributions to shareholders from:
Investment income - net:
Class A ............................................................... (206,175) (224,129)
Class B ............................................................... (16,604) (5,193)
----------- -----------
Total distributions ................................................. (222,779) (229,322)
----------- -----------
Share transactions (note 5):
Proceeds from sale of shares:
Class A (note 3) ...................................................... 181,975 443,991
Class B ............................................................... 25,000 346,034
Net asset value of shares issued in reinvestment of net investment income
distributions:
Class A ............................................................. 86,770 90,611
Class B ............................................................. 16,214 3,787
Payments for redemption of shares:
Class A ............................................................... (471,420) (595,116)
Class B ............................................................... -- (10)
----------- -----------
Increase (decrease) in net assets from share transactions ............... (161,461) 289,297
----------- -----------
Total increase (decrease) in net assets ............................... (246,098) 775,612
Net assets at beginning of period ............................................ 4,504,105 3,728,493
----------- -----------
Net assets at end of period (including undistributed net
investment income of $2,281 and $2,884,
respectively) ....................................................... $ 4,258,007 $ 4,504,105
=========== ===========
</TABLE>
See accompanying notes to financial statements.
VOYAGEUR UTAH TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Voyageur Utah 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 both federal and state
income taxes by investing in investment grade municipal bonds.
The Fund offers Class A, Class B and Class C Shares. Class A Shares are sold
with a front-end sales charge. Class B Shares may be subject to a contingent
deferred sales charge and such shares automatically convert to Class A after
eight years. Class C Shares may be subject to a contingent deferred sales charge
and have no conversion feature. There were no Class C Shares outstanding as of
December 31, 1996. 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 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, at December 31, 1996 the Fund had capital loss carryovers of
$94,313 that will expire in 2001 through 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 $1,733,988 and $1,907,177, 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. 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
$14,729 pursuant to the 1% expense limitation and, excluding waiver of
distribution fees, voluntarily absorbed fees and expenses of $15,271.
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 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 $8,808
and Class B distribution fees of $749.
Sales charges paid by Class A shareholders for the year ended December 31,
1996 were $4,575. Of this amount, Fund Distributors received $800.
(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>
A SHARES B SHARES
------------------------------- ----------------------------------
YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED MAY 27, 1995* TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold......................... 17,149 43,191 2,314 32,505
Shares issued for
reinvested distributions......... 8,069 8,680 1,507 354
Shares redeemed..................... (44,175) (57,218) -- (1)
---------- ----------- ------------ ------------
Increase (decrease) in shares
outstanding...................... (18,957) (5,347) 3,821 32,858
========== ============ ========= ========
</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>
A SHARES
-------------------------------------------------------------------------------
PERIOD FROM
YEAR YEAR TWO MONTHS YEAR YEAR OCTOBER 5,
ENDED ENDED ENDED ENDED ENDED 1992(d) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995 1994 1994 1993 1992
--------- --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period ............. $ 11.04 $ 9.80 $ 9.94 $ 11.07 $ 10.00 $10.00
--------- --------- --------- --------- --------- ------
Operations:
Net investment income ........... .55 .59 .10 .60 .65 --
Net realized and unrealized
gain (loss) on investments .... (.20) 1.24 (.15) (1.07) 1.07 --
--------- --------- --------- --------- --------- ------
Total from operations ....... .35 1.83 (.05) (.47) 1.72 --
--------- --------- --------- --------- --------- ------
Distributions to shareholders:
From net investment income (a) .. (.55) (.59) (.09) (.60) (.65) --
From net realized gains ......... -- -- -- (.06) -- --
--------- --------- --------- --------- --------- ------
Total distributions ........... (.55) (.59) (.09) (.66) (.65) --
--------- --------- --------- --------- --------- ------
Net asset value:
End of period ................... $ 10.84 $ 11.04 $ 9.80 $ 9.94 $ 11.07 $10.00
========= ========= ========= ========= ========= ======
Total investment return (b) ........ 3.35% 19.06% (0.41)% (4.50)% 17.54% --%
Net assets at end of period
(000's omitted) ................. $ 3,861 $ 4,142 $ 3,728 $ 4,054 $ 3,913 $ 19
Ratios:
Ratio of expenses to
average daily net assets (f) .. .68% .38% .11%(e) .10% --% --%
Ratio of net investment income
to average daily net assets ... 5.14% 5.51% 6.38%(e) 5.64% 5.65% --%
Assuming no voluntary waivers
and reimbursements:
Expenses (c) ............ 1.25% 1.25% 1.14%(e) 1.25% 1.25% --%
Net investment income ... 4.57% 4.64% 5.35%(e) 4.49% 4.40% --%
Portfolio turnover rate (excluding
short-term securities) .......... 39.58% 35.28% --% 2.77% 44.54% --%
</TABLE>
B SHARES
---------------------------------
PERIOD FROM
YEAR MAY 27,
ENDED 1995(d) TO
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
Net asset value:
Beginning of period ............. $ 11.04 $ 10.63
------- -------
Operations:
Net investment income ........... .47 .30
Net realized and unrealized
gain (loss) on investments .... (.21) .39
------- -------
Total from operations ....... .26 .69
------- -------
Distributions to shareholders:
From net investment income (a) .. (.47) (.28)
------- -------
Total distributions ......... (.47) (.28)
------- -------
Net asset value:
End of period ................... $ 10.83 $ 11.04
======= =======
Total investment return (b) ........ 2.47% 6.60%
Net assets at end of period
(000's omitted) ................. $ 397 $ 363
Ratios:
Ratio of expenses to
average daily net assets (f) .. 1.46% .92%(e)
Ratio of net investment income
to average daily net assets ... 4.34% 4.74%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c) ............ 2.00% 2.00%(e)
Net investment income ... 3.80% 3.66%(e)
Portfolio turnover rate (excluding
short-term securities) .......... 39.58% 35.28%
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 December 31, 1995, $.01 per share of the
distributions from net investment income was subject to state income tax
for the Fund's Class A Shares.
(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 each 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 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) 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 UTAH TAX FREE FUND
INVESTMENTS IN SECURITIES DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (b) RATE MATURITY VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
MUNICIPAL BONDS (99.2%):
GENERAL OBLIGATION (14.6%):
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 100 Cache County School District (AMBAC Insured)........................ 5.90% 06-15-13 $ 102,736
100 Iron County School District (MBIA Insured).......................... 6.50 01-15-13 107,929
200 Nebo Utah School District .......................................... 6.00 06-15-18 205,206
100 Provo City Independent School District.............................. 6.25 06-15-13 104,911
100 Salt Lake County Service Area #1.................................... 6.00 12-15-12 101,639
----------
622,421
----------
UTILITIES (12.9%):
-------------------------------------------------------------------------------------------------------
250 Provo City Energy System Revenue (MBIA Insured).................... 5.75 05-15-14 251,793
100 Puerto Rico Electric Power Authority Revenue....................... 5.50 07-01-25 95,573
200 White City Water District Revenue.................................. 5.90 02-01-22 202,088
----------
549,454
----------
TRANSPORTATION (6.0%):
-------------------------------------------------------------------------------------------------------
250 Salt Lake City Airport Revenue (FGIC Insured).................... 5.88 12-01-18 253,615
----------
HOUSING (20.6%):
-------------------------------------------------------------------------------------------------------
100 Salt Lake City Multifamily Housing Authority..................... 6.00 04-01-25 100,292
270 Salt Lake County Housing Authority Multifamily Bridgeside
(FHA Insured)................................................. 6.30(d) 11-01-28 271,736
200 Utah Housing Finance Authority Multifamily Cottonwood Project
(FNMA Insured)............................................... 6.30 07-01-15 205,894
145 Utah Housing Finance Authority Single Family Mortgage Revenue
Series 1992D-1................................................ 6.70 07-01-12 150,852
145 Utah Housing Finance Authority Single Family Mortgage Revenue
1994C......................................................... 6.30 07-01-16 148,849
----------
877,623
----------
HEALTH CARE (4.3%):
-------------------------------------------------------------------------------------------------------
200 Murray Utah Hospital Revenue (MBIA Insured)...................... 5.00 05-15-22 182,028
----------
EDUCATION (25.2%):
-------------------------------------------------------------------------------------------------------
150 Southern Utah University Board of Regents (AMBAC Insured)........ 6.35 05-01-10 161,727
390 Southern Utah University Pavillion Student Fee................... 6.30 06-01-16 394,118
100 Utah State University Board of Regents (AMBAC Insured)........... 6.30 06-01-12 105,008
150 Utah State University Board of Regents (MBIA Insured)............ 5.88 07-01-21 150,951
150 Utah State University Revenue (MBIA Insured)..................... 6.15 12-01-14 157,839
100 Weber State University Board of Regents (MBIA Insured)........... 6.25 04-01-10 104,470
-----------
1,074,113
-----------
LEASE/CERTIFICATES OF PARTICIPATION (15.6%):
-------------------------------------------------------------------------------------------------------
100 Salt Lake City Municipal Building Authority Lease
Revenue Series A.............................................. 6.38% 10-01-12 105,101
100 Utah State Building Authority Lease Revenue...................... 5.75 08-15-08 102,410
200 Weber County Utah Municipal Building Authority Lease Revenue..... 5.75 12-15-19 198,982
250 West Valley City Municipal Building Authority Lease Revenue
(MBIA Insured)................................................ 6.00 01-15-10 259,052
------------
665,545
------------
TOTAL INVESTMENTS IN SECURITIES (cost: $4,097,424) (c) $ 4,224,799
==========
See accompanying notes to investments in Securities.
</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>
Aaa/AAA Aa/AA A/A BBB NR Total
<S> <C> <C> <C> <C> <C> <C>
68% 11% 10% 2% 9% 100%
</TABLE>
(c) 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
$134,350 $(6,975) $127,375
(d) Security subject to the Alternative Minimum Tax and is equal to 6.4% of the
Fund's total net assets as of December 31, 1996.
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>
PER CLASS PER CLASS
A SHARE B SHARE
------------ ------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1996
------------ ------------
<S> <C> <C>
Net investment income distributions
(none qualifying for corporate dividend
received deduction)........................................ $.5521 $.4693
====== ======
</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
