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VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
IOWA TAX FREE FUND
SEMI-ANNUAL REPORT
DATED JUNE 30, 1996
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds as your objectives or market
conditions change.
VOYAGEUR HIGH YIELD FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in medium and
lower grade municipal bonds.
Voyageur MINNESOTA High Yield Municipal Bond Fund
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
<TABLE>
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Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur WISCONSIN Tax Free Fund
Voyageur KANSAS Tax Free Fund
</TABLE>
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
<TABLE>
<S> <C>
Voyageur ARIZONA Insured Tax Free Fund Voyageur MISSOURI Insured Tax Free Fund
Voyageur CALIFORNIA Insured Tax Free Fund Voyageur NATIONAL Insured Tax Free Fund
Voyageur FLORIDA Insured Tax Free Fund Voyageur OREGON Insured Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON Insured Tax Free Fund
</TABLE>
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
<TABLE>
<S> <C>
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited Term Tax Free Fund
Voyageur MINNESOTA Limited Term Tax Free Fund
</TABLE>
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
<TABLE>
<S> <C>
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
</TABLE>
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
<TABLE>
<S> <C>
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
</TABLE>
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
LETTER FROM THE PRESIDENT
[PHOTO] JOHN G. TAFT
PRESIDENT
Dear Shareholder:
Since our last report, the headline story in the municipal bond market has been
the demise of a radical tax reform. One of the best ways to illustrate this
demise is to look at how municipal bonds have traded in relation to Treasury
securities. At the height of the tax reform scare -- when Steve Forbes was
campaigning on his Flat Tax platform in January 1996 -- long municipal
securities were trading at a very cheap 90% of Treasuries. At the time of this
report, market fears have abated and municipal bonds are trading at a more
traditional 81%.
We believe the issue of reforming the tax code is far from thoroughly closed.
And it is likely -- in this a U.S. presidential election year -- that we may see
renewed discussions about less radical tax reforms. However, as is often the
case in the financial markets, we believe these times of short-term volatility
and uncertainty represent good opportunities for long-term investors.
At Voyageur, we continue to stress the importance of maintaining a long-term
view -- in both the investment horizons of our shareholders and in our approach
to purchasing securities for the Voyageur Tax Free Funds. In order to select the
best long-term securities for the funds, we favor purchasing negotiated new
municipal issues over those in the secondary or competitive market.
Unlike the taxable bond market where the structure of new bond issues are
frequently predetermined and fixed, we have more flexibility and negotiating
power in determining how a municipal bond issue will be structured. In many
cases, our credit research analysts -- who are experienced experts in the area
of municipal bond transactions -- work closely with municipal bond issuers to
determine the appropriate structure for new bond issues. Our analysts' intimate
knowledge of what's in the market and their ability to actually dissect
individual municipal securities helps us to determine appropriate prices that
accurately reflect an issuer's strength and value while assisting us in
protecting our shareholders' interests. They also help us pinpoint rising and
falling stars -- bonds whose credits may be upgraded or downgraded -- in the
municipal market.
We remain committed to providing our clients with the best investment products
and services available in today's financial markets. The Voyageur Tax Free Funds
allow you access to a wide variety of national and state-specific municipal
bonds funds, all of which are actively managed to meet their individual fund
objectives.
As part of our commitment to you, we have also redesigned our shareholder
reports to provide you with more in-depth information about your Voyageur fund
investments in an easier-to-read format. We welcome any comments you may have
about these changes and encourage you to call our Voyageur Shareholder Services
at 800.543.3863.
If at any time you have questions about your Voyageur fund investments, please
contact your personal financial advisor or Voyageur Shareholder Services. Our
Voyageur Shareholder Services 800 number -- known as Voyageur On Call(TM) --
allows you 24-hour access, seven days a week to an automated voice response
service with shareholder services representatives available from 8 a.m. to 5
p.m. Central Standard Time.
We appreciate your continued patronage of Voyageur Funds and look forward to
working with you and your financial advisors in creating products and services
designed to bring you closer to your investment goals.
Sincerely,
/s/ John G. Taft
John G. Taft
President
Voyageur Iowa Tax Free Fund
VOYAGEUR IOWA TAX FREE FUND
[PHOTO] STEVEN P. ELDREDGE IS THE
SENIOR MUNICIPAL BOND
MANAGER FOR THE VOYAGEUR
IOWA TAX FREE FUND. MR.
ELDREDGE HAS MORE THAN 18
YEARS OF INVESTMENT INDUSTRY
EXPERIENCE.
For the six months ended June 30, 1996, the total return at net asset value
(NAV) for the Voyageur Iowa Tax Free Fund's Class A shares was -3.34%.*
Within the Fund, we maintained our long-term outlook for lower interest rates by
keeping our Fund's duration long as compared to the industry average. Although
this caused the Fund's performance to lag when interest rates rose earlier this
year, we believe the worst is over and are expecting to see a turnaround in
interest rates later this year or early 1997. Also contributing to the Fund's
total return for the period has been the slight underperformance of the Fund's
holdings in territorial paper.
AREAS OF OPPORTUNITY
Within the portfolio, we remained committed to purchasing municipal bonds with
high credit ratings, emphasizing revenue bonds with dedicated and specific
sources of taxes pledged for their repayment. Due to the lack of municipal bond
issuers and the limited municipal bond supply in Iowa, a significant portion of
the Fund's assets are invested in territorial paper from issuers located in
Puerto Rico. This territorial paper -- which undergoes the same exhaustive,
continuous credit review as the other holdings within the fund -- allows us to
structure the Fund's portfolio consistent with our interest rate outlook and
assists us in meeting our income, maturity and yield objectives for the fund.
During the past six months, we continued to search for areas or sectors where we
could add value or dampen the impact of market volatility. One such area has
been to include investments that have added income to the Fund. Although we
still maintain our commitment to total return, we believe this addition of
income will allow us to dampen the effects of market volatility while allowing
our shareholders to benefit from higher income streams.
In order to attempt to protect our shareholders' current income level for a
longer period of time, we have continued to take advantage of opportunities to
extend the Fund's call protection. This emphasis has led to the Voyageur Iowa
Tax Free Fund having an average call protection of approximately nine years.
OUTLOOK FOR THE MUNICIPAL MARKET
The U.S. economy is still showing signs of moderate growth with moderate
inflation -- a trend we expect to see continue for the remainder of the year.
Our outlook for the municipal market continues to be favorable, and we expect
interest rates to decline over the long term. This has caused us to position the
Fund to take advantage of this trend.
*Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
VOYAGEUR IOWA TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 1996
- --------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at market value (note 1)
(identified cost: $43,465,189) ................................. $ 42,776,361
Accrued interest receivable ....................................... 838,960
Receivable for Fund shares sold ................................... 65,260
Receivable for investment securities sold ......................... 99,708
Organizational costs (note 4) ..................................... 14,405
------------
Total assets ................................................. 43,794,694
------------
LIABILITIES
Bank overdraft .................................................... 876,028
Dividends payable to shareholders ................................. 44,746
Payable for Fund shares redeemed .................................. 12,392
Other accrued expenses ............................................ 24,874
------------
Total liabilities ............................................ 958,040
------------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES ....................... $ 42,836,654
============
Represented by:
Capital Stock - $.01 par value (note 1) ........................ $ 46,139
Additional paid-in capital ..................................... 45,253,477
Distributions in excess of net investment income ............... (47,782)
Accumulated net realized loss on investments ................... (1,726,352)
Unrealized depreciation of investments ......................... (688,828)
------------
NET ASSETS ................................................... $ 42,836,654
============
Net assets applicable to outstanding Class A Shares ............... $ 40,965,032
============
Net assets applicable to outstanding Class B Shares ............... $ 1,254,410
============
Net assets applicable to outstanding Class C Shares ............... $ 617,212
============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - 4,412,276 Shares of Capital Stock outstanding (note 5) $ 9.28
============
Class B - 135,124 Shares of Capital Stock outstanding (note 5) . $ 9.28
============
Class C - 66,517 Shares of Capital Stock outstanding (note 5) .. $ 9.28
============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR IOWA TAX FREE FUND
STATEMENT OF OPERATIONS (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1996
- ------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest ........................................................... $ 1,211,772
-----------
Expenses (note 3):
Investment advisory and management fee ............................. 108,456
Dividend-disbursing, administrative and accounting services fees ... 43,088
Distribution fee - Class A ......................................... 52,267
Distribution fee - Class B ......................................... 5,035
Distribution fee - Class C ......................................... 2,702
Printing, postage and supplies ..................................... 1,615
Audit and accounting fees .......................................... 4,793
Legal fees ......................................................... 551
Directors' fees .................................................... 844
Registration fees .................................................. 537
Custodian fees ..................................................... 5,829
Amortization of organizational costs ............................... 3,324
Other .............................................................. 199
-----------
Total expenses ................................................ 229,240
Less: Expenses waived or absorbed by the distributor .............. (29,964)
-----------
Total net expenses ............................................ 199,276
-----------
Investment income - net ....................................... 1,012,496
-----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions (note 2) .................... (137,709)
Net change in unrealized appreciation or depreciation of investments (2,348,848)
-----------
Net loss on investments ....................................... (2,486,557)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... $(1,474,061)
===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VOYAGEUR IOWA TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
- ------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
Operations: (UNAUDITED) 1995
------------ ------------
<S> <C> <C>
Investment income - net ................................ $ 1,012,496 $ 1,883,413
Realized loss on investments - net ..................... (137,709) (210,045)
Net change in unrealized appreciation or depreciation of
investments ......................................... (2,348,848) 5,476,857
------------ ------------
Net increase (decrease) in net assets
resulting from operations ........................ (1,474,061) 7,150,225
------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A .............................................. (986,650) (1,930,689)
Class B .............................................. (20,903) (10,623)
Class C .............................................. (10,599) (8,928)
Distributions in excess of net investment income:
Class A .............................................. (47,047) --
Class B .............................................. (329) --
Class C .............................................. (406) --
------------
Total distributions ................................ (1,065,934) (1,950,240
------------ ------------
Capital share transactions (note 5):
Proceeds from sale of shares (note 3):
Class A .............................................. 3,767,381 8,551,193
Class B .............................................. 467,772 774,814
Class C .............................................. 189,533 436,983
Net asset value of shares issued in reinvestment
of net investment income distributions:
Class A ............................................ 769,101 1,262,488
Class B ............................................ 19,542 7,327
Class C ............................................ 1,952 1,141
Payments for redemption of shares:
Class A .............................................. (3,488,361) (4,952,018)
Class B .............................................. -- (9)
Class C .............................................. (5,000) (9)
------------ ------------
Increase in net assets from capital share transactions . 1,721,920 6,081,910
------------ ------------
Total increase (decrease) in net assets ............ (818,075) 11,281,895
Net assets at beginning of period ......................... 43,654,729 32,372,834
------------ ------------
Net assets at end of period (including undistributed or
(distributions in excess of) net investment income of
$(47,782), and $5,656, respectively) ................. $ 42,836,654 $ 43,654,729
============ ============
</TABLE>
See accompanying notes to financial statements.
VOYAGEUR IOWA TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Voyageur Iowa Tax Free Fund (the Fund) is one of a series of several
funds within Voyageur Mutual Funds, Inc., which is registered under the
Investment Company Act of 1940 (as amended) as a non-diversified, open-end
management investment company. 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. 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.
Pursuant to its articles of incorporation, Voyageur Mutual Funds, Inc.,
has 10 trillion shares of authorized capital stock that may be issued. Effective
December 31, 1994, the Fund changed its fiscal year end from August 31 to
December 31.
The significant accounting policies followed by the Fund are summarized as
follows:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of net increase (decrease) in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
INVESTMENTS IN SECURITIES
Securities are valued at fair value as determined by the Board of
Directors. 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 date the securities are
purchased or sold. 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
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 had capital loss carryovers of
$1,451,526 at December 31, 1995, that will expire in 2001 through 2004 if not
offset by subsequent capital gains. It is unlikely the Board of Directors will
authorize a distribution of any net realized capital gains until the available
capital loss carryover has been offset or expires.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends declared daily from net investment income are payable monthly in
cash or reinvested in additional shares of the Fund. Net short-term realized
capital gains, if any, may be paid 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 $6,103,299 and $3,828,347 respectively, for the
six months ended June 30, 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.
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 assetsand an annualized percentage of average daily netassets
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 six months ended
June 30, 1996, Fund Distributors voluntarily waived Class A distribution fees of
$28,696 and Class B distribution fees of $1,268.
Sales charges paid by Class A shareholders were $110,457. Of this amount,
Fund Distributors received $18,369.
(4) ORGANIZATIONAL COSTS
Organizational costs are being amortized over 60 months on a straight line
basis. If Voyageur redeems any or all of its shares in the Fund representing
initial capital prior to the end of the 60-month amortization period, Voyageur
will reimburse the Fund for the unamortized balance in the same proportion as
the number of shares redeemed bear to the number of initial shares outstanding
at the time of redemption.
(5) SHARE TRANSACTIONS
Transactions in shares of capital stock during each period were as
follows:
CLASS A
---------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
---------------------------
Shares sold .................. 395,299 922,331
Shares issued for
reinvested distributions .. 81,035 136,932
Shares redeemed .............. (372,881) (530,158)
-------- --------
Increase in shares outstanding 103,453 529,105
======== ========
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------- ------------------------------
PERIOD FROM PERIOD FROM
SIX MONTHS MARCH 24, SIX MONTHS JANUARY 4,
ENDED 1995* TO ENDED 1995* TO
JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 49,759 82,523 19,832 46,867
Shares issued for
reinvested distributions .. 2,066 777 207 121
Shares redeemed .............. -- (1) (509) (1)
------- ------- ------- -------
Increase in shares outstanding 51,825 83,299 19,530 46,987
======= ======= ======= =======
</TABLE>
* Commencement of operations.
(6) FINANCIAL HIGHLIGHTS
Per share data (rounded to the nearest cent) for a share of capital stock
outstanding and selected information for each period are as follows:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
SIX MONTHS YEAR FOUR MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 1996 DECEMBER 31, DECEMBER 31, AUGUST 31,
(UNAUDITED) 1995 1994 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period.................... $9.83 $8.56 $9.26 $10.00
----- ----- ----- ------
Operations:
Net investment income.................. .22 .45 .17 .49
Net realized and unrealized
gain (loss) on investments........... (.54) 1.29 (.72) (.74)
----- ----- ----- ------
Total from operations.............. (.32) 1.74 (.55) (.25)
----- ----- ----- ------
Distributions to shareholders:
From net investment income(a).......... (.22) (.47) (.15) (.49)
In excess of net investment income..... (.01) -- -- --
----- ----- ----- ------
Total distributions.................. (.23) (.47) (.15) (.49)
----- ----- ----- ------
Net asset value:
End of period.......................... $9.28 $9.83 $8.56 $ 9.26
===== ===== ===== ======
Total investment return (b)............... (3.34)% 20.80% (5.86)% (2.67)%
Net assets at end of period
(000's omitted)........................ $40,965 $42,374 $32,373 $38,669
Ratios:
Ratio of expenses to average
daily net assets (f)................. .89%(e) .72% .11%(d) .12%
Ratio of net investment income to
average daily net assets............. 4.69%(e) 4.88% 5.71%(d) 4.89%
Assuming no voluntary waivers
and reimbursements:
Expenses (c)................... 1.03%(e) 1.06% 1.25%(d) 1.25%
Net investment income.......... 4.55%(e) 4.54% 4.57%(d) 3.76%
Portfolio turnover rate
(excluding short-term securities)...... 8.93% 21.67% 7.18% 119.35%
</TABLE>
See accompanying notes to Financial Highlights.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------- ------------------------------
PERIOD FROM PERIOD FROM
SIX MONTHS MARCH 24, SIX MONTHS JANUARY 4,
ENDED 1995(e) TO ENDED 1995(e) TO
JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period...................... $9.83 $9.18 $9.83 $8.55
----- ----- ----- -----
Operations:
Net investment income.................... .19 .31 .18 .37
Net realized and unrealized
gain (loss) on investments............. (.54) .64 (.54) 1.28
----- ----- ----- -----
Total from operations................ (.35) .95 (.36) 1.65
----- ----- ----- -----
Distributions to shareholders:
From net investment income(a)............ (.20) (.30) (.18) (.37)
In excess of net investment income....... -- -- (.01) --
----- ----- ----- -----
Total distributions.................... (.20) (.30) (.19) (.37)
----- ----- ----- -----
Net asset value:
End of period............................ $9.28 $9.83 $9.28 $9.83
===== ===== ===== =====
Total investment return (b)................. (3.65)% 10.62% (3.77)% 19.66%
Net assets at end of period
(000's omitted).......................... $1,254 $819 $617 $462
Ratios:
Ratio of expenses to average
daily net assets (f)................... 1.53%(e) 1.28%(d) 1.75%(e) 1.61%(d)
Ratio of net investment income to
average daily net assets............... 4.04%(e) 4.06%(d) 3.80%(e) 3.74%(d)
Assuming no voluntary waivers
and reimbursements:
Expenses (c)..................... 1.78%(e) 1.65%(d) 1.78%(e) 1.72%(d)
Net investment income............ 3.79%(e) 3.69%(d) 3.77%(e) 3.63%(d)
Portfolio turnover rate
(excluding short-term securities)........ 8.93% 21.67% 8.93% 21.67%
</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 C Shares.
(d) Annualized.
(e) Commencement of operations.
(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 IOWA TAX FREE FUND
INVESTMENTS IN SECURITIES (UNAUDITED) JUNE 30, 1996
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PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (c) RATE MATURITY VALUE (a)
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(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
MUNICIPAL BONDS (99.9%):
ESCROWED WITH U.S. GOVERNMENT BONDS (4.1%):
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<S> <C> <C> <C> <C>
$1,500 Virgin Island Public Finance Authority Series A.................... 7.30% 10-01-18 $ 1,753,950
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UTILITY (31.1%):
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8,055 Iowa Finance Authority State Revolving Fund Series 93.............. 5.20 05-01-23 7,400,530
1,750 Iowa Finance Authority State Revolving Fund Series 94.............. 6.25 05-01-24 1,809,062
1,000 Puerto Rico Electric Power Authority Revenue Series 92R............ 6.25 07-01-17 1,013,470
1,100 Puerto Rico Electric Power Authority Revenue Series 94U............ 6.00 07-01-14 1,103,685
2,120 Puerto Rico Telephone Authority Revenue............................ 5.50 01-01-22 1,975,671
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13,302,418
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TRANSPORTATION (8.5%):
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1,450 Guam Highway (FSA Insured)....................................... 6.30 05-01-12 1,511,059
1,500 Puerto Rico Commonwealth Highway and Transportation ............. 5.25 07-01-21 1,344,945
500 Puerto Rico Commonwealth Highway and Transportation.............. 5.00 07-01-22 431,065
400 Puerto Rico Commonwealth Highway and Transportation ............. 5.50 07-01-26 374,216
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3,661,285
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INDUSTRIAL (25.1%):
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2,000 Iowa Finance Authority Correctional Facility..................... 5.70 06-15-14 1,996,580
90 Iowa Finance Authority Underground Storage Tank.................. 6.00 07-01-10 93,150
7,500 Iowa Finance Authority Underground Storage Tank.................. 5.13 07-01-14 6,993,750
500 Lee County Urban Renewal Revenue - Keokuk Waste Treatment........ 6.40 06-01-07 525,760
1,150 Puerto Rico Port Authority AMR Airlines.......................... 6.25(d) 06-01-26 1,138,098
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10,747,338
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EDUCATION (12.3%):
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500 Iowa State University - Board of Regents......................... 4.60 07-01-10 453,125
500 State University of Iowa-Board of Regents........................ 4.63 07-01-11 449,375
650 State University of Iowa-Board of Regents........................ 5.30 07-01-13 626,437
475 University of Northern Iowa - Board of Regents................... 4.63 07-01-10 431,062
515 University of Northern Iowa - Board of Regents................... 4.63 07-01-11 462,856
150 University of Northern Iowa - Board of Regents................... 5.00 07-01-11 141,189
160 University of Northern Iowa - Board of Regents................... 5.00 07-01-12 149,400
170 University of Northern Iowa - Board of Regents................... 5.00 07-01-13 157,463
180 University of Northern Iowa - Board of Regents................... 5.00 07-01-14 164,475
180 University of Northern Iowa - Board of Regents................... 5.00 07-01-15 164,025
1,000 University of Puerto Rico Revenue Series 95M (MBIA Insured)...... 5.50 06-01-15 968,750
1,200 University of Puerto Rico Revenue Series 95M(MBIA Insured)....... 5.25 06-01-25 1,107,000
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5,275,157
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GENERAL OBLIGATION (1.0%):
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500 Puerto Rico Aqueduct and Sewer Authority......................... 5.00 07-01-15 445,335
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HOUSING (2.3%)
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1,000 Puerto Rico Single Family Housing Bank and Finance Agency
(GNMA Insured)................................................ 6.25(d) 04-01-29 988,340
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HEALTH CARE (2.9%):
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1,200 Puerto Rico Hospital Revenue - Hospital Auxilio Mutuo
(MBIA Insured)................................................ 6.25 07-01-24 1,228,500
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OTHER REVENUE (12.6%):
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675 Puerto Rico Indl. Tourist-Polytechnic U.......................... 6.50 08-01-24 674,953
1,700 Puerto Rico Municipal Finance Authority (FSA Insured)............ 6.00 07-01-14 1,719,125
1,000 Puerto Rico Public Building Authority Revenue Series M........... 5.75 07-01-15 977,420
1,000 Puerto Rico Public Building Authority Revenue Series L........... 5.75 07-01-16 976,790
1,100 Puerto Rico Public Building Authority Revenue Series M........... 5.50 07-01-21 1,025,750
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5,374,038
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TOTAL INVESTMENTS IN SECURITIES (cost: $43,465,189) (b) $ 42,776,361
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</TABLE>
NOTES TO INVESTMENTS IN SECURITIES (UNAUDITED)
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) The cost of securities for federal income tax purposes is $43,602,306. The
aggregate gross unrealized appreciation and depreciation of securities
based on this cost are as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Depreciation
------------ ------------ ------------
<S> <C> <C> <C>
$463,114 $(1,289,059) $(825,945)
</TABLE>
(c) Investments in bonds, by rating category (unaudited) as a percentage of
total bonds, are as follows:
<TABLE>
<CAPTION>
Aaa/AAA Aa/AA A/A Baa/BBB Total
------- ----- --- ------- -----
<S> <C> <C> <C> <C> <C>
22% 1% 71% 6% 100%
</TABLE>
(d) Security subject to the Alternative Minimum Tax.
INVESTMENT ADVISER, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND
ACCOUNTING SERVICES AGENT
Voyageur Fund Managers, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
UNDERWRITER
Voyageur Fund Distributors, Inc.
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55479
GENERAL COUNSEL
Dorsey & Whitney P.L.L.P.
Minneapolis, MN 55402
AUDITORS
KPMG Peat Marwick LLP
Minneapolis, MN 55402
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Minneapolis, Minnesota 55402-4115
