WISCONSIN TAX FREE FUND
ANNUAL REPORT
Dated December 31, 1995
Voyageur offers a family of mutual funds, each with an individual objective
stated in its prospectus. Investment objectives of the funds range from high
current income to long-term capital appreciation. Exchange privileges allow you
to change your investment between Voyageur Funds
as your objectives or market conditions change.
VOYAGEUR TAX FREE FUNDS seek high current income free from both Federal income
taxes and state income taxes (where applicable). The Funds invest in investment
grade municipal bonds.
Voyageur ARIZONA Tax Free Fund Voyageur MINNESOTA Tax Free Fund
Voyageur CALIFORNIA Tax Free Fund Voyageur NATIONAL Tax Free Fund
Voyageur COLORADO Tax Free Fund Voyageur NEW MEXICO Tax Free Fund
Voyageur FLORIDA Tax Free Fund Voyageur NORTH DAKOTA Tax Free Fund
Voyageur IDAHO Tax Free Fund Voyageur UTAH Tax Free Fund
Voyageur IOWA Tax Free Fund Voyageur WISCONSIN Tax Free Fund
Voyageur KANSAS Tax Free Fund
VOYAGEUR INSURED TAX FREE FUNDS seek high current income free from both Federal
income taxes and state income taxes (where applicable) with the added safety of
an insured portfolio. The Funds invest in insured municipal bonds.
Voyageur ARIZONA Insured Voyageur MISSOURI Insured
Tax Free Fund Tax Free Fund
Voyageur CALIFORNIA Insured Voyageur NATIONAL Insured
Tax Free Fund Tax Free Fund
Voyageur FLORIDA Voyageur OREGON
Tax Free Fund Tax Free Fund
Voyageur MINNESOTA Insured Fund Voyageur WASHINGTON
Tax Free Fund
VOYAGEUR LIMITED TERM FUNDS seek to preserve original investment principal while
providing income free from both Federal income taxes and state income taxes
(where applicable). The Funds invest in intermediate term investment grade
municipal bonds.
Voyageur FLORIDA Limited Term Tax Free Fund Voyageur NATIONAL Limited
Voyageur MINNESOTA Limited Term Tax Free Fund Term Tax Free Fund
VOYAGEUR EQUITY FUNDS seek long term capital appreciation by investing in common
stocks.
Voyageur AGGRESSIVE GROWTH Fund Voyageur GROWTH Stock Fund
Voyageur GROWTH AND INCOME Fund Voyageur INTERNATIONAL Equity Fund
VOYAGEUR INCOME FUNDS seek high current income from investments issued,
guaranteed or otherwise backed by the full faith and credit of the U.S.
Government.
Voyageur U.S. GOVERNMENT SECURITIES Fund
VOYAGEUR CASH TRUST SERIES MONEY MARKET FUNDS seek high current income,
principal protection and liquidity by investing in money market instruments.
Voyageur CALIFORNIA MUNICIPAL CASH Series Voyageur MUNICIPAL CASH Series
Voyageur FLORIDA MUNICIPAL CASH Series Voyageur OHIO MUNICIPAL CASH Series
Voyageur GOVERNMENT CASH Series Voyageur PRIME CASH Series
Voyageur MINNESOTA MUNICIPAL CASH Series Voyageur TREASURY CASH Series
For more complete information regarding the investment objectives, fees and
expenses of the Funds, please obtain a prospectus from your Investment
Representative or from Voyageur, 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402-4115; (612) 376-7044 (local); 800-525-6584 (MKTG).
Dear Shareholder:
1995 was an excellent year for municipal bond fund investors and I am pleased to
report that your Fund did extremely well.
As you may recall, the previous year, 1994, represented one of the most
difficult years for fixed income investors since the 1920s. Voyageur's
investment strategy, however, emphasizes total return over the long term.
Shareholders who maintained a long term outlook through 1994 are to be
congratulated for their patience. This patience was rewarded in 1995.
Two of the major factors contributing to the resurgence of the municipal bond
market this past year were:
* Progressively lower interest rates throughout the year. (Falling interest
rates directly increases the value of your Fund's portfolio, and hence,
your shares.)
* A narrowing "spread" between yields on higher quality bonds versus lower
quality bonds. (Your Fund benefited from maintaining a large position in
quality bonds.)
In the following pages, Steve Eldredge, the Portfolio Manager, will elaborate on
these and other points of interest regarding the municipal bond market in 1995.
He will also share Voyageur's economic outlook for the next fiscal year.
Finally, I'd like to apprise you of the amount of capital appreciation and
current income generated by the Fund on your behalf in 1995.
<TABLE>
<CAPTION>
TOTAL NET
NET ASSET NET ASSET ASSETS
VALUE VALUE DIVIDENDS END OF
BEGINNING END PAID PER PERIOD
PERIOD OF PERIOD OF PERIOD SHARE (000'S)
- ------ ----------- --------- ----- ---------
Period ended December 31, 1995:
<S> <C> <C> <C> <C>
Class A Shares $8.74 $9.78 $0.48 $26,449
Class B Shares 9.39* 9.77 0.27 725
Class C Shares 9.34** 9.79 0.29 73
_________________________________
* Net asset value at April 22, 1995 (commencement of operations)
** Net asset value at March 28, 1995 (commencement of operations)
</TABLE>
I will be reporting to you again in August, 1996 to review the first half of the
coming year. In the interim, if you have any questions or comments about your
Fund, please call Voyageur's Shareholder Services Department at (800)545-3863 or
your financial advisor.
Thank you for investing with Voyageur.
Sincerely,
John G. Taft
President
Voyageur Wisconsin Tax Free Fund
FUND INVESTMENT OBJECTIVE AND STRATEGY
The primary objective of the Voyageur Wisconsin Tax Free Fund is to seek as high
a level of current income exempt from federal income tax and from state income
tax as is consistent with preservation of capital.
The Wisconsin Tax Free Fund generally invests in long-term, quality municipal
bonds. The Fund is exempt from federal income tax and Wisconsin state income
tax. We believe that investment grade bonds for the Wisconsin Tax Free Fund
offer the best value in today's interest rate environment.
DISCUSSION OF FUND PERFORMANCE
by Steven P. Eldredge
MR. ELDREDGE IS THE PORTFOLIO MANAGER OF THE VOYAGEUR WISCONSIN TAX FREE FUND AS
WELL AS A SENIOR VICE PRESIDENT FOR VOYAGEUR FUND MANAGERS. HE HAS SPECIALIZED
IN THE MUNICIPAL BOND MARKET SINCE 1978.
We at Voyageur are pleased to report the 1995 performance results of the
Voyageur Wisconsin Tax Free Fund. For the fiscal year ending December 31, 1995,
the Fund achieved a total return of +17.74% (for Class 'A' shares, assuming
purchase of shares at net asset value and reinvestment of dividend and capital
gains). For additional information about total returns achieved by the Fund
since its commencement and including the effect of sales charges, please refer
to the chart on page 7.
FACTORS AFFECTING FUND PERFORMANCE IN 1995
As previously discussed, a general downward trend in prevailing interest rates
had a positive impact on the net asset value of Fund shares in 1995. The Fund
was able to achieve an excellent total return relative to other states'
municipal bond funds during this period. (According to Lipper Analytical
Services, your Fund was ranked #17 of 53 "Other States" municipal bond funds for
total return in 1995. The Lipper "Other States" group's total return averaged
+16.28% during this period.) Keep in mind, however, that past performance does
not guarantee future results.
Your Fund was able to capture significant capital appreciation through duration
management. Longer duration funds experience wider fluctuations in market prices
than shorter duration funds. The Voyageur Wisconsin Tax Free Fund started 1995
with an average weighted duration of over 10.5 years which allowed for a
significant increase in net asset value. After having captured this market
rally, the duration of the Fund was systematically reduced, closing the year at
approximately 7.5 years.
The Voyageur Wisconsin Tax Free Fund also benefited from relative changes in
value between high quality bonds and lower quality bonds. As interest rate
spreads between these two classes of municipal bonds narrowed, high quality
bonds (which had been dramatically oversold during the 1994 bear market) gained
significant relative value. As of December 31, 1995 the Fund was comprised of
31% AAA and/or Aaa bonds, and 83% of the Fund was held in investment grade
securities.
Finally, supply and demand trends of Wisconsin municipal bonds benefited Fund
shareholders. New issuance of municipal bonds remained low. A lower level of
supply of Wisconsin bonds favors existing bond holders, particularly large
institutional buyers, such as mutual funds.
OUTLOOK FOR 1996
Our outlook for the Wisconsin municipal bond market remains bullish. However, we
do not anticipate as significant levels of total return in the upcoming year as
was achieved in 1995.
Our 1996 economic outlook calls for:
* CONTINUED LOW RATES OF INFLATION. We expect a Consumer Price Index (CPI)
increase of from 2.5% to 2.8%.
* SLOWING OF ECONOMIC GROWTH. In 1995 U.S. Gross Domestic Product (GDP)
climbed about 3%. Voyageur's 1996 projection for GDP calls for an increase
of about 2.4%.
* STABLE TO SLIGHTLY DECLINING INTEREST RATES. During 1995 the Federal
Reserve Board encouraged lower interest rates by reducing the Federal Funds
Rate by a total of .5%. (Rates were subsequently lowered by an additional
.25% in February 1996.) We expect further reductions of .5% to .75%, which
will likely occur well in advance of the November elections.
In conclusion, Voyageur believes the municipal bond market will have a good year
in 1996. However, we advise against expectations of total return levels achieved
in 1995.
PURSUANT TO RULE 232.304(a) OF REGULATION S-T THE FOLLOWING IS A TABULAR
REPRESENTATION OF A LINE GRAPH FOR VOYAGEUR WISCONSIN TAX FREE FUND PORTFOLIO
ABSTRACT FOR THE PERIOD ENDED DECEMBER 31, 1995. THE DATA REPRESENTS THE
CUMULATIVE TOTAL RETURN OF A HYPOTHETICAL INVESTMENT IN CLASS A SHARES OF
$10,000 MADE ON THE DATE THE FUND COMMENCED OPERATIONS THROUGH DECEMBER 31,
1995.
ENDING VALUE ENDING VALUE ENDING VALUE
WITH SALES WITHOUT SALES LEHMAN BROS.
DATE CHARGE CHARGE BOND INDEX
- ---- ------ ------ ----------
Sep-93 9625 10000 10000
Sep-93 9701.19 10079.16 10126
Oct-93 9762.63 10142.99 10144.23
Nov-93 9638.99 10014.54 10032.64
Dec-93 9825.72 10208.54 10274.43
Jan-94 9914.66 10300.95 10403.88
Feb-94 9718.59 10097.23 10094.89
Mar-94 9394.11 9760.11 9562.89
Apr-94 9284.84 9646.59 9641.3
May-94 9334.29 9697.96 9755.07
Jun-94 9243.74 9603.88 9657.52
Jul-94 9404.23 9770.63 9878.68
Aug-94 9393.8 9759.79 9906.34
Sep-94 9261.67 9622.52 9708.21
Oct-94 9057.88 9410.78 9451.92
Nov-94 8853.45 9198.39 9230.74
Dec-94 9006.97 9357.89 9520.59
Jan-95 9305.7 9668.26 9892.84
Feb-95 9636.82 10012.28 10251.95
Mar-95 9729.99 10109.09 10368.82
Apr-95 9760.64 10140.92 10366.75
May-95 10001.66 10391.34 10757.58
Jun-95 9906.01 10291.96 10591.91
Jul-95 9958.59 10346.59 10646.99
Aug-95 10054.84 10446.58 10792.85
Sep-95 10162.12 10558.05 10878.11
Oct-95 10312.67 10714.46 11109.82
Nov-95 10485.59 10894.12 11355.34
Dec-95 10604.91 11018.09 11514.32
VOYAGEUR WISCONSIN TAX FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
(CLASS A SHARES)
----------------
Since
1 Year 9/1/93**
------ --------
Without Sales Charge 17.74% 4.24%
With Sales Charge* 13.33% 2.55%
Lehman Bros. 20 20.94% 6.23%
Year Municipal
Bond Index
VOYAGEUR WISCONSIN TAX FREE FUND
TOTAL RETURNS
(CLASS B SHARES)
----------------
SINCE
4/22/95**
---------
Without Contingent 7.08%
Deferred Sales Charge
With Contingent 3.08%
Deferred Sales Charge***
VOYAGEUR WISCONSIN TAX FREE FUND
TOTAL RETURNS
(CLASS C SHARES)
----------------
SINCE
-----
3/28/95**
8.06%
* Average annual total returns include the maximum 3.75% sales charge.
** Commencement of operations.
*** Assumes redemption on December 31, 1995.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Mutual Funds, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of Voyageur Wisconsin Tax
Free Fund (a fund within Voyageur Mutual Funds, Inc.) as of December 31, 1995,
and the related statement of operations for the year then ended, the statements
of changes in net assets and the financial highlights for the year ended
December 31, 1995 the four-month period ended December 31, 1994 and the year
ended August 31, 1994. 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody are confirmed to us by the custodian. As to securities purchased
but not received, we request confirmations from brokers, and where replies are
not received, we carry out other appropriate auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Voyageur Wisconsin Tax Free
Fund at December 31, 1995 and the results of its operations for the year then
ended, and 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 9, 1996
<TABLE>
<CAPTION>
VOYAGEUR WISCONSIN TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at market value (note 1)
(identified cost: $25,707,189).......................................... $27,093,408
Cash in bank on demand deposit............................................. 534
Accrued interest receivable................................................ 436,426
Receivable for Fund shares sold............................................ 18,659
Organizational costs (note 4).............................................. 8,063
-----------
Total assets............................................................ 27,557,090
-----------
LIABILITIES
Dividends payable to shareholders.......................................... 111,961
Payable for investment securities purchased................................ 142,085
Payable for Fund shares redeemed........................................... 23,771
Distribution fees payable.................................................. 2,752
Other accrued expenses..................................................... 30,035
-----------
Total liabilities....................................................... 310,604
-----------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES................................ $27,246,486
===========
Represented by:
Capital Stock - $.01 par value (note 1)................................. $ 27,863
Additional paid-in capital.............................................. 26,521,978
Undistributed net investment income (note 1)............................ 28,230
Accumulated net realized loss on investments............................ (717,804)
Unrealized appreciation of investments.................................. 1,386,219
-----------
NET ASSETS............................................................ $27,246,486
===========
Net assets applicable to outstanding Class A Shares........................ $26,448,679
===========
Net assets applicable to outstanding Class B Shares........................ $ 724,828
===========
Net assets applicable to outstanding Class C Shares........................ $ 72,979
===========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE:
Class A - Shares of Capital Stock outstanding: 2,704,667 (note 5)...... $9.78
=====
Class B - Shares of Capital Stock outstanding: 74,167 (note 5)......... $9.77
=====
Class C - Shares of Capital Stock outstanding: 7,451 (note 5).......... $9.79
=====
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR WISCONSIN TAX FREE FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------
Investment income:
<S> <C>
Interest............................................................... $1,445,610
----------
Expenses (note 3):
Investment advisory and management fee.................................. 123,548
Dividend-disbursing, administrative and
accounting services fees.............................................. 49,595
Distribution fees - Class A............................................. 60,960
Distribution fees - Class B............................................. 3,151
Distribution fees - Class C............................................. 308
Printing, postage and supplies.......................................... 3,034
Audit and accounting fees............................................... 5,207
Legal fees.............................................................. 866
Directors' fees......................................................... 742
Registration fees....................................................... 1,011
Custodian fees.......................................................... 19,535
Amortization of organizational costs.................................... 1,528
Other................................................................... 1,152
----------
Total expenses........................................................ 270,637
Less: Expenses waived or absorbed by the distributor................... (51,552)
----------
Net expenses before earnings credits on uninvested cash................. 219,085
Less: Earnings credits on uninvested cash.............................. (19,535)
----------
Total net expenses ................................................... 199,550
----------
Investment income - net............................................... 1,246,060
----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions (note 2)......................... (183,524)
Net change in unrealized appreciation or
depreciation of investments........................................... 2,806,731
----------
Net gain on investments............................................. 2,623,207
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $3,869,267
==========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR WISCONSIN TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
YEAR FOUR MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, AUGUST 31,
Operations: 1995 1994 (NOTE 1) 1995
------------- -------------- -------------
<S> <C> <C> <C>
Investment income - net...................................... $ 1,246,060 $ 350,233 $ 454,903
Realized loss on investments - net........................... (183,524) (111,327) (422,953)
Net change in unrealized appreciation or
depreciation of investments................................ 2,806,731 (1,024,537) (395,975)
----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.............................. 3,869,267 (785,631) (364,025)
----------- ----------- -----------
Distributions to shareholders from:
Investment income - net:
Class A.................................................... (1,238,497) (319,554) (454,903)
Class B.................................................... (12,797) N/A N/A
Class C.................................................... (1,207) N/A N/A
Distributions in excess of net investment income:
Class A.................................................... -- -- (142)
Class B.................................................... -- N/A N/A
Class C.................................................... -- N/A N/A
----------- ----------- -----------
Total distributions...................................... (1,252,501) (319,554) (455,045)
----------- ----------- -----------
Capital share transactions (note 5): Proceeds from sale of shares:
Class A (note 3)........................................... 5,911,941 6,613,622 22,003,957
Class B.................................................... 691,682 N/A N/A
Class C.................................................... 70,196 N/A N/A
Net asset value of shares issued in reinvestment
of net investment income distributions:
Class A.................................................. 712,516 136,785 257,967
Class B.................................................. 7,990 N/A N/A
Class C.................................................. 1,011 N/A N/A
Payments for redemption of shares:
Class A.................................................... (2,932,375) (1,571,590) (5,349,709)
Class B.................................................... (9) N/A N/A
Class C.................................................... (9) N/A N/A
----------- ----------- -----------
Increase in net assets from capital share transactions....... 4,462,943 5,178,817 16,912,215
----------- ----------- -----------
Total increase in net assets............................... 7,079,709 4,073,632 16,093,145
Net assets at beginning of period............................... 20,166,777 16,093,145 --
----------- ----------- -----------
Net assets at end of period (including undistributed net investment
income of $28,230, $32,899 and $1,630, respectively)......... $27,246,486 $20,166,777 $16,093,145
=========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
VOYAGEUR WISCONSIN TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Voyageur Wisconsin Tax Free Fund (the Fund) is one of a series of funds
within Voyageur Mutual Funds, Inc. which is registered under the Investment
Company Act of 1940 (as amended) as 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, first offered in 1995, may
be subject to a contingent deferred sales charge and such shares automatically
convert to Class A after eight years. Class C Shares, first offered in 1995, are
not subject to a contingent deferred sales charge or a front-end 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 are allocated to each class of
shares based upon 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.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, reclassification adjustments have been made to increase
undistributed net investment income and decrease additional paid-in capital by
$1,772 for the Fund.
For federal income tax purposes, the Fund had capital loss carryovers of
$682,923, 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.
ILLIQUID SECURITIES
At December 31, 1995, investments in securities for the Fund include issues
that are illiquid. The Fund currently limits investments in illiquid securities
to 15% of net assets, at market value, at the date of purchase. The aggregate
value of such securities at December 31, 1995, was $2,104,220 which represents
7.72% of net assets.
(2) INVESTMENT SECURITIES TRANSACTIONS
Purchase cost and proceeds of sales of investment securities other than
short-term securities aggregated $8,315,251 and $2,911,069, respectively, for
the year ended December 31, 1995.
(3) EXPENSES
The Fund has an investment advisory and management fee agreement with
Voyageur Fund Managers, Inc. (Voyageur) under which Voyageur manages the Fund's
assets and provides other specified services. The fee for investment management
and advisory services is payable monthly and is based on the average daily net
assets of the Fund at the annual rate of .50%. In addition, the Fund will pay
most other operating expenses including directors' fees, registration fees,
printing of shareholder reports, legal and auditing services and other
miscellaneous expenses. 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 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 Fund's 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 period ended
December 31, 1995, Fund Distributors voluntarily waived Class A distribution
fees of $50,749 and Class B distribution fees of $803. During the year ended
December 31, 1995, the Fund earned $19,535 in credits on uninvested cash
balances held by the Fund at the custodian. These credits were used to reduce
certain fees for various custodial, pricing and accounting services provided by
the custodian bank.
Sales charges paid by Class A shareholders were $139,886. Of this amount,
Fund Distributors received $25,338.
(4) ORGANIZATIONAL COSTS
Organizational costs are being amortized over 60 months on an inverse
acceleration (sum-of-the-years' digits) basis.
(5) SHARE TRANSACTIONS
Transactions in shares of capital stock during the periods ended December
31, 1995 and 1994 and August 31, 1994 were as follows:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
YEAR FOUR MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, AUGUST 31,
1995 1994 1994
------------ -------------- ------------
<S> <C> <C> <C>
Shares sold................................. 632,738 737,946 2,250,015
Shares issued for reinvested distributions. 76,251 15,475 27,018
Shares redeemed............................. (311,297) (180,346) (543,133)
---------- ------------ ------------
Increase in shares outstanding.............. 397,692 573,075 1,733,900
========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------ ------------
PERIOD FROM PERIOD FROM
APRIL 22, MARCH 28,
1995* TO 1995* TO
DECEMBER 31, DECEMBER 31,
1995 1995
------------ ------------
<S> <C> <C>
Shares sold................................. 73,327 7,346
Shares issued for reinvested distributions.. 841 106
Shares redeemed............................. (1) (1)
--------- --------
Increase in shares outstanding.............. 74,167 7,451
======== ========
_________________________________
* Commencement of operations.
</TABLE>
(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>
A SHARES B SHARES C SHARES
-------------------------------------- ------------ ------------
PERIOD FROM PERIOD FROM
YEAR FOUR MONTHS YEAR APRIL 22, MARCH 28,
ENDED ENDED ENDED 1995 (f) TO 1995 (f) TO
DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1995 1994 1994 1995 1995
Net asset value: ------------ ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Beginning of period......................... $8.74 $9.28 $10.00 $9.39 $9.34
----- ----- ------ ----- -----
Operations:
Net investment income....................... .48 .16 .49 .28 .30
Net realized and unrealized gain (loss)
on investments............................ 1.04 (.55) (.72) .37 .44
----- ----- ------ ----- -----
Total from operations................... 1.52 (.39) (.23) .65 .74
----- ----- ------ ----- -----
Distributions to shareholders:
From net investment income (a).............. (.48) (.15) (.49) (.27) (.29)
----- ----- ------ ----- -----
Net asset value:
End of period............................... $9.78 $ 8.74 $ 9.28 $9.77 $9.79
===== ====== ====== ===== =====
Total investment return (b).................... 17.74% (4.12)% (2.40)% 7.08% 8.06%
Net assets at end of year (000's omitted)...... $26,449 $20,167 $16,093 $725 $73
Ratios:
Ratio of expenses to average
daily net assets (e)...................... .88% .08%(d) .04% 1.45%(d) 1.77%(d)
Ratio of net investment income to
average daily net assets.................. 5.05% 5.54%(d) 4.89% 4.31%(d) 4.04%(d)
Assuming no voluntary waivers and
reimbursements:
Expenses (c)........................ 1.09% 1.25%(d) 1.25% 1.70%(d) 1.77%(d)
Net investment income............... 4.84% 4.37%(d) 3.68% 4.06%(d) 4.04%(d)
Portfolio turnover rate (excluding
short-term securities)...................... 12.10% 20.52% 86.26% 12.10% 12.10%
_________________________________
* Commencement of operations.
See accompanying notes to Financial Highlights.
</TABLE>
(6) FINANCIAL HIGHLIGHTS (CONTINUED)
NOTES TO FINANCIAL HIGHLIGHTS
- -----------------------------
(a) For federal income tax purposes, all of the net investment income
distributions were derived from interest on securities exempt from federal
income tax. For the year ended August 31, 1994, $.02 per share of the
distributions from net investment income were subject to state income tax.
(b) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(c) Voyageur and Fund Distributors voluntarily waived or reimbursed a portion
of expenses during 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) Annualized.
(e) 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.
(f) Commencement of operations.
<TABLE>
<CAPTION>
VOYAGEUR WISCONSIN TAX FREE FUND
INVESTMENTS IN SECURITIES DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (d) RATE MATURITY VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
MUNICIPAL BONDS (99.3%):
ESCROWED WITH U.S. GOVERNMENT BONDS (3.9%):
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 700 Virgin Island Public Finance Authority, Escrowed to Maturity........... 7.30% 10-01-18 $ 861,875
175 Wisconsin Housing Finance Authority Revenue (FHA Insured).............. 6.10 06-01-17 188,732
-----------
1,050,607
GENERAL OBLIGATION (6.1%):
------------------------------------------------------------------------------------------------------
1,600 Puerto Rico Commonwealth G.O. (AMBAC Insured).......................... 5.85 07-01-15 1,654,000
------------
UTILITY (8.1%):
------------------------------------------------------------------------------------------------------
400 Puerto Rico Aqueduct and Sewer Authority Revenue....................... 5.00(g) 07-01-15 379,932
1,000 Puerto Rico Electric Power Authority Revenue........................... 6.00 07-01-14 1,036,630
285 Puerto Rico Telephone Authority Revenue................................ 5.75 01-01-11 291,923
490 Puerto Rico Telephone Authority Revenue................................ 5.50 01-01-22 491,377
-----------
2,199,862
-----------
TRANSPORTATION (8.2%):
------------------------------------------------------------------------------------------------------
1,000 Guam Highway Revenue (FSA Insured)..................................... 6.30 05-01-12 1,072,500
900 Puerto Rico Highway & Transportation Authority Revenue................. 5.25 07-01-21 870,543
300 Puerto Rico Highway & Transportation Authority Revenue................. 5.50 07-01-15 300,711
-----------
2,243,754
-----------
INDUSTRIAL (22.7%):
------------------------------------------------------------------------------------------------------
1,000 Deforest Redevelopment Authority Lease Revenue......................... 6.25 02-01-18 1,046,420
200 Hartford Community Development Authority Lease Revenue................. 5.90 12-01-06 214,436
240 Hartford Community Development Authority Lease Revenue................. 6.15 12-01-09 257,849
2,000 Milwaukee Redevelopment Authority Revenue - Goodwill Industries, Inc... 6.35(e) 10-01-09 2,104,220
1,100 Puerto Rico Industrial, Medical and Environmental Revenue
- Pepsico Project.................................................... 6.25 11-15-13 1,188,209
250 Two Rivers Community Development Authority Revenue
-Architectural Forest Products....................................... 6.35 12-15-12 267,505
1,080 West Allis Community Development Authority Revenue
-Poblocki Investments, Ltd........................................... 5.90 05-01-03 1,119,485
-----------
6,198,124
-----------
HEALTH CARE (17.6%):
------------------------------------------------------------------------------------------------------
200 Kaukauna Housing Authority Revenue - St. Paul Home Inc................. 6.10 09-01-07 208,292
1,000 Puerto Rico Ind Hosp Auxilio (MBIA Insured)............................ 6.25 07-01-24 1,067,500
305 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.15 12-01-10 301,547
250 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.20 12-01-11 247,190
355 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.20 12-01-12 349,881
105 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.25 12-01-13 103,663
100 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.25 12-01-15 98,179
100 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.30 12-01-16 98,591
200 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.30 12-01-17 197,060
195 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.30 12-01-18 192,065
395 Sheboygan County Housing Revenue - Rocky Knoll Health Center Project... 5.30 12-01-19 388,929
65 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.50 05-01-06 68,087
300 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.50 11-01-06 314,250
100 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.60 05-01-07 104,750
230 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.60 11-01-07 240,925
225 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.65 05-01-08 234,844
150 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.65 11-01-08 156,563
160 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.70 11-01-09 166,400
250 Superior Redevelopment Authority Revenue-Superior Memorial Hospital
(FHA Insured)........................................................ 5.80 05-01-10 260,938
-----------
4,799,654
-----------
HOUSING (11.1%):
------------------------------------------------------------------------------------------------------
125 Dane County Multifamily Housing Revenue
- Forest Harbor Apt: Project......................................... 5.85 07-01-11 126,641
125 Dane County Multifamily Housing Revenue
- Forest Harbor Apt: Project......................................... 5.90(f) 07-01-12 126,496
100 Madison Multifamily Housing Revenue.................................... 4.95 12-01-07 98,669
500 New Berlin Multifamily Housing Authority Revenue....................... 7.13(f) 05-01-24 495,625
650 Puerto Rico Housing Authority Single Family Mortgage Revenue
(GNMA Insured)...................................................... 6.85 10-15-23 689,813
1,000 Puerto Rico Housing Bank & Finance Agency (GNMA Insured)............... 6.25(f) 04-01-29 1,018,750
480 Wauwatosa Multifamily Housing Revenue - Harwood Place, Inc............. 5.75 12-01-08 481,200
-----------
3,037,194
-----------
EDUCATION (1.9%):
------------------------------------------------------------------------------------------------------
500 Madison Community Development Authority Revenue
- Edgewood College................................................... 6.25 04-01-14 532,780
-----------
OTHER REVENUE (19.7%):
------------------------------------------------------------------------------------------------------
1,000 Cudahey Community Development Authority Revenue........................ 6.00 06-01-11 1,006,470
125 Madison Community Development Auth. - Monona Terrace Project........... 5.80 03-01-05 134,262
365 Madison Community Development Auth. - Monona Terrace Project........... 5.90 03-01-06 391,926
1,500 Madison Community Development Auth. - Monona Terrace Project........... 6.10 03-01-10 1,614,375
300 Omro Community Development Authority Revenue........................... 5.88 12-01-11 312,150
1,800 Puerto Rico Municipal Finance Authority (FSA Insured).................. 6.00 07-01-14 1,892,250
-----------
5,351,433
-----------
TOTAL MUNICIPAL BONDS (cost: $25,681,189) 27,067,408
-----------
SHORT-TERM SECURITIES (0.1%):
------------------------------------------------------------------------------------------------------
26 Nuveen Investment Tax-Free Fund (cost: $26,000)........................4.56 (b) 26,000
-----------
TOTAL INVESTMENTS IN SECURITIES (cost: $25,707,189) (c) $27,093,408
===========
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES
- ----------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) Dividend yields change daily to reflect current market conditions. Rate
shown is the quoted yield as of December 31, 1995.
(c) At December 31, 1995 the cost of securities for federal income tax purposes
is $25,742,070. The aggregate gross unrealized appreciation and
depreciation of securities based on this cost are as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
$1,386,634 $(35,296) $1,351,338
(d) Investments in bonds, by rating category (unaudited) as a percentage of
total bonds, are as follows:
AAA/AAA AA/AA A/A BAA/BBB BA/BB NR/NR TOTAL
- ------- ----- --- ------- ----- ----- -----
31% 14% 36% 2% 8% 9% 100%
(e) The Fund entered into the following restricted security transaction: On
October 13, 1994, the Fund purchased $2,000,000 par of Milwaukee Goodwill
Industries with a cost basis of $2,000,000. This private placement
represents all of the restricted illiquid securities owned by the Fund and
is equal to 7.72% of net assets.
(f) Security subject to the Alternative Minimum Tax.
(g) At December 31, 1995, the cost of securities purchased on a when issued
basis was $141,440.
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions for the year ended December
31, 1995 shown below. Exempt interest dividends are exempt from federal income
tax and should not be included in shareholder's gross income, but need to be
reported on the income tax return for informational purposes. Each shareholder
should consult a tax adviser about reporting this income for state and local
purposes. In January 1996, the Fund separately provided each shareholder with
tax information for calendar year 1995.
<TABLE>
<CAPTION>
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------- ------- -------
YEAR PERIOD FROM PERIOD FROM
ENDED APRIL 22, 1995 MARCH 28, 1995
DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
1995 1995 1995
------------ --------------- ---------------
<S> <C> <C> <C>
Net investment income distributions
(none qualifying for corporate
dividend received deduction).............. $.4802 $.2733 $.2900
====== ====== ======
</TABLE>
For federal income tax purposes, 99.98% of the above net investment income
distributions were derived from interest on securities exempt from federal
income tax.
