VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANGER
IDAHO 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.
<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 Idaho Tax Free Fund
VOYAGEUR IDAHO TAX FREE FUND
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 returns.
VOYAGEUR IDAHO 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 Idaho Free Fund was 4.36%.*
The Voyageur Idaho Tax Free Fund had a good year in terms of total return. We
believe a significant portion of the positive return can be attributed to our
management of credits within the Fund. We focused much of our effort in 1996 on
increasing tax-free coupon income on the portfolio. We also worked to shorten
the average maturity of several bonds to further decrease the price volatility
of the overall portfolio. The average asset quality of the Fund is A/A. We have
strong call protection in the portfolio, as well as a good mix of sector
weightings to ensure diversity in the portfolio.
In past years, the availability of Idaho municipal bonds has been very limited,
but we found that 1996 presented professional bond managers with numerous
opportunities to buy new issue bonds and purchase securities in the secondary
market. We capitalized on several of these opportunities for shareholders and
were able to add bonds to the Fund that represented -- in our opinion --
superior long term investment value.
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.
[PHOTO]
ELIZABETH H. HOWELL IS THE
SENIOR MUNICIPAL BOND
MANAGER FOR THE VOYAGEUR
IDAHO TAX FREE FUND. MS.
HOWELL HAS MORE THAN 10
YEARS OF INVESTMENT INDUSTRY
EXPERIENCE.
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
VOYAGEUR IDAHO TAX FREE FUND
PORTFOLIO ABSTRACT
For the Period Ended December 31, 1996
CLASS A SHARES
[GRAPH]
<TABLE>
<CAPTION>
ID Tax Free ID Tax Free Lehman Bros. 20
Without Sales Charge With Sales Charge Year Municipal Bond Index
<S> <C> <C> <C>
Dec-94 10000 9625 10000
10270 9885 10352
10564 10168 10728
10708 10306 10850
10719 10317 10848
11068 10653 11257
10935 10525 11084
10977 10565 11141
11092 10676 11294
11207 10786 11383
11385 10958 11626
11585 11151 11882
Dec-95 11748 11307 12049
11834 11390 12110
11746 11305 11972
11528 11095 11781
11493 11062 11734
11511 11079 11748
11640 11203 11913
11747 11306 12030
11755 11314 12011
11927 11480 12253
12056 11604 12400
12253 11793 12660
Dec-96 12260 11800 12585
</TABLE>
Voyageur Idaho Tax Free Fund Without Sales Charge - Ending Value $12,260
Voyageur Idaho Tax Free Fund With Sales Charge - Ending Value $11,800
Lehman Bros. 20 Year Municipal Bond Index - Ending Value $12,585
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 Idaho Tax Free Fund
Average Annual Total Returns
(Class A Shares)
Class A Shares
Since
1 Year 1/4/95**
Without Sales Charge 4.36% 10.76%
With Sales Charge *0.44% 8.65%
Lehman Bros. 20 4.45% 12.24%
Year Municipal
Bond Index
Voyageur Idaho Tax Free Fund
Average Annual Total Returns
(Class B Shares)
Since
1 Year 3/16/95**
Without Contingent 3.75% 7.54%
Deferred Sales Charge
With Contingent (1.25%) 5.42%
Deferred Sales Charge***
Voyageur Idaho Tax Free Fund
Average Annual Total Returns
(Class C Shares)
Since
1 Year 1/11/95**
3.48% 9.60%
Quality Breakdown
[PIE CHART]
NR/NR 10%
Aa/AA 11%
Baa/BBB 23%
Aaa/AAA 28%
A/A 28%
Sector Breakdown
(shown as % of total net assets)
Industrial 25.7%
Other Revenue 18.4%
General Obligation 15.8%
Housing 13.5%
Health Care 12.7%
Education 5.8%
Utilities 5.1%
Transportation 1.0%
Statistics
Average Maturity 13.0 Years
Average Coupon 6.05%
Portfolio Duration 8.4 Years
Average Quality A/A
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 Idaho Tax Free
Fund (a fund within Voyageur Mutual Funds, Inc.) as of December 31, 1996, the
related statements of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for the year ended December
31, 1996 and the period from January 4, 1995, commencement of operations, to
December 31, 1995. 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
audit.
We conducted our audit 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. 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 Idaho Tax Free Fund at 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 IDAHO TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at market value (note 1)
(identified cost, $32,346,868) .................................. $ 32,955,170
Cash in bank on demand deposit ..................................... 5,969
Accrued interest receivable ........................................ 617,723
Receivable for Fund shares sold .................................... 50,672
Organizational costs (note 4) ...................................... 5,501
------------
Total assets .................................................... 33,635,035
------------
LIABILITIES
Dividends payable to shareholders .................................. 136,955
Payable for Fund shares redeemed ................................... 16,000
Distribution fees payable .......................................... 20,862
Other accrued expenses ............................................. 10,006
------------
Total liabilities ............................................... 183,823
------------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES ........................ $ 33,451,212
============
Represented by:
Capital stock - $.01 par value (note 1) ......................... $ 30,675
Additional paid-in capital ...................................... 32,817,889
Undistributed net investment income ............................. 34,828
Accumulated net realized loss on investments (note 1) ........... (40,482)
Unrealized appreciation of investments .......................... 608,302
------------
TOTAL NET ASSETS .............................................. $ 33,451,212
============
Net assets applicable to outstanding Class A Shares ................ $ 27,683,985
============
Net assets applicable to outstanding Class B Shares ................ $ 4,945,246
============
Net assets applicable to outstanding Class C Shares ................ $ 821,981
============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Class A - Shares of Capital Stock outstanding: 2,538,218 (note 6) $ 10.91
============
Class B - Shares of Capital Stock outstanding: 453,932 (note 6) . $ 10.89
============
Class C - Shares of Capital Stock outstanding: 75,392 (note 6) .. $ 10.90
============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR IDAHO TAX FREE FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------
Investment income:
<S> <C>
Interest ........................................................... $ 1,550,032
-----------
Expenses (note 3):
Investment advisory and management fee ............................. 131,410
Dividend-disbursing, administrative and accounting services fee .... 62,657
Printing, postage and supplies ..................................... 5,076
Audit and accounting fees .......................................... 6,540
Legal fees ......................................................... 264
Distribution fees - Class A ........................................ 54,123
Distribution fees - Class B ........................................ 37,996
Distribution fees - Class C ........................................ 8,416
Directors' fees .................................................... 1,416
Registration fees .................................................. 4,876
Custodian fees ..................................................... 6,569
Amortization of organizational costs ............................... 1,833
Other .............................................................. 2,348
-----------
Total expenses ................................................... 323,524
Less: Expenses waived or absorbed ................................. (139,559)
-----------
Total net expenses ............................................... 183,965
-----------
Investment income - net .......................................... 1,366,067
-----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions ............................. (40,482)
Net change in unrealized appreciation or depreciation of investments 66,395
-----------
Net gain on investments .......................................... 25,913
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $ 1,391,980
===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR IDAHO TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------
YEAR PERIOD FROM
ENDED JANUARY 4, 1995*
DECEMBER 31, TO DECEMBER 31,
Operations: 1996 1995
------------ ---------------
<S> <C> <C>
Investment income - net .................................................. $ 1,366,067 $ 396,749
Realized gain (loss) on security transactions ............................ (40,482) 120,997
Net change in unrealized appreciation or depreciation of investments ..... 66,395 541,907
------------ ------------
Net increase in net assets resulting from operations ................... 1,391,980 1,059,653
------------ ------------
Distributions to shareholders from:
Investment income - net:
Class A ................................................................ (1,118,768) (349,633)
Class B ................................................................ (176,734) (27,857)
Class C ................................................................ (37,976) (20,686)
Net realized gain on investments:
Class A ................................................................ -- (100,536)
Class B ................................................................ -- (14,456)
Class C ................................................................ -- (6,005)
------------ ------------
Total distributions .................................................. (1,333,478) (519,173)
------------ ------------
Share transactions (note 6): Proceeds from sale of shares:
Class A (note 3) ....................................................... 14,993,646 13,745,657
Class B ................................................................ 3,034,644 1,933,569
Class C ................................................................ 369,077 841,585
Net asset value of shares issued in reinvestment of net investment
income and realized gain distributions:
Class A .............................................................. 593,826 176,742
Class B .............................................................. 63,171 8,012
Class C .............................................................. 42,079 16,633
Payments for redemption of shares:
Class A ................................................................ (1,473,902) (855,942)
Class B (note 3) ....................................................... (162,225) (1,063)
Class C (note 3) ....................................................... (374,650) (98,629)
------------ ------------
Increase in net assets from share transactions ........................... 17,085,666 15,766,564
------------ ------------
Total increase in net assets ........................................... 17,144,168 16,307,044
Net assets at beginning of period ........................................... 16,307,044 --
------------ ------------
Net assets at end of period (including undistributed net investment income of
$34,828 and $406, respectively) .......................................... $ 33,451,212 $ 16,307,044
============ ============
- ----------------------------------
* Commencement of operations.
See accompanying notes to financial statements.
</TABLE>
VOYAGEUR IDAHO TAX FREE FUND
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Voyageur Idaho 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 an 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 is
classified as a non-diversified investment company.
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 in one or more
series.
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 Directors.
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
$1,833 for the Fund.
For federal income tax purposes, Idaho Tax Free Fund had a capital loss
carryover at December 31, 1996, of $40,482 that will expire in 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, 1996, 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, 1996, was $267,040 which represents .8%
of net assets.
(2) INVESTMENT SECURITIES TRANSACTIONS
Purchase cost and proceeds of sales of investment securities other than
short-term securities aggregated $24,385,096 and $9,005,821, respectively, for
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
voluntarily absorbed $130,000, excluding waiver of distribution fees.
The Fund will also pay a fee to Voyageur for acting as the Fund's dividend
disbursing, administrative and accounting services agent. The fee is paid
monthly and is equal to the sum of $1.33 per shareholder account per month, a
fixed monthly fee ranging from $1,000 to $1,500 based on the level of the Fund's
average daily net assets and an annualized percentage of average daily net
assets at reducing rates from .11% to .02%. The Fund is also responsible for
reimbursing Voyageur's out-of pocket expense in connection with the performance
of dividend-disbursing, administrative and accounting services.
All classes of shares have a Distribution Agreement under Rule 12b-1 of the
Investment Company Act of 1940 with Voyageur Fund Distributors, Inc. (Fund
Distributors). Under this plan the Fund is obligated to pay Fund Distributors a
monthly distribution fee at an annual rate of .25% of the Fund's average daily
net assets of the Class A Shares and 1.00% of the Fund=s average daily net
assets of the Class B and Class C Shares. Fund Distributors may waive all or
part of its distribution fee at its sole discretion. During the year ended
December 31, 1996, Fund Distributors voluntarily waived Class B distribution
fees of $9,559.
During the year ended December 31, 1996, sales charges paid by Class A
shareholders were $313,894. Of this amount, Fund Distributors received $32,689.
Contingent deferred sales charges paid by Class B and Class C shareholders were
$47 and $752, respectively.
(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) 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 Directors and shareholders.
(6) SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods shown were as follows:
A SHARES
-------------------------------
YEAR PERIOD FROM
ENDED JANUARY 4, 1995*
DECEMBER 31, TO DECEMBER 31,
1996 1995
------------ ----------------
Shares sold ................. 1,392,372 1,295,483
Shares issued for
reinvested distributions.. 55,095 16,473
Shares redeemed ............. (137,976) (83,229)
---------- ----------
Increase in shares
outstanding .............. 1,309,491 1,228,727
========== ==========
B SHARES
------------------------------
YEAR PERIOD FROM
ENDED MARCH 16, 1995*
DECEMBER 31, TO DECEMBER 31,
1996 1995
------------ ---------------
Shares sold ................. 283,576 179,009
Shares issued for
reinvested distributions.. 5,873 743
Shares redeemed ............. (15,168) (101)
-------- --------
Increase in shares
outstanding .............. 274,281 179,651
======== ========
C SHARES
--------------------------------
YEAR PERIOD FROM
ENDED JANUARY 11, 1995*
DECEMBER 31, TO DECEMBER 31,
1996 1995
------------ -----------------
Shares sold ................. 34,723 79,417
Shares issued for
reinvested distributions.. 3,898 1,549
Shares redeemed ............. (34,878) (9,317)
------- -------
Increase in shares
outstanding .............. 3,743 71,649
======= =======
- ---------------------------------
* Commencement of operations.
(7) 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 PERIOD FROM
YEAR JANUARY 4, YEAR MARCH 16, YEAR JANUARY 11,
ENDED 1995(d) TO ENDED 1995(d) TO ENDED 1995(d) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period .............. $ 11.02 $ 10.00 $ 11.01 $ 10.50 $ 11.02 $ 10.04
---------- ---------- ---------- ---------- ---------- ----------
Operations:
Net investment income ............ .58 .60 .52 .42 .50 .50
Net realized and unrealized
gain (loss) on investments ..... (.12) 1.10 (.13) .59 (.13) 1.06
---------- ---------- ---------- ---------- ---------- ----------
Total from operations ........ .46 1.70 .39 1.01 .37 1.56
---------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income (a) ... (.57) (.60) (.51) (.42) (.49) (.50)
From realized gains .............. -- (.08) -- (.08) -- (.08)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions .......... (.57) (.68) (.51) (.50) (.49) (.58)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value:
End of period .................... $ 10.91 $ 11.02 $ 10.89 $ 11.01 $ 10.90 $ 11.02
========== ========== ========== ========== ========== ==========
Total investment return (b) ......... 4.36% 17.48% 3.75% 9.86% 3.48% 15.81%
Net assets at end of period
(000's omitted) .................. $ 27,684 $ 13,540 $ 4,945 $ 1,977 $ 822 $ 789
Ratios:
Ratio of expenses to
average daily net assets (f) ... .60% .26%(e) 1.11% .79%(e) 1.33% 1.05%(e)
Ratio of net investment income
to average daily net assets .... 5.29% 5.24%(e) 4.78% 4.68%(e) 4.57% 4.48%(e)
Assuming no voluntary waivers
and reimbursements:
Expenses (c) ............. 1.10% 1.25%(e) 1.85% 1.90%(e) 1.82% 2.00%(e)
Net investment income .... 4.79% 4.25%(e) 4.04% 3.57%(e) 4.08% 3.53%(e)
Portfolio turnover rate (excluding
short-term securities) ......... 34.68% 41.97% 34.68% 41.97% 34.68% 41.97%
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. $.01 per share of distributions from net investment income was
subject to state income tax for the period ended December 31, 1995.
(b) Total investment return is based on the change in net asset value of a
share during the periods and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(c) Voyageur and Fund Distributors voluntarily waived or reimbursed a portion
of expenses during the periods presented. The annual contractual expense
limit for the Fund (excluding distribution fees, insurance premiums on
portfolio securities, taxes, interest and brokerage commissions) is 1% of
average daily net assets. The maximum distribution fee is .25% of the
Fund's average daily net assets for Class A Shares and 1.00% of the Fund=s
average daily net assets for Class B and Class C Shares.
(d) Commencement of operations.
(e) Adjusted to an annual basis.
(f) The expense ratio reflects the effect of gross expenses attributable to
earnings credits on uninvested cash balances received by the Fund.
VOYAGEUR IDAHO TAX FREE FUND
INVESTMENTS IN SECURITIES DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT COUPON MARKET
($000) NAME OF ISSUER (d) RATE MATURITY VALUE (a)
-----------------------------------------------------------------------------------------------------------------
(PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.)
MUNICIPAL BONDS (98.0%):
GENERAL OBLIGATION (15.8%):
------------------------------------------------------------------------------------------------------
$ 1,325 Ada and Canyon County School District #2............................... 5.60% 07-30-12 $1,336,514
210 Bingham County Blackfoot School District #55 (MBIA Insured)............ 5.65 08-01-15 213,555
215 Boise City Independent School District ................................ 5.50 07-30-16 216,533
150 Bonner County Local Improvement District #93-1......................... 6.20 04-30-05 154,998
185 Bonner County Local Improvement District #93-1......................... 6.35 04-30-06 191,647
195 Bonner County Local Improvement District #93-1......................... 6.40 04-30-07 201,993
110 Bonner County Local Improvement District #93-1......................... 6.50 04-30-08 113,930
100 Bonner County Local Improvement District #93-1......................... 6.50 04-30-10 102,568
590 Canyon County Independent School District #131 (MBIA Insured).......... 5.50 07-30-12 595,145
85 Coeur D= Alene Local Improvement District #6 Series 1995............... 6.00 07-01-09 85,994
90 Coeur D= Alene Local Improvement District #6 Series 1995............... 6.05 07-01-10 90,931
40 Coeur D= Alene Local Improvement District #6 Series 1995............... 6.10 07-01-12 40,379
45 Coeur D= Alene Local Improvement District #6 Series 1995............... 6.10 07-01-14 45,427
250 Fremont/Madison County Independent School District #215 (FSA Insured).. 5.50 08-01-12 253,153
100 Gooding Lincoln Independent School District #231 (FSA Insured)......... 6.30 02-01-14 106,799
120 Jefferson County Independent School District #253 (MBIA Insured)....... 5.50 08-01-14 121,418
300 Madison County (FSA Insured)........................................... 5.40 08-01-14 301,212
85 Post Falls Limited #2 Special Assessment............................... 5.60 09-01-04 84,576
85 Post Falls Limited #2 Special Assessment............................... 5.75 09-01-05 84,707
180 Sun Valley............................................................. 5.20 08-01-09 183,609
220 Sun Valley............................................................. 5.30 08-01-10 221,833
525 Teton County #401 (FSA Insured)........................................ 5.63 08-01-15 528,139
-----------
5,275,060
-----------
UTILITIES (5.1%):
------------------------------------------------------------------------------------------------------
125 Chubbuck Water Revenue................................................. 6.35(f) 04-01-08 129,115
135 Chubbuck Water Revenue................................................. 6.40(f) 04-01-10 137,925
1,000 McCall Water Revenue (FSA Insured)..................................... 5.85 03-01-16 1,027,500
150 Owyhee Sewer District 95-1............................................. 5.50 05-15-04 153,917
100 Puerto Rico Electric Power Authority (FSA Insured)..................... 6.00 07-01-16 103,875
150 Puerto Rico Telephone Revenue Authority................................ 5.50 01-01-22 145,620
-----------
1,697,952
-----------
TRANSPORTATION (1.0%):
------------------------------------------------------------------------------------------------------
150 Guam Highway (FSA Insured)............................................. 6.30 05-01-12 159,456
175 Puerto Rico Highway Revenue Series W................................... 5.50 07-01-15 174,998
-----------
334,454
-----------
INDUSTRIAL (25.7%):
------------------------------------------------------------------------------------------------------
100 Idaho State Water Resource Boise Water................................. 7.25(e) 12-01-21 108,149
1,250 Meridan EDA for Hi-Micro............................................... 5.85(e) 08-15-11 1,238,300
5,500 Nez Perce County Potlatch Corporation.................................. 6.00 10-01-24 5,542,735
1,500 Pocatello Idaho Development Revenue.................................... 7.25 12-01-08 1,554,375
150 Puerto Rico Pepsico Project Series A................................... 6.25 11-15-13 159,846
-----------
8,603,405
-----------
HEALTH CARE (12.7%):
------------------------------------------------------------------------------------------------------
500 Idaho Magic Valley Health Facilities (AMBAC Insured)................... 5.63 12-01-13 505,900
590 Idaho St. Alphonsus Health Facility.................................... 6.25 12-01-22 619,169
1,645 Idaho State Health Facility Revenue Bannock Medical Center............. 6.38 05-01-17 1,662,651
1,500 Idaho State Health Facility Revenue Bannock Medical Center............. 6.13 05-01-25 1,467,300
-----------
4,255,020
-----------
HOUSING (13.5%):
------------------------------------------------------------------------------------------------------
1,000 Idaho State Housing Agency Multi-Family PL. Plaza (FHA Insured)........ 6.50(e) 12-01-36 1,020,370
350 Idaho State Housing Finance Authority Series C-2....................... 6.35(e) 07-01-15 357,788
370 Idaho State Housing Single Family Senior Bonds......................... 6.10(e) 07-01-16 371,906
500 Idaho State Housing Single Family (AMBAC Insured)...................... 6.05(e) 07-01-13 503,985
95 Idaho State Single Family Housing Authority Revenue Series A1.......... 6.85 07-01-12 99,695
255 Idaho State Single Family Housing Finance Authority Series C-2......... 6.35(e) 07-01-15 260,477
1,500 Idaho State Single Family Housing Revenue Series G-2................... 6.15(e) 07-01-15 1,511,505
180 Idaho State Single Family Housing Revenue ............................. 6.60 07-01-11 187,988
200 Idaho State Single Family Mortgage Series 95B (FHA Insured) ........... 6.45(e) 07-01-15 205,356
-----------
4,519,070
-----------
EDUCATION (5.8%):
------------------------------------------------------------------------------------------------------
550 Idaho State University (MBIA Insured)................................. 5.80 04-01-20 558,729
1,300 University of Idaho Revenue (FSA Insured)............................. 5.85 04-01-11 1,367,353
-----------
1,926,082
-----------
OTHER REVENUE (18.4%):
------------------------------------------------------------------------------------------------------
350 Ammon Urban Renewal Tax Inc Revenue................................... 5.88 08-01-17 358,341
2,500 Boise Urban Renewal Agency Tax Inc Revenue............................ 6.13 09-01-15 2,481,650
2,040 Boise Urban Renewal Tax Inc Bd-B...................................... 6.13 09-01-15 2,025,026
160 City of Hayden LID #1995-2............................................ 5.80 11-01-06 160,000
1,175 Puerto Rico PBA Series M.............................................. 5.50 07-01-21 1,134,110
-----------
6,159,127
-----------
TOTAL MUNICIPAL BONDS (cost: $32,161,868) 32,770,170
-----------
SHORT-TERM SECURITIES (0.6%):
------------------------------------------------------------------------------------------------------
185 Dreyfus Investment Tax Exempt Money Market Fund
(cost: $185,000).................................................. 3.69(b) 185,000
-----------
TOTAL INVESTMENTS IN SECURITIES (cost: $32,346,868) (c) $32,955,170
===========
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) Dividend yields change daily to reflect current market conditions. Rate
shown is the quoted yield as of December 31, 1996.
(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
------------ -------------- ------------
$650,021 $(41,719) $608,302
(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 NR/NR Total
------- ----- --- ------- ----- -----
28% 11% 28% 23% 10% 100%
(e) These securities are subject to the Alternative Minimum Tax. The aggregate
market value of such securities is equal to 16.7% of the Fund=s net assets.
(f) Security deemed illiquid by Fund management. The total of such securities
is equal to .8% of the Fund's total net assets as of December 31, 1996.
Such determinations are reviewed from time to time by Fund management and
are subject to change.
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. Net investment income distributions exempt from federal
income tax should not be included in shareholder's gross income, but are
reported on the federal income tax return for informational purposes.
Information needed by shareholders for income tax purposes was sent to them in
January 1997. Shareholders should consult a tax adviser on how to report these
distributions for state and local purposes.
<TABLE>
<CAPTION>
PER CLASS PER CLASS PER CLASS
A SHARE B SHARE C SHARE
------------ ------------ ------------
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income distributions per share
(none qualifying for corporate dividend
received deduction)............................. $.5677 $.5138 $.4869
====== ====== ======
</TABLE>
For federal income tax purposes, 99.92% of the above net investment income
distributions were derived from interest on securities exempt from federal
income tax.
VOYAGEUR ON CALL(TM)
[Line Drawing of a telephone]
800.545.3863
We invite you to use the Voyaguer interactive voice response system, Voyageur On
Call(TM) (800.545.3863). The system is designed to give you information about
the Fund(s) in your account. It can also provide price and yield information
for the Fund(s). 24-hour access available to Touch Tone telephones only.
VOYAGEUR
YOUR TAX SENSITIVE INVESTMENT MANAGER
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402-4115
VOY-IDAR 3/97
