VFI CORE PORTFOLIO
VFI INTERMEDIATE DURATION PORTFOLIO
SEMI ANNUAL REPORT
Dated April 30, 1997
<PAGE>
Dear Shareholder:
Let me begin by thanking you for your continued support during the past 6
months. The Voyageur Financial Institutions Funds have enjoyed a good "base
building" period, in terms of both fund share growth and investment returns. In
addition, we continue to see a broader array of client types participating in
and contemplating investment in the Funds, as non-financial institution clients
recognize the benefits of holding high quality funds that seek to balance
current income and total return objectives. Client interest and your support
have been critical components in our success.
On the economic front, interest rates have traded in almost a full 1% range
across the Treasury curve, while rising on a net basis over the past six months.
The strong economic backdrop prevailing in the first quarter of 1997 prompted
the Federal Reserve Board to raise the Fed Funds rate by 0.25% on March 25th.
The general rise in rates, which reflected future inflationary expectations and
commensurate hikes by the Fed helped to boost the Funds' distribution rates,
with only about a 1% decline in net asset value (NAV) compared to their
valuations at inception.
Although we expect the Fed will remain vigilant in its watch on inflation, the
general consensus has more recently shifted toward a greater expectation for
stable Federal Reserve Board policy. We expect that bond prices and Fund NAVs
should benefit from the diminished threat of inflation, but we remain poised to
respond to any future acceleration of inflation.
Appearing below is a summary of the results for each of the Funds, including
NAV, dividends paid, and total net assets for the reporting period.
<TABLE>
<CAPTION>
Net Asset Total Net
Value Net Asset Dividends Assets
Beginning of Value Paid Per End of Period
Period Period End of Period Share (000's)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SIX-MONTH PERIOD ENDED APRIL 30, 1997:
VFI Core Portfolio $10.04 $9.89 $0.33 $45,544
VFI Intermediate Duration Portfolio $10.02 $9.93 $0.31 $30,446
</TABLE>
On the page that follows, fund manager Randal W. Harrison, CFA, provides an
update on the economy, the current/anticipated interest rate environment, and
overall tone of the bond market.
Thank you for your confidence in the Voyageur Financial Institutions Funds and
the opportunity to serve your investment needs.
Sincerely,
John G. Taft
President
VFI Core Portfolio
VFI Intermediate Duration Portfolio
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
by Randal W. Harrison, CFA - Portfolio Manager, VOYAGEUR ASSET MANAGEMENT
DISCUSSION OF FUND PERFORMANCE
The investment objective of the VFI Core and Intermediate Duration Portfolios is
to seek an attractive level of current income while maintaining total rate of
return performance commensurate with the duration risk of the respective
Portfolio. The modest rise in interest rates since inception resulted in a net
decline in the net asset values (NAV), but provided a welcome boost to the
distribution rates. In fact, the distribution rates have experienced a generally
rising trend throughout the roughly 13-month history of the funds.
o The VFI Core Portfolio achieved a total return of 6.36%* since April 1,
1996 (effective inception date, utilized in fee calculations). Voyageur
has sought to achieve an attractive rate and total return performance
throughout the life of the fund. These objectives were pursued by
strategically adjusting the security allocations and managing the
duration exposure.
o The VFI Intermediate Duration Portfolio achieved a total return of
5.84%* since April 1, 1996 (effective inception date, utilized in fee
calculations). Voyageur has sought to achieve an attractive rate and
total return performance throughout the life of this fund as well.
These objectives were pursued by strategically adjusting the security
allocations and managing the duration exposure, similar to the VFI Core
Portfolio.
OUTLOOK FOR THE VFI FUNDS
Voyageur anticipates that the VFI Funds will benefit from their strong
weightings in the mortgage sector, especially in light of the positive
prevailing supply and demand technicals that continue to lend support to the
mortgage market. Given this view we expect to maintain a fairly aggressive
weighting to mortgages until the sector appears vulnerable to a shift in the
underlying technical factors.
* Past performance does not guaranty future results.
<PAGE>
<TABLE>
<CAPTION>
THE VOYAGEUR FINANCIAL INSTITUTIONS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 1997
- -----------------------------------------------------------------------------------------------
VFI
VFI INTERMEDIATE
CORE DURATION
PORTFOLIO PORTFOLIO
------------ ------------
<S> <C> <C>
ASSETS
Investments in securities, at market value (note 1)
(identified costs, $45,568,900 and $30,268,040, respectively) $ 45,464,281 $ 30,317,809
Cash in bank on demand deposit ................................. 406 818
Accrued interest receivable .................................... 326,602 154,264
Receivable for investment securities sold ...................... -- 115,948
Due from adviser ............................................... 10,000 15,000
Organizational costs (note 3) .................................. 6,052 6,052
------------ ------------
Total assets ................................................ 45,807,341 30,609,891
------------ ------------
LIABILITIES
Dividends payable to shareholders .............................. 253,515 155,281
Other accrued expenses ......................................... 9,681 8,651
------------ ------------
Total liabilities ........................................... 263,196 163,932
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK ............. $ 45,544,145 $ 30,445,959
============ ============
Represented by:
Capital stock-authorized 10 billion shares of $.01 par value
(note 1) ................................................. $ 46,064 $ 30,666
Additional paid-in capital .................................. 45,866,373 30,631,773
Accumulated net realized loss on investments ................ (263,673) (266,249)
Unrealized appreciation (depreciation) of investments ....... (104,619) 49,769
------------ ------------
TOTAL NET ASSETS .......................................... $ 45,544,145 $ 30,445,959
============ ============
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Shares of Capital stock outstanding: 4,606,431 and 3,066,567,
respectively (note 4) .................................... $ 9.89 $ 9.93
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE VOYAGEUR FINANCIAL INSTITUTIONS FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) SIX MONTHS ENDED APRIL 30, 1997
- --------------------------------------------------------------------------------------
VFI
VFI INTERMEDIATE
CORE DURATION
PORTFOLIO PORTFOLIO
----------- -----------
<S> <C> <C>
Investment income:
Interest ............................................ $ 1,548,888 $ 996,915
----------- -----------
Expenses (note 3):
Investment advisory and management fee .............. 44,327 30,332
Service fees ........................................ 11,082 7,583
Dividend-disbursing, transfer, administrative
and accounting services fees ...................... 30,116 28,194
Other expenses ...................................... 1,275 1,200
Amortization of organizational costs ................ 773 773
----------- -----------
Total expenses .................................... 87,573 68,082
Less: Expenses waived or absorbed ...................... (10,000) (15,000)
----------- -----------
Total net expenses ................................ 77,573 53,082
----------- -----------
Investment income - net ........................... 1,471,315 943,833
----------- -----------
Realized and unrealized gain (loss) on investments:
Realized loss on security transactions (note 2) ..... (63,050) (84,323)
Net change in unrealized appreciation or depreciation
of investments ................................... (655,227) (184,993)
----------- -----------
Net loss on investments ......................... (718,277) (269,316)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $ 753,038 $ 674,517
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE VOYAGEUR FINANCIAL INSTITUTIONS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
VFI
VFI INTERMEDIATE
CORE DURATION
---------------------------- ----------------------------
PORTFOLIO PORTFOLIO
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED MARCH 27, 1996* ENDED MARCH 27, 1996*
APRIL 30, 1997 TO OCTOBER 31, APRIL 30, 1997 TO OCTOBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income - net ................ $ 1,471,315 $ 1,295,123 $ 943,833 $ 1,030,226
Realized loss on security
transactions - net ................... (63,050) (200,623) (84,323) (181,926)
Net change in unrealized appreciation or
depreciation of investments .......... (655,227) 550,608 (184,993) 234,762
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations ....... 753,038 1,645,108 674,517 1,083,062
------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income - net ................ (1,471,315) (1,295,733) (943,833) (1,030,836)
------------ ------------ ------------ ------------
Capital share transactions (note 4):
Proceeds from sale of shares ........... 5,123,919 40,695,466 -- 30,761,353
Net asset value of shares issued in
reinvestment of net investment income
distributions ..................... 106,895 79,011 3,534 334
Payments for redemption of shares ...... (2,970) (89,274) -- (102,172)
------------ ------------ ------------ ------------
Increase in net assets from
capital share transactions ........... 5,227,844 40,685,203 3,534 30,659,515
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets .......................... 4,509,567 41,034,578 (265,782) 30,711,741
Net assets at beginning of period ......... 41,034,578 -- 30,711,741 --
------------ ------------ ------------ ------------
Net assets at end of period ............... $ 45,544,145 $ 41,034,578 $ 30,445,959 $ 30,711,741
============ ============ ============ ============
- --------------------------------
* Commencement of operations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
THE VOYAGEUR FINANCIAL INSTITUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
During the period ended April 30, 1997, Voyageur Financial Institutions (VFI)
Core Portfolio, and VFI Intermediate Duration Portfolio (the "Funds") are series
within Voyageur Funds, Inc. and are registered under the Investment Company Act
of 1940 (as amended) as diversified, open-end management investment companies.
The investment objective of each Fund is to seek as high a level of current
income as is consistent with preservation of principal and the average duration
of its respective portfolio securities by investing in securities issued or
guaranteed by the United States Government or its agencies or instrumentalities.
On April 30, 1997 the Funds reorganized by transferring substantially all their
assets to a new series of VAM Institutional Funds, Inc. The Funds' investment
policies and objectives were not changed as a result of the reorganization.
The significant accounting policies followed by the Funds 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 trade date. Securities gains
and losses are calculated on the identified-cost basis. Interest income,
including level- yield amortization of premium and discount, is accrued daily.
FEDERAL INCOME TAXES
The Funds' 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 Funds. Net investment income and net realized gains (losses) for
the Funds 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 Funds.
For federal income tax purposes, as of October 31, 1996, VFI Core Portfolio
had a capital loss carryover of $200,623 and VFI Intermediate Duration Portfolio
had a capital loss carryover of $181,926 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 may be reinvested in additional shares of each Fund at net asset value.
Net realized short-term capital gains, when available, may be distributed
throughout the year. Net realized long-term capital gains, when available, are
distributed annually.
REPURCHASE AGREEMENTS
Securities pledged as collateral for repurchase agreements are held by each
Fund's custodian bank until maturity of the repurchase agreement. Procedures for
all agreements ensure that the daily market value of the collateral is in excess
of the repurchase agreement in the event of default.
(2) INVESTMENT SECURITIES TRANSACTIONS
Purchase cost and proceeds of sales of investment securities, other than
short-term securities, aggregated $154,021,533 and $153,184,781 for VFI Core
Portfolio and $23,171,141 and $24,264,845 for VFI Intermediate Duration
Portfolio, respectively, for the six months
<PAGE>
THE VOYAGEUR FINANCIAL INSTITUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
ended April 30, 1997.
(3) EXPENSES
For the period ended April 30, 1997, the Funds had an investment advisory
agreement with Marquette Trust Company (Marquette). Marquette retained Voyageur
Fund Managers, Inc. (Voyageur) as the sub-adviser to the Funds. The investment
sub-adviser furnished, at its own expense, office facilities, equipment and
personnel for servicing the investments of the respective funds. Under the
investment advisory agreements of the Funds, each Fund's investment adviser is
entitled to receive from the Fund a monthly advisory and management fee
equivalent on an annual basis to .20% of the average daily net assets of such
Fund, subject to a performance adjustment of up to plus or minus .15%. Voyageur
is entitled to a fee equal to an annual rate of 50% of the monthly advisory fee
plus or minus 50% of the performance fee adjustment. The performance fee
adjustment will be determined based on a comparison to a predetermined index.
VFI Core Portfolio will be compared to the Lehman Brothers Mutual Fund
Government/Mortgage Index and VFI Intermediate Duration Portfolio will be
compared to the Lehman Brothers Mutual Fund (1-5 year) U.S.
Government Index.
Each Fund also pays a monthly service fee equal on an annual basis, of .05%
of each Fund's average daily net assets. Such fee is paid to Voyageur Fund
Distributors, Inc. (the Underwriter) to compensate the Underwriter for expenses
incurred in connection with servicing of Fund shareholder accounts.
Marquette serves as the custodian of each Fund's portfolio securities and
cash. Marquette receives no additional compensation for acting as the custodian
the Funds. Voyageur acts as each Fund's dividend disbursing, transfer,
administrative and accounting services agent. Voyageur receives a monthly fee
from each Fund equal on an annual basis to .10% of each Fund's average daily net
assets.
In addition to the fees above, the Funds are responsible for paying most
other operating expenses including directors fees, registration fees, legal and
auditing services and other miscellaneous expenses. Organizational costs are
being amortized over 60 months on a straight-line basis.
Marquette, Voyageur and the Underwriter reserve the right to voluntarily
waive their fees in whole or part and/or to voluntarily absorb certain other of
the Fund's expenses. Any such waiver or absorption, however, will be in their
sole discretion and may be lifted or reinstated at any time. For the six months
ended April 30, 1997 Voyageur voluntarily waived $10,000 and $15,000 for VFI
Core Portfolio and VFI Intermediate Duration Portfolio, respectively.
As of October 31, 1996, affiliated parties owned 3,057,129 shares and
3,054,835 shares of VFI Core Portfolio and VFI Intermediate Duration Portfolio,
respectively. This represents ownership of 66.4% and 99.6%, respectively.
(4) SHARE TRANSACTIONS
Transactions in shares during the periods ended April 30, 1997 and October 31,
1996 were as follows:
<TABLE>
<CAPTION>
VFI
VFI INTERMEDIATE
CORE DURATION
PORTFOLIO PORTFOLIO
----------------------------- ------------------------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED MARCH 27, 1996* ENDED MARCH 27, 1996*
APRIL 30, 1997 TO OCTOBER 31, APRIL 30, 1997 TO OCTOBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C>
Shares sold............................... 507,004 4,090,115 -- 3,076,520
Shares issued for
reinvested distributions............... 10,704 8,031 354 34
Shares redeemed........................... (297) (9,126) -- (10,341)
------------- ------------ ------------ ------------
Increase in shares outstanding............ 517,411 4,089,020 354 3,066,213
============= ============ ============ ============
- --------------------------------
* Commencement of operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE VOYAGEUR FINANCIAL INSTITUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------
(5) FINANCIAL HIGHLIGHTS
Per shares data (rounded to the nearest cent) for a share of capital stock
outstanding and selected information for each period are as follows:
VFI
VFI INTERMEDIATE
CORE DURATION
PORTFOLIO PORTFOLIO
------------------------- ------------------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED MARCH 27, 1996* ENDED MARCH 27, 1996*
APRIL 30, 1997 TO OCTOBER 31, APRIL 30, 1997 TO OCTOBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
--------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period.................... $10.04 $10.00 $10.02 $10.00
--------- ---------- -------- ---------
Operations:
Net investment income.................. .33 .37 .31 .34
Net realized and unrealized gain (loss)
on investments....................... (.15) .04 (.09) .02
--------- ---------- -------- ---------
Total from operations.............. .18 .41 .22 .36
--------- ---------- -------- ---------
Distributions to shareholders:
From net investment income............. (.33) (.37) (.31) (.34)
--------- ---------- ------- ---------
Net asset value:
End of period.......................... $ 9.89 $10.04 $ 9.93 $10.02
====== ======= ====== =======
Total investment return (b)............... 1.61% 4.25% 1.99% 3.65%
Net assets at end of
period (000's omitted)................. $45,544 $41,035 $30,446 $30,712
Ratios:
Ratio of expenses to
average daily net assets............. .35%(c) .35%(c) .35%(c) .35%(c)
Ratio of net investment income
to average daily net assets.......... 6.65%(c) 6.31%(c) 6.23%(c) 5.64%(c)
Assuming no voluntary waivers
and reimbursements:
Expenses........................... .40%(c) .35%(c) .45%(c) .35%(c)
Net investment income.............. 6.60%(c) 6.31%(c) 6.13%(c) 5.64%(c)
Portfolio turnover rate
(excluding short-term securities)...... 266.24% 304.10% 76.93% 487.04%
See accompanying notes to Financial Highlights.
</TABLE>
<PAGE>
THE VOYAGEUR FINANCIAL INSTITUTIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
(5) FINANCIAL HIGHLIGHTS (CONTINUED)
NOTES TO FINANCIAL HIGHLIGHTS
(a) Commencement of operations.
(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.
(c) Annualized.
<PAGE>
<TABLE>
<CAPTION>
VFI CORE PORTFOLIO
INVESTMENTS IN SECURITIES (UNAUDITED) APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
NAME OF ISSUER AMOUNT VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(Percentage of investment category relates to total net assets)
BONDS: (86.2%)
U. S. GOVERNMENT AGENCY OBLIGATIONS: (79.5%)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corporation
4.00%, due 05/15/03 $ 275,000 $ 269,412
7.00%, due 08/01/03 286,938 286,728
7.00%, due 11/15/05 266,752 268,667
6.50%, due 10/15/16 244,478 244,400
7.00%, due 02/15/20 111,778 112,022
6.50%, due 05/01/26 4,919,994 4,783,661
Government National Mortgage Association
7.50%, due 03/15/24 3,027,726 3,003,716
7.50%, due 01/15/27 4,019,583 3,987,708
7.50%, due 01/15/27 11,109,004 11,020,910
7.50%, due 02/15/27 5,550,497 5,506,481
8.00%, due 04/15/27 5,050,000 5,122,669
Federal National Mortgage Association
4.75%, due 12/25/11 766,095 760,104
6.15%, due 01/25/16 842,386 838,174
------------
TOTAL U.S. AGENCY OBLIGATIONS (cost: $36,372,979) 36,204,652
------------
See accompanying notes to investments in securities.
<PAGE>
VFI CORE PORTFOLIO
INVESTMENTS IN SECURITIES (UNAUDITED)(CONTINUED) APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
NAME OF ISSUER AMOUNT VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
U.S. TREASURY ISSUES (6.7%):
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes
7.25%, due 05/15/16 (cost: $3,007,062) $3,000,000 $ 3,070,770
------------
TOTAL BONDS (cost: $39,380,041) 39,275,423
------------
SHORT-TERM SECURITIES (13.6%):
- -------------------------------------------------------------------------------------------------------------------
U.S. Government Money Market Fund, 5.20%(c) 898,616 898,616
Federal Home Loan Bank Discount Note
5.43%, due 05/02/97 2,300,000 2,299,658
5.47%, due 05/22/97 3,000,000 2,990,585
-------------
TOTAL SHORT-TERM SECURITIES (cost:$6,188,859) 6,188,859
-------------
TOTAL INVESTMENTS IN SECURITIES (cost: $45,568,900) (b) $45,464,281
===========
See accompanying notes to investments in securities.
<PAGE>
VFI INTERMEDIATE DURATION PORTFOLIO
INVESTMENTS IN SECURITIES (UNAUDITED) APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
NAME OF ISSUER AMOUNT VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
(Percentage of investment category relates to total net assets)
U. S. GOVERNMENT AGENCY OBLIGATIONS: (76.0%)
- -------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association
6.50%, due 05/20/26(d) $ 1,211,944 $ 1,242,243
7.50%, due 01/15/27 3,897,252 3,866,346
7.50%, due 02/15/27 837,001 830,363
8.00%, due 04/15/27 1,512,349 1,534,112
Government National Mortgage Association II
6.50%, due 03/20/23(d) 1,340,253 1,373,344
Federal Home Loan Mortgage Corporation
8.50%, due 06/01/01 1,970,427 2,011,642
5.60%, due 06/15/02 540,632 501,790
5.50%, due 10/15/02 159,460 158,811
6.50%, due 05/01/03 4,371,419 4,316,645
5.25%, due 06/15/03 316,100 313,828
7.00%, due 08/01/03 382,615 382,336
5.40%, due 01/15/08 530,724 522,429
5.10%, due 10/15/09 19,859 19,803
5.00%, due 12/15/12 352,603 350,068
5.00%, due 06/15/16 75,185 73,946
6.80%, due 02/15/18 1,500,000 1,507,020
6.80%, due 04/15/18 300,000 300,093
5.00%, due 09/15/18 250,000 246,953
Federal National Mortgage Association
5.60%, due 01/16/98 1,500,000 1,496,250
7.00%, due 01/01/99 500,368 502,824
5.00%, due 11/25/02 50,694 50,456
5.00%, due 02/25/03 138,455 137,545
5.50%, due 02/25/13 184,047 182,781
5.90%, due 01/25/16 169,880 168,659
6.15%, due 01/25/16 421,193 419,087
7.00%, due 05/25/17 151,033 151,316
6.75%, due 09/25/18 118,965 118,778
See accompanying notes to investments in securities.
<PAGE>
VFI INTERMEDIATE DURATION PORTFOLIO
INVESTMENTS IN SECURITIES (UNAUDITED) (CONTINUED) APRIL 30, 1997
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
NAME OF ISSUER AMOUNT VALUE (a)
- -------------------------------------------------------------------------------------------------------------------
7.25%, due 01/25/19 $ 104,937 $ 105,297
7.00%, due 03/25/19 268,497 267,992
--------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (cost: $23,099,726) 23,152,757
------------
U.S. TREASURY NOTES (0.8%):
- -------------------------------------------------------------------------------------------------------------------
7.13%, due 02/29/00 (cost: $257,656) 250,000 254,394
--------------
SHORT-TERM SECURITIES (22.7%):
- -------------------------------------------------------------------------------------------------------------------
U.S. Government Money Market Fund, 5.20% (c) 323,000 323,000
Federal Home Loan Mortgage Corporation
5.43%, due 05/02/97 2,800,000 2,799,584
5.47%, due 05/22/97 3,800,000 3,788,074
--------------
TOTAL SHORT-TERM SECURITIES (cost: $6,910,658) 6,910,658
--------------
TOTAL INVESTMENTS IN SECURITIES (cost: $30,268,040) (b) $30,317,809
===========
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
VFI CORE PORTFOLIO
VFI INTERMEDIATE DURATION PORTFOLIO
NOTES TO INVESTMENTS IN SECURITIES (UNAUDITED)
- -------------------------------------------------------------------------------
(a) Securities are valued by procedures described in note 1 to the financial
statements.
(b) The cost of securities for federal income tax purposes was $45,568,900 and
$30,268,040 for Core Portfolio and Intermediate Duration Portfolio,
respectively. The aggregate gross unrealized appreciation and depreciation
based on this cost was:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation (Depreciation) Appreciation/(Depreciation)
------------ ------------- ---------------------------
<S> <C> <C> <C>
VFI Core Portfolio...................... $106,856 $(211,475) $(104,619)
VFI Intermediate Duration Portfolio..... 93,627 (43,858) 49,769
</TABLE>
(c) Dividend yields change daily to reflect current market conditions. Rate
shown is quoted yield as of April 30, 1997.
(d) Adjustable rate mortgage security. The interest rate disclosed represents
the interest rate in effect as of April 30, 1997.
