-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UT26TulhHftdajr7+N7mwNtFwBBlAumajNFerdrOJuNKCP9Sj2FtHwqWpAltn/dr ot5YAjRtpguwDOsDi79llg== 0000763749-96-000056.txt : 19960229 0000763749-96-000056.hdr.sgml : 19960229 ACCESSION NUMBER: 0000763749-96-000056 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960228 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOYAGEUR TAX FREE FUNDS INC CENTRAL INDEX KEY: 0000733362 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03910 FILM NUMBER: 96527350 BUSINESS ADDRESS: STREET 1: 90 S 7TH ST STREET 2: STE 4400 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123718684 FORMER COMPANY: FORMER CONFORMED NAME: VOYAGEUR MINNESOTA TAX FREE FUNDS INC DATE OF NAME CHANGE: 19910226 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE EXEMPT FLEX FUND INC DATE OF NAME CHANGE: 19900131 N-30D 1 ANNUAL REPORT TO SHAREHOLDERS NORTH DAKOTA TAX FREE FUND ANNNUAL 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, Beth Howell, the Fund's portfolio manager will elaborate on these and other points of interest regarding the municipal bond market in 1995. Beth 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. VOYAGEUR NORTH DAKOTA TAX FREE FUND
TOTAL NET NET ASSET NET ASSET ASSETS VALUE VALUE DIVIDENDS END OF BEGINNING END PAID PER PERIOD OF PERIOD OF PERIOD SHARE (000'S) --------- --------- ----- ------- PERIOD - ------ Period ended December 31, 1995: Class A Shares $9.85 $11.00 $0.57 $36,096 Class B Shares 9.85 11.00 0.51 375 Class C Shares 10.51* 11.00 0.18 20 ___________________________________ *Net asset value at July 29, 1995 (commencement of operations)
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 North Dakota Tax Free Fund FUND INVESTMENT OBJECTIVE AND STRATEGY The primary objective of the Voyageur North Dakota 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 North Dakota Tax Free Fund generally invests in long-term, quality bonds. The Fund is exempt from federal income tax and North Dakota state income tax. We believe that investment grade bonds for the North Dakota Tax Free Fund offer the best value in today's interest rate environment. DISCUSSION OF FUNDS PERFORMANCE by Elizabeth H. Howell MS. HOWELL IS A SENIOR VICE PRESIDENT AND TAX EXEMPT PORTFOLIO MANAGER FOR VOYAGEUR FUND MANAGERS, AND PORTFOLIO MANAGER FOR THE VOYAGEUR NORTH DAKOTA TAX FREE FUND. We at Voyageur are pleased to report the 1995 performance results of the Voyageur North Dakota Tax Free Fund. For the fiscal year ending December 31, 1995, only the Class 'A' and 'B' shares of the Fund were in operation for the entire year. The Fund achieved a total return of +17.8% (for Class 'A' shares, assuming purchase of shares at net asset value and reinvestment of dividend and capital gains) and +17.2% (for Class 'B' shares, assuming reinvestment of dividends and capital gains). For additional information about total returns achieved by the Fund over other timeframes 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 falling interest rates also favored longer duration securities. Your Fund was able to capture significant capital appreciation through duration management. Longer duration funds experience wider fluctuations in market prices that shorter duration funds. The Voyageur North Dakota Tax Free Fund started 1995 with an average weighted duration of nearly 9 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 6.1 years. The Voyageur North Dakota 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. The Fund's asset quality throughout 1995 remained high. As of December 31, 1995 the Fund was comprised of 51% AAA and/or Aaa bonds; 99% of the Fund was held in investment grade securities. Finally, supply and demand trends of North Dakota municipal bonds benefited Fund shareholders. North Dakota's new issuance of municipal bonds remained low. A lower level of supply of North Dakota bonds favors existing bond holders, particularly large institutional buyers, such as mutual funds. OUTLOOK FOR 1996 Our outlook for the 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 NORTH DAKOTA 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 ENDEING VALUE ENDING VALUE WITH SALES WITHOUT SALES LEHMAN BROS. DATE CHARGE CHARGE BOND INDEX - ---- ------ ------ ---------- Apr-91 9525 10000 10000 Apr-91 9626.59 10106.66 10145 May-91 9720.75 10205.51 10250.51 Jun-91 9783.56 10271.46 10220.78 Jul-91 9887.79 10380.88 10370 Aug-91 9984.04 10481.93 10508.96 Sep-91 10118.17 10622.75 10651.88 Oct-91 10167.63 10674.68 10756.27 Nov-91 10225.44 10735.38 10773.48 Dec-91 10402.42 10921.17 11002.96 Jan-92 10421.35 10941.05 11026.06 Feb-92 10430.01 10950.14 11030.48 Mar-92 10448.61 10969.67 11056.95 Apr-92 10559.21 11085.78 11160.88 May-92 10660.13 11191.74 11307.09 Jun-92 10813 11352.23 11515.14 Jul-92 11133.68 11688.9 11927.38 Aug-92 10974.77 11522.07 11778.29 Sep-92 11014.01 11563.26 11837.18 Oct-92 10958.15 11504.61 11669.09 Nov-92 11326.86 11891.72 11965.49 Dec-92 11411.08 11980.14 12122.24 Jan-93 11516.01 12090.29 12251.95 Feb-93 11858.52 12449.89 12771.43 Mar-93 11853.23 12444.34 12660.32 Apr-93 11955.44 12551.64 12819.84 May-93 12015.06 12614.23 12926.24 Jun-93 12184.45 12792.07 13164.08 Jul-93 12277.76 12890.04 13179.88 Aug-93 12504.09 13127.66 13494.88 Sep-93 12529.17 13153.99 13664.92 Oct-93 12587.96 13215.71 13689.51 Nov-93 12452.82 13073.83 13538.93 Dec-93 12688.85 13321.62 13865.22 Jan-94 12940.1 13585.4 14039.92 Feb-94 12685.9 13318.53 13622.93 Mar-94 12232.88 12842.92 12905 Apr-94 12034 12634.12 13010.83 May-94 12101.59 12705.08 13164.35 Jun-94 12109.66 12713.56 13032.71 Jul-94 12342.12 12957.6 13331.16 Aug-94 12374.29 12991.38 13368.49 Sep-94 12228.09 12837.89 13101.12 Oct-94 12009.59 12608.49 12755.25 Nov-94 11718.38 12302.76 12456.77 Dec-94 11994.93 12593.1 12847.92 Jan-95 12332.59 12947.6 13350.27 Feb-95 12745.3 13380.89 13834.88 Mar-95 12852.32 13493.24 13992.6 Apr-95 12872.86 13514.81 13989.8 May-95 13229.37 13889.11 14517.22 Jun-95 13125.43 13779.98 14293.65 Jul-95 13209.54 13868.29 14367.98 Aug-95 13382.34 14049.7 14564.82 Sep-95 13530.43 14205.17 14679.88 Oct-95 13780.55 14467.77 14992.57 Nov-95 13993.71 14691.56 15323.9 Dec-95 14130.66 14835.34 15538.44 VOYAGEUR NORTH DAKOTA TAX FREE FUND AVERAGE ANNUAL TOTAL RETURNS (CLASS A SHARES) ---------------- 1 SINCE YEAR 4/1/91** ---- -------- Without Sales Charge 17.81% 8.65% With Sales Charge* 12.21% 7.55% Lehman Bros. 20 20.94% 9.72% Year Municipal Bond Index VOYAGEUR NORTH DAKOTA TAX FREE FUND AVERAGE ANNUAL TOTAL RETURNS (CLASS B SHARES) ---------------- SINCE 1 YEAR 5/10/94** ------ --------- Without Contingent Deferred Sales Charge 17.24% 10.17% With Contingent Deferred Sales Charge*** 13.24% 7.87% VOYAGEUR NORTH DAKOTA TAX FREE FUND TOTAL RETURNS (CLASS C SHARES) ---------------- SINCE 7/29/95** --------- 6.47% * Average annual total returns include the maximum 4.75% sales charge. ** Commencement of operations. *** Assumes redemption on December 31, 1995. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Voyageur Tax Free Funds, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of Voyageur North Dakota Tax Free Fund (a fund within Voyageur Tax Free 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 for each of the years in the two-year period ended December 31, 1995 and the financial highlights for each of the years in the four-year period ended December 31, 1995 and for the period from April 1, 1991, commencement of operations, to December 31, 1991. 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 sold but not delivered, 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 North Dakota Tax Free Fund at December 31, 1995 and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period ended December 31, 1995 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
VOYAGEUR NORTH DAKOTA TAX FREE FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 - ------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market value (note 1) (identified cost: $35,958,657)............................................... $37,179,596 Accrued interest receivable..................................................... 503,290 Receivable for investment securities sold....................................... 5,000 Receivable for Fund shares sold................................................. 673 Organizational costs (note 1)................................................... 989 ----------- Total assets................................................................. 37,689,548 ----------- LIABILITIES Bank overdraft.................................................................. 1,012,636 Dividends payable to shareholders............................................... 155,727 Distribution fees payable....................................................... 895 Other accrued expenses.......................................................... 28,947 ----------- Total liabilities............................................................ 1,198,205 ----------- NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK.............................. $36,491,343 =========== Represented by: Capital Stock - $.01 par value (note 1)...................................... $ 33,170 Additional paid-in capital................................................... 35,386,261 Undistributed net investment income.......................................... 6,208 Accumulated net realized loss on investments................................. (155,235) Unrealized appreciation of investments....................................... 1,220,939 ----------- TOTAL NET ASSETS........................................................... $36,491,343 =========== Net assets applicable to outstanding Class A Shares............................. $36,096,088 =========== Net assets applicable to outstanding Class B Shares............................. 374,954 =========== Net assets applicable to outstanding Class C Shares............................. 20,301 =========== SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE Class A - Shares of Capital Stock outstanding: 3,281,055 (note 4)........... $11.00 ====== Class B - Shares of Capital Stock outstanding: 34,078 (note 4).............. $11.00 ====== Class C - Shares of Capital Stock outstanding: 1,846 (note 4)............... $11.00 ======
VOYAGEUR NORTH DAKOTA TAX FREE FUND STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 - ------------------------------------------------------------------------------------------------- Investment income: Interest................................................................ $2,094,284 ---------- Expenses (note 3): Investment advisory and management fee.................................. 179,121 Dividend-disbursing, administrative and accounting services fees........ 75,910 Printing, postage and supplies.......................................... 4,835 Audit and accounting fees............................................... 8,573 Legal fees.............................................................. 783 Distribution fees - Class A............................................. 88,956 Distribution fees - Class B............................................. 2,317 Distribution fees - Class C............................................. 168 Directors' fees......................................................... 1,616 Registration fees....................................................... 1,244 Custodian fees.......................................................... 10,167 Amortization of organizational costs.................................... 3,451 Other ................................................................ 226 ---------- Total expenses........................................................ 377,367 Less: Expenses waived or absorbed by the distributor................... (86,608) ---------- Net expenses before earnings credits on uninvested cash................. 290,759 Less: Earnings credits on uninvested cash.............................. (9,786) ---------- Total net expenses.................................................... 280,973 ---------- Investment income - net............................................... 1,813,311 ---------- Realized and unrealized gain (loss) on investments: Realized loss on security transactions (note 2)......................... (87,044) Net change in unrealized appreciation or depreciation of investments.... 4,122,617 ---------- Net gain on investments............................................... 4,035,573 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $5,848,884 ==========
VOYAGEUR NORTH DAKOTA TAX FREE FUND STATEMENTS OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------------------------------------------- YEAR YEAR ENDED ENDED DECEMBER 31, DECEMBER 31, Operations: 1995 1994 ------------- ------------- Investment income - net........................................... $ 1,813,311 $ 1,935,876 Realized gain (loss) on investments - net......................... (87,044) 283,858 Net change in unrealized appreciation or depreciation of investments 4,122,617 (4,311,228) ------------- ------------- Net increase (decrease) in net assets resulting from operations. 5,848,884 (2,091,494) ------------- ------------- Distributions to shareholders from: Investment income - net: Class A......................................................... (1,912,391) (1,816,356) Class B......................................................... (10,940) (2,596) Class C......................................................... (696) N/A Net realized gain on investments: Class A......................................................... -- (282,927) Class B......................................................... -- (931) Excess distributions of net realized gains: Class A......................................................... -- (67,967) Class B......................................................... -- (224) ------------- ------------ Total distributions........................................... (1,924,027) (2,171,001) ------------- ------------ Capital share transactions (note 4): Proceeds from sale of shares: Class A (note 3)................................................ 3,442,030 7,013,267 Class B......................................................... 248,571 148,507 Class C......................................................... 62,010 N/A Net asset value of shares issued in reinvestment of net investment income and realized gain distributions: Class A....................................................... 1,297,310 1,276,264 Class B....................................................... 8,279 1,955 Class C....................................................... 611 N/A Payments for redemption of shares: Class A......................................................... (6,371,759) (5,084,626) Class B (note 3)................................................ (49,862) -- Class C......................................................... (44,010) N/A ------------- ------------ Increase (decrease) in net assets from share transactions......... (1,406,820) 3,355,367 ------------- ------------ Total increase (decrease) in net assets......................... 2,518,037 (907,128) Net assets at beginning of period.................................... 33,973,306 34,880,434 ------------- ------------ Net assets at end of period (including undistributed net investment income of $6,208, and $116,924, respectively).......... $36,491,343 $33,973,306 ============= ============
VOYAGEUR NORTH DAKOTA TAX FREE FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Voyageur North Dakota Tax Free Fund (the Fund), a fund within Voyageur Tax Free Funds, Inc., is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, open-end management investment company. The Fund seeks high current income free from both federal and state income taxes by investing in investment grade municipal bonds. The Fund offers Class A, Class B and Class C Shares. Class A Shares are sold with a front-end sales charge. Class B Shares may be subject to a contingent deferred sales charge and such shares automatically convert to Class A after eight years. Class C Shares (first offered in 1995) are not subject to a front-end sales charge or contingent deferred sales charge and have no conversion feature. Each class of shares has 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 amended articles of incorporation, Voyageur Tax Free 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 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 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 trade date. Securities gains and losses are calculated on the identified-cost basis. Interest income, including level- yield amortization of premium and original issue discount, is accrued daily. The Fund concentrates its investments in a single state, and therefore may have more credit risk related to the economic conditions of the state of North Dakota 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. ORGANIZATIONAL COSTS Organizational costs are being amortized over 60 months on an inverse acceleration (sum of the years' digits) basis. 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 all of its taxable 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. The effect on dividend distributions on certain book-to-tax differences is reflected as excess distributions of net realized gains in the statement of changes in net assets. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. For federal income tax purposes, as of December 31, 1995, the Fund had a capital loss carryover of $122,540 that will expire in 2003 and 2004 if not offset by subsequent capital gains. It is unlikely that the Board of Directors will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or expires. DISTRIBUTIONS TO SHAREHOLDERS Dividends declared daily from net investment income are payable monthly in cash or reinvested in additional shares of the Fund. Net short-term realized capital gains, if any, may be paid throughout the year and net long-term realized capital gains, when available, are distributed annually. (2) SECURITIES TRANSACTIONS Purchase cost and proceeds from sales of securities other than short-term securities aggregated $15,942,252 and $16,594,098 during the year ended December 31, 1995, respectively. (3) EXPENSES The Fund has an investment advisory and management 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 paid 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. Each class of shares has a Distribution Agreement under Rule 12b-1 of the Investment Company Act of 1940 with Voyageur Fund Distributors, Inc. (Fund Distributors). Under these plans the Fund is obligated to pay Fund Distributors a monthly distribution fee at an annual rate of .25% of average daily net assets of the Class A Shares and 1.00% of 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, 1995, Fund Distributors voluntarily waived Class A distribution fees of $85,447 and Class B distribution fees of $1,161. The Fund earned $9,786 in credits on uninvested cash balances held by the Fund at the custodian during the year ended December 31, 1995. 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 $63,571. Of this amount, Fund Distributors received $8,965. Contingent deferred sales charges paid by Class B Shareholders were $1,995. (4) SHARE TRANSACTIONS Transactions in shares of capital stock during the periods ended December 31, 1995 and 1994 were as follows:
CLASS A ----------------------------------------- YEAR YEAR ENDED ENDED DECEMBER 31, DECEMBER 31, 1995 1994 -------------------- ---------------- Shares sold.......................................... 325,541 657,610 Shares issued for reinvested distributions........... 124,904 121,738 Shares redeemed...................................... (604,981) (495,792) ------------ ------------ Increase (decrease) in shares outstanding............ (154,536) 283,556 ============ =========== CLASS B ---------------------------------------- YEAR PERIOD FROM ENDED MAY 10, 1994* DECEMBER 31, TO DECEMBER 31, 1995 1994 -------------------- --------------- Shares sold.......................................... 23,246 14,434 Shares issued for reinvested distributions........... 792 193 Shares redeemed...................................... (4,587) -- ------------ ---------- Increase in shares outstanding....................... 19,451 14,627 =========== ==========
CLASS C --------------- PERIOD FROM JULY 29, 1995* TO DECEMBER 31, --------------- 1995 Shares sold.......................................... 5,855 Shares issued for reinvested distributions........... 57 Shares redeemed...................................... (4,066) --------- Increase in shares outstanding....................... 1,846 ========= __________________________________ * Commencement of operations.
(5) 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:
CLASS A ------------------------------------------------------------------- PERIOD FROM APRIL 1, 1991(d) YEAR ENDED DECEMBER 31, TO DECEMBER 31, -------------------------------------------------- 1995 1994 1993 1992 1991 ------------------------------------------------------------------- Net asset value: Beginning of period...................... $ 9.85 $11.07 $10.59 $10.34 $10.00 ------ ------ ------ ------ ------ Operations: Net investment income.................... .54 .56 .58 .62 .49 Net realized and unrealized gain (loss) on investments............. 1.18 (1.15) .58 .34 .41 ------ ------- ------ ------ ------ Total from operations................ 1.72 (.59) 1.16 .96 .90 ------ ------- ------ ------ ------ Distributions to shareholders: From net investment income (a)........... (.57) (.53) (.58) (.62) (.49) From net realized gains.................. -- (.08) (.10) (.09) (.07) In excess of net realized gains.......... -- (.02) -- -- -- ------ ------- ------ ------ ------ Total distributions.................... (.57) (.63) (.68) (.71) (.56) ------ ------- ------ ------ ------ Net asset value: End of period............................ $11.00 $9.85 $11.07 $10.59 $10.34 ====== ===== ====== ====== ====== Total investment return (b)................. 17.81% (5.47)% 11.20% 9.70% 9.23% Net assets at end of period (000's omitted). $36,096 $33,829 $34,880 $15,846 $4,914 Ratios: Ratio of expenses to average daily net assets (f)........... .81% .46% .59% .40% .16%(e) Ratio of net investment income to average daily net assets............ 5.07% 5.36% 5.11% 5.78% 6.43%(e) Assuming no voluntary waivers and reimbursements: Expenses (c)..................... 1.05% 1.14% 1.25% 1.25% 1.25%(e) Net investment income............ 4.83% 4.68% 4.45% 4.93% 5.34%(e) Portfolio turnover rate (excluding short-term securities)................... 45.34% 32.60% 27.39% 26.27% 126.37% See accompanying notes to Financial Highlights.
VOYAGEUR NORTH DAKOTA TAX FREE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - ---------------------------------------------------------------------------------------------------------------- (5) FINANCIAL HIGHLIGHTS (CONTINUED) CLASS B CLASS C -------------------------------------- ---------------- YEAR PERIOD FROM PERIOD FROM ENDED MAY 10, 1994(d) JULY 29, 1995(d) DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31, 1995 1994 1995 --------------------------------------------------------- Net asset value: Beginning of period............................... $ 9.85 $10.31 $10.51 ------ ------ ------ Operations: Net investment income............................. .48 .30 .17 Net realized and unrealized gain (loss) on investments...................... 1.18 (.39) .50 ------ ------ ------ Total from operations......................... 1.66 (.09) .67 ------ ------ ------ Distributions to shareholders: From net investment income (a).................... (.51) (.27) (.18) From net realized gains........................... -- (.08) -- In excess of net realized gains................... -- (.02) -- ------ ------ ------ Total distributions............................. (.51) (.37) (.18) ------ ------ ------ Net asset value: End of period..................................... $11.00 $9.85 $11.00 ====== ===== ====== Total investment return (b).......................... 17.24% (0.77)% 6.47% Net assets at end of period (000's omitted).......... $375 $144 $20 Ratios: Ratio of expenses to average daily net assets (f).................... 1.29% .99%(e) 1.73%(e) Ratio of net investment income to average daily net assets..................... 4.56% 4.97%(e) 4.00%(e) Assuming no voluntary waivers and reimbursements: Expenses (c).............................. 1.79% 1.89%(e) 1.73%(e) Net investment income..................... 4.06% 4.07%(e) 4.00%(e) Portfolio turnover rate (excluding short-term securities)............................ 45.34% 32.60% 45.34% See accompanying notes to Financial Highlights.
VOYAGEUR NORTH DAKOTA TAX FREE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- (5) 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 period ended December 31, 1991 $.01 per share of the distribution from net investment income was 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 Fund Distributors voluntarily waived or reimbursed expenses during the periods presented. The annual contractual expenses 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) Annualized. (f) Beginning in the year ended December 31, 1995, the expense ratio reflects the effect of gross expenses attributable to earnings credits on uninvested cash balances received by the Fund. Prior period expense ratios have not been adjusted.
VOYAGEUR NORTH DAKOTA TAX FREE FUND INVESTMENTS IN SECURITIES DECEMBER 31, 1995 - ------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT COUPON MARKET ($000) NAME OF ISSUER (C) RATE MATURITY VALUE (A) - ------------------------------------------------------------------------------------------------------------------- (PERCENTAGE OF EACH INVESTMENT CATEGORY RELATES TO TOTAL NET ASSETS.) NORTH DAKOTA MUNICIPAL BONDS (101.9%): PRE-REFUNDED/ESCROWED TO MATURITY (0.6%): -------------------------------------------------------------------------------------- $ 200 Fargo Park District Revenue............................................ 7.25% 11-01-00 $ 217,944 --------- GENERAL OBLIGATION (12.0%): ------------------------------------------------------------------------------------------------------ 210 Bismarck Tax Increment GO.............................................. 5.70 05-01-07 213,190 110 Devils Lake............................................................ 5.75 05-01-10 111,204 100 Devils Lake Public School District #1.................................. 6.80 05-01-11 104,122 490 Fargo Public School District #1 (MBIA Insured)......................... 5.55 06-01-09 502,074 625 Fargo Public School District #1 (MBIA Insured)......................... 5.75 05-01-10 641,487 650 Fargo Public School District #1 (MBIA Insured)......................... 5.75 05-01-12 663,546 1,090 Fargo Refunding Bonds 1995-B........................................... 5.30 05-01-14 1,085,237 155 Grand Forks Highway Unlimited Tax...................................... 6.00 12-01-10 162,514 165 Grand Forks Highway Unlimited Tax ..................................... 6.00 12-01-11 172,531 170 Grand Forks Highway Unlimited Tax...................................... 6.00 12-01-12 177,259 270 Grand Forks Sewer Reserve.............................................. 6.70 06-01-07 290,443 250 North Dakota State Real Estate......................................... 6.00 09-01-96(b) 254,630 --------- 4,378,237 --------- UTILITIES (8.5%): ------------------------------------------------------------------------------------------------------- 145 Grand Forks Water Revenue.............................................. 5.70 06-01-11 147,665 155 Grand Forks Water Revenue.............................................. 5.75 06-01-12 157,967 165 Grand Forks Water Revenue.............................................. 5.80 06-01-13 168,516 175 Grand Forks Water Revenue.............................................. 5.85 06-01-14 179,081 190 Grand Forks Water Revenue.............................................. 5.85 06-01-15 194,081 2,200 Mercer County Pollution Control - Special Utility (MBIA Insured)....... 5.85 06-01-23 2,263,976 --------- 3,111,286 --------- INDUSTRIAL (15.8%): ------------------------------------------------------------------------------------------------------ 1,000 Fargo Trollwood Village................................................ 5.13 11-01-16 1,002,010 500 Mercer Pollution Control Otter Tail Power.............................. 6.90 02-01-19 541,900 500 Mercer Pollution Control (FGIC Insured)................................ 6.65 06-01-22 543,110 1,000 Mercer Pollution Control Revenue Basin Electric (AMBAC Insured)........ 6.05 01-01-19 1,053,180 2,250 Morton County Pollution Control Revenue (FGIC Insured)................. 6.65 06-01-22 2,443,995 180 Oliver County Pollution Control Revenue................................ 7.00 12-31-10 180,196 ---------- 5,764,391 ---------- HEALTH CARE (17.2%): ------------------------------------------------------------------------------------------------------ 500 Bismarck Hospital Alexius Medical Center (AMBAC Insured)............... 6.90 05-01-06 553,805 250 Bismarck Hospital Medical Center (BIG Insured)......................... 7.50 05-01-13 273,125 500 Carrington Health Facility Revenue..................................... 6.25 11-15-15 516,570 1,000 Cass County Health Facility Catholic Health Corp., Villa Nazareth Project............................................................. 6.25 11-15-14 1,050,050 1,000 Fargo Hospital Facility St. Luke's Hospital, Series 1992............... 6.50 06-01-15 1,070,350 225 Grand Forks Health Care (MBIA Insured)................................. 6.13 12-01-14 239,926 250 Grand Forks Health Care Revenue (MBIA Insured)......................... 6.25 12-01-19 268,613 500 Ward County Health Care Facility....................................... 7.50 07-01-21 559,375 1,750 Williston Hospital Revenue (MBIA Insured)............................. 5.50 11-15-14 1,744,785 --------- 6,276,599 --------- HOUSING REVENUE (22.0%): ------------------------------------------------------------------------------------------------------ 305 Grand Forks Multifamily Housing Authority Revenue - Ryan House Sec. 8.. 6.30 03-01-22 313,955 360 Minot Single Family Mortgage........................................... 7.70 08-01-10 402,563 1,000 North Dakota Housing Finance Authority Single Family Mortgage.......... 6.00(e) 07-01-15 1,002,610 210 North Dakota State Housing Finance Agency Single Family Mortgage Series A (FHA Insured)....................................................... 6.75 07-01-12 221,928 420 North Dakota State Housing Finance Agency Single Family Mortgage Series A............................................................. 6.95 07-01-12 449,013 1,960 North Dakota State Housing Finance Agency Single Family Mortgage Series B............................................................. 5.80 07-01-25 1,946,300 985 North Dakota State Housing Finance Agency Single Family Mortgage Series E............................................................. 6.30 01-01-15 1,015,486 500 North Dakota State Housing Finance Agency Revenue (FNMA Insured)....... 6.13 12-01-15 514,455 1,300 North Dakota State Housing Finance Agency Revenue Multifamily (FNMA Insured)............................................................. 6.15 12-01-17 1,339,780 810 North Dakota State Housing Finance Authority Multifamily (MBIA Insured)............................................................. 5.75 07-01-23 810,915 --------- 8,017,005 EDUCATION (3.7%): ------------------------------------------------------------------------------------------------------ 250 Burleigh County University Facilities Mary PJ Bank Qualified........... 7.13 12-01-11 265,755 250 North Dakota State University Housing and Auxiliary Facility........... 6.30 04-01-07 268,265 500 North Dakota State University Housing and Auxiliary Facility........... 6.50 04-01-12 533,785 300 University of North Dakota State Board of Higher Education............. 5.25 04-01-13 293,223 --------- 1,361,028 --------- OTHER REVENUE (22.1%): ------------------------------------------------------------------------------------------------------ 500 Fargo Refunding Improvement ........................................... 5.90 05-01-07 525,765 500 Fargo Sales Tax Revenue (AMBAC Insured)................................ 5.20 07-01-08 502,975 1,295 Fargo Sales Tax Revenue (AMBAC Insured)................................ 5.20 01-01-09 1,297,111 1,310 North Dakota Building Authority Revenue (CGIC Insured)................. 6.00 12-01-14 1,371,531 1,480 North Dakota Building Authority Revenue (CGIC Insured)................. 6.10 12-01-16 1,559,683 450 North Dakota Muni Bond Bank............................................ 6.25 12-01-11 464,503 2,000 North Dakota Muni Bond Bank............................................ 6.25 10-01-14 2,115,940 200 North Dakota Student Loan (AMBAC Insured).............................. 7.00 07-01-05 215,598 --------- 8,053,106 --------- TOTAL INVESTMENT IN SECURITIES (cost: $35,958,657) (d) $37,179,596 =========== See accompanying notes to investments in securities.
VOYAGEUR NORTH DAKOTA TAX FREE FUND NOTES TO INVESTMENTS IN SECURITIES - -------------------------------------------------------------------------------- (a) Securities are valued by procedures described in note 1 to the financial statements. (b) The maturity dates for these issues represent mandatory puts or dates on which, in the opinion of the Fund's investment advisor, the issue is likely to be called. (c) Investments in bonds, by rating category (unaudited) as a percentage of total bonds, are as follows: AAA/AAA AA/AA A/A NR/NR TOTAL ------- ----- --- ----- ----- 51% 23% 25% 1% 100% (d) The cost of securities for federal income tax purposes is $35,991,352 and 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 ------------ -------------- ------------ $1,238,357 $(50,113) $1,188,244 (e) Security subject to the Alternative Minimum Tax. 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.
PER CLASS PER CLASS PER CLASS A SHARE B SHARE C SHARE ------------ ------------ --------------- YEAR YEAR PERIOD FROM ENDED ENDED JULY 29, 1995 DECEMBER 31, DECEMBER 31, TO DECEMBER 31, 1995 1995 1995 ------------ ------------ --------------- Net investment income distributions (none qualifying for corporate dividend received deduction)............................. $.5653 $.5140 $.1844 ------ ------ ------ Total Distribution................................ $.5653 $.5140 $.1844 ====== ====== ======
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. -----END PRIVACY-ENHANCED MESSAGE-----