1933 Act Registration No. 2-95930
1940 Act Registration No. 811-4546
As filed with the Securities and Exchange Commission on August 1, 1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 23
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 23
(Check appropriate box or boxes.)
VAM INSTITUTIONAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
90 SOUTH SEVENTH STREET, SUITE 4400, MINNEAPOLIS, MINNESOTA 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 376-7000
(Registrant's Telephone Number, including Area Code)
JOHN G. TAFT
90 SOUTH SEVENTH STREET, SUITE 4400, MINNEAPOLIS, MINNESOTA 55402
(Name and Address of Agent for Service)
Copy to:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402
It is proposed that this filing will become effective (check appropriate box):
_X_ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on (specify date) pursuant to paragraph (b) of Rule 485
___ 75 days after filing pursuant to paragraph (a) of Rule 485
___ on (date) pursuant to paragraph (a) of Rule 485
The Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice was filed by the Registrant on June 17,
1994, for the fiscal year ended April 30, 1994. The Registrant's fiscal year end
has been changed to October 31; however no Rule 24f-2 Notices have been filed
because none of the Registrant's series have commenced operations.
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
(VAM INSTITUTIONAL FUNDS, INC.)
Item No. of
Form N-1A Caption in Prospectus
1 Cover Page
2 Fund Expenses
3 Not Applicable
4 Investment Objectives and Policies; Risks and
Characteristics of Securities and Investment
Techniques; Investment Restrictions; General
Information
5 Management; General Information
6 Distributions to Shareholders and Taxes; General
Information
7 Purchase of Shares; Exchange Privilege; Management;
Determination of Net Asset Value
8 Redemption of Shares
9 Not Applicable
Caption in Statement of Additional Information
10 Cover Page
11 Table of Contents
12 Additional Information
13 Investment Policies and Restrictions
14 Directors and Executive Officers
15 Directors and Executive Officers
16 Directors and Executive Officers; The Investment
Adviser, Sub-Adviser, Administrative Services,
Expenses and Brokerage
17 The Investment Adviser, Sub-Adviser, Administrative
Services, Expenses and Brokerage
18 Not Applicable
19 Net Asset Value and Public Offering Price
20 Taxes
21 The Investment Adviser, Sub-Adviser, Administrative
Services, Expenses and Brokerage
22 Calculation of Performance Data
23 Financial Statements
VAM Institutional Funds, Inc. (the "Company") is an open-end management
investment company, or mutual fund, which offers its shares in separate
investment portfolios (the "Funds"), each with its own investment objective and
policies. Each Fund operates as a diversified Fund, except VAM Global Fixed
Income Fund which is non-diversified. This prospectus relates to shares of seven
Funds as listed below. The Funds are primarily designed to provide pension and
profit sharing plans, employee benefit trusts, endowments, foundations, other
institutions, corporations and high net worth individuals access to the
professional investment management services offered by Voyageur Fund Managers,
Inc. ("the Adviser"), which serves as investment adviser to the Funds. The
Adviser has retained Lazard London International Investment Management Limited
(the "Sub-Adviser") to act as sub-adviser to VAM Global Fixed Income Fund. Each
Fund (other than VAM Global Fixed Income Fund) offer two classes of shares --
the Institutional Class Shares ("Institutional Shares") and the Institutional
Service Class Shares ("Service Shares"), each of which is sold pursuant to
different sales arrangements and bears different expenses. VAM Global Fixed
Income Fund offers only Institutional Shares. The Funds are:
VAM GLOBAL FIXED INCOME FUND
VAM SHORT DURATION GOVERNMENT AGENCY FUND
VAM INTERMEDIATE DURATION GOVERNMENT AGENCY FUND
VAM GOVERNMENT MORTGAGE FUND
VAM SHORT DURATION TOTAL RETURN FUND
VAM INTERMEDIATE DURATION TOTAL RETURN FUND
VAM INTERMEDIATE DURATION MUNICIPAL FUND
The investment objective of each Fund, along with a detailed
description of the types of securities in which each Fund may invest and of
investment policies and restrictions applicable to each Fund, are set forth in
this Prospectus. There is no assurance that any Fund's investment objective will
be achieved.
The Funds are no-load which means that there is no sales charge when
you buy or redeem shares.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
FEDERAL AGENCY. AN INVESTMENT IN ANY OF THE FUNDS INVOLVES INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL DUE TO FLUCTUATIONS IN THE APPLICABLE
FUND'S NET ASSET VALUE.
This Prospectus sets forth certain information about the Funds that a
prospective investor ought to know before investing. A Statement of Additional
Information (dated August 1, 1995), as amended from time to time, has been filed
with the Securities and Exchange Commission. The Statement of Additional
Information is available free of charge by telephone and at the mailing address
below, and is incorporated in its entirety by reference into this Prospectus in
accordance with the Commission's rules.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
(612) 376-7000
(800) 553-2143
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated August 1,1995
TABLE OF CONTENTS
Page
Comparison of VAM Institutional Funds ........................... 3
Fund Expenses ................................................... 4
Investment Objectives and Policies .............................. 5
Risks and Characteristics of Securities and Investment Techniques 10
Investment Restrictions ......................................... 22
Purchase of Shares .............................................. 22
Redemption of Shares ............................................ 24
Exchange Privilege .............................................. 25
Management ...................................................... 25
Determination of Net Asset Value ................................ 27
Distributions to Shareholders and Taxes ......................... 28
Investment Performance .......................................... 29
General Information ............................................. 30
SHARES OF THE FUNDS COVERED BY THIS PROSPECTUS
ARE NOT REGISTERED IN ALL STATES. SHARES THAT ARE NOT REGISTERED
IN ONE OR MORE STATES ARE NOT BEING OFFERED AND SOLD IN SUCH STATES.
COMPARISON OF VAM INSTITUTIONAL FUNDS
<TABLE>
<CAPTION>
Maximum Total
Operating Expenses*
Primary Credit Foreign Institutional Service
Fund Securities Duration Quality Securities Shares Shares Benchmarks
<S> <C> <C> <C> <C> <C> <C> <C>
VAM Global Global Debt 3-8 Years B-Aaa Up to 100% 1.00% N/A Soloman Brothers
Fixed Income Securities (0-5% World
Fund below Baa) Government
Bond Index
VAM Short Government/ 0-3 Years Treasury/ None .50% .75% Merrill Lynch
Duration Agency Agency 1 - 3 Year
Government Treasury Index
Agency Fund
VAM Government/ 3-5.5 Years Treasury/ None .50% .75% Merrill Lynch
Intermediate Agency Agency 3 - 7 Year
Duration Treasury Index
Government
Agency Fund
VAM Government/ 0-8 Years Agency None .50% .75% Merrill Lynch
Government Mortgage 15-Year
Mortgage Fund GNMA Index
VAM Short Government/ 0-3 Years B-Aaa 0-25% .50% .75% Merrill Lynch
Duration Total Corporate/ (0-5% 1 - 3 Year
Return Fund Agency below Baa) Government
Bond Index
VAM Government/ 3-5.5 Years B-Aaa 0-25% .50% .75% Lehman Brothers
Intermediate Corporate/ (0-5% Intermediate
Duration Agency below Baa) Government/
Total Corporate Bond
Return Fund Index
VAM National 0-6.5 Years B-Aaa None .50% .75% Merrill Lynch
Intermediate Municipal (0-5% 1-10 Year Inter-
Duration below Baa) mediate Term
Municipal Fund High Quality
Corporate
Index (after-tax
returns)
</TABLE>
All of the above information is qualified by the more detailed
descriptions of the Funds' investment objectives and policies contained in this
Prospectus.
* Reflects voluntary fee waivers and expense reimbursements through October
31, 1995. For more information, see "Fund Expenses" below.
FUND EXPENSES
Each Fund is offered to investors on a no-load basis, without any sales
commissions or distribution ("12b-1 plan") charges. Each Fund (other than VAM
Global Fixed Income Fund) offers two classes of shares, Institutional Shares and
Service Shares, which are substantially identical except that Service Shares are
assessed a service charge. VAM Global Fixed Income Fund offers only
Institutional Shares.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................... None
Sales Load Imposed on Reinvested Dividends.................... None
Deferred Sales Load........................................... None
Redemption Fees ............................................ None
Exchange Fee ............................................ None
ANNUAL FUND OPERATING EXPENSES
(after fee waivers and expense reimbursements
as a percentage of average net assets)
<TABLE>
<CAPTION>
Investment Total
Advisory Service Other Operating
Fees Fees Expenses Expenses
(after expense (after fee waivers and
(after fee waiver) reimbursements) and expense reimbursements)
<S> <C> <C> <C> <C>
VAM Global Fixed Income Fund
Institutional Shares.......................... .70% -- .30% 1.00%
VAM Short Duration Government
Agency Fund
Institutional Shares.......................... .40% -- .10% .50%
Service Shares................................ .40% .25% .10% .75%
VAM Intermediate Duration Government
Agency Fund
Institutional Shares.......................... .40% -- .10% .50%
Service Shares................................ .40% .25% .10% .75%
VAM Government Mortgage Fund
Institutional Shares.......................... .40% -- .10% .50%
Service Shares................................ .40% .25% .10% .75%
VAM Short Duration Total Return Fund
Institutional Shares.......................... .40% -- .10% .50%
Service Shares................................ .40% .25% .10% .75%
VAM Intermediate Duration Total
Return Fund
Institutional Shares.......................... .40% -- .10% .50%
Service Shares................................ .40% .25% .10% .75%
VAM Intermediate Duration
Municipal Fund
Institutional Shares.............................. .40% -- .10% .50%
Service Shares.................................... .40% .25% .10% .75%
</TABLE>
Example
You would pay the following expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period:
1 YEAR 3 YEARS
VAM GLOBAL FIXED INCOME FUND
Institutional Shares ................. $10 $32
VAM SHORT DURATION GOVERNMENT AGENCY FUND
Institutional Shares ................. 5 16
Service Shares ....................... 8 24
VAM INTERMEDIATE DURATION GOVERNMENT
AGENCY FUND
Institutional Shares ................. 5 16
Service Shares ....................... 8 24
VAM GOVERNMENT MORTGAGE FUND
Institutional Shares ................. 5 16
Service Shares ....................... 8 24
VAM SHORT DURATION TOTAL RETURN FUND
Institutional Shares ................. 5 16
Service Shares ....................... 8 24
VAM INTERMEDIATE DURATION TOTAL RETURN FUND
Institutional Shares ................. 5 16
Service Shares ....................... 8 24
VAM INTERMEDIATE DURATION MUNICIPAL FUND
Institutional Shares ................. 5 16
Service Shares ....................... 8 24
THE EXAMPLES CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. The purpose of the above Fund Expenses table is to assist the
investor in understanding the various costs and expenses that investors in the
Funds will bear directly or indirectly. The Adviser and Voyageur Fund
Distributors, Inc. (the "Underwriter") have voluntarily agreed to waive fees and
reimburse expenses to the levels set forth in the table through October 31,
1995. The Investment Advisory Fees set forth in the table reflect a voluntary
fee waiver for each Fund other than VAM Global Fixed Income Fund. Under its
Investment Advisory Agreement with the Company, the Adviser is entitled to
receive from each such Fund a monthly advisory and management fee equivalent on
an annual basis to .50% of the average daily net assets of such Fund. See
"Management--Investment Adviser." In addition to the operating expenses paid by
each Fund, the Service Shares pay an additional service fee, equal on an annual
basis, of up to .25% of the Fund's average daily net assets attributable to
Service Shares. Such fee is paid to Service Organizations to provide additional
administrative, recordkeeping and other shareholder services to their customers
who are beneficial owners of Service Shares. See "Management -- Service
Organizations." After October 31, 1995, the voluntary fee waivers and expense
limitations reflected in the table may be discontinued or modified by the
Adviser and the Underwriter in their sole discretion. Absent such voluntary
limitations and waivers, Other Expenses for each of the Institutional Shares and
the Service Shares of each Fund (other than VAM Global Fixed Income Fund) are
not expected to exceed .50% per annum of the average daily net assets
attributable to such shares and Total Operating Expenses for such shares are not
expected to exceed 1.10% and 1.35% per annum, respectively, of the average daily
net assets attributable to such shares. The Other Expenses and Total Operating
Expenses for the Institutional Shares of VAM Global Fixed Income Fund are not
expected to exceed .60% and 1.50%, respectively, of the average daily net assets
of the Fund.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described below.
The securities in which the Funds invest and the investment techniques discussed
in this section are described in greater detail in the Prospectus under "Risks
and Characteristics of Securities and Investment Techniques" and in the
Statement of Additional Information. Each Fund's investment objective is
fundamental, which means that it cannot be changed without the vote of its
respective shareholders as provided in the Investment Company Act of 1940, as
amended (the "1940 Act"). The investment policies and techniques employed in
pursuit of the Funds' objectives may be changed without shareholder approval,
unless otherwise noted. There are risks in any investment program and there is
no assurance that a Fund's investment objective will be achieved. The value of
each Fund's shares will fluctuate with changes in the market value of its
investments. References to a "Fund" which appear below through the heading
"Duration" relate only to the Fund or Funds described in the heading preceding
such reference.
VAM GLOBAL FIXED INCOME FUND
The investment objective of VAM Global Fixed Income Fund ("Global
Fund") is to maximize total return, consistent with preservation of capital and
prudent investment management. The Fund will attempt to achieve its investment
objective by investing primarily in debt securities issued by issuers located
anywhere in the world.
Total investment return is the combination of income and capital
appreciation. The Adviser and the Sub-Adviser emphasize income in selecting
securities for the Fund, but also considers the potential for changes in value
resulting from changes in currency relationships, interest rates, individual
issuers' credit standing and other factors. The Fund seeks to maintain an
average portfolio duration ranging from three to eight years.
Foreign debt securities in which the Fund may invest include: (a)
obligations issued or guaranteed by foreign national governments, their
agencies, instrumentalities, or political subdivisions; (b) debt securities
issued or guaranteed by supranational organizations established or supported by
several national governments; (c) Brady Bonds; and (d) non-government foreign
debt securities. U.S. debt obligations in which the Fund may invest include U.S.
Government Securities, including mortgage-related securities, privately issued
mortgage-related securities, asset-backed securities and corporate debt
securities. The Fund may also invest in American Depository Receipts and
European Depository Receipts and in foreign index linked securities. A more
complete description of some of these types of securities is set forth under
"Risks and Characteristics of Securities and Investment Techniques."
The Fund will invest primarily in investment grade debt securities
(securities rated at least Baa by Moody's or BBB by S&P or, if unrated, of
comparable quality as determined by the Adviser or Sub-Adviser). Securities
rated Baa are considered by Moody's as medium-grade obligations which lack
outstanding investment characteristics and in fact have speculative
characteristics as well, while securities rated BBB are regarded by S&P as
having an adequate capacity to pay principal and interest. However, the Fund may
invest up to 5% of its net asset in debt securities that are rated below
investment grade but rated B or higher by Moody's or S&P (or, if unrated,
determined by the Adviser or the Sub-Adviser to be of comparable quality). Such
securities are sometimes referred to as "high yield" or "junk" bonds. See
"Investment Policies and Restrictions -- High Yield Securities" in the Statement
of Additional Information for a discussion of the risks of investing in high
yield securities. See Appendix A to the Statement of Additional Information for
a description of Moody's and S&P ratings applicable to fixed income securities.
Global Fund may invest in securities issued anywhere in the world,
including the United States. Under normal conditions, the Fund will be invested
in at least three different countries, one of which may be the United States.
Subject to the requirement that Global Fund may not invest 25% or more of its
total assets in obligations issued by the government of any one country (other
than the United States), there is no limit on the amount the Fund may invest in
any one country, or in securities denominated in the currency of any one
country, to take advantage of what the Sub-Adviser believes to be favorable
yields, currency exchange conditions or total investment return potential.
Depending on the Sub-Adviser's current opinion as to the proper allocation of
assets among domestic and foreign issuers, investments in the securities of
issuers located outside the United States will normally vary between 25% and 75%
of the Fund's assets.
The Fund may invest in securities denominated in the currencies of
countries that the Sub-Adviser considers to have stable governments and in debt
securities denominated in multi-national currency units, such as the European
Currency Unit ("ECU"). The ECU is a "basket" consisting of specified amounts of
the currencies of certain of the 12-member states of the European Community.
Securities of issuers within a given country may be denominated in the currency
of another country.
The Sub-Adviser will actively manage the allocation of the Fund's
investments among countries, geographic regions and currency denominations in an
attempt to achieve the Fund's objective. In allocating the Fund's assets among
various markets, the Sub-Adviser will consider such factors as the relative
yields and anticipated direction of interest rates in particular markets, the
level of inflation, liquidity and financial soundness of each country or market,
the general market and economic conditions existing in each country or market,
and the relationship of currencies of various countries to the U.S. dollar and
to each other. In its evaluations, the Sub-Adviser will utilize its internal
financial, economic, and credit analysis resources as well as information
obtained from other sources. The Fund's share price and yield will fluctuate due
to the movement of foreign currencies against the U.S. dollar and changes in
world wide interest rates and fixed-income markets. By actively managing the
portfolio and using currency hedging techniques, however, the Sub-Adviser will
attempt to reduce the risks.
Global Fund may buy or sell interest rate futures contracts, options on
interest rate futures contracts and options on debt securities for the purpose
of hedging against changes in the value of securities which the Fund owns or
anticipates purchasing due to anticipated changes in interest rates. The Fund
also may engage in foreign currency exchange transactions by means of buying and
selling foreign currency options, foreign currency futures, and options of
foreign currency futures. Foreign currency exchange transactions may be entered
into for the purpose of hedging against foreign currency exchange risk arising
from the Fund's investment or anticipated investment in securities denominated
in foreign currencies. Global Fund also may enter into foreign currency forward
contracts and buy or sell foreign currencies or foreign currency options for
purposes of increasing exposure to a particular foreign currency or to shift
exposure to foreign currency fluctuations from one country to another. The Fund
may enter into swap agreements for purposes of attempting to obtain a particular
investment return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that provided that desired return. In addition, the
Fund may purchase and sell securities on a when-issued or delayed-delivery basis
and enter into forward commitments to purchase securities, lend its securities
to brokers, dealers and other financial institutions to earn income, and enter
into reverse repurchase agreements as a means of borrowing money for investment
purposes. See "Risks and Characteristics of Securities and Investment
Techniques" for a description of these techniques and the risks involved in
their use.
Investing in foreign securities involves certain special considerations
which are not typically associated with investing in U.S. securities. See "Risks
and Characteristics of Securities and Investment Techniques -- Foreign
Securities."
Global Fund is "non-diversified" and, accordingly, will be able to
invest more than 5% of the value of its assets in the obligations of a single
issuer, subject to the diversification requirements of subchapter M of the
Internal Revenue Code of 1986, as amended. To the extent that Global Fund
invests a relatively high percentage of its assets in obligations of a limited
number of issuers, the Fund may be more susceptible than more widely
diversified funds to any single economic, political or regulatory occurrence or
to changes in an issuer's financial condition or in the market's assessments of
the issuer. See "Investment Policies and Restrictions -- Diversification" in the
Statement of Additional Information.
VAM SHORT DURATION GOVERNMENT AGENCY FUND AND VAM INTERMEDIATE DURATION
GOVERNMENT AGENCY FUND
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. VAM Short Duration Government
Agency Fund ("Short Government Fund") seeks to maintain an average portfolio
duration ranging from zero to three years and VAM Intermediate Duration
Government Agency Fund ("Intermediate Government Fund") seeks to maintain an
average portfolio duration ranging from three to five and one-half years.
Each Fund will invest exclusively in securities issued or guaranteed by
the United States government or its agencies or instrumentalities ("U.S.
Government Securities") and repurchase agreements fully secured by U.S.
Government Securities. The Funds may invest in mortgage-related U.S. Government
Securities, including derivative mortgage securities. The Funds will not,
however, invest in any derivative mortgage securities that have risk
characteristics which, in the opinion of the Adviser, are greater than those of
the underlying collateral, or in any derivative mortgage securities that have an
imbedded leverage component. Each Fund may purchase securities on a when-issued
basis and purchase or sell securities on a forward commitment basis and lend
their securities to brokers, dealers and other financial institutions to earn
income. The foregoing techniques involve special risk considerations. See "Risks
and Characteristics of Securities and Investment Techniques" for a description
of these techniques and the risks involved in their use.
VAM GOVERNMENT MORTGAGE FUND
The investment objective of VAM Government Mortgage Fund ("Government
Mortgage Fund") is to seek as high a level of current income as is consistent
with preservation of principal and the average duration of its portfolio
securities. The Fund seeks to maintain an average portfolio duration ranging
from zero to eight years. In attempting to achieve its investment objective, the
Fund will invest at least 65% of its total assets in mortgage-related U.S.
Government Securities; up to 35% of the Fund's total assets may be invested in
any combination of other U.S. Government Securities (e.g., Treasury bills, notes
and bonds and U.S. Government agency securities which are not mortgage-related)
and privately issued mortgage-related securities. Privately issued
mortgage-related securities in which the Fund invests must be rated A or higher
at the time of investment by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") or comparably rated by any other
nationally recognized statistical rating organization. For a discussion of the
various ratings assigned by Moody's and S&P, see Appendix A to the Statement of
Additional Information. The Fund's investments in mortgage-related securities
may include derivative mortgage securities. Risk characteristics of any
derivative mortgage securities in which the Fund invests will be limited as
described above for the Short and Intermediate Government Funds. The Fund may
enter into repurchase agreements collateralized by the securities in which it
may invest. In addition, the Fund may purchase securities on a when-issued basis
and purchase or sell securities on a forward commitment basis, lend its
securities to brokers, dealers and other financial institutions to earn income,
and enter into reverse repurchase agreements as a means of borrowing money for
investment purposes. The foregoing techniques involve special risk
considerations. See "Risks and Characteristics of Securities and Investment
Techniques" for a description of these techniques and the risks involved in
their use.
VAM SHORT DURATION TOTAL RETURN FUND AND VAM INTERMEDIATE DURATION TOTAL RETURN
FUND
The investment objective of each Fund is to achieve as high a level of
total return as is consistent with reasonable risk and with the average duration
of its respective portfolio securities. Under normal circumstances, VAM Short
Duration Total Return Fund ("Short Total Return Fund") seeks to maintain an
average portfolio duration ranging from zero to three years and VAM Intermediate
Duration Total Return Fund ("Intermediate Total Return Fund") seeks to maintain
an average portfolio duration ranging from three to five and one-half years. The
total return sought by the Funds is the combination of income and capital
appreciation. The Adviser emphasizes income in selecting securities for the
Funds, but also considers the potential for changes in value resulting from
changes in interest rates, individual issuers' credit standing and other
factors.
Each Fund will seek to realize its objective by investing in a
diversified portfolio of U.S. Government Securities (including mortgage-related
securities), corporate bonds and other fixed-income securities, including
privately issued mortgage-backed securities, asset-backed securities,
convertible bonds fixed-income securities issued by foreign governmental and
non-governmental issuers, foreign index linked securities and short-term
fixed-income securities. The Funds' investments in foreign securities (which
include securities issued by both governmental and non-governmental issuers)
will be limited to no more than 25% of a Fund's total assets and will consist
only of dollar denominated securities. The Funds' investments in
mortgage-related securities include derivative mortgage securities. Risk
characteristics of any derivative mortgage security in which the Funds invest
will be limited as described above for the Short and Intermediate Government
Funds.
The securities in each Fund's portfolio will have an overall
dollar-weighted average quality of at least A (as rated by Moody's or S&P). In
determining a Fund's overall dollar-weighted average quality, unrated securities
are treated as if rated, based on the Adviser's view of their comparability to
rated securities. Each Fund may invest up to 5% of its net assets in securities
that are rated lower than BBB by S&P or lower than Baa by Moody's but rated at
least B by S&P or Moody's (or, in either case, if unrated, deemed by the Adviser
to be of comparable quality). Securities rated Baa are considered by Moody's as
medium-grade obligations which lack outstanding investment characteristics and
in fact have speculative characteristics as well, while securities rated BBB are
regarded by S&P as having an adequate capacity to pay principal and interest.
Securities rated lower than Baa or BBB are sometimes referred to as "high yield"
or "junk" bonds. See "Investment Policies and Restrictions -- High Yield
Securities" in the Statement of Additional Information for a discussion of the
risks of investing in high yield securities. The Funds may be more dependent on
the Adviser's investment analysis with respect to securities for which a
comparable quality determination is made than is the case with respect to rated
securities. See Appendix A to the Statement of Additional Information for a
description of Moody's and S&P ratings applicable to fixed income securities.
Each Fund may buy or sell interest rate futures contracts, options on
interest rate futures contracts and options on debt securities for the purpose
of hedging against changes in the value of securities which a Fund owns or
anticipates purchasing due to anticipated changes in interest rates. The Funds
may enter into swap agreements for purposes of attempting to obtain a particular
investment return at a lower cost to the Fund than if the Fund had invested
directly in an instrument that provided that desired return. In addition, the
Funds may purchase securities on a when-issued basis and purchase or sell
securities on a forward commitment basis, lend their securities to brokers,
dealers and other financial institutions to earn income, and enter into reverse
repurchase agreements as a means of borrowing money for investment purposes. The
foregoing techniques involve special risk considerations. See "Risks and
Characteristics of Securities and Investment Techniques" for a description of
these techniques and the risks involved in their use.
VAM INTERMEDIATE DURATION MUNICIPAL FUND
The investment objective of VAM Intermediate Duration Municipal Fund
("Municipal Fund") is to provide current income that is exempt from regular
federal income tax, consistent with prudent investment risk and preservation of
capital. The Fund will seek to achieve its objective by investing substantially
all (in excess of 80%) of its total assets in tax-exempt Municipal Obligations
rated investment grade at the time of investment or determined by the Adviser to
be of comparable quality. Investment grade securities are those rated Baa or
better by Moody's or BBB or better by S&P in the case of long-term obligations,
or having equivalent ratings in the case of short-term obligations. Municipal
Obligations rated Baa are considered by Moody's as medium-grade obligations
which lack outstanding investment characteristics and in fact have speculative
characteristics as well, while Municipal Obligations rated BBB are regarded by
S&P as having an adequate capacity to pay principal and interest. The Fund may
invest up to 5% of its net assets in securities that are rated lower than BBB by
S&P or lower than Baa by Moody's but rated at least B by S&P or Moody's (or, in
either case, if unrated, deemed by the Adviser to be of comparable quality).
Such securities are sometimes referred to as "high yield" or "junk" bonds. See
"Investment Policies and Restrictions -- High Yield Securities" in the Statement
of Additional Information for a discussion of the risks of investing in high
yield securities. The securities in the Fund's portfolio will have an overall
dollar-weighted average quality of at least Aa or AA (as rated by Moody's or
S&P, respectively, or, if unrated, determined by the Adviser to be of comparable
quality). In determining the Fund's overall dollar-weighted average quality,
unrated securities are treated as if rated, based on the Adviser's view of their
comparability to rated securities. The Fund seeks to maintain an average
portfolio duration ranging from zero to six and one-half years.
The Fund does not intend to invest more than 25% of its total assets in
securities of governmental units located in any one state, territory or
possession of the United States. In addition, the Fund will not invest more than
25% of its total assets in limited obligation bonds payable only from revenues
derived from facilities or projects within a single industry. As to utility
companies, gas, electric, water and telephone companies will be considered as
separate industries.
In order to hedge its investment portfolio against market risk, the
Fund may purchase and sell futures contracts and may purchase and sell (or
write) exchange-listed and over-the-counter put and call options on securities
and futures contracts. The Fund may also purchase securities on a when-issued
basis and purchase or sell securities on a forward commitment basis. These
techniques involve special risk considerations. See "Risks and Characteristics
of Securities and Investment Techniques" for a description of these techniques
and the risks involved in their use.
The securities owned by the Fund may generate interest that is subject
to federal alternative minimum tax ("AMT"). Therefore, shares of the Fund may
not be an appropriate investment for investors who are, or as a result of an
investment in the Fund would be, subject to AMT. See "Distributions to
Shareholders and Taxes."
DURATION
Duration is a measure of the expected life of a fixed income security
that was developed as a more precise alternative to the concept of "term to
maturity." Duration incorporates a bond's yield, coupon interest payments, final
maturity and call features into one measure. Duration estimates the interest
rate risk (price volatility) of a security, i.e., how much the value of the
security is expected to change with a given change in interest rates. The longer
a security's effective duration, the more sensitive its price is to changes in
interest rates. For example, if interest rates were to increase by 1%, the
market value of a bond with an effective duration of five years would decrease
by about 5%, with all other factors being consistent. Duration is one of the
fundamental tools used by the Adviser, and with respect to Global Fund, the
Sub-Adviser, in portfolio selection for the Funds. With respect to Global Fund,
the Sub-Adviser manages the over-all duration of the portfolio, and the Adviser
and Sub-Adviser jointly determine the duration of the U.S. securities held by
the Fund.
Traditionally, a debt security's "term to maturity" has been used as a
proxy for the sensitivity of the security's price to changes in interest rates
(which is the "interest rate risk" or "volatility" of the security). However,
"term to maturity" measures only the time until a debt security provides its
final payment, taking no account of the pattern of the security's payments prior
to maturity. Duration is a measure of the expected life of a fixed income
security on a present value basis. Duration takes the length of the time
intervals between the present time and the time that the interest and principal
payments are scheduled or, in the case of a callable bond, expected to be
received, and weights them by the present values of the cash to be received at
each future point in time. For any fixed income security with interest payments
occurring prior to the payment of principal, duration is always less than
maturity. In general, all other things being equal, the lower the stated or
coupon rate of interest of a fixed income security, the longer the duration of
the security; conversely, the higher the stated or coupon rate of interest of a
fixed income security, the shorter the duration of the security.
Futures, options and options on futures have durations which, in
general, are closely related to the duration of the securities which underlie
them. Holding long futures or call option positions (backed by a segregated
account of cash and cash equivalents) will lengthen a Fund's duration by
approximately the same amount as holding an equivalent amount of the underlying
securities. Short futures or put option positions have durations roughly equal
to the negative duration of the securities that underlie these positions and
have the effect of reducing portfolio duration by approximately the same amount
as selling an equivalent amount of the underlying securities.
There are some situations where even the standard duration calculation
does not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage pass-through securities. The stated
final maturity of such securities is up to 30 years, but current prepayment
rates are more critical in determining the securities' interest rate exposure.
In these and other similar situations, the Adviser will use more sophisticated
analytical techniques that incorporate the economic life of a security into the
determination of its interest rate exposure. Deviations from these estimates in
the actual prepayments experienced, however, may significantly affect the
ultimate maturity of the security and, in such an event, the maturity, duration
and risk characteristics of the security may be significantly greater or less
than intended.
TEMPORARY INVESTMENTS
Each Fund may retain cash or invest in short-term money market
instruments when economic or market conditions are such that the Adviser deems a
temporary defensive position to be appropriate. In addition, even when a Fund is
fully invested, normally up to 5% of the Fund's total assets will be held in
short-term money market securities and cash to pay redemption requests and Fund
expenses. Investments in short-term money market securities may include
obligations of the U.S. Government and its agencies and instrumentalities, time
deposits, bank certificates of deposit, bankers' acceptances, high-grade
commercial paper and other money market instruments. Municipal Fund's
investments in short-term money market instruments may include both taxable and
tax-exempt obligations. To the extent Municipal Fund invests during temporary
defensive periods in taxable investments, the Fund will not at such times be in
a position to achieve its investment objective of tax-exempt income. Short
Government Fund's and Intermediate Government Fund's investments in short-term
money market securities will be limited to obligations of the U.S. Government
and its agencies and instrumentalities. See "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information.
RISKS AND CHARACTERISTICS OF SECURITIES
AND INVESTMENT TECHNIQUES
The following describes in greater detail different types of securities
and investment techniques used by the Funds, and discusses certain concepts
relevant to the investment policies of the Funds. Additional information about
the Funds' investments and investment practices may be found in the Statement of
Additional Information.
GENERAL
The different types of securities and investment techniques used by the
Funds all have attendant risks of varying degrees. For example, with respect to
debt securities, including money market instruments, there is the risk that the
issuer of a security may not be able to meet its obligation to make scheduled
interest or principal payments. In addition, the value of debt securities
generally rises and falls inversely with interest rates, and the longer the
maturity or duration of the debt security, the more volatile it may be in terms
of changes in current value. Because each Fund seeks a different investment
objective and has different investment policies, each is subject to varying
degrees of financial, market and credit risks. Therefore, investors should
carefully consider the investment objective, investment policies and potential
risks of any Fund before investing. Certain types of investments and investment
techniques that may be used by the Funds are described in greater detail,
including the risks of each, in this section.
U.S. GOVERNMENT SECURITIES
Each Fund other than Municipal Fund may invest in U.S. Government
Securities. U.S. Government Securities are issued or guaranteed as to payment of
principal and interest by the U.S. Government, its agencies or
instrumentalities. THE CURRENT MARKET PRICES FOR SUCH SECURITIES ARE NOT
GUARANTEED AND WILL FLUCTUATE AS WILL THE NET ASSET VALUE OF THE FUNDS. Some
U.S. Government Securities, such as Treasury bills, notes and bonds and
securities guaranteed by the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations, and still others are
supported only by the credit of the instrumentality.
U.S. Government Securities include securities that have no coupons, or
have been stripped of their unmatured interest coupons, individual interest
coupons from such securities that trade separately and evidences of receipt of
such securities. Such securities may pay no cash income and are purchased at a
deep discount from their value at maturity. Because interest on zero coupon
securities is not distributed on a current basis but is, in effect, compounded,
zero coupon securities tend to be subject to greater market risk than
interest-paying securities of similar maturities.
CORPORATE FIXED-INCOME SECURITIES
Short Total Return Fund, Intermediate Total Return Fund and Global Fund
may invest in corporate fixed-income securities, which include corporate bonds,
debentures, notes and other similar corporate debt instruments, including
convertible securities. Fixed-income securities may be acquired with warrants
attached. Corporate income-producing securities may also include forms of
preferred or preference stock. The rate of return or return of principal on some
fixed-income obligations may be linked or indexed to the level of exchange rates
between the U.S. dollar and a foreign currency or currencies. See "Foreign Index
Linked Securities," below.
The Funds' investments in corporate fixed-income securities may also
include zero coupon, pay-in-kind and delayed interest securities. Zero coupon
securities pay no cash income to their holders until they mature and are issued
at substantial discounts from their value at maturity. When held to maturity,
their entire return comes from the difference between their purchase price and
their maturity value. Pay-in-kind securities pay interest through the issuance
to the holders of additional securities. Delayed interest securities are
securities that remain zero coupon securities until a predetermined date at
which time the stated coupon rate becomes effective and interest becomes payable
at regular intervals. Because interest on zero coupon, pay-in-kind and delayed
interest securities is not paid on a current basis, the values of securities of
this type are subject to greater fluctuations than the values of securities that
distribute income regularly and they may be more speculative than such
securities. Accordingly, the values of these securities may be highly volatile
as interest rates rise or fall. In addition, a Fund's investments in zero
coupon, pay-in-kind and delayed interest securities will result in special tax
consequences. Although zero coupon securities do not make interest payments, for
tax purposes a portion of the difference between a zero coupon security's
maturity value and its purchase price is taxable income of the Fund each year.
MORTGAGE-RELATED SECURITIES
Each Fund's investments in U.S. Government Securities may include
investments in mortgage-related securities. In addition, Government Mortgage
Fund, Short Total Return Fund, Intermediate Total Return Fund and Global Fund
may invest in mortgage-related securities issued by private issuers.
Mortgage-related securities, as the term is used in this Prospectus, include
mortgage pass-through securities, adjustable rate mortgage securities and
derivative mortgage securities such as collateralized mortgage obligations and
stripped mortgage-backed securities. The investment characteristics of
mortgage-related securities differ from those of traditional fixed-income
securities. The major differences include the fact that interest payments and
principal repayments on mortgage-related securities are made more frequently
(usually monthly), and principal may be prepaid at any time because the
underlying mortgage loans or other assets generally may be prepaid at any time.
These differences can result in significantly greater price and yield volatility
than is the case with traditional fixed-income securities. As a result, if a
Fund purchases mortgage-related securities at a premium, a prepayment rate that
is faster than expected will reduce both the market value and the yield to
maturity from that which was anticipated, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity and
market value. Conversely, if a Fund purchases mortgage-related securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity and market value.
Mortgage pass-through securities are securities representing interests
in "pools" of mortgage loans secured by residential or commercial real property
in which payments of both interest and principal on the securities are generally
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities).
Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by GNMA); or guaranteed by agencies or instrumentalities
of the U.S. Government (in the case of securities guaranteed by FNMA or the
Federal Home Loan Mortgage Corporation ("FHLMC"), which guarantees are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage-related securities created by non-governmental
issuers (such as commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers) may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit, which
may be issued by governmental entities, private insurers or the mortgage
poolers.
Adjustable rate mortgage securities ("ARMS") are pass-through mortgage
securities collateralized by mortgages with interest rates that are adjusted
from time to time. The adjustments usually are determined in accordance with a
predetermined interest rate index and may be subject to certain limits. While
values of ARMS, like other fixed-income securities, generally vary inversely
with changes in market interest rates (increasing in value during periods of
declining interest rates and decreasing in value during periods of increasing
interest rates), the values of ARMS should generally be more resistant to price
swings than other fixed-income securities because the interest rates of ARMS
move with market interest rates. The adjustable rate feature of ARMS will not,
however, eliminate fluctuations in the prices of ARMS, particularly during
periods of extreme fluctuations in interest rates. Also, since many adjustable
rate mortgages only reset on an annual basis, it can be expected that the prices
of ARMS will fluctuate to the extent that changes in prevailing interest rates
are not immediately reflected in the interest rates payable on the underlying
adjustable rate mortgages.
Collateralized mortgage obligations ("CMOs") are derivative
mortgage-related instruments. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into multiple
classes, with each class bearing a different stated maturity. The principal and
interest payments on the underlying mortgages or mortgage pass-through
securities may be allocated among the several classes of a CMO in many ways. For
example, certain tranches may have variable or floating interest rates and
others may be stripped securities which provide only the principal or interest
feature of the underlying security. Generally, the purpose of the allocation of
the cash flow of a CMO to the various classes is to obtain a more predictable
cash flow to certain of the individual classes than exists with the underlying
collateral of the CMO. As a general rule, the more predictable the cash flow is
on a CMO class, the lower the anticipated yield will be on that tranche at the
time of issuance relative to prevailing market yields on mortgage-related
securities. As part of the process of creating more predictable cash flows on
most of the classes of a CMO, one or more tranches generally must be created
that absorb most of the volatility in the cash flows on the underlying mortgage
loans. The yields on these classes are generally higher than prevailing market
yields on mortgage-related securities with similar maturities. As a result of
the uncertainty of the cash flows of theses classes, the market prices of and
yields on the classes are generally more volatile. The Funds will not invest in
classes that the Adviser believes have risk characteristics greater than those
of the underlying collateral, including any classes that have an imbedded
leverage component. Classes in which the Funds will not invest include
"interest-only" or "IO" tranches, "principal only" or "PO" tranches, "inverse
floaters," "companion bonds," "z-tranches" and "inverse IOs." The Funds also
will not invest in stripped mortgage-backed securities.
CMOs that are issued or guaranteed by the U.S. Government or by any of
its agencies or instrumentalities will be considered U.S. Government Securities
by the Funds, while other CMOs, even if collateralized by U.S. Government
Securities, will have the same status as other privately issued securities for
purposes of applying a Fund's investment policies.
ASSET-BACKED SECURITIES
Short Total Return Fund, Intermediate Total Return Fund and Global Fund
may invest in asset-backed securities. Such securities represent the application
of the securitization techniques used to develop mortgage-related securities to
a broad range of other assets. Through the use of trusts and special purpose
corporations, various types of assets, primarily automobile and credit card
receivables and home equity loans, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above or in
a pay-through structure similar to the CMO structure.
In general, the collateral supporting asset-backed securities is of
shorter maturity than mortgage loans and is less likely to experience
substantial prepayments. As with mortgage-related securities, asset-backed
securities are often backed by a pool of assets representing obligations of a
number of different parties and use various credit enhancement techniques.
Generally, asset-backed securities involve many of the risks associated
with mortgage-related securities; however, asset-backed securities involve
certain risks that are not posed by mortgage-related securities, resulting
mainly from the fact that asset-backed securities do not usually contain the
complete benefit of a security interest in the related collateral. For example,
credit card receivables generally are unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, including
the bankruptcy laws, some of which may reduce the ability to obtain full
payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds for repossessed collateral may not always be
sufficient to support payments on these securities.
FOREIGN SECURITIES
Short Total Return Fund, Intermediate Total Return Fund and Global Fund
may invest in foreign fixed income securities denominated in U.S. dollars and
Global Fund may also invest in non-dollar denominated foreign securities.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than domestic custodial arrangements and
transaction costs of foreign currency conversions. Changes in foreign exchange
rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar.
Depository Receipts and Depository Shares. Short Total Return Fund,
Intermediate Total Return Fund and Global Fund may invest in American Depository
Receipts ("ADRs") or other similar securities, such as American Depository
Shares, convertible into securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a U.S. bank or
trust company evidencing ownership of the underlying securities. Generally,
ADRs, in registered form, are designed for use in U.S. securities markets. As a
result of the absence of established securities markets and publicly owned
corporations in certain foreign countries as well as restrictions on direct
investment by foreign entities, the Funds may be able to invest in such
countries solely or primarily through ADRs or similar securities and government
approved investment vehicles. No more than 5% of a Fund's assets will be
invested in ADRs sponsored by persons other than the underlying issuers. Issuers
of the stock of such unsponsored ADRs are not obligated to disclose material
information in the United States and, therefore, there may not be a correlation
between such information and the market value of such ADRs.
These Funds may also invest in Global Depository Receipts and Global
Depository Shares which are typically issued in bearer form and are designed for
use in European and other international securities markets.
Supranational Organizations. Short Total Return Fund, Intermediate
Total Return Fund and Global Fund may invest in fixed-income securities issued
or guaranteed by supranational organizations. Such organizations are entities
designated or supported by a government or government entity to promote economic
development, and include, among others, the Asian Development Bank, the European
Coal and Steel Community, the European Economic Community and the World Bank.
These organizations do not have taxing authority and are dependent upon their
members for payments of interest and principal. Each supranational entity's
lending activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves and
net income. Securities issued by supranational organizations may be denominated
in U.S. dollars or in foreign currencies. Short Total Return Fund and
Intermediate Total Return Fund will invest only in those securities denominated
in U.S. dollars. Global Fund is subject to no such limitation. Securities issued
or guaranteed by supranational organizations are considered by the Securities
and Exchange Commission to be securities in the same industry. Therefore, no
Fund will concentrate 25% or more of the value of its assets in securities of a
single supranational organization.
Brady Bonds. Short Total Return Fund, Intermediate Total Return Fund
and Global Fund may invest in Brady Bonds, which are created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are dollar-denominated) and they are actively
traded in the over-the-counter secondary market.
FOREIGN INDEX LINKED SECURITIES
Short Total Return Fund, Intermediate Total Return Fund and Global Fund
each may invest up to 10% of its total assets in instruments that return
principal and/or pay interest to investors in amounts which are linked to the
level of a particular foreign index ("Foreign Index Linked Securities"). A
foreign index may be based upon the exchange rate of a particular currency or
currencies or the differential between two currencies, or the level of interest
rates in a particular country or countries or the differential in interest rates
between particular countries. In the case of Foreign Index Linked Securities
linking the principal amount to a foreign index, the amount of principal payable
by the issuer at maturity will increase or decrease in response to changes in
the level of the foreign index during the term of the Foreign Index Linked
Securities. In the case of Foreign Index Linked Securities linking the interest
component to a foreign index, the amount of interest payable will adjust
periodically in response to changes in the level of the foreign index during the
term of the Foreign Index Linked Security. Foreign Index Linked Securities may
be issued by a U.S. or foreign governmental agency or instrumentality or by a
private domestic or foreign issuer. Only Foreign Index Linked Securities issued
by foreign governmental agencies or instrumentalities or by foreign issuers will
be considered foreign securities for purposes of the Funds' investment policies
and restrictions.
Foreign Index Linked Securities may offer higher yields than comparable
securities linked to purely domestic indexes but also may be more volatile.
Foreign Index Linked Securities are relatively recent innovations for which the
market has not yet been fully developed and, accordingly, they typically are
less liquid than comparable securities linked to purely domestic indexes. In
addition, the value of Foreign Index Linked Securities will be affected by
fluctuations in foreign exchange rates or in foreign interest rates. If the
Adviser is incorrect in its prediction as to the movements in the direction of
particular foreign currencies or foreign interest rates, the return realized by
a Fund on Foreign Index Linked Securities may be lower than if the Fund had
invested in a similarly rated domestic security.
MUNICIPAL OBLIGATIONS
Municipal Fund invests substantially all of its total assets in
tax-exempt Municipal Obligations. Municipal Obligations, as the term is used in
this prospectus, include Municipal Debt Securities, Derivative Municipal
Obligations and Municipal Lease Obligations, as defined below.
The yields on Municipal Obligations are dependent on a variety of
factors, including the financial condition of the issuer or other obligor
thereon or the revenue source from which debt service is payable, general
economic and monetary conditions, conditions in the relevant market, the size of
a particular issue, maturity of the obligation and the rating of the issue.
Generally, Municipal Obligations of longer maturity produce higher current
yields than municipal securities with shorter maturities but are subject to
greater price fluctuation due to changes in interest rates, tax laws and other
general market factors. Lower-rated Municipal Obligations generally produce a
higher yield than higher-rated Municipal Obligations due to the perception of a
greater degree of risk as to the payment of principal and interest. Certain
Municipal Obligations held by the Fund may permit the issuer at its option to
"call," or redeem, its securities. If an issuer were to redeem securities held
by the Fund during a time of declining interest rates, the Fund might not be
able to reinvest the proceeds in securities providing the same investment return
as the securities redeemed.
Municipal Obligations are subject to the provisions of bankruptcy,
insolvency, reorganization and other laws affecting the rights and remedies of
creditors, such as the federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or the applicable state legislature extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations. There is also the possibility that as a result
of litigation or other conditions the power or ability of issuers to meet their
obligations for the payment of interest on and principal of their Municipal
Obligations may be materially affected. THE CURRENT MARKET PRICES FOR SUCH
SECURITIES ARE NOT GUARANTEED AND WILL FLUCTUATE AS WILL THE NET ASSET VALUE OF
THE FUNDS.
Municipal Debt Securities. Municipal Debt Securities include
fixed-income obligations issued by states, cities, local authorities, and
possessions and certain territories of the United States, to obtain funds for
various public purposes, including the construction of such public facilities as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. Other public purposes for which Municipal
Debt Securities may be issued include the refinancing of outstanding obligations
and the obtaining of funds for general operating expenses and for loans to other
public institutions and facilities. In addition, certain industrial development,
private activity and pollution control bonds may be included within the term
Municipal Debt Securities if the interest paid thereon qualifies as exempt from
federal income tax. Municipal Debt Securities include long-term obligations,
often called municipal bonds, as well as short-term municipal notes and
tax-exempt commercial paper.
The two principal classifications of municipal bonds are "general
obligations" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Industrial
development, private activity and pollution control bonds are in most cases
revenue bonds and do not generally constitute the pledge of the credit or taxing
power of the issuer of such bonds. There are, of course, variations in the
security of Municipal Debt Securities, both within a particular classification
and between classifications, depending on numerous factors.
Certain Municipal Debt Securities may carry variable or floating rates
of interest whereby the rate of interest is not fixed but varies with changes in
specified market rates or indexes, such as a bank prime rate or a tax-exempt
money market index. Accordingly, the yield on such obligations can be expected
to fluctuate with changes in prevailing interest rates.
Other Municipal Debt Securities are zero coupon securities, which are
debt obligations which do not entitle the holder to any periodic payments prior
to maturity and are issued and traded at a discount from their face amounts. The
discount varies depending on the time remaining until maturity, prevailing
interest rates, liquidity of the security and perceived credit quality of the
issuer. The market prices of zero coupon securities are generally more volatile
than the market prices of securities that pay interest periodically and are
likely to respond to changes in interest rates to a greater degree than do
securities having similar maturities and credit quality that do pay periodic
interest.
Derivative Municipal Obligations. Municipal Fund may also acquire
Derivative Municipal Obligations, which are custodial receipts or certificates
underwritten by securities dealers or banks that evidence ownership of future
interest payments, principal payments or both on certain Municipal Debt
Securities. The underwriter of these certificates or receipts typically
purchases Municipal Debt Securities and deposits the securities in an
irrevocable trust or custodial account with a custodian bank, which then issues
receipts or certificates that evidence ownership of the periodic unmatured
coupon payments and the final principal payment on the obligations. Although
under the terms of a custodial receipt Municipal Fund typically would be
authorized to assert its rights directly against the issuer of the underlying
obligation, Municipal Fund could be required to assert through the custodian
bank those rights as may exist against the underlying issuer. Thus, in the event
the underlying issuer fails to pay principal and/or interest when due, Municipal
Fund may be subject to delays, expenses and risks that are greater than those
that would have been involved if Municipal Fund had purchased a direct
obligation of the issuer. In addition, in the event that the trust or custodial
account in which the underlying security had been deposited is determined to be
an association taxable as a corporation, instead of a non-taxable entity, it
would be subject to state income tax (but not federal income tax) on the income
it earned on the underlying security, and the yield on the security paid to
Municipal Fund and its shareholders would be reduced by the amount of taxes
paid. Furthermore, amounts paid by the trust or custodial account to Municipal
Fund would lose their tax-exempt character and become taxable, for federal and
state purposes, in the hands of Municipal Fund and its shareholders. However,
custodial receipts in which Municipal Fund will invest will be accompanied by a
tax opinion stating that interest payable on the receipts is tax exempt. If
Municipal Fund invests in custodial receipts, it is possible that a portion of
the discount at which Municipal Fund purchases the receipts might have to be
accrued as taxable income during the period that Municipal Fund holds the
receipts. See "Taxes -- Municipal Fund" in the Statement of Additional
Information.
The principal and interest payments on the Municipal Debt Securities
underlying custodial receipts may be allocated in a number of ways. For example,
payments may be allocated such that certain custodial receipts may have variable
or floating interest rates and others may be stripped securities which pay only
the principal or interest due on the underlying Municipal Debt Securities.
Municipal Fund currently does not invest in "interest only" or "principal only"
custodial receipts or in "inverse floating obligations." Municipal Fund may
invest in floating rate custodial receipts without limitation.
Derivative Municipal Obligations also include Municipal Debt Securities
that contain embedded instruments such as interest rate swaps, caps or floors
purchased by the issuing municipalities. By combining a fixed-rate, long-term
bond with an interest rate contract, a municipal issuer is able to issue a tax
exempt bond that will provide a partial hedge against interest fluctuations. For
example, if Municipal Fund purchases a Municipal Debt Security containing an
interest rate cap, during the term of the embedded cap Municipal Fund receives
the coupon rate on the underlying long-term bond less the cost of the cap for so
long as interest rates remain below the level of the cap. When interest rates
rise above that level, Municipal Fund receives the long-term bond coupon less
the cost of the cap plus the amount by which an index specified in the cap
agreement exceeds the cap level. This type of instrument would allow Municipal
Fund to hedge against a rise in interest rates. Municipal Fund will purchase
such obligations only if accompanied by a tax opinion stating that the entire
amount of interest payable on the obligation is tax exempt. Because final
Treasury Regulations have not been adopted with respect to these types of hybrid
obligations, however, it is possible that the Internal Revenue Service might
find a portion of the interest to be taxable. In addition, such obligations may
not be readily marketable.
Types of Derivative Municipal Obligations other than those described
above can be expected to be developed and marketed from time to time. Consistent
with its investment limitations, Municipal Fund expects to invest in those new
types of Derivative Municipal Obligations that the Adviser believes may assist
Municipal Fund in achieving its investment objective. Municipal Fund will notify
its shareholders to the extent that it intends to invest more than 5% of its net
assets in such obligations.
Municipal Lease Obligations. Also included within the general category
of Municipal Obligations are lease obligations or installment purchase contract
obligations and participations therein issued by tax-exempt issuers such as
state and local governments and their agencies and instrumentalities to finance
the acquisition of equipment and facilities (hereinafter collectively called
"Municipal Lease Obligations"). Although Municipal Lease Obligations do not
constitute general obligations of the issuer for which such issuer's taxing
power is pledged, a Municipal Lease Obligation is ordinarily backed up by the
issuer's covenant to budget for, appropriate and make the payments due under the
obligation. However, certain Municipal Lease Obligations contain
"non-appropriation" clauses which provide that the issuer has no obligation to
make lease or installment purchase payments in future years unless money is
appropriated for such purpose on a yearly basis. In the case of a
"non-appropriation" lease, Municipal Fund's ability to recover under the lease
in the event of non-appropriation or default will be limited solely to the
repossession of the leased property, without recourse to the general credit of
the lessee, and disposition of the property in the event of foreclosure might
prove difficult. In determining Municipal Lease Obligations in which Municipal
Fund will invest, the Adviser will carefully evaluate the outstanding credit
rating of the issuer (and the probable secondary market acceptance of such
credit rating). Municipal Lease Obligations, except in certain circumstances,
are considered illiquid by the staff of the Securities and Exchange Commission.
Municipal Lease Obligations held by Municipal Fund will be treated as illiquid
unless they are determined to be liquid pursuant to guidelines established by
the Board of Directors. See "Illiquid Securities," below.
HEDGING TECHNIQUES
To the extent permitted by the investment objectives and policies of
the Funds, the Funds may purchase and sell put and call options on securities
and securities indexes and enter into futures contracts and use options on
futures contracts as further described below. Certain Funds also may enter into
swap agreements with respect to interest rates and securities indexes. The Funds
may use these techniques to hedge against changes in interest rates or
securities prices, to generate income, to facilitate allocation of a Fund's
investments among asset classes or otherwise as part of their overall investment
strategies. The Funds will maintain segregated accounts consisting of cash, U.S.
Government Securities, or other high grade liquid debt obligations (or, as
permitted by applicable regulation, enter into certain offsetting positions) to
cover their obligations under options and futures contracts to avoid leveraging
of the Funds. The use of futures and options by Municipal Fund can be expected
to result in taxable income or gain to the Fund.
Options. A Fund may purchase put options on securities to protect
holdings on an underlying or related security against a substantial decline in
market value. A Fund may purchase call options on securities to protect against
substantial increases in prices of securities the Fund intends to purchase
pending its ability to invest in such securities in an orderly manner. A Fund
may sell put or call options it has previously purchased, which could result in
a net gain or loss depending on whether the amount realized on the sale is more
or less than the premium and other transaction costs paid on the put or call
option which is sold. A Fund may write a call or put option only if the option
is "covered" by the Fund holding a position in the underlying securities or by
other means which would permit immediate satisfaction of the Fund's obligation
as writer of the option. Prior to exercise or expiration, an option may be
closed out by an offsetting purchase or sale of an option of the same series.
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase above the
exercise price in the underlying securities, but, as long as its obligation as a
writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying securities at the exercise price. If a
put or call option purchased by a Fund is not sold when it has remaining value,
and if the market price of the underlying security, in the case of a put,
remains equal to or greater than the exercise price or, in the case of a call,
remains less than or equal to the exercise price, the Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security. There can be no assurance that a liquid market will exist when
a Fund seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options markets, a Fund may be
unable to close out a position.
The Funds may purchase and sell both exchange traded options and
over-the-counter options. Over-the-counter options differ from traded options in
that they are two-party contracts with price and other terms negotiated between
buyer and seller and generally do not have as much market liquidity as
exchange-traded options.
Swap Agreements. Short Total Return Fund, Intermediate Total Return
Fund and Global Fund may enter into interest rate and index swap agreements for
purposes of attempting to obtain a particular desired return at a lower cost to
such Funds than if such Funds had invested directly in an instrument that
yielded that desired return. Swap agreements are two-party contracts entered
into primarily by institutional investors for periods ranging from a few weeks
to more than one year. In a standard "swap" transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate or in a "basket" of
securities representing a particular index. Commonly used swap agreements
include interest rate caps, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates exceed a
specified rate, or "cap;" interest rate floors, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor;" and interest rate
collars, under which a party sells a cap and purchases a floor or vice versa in
an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictive basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by the Funds would
calculate the obligations of the parties to the agreement on a "net basis."
Consequently, a Fund's obligations (or rights) under a swap agreement will
generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). A Fund's obligations under a swap agreement
will be accrued daily (offset against amounts owed to the Fund) and any accrued
but unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
Securities, or high grade debt obligations, to avoid any potential leveraging of
the Fund's portfolio. A Fund will not enter into a swap agreement with any
single party if the net amount owed or to be received under existing contracts
with that party would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Adviser's ability to
predict correctly whether certain types of investments are likely to produce
greater returns than other investments. Because they are two-party contracts and
because they may have terms of greater than seven days, swap agreements may be
considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Adviser will cause a Fund to
enter into swap agreements only with counterparties that would be eligible for
consideration as repurchase agreement counterparties under the Fund's repurchase
agreement guidelines. Certain restrictions imposed on the Funds by the Internal
Revenue Code may limit the Funds' ability to use swap agreements. The swaps
market is a relatively new market and is largely unregulated. It is possible
that developments in the swaps market, including potential government
regulation, could adversely affect a Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.
Futures Contracts and Options on Futures Contracts. Certain of the
Funds may invest, as set forth under "Investment Objectives and Policies," in
interest rate futures contracts, stock index futures contracts and options
thereon ("futures options") that are traded on a United States exchange or board
of trade.
There are several risks associated with the use of futures and futures
options for hedging purposes. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and in the portfolio
securities being hedged. An incorrect correlation could result in a loss on both
the hedged securities in a Fund and the hedging vehicle so that the portfolio
return might have been greater had hedging not been attempted. There can be no
assurance that a liquid market will exist at a time when a Fund seeks to close
out a futures contract or a futures option position. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent a Fund from liquidating an unfavorable position and the
Fund would remain obligated to meet margin requirements until the position is
closed.
The Funds will only enter into futures contracts or futures options
which are standardized and traded on a U.S. exchange or board of trade, or
similar entity, or quoted on an automated quotation system. Each Fund will use
financial futures contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the Commodity
Futures Trading Commission. With respect to positions in financial futures and
related options that do not qualify as "bona fide hedging" positions, each Fund
will enter such non-hedging positions only to the extent that aggregate initial
margin deposits plus premiums paid by it for open futures option positions, less
the amount by which any such positions are "in-the-money," would not exceed 5%
of the Fund's total assets.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks or the failure to intervene, or by currency
controls or political developments in the U.S.
or abroad.
Global Fund may, in addition to buying and selling foreign currency
futures contracts and options on foreign currencies and foreign currency
futures, enter into forward foreign currency exchange contracts to reduce the
risks of adverse changes in foreign exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
By entering into a forward foreign currency contract, the Fund "locks in" the
exchange rate between the currency it will deliver and the currency it will
receive for the duration of the contract. As a result, the Fund reduces its
exposure to changes in the value of the currency it will deliver and increases
its exposure to changes in the value of the currency it will exchange into. The
effect on the value of the Fund is similar to selling securities denominated in
one currency and purchasing securities denominated in another. The Fund may
enter into these contracts for the purpose of hedging against foreign exchange
risk arising from the Fund's investment or anticipated investment in securities
denominated in foreign currencies. Global Fund may also enter into these
contracts for purposes of increasing exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one country to another. For
additional information, see "Investment Policies and Restrictions -- Foreign
Currency Transactions" in the Statement of Additional Information.
REPURCHASE AGREEMENTS
For the purpose of achieving income, each Fund may enter into
repurchase agreements with respect to any securities which it may acquire
consistent with its investment policies and restrictions. Repurchase agreements
are transactions by which a portfolio purchases a security and simultaneously
commits to resell that security to the seller (a bank or securities dealer) at
an agreed upon price on an agreed upon date (usually within seven days of
purchase). The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or date of
maturity of the purchased security. In these transactions, the securities
purchased by the Fund have a total value equal to or in excess of the repurchase
price and are held by the Fund's custodian bank until repurchased. Such
agreements permit the Fund to keep all its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer term nature. If
the party agreeing to repurchase should default, as a result of bankruptcy or
otherwise, the Fund will seek to sell the securities which it holds, which
action could involve procedural costs or delays in addition to a loss on the
securities if their value should fall below their repurchase price.
REVERSE REPURCHASE AGREEMENTS
Each Fund other than Short Government Fund and Intermediate Government
Fund may engage in "reverse repurchase agreements" with banks and securities
dealers. Reverse repurchase agreements will be used as a means of borrowing for
investment purposes. A reverse repurchase agreement involves the sale of a
security by a Fund and its agreement to repurchase the instrument at a specified
time and price. At the time a Fund enters into a reverse repurchase agreement,
cash, U.S. Government Securities or other liquid high-grade debt obligations
having a value sufficient to make payments for the securities to be repurchased
will be segregated, and will be maintained throughout the period of the
obligation. The use of reverse repurchase agreements by a Fund creates leverage,
which increases a Fund's investment risk. If the income and gains on securities
purchased with the proceeds of reverse repurchase agreements exceed the cost of
the agreements, the Fund's earnings or net asset value will increase faster than
otherwise would be the case; conversely, if the income and gains fail to exceed
the cost, earnings or net asset value would decline faster than otherwise would
be the case.
WHEN-ISSUED SECURITIES
Each Fund may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
The Funds will not accrue income with respect to when-issued or forward
commitment securities prior to their stated delivery date. Pending delivery of
the securities, each Fund maintains in a segregated account cash or liquid
high-grade debt obligations in an amount sufficient to meet its purchase
commitments. The Funds will likewise segregate securities they sell on a forward
commitment basis.
The purchase of securities on a when-issued or forward commitment basis
exposes a Fund to risk because the securities may decrease in value prior to
their delivery. Purchasing securities on a when-issued or forward commitment
basis involves the additional risk that the return available in the market when
the delivery takes place will be higher than that obtained in the transaction
itself. Placing securities rather than cash in the segregated account referred
to in the previous paragraph may have a leveraging effect on a Fund's net asset
value per share; that is, to the extent that a Fund remains substantially fully
invested in securities at the same time that it has committed to purchase
securities on a when-issued or forward commitment basis, greater fluctuations in
its net asset value per share may occur than if it had set aside cash to satisfy
its purchase commitments.
MORTGAGE DOLLAR ROLLS
Consistent with their ability to purchase securities on a when-issued
or forward commitment basis, each Fund other than Municipal Fund may enter into
mortgage "dollar rolls" in which a Fund sells securities for delivery in the
current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical securities
on a specified future date. The Fund entering into the dollar roll gives up the
right to receive principal and interest paid on the securities sold. However,
the Fund would benefit to the extent of any difference between the price
received for the securities sold and the lower forward price for the future
purchase plus any fee income received. Unless such benefits exceed the income,
capital appreciation and gain or loss due to mortgage prepayments that would
have been realized on the securities sold as part of the mortgage dollar roll,
the use of this technique will diminish the investment performance of a Fund
compared with what such performance would have been without the use of mortgage
dollar rolls. Each Fund entering into mortgage dollar roll transactions will
hold and maintain in a segregated account until the settlement date cash or
liquid high-grade debt securities in an amount equal to the forward purchase
price. The benefits derived from the use of mortgage dollar rolls may depend
upon the Adviser's ability to predict correctly mortgage prepayments and
interest rates. There is no assurance that mortgage dollar rolls can be
successfully employed. In addition, as discussed above with respect to
when-issued and forward commitment purchases, the use of mortgage dollar rolls
by a Fund while remaining substantially fully invested in securities may result
in greater fluctuations in the net asset value of a Fund's shares than would
have occurred had the Fund set aside cash to satisfy its purchase commitments.
BORROWING
Each Fund may borrow money from banks for temporary or emergency
purposes in an amount up to 20% of the value of the Fund's total assets. Reverse
repurchase agreements are not included in this limitation. See "Reverse
Repurchase Agreements" above. Interest paid by a Fund on borrowed funds would
decrease the net earnings of that Fund. None of the Funds will purchase
portfolio securities while outstanding borrowings (other than reverse repurchase
agreements) exceed 5% of the value of the Fund's total assets. Each Fund may
mortgage, pledge or hypothecate its assets to secure temporary or emergency
borrowing. The policies set forth in this paragraph are fundamental and may not
be changed with respect to a Fund without the approval of a majority of that
Fund's shares.
LOANS OF PORTFOLIO SECURITIES
For the purpose of achieving income, each Fund other than Short
Government Fund and Intermediate Government Fund may lend portfolio securities
up to one-third of the value of its total assets to broker-dealers, banks or
other financial borrowers of securities. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. However, the Funds will
receive collateral in the form of cash, U.S. Government Securities or other
high-grade debt obligations equal to at least 100% of the value of the
securities loaned. The value of the collateral and of the securities loaned will
be marked to market on a daily basis. During the time portfolio securities are
on loan, the borrower pays the Fund an amount equivalent to any dividends or
interest paid on the securities and the Fund may invest the cash collateral and
earn additional income or may receive an agreed upon amount on interest income
from the borrower. However, the amounts received by the Fund may be reduced by
finders' fees paid to broker-dealers and related expenses.
ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in illiquid
securities. Illiquid securities may offer a higher yield than securities which
are more readily marketable but they may not always be marketable on
advantageous terms. "Restricted securities" are securities which were originally
sold in private placements without registration under the Securities Act of 1933
(the "1933 Act"). Such securities will not be subject to the 15% limitation if
they are eligible for resale under Rule 144A of the 1933 Act and if they are
determined to be liquid by the Board of Directors of the Company or by the
Adviser subject to the oversight of and pursuant to procedures adopted by the
Board of Directors. See "Investment Objectives, Policies and Restrictions --
Illiquid Investments" in the Statement of Additional Information. Similar
determinations may be made with respect to privately placed commercial paper and
Municipal Lease Obligations.
The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. A Fund may be restricted in its
ability to sell such securities at a time when the Adviser deems it advisable to
do so. In addition, in order to meet redemption requests, a Fund may have to
sell other assets, rather than such illiquid securities, at a time which is not
advantageous.
PORTFOLIO TURNOVER
It is anticipated that under normal market conditions, the annual rate
of portfolio turnover will not exceed 100% for Municipal Fund, 150% for
Intermediate Government Fund, Government Mortgage Fund and Intermediate Total
Return Fund, 300% for Short Government Fund and Short Total Return Fund and 150%
for Global Fund. A 100% portfolio turnover rate would occur, for example, if all
of the securities in a Fund's portfolio (other than short-term securities) were
replaced once during the fiscal year. Portfolio turnover could be greater than
the rates indicated above in periods of unusual market movement and volatility.
A higher portfolio turnover rate would result in higher brokerage commissions or
other transactional expenses, which must be borne, directly or indirectly, by a
Fund and ultimately by the Fund's shareholders. For information on how portfolio
turnover rate is calculated, see "Investment Objectives and Policies--Portfolio
Turnover" in the Statement of Additional Information.
High portfolio turnover may result in a Fund accelerating the
realization of a gain and realizing more short-term capital gains than would be
the case if portfolio turnover were lower. Distributions of short-term capital
gains generally are taxed to shareholders as ordinary income. In addition, in
order for each Fund to maintain its status as a regulated investment company for
federal income tax purposes, it must limit the amount of gains from dispositions
of securities and certain other assets held less than three months to less than
30% of the Fund's gross income for the taxable year. High portfolio turnover may
result in more gains arising from sales of securities held less than three
months than in a situation in which portfolio turnover is lower. Although there
can be no assurance that a Fund will qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the"Code"), each Fund
intends to so qualify.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions in addition to
those set forth above, which are set forth in their entirety in the Statement of
Additional Information. Certain of these restrictions are fundamental and cannot
be changed without shareholder approval, including the following: (1) No Fund
(other than Global Fund) will, with respect to 75% of its total assets,
invest more than 5% of its total assets (taken at market value at the time of
such investment) in securities of any one issuer, except that this restriction
does not apply to U.S. Government Securities. (2) No Fund will concentrate 25%
or more of its total assets in any particular industry, except that this
restriction does not apply to U.S. Government Securities. Each Fund also has a
number of non-fundamental investment restrictions which may be changed by the
Fund's Board of Directors without shareholder approval. These include
restrictions providing that (a) no Fund may invest in the securities of an
investment company, except to the extent permitted by 1940 Act (currently no
more than 5% of total assets in securities of any single investment company or
10% of total assets in securities of two or more investment companies) and
except as part of a merger, consolidation or acquisition of assets and (b) no
Fund will invest more than 5% of its total assets in the securities of issuers
which, with their predecessors, have a record of less than three years'
continuous operation. To the extent that a Fund invests in the securities of
other investment companies, investors will be subject to duplicate management
and other fees and expenses.
Except for each Fund's policy regarding borrowing, if a percentage
restriction is adhered to at the time of an investment, a later increase or
decrease in percentage resulting from changes in values or assets will not
constitute a violation of such restriction.
PURCHASE OF SHARES
GENERAL
Shares of each Fund are purchased at the net asset value per share next
calculated after receipt of the purchase order, without a sales charge. The
minimum initial investment in each Fund is $100,000 and the minimum additional
investment is $10,000. Purchases of Fund shares will be made in full and
fractional shares. In the interest of economy and convenience, certificates for
shares will generally not be issued. Each Fund reserves the right, in its
absolute discretion, to reject any order for the purchase of its shares.
Interest income begins to accrue as of the opening of the New York
Stock Exchange (the "Exchange") on the day that payment is received. If payment
is made by check, payment is considered received on the day the check is
received if the check is drawn upon a member bank of the Federal Reserve System
within the Ninth Federal Reserve District (Michigan's Upper Peninsula,
Minnesota, Montana, North Dakota, South Dakota and northwestern Wisconsin). In
the case of other checks, payment is considered received when the check is
converted into "Federal Funds," i.e., monies of member banks within the Federal
Reserve System that are on deposit at a Federal Reserve Bank, normally within
two days after receipt.
An investor who may be interested in having shares redeemed shortly
after purchase should consider making unconditional payment by certified check,
by transmitting Federal Funds by wire or other means approved in advance by the
Underwriter. Payment of redemption proceeds will be delayed as long as necessary
to verify by expeditious means that the purchase payment has been or will be
collected. Such period of time typically will not exceed 15 days.
INSTITUTIONAL SHARES
Institutional Shares of the Funds may be purchased by opening an
account either by mail or by phone.
Purchases by Mail. To open an account by mail, complete the general
authorization form attached to this Prospectus and mail it along with a check
payable to the appropriate Fund, to Voyageur Fund Managers, Inc., South Seventh
Street, Suite 4400, Minneapolis, Minnesota 55402.
Purchases By Telephone. To open an account by telephone, call (612)
376-7014 or (800) 545-3863 to obtain an account number and instructions.
Information concerning the account will be taken over the phone. The investor
must then request a commercial bank with which he or she has an account and
which is a member of the Federal Reserve System to transmit Federal Funds by
wire to the appropriate Fund as follows:
First Bank, N.A., ABA #091000022
For credit of: (insert applicable Fund name)
Checking Account No.:
VAM Global Fixed Income Fund 1702-2514-4063
VAM Short Duration Government Agency Fund 1702-2514-1366
VAM Intermediate Duration Government Agency
Fund 1702-2514-3099
VAM Government Mortgage Fund 1702-2514-3107
VAM Short Duration Total Return Fund 1702-2514-3115
VAM Intermediate Duration Total Return Fund 1702-2514-3123
VAM Intermediate Duration Municipal Fund 1702-2514-3131
Account Number: (assigned by telephone)
Information on how to transmit Federal Funds by wire is available at
any national bank or any state bank that is a member of the Federal Reserve
System. The bank may charge the shareholder for the wire transfer. If the phone
order and Federal Funds are received before the primary close of trading on the
Exchange, the order will be deemed to become effective at that time. Otherwise,
the order will be deemed to become effective as of the primary close of trading
on the Exchange on the next day the Exchange is open for trading. The investor
will be required to complete the general authorization form attached to this
Prospectus and mail it to the appropriate Fund after making the initial
telephone purchase.
SERVICE SHARES
Customers of Service Organizations may invest in Service Shares only
through their Service Organizations. (Global Fund does not issue Service
Shares.)
Purchase orders may be made by telephoning the Underwriter at (800)
545-3863 or by a written request addressed to Voyageur Fund Managers, Inc., 90
South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402. It is strongly
recommended that payment be effected by wiring Federal Funds to the appropriate
Fund. For complete wire instructions, see "-- Institutional Shares -- Purchases
by Telephone" above. (Service Organizations should utilize this payment
information also.)
The Service Organizations are responsible for timely transmittal of
purchase orders and Federal Funds. In order to facilitate timely transmittal,
the Service Organizations have established times by which purchase orders and
Federal Funds must be received by them.
Service Organizations may charge other fees to their customers who are
the beneficial owners of Service Shares in connection with their customer
accounts. These fees would be in addition to any amounts received by the Service
Organization pursuant to its Service Agreement with Voyageur.
REDEMPTION OF SHARES
INSTITUTIONAL SHARES
Written Redemptions. Each Fund will redeem its shares in cash at the
net asset value next determined after receipt of a shareholder's written request
for redemption in "good order." "Good order" means that the redemption request
must be executed exactly as the shares are registered. If the redemption
proceeds are to be paid to the registered holder(s), a signature guarantee is
not normally required. A signature guarantee is required in certain other
circumstances. See "Redemptions" in the Statement of Additional Information.
Telephone Redemptions. Shareholders of any Fund redeeming at least
$1,000 of shares may do so by telephoning (612) 376-7014 or (800) 545-3863. The
applicable section of the authorization form must have been completed and filed
with the Fund before the telephone request is received. Shares will be redeemed
at their net asset value next determined following a Fund's receipt of the
redemption request. The proceeds of the redemption will be paid by check mailed
to the shareholder's address of record or, if requested at the time of
redemption, by wire to the bank designated on the authorization form.
The Funds will employ reasonable procedures to confirm that telephone
requests are genuine, including requiring that payment be made only to the
address of record or the bank account designated on the authorization form and
requiring certain means of telephonic identification. If a Fund follows such
procedures, it will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If a Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
Each Fund reserves the right at any time to suspend or terminate
telephone redemptions or to impose a fee for this service. There is currently no
additional charge to the shareholder for use of the telephone redemption
procedure.
SERVICE SHARES
Customers of Service Organizations may redeem Service Shares through
their respective Service Organizations. The Service Organizations are
responsible for the transmittal of redemption requests by their customers to the
Underwriter. In order to facilitate timely transmittal of redemption requests,
Service Organizations have established procedures by which redemption requests
must be made and times by which redemption requests must be received by them.
Additional documentation may be required when deemed appropriate by a Service
Organization.
A Service Organization as the record holder of Service Shares may
redeem such Shares without charge upon request on any Business Day at the net
asset value next determined after receipt by the Underwriter of the redemption
request. Redemption requests may be made using either of the procedures
described above for redemptions of Institutional Shares.
ADDITIONAL REDEMPTION INFORMATION
Shareholders who have submitted a request to one of the Funds for
redemption of their shares will not earn any income on such shares distributed
by the Fund on the redemption date. If shares for which payment has been
collected are redeemed, payment must be made within seven days. Each Fund may
suspend this right of redemption and may postpone payment only when the Exchange
is closed for other than customary weekends or holidays, or if permitted by the
rules of the Securities and Exchange Commission during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for such Fund to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Commission
for the protection of investors.
Each Fund reserves the right and currently plans to redeem Fund shares
and mail the proceeds to the shareholder if at any time the value of Fund shares
in the account falls below a specified value, currently set at $1,000.
Shareholders will be notified and will have 60 days to bring the account up to
the required value before any redemption action will be taken by a Fund.
EXCHANGE PRIVILEGE
Institutional Shares and Service Shares may be exchanged for shares of
the same class of any other of the Company's Funds which issue such shares,
provided that the shares to be acquired in the exchange are eligible for sale in
the shareholder's state of residence. An exchange must meet the minimum account
size requirement of the Fund; however, if an account is in existence, the
minimum amount which may be exchanged into that account is $1,000. The exchange
will be made on the basis of the relative net asset values next determined after
receipt of the exchange request. The Underwriter reserves the right, upon 60
days' prior notice, to restrict the frequency of, or otherwise modify,
condition, terminate or impose charges upon, exchanges. An exchange is
considered to be a sale of shares on which the investor may realize a capital
gain or loss for income tax purposes. Exchange requests should be placed
directly with the Fund by calling (800) 545-3863.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE FUNDS
Under the laws of the State of Minnesota, the Board of Directors of the
Company is responsible for managing the business and affairs of the Funds. The
names, addresses, principal occupations and other affiliations of Directors and
executive officers of the Company are set forth in the Statement of Additional
Information.
INVESTMENT ADVISER
The Adviser has been retained under an investment advisory agreement
(the "Advisory Agreement") with the Company to act as each Fund's investment
adviser, subject to the authority of the Board of Directors. The Adviser and the
Underwriter are each indirect wholly-owned subsidiaries of Dougherty Financial
Group Inc. ("DFG"), which is owned approximately 49% by Michael E. Dougherty,
49% by Pohlad Companies and less than 1% by cerain retirement plans for the
benefit of DFG employees. Mr. Dougherty co-founded the predecessor of DFG in
1977 and has served as Chairman of the Board and Chief Executive officer of DFG
since inception. Pohlad Companies is a holding company owned in equal parts by
each of James O. Pohlad, Robert C. Pohlad and William M. Pohlad. As of June 30,
1995, the Adviser and its affiliates served as the manager to six closed-end and
ten open-end investment companies (comprising 38 separate investment
portfolios), administered numerous private accounts and managed approximately
$8.9 billion in assets. The Adviser's principal business address is 90 South
Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
The Funds pay the Adviser a monthly investment advisory and management
fee equivalent on an annual basis to .70% of the average daily net assets of
Global Fund and .50% of the average daily net assets of each of the other Funds.
For the fiscal year ending October 31, 1995, the Adviser intends to limit such
fees to .70% of the average daily net assets of Global Fund and to .40% of each
of the other Fund's average daily net assets.
SUB-ADVISER
Lazard London International Investment Management (the "Sub-Adviser")
is the wholly owned SEC-registered investment advisory subsidiary of Lazard
Brothers & Co., Limited. Founded in 1870, Lazard Brothers & Co., Limited is
based in London and is one of the leading merchant banks in Europe. The address
of the Sub-Adviser is 21 Moorfields, London EC2P 2HT.
The fixed income investment style of Lazard's is that of a "top down"
specialist, with asset allocation refined through the application of
quantitative techniques. Investment policy is based on an examination of long
term global macro-economic fundamentals over a medium term time horizon. The
process seeks to add value from active management of currency exposure, country
allocation and the overall duration decision. The use of currency and interest
derivatives is emphasized in the implementation and control of risk.
The Sub-Advisory Agreement between the Adviser and the Sub-Adviser
provides that the Sub-Adviser is entitled to a fee paid by the Adviser, which is
accrued daily and paid monthly, equal to an annual rate of .35% of Global Fund's
average daily net assets. Global Fund pays no direct fee to the Sub-Adviser.
PORTFOLIO MANAGEMENT
Jane M. Wyatt, Chief Investment Officer of the Adviser, has overall
supervisory responsibility with respect to all open-end and closed-end funds
managed by the Adviser. The day-to-day portfolio manager of Short Government
Fund, Intermediate Government Fund, Government Mortgage Fund, Short Total Return
Fund and Intermediate Total Return Fund since their inception has been Richard
L. Vandenberg. Mr. Vandenberg has been a Portfolio Manager of the Adviser since
October 1992, prior to which he was a Proprietary Trader with Norwest Bank from
March 1992 to October 1992 and President of Ravan Corporation, a commodity
trading adviser in Excelsior, Minnesota, from 1990 to March 1992. Since its
inception, the day-to-day portfolio manager of Municipal Fund has been
Christopher R. Dougall. Mr. Dougall has been a Portfolio Manager of the Adviser
since December 1993, prior to which he was portfolio manager with Harris
Investment Management, Inc. in Chicago from December 1991 to December 1993 and
an analyst and associate portfolio manager with Harris from October 1988 to
December 1991. The day-to-day portfolio managers of Global Fund's portfolio have
been Patrick Shine, Ian Donald and Liisa Salojarvi since inception. Mr. Shine is
Deputy Head of Fixed Income Investments of the Sub-Adviser and is the senior
fixed income portfolio manager. He joined Lazard in 1991, prior to which he was
with Julius Baer Investment Management. Mr. Donald has been Fixed Income
Portfolio Manager of the Sub-Adviser since 1987. Ms. Salojarvi has been a Senior
Portfolio Manager of the Sub-Adviser since 1994, prior to which she served with
Nomura Research Institute, UBS Phillips & Drew and Balties Finance in
Copenhagen. Ms. Salojarvi is a Danish national. Since its inception, the
day-to-day portfolio manager of the U.S. securities in Global Fund's portfolio
has been Richard L. Vandenberg.
THE UNDERWRITER
The Institutional Shares of the Funds are distributed through Voyageur
Fund Distributors, Inc. (the "Underwriter") pursuant to a Distribution Agreement
between the Underwriter and the Company. No compensation is paid by the Funds
under the Distribution Agreement.
CUSTODIAN
First Trust National Association serves as the custodian of each Fund's
portfolio securities and cash.
DIVIDEND DISBURSING, TRANSFER, ADMINISTRATIVE AND ACCOUNTING SERVICES AGENT
The Adviser acts as each Fund's dividend disbursing, transfer,
administrative and accounting services agent to perform dividend-paying
functions, to calculate each Fund's daily share price, to maintain shareholder
records and to perform certain regulatory reporting and compliance related
services for the Funds. The fees paid for these services are based on each
Fund's assets and include reimbursement of out-of-pocket expenses. The Adviser
receives a monthly fee from each Fund equal on an annual basis to .15% of Global
Fund's average daily net assets and .10% of each of the other Fund's average
daily net assets. See "The Investment Adviser and Underwriter -- Expenses of the
Funds" in the Statement of Additional Information.
SERVICE ORGANIZATIONS
The Company, on behalf of each Fund other than Global Fund, has adopted
a Service Plan for Service Shares under which each Fund is authorized to
compensate Service Organizations to provide additional administrative,
recordkeeping and other shareholder services to their customers who are
beneficial owners of Service Shares. Pursuant to this Service Plan, the Company,
on behalf of each Fund, will enter into agreements with Service Organizations
which purchase Service Shares on behalf of their customers ("Service
Agreements"). The Service Agreements will provide for compensation to the
Service Organizations in an amount up to .25% (on an annualized basis) of the
average daily net assets of the Service Shares of the applicable Fund
attributable to or held in the name of the Service Organization for its
customers. The services provided by a Service Organization may include various
types of account administration and shareholder liaison services such as:
providing shareholder sub-accounting; receiving, aggregating and processing
shareholder orders; processing and maintaining separate records for employee
benefit plans; providing additional levels of shareholder communications; and
other services that augment the basic services provided by the Company to its
Funds under the Administrative Services Agreement.
Holders of Service Shares of a Fund will bear all expenses and fees
paid to Service Organizations for their services with respect to such Shares as
well as any other expenses which are directly attributable to such Shares.
Service Organizations (other than broker-dealers) may charge other fees to their
customers who are the beneficial owners of Service Shares in connection with
their customer accounts. These fees would be in addition to any amounts received
by the Service Organization under a Service Agreement and may affect the yield
earned on an investment in a Fund.
EXPENSES OF THE FUNDS
The Adviser and the Underwriter reserve the right to voluntarily waive
their fees in whole or part and to voluntarily absorb certain other of the
Funds' expenses. The Adviser and the Underwriter have agreed to waive fees or
absorb expenses for the fiscal year ending October 31, 1995, in such a manner
as will result in each Fund being charged total operating fees and expenses that
approximate those set forth in the section "Fund Expenses." After September 30,
1995, such voluntary fee and expense waivers may be discontinued or modified by
the Adviser and the Underwriter in their sole discretion.
Each Fund's expenses include, among others, fees of Directors, expenses
of Directors' and shareholders' meetings, insurance premiums, expenses of
redemption of shares, expenses of the issue and sale of shares (to the extent
not otherwise borne by the Underwriter), expenses of printing and mailing and
shareholder statements, association membership dues, charges of the Fund's
custodian, bookkeeping, auditing and legal expenses, the fees and expenses of
registering the Fund and its shares with the Securities and Exchange Commission
and registering or qualifying its shares under state securities laws, and
expenses of preparing and mailing prospectuses and reports to existing
shareholders.
PORTFOLIO TRANSACTIONS
No Fund will effect any brokerage transactions in its portfolio
securities with any broker-dealer affiliated directly or indirectly with the
Adviser unless such transactions, including the frequency thereof, the receipt
of commissions payable in connection therewith and the selection of the
affiliated broker-dealer effecting such transactions, are not unfair or
unreasonable to the shareholders of such Fund. It is not anticipated that any
Fund will effect any brokerage transactions with any affiliated broker-dealer,
including the Underwriter, unless such use would be to such Fund's advantage.
The Adviser may consider sales of shares of the Funds as a factor in the
selection of broker-dealers to execute the Funds' securities transactions.
DETERMINATION OF NET ASSET VALUE
The net asset value of Fund shares is determined once daily, Monday
through Friday, as of 3:00 p.m., Minneapolis time (the regular close of trading
on the Exchange) on each business day the Exchange is open for trading, except
on (i) days on which changes in the value of a Fund's portfolio securities will
not materially affect the current net asset value of the Fund's shares, (ii)
days during which no Fund shares are tendered for redemption and no order to
purchase or sell Fund shares is received by the Fund or (iii) customary national
business holidays on which the Exchange is closed for trading (as of the date
hereof, New Year's Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day).
For each Fund, the net asset value per share is determined by dividing
the value of the securities, cash and other assets of the Fund less all
liabilities by the total number of shares outstanding. A security listed or
traded on an exchange is valued at its last sale price (prior to the time as of
which assets are valued) on the exchange where it is principally traded.
Securities which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges. Lacking any sales on the exchange where it is principally
traded on the day of valuation, prior to the time as of which assets are valued,
the security generally is valued at the last bid price on that exchange. All
other securities for which over-the-counter quotations are readily available are
valued on the basis of the last current bid price. When market quotations are
not readily available, such securities are valued at fair value as determined in
good faith by the Board of Directors. However, debt securities may be valued on
the basis of valuations furnished by a pricing service which utilizes electronic
data processing techniques to determine valuations without regard to sale or bid
prices, when such valuations are believed by the Fund's officers, under the
supervision of the Board of Directors, to more accurately reflect the fair
market value of such securities. Short-term investments in debt securities with
maturities of less than 60 days when acquired, or which subsequently are within
60 days of maturity, are valued at amortized cost. While this method provides
certainty in valuation, it may result in periods during which the value, due to
changes in interest rates or other factors, of such short term investments is
higher or lower than the value the Fund would receive if it sold the security.
All assets and liabilities initially expressed in foreign currency values will
be converted into U.S. dollars as last quoted by any recognized dealer.
Generally, trading in foreign securities and in certain other
securities such as tax-exempt securities, corporate bonds, U.S. Government
Securities and money market instruments is substantially completed each day at
various times prior to the primary close of trading on the Exchange. The values
of such securities used in determining the net asset value of Fund shares are
computed as of such times. Occasionally events affecting the value of such
securities may occur between such times and the primary close of trading on the
Exchange which are not reflected in the computation of a Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities are valued at their fair market value as
determined in good faith by the Adviser in accordance with procedures adopted by
the Board of Directors.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
The present policy of each Fund is to declare a distribution from the
net investment income of the Fund on each day that the Fund is open for
business. Net investment income consists of interest accrued on portfolio
investments of a Fund, less accrued expenses, computed in each case since the
most recent determination of net asset value. Net realized long-term capital
gains, if any, are distributed annually, after utilization of any available
capital loss carryovers.
Shareholders of each Fund receive distributions from investment income
and capital gains in additional shares of the Fund at net asset value, without
any sales charge, unless they elect otherwise. Each Fund sends quarterly
statements to its shareholders with details of any reinvested dividends.
FEDERAL INCOME TAXATION
Each Fund is treated as a separate entity for federal income tax
purposes. Each Fund intends to qualify during its current taxable year as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). So long as a Fund so qualifies, it will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders. The following discussion of the federal income tax consequences of
investing in the Funds is based upon tax laws and regulations in effect on the
date of this Prospectus and is subject to change by legislative or
administrative action. For additional information, see "Taxes" in the Statement
of Additional Information. Prospective investors are advised to consult with
their tax advisers concerning the application of state and local tax laws to
investments in and distributions by the Funds. Shareholders will be notified
annually as to the amount, nature and federal income tax status of dividends and
distributions.
If shares of any Fund are sold or otherwise disposed of, the
shareholder will realize a capital gain or loss equal to the difference between
the purchase price and the sales price of the shares disposed of, if, as is
usually the case, the shares are a capital asset in the hands of the
shareholder. If the sale or other disposition occurs more than one year after
the shares were acquired, the resulting capital gain or loss will be long-term.
A special provision of the Code states that, if a Fund's shares with respect to
which a long-term capital gain distribution has been made are held for six
months or less, any loss on the sale or other disposition of those shares will
be a long-term capital loss to the extent of such long-term capital gain
distribution, unless such sale or other disposition is made pursuant to a plan
that provides for the periodic liquidation of an investment in the Fund.
A Fund investing in foreign securities may be required to pay
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 40%, which would reduce the Fund's net investment income. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If at the end of Short Total Return Fund's, Intermediate
Total Return Fund's or Global Fund's taxable year more than 50% of that Fund's
total assets consist of securities of foreign corporations, it will be eligible
to file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro rata
portions of such foreign taxes in gross income, treat such amounts as foreign
taxes paid by them, and deduct such amounts in computing their taxable income
or, alternatively, use them as foreign tax credits against their federal income
taxes.
Municipal Fund. Municipal Fund intends to take all actiona required to
ensure that the Fund can pay exempt-interest dividends. Distributions of net
interest income from tax-exempt obligations that are designated by Municipal
Fund as exempt-interest dividends are excludable from the gross income of such
Fund's shareholders. Municipal Fund's present policy is to designate
exempt-interest dividends at each daily distribution of net interest income.
Shareholders are required for information purposes to report exempt-interest
dividends and other tax-exempt interest on their tax returns. Distributions paid
from other interest income and from any net realized short-term capital gains
will be taxable to shareholders as ordinary income, whether received in cash or
in additional shares. Distributions paid from long-term capital gains (and
designated as such) are taxable as long-term capital gains for federal income
tax purposes, whether received in cash or shares, regardless of how long a
shareholder has held shares in Municipal Fund.
For federal income tax purposes, an alternative minimum tax ("AMT") is
imposed on taxpayers to the extent that such tax, if any, exceeds a taxpayer's
regular income tax liability (with certain adjustments). Liability for AMT will
depend on each shareholder's individual tax situation. Municipal Fund may invest
without limitation in obligations the interest on which is treated as an item of
tax preference for purposes of the AMT.
The Code imposes requirements on certain tax-exempt bonds which, if not
satisfied, could result in loss of tax exemption for interest on such bonds,
even retroactively to the date of issuance of the bonds. Proposals may be
introduced before Congress in the future, the purpose of which will be to
further restrict or eliminate the federal income tax exemption for tax-exempt
bonds held by Municipal Fund. Municipal Fund will avoid investment in bonds
which, in the opinion of the investment adviser, pose a material risk of the
loss of tax exemption. Further, if a bond in Municipal Fund's portfolio lost its
exempt status, Municipal Fund would make every effort to dispose of such
investment on terms that are not detrimental to such Fund.
Other Funds. Distributions by the Funds other than Municipal Fund are
generally taxable to shareholders, whether received in cash or in additional
shares of the Fund. Distributions from a Fund's net investment income and net
short-term capital gains are taxable to shareholders as ordinary income.
Distributions from a Fund designated as long-term capital gain distributions
will be taxable to the shareholder as long-term capital gains irrespective of
how long the shareholder has held the shares. Shareholders not subject to
federal income taxation will not be taxed on distributions by the Funds.
INVESTMENT PERFORMANCE
Advertisements and other sales literature for the Funds may refer to
"yield," "average annual total return," "cumulative total return," "current
distribution rate" and, with respect to Municipal Fund, "taxable equivalent
yield," and may compare such performance quotations with published indices and
comparable quotations of other funds. Performance quotations are computed
separately for Institutional Shares and Service Shares of the Funds. When a Fund
advertises any performance information, it also will advertise its average
annual total return as required by the rules of the Securities and Exchange
Commission and will include performance data for Institutional Shares and
Service Shares. All such figures are based on historical earnings and
performance and are not intended to be indicative of future performance.
Additionally, performance information may not provide a basis for comparison
with other investments or other mutual funds using a different method of
calculating performance. The investment return on and principal value of an
investment in any Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
The advertised "yield" of a Fund will be based on a 30-day period in
the advertisement. Yield is calculated by dividing the net investment income per
share deemed earned during the period by the maximum offering price per share on
the last day of the period. The result is then "annualized" using a formula that
provides for semi-annual compounding of income.
"Taxable equivalent yield" is calculated by applying the stated income
tax rate only to that portion of the yield that is exempt from taxation. The tax
exempt portion of the yield is divided by the number 1 minus the stated income
tax rate (e.g., 1-28% = 72%). The result is then added to that portion of the
yield, if any, that is not tax exempt.
The "average annual total return" is the average annual compounded rate
of return based upon a hypothetical $1,000 investment made at the beginning of
the advertised period. In calculating average annual total return, the maximum
sales charge is deducted from the hypothetical investment and all dividends and
distributions are assumed to be reinvested.
"Cumulative total return" is calculated by subtracting a hypothetical
$1,000 payment to a Fund from the ending redeemable value of such payment (at
the end of the relevant advertised period), dividing such difference by $1,000
and multiplying the quotient by 100. In calculating ending redeemable value, all
income and capital gain distributions are assumed to be reinvested in additional
Fund shares and the maximum sales charge is deducted.
Each Fund, from time to time, may also quote a "current distribution
rate" to shareholders. A current distribution rate as of a date is calculated by
determining the amount of distributions that would have been paid over the
twelve-month period ending on such date to the holder of one hypothetical Fund
share purchased at the beginning of such period, and dividing such amount by the
current maximum offering price per share (the net asset value per Fund share
plus the maximum sales charge).
In addition to advertising total return and yield, comparative
performance information may be used from time to time in advertising the Funds'
shares, including data from Lipper Analytical Services, Inc., Morningstar and
other entities or organizations which track the performance of investment
companies. Performance information for the Funds may also be compared to various
unmanaged indices, such as the Lehman Brothers Government and Corporate Bond
Index, the Merrill Lynch 1 to 3 Year and 3 to 7 Year Treasury Indices, the
Merrill Lynch 1 to 3 Year Government Bond Index, the Merrill Lynch 15 Year GNMA
Index, the Salomon Brothers World Government Benchmark Bond Index, the Merrill
Lynch 1 to 10 Year Intermediate Term High Quality Corporate Bond Index and the
Lehman Brothers G7 Global Bond Index. Unmanaged indices generally do not reflect
deductions for administrative and management costs and expenses. For Fund
performance information and daily net asset value quotations, investors may call
(612) 376-7010 or (800) 525-6584.
For additional information regarding the calculation of each Fund's
yield, average annual total return, cumulative total return and current
distribution rate, see "Calculation of Performance Data" in the Statement of
Additional Information.
GENERAL INFORMATION
Each Fund sends to its shareholders six-month unaudited and annual
audited financial statements which include a list of investment securities held
by the Fund.
Global Fund was established in 1995 and each of the other Funds was
established in 1994, each as a separate series of VAM Institutional Funds, Inc.,
a Minnesota corporation incorporated in January 1985. The Articles of
Incorporation limit the liability of the Directors to the fullest extent
permitted by law. The Articles of Incorporation currently permit the Directors
to issue an unlimited number of full and fractional shares of seven distinct
series, each of which evidences an interest in a separate portfolio of
investments with its own investment objective, policies and restrictions. The
Articles of Incorporation also permit the Directors, without shareholder
approval, to create additional series of shares and to subdivide any series into
various classes of shares with such dividend preferences and other rights as the
Directors may designate. The Funds currently offer their shares in two classes:
Institutional Shares and Service Shares.
It is contemplated that most Service Shares will be held in accounts
of which the record owner is a bank or other institution acting, directly or
through an agent, as nominee for its customers who are the beneficial owners of
the shares or another organization designated by such bank or institution.
Service Shares will be marketed only to such institutional investors, at net
asset value with no sales load. Institutional Shares may be purchased for
accounts in the name of an investor or institution that is not compensated by
the Fund for services provided to the institution's investors. Service Shares
may be purchased for accounts held in the name of an institution that is
compensated for providing certain account administration and shareholder liaison
services to its customers, including providing shareholder sub-accounting;
receiving, aggregating and processing shareholder orders; processing and
maintaining separate records for employee benefit plans; providing additional
levels of shareholder communications; and other services that augment the basic
services provided to the Company and its Funds under the Administrative Services
Agreement. Service Shares bear the cost of service fees at the annual rate of up
to .25 of 1% of the average daily net assets of such Shares.
Each Institutional Share and Service Share of a Fund represents an
equal proportionate interest in the assets belonging to the Fund and have
identical voting, dividend, liquidation and other rights on the same terms and
conditions except that the service fees relating to the Service Shares will be
borne exclusively by that class. In addition, each class of shares has exclusive
voting rights with respect to any other matters for which separate class voting
is appropriate under applicable law.
It is possible that an investor may be offered different classes of
shares and thus indirectly bear different expenses with respect to different
classes of the same Fund, although the Funds intend to limit the availability of
shares of the different classes to different types of investors.
Fund shares are freely transferable, are entitled to dividends as
declared by the Directors, and, in liquidation of a Fund, are entitled to
receive the net assets of such Fund. The Funds do not generally hold annual
meetings of shareholders and will do so only when required by law. Shareholders
may remove Directors from office by votes cast in person or by proxy at a
meeting of shareholders or by written consent and, in accordance with Section
16(c) of the 1940 Act, the Directors shall promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director when requested to do so by the record holders of not less than 10% of
the outstanding shares.
Each share of a series has one vote irrespective of the relative net
asset value of the series' shares. On some issues, such as the election of
Directors, all shares of the Company vote together as one series. On an issue
affecting only a particular series, the shares of the affected series vote as a
separate series. An example of such an issue would be a fundamental investment
restriction pertaining to only one series. In voting on the Investment Advisory
Agreements, approval by the shareholders of a particular series is necessary to
make such agreement effective as to that series.
The assets received by the Company for the issue or sale of shares of
each series or class thereof, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are allocated to such series,
and in the case of a class, allocated to such class, and constitute the
underlying assets of such series or class. The underlying assets of each series
or class thereof are required to be segregated on the books of account, and are
to be charged with the expenses in respect to such series or class and with a
share of the general expenses of the Company. Any general expenses of the
Company not readily identifiable as belonging to a particular series or class
shall be allocated among the series or classes thereof, based upon the relative
net assets of the series or class at the time such expenses were accrued.
For a further discussion of the above matters, see "Additional
Information" in the Statement of Additional Information.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS (AND/OR IN THE
STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE COVER PAGE OF THIS
PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR VOYAGEUR FUND
DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN THE STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
PART B
VAM GLOBAL FIXED INCOME FUND
VAM SHORT DURATION GOVERNMENT AGENCY FUND
VAM INTERMEDIATE DURATION GOVERNMENT AGENCY FUND
VAM GOVERNMENT MORTGAGE FUND
VAM SHORT DURATION TOTAL RETURN FUND
VAM INTERMEDIATE DURATION TOTAL RETURN FUND
VAM INTERMEDIATE DURATION MUNICIPAL FUND
SEPARATELY MANAGED SERIES OF VAM INSTITUTIONAL FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED AUGUST 1, 1995
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Prospectus of the Funds dated August 1,
1995. A copy of the Prospectus or this Statement of Additional Information may
be obtained free of charge by contacting the Funds at 90 South Seventh Street,
Suite 4400, Minneapolis, Minnesota 55402. Telephone: (612) 376-7000 or Toll Free
(800) 553-2143.
Each Fund (other than VAM Global Fixed Income Fund) offers two classes
of shares -- the Institutional Class Shares ("Institutional Shares) and the
Institutional Service Class Shares ("Service Shares"). Both classes of shares
are primarily designed to provide pension and profit sharing plans, employee
benefit trusts, endowments, foundations, corporations, other institutions and
high net worth individuals access to the professional investment management
services offered by Voyageur Fund Managers, Inc. (the "Adviser"). VAM Global
Fixed Income Fund offers only Institutional Shares.
TABLE OF CONTENTS
Page
Investment Policies and Restrictions .............. 2
Directors and Executive Officers .................. 14
The Investment Adviser, Sub-Adviser,
Administrative Services, Expenses and Brokerage... 16
Net Asset Value and Public Offering Price ......... 20
Taxes ............................................. 20
Calculation of Performance Data ................... 23
Redemptions ....................................... 24
Additional Information ............................ 24
Financial Statements .............................. F-1
Appendix A -- Description of Securities Ratings.... A-1
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information or the Prospectus dated August 1, 1995, and, if given or made, such
information or representations may not be relied upon as having been authorized
by the Funds. This Statement of Additional Information does not constitute an
offer to sell securities in any state or jurisdiction in which such offering may
not lawfully be made. The delivery of this Statement of Additional Information
at any time shall not imply that there has been no change in the affairs of the
Funds since the date hereof.
INVESTMENT POLICIES AND RESTRICTIONS
The investment objectives, policies and restrictions of VAM Global
Fixed Income Fund ("Global Fund"), VAM Short Duration Government Agency Fund
("Short Government Fund"), VAM Intermediate Duration Government Agency Fund
("Intermediate Government Fund"), VAM Government Mortgage Fund ("Government
Mortgage Fund"), VAM Short Duration Total Return Fund ("Short Total Return
Fund"), VAM Intermediate Duration Total Return Fund ("Intermediate Total Return
Fund") and VAM Intermediate Duration Municipal Fund ("Municipal Fund")
(collectively, the "Funds") are set forth in the Prospectus. Certain additional
investment information is set forth below. All capitalized terms not defined
herein have the same meanings as set forth in the Prospectus.
MORTGAGE-RELATED SECURITIES
As discussed in the Prospectus, each Fund may invest in
mortgage-related securities. Certain of the Funds may invest only in
mortgage-related securities which are issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, whereas other Funds may
also invest in mortgage-related securities issued by private issuers. The
mortgage-related securities in which the Funds may invest include mortgage
pass-through securities, adjustable rate mortgage securities and derivative
mortgage securities such as collateralized mortgage obligations. There are
currently three basic types of mortgage-related securities: (a) those issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities,
such as GNMA, FNMA and FHLMC; (b) those issued by non-governmental issuers that
represent interests in, or are collateralized by, mortgage-related securities
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities; and (c) those issued by non-governmental issuers that
represent an interest in, or are collateralized by, whole mortgage loans or
mortgage-related securities without a government guarantee but usually with
over-collateralization or some other form of private credit enhancement.
Non-governmental issuers referred to in (b) and (c) above include originators of
and investors in mortgage loans, including savings and loan associations,
mortgage bankers, commercial banks, investment banks and special purpose
subsidiaries of the foregoing.
The government guaranteed mortgage pass-through securities in which the
Funds may invest will include certificates issued or guaranteed by GNMA, FNMA
and FHLMC, which represent interests in underlying residential mortgage loans.
These mortgage pass-through securities provide for the pass-through to investors
of their pro-rata share of monthly payments (including any prepayments) made by
the individual borrowers on the pooled mortgage loans, net of any fees paid to
the guarantor of such securities and the servicer of the underlying mortgage
loans. Each of GNMA, FNMA and FHLMC guarantee timely distributions of interest
to certificate holders. GNMA and FNMA guarantee timely distributions of
scheduled principal. FHLMC generally guarantees only ultimate collection of
principal of the underlying mortgage loans.
Private mortgage pass-through securities ("Private Pass-Throughs") are
structured similarly to GNMA, FNMA and FHLMC mortgage pass-through securities
and are issued by originators of and investors in mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. Since Private
Pass-Throughs typically are not guaranteed by an entity having the credit status
of GNMA, FNMA or FHLMC, such securities generally are structured with one or
more types of credit enhancement.
Collateralized mortgage obligations ("CMOs") are debt instruments
issued by special purpose entities which are secured by pools of mortgage loans
or other mortgage-related securities. Multi-class pass-through securities are
equity interests in a trust composed of mortgage loans or other mortgage-related
securities. Payments of principal and interest on underlying collateral provide
the funds to pay debt service on the CMO or make scheduled distributions on the
multi-class pass-through security. CMOs and multi-class pass-through securities
(collectively CMOs unless the context indicates otherwise) may be issued by
agencies or instrumentalities of the United States Government or by private
organizations.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements. The Funds' custodian
will hold the securities underlying any repurchase agreement or such securities
will be part of the Federal Reserve Book Entry System. The market value of the
collateral underlying the repurchase agreement will be determined on each
business day. If at any time the market value of the collateral falls below the
repurchase price of the repurchase agreement (including any accrued interest)
the applicable Fund will promptly receive additional collateral (so that the
total collateral has a market value at least equal to the repurchase price plus
accrued interest).
HIGH YIELD SECURITIES
Short Total Return Fund, Intermediate Total Return Fund, Municipal Fund
and Global Fund may each invest up to 5% of their net assets in fixed-income
securities rated lower than Baa by Moody's or lower than BBB by S&P but rated at
least B by Moody's or S&P. Securities rated lower than Baa by Moody's or lower
than BBB by S&P are sometimes referred to as "high yield" or "junk" bonds. In
addition, securities rated Baa are considered by Moody's to have some
speculative characteristics.
Investing in high yield securities involves special risks in addition
to the risks associated with investments in higher rated fixed-income
securities. High yield securities may be regarded as predominately speculative
with respect to the issuer's continuing ability to meet principal and interest
payments. Analysis of the creditworthiness of issuers of high yield securities
may be more complex than for issuers of higher quality fixed-income securities,
and the ability of the Funds to achieve their investment objectives may, to the
extent of their investments in high yield securities, be more dependent upon
such creditworthiness analysis than would be the case if the Funds were
investing in higher quality securities.
High yield securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than higher grade
securities. The prices of high yield securities have been found to be less
sensitive to interest rate changes than more highly rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in high yield security prices because the advent
of a recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of high
yield securities defaults, the Funds may incur additional expenses to seek
recovery. In the case of high yield securities structured as zero coupon or
payment-in-kind securities, the market prices of such securities are affected to
a greater extent by interest rate changes, and therefore tend to be more
volatile than securities which pay interest periodically and in cash.
The secondary markets on which high yield securities are traded may be
less liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect and cause large fluctuations in
the daily net asset value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high yield securities, especially in a thinly traded
market.
There may be special tax considerations associated with investing in
high yield securities structured as zero coupon or payment-in-kind securities. A
Fund records the interest on these securities as income even though it receives
no cash interest until the security's maturity or payment date. The Funds will
be required to distribute all or substantially all such amounts annually and may
have to obtain the cash to do so by selling securities which otherwise would
continue to be held. Shareholders will be taxed on these distributions.
The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit ratings
in a timely fashion to reflect events since the security was last rated. The
Adviser does not rely solely on credit ratings when selecting securities for the
Funds and develops its own independent analysis of issuer credit quality. If a
credit rating agency changes the rating of a portfolio security held by a Fund,
the Fund may retain the portfolio security if the Adviser deems it in the best
interest of the Fund's shareholders.
The market for high yield securities may be thinner and less active
than that for higher rated fixed-income securities, which can adversely affect
the prices at which the former are sold. If market quotations are not available,
high yield securities will be valued in accordance with procedures established
by the Board of Directors, including the use of outside pricing services.
Judgment plays a greater role in valuing high yield debt securities than is the
case for securities for which more external sources for quotations and last sale
information is available. Adverse publicity and changing investor perception may
affect the ability of outside pricing services to value high yield securities
and the Funds' ability to dispose of these securities.
Since the risk of default is high for high yield securities, research
and credit analysis are an especially important part of managing securities of
this type. The Adviser will attempt to identify those issuers of high yielding
debt securities whose financial condition is adequate to meet future
obligations, has improved or is expected to improve in the future. The Adviser's
analysis will focus on relative values based on such factors as interest in
dividend coverage, asset coverage, earnings prospects and the experience and
managerial strength of the issuer.
OPTIONS AND FUTURES TRANSACTIONS
To the extent set forth in the Prospectus and herein, certain Funds may
buy and sell put and call options, futures contracts and options on futures
contracts with respect to financial instruments and stock and interest rate
indexes. Futures and options will be used to facilitate allocation of a Fund's
investments among asset classes, to generate income or to hedge against changes
in interest rates or declines in securities prices or increases in prices of
securities proposed to be purchased. Different uses of futures and options have
different risk and return characteristics. Generally, selling futures contracts,
purchasing put options and writing (i.e., selling) call options are strategies
designed to protect against falling securities prices and can limit potential
gains if prices rise. Purchasing futures contracts, purchasing call options and
writing put options are strategies whose returns tend to rise and fall together
with securities prices and can cause losses if prices fall. If securities prices
remain unchanged over time option writing strategies tend to be profitable,
while option buying strategies tend to decline in value.
Writing Options. Certain Funds may write (i.e., sell) covered put and
call options with respect to the securities in which they may invest. By writing
a call option, a Fund becomes obligated during the term of the option to deliver
the securities underlying the option upon payment of the exercise price if the
option is exercised. By writing a put option, a Fund becomes obligated during
the term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. With respect to put options written
by any Fund, there will have been a predetermination that acquisition of the
underlying security is in accordance with the investment objective of such Fund.
"Covered options" means that so long as a Fund is obligated as the
writer of a call option, it will own the underlying securities subject to the
option (or comparable securities satisfying the cover requirements of securities
exchanges). A Fund will be considered "covered" with respect to a put option it
writes if, so long as it is obligated as the writer of a put option, it deposits
and maintains with its custodian cash, U.S. Government securities or other
liquid high-grade debt obligations having a value equal to or greater than the
exercise price of the option.
Through the writing of call or put options, a Fund may obtain a greater
current return than would be realized on the underlying securities alone. A Fund
receives premiums from writing call or put options, which it retains whether or
not the options are exercised. By writing a call option, a Fund might lose the
potential for gain on the underlying security while the option is open, and by
writing a put option, a Fund might become obligated to purchase the underlying
security for more than its current market price upon exercise.
Purchasing Options. Certain Funds may purchase put options in order to
protect portfolio holdings in an underlying security against a decline in the
market value of such holdings. Such protection is provided during the life of
the put because a Fund may sell the underlying security at the put exercise
price, regardless of a decline in the underlying security's market price. Any
loss to a Fund is limited to the premium paid for, and transaction costs paid in
connection with, the put plus the initial excess, if any, of the market price of
the underlying security over the exercise price. However, if the market price of
such security increases, the profit a Fund realizes on the sale of the security
will be reduced by the premium paid for the put option less any amount for which
the put is sold.
A Fund may wish to protect certain portfolio securities against a
decline in market value at a time when no put options on those particular
securities are available for purchase. The Fund may therefore purchase a put
option on securities other than those it wishes to protect even though it does
not hold such other securities in its portfolio.
Each Fund may also purchase call options. During the life of the call
option, the Fund may buy the underlying security at the call exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, a Fund will reduce any
profit it might have realized had it bought the underlying security at the time
it purchased the call option by the premium paid for the call option and by
transaction costs.
The securities exchanges have established limitations governing the
maximum number of options which may be written by an investor or group of
investors acting in concert. These position limits may restrict a Fund's ability
to purchase or sell options on a particular security. It is possible that with
respect to a Fund, the Fund and other clients of the Adviser may be considered
to be a group of investors acting in concert. Thus, the number of options which
a Fund may write may be affected by options written by other investment advisory
clients of the Adviser.
Securities Index Option Trading. Certain Funds may purchase and write
put and call options on securities indexes. Options on securities indexes are
similar to options on securities except that, rather than the right to take or
make delivery of a security at a specified price, an option on an index gives
the holder the right to receive, upon exercise of the option, an amount of cash
if the closing level of the index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. The writer of the option is obligated to make delivery of
this amount.
The effectiveness of purchasing or writing index options as a hedging
technique depends upon the extent to which price movements in a Fund's portfolio
correlate with price movements of the index selected. Because the value of an
index option depends upon movements in the level of the index rather than the
price of a particular security, whether a Fund will realize a gain or loss from
the purchase or writing of options on an index depends upon movements in the
level of prices in the stock or bond markets generally or, in the case of
certain indexes, in an industry market segment, rather than movements in the
price of a particular security. Accordingly, successful use by a Fund of options
on security indexes will be subject to the Adviser's ability to predict
correctly movements in the direction of the stock market or interest rates
market generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual securities. In the
event the Adviser is unsuccessful in predicting the movements of an index, a
Fund could be in a worse position than had no hedge been attempted.
Because exercises of index options are settled in cash, a Fund cannot
determine the amount of its settlement obligations in advance and, with respect
to call writing, cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. When a Fund
writes an option on an index, the Fund will segregate or put into escrow with
its custodian or pledge to a broker as collateral for the option, cash,
high-grade liquid debt securities or "qualified securities" with a market value
determined on a daily basis of not less than 100% of the current market value of
the option.
Options purchased and written by a Fund may be exchange traded or may
be options entered into by the Fund in negotiated transactions with investment
dealers and other financial institutions (over-the-counter or "OTC" options)
(such as commercial banks or savings and loan associations) deemed creditworthy
by the Adviser. OTC options are illiquid and it may not be possible for the Fund
to dispose of options it has purchased or to terminate its obligations under an
option it has written at a time when the Adviser believes it would be
advantageous to do so.
Futures Contracts and Options on Futures Contracts. Certain Funds may
enter into futures contracts and purchase and write options on these contracts,
including but not limited to interest rate, securities index and foreign
currency futures contracts and put and call options on these futures contracts.
These contracts will be entered into on domestic and foreign exchanges and
boards of trade, subject to applicable regulations of the Commodity Futures
Trading Commission. These transactions may be entered into for bona fide hedging
and other permissible risk management purposes.
In connection with transactions in futures contracts and writing
related options, each Fund will be required to deposit as "initial margin" a
specified amount of cash or short-term, U.S. Government securities. The initial
margin required for a futures contract is set by the exchange on which the
contract is traded. It is expected that the initial margin would be
approximately 1-1/2% to 5% of a contract's face value. Thereafter, subsequent
payments (referred to as "variation margin") are made to and from the broker to
reflect changes in the value of the futures contract. No Fund will purchase or
sell futures contracts or related options if, as a result, the sum of the
initial margin deposit on that Fund's existing futures and related options
positions and premiums paid for options or futures contracts entered into for
other than bona fide hedging purposes would exceed 5% of the liquidation value
of the Fund's portfolio.
Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded, a
Fund will incur brokerage fees when it purchases or sells futures contracts.
Risks of Transactions in Futures Contracts and Options.
Hedging Risks in Futures Contracts Transactions. There are several
risks in using stock index or interest rate futures contracts as hedging
devices. One risk arises because the prices of futures contracts may not
correlate perfectly with movements in the underlying index or financial
instrument due to certain market distortions. First, all participants in the
futures market are subject to initial margin and variation margin requirements.
Rather than making additional variation margin payments, investors may close the
contracts through offsetting transactions which could distort the normal
relationship between the index or security and the futures market. Second, the
margin requirements in the futures market are lower than margin requirements in
the securities market, and as a result the futures market may attract more
speculators than does the securities market. Increased participation by
speculators in the futures market may also cause temporary price distortions.
Because of possible price distortion in the futures market and because of
imperfect correlation between movements in stock indexes of securities and
movements in the prices of futures contracts, even a correct forecast of general
market trends may not result in a successful hedging transaction over a very
short period.
Another risk arises because of imperfect correlation between movements
in the value of the futures contracts and movements in the value of securities
subject to the hedge. With respect to index futures contracts, the risk of
imperfect correlation increases as the composition of a Fund's portfolio
diverges from the financial instruments included in the applicable index.
Successful use of futures contracts by a Fund is subject to the ability
of the Adviser to predict correctly movements in the direction of interest rates
or the stock market. If a Fund has hedged against the possibility of a decline
in the value of the stocks held in its portfolio or an increase in interest
rates adversely affecting the value of fixed-income securities held in its
portfolio and stock prices increase or interest rates decrease instead, the Fund
will lose part or all of the benefit of the increased value of its security
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices which
reflect the rising market or decline in interest rates. The Fund may have to
sell securities at a time when it may be disadvantageous to do so.
Liquidity of Futures Contracts. A Fund may elect to close some or all
of its contracts prior to expiration. The purpose of making such a move would be
to reduce or eliminate the hedge position held by the Fund. A Fund may close its
positions by taking opposite positions. Final determinations of variation margin
are then made, additional cash as required is paid by or to the Fund, and the
Fund realizes a loss or a gain.
Positions in futures contracts may be closed only on an exchange or
board of trade providing a secondary market for such futures contracts. Although
the Funds intend to enter into futures contracts only on exchanges or boards of
trade where there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular contract
at any particular time.
In addition, most domestic futures exchanges and boards of trade limit
the amount of fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that the price of a
futures contract may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular contract, no trades may be made that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such event, it
will not be possible to close a futures position and, in the event of adverse
price movements, the Fund would be required to make daily cash payments of
variation margin. In such circumstances, an increase in the value of the portion
of the portfolio being hedged, if any, may partially or completely offset losses
on the futures contract. However, as described above, there is no guarantee that
the price of the securities being hedged will, in fact, correlate with the price
movements in the futures contract and thus provide an offset to losses on a
futures contract.
Risks of Options. The use of options on financial instruments and
indexes and on interest rate and stock index futures contracts also involves
additional risk. Compared to the purchase or sale of futures contracts, the
purchase of call or put options involves less potential risk to a Fund because
the maximum amount at risk is the premium paid for the options (plus
transactions costs). The writing of a call option generates a premium which may
partially offset a decline in the value of a Fund's portfolio assets. By writing
a call option, the Fund becomes obligated to sell an underlying instrument or a
futures contract, which may have a value higher than the exercise price.
Conversely, the writing of a put option generates a premium, but the Fund
becomes obligated to purchase the underlying instrument or futures contract,
which may have a value lower than the exercise price. Thus, the loss incurred by
a Fund in writing options may exceed the amount of the premium received.
The effective use of options strategies is dependent, among other
things, on a Fund's ability to terminate options positions at a time when the
Adviser deems it desirable to do so. Although a Fund will enter into an option
position only if the Adviser believes that a liquid secondary market exists for
such option, there is no assurance that the Fund will be able to effect closing
transactions at any particular time or at an acceptable price. The Funds'
transactions involving options on futures contracts will be conducted only on
recognized exchanges.
A Fund's purchase or sale of put or call options will be based upon
predictions as to anticipated interest rates or market trends by the Adviser,
which could prove to be inaccurate. Even if the expectations of the Adviser are
correct, there may be an imperfect correlation between the change in the value
of the options and of the Fund's portfolio securities.
The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or purchased, in the case
of a put option; the writer may be assigned an exercise notice at any time prior
to the termination of the obligation. Whether or not an option expires
unexercised, the writer retains the amount of the premium. This amount, of
course, may, in the case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period. If a call
option is exercised, the writer experiences a profit or loss from the sale of
the underlying security. If a put option is exercised, the writer must fulfill
the obligation to purchase the underlying security at the exercise price which
will usually exceed the then market value of the underlying security.
The writer of an option that wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option. Likewise, an investor who is
the holder of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
Effecting a closing transaction in the case of a written call option
will permit a Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both, or in the case of
a written put option will permit a Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other Fund investments. If a Fund desires to sell a
particular security from its portfolio on which it has written a call option, it
will effect a closing transaction prior to or concurrent with the sale of the
security.
A Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; a Fund will realize a loss
from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
An option position may be closed out only where there exists a
secondary market for an option of the same series. If a secondary market does
not exist, it might not be possible to effect closing transactions in particular
options with the result that the Fund would have to exercise the options in
order to realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market include the
following: (i) there may be insufficient trading interest in certain options,
(ii) restrictions may be imposed by a national securities exchange ("Exchange")
on opening transactions or closing transactions or both, (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities, (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange, (v) the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume, or (vi) one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.
Certain Funds may purchase put options to hedge against a decline in
the value of their portfolios. By using put options in this way, such Funds will
reduce any profit they might otherwise have realized in the underlying security
by the amount of the premium paid for the put option and by transaction costs.
Certain Funds may purchase call options to hedge against an increase in
the price of securities that the Funds anticipate purchasing in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by a Fund upon exercise of the option, and, unless the
price of the underlying security rises sufficiently, the option may expire
worthless to the Fund.
As discussed above, options may be traded over-the-counter ("OTC
options"). In an over-the-counter trading environment, many of the protections
afforded to exchange participants will not be available. For example, there are
no daily price fluctuation limits, and adverse market movements could therefore
continue to an unlimited extent over a period of time. OTC options are illiquid
and it may not be possible for the Funds to dispose of options they have
purchased or terminate their obligations under an option they have written at a
time when the Adviser believes it would be advantageous to do so. Accordingly,
OTC options are subject to each Fund's limitation that a maximum of 15% of its
net assets be invested in illiquid securities. In the event of the bankruptcy of
the writer of an OTC option, a Fund could experience a loss of all or part of
the value of the option.
Foreign Transactions. Transactions in options and futures contracts by
Funds investing in foreign securities may be conducted outside of the United
States. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (a) other complex
foreign political and economic factors; (b) lesser availability than in the
United States of data on which to make trading decisions; (c) delays in a Fund's
ability to act upon economic events occurring in foreign during nonbusiness
hours in the United States; (d) the imposition of different exercise and
settlement terms and procedures and margin requirements than in the United
States; and (e) lesser trading volume. In addition, such transactions may not
involve a clearing mechanism and related guarantee.
FOREIGN CURRENCY TRANSACTIONS
As discussed in the Prospectus, Global Fund may engage in currency
exchange transactions in connection with the purchase and sale of its
investments. A forward foreign currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract as agreed by the parties, at a
price set at the time of the contract. In the case of a cancelable forward
contract, the holder has the unilateral right to cancel the contract at maturity
by paying a specified fee. The contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in any
given month. Forward contracts may be in any amounts agreed upon by the parties
rather than predetermined amounts. Also, forward foreign exchange contracts are
traded directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or, at or
prior to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are affected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Options on foreign currencies operate similarly to options on
securities (discussed above), and are traded primarily on the over-the-counter
market, although options on foreign currencies have recently been listed on
several exchanges. Options traded on the over-the-counter market are illiquid
and it may not be possible for the Fund to dispose of an option it has purchased
or terminate its obligations under an option it has written at a time when
Voyageur believes it would be advantageous to do so. Options on foreign
currencies are affected by all of those factors which influence foreign exchange
rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign debt security. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be involved in the use of foreign currency options,
investors may be disadvantaged by having to deal in an odd-lot market (generally
consisting of transactions, of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots. These is no
systematic reporting of last sale information for foreign currencies and there
is no regulatory requirement that quotations available through dealers or other
market sources be provided on a timely basis. Available quotation information is
generally representative of very large transactions in the interbank market and
thus may not reflect relatively smaller transactions (less than $1 million)
where rates may be less favorable. The interbank market in foreign currencies in
a global, around-the-clock market. To the extent that the U.S. options markets
are closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options markets.
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based upon the difference between prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to Global Fund at one rate, while offering a lesser
rate of exchange should the Fund desire to resell that currency to the dealer.
ILLIQUID INVESTMENTS
As a non-fundamental policy, each Fund is permitted to invest up to 15%
of its net assets in illiquid investments. An investment is generally deemed to
be "illiquid" if it cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the investment company
is valuing the investment. "Restricted securities" are securities which were
originally sold in private placements and which have not been registered under
the Securities Act of 1933 ( the "1933 Act"). Such securities generally have
been considered illiquid by the staff of the Securities and Exchange Commission
(the "SEC"), since such securities may be resold only subject to statutory
restrictions and delays or if registered under the 1933 Act. However, the SEC
has recently acknowledged that a market exists for certain restricted securities
and other securities previously deemed illiquid by the SEC (for example,
securities qualifying for resale to certain "qualified institutional buyers"
pursuant to Rule 144A under the 1933 Act ("Rule 144A Securities"), commercial
paper issued pursuant to the private placement exemption of Section 4(2) of the
1933 Act, and certain municipal lease obligations). As set forth in the
Prospectus, the Funds may invest in Rule 144A securities, commercial paper
issued pursuant to Rule 4(2) under the Securities Act of 1933, and municipal
lease obligations, and treat such securities as liquid if such securities are
deemed by the Adviser to be liquid in accordance with standards established by
the Company's Board of Directors. Under these guidelines, the Adviser must
consider, among other things, (a) the frequency of trades and quotes for the
security, (b) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers, (c) dealer undertakings to make a
market in the security, and (d) the nature of the security and the nature of the
marketplace trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer).
At the present time, it is not possible to predict with accuracy how
the markets for certain restricted securities will develop. Investing in
restricted securities could have the effect of increasing the level of a Fund's
illiquidity to the extent that qualified purchasers of the securities become,
for a time, uninterested in purchasing these securities.
TEMPORARY INVESTMENTS
To the extent set forth in the Prospectus, the Funds may invest in
short-term money market securities, including obligations of the U.S. Government
and its agencies and instrumentalities, bank certificates of deposit, bankers'
acceptances, high-grade commercial paper and other money market instruments.
Securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities include Treasury securities, which differ only in their
interest rates, maturities and times of issuance. Treasury bills have initial
maturities of one year or less; Treasury notes have initial maturities of one to
ten years; and Treasury bonds generally have initial maturities of greater than
ten years. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, GNMA pass-through certificates, are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Federal Home Loan Banks, by the right of the issuer to borrow from the Treasury;
others, such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, such as those issued by the
Student Loan Marketing Association, only by the credit of the agency or
instrumentality. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies or instrumentalities, no assurance can be
given that it will always do so, since it is not so obligated by law. Securities
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
that mature within 397 days are considered money market securities for purposes
of the Funds' investment policies.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits are not transferable and are therefore illiquid prior to their
maturity. No Fund will invest more than 15% of its net assets in time deposits
and other illiquid securities. See "Investment Restrictions" below. Certificates
of deposit are certificates evidencing the obligation of a bank to repay funds
deposited with it for a specified period of time. Bankers' acceptances are
credit instruments evidencing the obligation of a bank to pay a draft drawn on
it by a customer. These instruments reflect the obligation both of the bank and
of the drawer to pay the full amount of the instrument upon maturity.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper purchased by the
Funds will consist only of direct obligations which, at the time of their
purchase, are (a) rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P (or
comparably rated by any other nationally recognized statistical rating
organization), (b) issued by companies having an outstanding unsecured debt
issue currently rated at least Aa by Moody's or at least AA by S&P (or
comparably rated by any other nationally recognized statistical rating
organization), or (c) if unrated, determined by the Adviser to be of comparable
quality to those rated obligations which may be purchased by the Funds.
Money market instruments in which the Funds may invest also include
non-convertible corporate debt securities (for example, bonds and debentures)
with no more than 397 days remaining to maturity, provided such obligations are
rated Aa or better by Moody's, AA or better by S&P (or comparably rated by any
other nationally recognized statistical rating organization) or, if unrated,
determined to be of comparable quality by the Adviser.
Municipal Fund's investments in short-term money market securities may
include both short-term tax-exempt securities in the rating categories set forth
above or if such securities are not available or, in the Adviser's judgment, do
not afford sufficient protection against adverse market conditions, the taxable
money market securities set forth above.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following investment restrictions which,
together with the investment objective of such Fund, cannot be changed without
approval by holders of a majority of the outstanding voting shares of such Fund.
As defined in the 1940 Act, this means the lesser of the vote of (a) 67% of the
shares of such Fund at a meeting where more than 50% of the outstanding shares
of such Fund are present in person or by proxy or (b) more than 50% of the
outstanding shares of such Fund.
1. No Fund, other than VAM Global Fixed Income, will operate in
such a manner that it would no longer qualify as a
"diversified" management investment company, as defined under
Section 5 of 1940 Act. In connection therewith, no Fund will,
with respect to 75% of its total assets, purchase any
securities (other than obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities) if, as
a result, more than 5% of the Fund's total assets would then
be invested in the securities of a single issuer or if, as a
result, the Fund would hold more than 10% of the outstanding
voting securities of any single issuer, or each Fund will
otherwise limit its investment as required in order to qualify
as a "diversified" management investment company as defined
under Section 5 of the 1940 Act.
2. No Fund will concentrate 25% or more of the value of its
assets in any one industry; provided, however, that there is
no limitation with respect to investments in obligations
issued or guaranteed by the U.S. Government or its agencies
and instrumentalities and repurchase agreements secured
thereby.
3. No Fund will make loans, except through the purchase of
fixed-income obligations in which such Fund may invest
consistent with its investment objective and policies and
through repurchase agreements, and except that each Fund other
than Short Government Fund and Intermediate Government Fund
may loan its portfolio securities.
4. No Fund will underwrite the securities of other issuers except
to the extent that, in connection with the disposition of its
portfolio securities, the Fund may be deemed to be an
underwriter.
5. No Fund will borrow money (provided that the Funds other than
Short Government Fund and Intermediate Government Fund may
enter into reverse repurchase agreements) except from banks
for temporary or emergency purposes and then only in an amount
not exceeding 20% of the value of such Fund's total assets. No
Fund will purchase portfolio securities while outstanding
borrowings (other than reverse repurchase agreements) exceed
5% of the value of the Fund's total assets. In order to secure
any permitted borrowings under this section, each Fund may
pledge, mortgage or hypothecate its assets.
6. No Fund will issue any senior securities (as defined in the
1940 Act), except as set forth in investment restriction
number 5 above, and except to the extent that using options,
futures contracts and options on futures contracts, or
purchasing or selling securities on a when-issued or forward
commitment basis, or using similar investment strategies may
be deemed to constitute issuing a senior security.
7. No Fund will invest in commodities, commodities futures
contracts or real estate, although it may invest in securities
which are secured by real estate or real estate mortgages and
securities of issuers which invest or deal in commodities,
commodity futures, real estate or real estate mortgages and
provided that it may purchase or sell stock index futures,
foreign currency futures, interest rate futures and options
thereon.
For purposes of fundamental restriction (1) above, the identification
of the issuer of a Municipal Obligation depends on the terms and conditions of
the obligation. If the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from those of the
government creating the subdivision, and the obligation is backed only by the
assets and revenues of the subdivision, such subdivision will be regarded as the
sole issuer. Similarly, in the case of a nongovernmental user, such as an
industrial corporation or a privately owned or operated hospital, if the
security is backed only by the assets and revenues of the nongovernmental user
then such non-governmental user will be deemed to be the sole issuer. If in
either case the creating government or another entity guarantees an obligation,
and the value of all securities issued or guaranteed by the guarantor and owned
by Municipal Fund exceeds 10% of the value of such Fund's total assets, the
guarantee will be regarded as a separate security and treated as an issue of
such government or entity.
For purposes of the Funds' concentration policy contained in
fundamental restriction (2) above, the applicable Funds intend to comply with
the SEC staff position that securities issued or guaranteed as to principal and
interest by any single foreign government are considered to be securities of
issuers in the same industry. Municipal Fund does not intend to invest more than
25% of its total assets in securities of governmental units located in any one
state, territory or possession of the United States. In addition, Municipal Fund
will not invest more than 25% of its total assets in limited obligation bonds
payable only from revenues derived from facilities or projects with a single
industry. As to utility companies, gas, electric, water and telephone companies
will be considered as separate industries.
Each Fund has adopted the following operating (i.e., non-fundamental)
investment restrictions which may be changed by the Board of Directors at any
time without shareholder approval. No Fund will:
1. Purchase the securities of any issuer with less than three
years' continuous operation if, as a result, more than 5% of
the value of its total assets would be invested in securities
of such issuers.
2. Purchase illiquid securities if more than 15% of the value of
the Fund's net assets would be invested in such securities.
Short Total Return Fund, Intermediate Total Return Fund and
Global Fund may buy and sell securities outside the U.S. that
are not registered with the SEC or marketable in the United
States.
3. Purchase or retain securities of any issuer if the officers
and directors of the Fund or the Adviser, owning beneficially
more than 1/2 or 1% of the securities of such issuer, together
own beneficially more than 5% or such issuer's securities.
4. Invest in warrants if more than 5% of the value of the Fund's
net assets would be invested in such securities.
5. Invest in interests in oil, gas or other mineral exploration
or development programs or leases although it may invest in
securities of issuers which invest in or sponsor such
programs.
6. Invest in the securities of an investment company, except to
the extent permitted by the 1940 Act and except as part of a
merger, consolidation or acquisition of assets.
7. Purchase any securities on margin except that each Fund may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities. The deposit or
payment by a Fund of initial or maintenance margin in
connection with financial futures contracts or related
transactions is not considered the purchase of a security on
margin.
8. Invest for the purpose of exercising control or management of
another issuer.
9. Make short sales of securities or maintain a short position
for the account of the Fund unless at all times when a short
position is open it owns an equal amount of such securities or
owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short.
Any investment restriction or limitation which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or a utilization of assets and such excess results therefrom.
DIVERSIFICATION
As indicated by the first fundamental investment restriction set forth
above, each Fund other than Global Fund operates as a "diversified" fund. Global
Fund is "non-diversified" and, accordingly, will be able to invest more than 5%
of the value of its total assets in the obligations of a single issuer. However,
Global Fund, as well as each of the other Funds, intends to conduct its
operations so that it will comply with diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
qualify as a regulated investment company. In order to qualify as a regulated
investment company, each Fund must limit its investments so that, at the close
of each quarter of the taxable year, with respect to at least 50% of its total
assets, not more that 5% of its total assets will be invested in the securities
of a single issuer. In addition, the Code requires that not more than 25% in
value of each Fund's total assets may be invested in the securities of a single
issuer at the close of each quarter of the taxable year.
PORTFOLIO TURNOVER
Portfolio turnover is the ratio of the lesser of annual purchases or
sales of portfolio securities by a Fund to the average monthly value of
portfolio securities owned by the Fund, not including securities maturing in
less than 12 months. A 100% portfolio turnover rate would occur, for example, if
the lesser of the value of purchases or sales of a Fund's portfolio securities
for a particular year were equal to the average monthly value of the portfolio
securities owned by the Fund during the year. Each Fund will dispose of
securities without regard to the time they have been held when such action
appears advisable to the Adviser. Frequent portfolio trades may result in higher
transaction and other costs for a Fund.
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and officers of the Company, their position with the
Company and their principal occupations during the past five years are set forth
below. In addition to the occupations set forth below, the directors and
officers also serve as directors and trustees or officers of various closed-end
and open-end investment companies managed by the Adviser.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS POSITION PAST FIVE YEARS AND OTHER AFFILIATIONS
<S> <C> <C>
Clarence G. Frame Director Of counsel, Briggs & Morgan law firm since 1984.
W-875
First National Bank Building
332 Minnesota Street
St. Paul, Minnesota 55101
Richard F. McNamara Director Chief Executive Officer of Activar, Inc., a
7808 Creekridge Circle, #200 Minneapolis-based holding company consisting
Minneapolis, Minnesota 55439 of seventeen companies in industrial plastics,
sheet metal, automotive aftermarket, construction
supply, electronics and financial services,
since 1966.
Thomas F. Madison * Director Vice Chairman-Office of the CEO, Minnesota
200 South Fifth Street Mutual Life Insurance Company since February
Suite 2100 1994; President and CEO of MLM Partners, Inc.
Minneapolis, Minnesota 55402 since January 1993; previously, President of
U.S. WEST Communications -- Markets from 1988
to 1993; Mr. Madison currently serves on the
board of directors of Minnesota Mutual Life
Insurance Company, Valmont Industries, Inc.,
Eltrax Systems, Inc. and various civic and
educational organizations.
James W. Nelson Director Chairman and Chief Executive Officer of
81 South Ninth Street Eberhardt Holding Company and its subsidiaries
Suite 400 since 1990.
Minneapolis, Minnesota 55402
Robert J. Odegard Director Special Assistant to the President of the
University of Minnesota University of Minnesota since 1990.
Foundation
1300 South Second Street
Minneapolis, Minnesota 55454
John G. Taft President President (since 1991) and Director (since
90 South Seventh Street 1993) of the Adviser; Director (since 1993)
Suite 4400 and Executive Vice President (since 1995) of
Minneapolis, Minnesota 55402 the Underwriter; previously, President of the
Underwriter from 1991 to 1995; Management
committee member of the Adviser from 1991 to
1993; Managing Director at Piper, Jaffray &
Hopwood Incorporated in Minneapolis, Minnesota
from 1986 to 1991.
Andrew M. McCullagh, Jr. Executive Portfolio Manager of the Adviser since 1990;
717 Seventeenth Street Vice previously, Director of the Adviser and the
Denver, Colorado 80202 President Underwriter from 1993 to 1995.
Jane M. Wyatt Executive Chief Investment Officer (since 1993)
90 South Seventh Street Vice and Portfolio Manager (since 1989) of
Suite 4400 President the Adviser; Director of the Adviser and
Minneapolis, Minnesota 55402 the Underwriter since 1993.
Elizabeth H. Howell Vice Portfolio Manager of the Adviser since
90 South Seventh Street President 1991; previously, portfolio manager for
Suite 4400 Windsor Financial Group, Minneapolis,
Minneapolis, Minnesota 55402 Minnesota from 1988 to 1991.
James C. King Vice Portfolio Manager of the Adviser since 1990;
90 South Seventh Street President previously, Director of the Adviser and the
Suite 4400 Underwriter from 1993 to 1995.
Minneapolis, Minnesota 55402
Richard Vandenberg Vice Portfolio Manager of the Adviser since
90 South Seventh Street President October 1992; previously, Proprietary
Suite 4400 Trader with Norwest Bank from March 1992
Minneapolis, Minnesota 55402 to October 1992; President of Ravan
Corporation, a commodity trading adviser
in Excelsior, Minnesota from 1990 to March
1992.
Kenneth R. Larsen Treasurer Treasurer of the Adviser and the Underwriter
90 South Seventh Street since 1990; previously, Chief Financial
Suite 4400 Officer (from 1991 to 1995), Director (from
Minneapolis, Minnesota 55402 1993 to 1995), Secretary (from 1990 to 1993)
and Controller (from 1988 to 1990) of the
Adviser and the Underwriter.
Thomas J. Abood Secretary General Counsel of the Adviser and the
90 South Seventh Street Underwriter since October 1994; previoulsy,
Suite 4400 associated with the law firm of Skadden,
Minneapolis, Minnesota 55402 Arps, Slate, Meagher & Flom, Chicago,
Illinois from 1988 too 1994.
</TABLE>
* Denotes a director of the Company who is an interested person of the Company,
the Adviser and/or the Underwriter.
As of June 30, 1995, the officers and directors of the Company as a
group did not own any shares of the Funds.
The Company does not compensate its officers. Each director (who is not
an employee of the Adviser or any of its affiliates) receives a total annual fee
of $24,000 for serving as a director or trustee for each of the open-end and
closed-end investment companies (the "Fund Complex") for which the Adviser acts
as investment adviser, plus a $500 fee for each special in-person meeting
attended by such director. These fees are allocated among each series or fund in
the Fund Complex based on the relative average net asset value of each series or
fund. Currently the Fund Complex consists of ten open-end investment companies
comprising twenty-nine series or funds and six closed-end investment companies.
In addition, each director who is not an employee of the Adviser or any of its
affiliates is reimbursed for expenses incurred in connection with attending
meetings. The following table sets forth the aggregate compensation received by
each director from the Funds for the most recently ended fiscal year as well as
the total compensation received by each director from the Fund Complex during
the calendar year ended December 31, 1994.
<TABLE>
<CAPTION>
Pension or Retirement Estimated Total
Aggregate Benefits Annual Benefits Compensation
Compensation Accrued as Part Upon from Fund
Director from the Funds of Fund Expense Retirement Complex
<S> <C> <C> <C> <C>
Clarence G. Frame $ -0- None None $22,500
Richard F. McNamara $ -0- None None $22,500
Thomas F. Madison $ -0- None None $16,000
James W. Nelson $ -0- None None $22,500
Robert J. Odegard $ -0- None None $22,500
</TABLE>
Voyageur Fund Distributors, Inc. (the "Underwriter") is the principal
distributor of each Fund's shares. With regard to the Underwriter, Mr. Frank
Tonnemaker is the President and a director, Mr. Taft and Ms. Wyatt are each
Executive Vice Presidents and directors and Mr. Larsen is Treasurer.
THE INVESTMENT ADVISER, SUB-ADVISER, ADMINISTRATIVE
SERVICES, EXPENSES AND BROKERAGE
GENERAL
The Adviser, a Minnesota corporation, has been retained under an
investment advisory agreement (the "Advisory Agreement") with the Company to act
as the Funds' investment adviser, subject to the authority of the Board of
Directors. the Adviser and the Underwriter are each indirect wholly-owned
subsidiaries of Dougherty Financial Group Inc. ("DFG"), which is owned
approximately 49% by Michael E. Dougherty, 49% by Pohlad Companies and less than
1% by certain retirement plans for the benefit of DFG employees. Mr. Dougherty
co-founded the predecessor of DFG in 1977 and has served as Chairman of the
Board and Chief Executive Officer of DFG since inception. Pohlad Companies is a
holding company owned in equal parts by each of James O. Pohlad, Robert C.
Pohlad and William M. Pohlad. The principal executive offices of the Adviser are
located at 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
INVESTMENT ADVISORY AGREEMENT
The Funds do not maintain their own research department. The Company,
on behalf of each Fund, has contracted with the Adviser for investment advice,
research and management. Pursuant to the Investment Advisory Agreement, the
Adviser has the sole and exclusive responsibility for the management of each
Fund's portfolio and the making and execution of all investment decisions for
the Fund subject to the objectives and investment policies and restrictions of
the Fund and subject to the supervision of the Company's Board of Directors. The
Adviser also furnishes, at its own expense, office facilities, equipment and
personnel for servicing the investments of each Fund. The Adviser has agreed to
arrange for officers and employees of the Adviser to serve without compensation
from the Funds as directors, officers or employees of the Company if duly
elected to such positions by the shareholders or directors.
As compensation for the Adviser's services, Global Fund is obligated to
pay to the Adviser a monthly investment advisory fee equivalent on an annual
basis to .70% of its average daily net assets and each of the other Funds are
obligated to pay a monthly fee equivalent on an annual basis to .50% of each
such Fund's average daily net assets. The percentage fee is based on the average
daily value of each Fund's net assets at the close of each business day. For
purposes of calculating average daily net assets, as such term is used in the
Investment Advisory Agreements, each Fund's net assets equal its total assets
minus its total liabilities.
The Investment Advisory Agreement continues from year to year only if
approved annually (a) by the Board of Directors of the Company or by vote of a
majority of the outstanding voting securities of each Fund and (b) by vote of a
majority of Directors of the Company who are not parties to such Investment
Advisory Agreement or interested persons (as defined in the 1940 Act) of any
such party, cast in person at a meeting of the Board of Directors called for the
purpose of voting on such approval. The Investment Advisory Agreement may be
terminated by either party on 60 days' notice to the other party and terminates
automatically upon its assignment. The Investment Advisory Agreement also
provides that amendments to the Agreement may be effected if approved by the
Board of Directors of the Company (including a majority of the directors who are
not interested persons of the Adviser or the Company), unless the 1940 Act
requires that any such amendment must be submitted for approval by the
shareholders and that all proposed assignments of such agreement are subject to
approval by the Company's Board of Directors (unless the 1940 Act otherwise
requires shareholder approval thereof).
THE SUB-ADVISER
Global Fund's Sub-Adviser is Lazard London International Investment
Management Limited (the "Sub-Adviser"). Pursuant to a Sub-Advisory Agreement
with the Adviser, the Sub-Adviser provides Global Fund with investment advice
and portfolio management relating to the Fund's investments in foreign
securities. Under the Sub-Advisory Agreement, the Sub-Adviser is required, among
other things, to report to the Adviser or the Board of Directors regularly at
such times and in such detail as the Adviser or the Board of Directors may from
time to time request in order to permit the Adviser and the Board of Directors
to determine the adherence of the Fund to its investment objective, policies and
restrictions. The Sub-Advisory Agreement also requires the Sub-Adviser to
provide all office space, personnel and facilities necessary and incident to the
Sub-Adviser's performance of its services under the Sub-Advisory Agreement. For
its services, the Sub-Adviser receives a monthly sub-advisory fee from the
Adviser equivalent on an annual basis to .35% of the average daily net assets of
the Fund.
ADMINISTRATIVE SERVICES AGREEMENT
The Adviser also acts as each Fund's dividend disbursing, transfer,
administrative and accounting services agent pursuant to an Administrative
Services Agreement (the "Administrative Services Agreement") between the Adviser
and the Company. Pursuant to the Administrative Services Agreement, the Adviser
provides each Fund all dividend disbursing, transfer agency, administrative and
accounting services required by such Fund including, without limitation, the
following: (i) the calculation of net asset value per share (including the
pricing of each Fund's portfolio of securities) at such times and in such manner
as is specified in the Fund's current Prospectus and Statement of Additional
Information, (ii) upon the receipt of funds for the purchase of such Fund's
shares or the receipt of redemption requests with respect to such Fund's shares
outstanding, the calculation of the number of shares to be purchased or
redeemed, respectively, (iii) upon such Fund's distribution of dividends, the
calculation of the amount of such dividends to be received per share, the
calculation of the number of additional shares of such Fund to be received by
each shareholder of such Fund (other than any shareholder who has elected to
receive such dividends in cash) and the mailing of payments with respect to such
dividends to shareholders who have elected to receive such dividends in cash,
(iv) the provision of transfer agency services, (v) the creation and maintenance
of such records relating to the business of such Fund as such Fund may from time
to time reasonably request, (vi) the preparation of tax forms, reports, notices,
proxy statements, proxies and other shareholder communications, and the mailing
thereof to shareholders of such Fund, and (vii) the provision of such other
dividend disbursing, transfer agency, administrative and accounting services as
such Fund and the Adviser may from time to time agree upon. Pursuant to the
Administrative Services Agreement, the Adviser also provides such regulatory
reporting and compliance related services and tasks for the Company or any Fund
as the Company may reasonably request.
As compensation for these services, Global Fund pays the Adviser a
monthly fee equivalent on an annual basis to .15% of the Fund's average daily
net assets and each of the other Funds pay the Adviser a monthly fee of .10% of
each such Fund's average daily net assets. For purposes of calculating average
daily net assets, as such term is used in the Administrative Services
Agreements, each Fund's net assets equals its total assets minus its total
liabilities. Each Fund also reimburses the Adviser for its out-of-pocket
expenses in connection with the Adviser's provision of services under such
Fund's Administrative Services Agreement.
A majority of the disinterested directors of the Company specifically
found, in the course of their review of each Fund's Administrative Services
Agreement, that such agreement is in the best interests of the Fund and its
shareholders, the services to be performed pursuant to such agreement are
services required for the operation of the Fund, the Adviser can provide
services the nature and quality of which are at least equal to those provided by
others offering the same or similar services, and the fees for such services are
fair and reasonable in light of the usual and customary charges made by others
for services of the same nature and quality. The Administrative Services
Agreement is renewable from year to year if the Company's directors (including a
majority of the Company's disinterested directors) approve the continuance of
the Agreement. Each Fund or the Adviser can terminate such Fund's Administrative
Services Agreement on 60 days' notice to the other party. The Administrative
Services Agreement also provides that amendments to the Agreement may be
effected if approved by the Board of Directors of the Company (including a
majority of the directors who are not interested persons of the Adviser or the
Fund), unless the 1940 Act requires that any such amendment must be submitted
for approval by the Fund's shareholders, and that all proposed assignments of
such agreement are subject to approval by the Company's Board of Directors
(unless the 1940 Act otherwise requires shareholder approval thereof).
EXPENSES OF THE FUNDS
The Adviser reserves the right to voluntarily waive its fees in whole
or part and to voluntarily absorb certain other of the Fund's expenses. Any such
waiver or absorption, however, is in the Adviser's sole discretion and may be
lifted or reinstated at any time. The Adviser and the Underwriter have agreed to
voluntarily limit the operating expenses of the Institutional Shares and the
Service Shares of each Fund to the amounts set forth in the Prospectus under
"Fund Expenses." Such waivers are for the fiscal year ended September 30, 1995,
after which such waivers may be discontinued or modified by the Adviser and the
Underwriter in their sole discretion.
All costs and expenses (other than those specifically referred to as
being borne by the Adviser or the Underwriter) incurred in the operation of each
Fund are borne by such Fund. These expenses include, among others, fees of the
directors who are not employees of the Adviser or any of its affiliates,
expenses of directors' and shareholders' meetings, including the cost of
printing and mailing proxies, expenses of insurance premiums for fidelity and
other coverage, expenses of redemption of shares, expenses of issue and sale of
shares (to the extent not borne by the Underwriter under its agreement with such
Fund), expenses of printing and mailing stock certificates representing shares
of such Fund, association membership dues, charges of such Fund's custodian, and
bookkeeping, auditing and legal expenses. Each Fund will also pay the fees and
bear the expense of registering and maintaining the registration of such Fund
and its shares with the Securities and Exchange Commission and registering or
qualifying its shares under state or other securities laws and the expense of
preparing and mailing prospectuses, reports and statements to shareholders.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
As the Funds' portfolios are composed exclusively of debt, rather than
equity securities, most of the Funds' portfolio transactions are effected with
dealers without the payment of brokerage commissions, but rather at net prices
which usually include a spread or markup. In effecting such portfolio
transactions on behalf of the Funds, the Adviser, and with respect to Global
Fund, the Sub-Adviser, seek the most favorable net price consistent with the
best execution. However, frequently, the Adviser or Sub-Adviser selects a dealer
to effect a particular transaction without contacting all dealers who might be
able to effect such transaction, because of the volatility of the bond market
and the desire of the Adviser or Sub-Adviser to accept a particular price for a
security because the price offered by the dealer meets its guidelines for
profit, yield or both. No brokerage commissions are expected to be paid by the
Funds.
Decisions with respect to placement of the Funds' portfolio
transactions are made by the Adviser and, with respect to Global Fund, the
Sub-Adviser. The primary consideration in making these decisions is efficiency
in the execution of orders and obtaining the most favorable net prices for the
Funds. When consistent with these objectives, business may be placed with
broker-dealers who furnish investment research services to the Adviser or
Sub-Adviser. Such research services include advice, both directly and in
writing, as to the value of securities; the advisability of investing in,
purchasing or selling securities; and the availability of securities, or
purchasers or sellers of securities; as well as analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts. This allows the Adviser and Sub-Adviser to
supplement their own investment research activities and enables the Adviser and
Sub-Adviser to obtain the views and information of individuals and research
staffs of many different securities firms prior to making investment decisions
for the Funds. To the extent portfolio transactions are effected with
broker-dealers who furnish research services to the Adviser and/or Sub-Adviser,
the Adviser and/or Sub-Adviser receive a benefit, not capable of evaluation in
dollar amounts, without providing any direct monetary benefit to the Funds from
these transactions.
The Adviser and Sub-Adviser have not entered into any formal or
informal agreements with any broker-dealers, nor do they maintain any "formula"
which must be followed in connection with the placement of the Funds' portfolio
transactions in exchange for research services provided the Adviser or
Sub-Adviser, except as noted below. However, each of the Adviser and Sub-Adviser
maintains informal lists of broker-dealers, which is used from time to time as a
general guide in the placement of the Funds' business, in order to encourage
certain broker-dealers to provide the Adviser and Sub-Adviser with research
services which the Adviser and Sub-Adviser anticipate will be useful to them.
Because the list is merely a general guide, which is to be used only after the
primary criterion for the selection of broker-dealers (discussed above) has been
met, substantial deviations from the list are permissible and may be expected to
occur. The Adviser and Sub-Adviser will authorize the Funds to pay an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker-dealer would have charged only if the Adviser or
Sub-Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Adviser's or Sub-Adviser's overall responsibilities with
respect to the accounts as to which it exercises investment discretion.
The Funds will not effect any brokerage transactions in their portfolio
securities with any broker-dealer affiliated directly or indirectly with the
Adviser or Sub-Adviser, unless such transactions, including the frequency
thereof, the receipt of commissions payable in connection therewith and the
selection of the affiliated broker-dealer effecting such transactions are not
unfair or unreasonable to the shareholders of the Funds. In the event any
transactions are executed on an agency basis, the Adviser or Sub-Adviser will
authorize the Funds to pay an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker-dealer would
have charged only if the Adviser or Sub-Adviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either that particular transaction or the Adviser's or Sub-Adviser's overall
responsibilities with respect to the Funds as to which it exercises investment
discretion. If the Funds execute any transactions on an agency basis, they will
generally pay higher than the lowest commission rates available.
In determining the commissions to be paid to a broker-dealer affiliated
with the Adviser or Sub-Adviser, it is the policy of the Funds that such
commissions will, in the judgment of the Adviser or Sub-Adviser, subject to
review by the Board of Directors, be both (a) at least as favorable as those
which would be charged by other qualified brokers in connection with comparable
transactions involving similar securities being purchased or sold on an exchange
during a comparable period of time, and (b) at least as favorable as commissions
contemporaneously charged by such affiliated broker-dealers on comparable
transactions for their most favored comparable unaffiliated customers. While
each Fund does not deem it practicable and in its best interest to solicit
competitive bids for commission rates on each transaction, consideration will
regularly be given to posted commission rates as well as to other information
concerning the level of commissions charged on comparable transactions by other
qualified brokers.
Pursuant to conditions set forth in rules of the Securities and
Exchange Commission, the Funds may purchase securities from an underwriting
syndicate of which an affiliated broker-dealer is a member (but not directly
from such affiliated broker-dealer itself). Such conditions relate to the price
and amount of the securities purchased, the commission or spread paid and the
quality of the issuer. The rules further require that such purchases take place
in accordance with procedures adopted and reviewed periodically by the Board of
Directors of the Funds, particularly those directors who are not interested
persons of the Funds.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to the policies set forth in the
preceding paragraphs and such other policies as the Company's directors may
determine, the Adviser and Sub-Adviser may consider sales of shares of the Funds
as a factor in the selection of broker-dealers to execute the Funds' securities
transactions.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of Fund shares,
which is equal to the net asset value per share, is summarized in the
Prospectus. The portfolio securities in which the Funds invest fluctuate in
value and hence the net asset value per share of each Fund also fluctuates. The
net asset value of each Fund's shares is determined on each day on which the New
York Stock Exchange is open, provided that the net asset value need not be
determined on days when no Fund shares are tendered for redemption and no order
for Fund shares is received. The New York Stock Exchange is not open for
business on the following holidays (or on the nearest Monday or Friday if the
holiday falls on a weekend): New Year's Day, President's Day, Good Friday,
Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas.
TAXES
GENERAL INFORMATION
To qualify under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") for tax treatment as a regulated investment company, each
Fund must, among other things: (a) distribute to its shareholders at least 90%
of its investment company taxable income (as that term is defined in the Code
determined without regard to the deduction for dividends paid); (b) derive less
than 30% of its annual gross income from the sale or other disposition of stock,
securities, options, futures, or forward contracts held for less than three
months; and (c) diversify its holdings so that, at the end of each fiscal
quarter of the Fund, (i) at least 50% of the market value of the Fund's assets
is represented by cash, cash items, U.S. Government securities and securities of
other regulated investment companies, and other securities, with these other
securities limited, with respect to any one issuer, to an amount no greater than
5% of the Fund's total assets and no greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the market value of the
Fund's total assets is invested in the securities of any one issuer (other than
U.S. Government securities or securities of other regulated investment
companies).
Each Fund will be subject to a nondeductible excise tax equal to 4% of
the excess, if any, of the taxable amount required to be distributed for each
calendar year over the amount actually distributed. In order to avoid this
excise tax, each Fund must declare dividends by the end of the calendar year
representing 98% of the Fund's ordinary income for the calendar year and 98% of
its capital gain net income (both long-term and short-term gains) for the
12-month period ending on October 31 of such year. For purposes of this
requirement, any income with respect to which a Fund has paid corporate income
tax is deemed to have been distributed. Each Fund intends to make sufficient
distributions each year to avoid the payment of the excise tax.
When shares of a Fund are sold or otherwise disposed of, the Fund
shareholder will realize a capital gain or loss equal to the difference between
the purchase price and the sale price of the shares disposed of, if, as is
usually the case, the Fund shares are a capital asset in the hands of the Fund
shareholder. In addition, pursuant to a special provision in the Code, if Fund
shares with respect to which a long-term capital gain distribution has been made
are held for six months or less, any loss on the sale or other disposition of
such shares will be a long-term capital loss to the extent of such long-term
capital gain distribution. Certain deductions otherwise allowable to financial
institutions and property and casualty insurance companies will be eliminated or
reduced by reason of the receipt of certain exempt-interest dividends.
Any loss on the sale or exchange of shares of a Fund generally will be
disallowed to the extent that a shareholder acquires or contracts to acquire
shares of the same Fund within 30 days before or after such sale or exchange.
Pursuant to the Code, distributions of net investment income by a Fund
to a shareholder who, as to the U.S., is a nonresident alien individual,
nonresident alien fiduciary of a trust or estate, foreign corporation, or
foreign partnership (a "foreign shareholder") will generally be subject to U.S.
withholding tax (at a rate of 30% or lower treaty rate). Withholding will not
apply if a dividend paid by the Fund to a foreign shareholder is "effectively
connected" with a U.S. trade or business of such shareholder, in which case the
reporting and withholding requirements applicable to U.S. citizens or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year. Each Fund will report
annually to its shareholders the amount of any withholding. It is expected that
dividends paid by the Funds will not be eligible for the 70% deduction for
dividends received by corporations because the Funds' income will not consist of
dividends paid by U.S. corporations.
The Funds will recognize gain or loss on futures contracts, options,
and forward currency contracts when realized by entering into a closing
transaction or by exercise. In addition, if a Fund holds such contracts and
options at the end of its taxable year, unrealized gain or loss on such
contracts is taken into account at the then current fair market value thereof
under a special "marked-to-market, 60/40 system," and such gain or loss is
recognized for tax purposes. The gain or loss from such contracts and options
(including premiums on certain options that expire unexercised) is treated as
60% long-term and 40% short-term capital gain or loss, regardless of their
holding period. The amount of any capital gain or loss actually realized by a
Fund in a subsequent sale or other disposition of such contracts will be
adjusted to reflect any capital gain or loss taken into account by the Fund in a
prior year as a result of the constructive sale under the "marked-to-market,
60/40 system." Notwithstanding the rules described above, with respect to
certain futures or forward currency contracts, a Fund may make an election that
will have the effect of exempting all or a part of those identified contracts
from being treated for federal income tax purposes as sold on the last business
day of the Fund's taxable year. All or part of any loss realized by a Fund on
any closing of a contract may be deferred until all of the Fund's offsetting
positions with respect to the futures contract are closed.
Code Section 988 may also apply for forward currency contracts. Under
Section 988, each foreign currency gain or loss is generally computed separately
and treated as ordinary income or loss. In the case of overlap between Sections
1256 and 988, special provisions determine the character and timing of any
income, gain or loss. The Funds engaging in forward currency contracts will
attempt to monitor Section 988 transactions to avoid an adverse tax impact.
Sales of forward currency contracts which are intended to hedge against
a change in the value of securities or currencies held by a Fund may affect the
holding period of such securities or currencies and, consequently, the nature of
the gain or loss on such securities or currencies upon distribution.
It is expected that any net gain realized from the closing out of
forward currency contracts will be considered gain from the sale of securities
or currencies and therefore be qualifying income for purposes of the 90% of
gross income from qualified sources requirement, as discussed above. In order to
avoid realizing excessive gains on securities or currencies held less than three
months, a Fund may be required to defer the closing out of forward currency
contracts beyond the time when it would otherwise be advantageous to do so. It
is expected that unrealized gains on forward currency contracts, which have been
open for less than three months as of the end of a Fund's fiscal year and which
are recognized for tax purposes, will not be considered gains on securities or
currencies held less than three months for purposes of the 30% test, as
discussed above.
Under the Code, a Fund's taxable income for each year will be computed
without regard to any net foreign currency loss attributable to transactions
after October 31, and any such net foreign currency loss will be treated as
arising on the first day of the following taxable year.
The Code forbids a regulated investment company from earning 30% or
more of its gross income from the sale or other disposition of securities held
less than three months. This restriction may limit the extent to which any Fund
enter into options transactions and futures and forward contracts . To the
extent a Fund engages in short-term trading and enters into options transactions
and futures and forward contracts, the likelihood of violating this 30%
requirement is increased.
MUNICIPAL FUND
Under the Code, interest on indebtedness incurred or continued to
purchase or carry shares of an investment company paying exempt-interest
dividends, such as Municipal Fund, will not be deductible by a shareholder in
proportion to the ratio of the Fund's exempt-interest income to its total gross
income, excluding its net income from capital gains. Indebtedness may be
allocated to shares of the Fund even though not directly traceable to the
purchase of such shares.
For shareholders who are recipients of Social Security benefits,
exempt-interest dividends are includable in computing "modified adjusted gross
income" for purposes of determining the amount of Social Security benefits, if
any, that is required to be included in gross income. The maximum amount of
Social Security benefits that may be included in gross income is 85%.
Any loss on the sale or exchange of shares of Municipal Fund held for
six months or less (although regulations may reduce this time period to 31 days)
will be disallowed for federal income tax purposes to the extent of the amount
of any exempt-interest dividend received with respect to such shares.
For federal income tax purposes, an alternative minimum tax ("AMT") is
imposed on taxpayers to the extent that such tax, if any, exceeds a taxpayer's
regular income tax liability (with certain adjustments). Exempt-interest
dividends attributable to interest income on certain tax-exempt obligations
issued after August 7, 1986 to finance private activities are treated as an item
of tax preference that is included in alternative minimum taxable income for
purposes of computing the federal AMT for all taxpayers and the federal
environmental tax on corporations. In addition, all other tax-exempt interest
received by a corporation, including exempt-interest dividends, will be included
in adjusted current earnings for purposes of determining the federal corporate
AMT and the environmental tax imposed on corporations by Section 59A of the
Code. Liability for AMT will depend on each shareholder's individual tax
situation.
The Code imposes requirements on certain tax-exempt bonds which, if not
satisfied, could result in loss of tax exemption for interest on such bonds,
even retroactively to the date of issuance of the bonds. Proposals may be
introduced before Congress in the future, the purpose of which will be to
further restrict or eliminate the federal income tax exemption for tax-exempt
bonds held by the Funds. The Funds will avoid investment in bonds which, in the
opinion of the investment adviser, pose a material risk of the loss of tax
exemption. Further, if a bond in any Fund's portfolio lost its exempt status,
such Fund would make every effort to dispose of such investment on terms that
are not detrimental to the Fund.
If Municipal Fund invests in custodial receipts (see "Risks and
Characteristics of Securities and Investment Techniques -- Municipal Obligations
-- Derivative Municipal Obligations" in the Prospectus), it is possible that a
portion of the discount at which the Fund purchases the receipts might have to
be accrued as taxable income during the period that the Fund holds the receipts.
Because of the requirement that Municipal Fund distribute 90% of its net
investment income to maintain its status as a regulated investment company, the
Fund would be obligated to distribute taxable income to shareholders in the
amount of its accrued taxable income.
The foregoing relates only to federal income taxation and is a general
summary of the federal tax law in effect as of the date of this Statement of
Additional Information.
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Funds may refer to
"yield," "taxable equivalent yield" (with respect to Municipal Fund only),
"average annual total return," "cumulative total return" and "current
distribution rate." These amounts are calculated as described below. No
performance information is provided for the Funds because none of the Funds had
commenced operations as of the date of this Statement of Additional Information.
YIELD
Yield is computed by dividing the net investment income per share
deemed earned during the computation period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2[(a-b/cd + 1)(6th power) - 1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of
the period.
TAXABLE EQUIVALENT YIELD
Taxable equivalent yield is computed by dividing that portion of the
yield of a Fund (as computed above) which is tax-exempt by one minus a stated
income tax rate and adding the product to that portion, if any, of the yield of
the Fund that is not tax-exempt.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P[(1+T)(nth power)] = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made at
the beginning of such period.
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
CUMULATIVE TOTAL RETURN
Cumulative total return is computed by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
CTR = (ERV-P/P)100
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period; and
P = initial payment of $1,000.
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
DISTRIBUTION RATE
A Fund's current distribution rate as of a specified date is calculated
by determining the amount of distributions that would have been paid over the
twelve-month period ending on such date to the holder of one hypothetical Fund
share purchased at the beginning of such period, and dividing such amount by the
current offering price per share.
REDEMPTIONS
A signature guarantee is required if a redemption: (1) exceeds $50,000
(unless it is being wired to a pre-authorized bank account, in which case a
guarantee is not required), (2) is to be paid to someone other than the
registered shareholder or (3) is to be mailed to an address other than the
address of record or wired to an account other than the pre-authorized bank or
brokerage account. On joint account redemptions, each signature must be
guaranteed. A signature guarantee may not be provided by a notary public. Please
contact the Adviser for instructions as to what institutions constitute eligible
signature guarantors. The Underwriter may waive certain of these redemption
requirements at its own risk, but also reserves the right to require signature
guarantees on all redemptions, in contexts perceived by the Underwriter to
subject a Fund to an unusual degree of risk.
ADDITIONAL INFORMATION
Organizational costs incurred by the Company in connection with its
start-up and initial registration will be amortized over 60 months on an inverse
acceleration (sum-of-the-years-digits) basis beginning on the date of each
Fund's initial effective date. If the Adviser redeems any or all of its shares
of any Fund prior to the end of such Fund's 60-month amortization period, the
redemption proceeds will be reduced by its pro rata portion of such Fund's
unamortized organizational costs. If a Fund liquidates prior to the date such
costs are fully amortized, the Adviser will bear all unamortized organizational
costs of such Fund.
CUSTODIAN; COUNSEL; INDEPENDENT AUDITORS
First Trust National Association, 180 East Fifth Street, St. Paul,
Minnesota 55101, acts as custodian of the Funds' assets and portfolio
securities.
Dorsey & Whitney P.L.L.P., 220 South Sixth Street, Minneapolis,
Minnesota 55402, serves as general counsel for the Funds.
KPMG Peat Marwick LLP, 4200 Norwest Center, Minneapolis, Minnesota
55402, serves as the Funds' independent auditors.
SHAREHOLDER MEETINGS
The Company is not required under Minnesota law or under the Company's
Articles of Incorporation to hold annual or periodically scheduled regular
meetings of shareholders. Regular and special shareholder meetings are held only
at such times and with such frequency as required by law. Minnesota law and the
Company's Articles of Incorporation provide for the Board of Directors to
convene shareholder meetings when it deems appropriate. Additionally, the 1940
Act requires shareholder votes for all amendments to fundamental investment
policies and restrictions and for all investment advisory contracts and
amendments thereto.
LIMITATION OF DIRECTOR LIABILITY
Under Minnesota law, each director of the Company owes certain
fiduciary duties to each Fund and to its shareholders. Minnesota law provides
that a director "shall discharge the duties of the position of director in good
faith, in a manner the director reasonably believes to be in the best interest
of the corporation, and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances." Fiduciary duties of a
director of a Minnesota corporation include, therefore, both a duty of "loyalty"
(to act in good faith and act in a manner reasonably believed to be in the best
interests of the corporation) and a duty of "care" (to act with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances). Minnesota corporations are authorized to eliminate or limit the
personal liability of a director to the corporation or its shareholders for
monetary damages for breach of the fiduciary duty of "care". Minnesota law does
not, however, permit a corporation to eliminate or limit the liability of
directors (i) for any breach of the directors' duty of "loyalty" to the
corporation or its shareholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) for
authorizing a dividend, stock repurchase or redemption or other distribution in
violation of Minnesota law or for violation of certain provisions of Minnesota
securities law, or (iv) for any transaction from which the directors derived an
improper personal benefit. The Articles of Incorporation of each of the Funds
limits the liability of such Funds' directors to the fullest extent permitted by
Minnesota statutes, except to the extent that such liability cannot be limited
as provided in the 1940 Act (which Act prohibits any provisions which purport to
limit the liability of directors arising from such directors' willful
misfeasance, bath faith, gross negligence, or reckless disregard of the duties
involved in the conduct of their role as directors).
Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Minnesota law, further, does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers). Minnesota law does not permit elimination or limitation of
the availability of equitable relief, such as injunctive or rescissionary
relief. Further, Minnesota law does not permit elimination or limitation of a
director's liability under the1933 Act or the Securities Exchange Act of 1934,
and it is uncertain whether and to what extent the elimination of monetary
liability would extend to violations of duties imposed on directors by the 1940
Act and the rules and regulations adopted thereunder.
ORGANIZATION AND CAPITALIZATION OF THE FUNDS
The Company's (and, therefore, each Fund's) fiscal year ends on
October 31 of each year.
The Articles of Incorporation of the Company were amended and restated
on November 23, 1993 to, among other things, change the name of the Company from
Voyageur Money Market Fund, Inc. to Voyageur Mutual Funds IV, Inc. and on
January 20, 1995 to change the Company name to VAM Institutional Funds, Inc.
As described in the text of the Prospectus following the caption
"General Information," shares of the Funds are entitled to one vote per share
(with proportional voting for fractional shares) on such matters as shareholders
are entitled to vote. There will normally be no meetings of shareholders for the
purpose of electing directors, except insofar as elections are required under
the 1940 Act in the event that (i) less than a majority of the directors have
been elected by shareholders, or (ii) if, as a result of a vacancy, less than
two-thirds of the directors have been elected by the shareholders, the vacancy
will be filled only by a vote of the shareholders. In addition, the directors
may be removed from office by a written consent signed by the holders of
two-thirds of the outstanding shares of the Funds and filed with the Funds'
custodian or by a vote of the holders of two-thirds of the outstanding shares of
the Funds at a meeting duly called for the purpose, which meeting shall be held
upon the written request of the holders of not less than 10% of the outstanding
shares. Upon written request by ten or more shareholders, who have been such for
at least six months, and who in the aggregate hold shares having a net asset
value of at least $25,000 or constituting 1% of the outstanding shares, stating
that such shareholders wish to communicate with the other shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a director, the Funds have undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). Except as set forth above, each director shall
continue to hold office and may appoint a successor.
Independent Auditors' Report
The Board of Directors and Shareholder
VAM Institutional Funds, Inc:
We have audited the statements of assets and liabilities of VAM Short Government
Agency Fund, VAM Intermediate Government Agency Fund, VAM Government Mortgage
Fund, VAM Short Duration Total Return Fund, VAM Intermediate Duration Total
Return Fund and VAM Intermediate Municipal Fund as of January 12, 1995. These
financial statements are the responsibility of Fund management. Our
responsibility is to express an opinion on these financial statements 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. Our procedures include
confirmation of cash in bank by correspondence with 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 audit provides a reasonable basis for our
opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of VAM Short
Government Agency Fund, VAM Intermediate Government Agency Fund, VAM Government
Mortgage Fund, VAM Short Duration Total Return Fund, VAM Intermediate Duration
Total Return Fund and VAM Intermediate Municipal Fund as of January 12, 1995, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 13, 1995
VAM INSTITUTIONAL FUNDS, INC.
Statements of Assets and Liabilities
January 12, 1995
<TABLE>
<CAPTION>
VAM VAM VAM
Short Intermediate VAM VAM Intermediate VAM
Government Government Government Short Duration Duration Intermediate
Agency Agency Mortgage Total Return Total Return Municipal
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash in bank $101,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Deferred organization expense (note 4) 10,000 10,000 10,000 10,000 10,000 10,000
Total assets 111,000 11,000 11,000 11,000 11,000 11,000
Liabilities:
Accrued expenses (note 4) 10,000 10,000 10,000 10,000 10,000 10,000
Net assets applicable to outstanding
capital stock $101,000 $1,000 $1,000 $1,000 $1,000 $1,000
Represented by (note 1):
Capital stock - $.01 par value $ 101 $ 1 $ 1 $ 1 $ 1 $ 1
Additional paid-in capital 100,899 999 999 999 999 999
Total net assets $101,000 $1,000 $1,000 $1,000 $1,000 $1,000
Net assets applicable to outstanding
Institutional Class Shares $100,000 $500 $500 $500 $500 $500
Net assets applicable to outstanding
Institutional Service Class Shares $ 1,000 $500 $500 $500 $500 $500
Shares outstanding and net asset value
per share
Institutional Class Shares outstanding:
10,000, 50, 50, 50, 50, and 50,
respectively $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Institutional Service Class Shares
outstanding:
100, 50, 50, 50, 50, and 50,
respectively $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
</TABLE>
See accompanying notes to statements of assets and liabilities
VAM INSTITUTIONAL FUNDS, INC.
Notes to Statements of Assets and Liabilities
1) Organization
VAM Short Government Agency Fund, VAM Intermediate Government Agency Fund,
VAM Government Mortgage Fund, VAM Short Duration Total Return Fund, VAM
Intermediate Duration Total Return Fund and VAM Intermediate Municipal
Fund, (the "Funds"), Funds within VAM Institutional Funds, Inc. which was
incorporated in January 1985, are registered under the Investment Company
Act of 1940 (as amended) as diversified, open-end management investment
companies. Pursuant to its articles of incorporation, VAM Institutional
Funds, Inc. has 10 trillion shares of authorized capital stock that may be
issued. The Funds offer two classes of shares - the Institutional Class
Shares and the Institutional Service Class Shares. Each of which is sold
pursuant to different sales arrangements and bear different expenses.
The only transactions of the Funds since their formation were the initial
sale (at $10 per share) on January 12, 1995 of 10,000, 50, 50, 50, 50, and
50 shares, respectively, of Institutional Class Shares and 100, 50, 50, 50,
50, and 50, shares, respectively, of Institutional Service Class Shares to
Voyageur Fund Managers, Inc. (Voyageur).
2) Federal Taxes
The Funds intend to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute taxable
income to the shareholders of the Funds in amounts that will avoid or
minimize federal income or excise taxes for the Funds.
3) Fees and Expenses
Each Fund has an investment advisory agreement with Voyageur, under which
Voyageur manages the Funds assets and furnishes related office facilities,
equipment, research and personnel. Each Fund pays a monthly fee to Voyageur
equal to an annual rate of .50% of average daily net assets.
Each Fund has a distribution agreement with Voyageur Fund Distributors,
Inc. (Fund Distributors). No compensation is paid by the Funds under the
Distribution Agreements.
Institutional Service Class Shares of each Fund also have an agreement with
Fund Distributors to compensate service organizations who provide
additional administrative, record keeping, and other shareholder services
to their customers who are beneficial owners of service shares. Each Fund
is obligated to pay Fund Distributors a service fee at an annual rate up to
.25% of the Fund's average daily net assets applicable to Institutional
Service Class Shares.
Each Fund will also pay a fee to Voyageur for acting as the Fund's dividend
disbursing, transfer, administrative and accounting services agent. The fee
is paid monthly and is equal to an annual rate of .10% of average daily net
assets. Each Fund is also responsible for reimbursing Voyageur's
out-of-pocket expenses in connection with the performance of dividend
disbursing, transfer, administrative and accounting services.
In addition to the fees above, each Fund is responsible for paying most
other operating expenses including director's fees, registration fees,
printing of shareholder reports, legal and auditing services,
organizational costs and other miscellaneous expenses. Under the investment
advisory agreement, Voyageur is obligated to pay all expenses and fees
(excluding interest, taxes, distribution fees and brokerage commissions)
which exceed 1.00% of each Fund's average daily net assets, on an annual
basis, up to the combined amount of its investment advisory and management
fee and its dividend-disbursing, transfer, administrative and accounting
service fees. However, during the fiscal year ending September 30, 1995,
Voyageur intends to voluntarily limit total expenses of each Fund to .50%
and .75% of average daily net assets for Institutional Class Shares and
Institutional Service Class Shares, respectively.
4) Deferred Organizational Expenses
Voyageur expects to incur organizational expenses in connection with the
start-up and initial registration of the Funds. These costs will be paid by
the Funds and amortized over 60 months on an inverse acceleration
(sum-of-the-years' digits) basis beginning with the commencement of
operations. If any or all of the shares representing initial capital of
each Fund are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organizational expense balance in the same proportion as the number of
shares redeemed bears to the number of initial shares outstanding
immediately preceding the redemption.
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
STANDARD & POOR'S CORPORATION -- A brief description of the applicable
Standard & Poor's Corporation (S&P) rating symbols and their meanings (as
published by S&P) follows:
An S&P corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or
hold a security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. S&P
does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default -- capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.
1. Long-term bonds.
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
BB Debt rated 'BB,' 'B,' 'CCC,' 'CC' and 'C' is regarded, on balance, as
B predominantly speculative with respect to capacity to pay interest and
CCC repay principal in accordance with the terms of the obligation.
CC 'BB' indicates the lowest degree of speculation and 'C' the highest
C degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties of
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied 'BBB-' rating.
B Debt rated 'B' has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The 'B'
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The 'CCC' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'B'
or 'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C'
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
CI The rating 'CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
'D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
PLUS (+) or MINUS (-): The ratings from 'AA' to 'B' may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
2. Short-term tax-exempt notes.
S&P's tax-exempt note ratings are generally given to such notes that
mature in three years or less. The three rating categories are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. These
issues determined to possess overwhelming safety characteristics will
be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Satisfactory capacity to pay principal and interest.
3. Commercial Paper.
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 165 days. Ratings are graded into four categories, ranging from "A" for
the highest quality obligations to "D" for the lowest. The categories are as
follows:
A Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further
refined with the designation 1, 2, and 3 to indicate the relative
degree of safety.
A-1 This designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for
issues designated "A-1."
A-3 Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
B Issues rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
The commercial paper rating is not a recommendation to purchase or sell
a security. The ratings are based on current information furnished to
S&P by the issuer or obtained from other sources it considers reliable.
The ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of such information.
MOODY'S INVESTORS SERVICE -- A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their
meanings (as published by Moody's) follows:
1. Long-term bonds.
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations,
i.e. they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future can be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Con (..) Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operating experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1, and B1.
2. Short-term exempt notes.
Moody's ratings for state and municipal short-term obligations will be
designed Moody's Investment Grade or (MIG). A short-term rating may also be
assigned on an issue having a demand feature-variable rate demand
obligation. Such ratings will be designated as VMIG or, if the demand
feature is not rated, as NR.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
MIG 3/VMIG 3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
MIG 4/VMIG 4. This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is specific
risk.
3. Commercial paper.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity
in excess of nine months. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating
categories, and are not judged to be investment grade.
PART C
VAM INSTITUTIONAL FUNDS, INC.
VAM Global Fixed Income Fund
VAM Short Duration Government Agency Fund
VAM Intermediate Duration Government Agency Fund
VAM Government Mortgage Fund
VAM Short Duration Total Return Fund
VAM Intermediate Duration Total Return Fund
VAM Intermediate Duration Municipal Fund
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial statements - are included in Part B.
(b) Exhibits
1 Amended and Restated Articles of Incorporation *
2 Bylaws, as amended *
3 Not applicable
4 Not applicable
5.1 Investment Advisory Agreement *
5.2 Sub-Advisory Agreement *
6.1 Distribution Agreement *
6.2 Form of Dealer Sales Agreement *
7 Not applicable
8.1 Custodian Agreement for Series B - G *
8.2 Custodian Agreement for Series A *
9.1 Administrative Services Agreement *
9.2 Service Plan *
10.1 Opinion and Consent of Dorsey & Whitney P.L.L.P.
with respect to Series B - G*
10.2 Opinion and Consent of Dorsey & Whitney P.L.L.P.
with respect to Series A *
11 Consent of KPMG Peat Marwick LLP *
12 Not applicable
13 Letter of Investment Intent with respect to
Series B - G *
14 Not applicable
15 Not applicable
16 Calculations of Yield - Not yet available
17 Master Power of Attorney *
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
Voyageur serves as investment manager to the following closed-end and
open-end management investment companies:
CLOSED-END INVESTMENT COMPANIES
Voyageur Arizona Municipal Income Fund, Inc.
Voyageur Colorado Insured Municipal Income Fund, Inc.
Voyageur Florida Insured Municipal Income Fund
Voyageur Minnesota Municipal Income Fund, Inc.
Voyageur Minnesota Municipal Income Fund II, Inc.
OPEN-END INVESTMENT COMPANIES AND SERIES THEREOF
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund
Voyageur Insured Funds, Inc.
Voyageur Minnesota Insured Fund
Voyageur Arizona Insured Tax Free Fund
Voyageur National Insured Tax Free Fund
Voyageur Colorado Insured Tax Free Fund
Voyageur Intermediate Tax Free Funds, Inc.
Voyageur Minnesota Limited Term Tax Free Fund
Voyageur National Limited Term Tax Free Fund
Voyageur Arizona Limited Term Tax Free Fund
Voyageur Colorado Limited Term Tax Free Fund
Voyageur California Limited Term Tax Free Fund
Voyageur Investment Trust
Voyageur Florida Insured Tax Free Fund
Voyageur California Insured Tax Free Fund
Voyageur Kansas Tax Free Fund
Voyageur Missouri Insured Tax Free Fund
Voyageur New Mexico Tax Free Fund
Voyageur Oregon Insured Tax Free Fund
Voyageur Utah Tax Free Fund
Voyageur Washington Insured Tax Free Fund
Voyageur Florida Tax Free Fund
Voyageur Investment Trust II
Voyageur Florida Limited Term Tax Free Fund
Voyageur Tax Free Funds, Inc.
Voyageur Minnesota Tax Free Fund
Voyageur North Dakota Tax Free Fund
Voyageur Mutual Funds, Inc.
Voyageur Iowa Tax Free Fund
Voyageur Wisconsin Tax Free Fund
Voyageur Idaho Tax Free Fund
Voyageur Arizona Tax Free Fund
Voyageur California Tax Free Fund
Voyageur National Tax Free Fund
Voyageur Mutual Funds II, Inc.
Voyageur Colorado Tax Free Fund
Voyageur Mutual Funds III, Inc.
Voyageur Growth Stock Fund
Voyageur International Equity Fund
Voyageur Aggressive Growth Fund
Voyageur Growth and Income Fund
VAM Institutional Funds, Inc.
VAM Global Fixed Income Fund
VAM Short Duration Government Agency Fund
VAM Intermediate Duration Government Agency Fund
VAM Government Mortgage Fund
VAM Short Duration Total Return Fund
VAM Intermediate Duration Total Return Fund
VAM Intermediate Duration Municipal Fund
Item 26. Number of Holders of Securities
No information is presented for the Funds because they have not yet
commenced operations.
Item 27. Indemnification
The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify such persons, for such expenses and liabilities, in
such manner, under such circumstances, and to such extent as permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereinafter amended, and any rules, regulations or releases promulgated
thereunder.
The Registrant may indemnify its officers and directors and other
"persons" acting in an "official capacity" (as such terms are defined in Section
302A.521) pursuant to a determination by the board of directors or shareholders
of the Registrant as set forth in Section 302A.521, by special legal counsel
selected by the board or a committee thereof for the purpose of making such a
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of the Registrant, then such director generally
may not be counted for the purpose of determining either the presence of a
quorum or such director's eligibility to be indemnified.
In any case, indemnification is proper only if the eligibility
determining body decides that the person seeking indemnification has (a) not
received indemnification for the same conduct from any other party or
organization; (b) acted in good faith; (c) received no improper personal
benefit; (d) in the case of criminal proceedings, had no reasonable cause to
believe the conduct was unlawful; (e) reasonably believed that the conduct was
in the best interest of the Registrant, or in certain contexts, was not opposed
to the best interest of the Registrant; and (f) had not otherwise engaged in
conduct which precludes indemnification under either Minnesota or Federal law
(including, but not limited to, conduct constituting willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as set forth in Section
17(h) and (i) of the Investment Company Act of 1940).
If a person is made or threatened to be made a party to a proceeding,
the person is entitled, upon written request to the Registrant, to payment or
reimbursement by the Registrant of reasonable expenses, including attorneys'
fees and disbursements, incurred by the person in advance of the final
disposition of the proceeding, (a) upon receipt by the Registrant of a written
affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant, if it is ultimately determined that the criteria for indemnification
have not been satisfied, and (b) after a determination that the facts then known
to those making the determination would not preclude indemnification under
Section 302A.521. The written undertaking required by clause (a) is an unlimited
general obligation of the person making it, but need not be secured and shall be
accepted without reference to financial ability to make the repayment.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless, in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant undertakes to comply with the indemnification
requirements of Investment Company Release 7221 (June 9, 1972) and Investment
Company Release 11330 (September 2, 1980).
Item 28. Business and Other Connections of Investment Adviser
The name and principal occupations(s) during the past two fiscal years
of each director and the executive officer of the Adviser are set forth below.
The business address of each is 90 South Seventh Street, Suite 4400,
Minneapolis, Minnesota 55402.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH ADVISER PRINCIPAL OCCUPATION(S)
<S> <C> <C>
Michael E. Dougherty Chairman Chairman of the Board, President and Chief
Executive Officer of Dougherty Financial Group,
Inc. ("DFG") and Chairman of Voyageur, the
Underwriter and Dougherty, Dawkins, Strand &
Bigelow Incorporated.
John G. Taft Director and President See biographical information in Part B of the
Registration Statement.
Jane M. Wyatt Director and Chief See biographical information in Part B of the
Investment Officer Registration Statement.
Edward J. Kohler Director and Executive Director and Executive Vice President of the
Vice President Adviser and Director of the Underwriter since
1995; previously, President and Director of Piper
Capital Management Incorporated from 1985 to 1995.
Frank C. Tonnemaker Director and Executive Director of Voyageur and the Underwriter since
Vice President 1993; Executive Vice President of Voyageur
since 1994; Vice President of Voyageur from 1990
to 1994.
Thomas J. Abood General Counsel See biographical information in Part B of the
Registration Statement.
Kenneth R. Larsen Treasurer See biographical information in Part B of the
Registration Statement.
Steven B. Johansen Secretary and Chief Secretary of DFG, the Underwriter and Dougherty,
Financial Officer Dawkins, Strand & Bigelow Incorporated; Chief
Financial Officer of DFG, the Underwriter and
Dougherty, Dawkins, Strand & Bigelow
Incorporated since 1995; previously, Treasurer
of DFG amd Dougherty, Dawkins, Strand &
Bigelow Incorporated from 1990 to 1995.
</TABLE>
Information on the business of Registrants' Adviser is contained in the
section of the Prospectus entitled "Management" and in the section of the
Statement of Additional Information entitled "The Investment Adviser,
Sub-Adviser, Administrative Services, Expenses and Brokerage" filed as part of
this Registration Statement.
Item 29. Principal Underwriters
(a) Voyageur Fund Distributors, Inc., the underwriter of the
Registrant's shares, is principal underwriter for the shares of Voyageur Tax
Free Funds, Inc., Voyageur Insured Funds, Inc., Voyageur Intermediate Tax Free
Funds, Inc., Voyageur Investment Trust, Voyageur Investment Trust II, Voyageur
Mutual Funds, Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual Funds III,
Inc. and VAM Institutional Funds, Inc., affiliated open-end management
investment companies.
(b) The directors of the Underwriter are the same as the directors of
the Adviser as set forth above in Item 28. Executive officers of the Underwriter
(who are not also directors of the Underwriter) and the positions of these
individuals with respect to the Registrant are:
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
Michael E. Dougherty Chairman None
Steven B. Johansen Secretary & CFO None
Kenneth R. Larsen Treasurer Treasurer
Thomas J. Abood General Counsel Secretary
The address of each of the executive officers is 90 South Seventh Street, Suite
4400, Minneapolis, Minnesota 55402.
(c) Not applicable.
Item 30. Location of Accounts and Records
The custodian for Registrant is First Trust, National Association, 180
East Fifth Street, St. Paul, Minnesota 55101. The dividend disbursing,
administrative and accounting services agent of Registrant is Voyageur Fund
Managers, Inc. The address of Voyageur Fund Managers, Inc. and the Registrant is
90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from the commencment of operations of each respective series.
(c) Each recipient of a prospectus of any series of the Registrant may
request the latest Annual Report of such series, and such Annual Report will be
furnished by the Registrant without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Minneapolis, and State of
Minnesota, on the 31st day of July 1995.
VAM INSTITUTIONAL FUNDS, INC.
By /s/ John G. Taft
John G. Taft, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
/s/John G. Taft President (Principal July 31, 1995
John G. Taft Executive Officer)
/s/ Kenneth R. Larsen Treasurer (Principal July 31, 1995
Kenneth R. Larsen Financial and Accounting
Officer)
James W. Nelson* Director
Clarence G. Frame* Director
Robert J. Odegard* Director
Richard F. McNamara* Director
Thomas F. Madison** Director
/s/John G. Taft Attorney-in-Fact July 31, 1995
John G. Taft
(Pursuant to Power of Attorney dated January 24, 1995*)
EXHIBIT INDEX
TO
REGISTRATION STATEMENT
OF
VAM INSTITUTIONAL FUNDS, INC.
Exhibit Page
1 Amended and Restated Articles of Incorporation
2 Bylaws, as amended
5.1 Investment Advisory Agreement
5.2 Sub-Advisory Agreement
6.1 Distribution Agreement
6.2 Form of Dealer Sales Agreement
8.1 Custodian Agreement with respect to Series B through G
8.2 Custodian Agreement with respect to Series A
9.1 Administrative Services Agreement
9.2 Service Plan
10.1 Opinion and Consent of Dorsey & Whitney P.L.L.P. with
respect to Series B through G
10.2 Opinion and Consent of Dorsey & Whitney P.L.L.P. with
respect to Series A
11 Consent of KPMG Peat Marwick LLP
13 Letter of Investment Intent with respect to Series B through G
17 Master Power of Attorney
CERTIFICATE OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
VOYAGEUR MUTUAL FUNDS IV, INC.
The undersigned, Thomas J. Abood, Secretary of Voyageur Mutual Funds
IV, Inc. (the "Corporation"), a Minnesota corporation, hereby certifies as
follows:
1. The name of the Corporation is Voyageur Mutual Funds IV, Inc.
2. At a meeting duly called and held (pursuant to the
requirements of the Minnesota Statutes, Chapter 302A) on
October 27, 1994, the Corporation's Board of Directors, there
being no shares of the Corporation outstanding on such date,
adopted and approved the following Amended and Restated
Articles of Incorporation of the Corporation to replace the
Corporation's existing Restated Articles of Incorporation in
their entirety, and directed that the officers of the
Corporation file the following Amended and Restated Articles
of Incorporation in the office of the Minnesota Secretary of
State.
2. The Amended and Restated Articles of Incorporation have been
adopted pursuant to Chapter 302A of the Minnesota Business
Corporation Act.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
VAM INSTITUTIONAL FUNDS, INC.
For the purpose of forming a corporation pursuant to the provisions of
Minnesota Statutes, Chapter 302A, the following Amended and Restated Articles of
Incorporation are adopted:
1. The name of the corporation (the "Corporation") is VAM Institutional
Funds, Inc.
2. The Corporation shall have general business purposes and shall have
unlimited power to engage in and do any lawful act concerning any and all lawful
businesses for which corporations may be organized under the Minnesota Statutes,
Chapter 302A. Without limiting the generality of the foregoing, the Corporation
shall have specific power:
(a) To conduct, operate and carry on the business of a
so-called "open-end" management investment company pursuant to
applicable state and federal regulatory statutes, and exercise all the
powers necessary and appropriate to the conduct of such operations.
(b) To purchase, subscribe for, invest in or otherwise
acquire, and to own, hold, pledge, mortgage, hypothecate, sell,
possess, transfer or otherwise dispose of, or turn to account or
realize upon, and generally deal in, all forms of securities of every
kind, nature, character, type and form, and other financial instruments
which may not be deemed to be securities, including but not limited to
futures contracts and options thereon. Such securities and other
financial instruments may include but are not limited to shares,
stocks, bonds, debentures, notes, scrip, participation certificates,
rights to subscribe, warrants, options, certificates of deposit,
bankers' acceptances, repurchase agreements, commercial paper, choses
in action, evidences of indebtedness, certificates of indebtedness and
certificates of interest of any and every kind and nature whatsoever,
secured and unsecured, issued or to be issued, by any corporation,
company, partnership (limited or general), association, trust, entity
or person, public or private, whether organized under the laws of the
United States, or any state, commonwealth, territory or possession
thereof, or organized under the laws of any foreign country, or any
state, province, territory or possession thereof, or issued or to be
issued by the United States government or any agency or instrumentality
thereof, options on stock indexes, stock index and interest rate
futures contracts and options thereon, and other futures contracts and
options thereon.
(c) In the above provisions of this Article 2, purposes shall
also be construed as powers and powers shall also be construed as
purposes, and the enumeration of specific purposes or powers shall not
be construed to limit other statements of purposes or to limit purposes
or powers which the Corporation may otherwise have under applicable
law, all of the same being separate and cumulative, and all of the same
may be carried on, promoted and pursued, transacted or exercised in any
place whatsoever.
3. The Corporation shall have perpetual existence.
4. The location and post office address of the registered office in
Minnesota is 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
5. The total authorized number of shares of the Corporation is ten
trillion, all of which shall be common shares of the par value of $.01 per share
(individually, a "Share" and collectively, the "Shares"). Of said Shares:
(a) ten billion Shares are designated as Series A Common
Shares, one billion of which are designated as Series A, Institutional
Class Common Shares, one billion of which are designated as Series A,
Institutional Service Class Common Shares, and eight billion of which
shall remain undesignated as to class;
(b) ten billion Shares are designated as Series B Common
Shares, one billion of which are designated as Series B, Institutional
Class Common Shares, one billion of which are designated as Series B,
Institutional Service Class Common Shares, and eight billion of which
shall remain undesignated as to class;
(c) ten billion Shares are designated as Series C Common
Shares, one billion of which are designated as Series C, Institutional
Class Common Shares, one billion of which are designated as Series C,
Institutional Service Class Common Shares, and eight billion of which
shall remain undesignated as to class;
(d) ten billion Shares are designated as Series D Common
Shares, one billion of which are designated as Series D, Institutional
Class Common Shares, one billion of which are designated as Series D,
Institutional Service Class Common Shares, and eight billion of which
shall remain undesignated as to class;
(e) ten billion Shares are designated as Series E Common
Shares, one billion of which are designated as Series E, Institutional
Class Common Shares, one billion of which are designated as Series E,
Institutional Service Class Common Shares, and eight billion of which
shall remain undesignated as to class;
(f) ten billion Shares are designated as Series F Common
Shares, one billion of which are designated as Series F, Institutional
Class Common Shares, one billion of which are designated as Series F,
Institutional Service Class Common Shares, and eight billion of which
shall remain undesignated as to class; and
(g) ten billion Shares are designated as Series G Common
Shares, one billion of which are designated as Series G, Institutional
Class Common Shares, one billion of which are designated as Series G,
Institutional Service Class Common shares, and eight billion of which
shall remain undesignated as to class.
The remaining nine trillion, nine hundred thirty billion Shares
authorized by this Article 5 shall initially be undesignated Shares (the
"Undesignated Shares"). Any series of Shares designated hereby, together with
any other series from time to time created by the Board of Directors, shall be
referred to herein as "Series." The Undesignated Shares may be issued in such
Series with such designations, preferences and relative, participating, optional
or other special rights, or qualifications, limitations or restrictions thereof,
as shall be stated or expressed in a resolution or resolutions providing for the
issue of such Series as may be adopted from time to time by the Board of
Directors of the Corporation pursuant to the authority hereby vested in the
Board of Directors. The Series A, Series B, Series C, Series D, Series E, Series
F and Series G Shares each evidence, and each other Series of Shares which the
Board of Directors may establish, as provided herein, may evidence, if the Board
of Directors shall so determine by resolution, an interest in a separate and
distinct portion of the Corporation's assets, which shall take the form of a
separate portfolio of investment securities, cash and other assets. Authority to
establish such separate portfolios is hereby vested in the Board of Directors of
the Corporation, and such separate portfolios may be established by the Board of
Directors without the authorization or approval of the holders of any Series of
Shares of the Corporation.
The Shares of each Series established by this Article 5 which remain
undesignated as to class, together with the shares of any Series hereafter
established, may be classified by the Board of Directors in one or more classes.
Each such class, and each class designated in this Article 5 (individually, a
"Class" and, collectively, the "Classes"), shall have such relative rights and
preferences as shall be stated or expressed in a resolution or resolutions
providing for the issue of such Class as may be adopted from time to time by the
Board of Directors of the Corporation pursuant to the authority hereby vested in
the Board of Directors and Minnesota Statutes, Section 302A.401, Subd. 3, or any
successor provision. The Shares of each Class within a Series may be subject to
such charges and expenses (including by way of example, but not by way of
limitation, front-end and deferred sales charges, expenses under Rule 12b-1
plans, administration plans, service plans, or other plans or arrangements,
however designated) as may be adopted from time to time by the Board of
Directors in accordance, to the extent applicable, with the Investment Company
Act of 1940, as amended (together with the rules and regulations promulgated
thereunder, the "1940 Act"), which charges and expenses may differ from those
applicable to another Class within such Series, and all of the charges and
expenses to which a Class is subject shall be borne by such Class and shall be
appropriately reflected (in the manner determined by the Board of Directors in
the resolution or resolutions providing for the issue of such Class) in
determining the net asset value and the amounts payable with respect to
dividends and distributions on and redemptions or liquidations of, such Class.
Subject to compliance with the requirements of the 1940 Act, the Board of
Directors shall have the authority to provide that Shares of any Class shall be
convertible (automatically, optionally or otherwise) into Shares of one or more
other Classes in accordance with such requirements and procedures as may be
established by the Board of Directors.
The Corporation may issue and sell any of its Shares in fractional
denominations to the same extent as its whole Shares, and Shares and fractional
denominations shall have, in proportion to the relative fractions represented
thereby, all the rights of whole Shares, including, without limitation, the
right to vote, the right to receive dividends and distributions, and the right
to participate upon liquidation of the Corporation.
6. The shareholders of each Series (or Class thereof) of common shares
of the Corporation:
(a) shall not have the right to cumulate votes for the
election of directors; and
(b) shall have no preemptive right to subscribe to any issue
of shares of any Series (or Class thereof) of the Corporation now or
hereafter created, designated or classified.
7. A description of the relative rights and preferences of all Series
of Shares (and Classes thereof) is as follows, unless otherwise set forth in one
or more amendments to these Articles of Incorporation or in the resolution
providing for the issue of such Series (and Classes thereof):
(a) On any matter submitted to a vote of shareholders of the
Corporation, all Shares of the Corporation then issued and outstanding
and entitled to vote, irrespective of Series or Class, shall be voted
in the aggregate and not by Series or Class, except: (i) when otherwise
required by Minnesota Statutes, Chapter 302A, in which case shares will
be voted by individual Series or Class, as applicable; (ii) when
otherwise required by the 1940 Act or the rules adopted thereunder, in
which case shares shall be voted by individual Series or Class, as
applicable; and (iii) when the matter does not affect the interests of
a particular Series or Class thereof, in which case only shareholders
of the Series or Class thereof affected shall be entitled to vote
thereon and shall vote by individual Series or Class, as applicable.
(b) All consideration received by the Corporation for the
issue or sale of Shares of any Series, together with all assets,
income, earnings, profits and proceeds derived therefrom (including all
proceeds derived from the sale, exchange or liquidation thereof and, if
applicable, any assets derived from any reinvestment of such proceeds
in whatever form the same may be) shall become part of the assets of
the portfolio to which the Shares of that Series relate, for all
purposes, subject only to the rights of creditors, and shall be so
treated upon the books of account of the Corporation. Such assets,
income, earnings, profits and proceeds (including any proceeds derived
from the sale, exchange or liquidation thereof and, if applicable, any
assets derived from any reinvestment of such proceeds in whatever form
the same may be) are herein referred to as "assets belonging to" such
Series of Shares of the Corporation.
(c) Assets of the Corporation not belonging to any particular
Series are referred to herein as "General Assets." General Assets shall
be allocated to each Series in proportion to the respective net assets
belonging to such Series. The determination of the Board of Directors
shall be conclusive as to the amount of assets, as to the
characterization of assets as those belonging to a Series or as General
Assets, and as to the allocation of General Assets.
(d) The assets belonging to a particular Series of Shares
shall be charged with the liabilities incurred specifically on behalf
of such Series of Shares ("Special Liabilities"). Such assets shall
also be charged with a share of the general liabilities of the
Corporation ("General Liabilities") in proportion to the respective net
assets belonging to such Series of common shares. The determination of
the Board of Directors shall be conclusive as to the amount of
liabilities, including accrued expenses and reserves, as to the
characterization of any liability as a Special Liability or General
Liability, and as to the allocation of General Liabilities among
Series.
(e) The Board of Directors may, to the extent permitted by
Minnesota Statutes, Chapter 302A or any successor provision thereto,
declare and pay dividends or distributions in Shares, cash or other
property on any or all Series (or Classes thereof) of Shares, the
amount of such dividends and the payment thereof being wholly in the
discretion of the Board of Directors.
(f) In the event of the liquidation or dissolution of the
Corporation, holders of the Shares of any Series shall have priority
over the holders of any other Series with respect to, and shall be
entitled to receive, out of the assets of the Corporation available for
distribution to holders of shares, the assets belonging to such Series
of Shares and the General Assets allocated to such Series of Shares,
and the assets so distributable to the holders of the Shares of any
Series shall be distributed among such holders in proportion to the
number of Shares of such Series held by each such shareholder and
recorded on the books of the Corporation, except that, in the case of a
Series with more than one Class of Shares, such distributions shall be
adjusted to appropriately reflect any charges and expenses borne by
each individual Class.
(g) With the approval of a majority of the shareholders of
each of the affected Series of Shares present in person or by proxy at
a meeting called for the following purpose (provided that a quorum of
the issued and outstanding Shares of the affected Series is present at
such meeting in person or by proxy), the Board of Directors may
transfer the assets of any Series to any other Series. Upon such a
transfer, the Corporation shall issue Shares representing interests in
the Series to which the assets were transferred in exchange for all
Shares representing interests in the Series from which the assets were
transferred. Such Shares shall be exchanged at their respective net
asset values.
8. The following additional provisions, when consistent with law, are
hereby established for the management of the business, for the conduct of the
affairs of the Corporation, and for the purpose of describing certain specific
powers of the Corporation and of its directors and shareholders.
(a) In furtherance and not in limitation of the powers
conferred by statute and pursuant to these Articles of Incorporation,
the Board of Directors is expressly authorized to do the following:
(i) to make, adopt, alter, amend and repeal Bylaws of
the Corporation unless reserved to the shareholders by the
Bylaws or by the laws of the State of Minnesota, subject to
the power of the shareholders to change or repeal such Bylaws;
(ii) to distribute, in its discretion, for any fiscal
year (in the year or in the next fiscal year) as ordinary
dividends and as capital gains distributions, respectively,
amounts sufficient to enable each Series to qualify under the
Internal Revenue Code as a regulated investment company to
avoid any liability for federal income tax in respect of such
year. Any distribution or dividend paid to shareholders from
any capital source shall be accompanied by a written statement
showing the source or sources of such payment;
(iii) to authorize, subject to such vote, consent, or
approval of shareholders and other conditions, if any, as may
be required by any applicable statute, rule or regulation, the
execution and performance by the Corporation of any agreement
or agreements with any person, corporation, association,
company, trust, partnership (limited or general) or other
organization whereby, subject to the supervision and control
of the Board of Directors, any such other person, corporation,
association, company, trust, partnership (limited or general),
or other organization shall render managerial, investment
advisory, distribution, transfer agent, accounting and/or
other services to the Corporation (including, if deemed
advisable, the management or supervision of the investment
portfolios of the Corporation) upon such terms and conditions
as may be provided in such agreement or agreements;
(iv) to authorize any agreement of the character
described in subparagraph (iii) of this paragraph (a) with any
person, corporation, association, company, trust, partnership
(limited or general) or other organization, although one or
more of the members of the Board of Directors or officers of
the Corporation may be the other party to any such agreement
or an officer, director, employee, shareholder, or member of
such other party, and no such agreement shall be invalidated
or rendered voidable by reason of the existence of any such
relationship;
(v) to allot and authorize the issuance of the
authorized but unissued Shares of any Series, or Class
thereof, of the Corporation;
(vi) to accept or reject subscriptions for Shares of
any Series, or Class thereof, made after incorporation;
(vii) to fix the terms, conditions and provisions of
and authorize the issuance of options to purchase or subscribe
for Shares of any Series, or Class thereof, including the
option price or prices at which Shares may be purchased or
subscribed for;
(viii) to take any action which might be taken at a
meeting of the Board of Directors, or any duly constituted
committee thereof, without a meeting pursuant to a writing
signed by that number of directors or committee members that
would be required to taken the same action at a meeting of the
Board of Directors or committee thereof at which all directors
or committee members were present; provided, however, that, if
such action also requires shareholder approval, such writing
must be signed by all of the directors or committee members
entitled to vote on such matter; and
(ix) to determine what constitutes net income, total
assets and the net asset value of the Shares of each Series
(or Class thereof) of the Corporation. Any such determination
made in good faith shall be final and conclusive, and shall be
binding upon the Corporation, and all holders (past, present
and future) of Shares of each Series and Class thereof.
(b) Except as provided in the next sentence of this paragraph
(b), Shares of any Series, or Class thereof, hereafter issued which are
redeemed, exchanged, or otherwise acquired by the Corporation shall
return to the status of authorized and unissued Shares of such Series
or Class. Upon the redemption, exchange, or other acquisition by the
Corporation of all outstanding Shares of any Series (or Class thereof),
hereafter issued, such Shares shall return to the status of authorized
and unissued Shares without designation as to Series (if no Shares of
the Series remain outstanding) or with the same designation as to
Series, but no designation as to Class within such Series (if Shares of
such Series remain outstanding, but no Shares of such Class thereof
remain outstanding), and all provisions of these articles of
incorporation relating to such Series, or Class thereof (including,
without limitation, any statement establishing or fixing the rights and
preferences of such Series, or Class thereof), shall cease to be of
further effect and shall cease to be a part of these articles. Upon the
occurrence of such events, the Board of Directors of the Corporation
shall have the power, pursuant to Minnesota Statutes Section 302A.135,
Subdivision 5 or any successor provision and without shareholder
action, to cause restated articles of incorporation of the Corporation
to be prepared and filed with the Secretary of State of the State of
Minnesota which reflect such removal from these articles of all such
provisions relating to such Series, or Class thereof.
(c) The determination as to any of the following matters made
by or pursuant to the direction of the Board of Directors consistent
with these Articles of Incorporation and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
duties, shall be final and conclusive and shall be binding upon the
Corporation and every holder of shares of its capital stock: namely,
the amount of the assets, obligations, liabilities and expenses of each
Series (or Class thereof) of the Corporation; the amount of the net
income of each Series (or Class thereof) of the Corporation from
dividends and interest for any period and the amount of assets at any
time legally available for the payment of dividends in each Series (or
Class thereof); the amount of paid-in surplus, other surplus, annual or
other net profits, or net assets in excess of capital, undivided
profits, or excess of profits over losses on sales of securities of
each Series (or Class thereof); the amount, purpose, time of creation,
increase or decrease, alteration or cancellation of any reserves or
charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges shall have been created
shall have been paid or discharged); the market value, or any sale, bid
or asked price to be applied in determining the market value, of any
security owned or held by or in each Series of the Corporation; the
fair value of any other asset owned by or in each Series of the
Corporation; the number of Shares of each Series (or Class thereof) of
the Corporation issued or issuable; any matter relating to the
acquisition, holding and disposition of securities and other assets by
each Series of the Corporation; and any question as to whether any
transaction constitutes a purchase of securities on margin, a short
sale of securities, or an underwriting of the sale of, or participation
in any underwriting or selling group in connection with the public
distribution of any securities.
(d) The Board of Directors or the shareholders of the
Corporation may adopt, amend, affirm or reject investment policies and
restrictions upon investment or the use of assets of each Series of the
Corporation and may designate some such policies as fundamental and not
subject to change other than by a vote of a majority of the outstanding
voting securities, as such phrase is defined in the 1940 Act, of the
affected Series of the Corporation.
9. The Corporation shall indemnify such persons for such expenses and
liabilities, in such manner, under such circumstances, and to the full extent
permitted by Section 302A.521 of the Minnesota Statutes, as now enacted or
hereafter amended, provided, however, that no such indemnification may be made
if it would be in violation of Section 17(h) of the 1940 Act, as now enacted or
hereafter amended.
10. To the fullest extent permitted by the Minnesota Statutes, Chapter
302A, as the same exists or may hereafter be amended (except as prohibited by
the 1940 Act, as the same exists or may hereafter be amended), a director of the
Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
IN WITNESS WHEREOF, the undersigned duly elected and serving Secretary
of the Corporation, has executed this Certificate of Amendment to the Articles
of Incorporation on this 19th day of January, 1995.
/s/ Thomas J. Abood
Thomas J. Abood
Secretary
BYLAWS
OF
VAM INSTITUTIONAL FUNDS, INC.
(AS AMENDED BY THE BOARD OF DIRECTORS ON JULY 31, 1995)
ARTICLE I
OFFICES, CORPORATE SEAL
Section 1.01. Name. The name of the corporation is "VAM Institutional
Funds, Inc." The name of the series represented by the corporation's Series A
Common Shares is "VAM Global Fixed Income Fund." The name of the series
represented by the corporation's Series B Common Shares is "VAM Short Duration
Government Agency Fund." The name of the series represented by the corporation's
Series C Common Shares is "VAM Intermediate Duration Government Agency Fund."
The name of the series represented by the corporation's Series D Common Shares
is "VAM Government Mortgage Fund." The name of the series represented by the
corporation's Series E Common Shares is "VAM Short Duration Total Return Fund."
The name of the series represented by the corporation's Series F Common Shares
is "VAM Intermediate Duration Total Return Fund." The name of the series
represented by the corporation's Series G Common Shares is "VAM Intermediate
Duration Municipal Fund."
Section 1.02. Registered Office. The registered office of the
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or resolution of the directors filed with the Secretary of State of Minnesota
changing the registered office.
Section 1.03. Other Offices. The corporation may have such other
offices, within or without the State of Minnesota, as the directors shall, from
time to time, determine.
Section 1.04. No Corporate Seal. The corporation shall have no
corporate seal.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meeting. Except as provided otherwise
by Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at
any place, within or without the State of Minnesota, designated by the directors
and, in the absence of such designation, shall be held at the registered office
of the corporation in the State of Minnesota. The directors shall designate the
time of day for each meeting and, in the absence of such designation, every
meeting of shareholders shall be held at ten o'clock a.m.
Section 2.02. Regular Meetings. The corporation shall not be required
to hold annual meetings of shareholders. Regular meetings shall be held only
with such frequency and at such times and places as provided in and required by
Minnesota Statutes Section 302A.431.
Section 2.03. Special Meetings. Special meetings of the shareholders
may be held at any time and for any purpose and may be called by the Chairman of
the Board, the President, any two directors, or by one or more shareholders
holding ten percent (10%) or more of the shares entitled to vote on the matters
to be presented to the meeting.
Section 2.04. Quorum, Adjourned Meetings. The holders of ten percent
(10%) of the shares outstanding and entitled to vote shall constitute a quorum
for the transaction of business at any regular or special meeting. In case a
quorum shall not be present at a meeting, those present in person or by proxy
shall adjourn the meeting to such day as they shall, by majority vote, agree
upon without further notice other than by announcement at the meeting at which
such adjournment is taken. If a quorum is present, a meeting may be adjourned
from time to time without notice other than announcement at the meeting. At
adjourned meetings at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally noticed. If a
quorum is present, the shareholders may continue to transact business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 2.05. Voting. At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the Articles of Incorporation provide
otherwise, shall have one vote for each share having voting power registered in
such shareholder's name on the books of the corporation. Except as otherwise
specifically provided by these Bylaws or as required by provisions of the
Investment Company Act of 1940 or other applicable laws, all questions shall be
decided by a majority vote of the number of shares entitled to vote and
represented at the meeting at the time of the vote. If the matter(s) to be
presented at a regular or special meeting relates only to particular classes or
series of the corporation, then only the shareholders of such classes or series
are entitled to vote on such matter(s).
Section 2.06. Voting - Proxies. The right to vote by proxy shall exist
only if the instrument authorizing such proxy to act shall have been executed in
writing by the shareholder or by such shareholder's attorney thereunto duly
authorized in writing. No proxy shall be voted after eleven months from its date
unless it provides for a longer period.
Section 2.07. Closing of Books. The Board of Directors may fix a time,
not exceeding sixty (60) days preceding the date of any meeting of shareholders,
as a record date for the determination of the shareholders entitled to notice
of, and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record date so fixed. The Board of Directors
may close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of, and to
vote at, any meeting of shareholders, the record date shall be the thirtieth
(30th) day preceding the date of such meeting.
Section 2.08. Notice of Meetings. There shall be mailed to each
shareholder, shown by the books of the corporation to be a holder of record of
voting shares, at such shareholder's address as shown by the books of the
corporation, a notice setting out the date, time and place of each regular
meeting and each special meeting, except where the meeting is an adjourned
meeting and the date, time and place of the meeting were announced at the time
of adjournment, which notice shall be mailed within the period required by law.
Every notice of any special meeting shall state the purpose or purposes for
which the meeting has been called, pursuant to Section 2.03, and the business
transacted at all special meetings shall be confined to the purpose stated in
such notice.
Section 2.09. Waiver of Notice. Notice of any regular or special
meeting may be waived either before, at or after such meeting orally or in a
writing signed by each shareholder or representative thereof entitled to vote
the shares so represented. A shareholder by his or her attendance at any meeting
of shareholders, shall be deemed to have waived notice of such meeting, except
where the shareholder objects at the beginning of the meeting to the transaction
of business because the item may not lawfully be considered at that meeting and
does not participate at that meeting in the consideration of the item at that
meeting.
Section 2.10. Written Action. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action. If the
action to be taken relates to particular classes or series of the corporation,
then only shareholders of such classes or series are entitled to vote on such
action.
ARTICLE III
DIRECTORS
Section 3.01. Number, Qualification and Term of Office. The number of
directors shall be established by resolution of the shareholders (subject to the
authority of the Board of Directors to increase or decrease the number of
directors as permitted by law). In the absence of such shareholder resolution,
the number of directors shall be the number last fixed by the shareholders, the
Board of Directors or the Articles of Incorporation. Directors need not be
shareholders. Each of the directors shall hold office until the regular meeting
of shareholders next held after his or her election and until his or her
successor shall have been elected and shall qualify, or until the earlier death,
resignation, removal or disqualification of such director.
Section 3.02. Election of Directors. Except as otherwise provided in
Sections 3.11 and 3.12 hereof, the directors shall be elected at the regular
shareholders' meeting. In the event that directors are not elected at a regular
shareholders' meeting, then directors may be elected at a special shareholders'
meeting, provided that the notice of such meeting shall contain mention of such
purpose. At each shareholders' meeting for the election of directors, the
directors shall be elected by a plurality of the votes validly cast at such
election. Each holder of shares of each class or series of stock of the
corporation shall be entitled to vote for directors and shall have equal voting
power for each share of each class or series of the corporation.
Section 3.03. General Powers.
(a) Except as otherwise permitted by statute, the property,
affairs and business of the corporation shall be managed by the Board
of Directors, which may exercise all the powers of the corporation
except those powers vested solely in the shareholders of the
corporation by statute, the Articles of Incorporation or these Bylaws,
as amended.
(b) All acts done by any meeting of the Directors or by any
person acting as a director, so long as his or her successor shall not
have been duly elected or appointed, shall, notwithstanding that it be
afterwards discovered that there was some defect in the election of the
directors or such person acting as aforesaid or that they or any of
them were disqualified, be as valid as if the directors or such other
person, as the case may be, had been duly elected and were or was
qualified to be directors or a director of the corporation.
Section 3.04. Power to Declare Dividends.
(a) The Board of Directors, from time to time as they may deem
advisable, may declare and pay dividends in cash or other property of
the corporation, out of any source available for dividends, to the
shareholders of each class or series of stock of the corporation
according to their respective rights and interests in the investment
portfolio of the corporation issuing such class or series of stock.
(b) Notwithstanding the above provisions of this Section 3.04,
the Board of Directors may at any time declare and distribute pro rata
among the shareholders of each class or series of stock a "stock
dividend" out of the authorized but unissued shares of stock of each
class or series, including any shares previously purchased by a class
or series of the corporation.
Section 3.05. Board Meetings. Meetings of the Board of Directors may be
held from time to time at such time and place within or without the State of
Minnesota as may be designated in the notice of such meeting.
Section 3.06. Calling Meetings, Notice. A director may call a board
meeting by giving ten (10) days notice to all directors of the date, time and
place of the meeting; provided that if the day or date, time and place of a
board meeting have been announced at a previous meeting of the board, no notice
is required.
Section 3.07. Waiver of Notice. Notice of any meeting of the Board of
Directors may be waived by any director either before, at or after such meeting
orally or in a writing signed by such director. A director, by his or her
attendance and participation in the action taken at any meeting of the Board of
Directors, shall be deemed to have waived notice of such meeting, except where
the director objects at the beginning of the meeting to the transaction of
business because the item may not lawfully be considered at that meeting and
does not participate at that meeting in the consideration of the item at that
meeting.
Section 3.08. Quorum. A majority of the directors holding office
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting; provided however,
notwithstanding the above, if the Board of Directors is taking action pursuant
to the Investment Company Act of 1940, as now enacted or hereafter amended, a
majority of directors who are not "interested persons" (as defined by the
Investment Company Act of 1940, as now enacted or hereafter amended) of the
corporation shall constitute a quorum for taking such action.
Section 3.09. Advance Consent or Opposition. A director may give
advance written consent or opposition to a proposal to be acted on at a meeting
of the Board of Directors. If such director is not present at the meeting,
consent or opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected. This procedure
shall not be used to act on any investment advisory agreement or plan of
distribution adopted under Rule 12b-1 of the Investment Company Act of 1940, as
amended.
Section 3.10. Conference Communications. Any or all directors may
participate in any meeting of the Board of Directors, or of any duly constituted
committee thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.10 shall be deemed present in person at
the meeting, and the place of the meeting shall be the place of origination of
the conference communication. This procedure shall not be used to act on any
investment advisory agreement or plan of distribution adopted under Rule 12b-1
of the Investment Company Act of 1940, as amended.
Section 3.11. Vacancies; Newly Created Directorships. Vacancies in the
Board of Directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the Board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the Board of Directors as permitted by Section
3.01 may be filled by a two-thirds (2/3) vote of the directors serving at the
time of such increase; and each person so elected shall be a director until his
or her successor is elected by the shareholders at their next regular or special
meeting; provided, however, that no vacancy can be filled as provided above if
prohibited by the provisions of the Investment Company Act of 1940.
Section 3.12. Removal. The entire Board of Directors or an individual
director may be removed from office, with or without cause, by a vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors. In the event that the entire Board or any one or more directors be so
removed, new directors shall be elected at the same meeting, or the remaining
directors may, to the extent vacancies are not filled at such meeting, fill any
vacancy or vacancies created by such removal. A director named by the Board of
Directors to fill a vacancy may be removed from office at any time, with or
without cause, by the affirmative vote of the remaining directors if the
shareholders have not elected directors in the interim between the time of the
appointment to fill such vacancy and the time of the removal.
Section 3.13. Committees. A resolution approved by the affirmative vote
of a majority of the Board of Directors may establish committees having the
authority of the board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors.
A majority of the members of the committee present at a meeting is a
quorum for the transaction of business, unless a larger or smaller proportion or
number is provided in a resolution approved by the affirmative vote of a
majority of the directors present.
Section 3.14. Written Action. Except as provided in the Investment
Company Act of 1940, as amended, any action which might be taken at a meeting of
the Board of Directors, or any duly constituted committee thereof, may be taken
without a meeting if done in writing and signed by that number of directors or
committee members that would be required to take the same action at a meeting of
the board or committee thereof at which all directors or committee members were
present; provided, however, that any action which also requires shareholder
approval may be taken by written action only if such writing is signed by all of
the directors or committee members entitled to vote on such matter .
Section 3.15. Compensation. Directors who are not salaried officers of
this corporation or affiliated with its investment adviser shall receive such
fixed sum per meeting attended and/or such fixed annual sum as shall be
determined, from time to time, by resolution of the Board of Directors. All
directors shall receive their expenses, if any, of attendance at meetings of the
Board of Directors or any committee thereof. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
Section 3.16. Resignation. A director may resign by giving written
notice to the corporation, and the resignation is effective without acceptance
when given, unless a later effective time is specified in the notice.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist of
a Chairman of the Board (if one is elected by the Board), the President, one or
more Vice Presidents (if desired by the Board), a Secretary, a Treasurer and
such other officers and agents as may, from time to time, be elected by the
Board of Directors. Any number of offices may be held by the same person.
Section 4.02. Election, Term of Office and Qualifications. The Board of
Directors shall elect, from within or without their number, the officers
referred to in Section 4.01 of these Bylaws, each of whom shall have the powers,
rights, duties, responsibilities and terms in office provided for in these
Bylaws or a resolution of the Board not inconsistent therewith. The President
and all other officers who may be directors shall continue to hold office until
the election and qualification of their successors, notwithstanding an earlier
termination of their directorship.
Section 4.03. Resignation. Any officer may resign his or her office at
any time by delivering a written resignation to the corporation. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 4.04. Removal and Vacancies. Any officer may be removed from
office by a majority of the Board of Directors with or without cause. Such
removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy among the officers of the corporation
by reason of death, resignation or otherwise, such vacancy shall be filled for
the unexpired term by the Board of Directors.
Section 4.05. Chairman of the Board. The Chairman of the Board, if one
is elected, shall preside at all meetings of the shareholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
Board of Directors.
Section 4.06. President. The President shall have general active
management of the business of the corporation. In the absence of the Chairman of
the Board, the President shall preside at all meetings of the shareholders and
directors. The President shall be the chief executive officer of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall be ex officio a member of all standing
committees. The President may execute and deliver, in the name of the
corporation, any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the corporation and, in general, shall perform all
duties usually incident to the office of the President. The President shall have
such other duties as may, from time to time, be prescribed by the Board of
Directors.
Section 4.07. Vice President. Each Vice President shall have such
powers and shall perform such duties as may be specified in the Bylaws or
prescribed by the Board of Directors or by the President. In the event of
absence or disability of the President, Vice Presidents shall succeed to the
President's power and duties in the order designated by the Board of Directors.
Section 4.08. Secretary. The Secretary shall be secretary of, and shall
attend, all meetings of the shareholders and Board of Directors and shall record
all proceedings of such meetings in the minute book of the corporation. The
Secretary shall give proper notice of meetings of shareholders and directors.
The Secretary shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors or by the President.
Section 4.09. Treasurer. The Treasurer shall be the chief financial
officer and shall keep accurate accounts of all money of the corporation
received or disbursed. The Treasurer shall deposit all moneys, drafts and checks
in the name of, and to the credit of, the corporation in such banks and
depositories as a majority of the Board of Directors shall, from time to time,
designate. The Treasurer shall have power to endorse, for deposit, all notes,
checks and drafts received by the corporation. The Treasurer shall disburse the
funds of the corporation, as ordered by the Board of Directors, making proper
vouchers therefor. The Treasurer shall render to the President and the
directors, whenever required, an account of all his or her transactions as
Treasurer and of the financial condition of the corporation, and shall perform
such other duties as may, from time to time, be prescribed by the Board of
Directors or by the President.
Section 4.10. Assistant Secretaries. At the request of the Secretary,
or in the Secretary's absence or disability, any Assistant Secretary shall have
power to perform all the duties of the Secretary, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the Secretary.
The Assistant Secretaries shall perform such other duties as from time to time
may be assigned to them by the Board of Directors or the President.
Section 4.11. Assistant Treasurers. At the request of the Treasurer, or
in the Treasurer's absence or disability, any Assistant Treasurer shall have
power to perform all the duties of the Treasurer, and when so acting, shall have
all the powers of, and be subject to all the restrictions upon, the Treasurer.
The Assistant Treasurers shall perform such other duties as from time to time
may be assigned to them by the Board of Directors or the President.
Section 4.12. Compensation. The officers of this corporation shall
receive such compensation for their services as may be determined, from time to
time, by resolution of the Board of Directors.
Section 4.13. Surety Bonds. The Board of Directors may require any
officer or agent of the corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940 and the
rules and regulations of the Securities and Exchange Commission) to the
corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his or her
duties to the corporation, including responsibility for negligence and for the
accounting of any of the corporation's property, funds or securities that may
come into his or her hands. In any such case, a new bond of like character shall
be given at least every six years, so that the dates of the new bond shall not
be more than six years subsequent to the date of the bond immediately preceding.
ARTICLE V
SHARES AND THEIR TRANSFER AND REDEMPTION
Section 5.01. Certificates for Shares.
(a) The corporation may have certificated or uncertificated
shares, or both, as designated by resolution of the Board of Directors.
Every owner of certificated shares of the corporation shall be entitled
to a certificate, to be in such form as shall be prescribed by the
Board of Directors, certifying the number of shares of the corporation
owned by him or her. Within a reasonable time after the issuance or
transfer of uncertificated shares, the corporation shall send to the
new shareholder the information required to be stated on certificates.
Certificated shares shall be numbered in the order in which they shall
be issued and shall be signed, in the name of the corporation, by the
President or a Vice President and by the Treasurer or Secretary or by
such officers as the Board of Directors may designate. Such signatures
may be by facsimile if authorized by the Board of Directors. Every
certificate surrendered to the corporation for exchange or transfer
shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing
certificate shall have been so cancelled, except in cases provided for
in Section 5.08.
(b) In case any officer, transfer agent or registrar who shall
have signed any such certificate, or whose facsimile signature has been
placed thereon, shall cease to be such an officer (because of death,
resignation or otherwise) before such certificate is issued, such
certificate may be issued and delivered by the corporation with the
same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
Section 5.02. Issuance of Shares. The Board of Directors is authorized
to cause to be issued shares of the corporation up to the full amount authorized
by the Articles of Incorporation in such classes or series and in such amounts
as may be determined by the Board of Directors and as may be permitted by law.
No shares shall be allotted except in consideration of cash or other property,
tangible or intangible, received or to be received by the corporation under a
written agreement, of services rendered or to be rendered to the corporation
under a written agreement, or of an amount transferred from surplus to stated
capital upon a share dividend. At the time of such allotment of shares, the
Board of Directors making such allotments shall state, by resolution, their
determination of the fair value to the corporation in monetary terms of any
consideration other than cash for which shares are allotted. No shares of stock
issued by the corporation shall be issued, sold or exchanged by or on behalf of
the corporation for any amount less than the net asset value per share of the
shares outstanding as determined pursuant to Article X hereunder.
Section 5.03. Redemption of Shares. Upon the demand of any shareholder,
this corporation shall redeem any share of stock issued by it held and owned by
such shareholder at the net asset value thereof as determined pursuant to
Article X hereunder. The Board of Directors may suspend the right of redemption
or postpone the date of payment during any period as may be permitted by law.
If following a redemption request by any shareholder of this
corporation, the value of such shareholder's interest in the corporation falls
below the required minimum investment, as may be set from time to time by the
Board of Directors, the corporation's officers are authorized, in their
discretion and on behalf of the corporation, to redeem such shareholder's entire
interest and remit such amount, provided that such a redemption will only be
effected by the corporation following: (a) a redemption by a shareholder, which
causes the value of such shareholder's interest in the corporation to fall below
the required minimum investment; (b) the mailing by the corporation to such
shareholder of a "notice of intention to redeem"; and (c) the passage of at
least sixty (60) days from the date of such mailing, during which time the
shareholder will have the opportunity to make an additional investment in the
corporation to increase the value of such shareholder's account to at least the
required minimum investment.
Section 5.04. Transfer of Shares. Transfer of shares on the books of
the corporation may be authorized only by the shareholder, or the shareholder's
legal representative, or the shareholder's duly authorized attorney-in-fact, and
upon the surrender of the certificate or the certificates for such shares or a
duly executed assignment covering shares held in unissued form. The corporation
may treat, as the absolute owner of shares of the corporation, the person or
persons in whose name shares are registered on the books of the corporation.
Section 5.05. Registered Shareholders. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of Minnesota.
Section 5.06. Transfer of Agents and Registrars. The Board of Directors
may from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 5.07. Transfer Regulations. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
shares of stock of the corporation.
Section 5.08. Lost, Stolen, Destroyed and Mutilated Certificates. The
holder of any stock of the corporation shall immediately notify the corporation
of any loss, theft, destruction or mutilation of any certificate therefor, and
the Board of Directors may, in its discretion, cause to be issued to such holder
a new certificate or certificates of stock, upon the surrender of the mutilated
certificate or in case of loss, theft or destruction of the certificate upon
satisfactory proof of such loss, theft, or destruction. A new certificate or
certificates of stock will be issued to the owner of the lost, stolen or
destroyed certificate only after such owner, or his or her legal
representatives, gives to the corporation and to such registrar or transfer
agent as may be authorized or required to countersign such new certificate or
certificates a bond, in such sum as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be made
against them or any of them on account of or in connection with the alleged
loss, theft, or destruction of any such certificate.
ARTICLE VI
DIVIDENDS
Section 6.01. The net investment income of each class or series of the
corporation will be determined, and its dividends shall be declared and made
payable at such time(s) as the Board of Directors shall determine. Dividends
shall be payable to shareholders of record as of the date of declaration.
It shall be the policy of each series of the corporation to qualify for
and elect the tax treatment applicable to regulated investment companies under
the Internal Revenue Code, so that such series will not be subjected to federal
income tax on such part of its income or capital gains as it distributes to
shareholders.
ARTICLE VII
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
Section 7.01. Share Register. The Board of Directors of the corporation
shall cause to be kept at its principal executive office, or at another place or
places within the United States determined by the board:
(1) a share register not more than one year old,
containing the names and addresses of the
shareholders and the number and classes or series of
shares held by each shareholder; and
(2) a record of the dates on which transaction statements
representing shares were issued.
Section 7.02. Other Books and Records. The Board of Directors shall
cause to be kept at its principal executive office, or, if its principal
executive office is not in Minnesota, shall make available at its registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by
Minnesota Statutes Section 302A.461, originals or copies of:
(1) records of all proceedings of shareholders for the
last three years;
(2) records of all proceedings of the Board of Directors
for the last three years;
(3) its articles and all amendments currently in effect;
(4) its bylaws and all amendments currently in effect;
(5) financial statements required by Minnesota Statutes
Section 302A.463 and the financial statement for the
most recent interim period prepared in the course of
the operation of the corporation for distribution to
the shareholders or to a governmental agency as a
matter of public record;
(6) reports made to shareholders generally within the
last three years;
(7) a statement of the names and usual business addresses
of its directors and principal officers;
(8) any shareholder voting or control agreements of which
the corporation is aware; and
(9) such other records and books of account as shall be
necessary and appropriate to the conduct of the
corporate business.
Section 7.03. Audit; Accountant.
(a) The Board of Directors shall cause the records and books
of account of the corporation to be audited at least once in each
fiscal year and at such other times as it may deem necessary or
appropriate.
(b) The corporation shall employ an independent public
accountant or firm of independent public accountants to examine the
accounts of the corporation and to sign and certify financial
statements filed by the corporation.
Section 7.04. Fiscal Year. The fiscal year of the corporation shall be
determined by the Board of Directors.
ARTICLE VIII
INDEMNIFICATION OF CERTAIN PERSONS
Section 8.01. The corporation shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and to such
extent as permitted by Section 302A.521 of the Minnesota Statutes, as now
enacted or hereafter amended, provided, however, that no such indemnification
may be made if it would be in violation of Section 17(h) of the Investment
Company Act of 1940, as now enacted or hereinafter amended.
ARTICLE IX
VOTING OF STOCK HELD
Section 9.01. Unless otherwise provided by resolution of the Board of
Directors, the President, any Vice President, the Secretary or the Treasurer,
may from time to time appoint an attorney or attorneys or agent or agents of the
corporation, in the name and on behalf of the corporation, to cast the votes
which the corporation may be entitled to cast as a stockholder or otherwise in
any other corporation or association, any of whose stock or securities may be
held by the corporation, at meetings of the holders of the stock or other
securities of any such other corporation or association, or to consent in
writing to any action by any such other corporation or association, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed on behalf
of the corporation, such written proxies, consents, waivers or other instruments
as it may deem necessary or proper; or any of such officers may themselves
attend any meeting of the holders of stock or other securities of any such
corporation or association and thereat vote or exercise any or all other rights
of the corporation as the holder of such stock or other securities of such other
corporation or association, or consent in writing to any action by any such
other corporation or association.
ARTICLE X
VALUATION OF NET ASSET VALUE
10.01. The net asset value per share of each class or series of stock
of the corporation shall be determined in good faith by or under supervision of
the officers of the corporation as authorized by the Board of Directors as often
and on such days and at such time(s) as the Board of Directors shall determine,
or as otherwise may be required by law, rule, regulation or order of the
Securities and Exchange Commission.
ARTICLE XI
CUSTODY OF ASSETS
Section 11.01. All securities and cash owned by this corporation shall,
as hereinafter provided, be held by or deposited with a bank or trust company
having (according to its last published report) not less than Two Million
Dollars ($2,000,000) aggregate capital, surplus and undivided profits (the
"Custodian").
This corporation shall enter into a written contract with the custodian
regarding the powers, duties and compensation of the Custodian with respect to
the cash and securities of this corporation held by the Custodian. Said contract
and all amendments thereto shall be approved by the Board of Directors of this
corporation. In the event of the Custodian's resignation or termination, the
corporation shall use its best efforts promptly to obtain a successor Custodian
and shall require that the cash and securities owned by this corporation held by
the Custodian be delivered directly to such successor Custodian.
ARTICLE XII
AMENDMENTS
Section 12.01. These Bylaws may be amended or altered by a vote of the
majority of the Board of Directors at any meeting provided that notice of such
proposed amendment shall have been given in the notice given to the directors of
such meeting. Such authority in the Board of Directors is subject to the power
of the shareholders to change or repeal such bylaws by a majority vote of the
shareholders present or represented at any regular or special meeting of
shareholders called for such purpose, and the Board of Directors shall not make
or alter any Bylaws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies in the Board of
Directors, or fixing the number of directors or their classifications,
qualifications or terms of office, except that the Board of Directors may adopt
or amend any Bylaw to increase or decrease their number.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Interpretation. When the context in which words are used
in these Bylaws indicates that such is the intent, singular words will include
the plural and vice versa, and masculine words will include the feminine and
neuter genders and vice versa.
Section 13.02. Article and Section Titles. The titles of Sections and
Articles in these Bylaws are for descriptive purposes only and will not control
or alter the meaning of any of these Bylaws as set forth in the text.
INVESTMENT ADVISORY AGREEMENT
This Agreement, made this 23rd day of January, l995, by and between VAM
Institutional Funds, Inc., a Minnesota corporation (the "Company"), on behalf of
each Fund represented by a series of shares of common stock of the Fund that
adopts this Agreement (each a "Fund" and, collectively, the "Funds") (the Funds,
together with the date each Fund adopts this Agreement, are set forth in Exhibit
A hereto, which shall be updated from time to time to reflect additions,
deletions or other changes thereto), and Voyageur Fund Managers, Inc., a
Minnesota corporation ("Voyageur"),
WITNESSETH:
1. INVESTMENT ADVISORY SERVICES.
(a) The Company hereby engages Voyageur on behalf of the
Funds, and Voyageur hereby agrees to act, as investment adviser for,
and to manage the investment of the assets of, the Funds.
(b) The investment of the assets of each Fund shall at all
times be subject to the applicable provisions of the Articles of
Incorporation, the Bylaws, the Registration Statement, and the current
Prospectus and the Statement of Additional Information, if any, of the
Company and each Fund and shall conform to the policies and purposes of
each Fund as set forth in such documents and as interpreted from time
to time by the Board of Directors of the Company. Within the framework
of the investment policies of each Fund, and except as otherwise
permitted by this Agreement, Voyageur shall have the sole and exclusive
responsibility for the management of each Fund's investment portfolio
and for making and executing all investment decisions for each Fund.
Voyageur shall report to the Board of Directors regularly at such times
and in such detail as the Board may from time to time determine
appropriate, in order to permit the Board to determine the adherence of
Voyageur to the investment policies of the Funds.
(c) Voyageur shall, at its own expense, furnish all office
facilities, equipment and personnel necessary to discharge its
responsibilities and duties hereunder. Voyageur shall arrange, if
requested by the Company, for officers or employees of Voyageur to
serve without compensation from any Fund as directors, officers, or
employees of the Company if duly elected to such positions by the
shareholders or directors of the Company (as required by law).
(d) Voyageur hereby acknowledges that all records pertaining
to each Fund's investments are the property of the Company, and in the
event that a transfer of investment advisory services to someone other
than Voyageur should ever occur, Voyageur will promptly, and at its own
cost, take all steps necessary to segregate such records and deliver
them to the Company.
2. COMPENSATION FOR SERVICES.
In payment for the investment advisory and management services to be
rendered by Voyageur hereunder, each Fund shall pay to Voyageur a monthly fee,
which fee shall be paid to Voyageur not later than the fifth business day of the
month following the month in which said services were rendered. The monthly fee
payable by each Fund shall be as set forth in Exhibit A hereto, which may be
updated from time to time to reflect amendments, if any, to Exhibit A. The
monthly fee payable by each Fund shall be based on the average of the net asset
values of all of the issued and outstanding shares of the Fund as determined as
of the close of each business day of the month pursuant to the Articles of
Incorporation, Bylaws, and currently effective Prospectus and Statement of
Additional Information of the Company and the Fund. For purposes of calculating
each Fund's average daily net assets, as such term is used in this Agreement,
each Fund's net assets shall equal its total assets minus (a) its total
liabilities and (b) its net orders receivable from dealers.
3. ALLOCATION OF EXPENSES.
(a) In addition to the fee described in Section 2 hereof, each
Fund shall pay all its costs and expenses which are not assumed by
Voyageur. These Fund expenses include, by way of example, but not by
way of limitation, all expenses incurred in the operation of the Fund
and any public offering of its shares, including, among others, Rule
12b-1 plan of distribution fees (if any), interest, taxes, brokerage
fees and commissions, fees of the directors who are not employees of
Voyageur or the principal underwriter of the Fund's shares (the
"Underwriter"), or any of their affiliates, expenses of directors' and
shareholders' meetings, including the cost of printing and mailing
proxies, expenses of insurance premiums for fidelity and other
coverage, expenses of redemption of shares, expenses of issue and sale
of shares (to the extent not borne by the Underwriter under its
agreement with the Fund), expenses of printing and mailing stock
certificates representing shares of the Fund, association membership
dues, charges of custodians, transfer agents, dividend disbursing
agents, accounting services agents, investor servicing agents, and
bookkeeping, auditing, and legal expenses. Each Fund will also pay the
fees and bear the expense of registering and maintaining the
registration of the Fund and its shares with the Securities and
Exchange Commission and registering or qualifying its shares under
state or other securities laws and the expense of preparing and mailing
prospectuses and reports to shareholders.
(b) The Underwriter shall bear all advertising and promotional
expenses in connection with the distribution of each Fund's shares,
including paying for prospectuses for new shareholders, except as
provided in the following sentence. No Fund shall use any of its assets
to finance costs incurred in connection with the distribution of its
shares except pursuant to a Plan of Distribution, if any, adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (as
amended, the "Act").
4. LIMIT ON EXPENSES.
It is understood that the laws of certain states in which Fund shares
are offered for sale may require that a Fund be reimbursed for excess Fund
expenses, and Voyageur agrees to make such reimbursement; provided, however,
that at no time shall Voyageur be required to make reimbursements for any fiscal
period in excess of fees received pursuant to Section 2 hereof for that same
period.
5. FREEDOM TO DEAL WITH THIRD PARTIES.
Voyageur shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.
6. REPORTS TO DIRECTORS OF THE FUND.
Appropriate officers of Voyageur shall provide the directors of the
Company with such information as is required by any plan of distribution adopted
by the Company on behalf of any Fund pursuant to Rule 12b-1 under the Act.
7. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
(a) The effective date of this Agreement with respect to each
Fund shall be the date set forth on Exhibit A hereto.
(b) Unless sooner terminated as hereinafter provided, this
Agreement shall continue in effect with respect to each Fund for a
period more than two years from the date of its execution but only as
long as such continuance is specifically approved at least annually by
(i) the Board of Directors of the Company or by the vote of a majority
of the outstanding voting securities of the applicable Fund, and (ii)
by the vote of a majority of the directors of the Company who are not
parties to this Agreement or "interested persons", as defined in the
Act, of Voyageur or of the Company cast in person at a meeting called
for the purpose of voting on such approval.
(c) This Agreement may be terminated with respect to any Fund
at any time, without the payment of any penalty, by the Board of
Directors of the Company or by the vote of a majority of the
outstanding voting securities of such Fund, or by Voyageur, upon 60
days' written notice to the other party.
(d) This agreement shall terminate automatically in the event
of its "assignment" (as defined in the Act).
(e) No amendment to this Agreement shall be effective with
respect to any Fund until approved by the vote of: (i) a majority of
the directors of the Company who are not parties to this Agreement or
"interested persons" (as defined in the Act) of Voyageur or of the
Company cast in person at a meeting called for the purpose of voting on
such approval; and (ii) a majority of the outstanding voting securities
of the applicable Fund.
(f) Wherever referred to in this Agreement, the vote or
approval of the holders of a majority of the outstanding voting
securities or shares of a Fund shall mean the lesser of (i) the vote of
67% or more of the voting securities of such Fund present at a regular
or special meeting of shareholders duly called, if more than 50% of the
Fund's outstanding voting securities are present or represented by
proxy, or (ii) the vote of more than 50% of the outstanding voting
securities of such Fund.
8. NOTICES.
Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and Voyageur have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
VAM INSTITUTIONAL FUNDS, INC.
By /s/
Its
VOYAGEUR FUND MANAGERS, INC.
By /s/
Its
Exhibit A
to
Investment Advisory Agreement
between
Voyageur Fund Managers, Inc.
and
VAM Institutional Funds, Inc.
<TABLE>
<CAPTION>
MONTHLY
ADVISORY FEE
(as % of average
FUND EFFECTIVE DATE daily net assets)
<S> <C> <C>
Series A--VAM Global Fixed Income Fund August 1, 1995 .058333%
Series B--VAM Short Duration Government Agency Fund January 23, 1995 .041667%
Series C--VAM Intermediate Duration Government January 23, 1995 .041667%
Agency Fund
Series D--VAM Government Mortgage Fund January 23, 1995 .041667%
Series E--VAM Short Duration Total Return Fund January 23, 1995 .041667%
Series F--VAM Intermediate Duration Total Return Fund January 23, 1995 .041667%
Series G--VAM Intermediate Duration Municipal Fund January 23, 1995 .041667%
</TABLE>
SUB-ADVISORY AGREEMENT
Agreement, dated July 31, 1995, by and between Voyageur Fund Managers,
Inc. (the "Adviser"), a Minnesota corporation, and Lazard London International
Investment Management Limited, an entity organized under the laws of the United
Kingdom, (the "Sub-Adviser").
WHEREAS, VAM Institutional Funds, Inc., a Minnesota corporation (the
"Company"), on behalf of Voyageur Global Fixed Income Fund, a separately managed
series of the Company (the "Fund"), has appointed the Adviser as the Fund's
investment adviser pursuant to an Investment Advisory Agreement dated November
1, 1993, as amended (the Advisory Agreement); and
WHEREAS, pursuant to the terms of the Advisory Agreement, the Adviser
desires to appoint the Sub-Adviser as its sub-adviser for the Fund, and the
Sub-Adviser is willing to act in such capacity upon the terms set forth herein;
and
WHEREAS, pursuant to the terms of the Advisory Agreement, the Company
has approved the appointment of the Sub-Adviser as the sub-adviser for the Fund.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Adviser and the Sub-Adviser agree as follows:
1. The Adviser hereby employs the Sub-Adviser to serve as sub-adviser
for, and to manage the investment of the assets of, the Fund as set forth
herein. The Sub-Adviser hereby accepts such employment and agrees, for the
compensation herein provided, to assume all obligations herein set forth and to
bear all expenses of its performance of such obligations (but no other
expenses). Except as provided herein, the Sub-Adviser shall not be required to
pay expenses of the Fund, including, but not limited to (a) brokerage and
commission expenses; (b) federal, state, local and foreign taxes, including
issue and transfer taxes incurred by or levied on the Fund; (c) interest charges
on borrowings; (d) the Fund's organizational and offering expenses, whether or
not advanced by the Adviser; (e) the cost of other personnel providing services
to the Fund; (f) fees and expenses of registering or otherwise qualifying the
shares of the Fund under applicable state securities laws; (g) expenses of
printing and distributing reports to shareholders; (h) costs of shareholders'
meetings and proxy solicitation; (i) charges and expenses of the Fund's
custodian and registrar, transfer agent and dividend disbursing agent; (j)
compensation of the Company's officers, directors and employees that are not
Affiliated Persons or Interested Persons (as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended (the "1940 Act") and the rules,
regulations and releases relating thereto) of the Adviser; (k) legal and
auditing expenses; (l) costs of certificates representing common shares of the
Fund; (m) costs of stationery and supplies; (n) insurance expenses; (o)
association membership dues; (p) the fees and expenses of registering the Fund
and its shares with the Securities and Exchange Commission; (q) travel expenses
of officers and employees of the Sub-Adviser to the extent such expenses relate
to the attendance of such persons at meetings at the request of the Board of
Directors of the Company; and (r) all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein. The Sub-Adviser
shall for all purposes herein be deemed to be an independent contractor and
shall, except as expressly provided or authorized (whether herein or otherwise)
have no authority to act for or on behalf of the Fund in any way or otherwise be
deemed an agent of the Fund.
2. The Sub-Adviser shall work with the Adviser to direct the Company's
investments in accordance with applicable law and the investment objective,
policies and restrictions set forth in the Fund's then-effective Registration
Statement under the Securities Act of 1933, as amended, including the Prospectus
and Statement of Additional Information of the Fund contained therein, subject
to the supervision of the Company, its officers and directors, and the Adviser
and in accordance with the investment objectives, policies and restrictions from
time to time prescribed by the Board of Directors of the Company and
communicated by the Adviser to the Sub-Adviser and subject to such further
limitations as the Adviser may from time to time impose by written notice to the
Sub-Adviser.
3. The Sub-Adviser shall formulate and implement an over-all continuing
program for managing the investment of the Fund's assets, and shall amend and
update such program from time to time as financial and other economic conditions
warrant. The Sub-Adviser shall (i) make all determinations with respect to
managing the investment of the international component (as described in the
Prospectus) of the Fund's assets, (ii) determine allocation of Fund assets among
domestic and international components and (iii) manage currency and foreign
exchange position with respect to all components of the Fund's assets and shall
take such steps as may be necessary to implement the same, including the
placement of purchase and sale orders on behalf of the Fund.
4. The Sub-Adviser shall furnish such reports to the Adviser as the
Adviser may reasonably request for the Adviser's use in discharging its
obligations under the Advisory Agreement, including any reports required
pursuant to Rule 17f-5 under the 1940 Act, which reports may be distributed by
the Adviser to the Company's Board of Directors at periodic meetings of the
Board of Directors and at such other times as may be reasonably requested by the
Board of Directors. Copies of all such reports shall be furnished to the Adviser
for examination and review within a reasonable time prior to the presentation of
such reports to the Company's Board of Directors.
5. The Sub-Adviser shall in good faith select the brokers and dealers
that will execute the purchases and sales of securities for the Fund and markets
on or in which such transactions will be executed and shall place, in the name
of the Fund or its nominee, all such orders.
(a) When placing such orders, the Sub-Adviser shall use its best
efforts to obtain the best available price and most favorable and efficient
execution for the Fund. Where best price and execution may be obtained from more
than one broker or dealer, the Sub-Adviser may, in its discretion, purchase and
sell securities through brokers or dealers who provide research, statistical and
other information to the Sub-Adviser. It is understood that such services may be
used by the Sub-Adviser for all of its investment advisory accounts and
accordingly, not all such services may be used by the Sub-Adviser in connection
with the Fund.
It is understood that certain other clients of the Sub-Adviser may have
investment objectives and policies similar to those of the Fund, and that the
Sub-Adviser may, from time to time, make recommendations that result in the
purchase or sale of a particular security by its other clients simultaneously
with the Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. In
such event, the Sub-Adviser shall allocate advisory recommendations and the
placing of orders in a manner that is deemed equitable by the Sub-Adviser to the
accounts involved, including the Fund. When two or more of the clients of the
Sub-Adviser (including the Fund) are purchasing or selling the same security on
a given day from the same broker or dealer, such transactions may be averaged as
to price.
(b) The Sub-Adviser agrees that it will not purchase or sell securities
for the Fund in any transaction in which it, the Adviser or any "affiliated
person" of the Company, the Adviser or Sub-Adviser or any affiliated person of
such "affiliated person" is acting as principal; provided, however, that the
Sub-Adviser may effect transactions pursuant to Rule 17a-7 under the 1940 Act in
compliance with the Fund's then-effective policies concerning such transactions.
(c) The Sub-Adviser agrees that it will not execute any portfolio
transactions for the Fund with a broker or dealer or futures commission-merchant
which is an "affiliated person" of the Company, the Adviser or the Sub-Adviser
or an "affiliated person" of such an "affiliated person" without the prior
written consent of the Adviser. In effecting any such transactions with the
prior written consent of the Adviser, the Sub-Adviser shall comply with Section
17(e)(1) of the 1940 Act, other applicable provisions of the 1940 Act, if any,
the then-effective Registration Statement of the Fund under the Securities Act
of 1933, as amended and the Fund's then-effective policies concerning such
transactions.
(d) The Sub-Adviser shall promptly communicate to the Adviser and, if
requested by the Adviser, to the Company's Board of Directors, such information
relating to portfolio transactions as the Adviser may reasonably request. The
parties understand that the Fund shall bear all brokerage commissions in
connection with the purchases and sales of portfolio securities for the Fund and
all ordinary and reasonable transaction costs in connection with purchases of
such securities in private placements and subsequent sales thereof.
6. The Sub-Adviser may (at its cost except as contemplated by paragraph
5 of this Agreement) employ, retain or otherwise avail itself of the services
and facilities of persons and entities within its own organization or any other
organization for the purpose of providing the Sub-Adviser, the Adviser or the
Fund with such information, advice or assistance, including but not limited to
advice regarding economic factors and trends and advice as to transactions in
specific securities, as the Sub-Adviser may deem necessary, appropriate or
convenient for the discharge of its obligations hereunder or otherwise helpful
to the Adviser or the Fund, or in the discharge of the Sub-Adviser's overall
responsibilities with respect to the other accounts for which it serves as
investment manager or investment adviser.
7. The Sub-Adviser shall cooperate with and make available to the
Adviser, the Fund and any agents engaged by the Fund, the Sub-Adviser's
expertise relating to matters affecting the Fund.
8. For the services to be rendered under this Agreement, and the
facilities to be furnished for each fiscal year of the Fund, the Adviser shall
pay to the Sub-Adviser a monthly management fee at the annual rate of .35% of
the Fund's average daily net assets as of the date hereof. This fee will be
computed based on net assets at the beginning of each day and will be paid to
the Sub-Adviser monthly on or before the fifteenth day of the month next
succeeding the month for which the fee is paid. The fee shall be prorated for
any fraction of a fiscal year at the commencement and termination of this
Agreement.
Pursuant to the Advisory Agreement, the Adviser receives monthly
from the Company compensation at the annual rate of .70% of the Fund's average
daily net assets. If the Adviser has undertaken in the Company's Registration
Statement as filed under the 1940 Act or elsewhere to waive all or part of its
fee under the Advisory Agreement or to reduce such fee upon order of the Board
of Directors or the vote of a majority of the outstanding voting securities of
the Company, the Sub-Adviser's fee payable under this Agreement will be
proportionately waived in whole or part.
9. The Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act") and is currently in compliance
and shall at all times continue to comply with the requirements imposed upon it
by the Advisers Act and other applicable laws and regulations. The Sub-Adviser
agrees to (i) supply the Adviser with such documents as the Adviser may
reasonably request to document compliance with such laws and regulations, (ii)
maintain or adopt a Code of Ethics substantially in the form of the Code of
Ethics maintained by the Adviser and (iii) immediately notify the Adviser of the
occurrence of any event which would disqualify the Sub-Adviser from serving as
an investment adviser of an investment company pursuant to any applicable law or
regulation.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Company all records required or permitted by the 1940 Act in the manner
provided by such Act. The Sub-Adviser agrees that copies of such records are the
property of the Company, and will be surrendered to the Company promptly upon
request.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Sub-Adviser as the Adviser may from time to
time require to document compliance with the 1940 Act, the Advisers Act, the
Internal Revenue Code, pplicable state securities laws and other applicable laws
and regulations or regulatory and taxing authorities in countries other than the
United States.
(d) After filing with the Securities and Exchange Commission any
amendment to its Form ADV, the Sub-Adviser will promptly furnish a copy of such
amendment to the Adviser.
(e) The Sub-Adviser will immediately notify the Adviser of the
occurrence of any event which would disqualify the Sub-Adviser from serving as
an investment adviser of an investment company pursuant to Section 9 of the 1940
Act or any other applicable statute or regulation.
10. This Agreement shall become effective as of the effective date of
the Fund's Registration Statement under the Securities Act of 1933, as amended.
Wherever referred to in this Agreement, the vote or approval of the holders of a
majority of the outstanding voting securities or shares of the Fund shall mean
the vote of 67% or more of such shares if the holders of more than 50% of such
shares are present in person or by proxy or the vote of more than 50% of such
shares, whichever is less (or such other definition as is provided for in the
1940 Act).
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect for a period of two years from the date of its execution, and
thereafter shall continue in effect only so long as such continuance is
specifically approved at least annually (a) by the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of the
Fund, and (b) by the vote of a majority of the directors who are not parties to
this Agreement or Interested Persons of the Adviser, the Sub-Adviser or the
Company, cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated at any time without the payment of any
penalty (a) by the vote of the Board of Directors of the Company or by the vote
of the holders of a majority of the outstanding voting securities of the Fund,
upon 60 days' written notice to the Adviser and the Sub-Adviser, or (b) by the
Adviser, upon 60 days' written notice to the Sub-Adviser; or (c) by the
Sub-Adviser, upon 60 days' written notice to the Adviser. This Agreement shall
automatically terminate in the event of its assignment as defined in the 1940
Act and the rules thereunder, provided, however, the such automatic termination
shall be prevented in a particular case by an order of exemption from the
Securities and Exchange Commission or a no-action letter of the staff of the
Commission to the effect that such assignment does not require termination as a
statutory or regulatory matter. This Agreement shall automatically terminate
upon completion of the dissolution, liquidation or winding up of the Fund.
11. No amendment to or modification of this Agreement shall be
effective unless and until approved by the vote of a majority of the outstanding
shares of the Fund.
12. This Agreement shall be binding upon, and inure to the benefit of,
the Adviser and the Sub-Adviser, and their respective successors.
13. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
14. (a) The Sub-Adviser will perform its duties and obligations
hereunder with due care, and use its reasonable judgement. In the absence of
wilful default or negligence on the part of the Sub-Adviser, the Sub-Adviser
shall not be liable for any act or omission that occurs in the course of or in
the connection with the services rendered by it under this Agreement or for any
decline in the value of the assets of the Fund or any loss or damage that may
result to the Adviser or the Fund from the Adviser acting upon any investment
advice given to it by the Sub-Adviser.
(b) The Adviser agrees to indemnify the Sub-Adviser from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgement, suits, costs, charges, demands, claims, expenses or disbursements of
any kind or nature whatsoever (other than those resulting from the negligence or
wilful default on the part of the Sub-Adviser) which may be imposed on, incurred
by or asserted against the Sub-Adviser in performing its function or duties
under this Agreement.
15. To the extent that state law is not preempted by the provisions of
any law of the United States heretofore or hereafter enacted, as the same may be
amended from time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Minnesota without reference to
the choice of laws principles of such state.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers thereunto duly authorized in multiple
counterparts, each of which shall be an original but all of which shall
constitute one of the same instrument.
VOYAGEUR FUND MANAGERS, INC.
By __________________________
Name:
Title:
LAZARD LONDON INTERNATIONAL
INVESTMENT MANAGEMENT LIMITED
By __________________________
Name:
Title:
VAM INSTITUTIONAL FUNDS, INC.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of August
1995, by and between VAM Institutional Funds, Inc., a Minnesota corporation (the
"Company"), for and on behalf of each series of the Company (each series is
referred to hereinafter as a "Fund"), and Voyageur Fund Distributors, Inc., a
Minnesota corporation (the "Underwriter"). This Agreement shall apply to the
Institutional Class shares offered by the following Funds:
VAM Global Fixed Income Fund
VAM Short Duration Government Agency Fund
VAM Intermediate Duration Government Agency Fund
VAM Government Mortgage Fund
VAM Short Duration Total Return Fund
VAM Intermediate Duration Total Return Fund
VAM Intermediate Duration Municipal Fund
WITNESSETH:
1. UNDERWRITING SERVICES
The Company, on behalf of each Fund, hereby engages the Underwriter,
and the Underwriter hereby agrees to act, as principal underwriter for each Fund
in the sale and distribution of the Institutional Class shares of such Fund to
the public, either through dealers or otherwise. The Underwriter agrees to offer
such shares for sale at all times when such shares are available for sale and
may lawfully be offered for sale and sold.
2. SALE OF SHARES
The shares of each Fund are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to
acceptance or rejection by the Company. Any offer for or sale
of shares shall be conclusively presumed to have been accepted
by the Company if the Company shall fail to notify the
Underwriter of the rejection of such offer or sale prior to
the computation of the net asset value of such shares next
following receipt by the Company of notice of such offer or
sale.
(b) No share of a Fund shall be sold by the Underwriter (i) for
any consideration other than cash or, pursuant to any exchange
privilege provided for by the applicable currently effective
Prospectus or Statement of Additional Information (hereinafter
referred to collectively as the "Prospectus"), shares of any
other investment company for which the Underwriter acts as an
underwriter, or (ii) except in instances otherwise provided
for by the applicable currently effective Prospectus, for any
amount less than the public offering price per share, which
shall be determined in accordance with the applicable
currently effective Prospectus.
(c) The Underwriter shall require any securities dealer entering
into a selected dealer agreement with the Underwriter to
disclose to prospective investors the existence of all
available classes of shares of a Fund and to determine the
suitability of each available class as an investment for each
such prospective investor.
3. REGISTRATION OF SHARES
The Company agrees to make prompt and reasonable efforts to effect and
keep in effect, at its expense, the registration or qualification of each Fund's
shares for sale in such jurisdictions as the Company may designate.
4. INFORMATION TO BE FURNISHED TO THE UNDERWRITER
The Company agrees that it will furnish the Underwriter with such
information with respect to the affairs and accounts of the Company (and each
Fund or class thereof) as the Underwriter may from time to time reasonably
require, and further agrees that the Underwriter, at all reasonable times, shall
be permitted to inspect the books and records of the Company.
5. ALLOCATION OF EXPENSES
During the period of this Agreement, the Company shall pay or cause to
be paid all expenses, costs and fees incurred by the Company which are not
assumed by the Underwriter. The Underwriter shall pay all costs of distributing
the Institutional Class shares of each Fund including, but not limited to, any
initial and ongoing sales compensation paid to investment executives of the
Underwriter and to other broker-dealers and participating financial
institutions; expenses incurred in the printing of prospectuses, statements of
additional information and reports used for sales purposes; expenses of
preparation and distribution of sales literature; expenses of advertising of any
type; payments to and expenses of persons who provide support services in
connection with the distribution of Institutional Class shares; and other
distribution-related expenses.
6. COMPENSATION TO THE UNDERWRITER
It is understood and agreed by the parties hereto that the sale of Fund
shares will benefit the Underwriter, which is an affiliate of the Funds'
investment adviser, and therefore the Underwriter will receive no additional
compensation for services it performs hereunder in connection with sales of Fund
shares.
7. LIMITATION OF THE UNDERWRITER'S AUTHORITY
The Underwriter shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have no authority to
act for or represent any Fund or the Company.
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELLED ORDERS
The Underwriter shall subscribe for the Institutional Class shares of a
Fund only for the purpose of covering purchase orders already received by it or
for the purpose of investment for its own account. In the event that an order
for the purchase of Institutional Class shares of a Fund is placed with the
Underwriter by a customer or dealer and subsequently cancelled, the Underwriter
shall forthwith cancel the subscription for such shares entered on the books of
the Fund, and, if the Underwriter has paid the Fund for such shares, shall be
entitled to receive from the Fund in refund of such payment the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation
by the Underwriter.
9. INDEMNIFICATION OF THE COMPANY
The Underwriter agrees to indemnify each Fund and the Company against
any and all litigation and other legal proceedings of any kind or nature and
against any liability, judgment, cost, or penalty imposed as a result of such
litigation or proceedings in any way arising out of or in connection with the
sale or distribution of the shares of such Fund by the Underwriter. In the event
of the threat or institution of any such litigation or legal proceedings against
any Fund, the Underwriter shall defend such action on behalf of the Fund or the
Company at the Underwriter's own expense, and shall pay any such liability,
judgment, cost, or penalty resulting therefrom, whether imposed by legal
authority or agreed upon by way of compromise and settlement; provided, however,
the Underwriter shall not be required to pay or reimburse a Fund for any
liability, judgment, cost, or penalty incurred as a result of information
supplied by, or as the result of the omission to supply information by, the
Company to the Underwriter, or to the Underwriter by a director, officer, or
employee of the Company who is not an "interested person," as defined in the
provisions of the Investment Company Act of 1940, and the rules and regulations
thereunder, as they may be amended from time to time (the "1940 Act"), of the
Underwriter, unless the information so supplied or omitted was available to the
Underwriter or the Fund's investment adviser without recourse to the Fund or the
Company or any such person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES
The Underwriter shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
(a) The effective date of this Agreement is set forth in the first
paragraph of this Agreement. Unless sooner terminated as hereinafter provided,
this Agreement shall continue in effect for a period of one year after the date
of its execution, and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by a vote of the Board of
Directors of the Company, and of the directors who are not "interested persons"
(as defined in the provisions of the 1940 Act) of the Company and have no direct
or indirect financial interest in the operation of this Agreement, cast in
person at a meeting called for the purpose of voting on this Agreement.
(b) This Agreement may be terminated at any time with respect to any
Fund, without the payment of any penalty, by the vote of a majority of the
members of the Board of Directors of the Company who are not "interested
persons" (as defined in the provisions of the 1940 Act) of the Company and have
no direct or indirect financial interest in the operation of this Agreement, or
by the vote of a majority of the outstanding voting securities of such Fund (or
class thereof), or by the Underwriter, upon 60 days' written notice to the other
party.
(c) This Agreement shall automatically terminate in the event of its
"assignment" (as defined by the provisions of the 1940 Act).
(d) Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of a Fund (or class
thereof) shall mean the lesser of (i) the vote of 67% or more of the voting
securities of such Fund (or class thereof) present at a regular or special
meeting of shareholders duly called, if more than 50% of the Fund's (or class's,
as applicable) outstanding voting securities are present or represented by
proxy, or (ii) the vote of more than 50% of the outstanding voting securities of
such Fund (or class thereof).
12. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until
approved by the Underwriter and by vote of a majority of the Board of Directors
of the Company who are not interested persons of the Underwriter.
13. NOTICES
Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and the Underwriter have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
VAM INSTITUTIONAL FUNDS, INC.
By /s/
Its
VOYAGEUR FUND DISTRIBUTORS, INC.
By /s/
Its
VOYAGEUR FUND DISTRIBUTORS, INC.
90 South Seventh Street
Minneapolis, MN 55402
FORM OF DEALER SALES AGREEMENT
Dear Sir or Madam:
This Dealer Sales Agreement (the "Agreement") made as of the date set
forth below, by and between Voyageur Fund Distributors, Inc., (the
"Underwriter"), and you (the "Dealer"), sets forth the terms of selling
arrangements between the Underwriter and you as Dealer.
WHEREAS, the Underwriter has entered into Distribution Agreements with
certain investment companies, including open-end investment companies and unit
investment trusts (the "Funds"), under which the Underwriter was engaged and
agreed to act as principal underwriter of the securities of such Funds to the
public, either through dealers or otherwise; and
WHEREAS, the parties hereto desire that the Dealer be a member of a
selling group to sell and distribute shares or units of the Funds' securities to
the public;
NOW, THEREFORE, the Dealer hereby offers to become a member in a
selling group to sell and distribute the Funds' securities to the public and to
render certain shareholder services, subject to the following terms and
conditions.
1. Acceptance of Subscriptions. Subscriptions solicited by you will be
accepted only at the price, in the amounts, and on the terms which are set forth
in the then current Prospectuses (the term "Prospectus" shall also include any
Statement of Additional Information incorporated therein by reference) of the
Funds.
2. Dealer Discount and Other Compensation. The Dealer shall receive,
for sales of the Funds' shares or units, the applicable Dealer Discount or other
compensation as set forth in the then current prospectus of the relevant Fund.
Additionally, with respect to certain of the Funds, the Dealer may be entitled
to receive additional compensation upon such terms and conditions and in such
amounts as set forth in such Prospectus (and on Schedule A attached hereto with
respect to sales of money market Funds) for providing to Fund shareholders
certain personal and account maintenance services (including, but not limited
to, responding to shareholder inquiries and providing information on their
investments) not otherwise required to be provided by the applicable Funds'
investment adviser or transfer agent ("Service Fees") or (in addition to the
aforementioned Dealer Discount) for sales of the applicable Fund's securities
("Distribution Fees"). These additional amounts may be amended in the Prospectus
or Schedule A in whole or in part without notice from time to time by the
Underwriter.
3. Orders. Orders to purchase shares or units of any Fund shall be
placed as described in the then current Prospectus of the applicable Fund and as
instructed from time to time by the Underwriter. Orders shall be placed promptly
upon receipt, and there shall be no postponement of orders received so as to
profit the Dealer by reason of such postponement. Each order shall be confirmed
by the Dealer in writing on the day such order was placed. Payment for shares or
units ordered from us shall be in New York or Boston clearinghouse funds
received by us by the later of: (i) the end of the fifth business day following
your receipt of the customer's order to purchase such shares or units or (ii)
the end of one business day following your receipt of the customer's payment for
such shares or units, but in no event later than the end of the eighth business
day following your receipt of the customer's order; provided, however, that
commencing as of June 1, 1995 and in accordance with Rule 15c6-1 under the
Securities Exchange Act of 1934, as amended, payment for such shares or units
must be received by us not later than the end of the third business day
following your receipt of the customer's order. If such payment is not received
by us, we reserve the right, without notice, forthwith to cancel the sale, or,
in the case of shares, at our option, to sell the shares ordered back to the
issuer, in which case we may hold you responsible for any loss, including loss
of profit, suffered by us resulting from your failure to make payment as
aforesaid.
4. General. In soliciting purchases of shares or units of any Fund, the
Dealer shall act as an independent contractor and not as an agent of the
Underwriter or the Fund. The Dealer agrees that neither the Underwriter nor any
other dealer nor any of the Funds shall be deemed an agent of the Dealer.
Nothing herein shall constitute the Dealer as a partner of the Underwriter, any
other dealer or any of the Funds, or render any such entity liable for
obligations of the Dealer. The Dealer understands and agrees that each
shareholder account which includes shares or units of any Fund subject to the
Fund's contingent deferred sales charge (as described in the applicable Fund's
current Prospectus) shall not be included the Dealer's omnibus or house account,
if any, but shall be established as a separate shareholder account in which
purchase and redemption transactions are reported separately to the Underwriter.
5. Dealer's Undertakings. No person is authorized to make any
representation concerning shares or units of any Fund except those contained in
the then current Prospectus of the applicable Fund. The Dealer shall not sell
shares or units of any Fund pursuant to this Agreement unless the then current
Prospectus of the applicable Fund is furnished to the purchaser prior to the
offer and sale. The Dealer shall not use any supplemental sales literature of
any kind without prior written approval of the Underwriter unless it is
furnished by the Underwriter for such purpose. In offering and selling shares or
units of any Fund, the Dealer will rely solely on the representations contained
in the then current Prospectus of the applicable Fund. With respect to any Fund
offering multiple classes of shares, the Dealer shall disclose to prospective
investors the existence of all available classes of such Fund and shall
determine the suitability of each available class as an investment for each such
prospective investor. Notwithstanding Paragraph 8 of this Agreement, the Dealer
agrees to indemnify and to hold harmless the Funds and/or the Underwriter from
and against any and all claims, liability, expense or loss in any way arising
out of or in any way connected with (i) any violation of this Paragraph 5, (ii)
any account established by the Dealer, or for which the Dealer is broker-dealer
of record, with a "transfer on death", "payable on death" or other similar
restriction or (iii) arising out of or in any way connected with the Dealer's
willful, reckless or negligent violation of any law, regulation, contract or
other arrangement; provided that the notice provisions set forth in Paragraph 9
with respect to the Underwriter shall apply equally under this Agreement with
respect to the Dealer.
6. Representations and Agreements of the Dealer. By accepting this
Agreement, the Dealer represents that it: (i) is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended; (ii) is qualified to act
as a dealer in each jurisdiction in which it will offer shares of any Fund;
(iii) is a member in good standing of the National Association of Securities
Dealers, Inc.; and (iv) will maintain such registrations, qualifications and
memberships throughout the term of this Agreement. The Dealer shall comply with
all applicable federal laws, the laws of each jurisdiction in which it will
offer shares of any Fund, and the rules and regulations of the National
Association of Securities Dealers, Inc. The Dealer shall not be entitled to any
compensation during any period in which it has been suspended or expelled from
membership in the National Association of Securities Dealers, Inc.
7. Dealer's Employees. By accepting this Agreement, the Dealer assumes
full responsibility for thorough and prior training of its representatives
concerning the selling methods to be used in connection with the offer and sale
of shares of the Fund, giving special emphasis to the principles of full and
fair disclosure to prospective investors.
8. Indemnification. Except as otherwise provided in this Agreement, the
Underwriter hereby agrees to indemnify and to hold harmless the Dealer and each
person, if any, who controls the Dealer within the meaning of Section 15 of the
Securities Act of 1933 (the "Act") and their respective successors and assigns
(hereinafter in this paragraph separately and collectively referred to as the
"Defendants") from and against any and all losses, claims, demands or
liabilities, joint or several, to which the Defendants may become subject under
the Act, at common law or otherwise (including any legal or other expense
reasonably incurred in connection therewith), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement of a material fact contained in the then current
Prospectuses (and/or Statements of Additional Information) of the Funds or arise
out of or are based upon the omission or alleged omission to state therein a
material fact that is required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that this indemnity agreement is subject to the
condition that notice be given as provided in paragraph 9.
9. Notice. Upon the presentation in writing of any claim or the
commencement of any suit against any Defendant in respect of which
indemnification may be sought from the Underwriter on account of its agreement
contained in the preceding sentence, such Defendant shall with reasonable
promptness give notice in writing of such suit to the Underwriter, but failure
so to give such notice shall not relieve the Underwriter from any liability that
it may have to the Defendants otherwise than on account of said indemnity
agreement. The Underwriter shall be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any such claim or
suit, but if the Underwriter elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to the Defendants who are
parties to such suit or against whom such claim is presented. If the Underwriter
elects to assume the defense and retain such counsel as herein provided, such
Defendant shall bear the fees and expenses subsequently incurred of any
additional counsel retained by them. The Underwriter agrees to notify the Dealer
promptly, as soon as it has knowledge thereof, of the commencement of any
litigation or proceedings against the Underwriter or any of the Funds or any of
their directors or officers, in connection with the offer or sale of shares of
the Funds' common stock to the public. The Underwriter's obligation under this
paragraph shall survive the termination of this Agreement.
10. Assignment. The Underwriter may assign this Agreement to an
affiliate upon notice to the Dealer. This Agreement may not be assigned by the
Dealer.
11. Termination. Either party may terminate this Agreement at any time
upon giving written notice to the other party hereto. This Agreement shall
terminate automatically upon an "assignment" as defined in the Investment
Company Act of 1940.
12. Waiver. No failure, neglect or forbearance on the part of the
Underwriter to require strict performance of this Agreement shall be construed
as a waiver of the rights or remedies of the Underwriter hereunder.
13. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Minnesota without reference to the choice of laws or
conflicts principles of such state.
14. Suspending sales, amending or canceling this Agreement. The
Underwriter may, at any time, without notice, suspend sales or withdraw any
offering of shares entirely. The Underwriter reserves the right to amend or
cancel this Agreement upon notice to you. The Dealer agrees that any order to
purchase shares of Funds placed after notice of any amendment to this Agreement
has been sent to the Dealer shall constitute the Dealer's agreement to any such
amendment.
DEALER:
_____________________________ ______________________________
(Name) (NSCC Clearing Number)
_____________________________ ______________________________
(Tax Identification Number) (NSCC Executing Broker Symbol)
_____________________________ ______________________________
(Street Address) (Telephone Number)
_____________________________ ______________________________
(City) (State) (Zip)
Date of offer: _________________________, 19____
By ______________________________________________
(Signature)
Please Print Name _______________________________
Its______________________________________________
(Title)
VOYAGEUR FUND DISTRIBUTORS, INC.
By:______________________________________________
Name: Frank C. Tonnemaker
Title : President
SCHEDULE A
Money Market Shares
A. For money market shares sold by a dealer participating in the Voyageur
Cash Advantage Program*:
<TABLE>
<CAPTION>
Average Annual
Fund Aggregate Balance Annual Fee
<S> <C> <C>
Voyageur Cash Trust Series $0 - $5 million ..... .40%
Voyageur Minnesota Municipal Cash Trust over $5 million - $10 million .45%
over $10 million .... .50%
Voyageur California Municipal Cash Trust not applicable ..... .25%
Voyageur Florida Municipal Cash Trust not applicable ..... .25%
</TABLE>
B. For money market shares sold by a dealer not participating in the Voyageur
Cash Advantage Program*:
<TABLE>
<CAPTION>
Average Annual
Fund Aggregate Balance Annual Fee
<S> <C> <C>
Voyageur Cash Trust Series not applicable ..... .30%
Voyageur Minnesota Cash Trust Series not applicable ..... .25%
Voyageur California Cash Trust Series not applicable ..... .25%
Voyageur Florida Cash Trust Series not applicable ..... .25%
</TABLE>
* The Voyageur Cash Advantage Program permits broker/dealers to use the Voyageur
Cash Trust Series of Money Market Funds and additional selected money market
funds as a "proprietary" money market fund family. In order to participate in
the Program, broker/dealers must communicate purchase and sell orders to
Voyageur through electronic or telephonic media, must maintain a single omnibus
account for each applicable Cash Trust Series and must perform all necessary
subaccounting and record keeping for individual client accounts.
CUSTODIAN AGREEMENT
V.A M. INSTITUTIONAL FUNDS, INC.
FIRST TRUST NATIONAL ASSOCIATION
THIS AGREEMENT, made this 13th day of January, 1995, by and between V.A.M.
INSTITUTIONAL FUNDS, INC., hereinafter also called the "Fund", and EAST TRUST
NATIONAL ASSOCIATION, a national banking association organized and existing
under the laws of the United States of America with its principal place of
business at St. Paul, Minnesota, hereinafter also called the Custodian",
witnesses:
1. APPOINTMENT OF CUSTODIAN.
Fund hereby constitutes and appoints Custodian as Custodian of the
Fund, and Custodian accepts such appointment.
2. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as practicable,
and from time to time thereafter, all portfolio securities acquired by
it and monies then owned by it except as permitted by the Investment
Company Act of 1940 or from time to time coming into its possession
during the time this Agreement shall continue in effect. Custodian
shall have no responsibility or liability whatsoever for or on account
of securities or monies not so delivered. All securities so delivered
to Custodian (other than bearer securities) shall be registered in the
name of Fund or its nominee, or of a nominee of Custodian, or shall be
properly endorsed and in form for transfer satisfactory to Custodian.
B. Delivery of Accounts and Records
Fund shall turn over to Custodian all of the Fund's relevant accounts
and records previously maintained by it, if any. Custodian shall be
entitled to rely conclusively on the completeness and correctness of
the accounts and records turned over to it by Fund, and Fund shall
indemnify and hold Custodian harmless of and from any and all expenses,
damages and losses whatsoever arising out of or in connection with any,
omission, inaccuracy or other deficiency of such accounts and records
or in the failure of Fund to provide any portion of such or to provide
any information needed by the Custodian knowledgeably to perform its
function hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account.
Custodian will not deliver, assign, pledge or hypothecate any such
assets to any person except as permitted by the provisions of this
Agreement or any agreement executed by it according to the terms of
Section 2.0 of this Agreement. Upon delivery of any such assets to a
subcustodian pursuant to Section 2.0 of this agreement, Custodian will
create and maintain records identifying those assets which have been
delivered to the subcustodian as belonging to Fund. The Custodian is
responsible for the securities and monies of Fund only until they have
been transmitted to and received by other persons as permitted under
the terms of this Agreement, except for securities and monies
transmitted to any subcustodians appointed by the Custodian pursuant to
Section 2.0, for which Custodian remains responsible. With respect to
subcustodians appointed at Fund's request, Custodian shall be
responsible to Fund for securities and cash transmitted to such
subcustodian to the same extent those entities are responsible to
Custodian. Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company, Treasury/Federal Reserve
Book Entry System, or Participant Trust Company (as such entities are
defined in 17 CFR Section 270.1 7f 4(b)) provided that (i) the account
of the Custodian in which securities of the Fund held at such an entity
shall not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers; (ii) the records of
the Custodian with respect to securities of the Fund which are
maintained in such an entity shall identify by book-entry those
securities belonging to the Fund; (iii) the Custodian shall pay for
securities purchased for the account of the Fund upon (a) receipt of
advice from such entity that the Fund's securities have been
transferred to the Custodian's account, and (b) the making of an entry
on the records of the Custodian to reflect such payment and transfer
for the account of the Fund; (iv) the Custodian shall transfer
securities sold for the account of the Fund upon (a) receipt of advice
from such entity that payment for the Fund's securities has been
transferred to the Custodian's account, and (b) the making of any entry
on the records of the Custodian to reflect such transfer and payment
for the account of the Fund; (v) copies of all advices or reports from
such entity(ies) of transfers of securities for the account of the Fund
shall be maintained for the Fund by the Custodian and the Custodian
shall furnish the Fund with confirmation of each transfer to or from
the account of the Fund; (vi) upon request the Custodian shall provide
the Fund with any report obtained by the Custodian on the entity(ies)
accounting system, internal accounting control and procedures for
safeguarding securities deposited with such entity.
D. Registration of Securities
Custodian will hold stocks and other registrable portfolio securities
of Fund registered in the name of Fund or in the name of any nominee of
Custodian for whose fidelity and liability Custodian will be fully
responsible, or in street certificate forms so-called, with or without
any indication of fiduciary capacity. Unless otherwise instructed,
Custodian will register all such portfolio securities in the name of
its authorized nominee. All securities, and the ownership thereof by
Fund, which are held by Custodian hereunder, however, shall at all
times be identifiable on the records of the Custodian. The Fund agrees
to hold Custodian and its nominee harmless from any liability resulting
from Custodian's status as record holder of securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 3.A,
Custodian will exchange, or cause to be exchanged, portfolio securities
held by it for the account of Fund for other securities or cash issued
or paid in connection with any reorganization, recapitalization,
merger, consolidation, split-up of shares, change of par value,
conversion or otherwise, and will deposit any such securities in
accordance with the terms of any reorganization or protective plan,
provided, however, that Custodian may proceed with any such mandatory
transaction without instructions. Without instructions, Custodian is
authorized to exchange securities held by it in-temporary form for
securities in definitive form, to effect an exchange of shares when the
par value of the stock is changed, and, upon receiving payment
therefore, to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption, except that
Custodian shall receive instructions prior to surrendering any
convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities shall
be made by it, deliver to Custodian instructions which shall specify
with respect to each such purchase:
1 The name of the issuer and description of the security;
2. The number of shares or the principal amount purchased, and
accrued interest, if any;
3. The trade date;
4. The settlement date;
5. The purchase price per unit and the brokerage commission,
taxes and other expenses payable upon such purchase;
6. The total amount payable upon such purchase; and
7. The name of the person from whom or the broker or dealer
through whom the purchase was made.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund and receive the portfolio
securities so purchased by or for the account of Fund. Such payment
will be made only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian.
G. Sales and Deliveries of Investments of Fund - Other than Options and
Futures
Fund will, on each business day on which a sale of investment
securities of Fund has been made, deliver to Custodian instructions
specifying with respect to each such sale:
1. The name of the issuer and description of the securities;
2. The number of shares or principal amount sold, and accrued
interest, if any;
3. The date on which the securities sold were purchased or other
information identifying the securities sold and to be
delivered;
4. The trade date;
5. The settlement date;
6. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
7. The total amount to be received by Fund upon such sale; and
8. The name and address of the broker or dealer through whom or
person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale, such delivery to be made only upon receipt of
payment therefore in such form as is satisfactory to Custodian, with
the understanding that Custodian may deliver or cause to be delivered
securities for payment in accordance with the customs prevailing among
dealers in securities.
H. Purchases or Sales of Security Options, Options on Indices and Security
Index Futures Contracts
Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or dealer through whom
the sale or purchase was made.
2. Options on Indices
a. The index; :
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased;
j. The name and address of the broker or dealer
through whom the sale or purchase was made, or other
applicable settlement instructions.
3. Security Index Futures Contracts
a. The last trading date specified in the contract and,
when available, the closing level thereof;
b. The index level on the date the contract is entered
into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition
to instructions, and if not already in the possession
of Custodian, Fund shall deliver a substantially
complete and executed custodial safekeeping account
and procedural agreement which shall be incorporated
by reference into this Custody Agreement); and
f. The name and address of the futures commission
merchant through whom the sale or purchase was made,
or other applicable settlement instructions.
4. Options on Index Future Contracts
a. The underlying index futures contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
1. Upon receipt of instructions, Custodian will release or cause
to be released securities held in custody to the pledgee
designated in such instructions by way of pledge or
hypothecation to secure any loan incurred by Fund; provided,
however, that the securities shall be released only upon
payment to Custodian of the monies borrowed, except that in
cases where additional collateral is required to secure a
borrowing already made, further securities may be released or
caused to be released for that purpose upon receipt of
instructions. Upon receipt of instructions, Custodian will
pay, but only from funds available for such purpose, any such
loan upon redelivery to it of the securities pledged or
hypothecated therefore and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated in such
instructions; provided, however, that the securities will be
released only upon deposit with Custodian of full cash
collateral as specified in such instructions, and that Fund
will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will release
the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Board of Directors of Fund.
K. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund
all income and other payments which become due and payable on
or after the effective date of this Agreement with respect to
the securities deposited under this Agreement, and credit the
account of Fund with such income on the date received;
2. Execute ownership and other certificates and affidavits for
all foreign, federal, state and local tax purposes in
connection with the collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income
and other payments, including but not limited to the
presentation for payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or
be called, redeemed, retired or otherwise
become payable and regarding which the
Custodian has actual knowledge, or
notice of which is contained in publications
of the type to which it normally subscribes
for such purpose; and
b. the endorsement for collection, in the name of Fund,
of all checks, drafts or other negotiable
instruments.
Custodian, however, will not be required to take action to effect
collection of any amount if the-securities upon which such payment is
due are in default, or if payment is refused after due demand and
presentation, except upon receipt of instructions and upon being
indemnified to its satisfaction against the costs and expenses of such
action. Custodian will receive, claim and collect all stock dividends,
rights and other similar items and will deal with.the same pursuant to
instructions. If Custodian receives notification of existence of rights
granted to Fund prior to the expiration date of such rights, Custodian
shall reflect such rights in the Fund's records, and shall advise Fund
of the expiration of such rights prior to the expiration date and await
instructions from Fund in connection therewith.
L. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies or
other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any such
securities, including any power to vote the same, or execute any proxy,
power of attorney, or other similar instrument voting any of such
securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
M. Disbursements
Custodian will pay or cause to be paid insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund, interest
charges, dividend disbursements, taxes, management fees, custodian
fees, legal fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating expenses of
Fund) pursuant to instructions of Fund setting forth the name of the
person to whom payment is to be made, the amount of the payment, and
the purpose of the payment.
N. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund as of the
close of business on each day, a detailed statement of the amounts
received or paid and of securities received or delivered for the
account of Fund during said day in compliance with Rule 3 la-l(b)(l) of
the Investment Company Act of 1940, as amended. Custodian will, from
time to time, upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and Custodian
will maintain such books and records as are necessary to enable it to
do so and will permit such persons as are authorized by Fund including
Fund's independent public accountants, access to such records or
confirmation of the contents of such records; and if demanded, will
permit federal and state regulatory agencies to examine the securities,
books and records. Upon the written instructions of Fund or as demanded
by federal or state regulatory agencies, Custodian will instruct any
subcustodian to give such persons as are authorized by Fund including
Fund's independent public accountants, access to such records or
confirmation of the contents of such records; and if demanded, to
permit federal and state regulatory agencies to examine the books,
records and securities held by subcustodian which relate to Fund.
O. Appointment of Subcustodians
Notwithstanding any other provisions of this Agreement, all or any of
the monies or securities of Fund may be held in Custodian's own custody
or in the custody of one or more other banks or trust companies
selected by Custodian or as directed by the Fund. Any such subcustodian
must have the qualifications required for custodians under the
Investment Company Act of 1940, as amended. The Custodian or
subcustodian may participate directly or indirectly in The Depository
Trust Company, Treasury/Federal Reserve Book Entry System, or
Participant Trust Company (as such entities are defined at 17 CFR Sec.
270.1 7f4(b)), or other depository approved by the Fund.
P. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and records
but shall be reimbursed for all expenses and employee time invested in
any such review outside of routine and normal periodic reviews. Upon
receipt from Fund of the necessary information, Custodian will supply
necessary data for Fund's completion of any necessary tax returns,
questionnaires, periodic reports to Shareholders and such other reports
and information requests as Fund and Custodian shall agree upon from
time to time.
Q. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they agree
upon, and Custodian may conclusively assume that no procedure approved
by Fund, or directed by Fund, conflicts with or violates any
requirements of its prospectus, Articles of Incorporation, Bylaws, or
any rule or regulation of any regulatory body or governmental agency.
Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules or policies which might necessitate
changes in Custodian's responsibilities or procedures.
R Overdrafts
If Custodian shall in its sole discretion advance funds to the account
of the Fund which results in an overdraft because the monies held by
Custodian on behalf of the Fund are insufficient to pay the total
amount payable upon a purchase of securities as specified in Fund's
instructions or for some other reason, the amount of the overdraft,
plus accrued interest thereon at a rate agreed upon by the parties from
time to time, shall be payable by the Fund to Custodian upon demand.
The Fund hereby grants Custodian a security interest in the assets held
in the account to the extent of any such advances.
3. INSTRUCTIONS.
A. The term "instructions", as used herein means written or oral
instructions to Custodian from a designated representative of
Fund. Certified copies of resolutions of the Board of
Directors of Fund naming one or more designated
representatives to give instructions in the name and on behalf
of Fund, may be received and accepted from time to time by
Custodian as conclusive evidence of the authority of any
designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will
be fully protected in acting in reliance thereon) until
receipt by Custodian of notice to the contrary. Unless the
resolution delegating authority to any person to give
instructions specifically requires that the approval of anyone
else will first have been obtained, Custodian will be under no
obligation to inquire into the right of the person giving such
instructions to do so. Notwithstanding any of the foregoing
provisions of this Section 3, no authorizations or
instructions received by Custodian from Fund, will be deemed
to authorize or permit any director, officer, employee or
agent of Fund to withdraw any of the securities or similar
investments of Fund upon the mere receipt of such
authorization or instructions from such director, officer,
employee or agent.
Notwithstanding any other provision of this Agreement,
Custodian, upon receipt (and acknowledgment if required at the
discretion of Custodian) of the instructions of a designated
representative of Fund will undertake to deliver for Fund's
account monies, (provided such monies are on hand or
available) in connection with Fund's transactions and to wire
transfer such monies to such broker, dealer, subcustodian,
bank or other agent specified in such instructions by a
designated representative of Fund.
B. No later than the next business day immediately following each
oral instruction, Fund will send Custodian written
confirmation of such oral instruction. At Custodian's sole
discretion, Custodian may record on tape, or otherwise, any
oral instructions whether given in person or via telephone,
each such-recording identifying the parties, the date and the
time of the beginning and ending of such oral instruction.
4. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall hold harmless and indemnify Fund from and
against any claim, loss, liability or expense (collectively a
"Claim") arising out of Custodian's failure to comply with the
terms of this Agreement or arising out of Custodian's
negligence, willful misconduct, or bad faith. Custodian shall
not be liable for consequential, special or punitive damages.
Custodian may reasonably request and obtain the advice and
opinion of counsel for Fund, or of its own counsel with
respect to questions or matters of law, and it shall be
without liability to Fund for any action taken or omitted by
it in good faith, in conformity with such advice or opinion.
B. The Fund agrees to indemnify and hold the Custodian harmless
from and against any Claim arising from the Custodian's
performance of its duties hereunder or its actions taken at
the direction of the Fund, provided that the Custodian shall
not be indemnified for any Claim arising out of Custodian's
failure to comply with the terms of this Agreement or arising
out of Custodian's negligence, bad faith or willful
misconduct. Fund shall not be liable for consequential,
special or punitive damages.
C. Custodian may rely upon the advice of Fund and upon statements
of Fund's accountants and other persons believed by it in good
faith, to be expert in matters upon which they are consulted,
and Custodian shall not be liable for any actions taken, in
good faith without negligence upon such statements.
D. If Fund requires Custodian in any capacity to take, with
respect to any securities, any action which involves the
payment of money by it, or which in Custodian's opinion might
make it or its nominee liable for payment of monies or in any
other way, Custodian, upon notice to Fund given prior to such
actions, shall be and be kept indemnified by Fund in an amount
and form satisfactory.to Custodian against any liability on
account of such action.
E. Custodian shall be entitled to receive, and Fund agrees to pay
to Custodian, on demand, reimbursement for such cash
disbursements, costs and expenses as may be agreed upon from
time to time by Custodian and Fund.
F. Custodian shall be protected in acting as custodian hereunder
upon any instructions, advice, notice, request, consent,
certificate or other instrument or paper reasonably appearing
to it to be genuine and to have been properly executed and
shall, unless otherwise specifically provided herein, be
entitled to receive as conclusive proof of any fact or matter
required to be ascertained from Fund hereunder, a certificate
signed by the Fund's President, or other officer specifically
authorized for such purpose.
G. Without limiting the generality of the foregoing, Custodian
shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased
by or for Fund, the legality of the purchase thereof
or evidence of ownership required by Fund to be
received by Custodian, or the propriety of the
decision to purchase or amount paid therefore; or
2. The legality of the sale of any securities by or for
Fund, or the propriety of the amount for which the
same are sold.
H. Custodian shall not be liable for any loss or diminution of
securities by reason of investment experience or for its
actions taken in reliance upon an instruction from Fund.
I. Custodian shall not be liable for, or considered to be
Custodian of, any money represented by any check, draft, wire
transfer, clearing house funds, uncollected funds, or
instrument for the payment of money received by it on behalf
of Fund, until Custodian actually receives such money,
provided only that it shall advise Fund promptly if it fails
to receive any such money in the ordinary course of business,
and use its best efforts. and cooperate with Fund toward the
end that such money shall be received.
J. Except for any subcustodians appointed under Section 2.0,
Custodian shall not be responsible for loss occasioned by the
acts, neglect, defaults or insolvency of any broker, bank,
trust company, or any other person with whom Custodian may
deal in the absence of negligence, or bad faith on the part of
Custodian.
5. COMPENSATION.
Fund will pay to Custodian such compensation as is stated in the Fee
Schedule attached hereto as Exhibit A which may be changed from time to
time as agreed to in writing by Custodian and Fund. Custodian may
charge such compensation against monies held by it for the account of
Fund. Custodian will also be entitled, notwithstanding the provisions
of Sections 4.D or 4.E hereof, to charge against any monies held by it
for the account of Fund or to place a lien upon the securities or
monies of the Fund the amount of any loss, damage, liability, or
expense for which it shall be entitled to reimbursement under the
provisions of this Agreement including fees or expenses due to
Custodian for other services provided to the Fund by the Custodian or
advance and interest due to Custodian under Section 2.R Custodian will
not be entitled to reimbursement by Fund for any loss or expenses of
any subcustodian, except for such expenses as would otherwise be paid
by the Fund under this Agreement.
6. TERMINATION.
Either party may terminate this Agreement by notice in writing,
delivered or mailed, postage prepaid, to the other party hereto and
received not less than ninety (90) days prior to the date upon which
such termination will take effect. Upon termination of this Agreement,
Fund will pay to Custodian such compensation for its reimbursable
disbursements, costs and expenses paid or incurred to such date and
Fund will use its best efforts to obtain a successor custodian. Unless
the holders of a majority of the outstanding shares of Capital Stock of
Fund vote to have the securities, funds and other properties held under
this Agreement delivered and paid over to some other person, firm or
corporation specified in the vote, having not less than Two Million
Dollars ($2,000,000) aggregate capital, surplus and undivided profits,
as shown by its last published report, and meeting such other
qualifications for custodian as set forth in the Bylaws of Fund, the
Board of Directors of Fund will, forthwith upon giving or receiving
notice of termination of this Agreement, appoint as successor custodian
a bank or trust company having such qualifications. Custodian will,
upon termination of this Agreement, deliver to the successor custodian
so specified or appointed, at Custodian's office, all securities then
held by Custodian hereunder, duly endorsed and in form for transfer,
and all funds and other properties of Fund deposited with or held by
Custodian hereunder, or will cooperate in effecting changes in
book-entries at the Depository Trust Company or in the Treasury/Federal
Reserve Book Entry System. In the event no such vote has been adopted
by the shareholders of Fund and no written order designating a
successor custodian has been delivered to Custodian on or before the
date when such termination 10 becomes effective, then Custodian will
deliver the securities, funds and properties of Fund to a bank or trust
company at the selection of Custodian and meeting the qualifications
for custodian, if any, set forth in the Bylaws of Fund and having not
less than Two Million Dollars ($2,000;000) aggregate capital, surplus
and undivided profits, as shown by its last published report. Upon
either such delivery to a successor custodian, Custodian will have no
further obligations or liabilities under this Agreement. Thereafter
such bank or trust company will be the successor custodian under this
Agreement and will be entitled to reasonable compensation for its
services. In the event that no such successor custodian can be found,
Fund will submit to its shareholders, before permitting delivery of the
cash and securities owned by Fund to anyone other than a successor
custodian, the question of whether Fund will be liquidated or function
without a custodian. Notwithstanding the foregoing requirement as to
delivery upon termination of this Agreement, Custodian may make any
other delivery of the securities, funds and property of Fund which is
permitted by the Investment Company Act of 1940, Fund's Articles of
Incorporation and Bylaws then in effect or apply to a court of
competent jurisdiction for the appointment of a successor custodian.
7. TRANSFER TAXES AND OTHER DISBURSEMENTS.
The Fund shall pay or reimburse the Custodian for any transfer taxes
payable upon transfers of securities made hereunder, including
transfers incident to the termination of this Agreement, and for all
other necessary and proper disbursements and expenses made or incurred
by the Custodian in the performance or incident to the termination of
this Agreement, and the Custodian shall have a lien upon any cash or
securities held by it for the account of the Fund for all such items,
enforceable, after thirty (30) days written notice by registered mail
to the Fund, by the sale of sufficient securities to satisfy such lien.
The Custodian may reimburse itself by deducting from the proceeds of
any sale of securities an amount sufficient to pay any transfer taxes
payable upon transfer of securities sold. The Custodian shall execute
such certificates in connection with securities delivered to it under
this Agreement as may be required, under the provisions of any federal
revenue act and any Regulations of the Treasury Department issued
thereunder or any state laws, to exempt from taxation any transfers
and/or deliveries of any such securities as may qualify for such
exemption.
8. NOTICES.
Notices, requests, instructions and other writings received by Fund at
90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402 or at
such other address as Fund may have designated to Custodian in writing,
will be deemed to have been properly given to Fund hereunder; and
notices, requests, instructions and other writings received by
Custodian at its offices at 336.N. Robert Street, 6th Floor Custody,
St. Paul, Minnesota 55101, or to such other address as it may have
designated to Fund in writing, will be deemed to have been properly
given to Custodian hereunder.
9. MISCELLANEOUS.
A. This Agreement is executed and delivered in the State of
Minnesota and shall be governed by the laws of said state.
B. All the terms and provisions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by
the respective successor and assigns of the parties hereto.
C. No provisions of the Agreement may be amended or modified, in
any manner except by a written agreement properly authorized
and executed by both parties hereto.
D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
E. This Agreement shall become effective at the close of business
on the 13th day of January, 1995.
F. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original but all
of which together will constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the
courts held to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
H. This Agreement may not be assigned by either party without
prior written consent of the other party. Any bank or trust
company into which the Custodian or any successor custodian
may be merged or converted or with which it or any successor
custodian may be consolidated, or any bank or trust company
resulting from any merger, conversion or consolidation to
which the Custodian or any successor custodian shall be a
party, or any bank or trust company succeeding to the business
of the Custodian, shall be and become the successor custodian
without the execution of any instrument or any further act on
the part of the Fund or the Custodian or any successor
custodian.
I. Nothing expressed or mentioned in or to be implied from any
provisions of this Agreement is intended to give or shall be
construed to give any person or corporation other than the
parties hereto any legal or equitable right, remedy or claim
under or in respect of this Agreement or any covenant,
condition or provision herein contained, this Agreement and
all of the covenants, conditions and provisions hereof being
intended to be, and being, for the sole and exclusive benefit
of the parties hereto and their respective successors and
assigns.
J. Custodian shall not be responsible for, and the Fund does
hereby waive all duties or functions of Custodian (imposed by
law or otherwise) relating to, the withholding and government
deposit of any and all taxes, or amounts with respect thereto,
that may be incurred or payable in connection with the account
established hereunder, income or gain realized on securities
held therein or transactions undertaken with respect thereto.
Except as required by law in such manner that cannot be
delegated to or assumed by the Fund, Custodian shall have no
responsibility to undertake any federal, state or local tax
reporting in connection with securities, the account
established hereunder or transactions therein.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement to be
executed in duplicateas of the date first above written by their fully
authorized officers.
ATTEST: V.A.M. INSTlTUTIONAL FUNDS, INC.
By: ______________________ By: __________________________
Its: ______________________ Its: __________________________
ATTEST: FIRST TRUST NATIONAL ASSOCIATION
By: ______________________ By: __________________________
Its: ______________________ Its: __________________________
CUSTODY AGREEMENT
This agreement between VAM Institutional Funds, Inc., a corporation
organized and existing under the laws of Minnesota, having its principal place
of business at 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota
55402, hereinafter called the "Company," and First Bank National Association, a
national banking association, having its principal place of business at 180 East
Fifth Street, St. Paul, Minnesota 55101, hereinafter called the "Custodian";
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held By It. The Company
hereby employs the Custodian as the custodian of the assets of the VAM Global
Fixed Income Fund (the "Fund"), a separate portfolio of the Company represented
by its Series A Common Shares. The Company's employment of the Custodian
includes securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside of the
United States ("foreign securities"). The Company agrees to deliver to the
Custodian all securities and cash of the Fund, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities of the Fund from time to time. All securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Company pursuant to the terms of this Agreement. The Custodian shall
have no power or authority to assign, hypothecate, pledge or otherwise dispose
of any such securities, except pursuant to the directive of the Company and only
for the account of the Fund. The Custodian shall not be responsible for any
property of the Fund held or received by the Company and not delivered to the
Custodian.
The Custodian may employ directly or through an agent as subcustodians
for the Fund's securities and other assets foreign banking institutions and
foreign securities depositories pursuant to the requirements of this Agreement.
All subcustodians of the Custodian shall be subject to the instructions of the
Custodian and not to those of the Company and shall act solely as agents of the
Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States.
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to be held by it in
the United States, including all domestic securities of the Fund, other than
securities which are maintained pursuant to Section 2.8 in a clearing agency
which acts as a securities depository or in a book-entry system authorized by
the U. S. Department of Treasury, collectively referred to herein as "Securities
System," or by an agent of Custodian as authorized in Section 2.7. There shall
be no co-mingling of assets of the Fund with the assets of any other series of
the Company which may in the future adopt this Agreement.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities of the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
(a) upon sale of such securities for the account of the Fund
and receipt of payment therefor;
(b) upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into by the
Company for the benefit of the Fund;
(c) in the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.8 hereof;
(d) to the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
(e) to the issuer thereof or its agent when such securities
are matured, called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(f) to the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.7 or into the name or nominee name of any
subcustodian appointed pursuant to Article 1, or for exchange for a
different number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the Custodian.
(g) upon the sale of such securities for the account of the
Fund, to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided that
in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise from
the Custodian's own negligence or willful misconduct;
(h) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
(i) in the case of warrants, rights, or similar securities,
the surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such case,
the new securities and cash, if any, are to be delivered to the
Custodian;
(j) for delivery in connection with any loans of securities
made by the Company for the benefit of the Fund, but only against
receipt of adequate collateral as agreed upon from time to time by the
Custodian and the Company, which may be in the form of cash,
obligations issued by the United States government, its agencies or
instrumentalities, or irrevocable bank letters of credit acceptable to
the Company;
(k) for delivery as security in connection with any borrowings
by the Company for the benefit of the Fund requiring a pledge of assets
from the Fund, but only against receipt of amounts borrowed;
(l) for delivery in accordance with the provisions of any
agreement among the Company, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Company for the benefit of the Fund;
(m) for delivery in accordance with the provisions of any
agreement among the Company, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Company for the benefit of the Fund; and
(n) for any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors signed by an officer of the
Company and certified by the Secretary or Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian or in the name or nominee name of any agent appointed pursuant to
Section 2.7 or in the name or nominee name of any subcustodian appointed
pursuant to Article 1. All securities accepted by the Custodian on behalf of the
Company under the terms of this Agreement shall be in "street name" or other
good delivery form.
2.4 Collection of Income. The Custodian shall, or shall cause its agent
or sub-custodian to, collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to which the
Fund shall be entitled either by law or pursuant to custom in the securities
business and shall collect on a timely basis all income and other payments with
respect to United States bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent or sub-custodian
thereof, unless such payment of income or other payment is in default, and shall
credit such income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due. Unless the Custodian is the lending agent in connection
with securities loaned by the Company for the benefit of the Fund, income due
the Fund on United States securities loaned pursuant to the provisions of
Section 2.2(j) shall be the responsibility of the Company and the Custodian will
have no duty or responsibility in connection therewith, other than to provide
the Company with such information or data as may be necessary to assist the
Company in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.5 Payment of Fund Moneys. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases only:
(a) upon the purchase of domestic securities, futures
contracts or options on futures contracts for the account of the Fund
but only (i) against the delivery of such securities, or evidence of
title to futures contracts or options on futures contracts, to the
Custodian (or any bank, banking firm or trust company doing business in
the United States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has been
designated by the Custodian as its agent for this purpose) registered
in the name of the Fund or in the name of a nominee of the Custodian or
Custodian's agent or sub-custodian or in proper form for transfer; (ii)
in the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.8 hereof; or
(iii) in the case of repurchase agreements entered into between the
Company for the benefit of the Fund and a bank or a broker-dealer which
is a member of NASD, against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities;
(b) in connection with conversion, exchange or surrender of
securities of the Fund as set forth in Section 2.2 hereof;
(c) for the redemption or purchase of shares issued by the
Fund;
(d) for the payments of any expense or liability incurred by
the Fund, including but not limited to the following payments for the
account of the Fund: interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the Fund whether or not
such expenses are to be in whole or part capitalized or treated as
deferred expenses;
(e) for payments in connection with the return of securities
of securities loaned by the Company for the benefit of the Fund upon
receipt of such securities or the reduction of collateral upon receipt
of proper notice;
(f) for the payment of any dividend declared pursuant to the
governing documents of the Fund; and
(g) for any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors of the Company signed by an officer of the
Company and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purchase for
which such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to be
made.
2.6 Liability for Payment in Advance of Receipt of Securities
Purchased. The Custodian shall not make payment for the purchase of domestic
securities for the account of the Fund in advance of receipt of the securities
purchased in the absence of specific written instructions from the Company to so
pay in advance. In any and every case where payment for purchase of domestic
securities for the account of the Fund is made by the Custodian in advance of
receipt of the securities purchased in the absence of specific written
instructions from the Company to so pay in advance the Custodian shall be liable
to the Company for such securities.
2.7 Appointment of Agents. The Custodian may at time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.8 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain domestic securities of the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or in
the book-entry system authorized by the U. S. Department of Treasury and certain
federal agencies, collectively referred to herein as "Securities System," in
accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
(a) The Custodian may keep domestic securities of the Fund in
a Securities System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System which
shall not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers.
(b) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a Securities System
shall identify by book-entry those securities belonging to the Fund.
(c) The Custodian shall pay for domestic securities purchased
for the account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account of the
Fund. The Custodian shall transfer domestic securities sold for the
account of the Fund upon (A) the simultaneous receipt of advice from
the Securities System that payment for such securities has been
transferred to the Account, and (B) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all records from the Securities System
of transfers of domestic securities for the account of the Fund shall
be maintained by the Custodian and be provided to the Company at its
request. As part of its regular reporting to the Company, the
Custodian shall furnish to the Company confirmation of each transfer to
or from the account of the Fund in the form of a written advice or
notice.
(d) The Custodian shall provide the Company with any report
obtained by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding domestic
securities deposited in the Securities System.
(e) The Custodian shall have received the initial certificate
required by Article 14 hereof.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Company for any
loss or damage to the Fund resulting from use of the Securities System
by reason of any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the election of
the Company, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the Securities System or
any other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Fund has not been
made whole for any such loss or damage.
2.9 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.8 hereof, (a) in accordance with the provisions
of any agreement among the Company, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any Futures Commission
Merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Company for the benefit of the Fund; (b) for purposes of segregating cash or
government securities in connection with options purchased, sold or written by
the Company for the benefit of the Fund or commodity futures contracts or
options thereon purchased or sold by the Company for the benefit of the Fund;
(c) for the purposes of compliance by the Company with the procedures required
by Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the maintenance
of segregated accounts by registered investment companies; and (d) for other
proper corporate purposes, but only, in the case of clause (d), upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution of the
Board of Directors signed by an officer of the Company and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper corporate
purposes.
2.10 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection with
transfers of such securities.
2.11 Reports to Company by Independent Public Accountants. The
Custodian shall provide the Company, at such times as the Company may reasonably
require, with reports by independent public accountants on the accounting
systems, internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including domestic
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Agreement; such reports shall be
of sufficient scope and in sufficient detail as may reasonably be required by
the Company to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States.
3.1 Appointment of Foreign Sub-Custodians. The Custodian is authorized
and instructed to employ as sub-custodians for the Fund's securities and other
assets maintained outside of the United States such foreign banking
institutions, foreign securities depositories and foreign clearing agencies
("foreign sub-custodians") as the Company shall designate from time to time by
Proper Instructions, together with a certified resolution of the Company's Board
of Directors. Each foreign banking institution shall be authorized to deposit
securities in foreign securities depositories and foreign clearing agencies
authorized pursuant to Rule 17f-5 under the Investment Company Act of 1940. Upon
receipt of Proper Instructions from the Company the Custodian shall cease the
employment of any one or more of such sub-custodians for maintaining custody of
the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign sub-custodian to: (a)
"foreign securities," as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash equivalents in such
amounts as the Custodian or the Company may determine to be reasonably necessary
to effect the Fund's foreign securities transactions.
3.3 Segregation of Securities. The Custodian shall identify on its
books as belonging to the Fund the foreign securities of the Fund held by each
foreign sub-custodian. Each agreement pursuant to which the Custodian employs a
foreign banking institution shall require that such institution establish a
custody account for the Custodian on behalf of its customers and physically
segregate in that account securities and other assets of the Custodian's
customers and, in the event that such institution deposits the Fund's securities
in a foreign securities depository, the subcustodian shall identify on its books
as belonging to the Custodian, as agent for the Custodian's customers, the
securities so deposited (all collectively referred to as the "Account").
3.4 Agreement with Foreign Banking Institution. Each agreement with a
foreign banking institution shall provide that: (a) the Fund's assets will not
be subject to any right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or its creditors, except a claim of
payment for their safe custody or administration; (b) beneficial ownership for
the Fund's assets will be freely transferable without the payment of money or
value other than for custody or administration, which may include payment of
stamp duties or government taxes; (c) adequate records will be maintained
identifying the assets as belonging to the customers of the Custodian; (d)
officers of or auditors employed by, or other representatives of the Custodian,
including independent public accountants for the Company, will be given access
to the books and records of the foreign banking institution relating to its
actions given under its agreement with the Custodian or shall be given
confirmation of the contents of such books and records; and (e) assets of the
Fund held by the foreign subcustodian will be subject only to the instructions
of the Custodian or its agents.
3.5 Access of Independent Accountants of the Company. Upon request of
the Company, the Custodian will use its best efforts to arrange for the
independent accountants of the Company to be afforded access to the books and
records of any foreign banking institution employed as a foreign subcustodian
insofar as such books and records relate to the performance of such foreign
banking institutions under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Company from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by foreign subcustodians, including but not
limited to an identification of entities having possession of the Fund's
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign
sub-custodian for the Custodian on behalf of the Fund indicating, as to
securities acquired for the Fund, the identity of the entity having physical
possession of such securities.
3.7 Foreign Securities Transactions.
(a) Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall make or
cause its foreign sub-custodian to transfer, exchange or deliver foreign
securities of the Fund, but except to the extent explicitly provided herein only
in any of the cases specified in Section 2.2.
(b) Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall pay out
or cause its foreign sub-custodian to pay out monies of the Fund, but except to
the extent explicitly provided herein only in any of the cases specified in
Section 2.5.
(c) Settlement and payment for securities received for the account of
the Fund and delivery of securities maintained for the account of the Fund may,
upon receipt of Proper Instructions, be effected in accordance with the
customary or established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities from
such purchaser or dealer.
(d) With respect to any transaction involving foreign securities, the
Custodian or any sub-custodian in its discretion may cause the Fund to be
credited on either the contractual settlement date or the actual settlement date
with the proceeds of any sale or exchange of foreign securities from the account
of the Fund and to be debited on either the contractual settlement date or the
actual settlement date for the cost of foreign securities purchased or acquired
for the Fund according to Custodian's then current internal policies and
procedures pertaining to securities settlement, which policies and procedures
may change from time to time. The Custodian shall advise the Company of any
changes to such policies and procedures. The Custodian may reverse any such
credit or debit made on the contractual settlement date if the transaction with
respect to which such credit or debit was made fails to settle within a
reasonable period, determined by Custodian in its discretion, after the
contractual settlement date except that if any foreign securities delivered
pursuant to this section are returned by the recipient thereof, the Custodian
may cause any such credits and debits to be reversed at any time.
(e) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Agreement and the Company agrees to hold any such
nominee harmless from any liability as a holder of record of such securities.
(f) Until the Custodian receives written instructions to the contrary,
the Custodian shall, or shall cause the sub-custodian to, collect all interest
and dividends paid on securities held in the Fund's account, unless such payment
is in default. Unless otherwise instructed, the Custodian shall convert
interest, dividends and principal received with respect to securities in the
Fund's account into United States dollars and the Custodian shall perform
foreign exchange contracts for the conversion of United States dollars to
foreign currencies for the settlement of trades whenever it is practicable to do
so through customary banking channels. Customary banking channels may vary based
upon industry practice in each jurisdiction, and shall include the banking
facilities of the Custodian's affiliates, in accordance with such affiliate's
then prevailing internal policy on funds repatriation. All risk and expense
incident to such foreign collection and conversions is the responsibility of the
Fund's account and the Custodian shall have no responsibility for fluctuation in
exchange rates affecting collections or conversions.
3.8 Foreign Securities Lending. Notwithstanding any other provisions
contained in this Agreement, the Custodian and any sub-custodian shall deliver
and receive securities loaned or returned in connection with securities lending
transactions only upon and in accordance with Proper Instructions; provided, if
the Custodian is not the lending agent in connection with such securities
lending, then neither the Custodian or any sub-custodian shall undertake, or
otherwise be responsible for: (a) marking to market values for such loaned
securities; (b) collection of dividends, interest or other disbursements or
distributions made with respect to such loaned securities; (c) receipt of
corporate action notices, communications, proxies or instruments with respect to
such loaned securities; and (d) custody, safekeeping, valuation or any other
actions or services with respect to any collateral securing any such securities
lending transactions.
In the event that the Custodian is the Company's lending agent in
connection with a specific securities loan from the Fund, the Custodian shall
undertake to perform all of the above duties with regard to such loan, except
that the Company shall not receive, nor be enabled to vote, proxies in
connection with such loaned security.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a foreign
subcustodian shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify and hold harmless the Custodian and
the Custodian's customers from and against any loss, damage, cost, expense,
liability or claim arising out of such subcustodian's negligence, fraud, bad
faith, willful misconduct or reckless disregard of its duties. At the election
of the Company, it shall be entitled to be subrogated to the right of the
Custodian with respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
3.10 Monitoring Responsibilities. The Custodian shall furnish annually
to the Company information concerning the foreign subcustodians employed by the
Custodian. Such information shall be similar in kind and scope to that furnished
to the Company in connection with the initial approval of this Agreement. In
addition, the Custodian will promptly inform the Company in the event that the
Custodian learns of a material adverse change in the financial condition of a
foreign subcustodian or is notified by a foreign banking institution employed as
foreign subcustodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (United States dollars) or
the equivalent thereof or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted United
States accounting principles).
3.11 Branches of United States Banks. Except as otherwise set forth in
this Agreement, the provisions hereof shall not apply where the custody of Fund
assets is maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940 which
meets the qualification set forth in Section 26(a) of said Act. The appointment
of any such branch as a sub-custodian shall be governed by Article 1 of this
Agreement.
3.12 Expropriation Insurance. The Custodian represents that it does not
intend to obtain any insurance for the benefit of the Fund which protects
against the imposition of exchange control restrictions or the transfer from any
foreign jurisdiction of the proceeds of sale of any securities or against
confiscation, expropriation or nationalization of any securities or the assets
of the issuer of such securities by a government of any foreign country in which
the issuer of such securities is organized or in which securities are held for
safekeeping either by the Custodian or any subcustodians in such country. The
Custodian represents that its understanding of the position of the Staff of the
Securities and Exchange Commission is that any investment company investing in
securities of foreign issuers has the responsibility for reviewing the
possibility of the imposition of exchange control restrictions which would
affect the liquidity of such investment company's assets and the possibility of
exposure to political risk, including the appropriateness of insuring against
such risk.
4. Proper Instructions. Proper Instructions as used herein means a
writing signed or initialled by one or more person or persons as the Board of
Directors shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Company shall cause
all oral instructions to be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistance Secretary as to the authorization by the Board
of Directors of the Company accompanied by a detailed description of procedures
approved by the Board of Directors, Proper Instructions may include
communication effected directly between electromechanical or electronic devices
provided that the Board of Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets.
5. Actions Permitted without Express Authority. The Custodian may in
its discretion, or may cause its sub-custodian or agent to, without express
authority from the Company:
(a) submit securities to the issuer thereof or its agent when
such securities are matured, called, redeemed, retired or otherwise
become payable; provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(b) submit securities for mandatory exchange or conversion
pursuant to any plan of merger, consolidation, recapitalization,
reorganization or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement; provided that, in any
such case, the new securities and cash, if any, are to be delivered to
the Custodian;
(c) execute in the name of the Fund such ownership and other
certificates as may be required to obtain payments in respect thereto,
provided that the Company shall have furnished to the Custodian any
information necessary in connection with such certificates;
(d) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under
this Agreement, provided that all such payments shall be accounted for
to the Company;
(e) surrender securities in temporary form for securities in
definitive form;
(f) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
(g) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the securities and property of the Fund except
as otherwise directed by the Board of Directors of the Company.
6. Proxies, Notices, Reports, etc. If the Custodian or any agent or
sub-custodian shall receive any proxies, notices, reports, or other
communications relative to any of the securities of the Fund in connection with
tender offers, reorganizations, mergers, consolidations, or similar events which
may have material impact upon the issuer thereof, the Custodian shall, on its
behalf or on the behalf of agent or sub-custodian, promptly transmit any such
communication to the Company by means which shall permit the Company to take
timely action. As specifically requested by the Company, the Custodian shall
execute and deliver or shall cause the nominee in whose name securities are
registered to execute and deliver to the Company proxies relating to securities
in the custody account registered in the name of such nominee, but without
indicating the manner in which such proxies are to be voted. The Custodian shall
take such reasonable steps to vote bearer securities in accordance with written
instructions of the Company timely received by the Custodian or such other
person or person as designated in or pursuant to the Custodian's Operations
Manual. The Custodian shall have no liability for any loss or liability
occasioned by delay in the actual receipt by them or any agent or sub-custodian
of notice of any payment, redemption, or other transaction regarding securities
in the custody account in respect of which it has agreed to take action as
provided in Section 3.7 hereof, unless such delay is a result of their own
negligence, fraud, or willful misconduct.
7. Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed by or
on behalf of the Company. The Company shall provide to the Custodian a certified
copy of a vote of the Board of Directors of the Company as conclusive evidence
(a) of the authority of any person to act in accordance with such vote or (b) of
any determination or of any action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary. The Company shall provide to the Custodian specimen
signatures of those persons authorized to act on behalf of the Company by the
Board of Directors.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income. The Custodian shall cooperate
with and supply necessary information to the entity or entities appointed by the
Board of Directors of the Company to keep the books of account of the Fund
and/or compute the net asset value per share of the outstanding shares of the
Fund.
9. Records. The Custodian shall create and maintain all records
relating to its activities and obligations under this Agreement in such manner
as will meet the obligations of the Company under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. The Custodian shall also maintain records as directed by the Company
in connection with applicable federal and state tax laws and any other law or
administrative rules or procedures with may be applicable to the Company. With
respect to securities and cash deposited with a Securities System, a
sub-custodian or an agent of the Custodian, the Custodian shall identify on its
books all such securities and cash as belonging to the Fund. All such records
shall be the property of the Company and shall at all times during the regular
business hours of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Company. Such records shall be made
available to the Company for review by employees and agents of the Securities
and Exchange Commission. Custodian shall furnish to the Company, and its agents
as directed by the Company, as of the close of business on the last day of each
month a statement showing all transactions and entries for the account of the
Fund during that month, and all holdings as of month-end.
All records so maintained in connection with the performance of its
duties under this Agreement shall remain the property of the Company and, in the
event of termination of this Agreement, shall be delivered to the Company.
Subsequent to such delivery, and surviving the termination of this Agreement,
the Company shall provide the Custodian access to examine and photocopy such
records as the Custodian, in its discretion, deems necessary, for so long as
such records are retained by the Company.
10. Option of Company's Independent Accountant. The Custodian shall
provide to the Company's independent accountants the books and records of the
Fund's account with respect to its activities hereunder in connection with the
preparation of the Company's Form N-1A, and Form N-SAR or other annual reports
to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
11. Transfer Taxes. The Company shall pay or reimburse the Custodian
and any sub-custodian for any transfer taxes payable upon transfers resulting
from the termination of this Agreement. The Custodian shall, and shall use its
best efforts to cause any subcustodian to, execute such certificates in
connection with securities delivered to it or such sub-custodian under this
Agreement as may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such securities which may
be entitled to such exemption.
12. Compensation of Custodian. The Custodian shall be entitled to
reasonable compensation for its services and expenses as Custodian, as agreed
upon from time to time between the Company and the Custodian.
13. Responsibility of Custodian. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received by it or delivered by it pursuant to this Agreement and shall
be held harmless in acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement, but shall be
kept indemnified by and shall be without liability to the Company for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Company)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice.
The Company agrees to indemnify and hold harmless the Custodian, any
subcustodian or agent of the Custodian, or any nominees thereof from all taxes,
charges, expenses, assessments, claims and liabilities (including counsel fees)
incurred or assessed against any such entity in connection with the performance
of this Agreement, except normal out-of-pocket expenses associated with
securities trading activities and except such as may arise from such entity's
own negligent action, negligent failure to act or willful misconduct. The
Custodian is authorized to charge the account of the Fund for such items. In the
event of any advance of cash for any purpose made by the Custodian resulting
from orders or instructions of the Company, or in the event that the Custodian
or any nominee thereof shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Agreement, except such as may arise from such entity's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the Fund shall be security therefore.
The Custodian shall not be liable for any loss or damage to the Fund
resulting from participation in a securities depository unless such loss or
damage arises by reason of any negligence, misfeasance, or willful misconduct of
officers or employees of the Custodian, or from its failure to enforce
effectively such rights as it may have against any securities depository or from
use of a sub-custodian or agent. Anything in the foregoing to the contrary
notwithstanding, the Custodian shall exercise, in the performance of its
obligations undertaken or reasonably assumed with respect to this Agreement,
reasonable care, for which the Custodian shall be responsible to the same extent
as if it were performing such duties directly and, in the case of foreign
agents, holding such securities and cash in the United States. The Custodian
shall be responsible for the securities and cash held by or deposited with any
sub-custodian or agent to the same extent as if such securities and cash were
directly held by or deposited with the Custodian. The Custodian hereby agrees
that it shall indemnify and hold the Fund harmless from and against any loss
which shall occur as a result of the failure of a foreign subcustodian holding
the securities and cash to provide a level of safeguards for maintaining the
Fund's securities and cash not materially different from that provided by a
United States custodian holding such securities and cash in the United States.
It is also understood that the Custodian shall not have liability for loss
except by reason of the Custodian's negligence, fraud or willful misconduct, or
by reason of negligence, fraud or willful misconduct of any sub-custodian or
agent holding such securities or cash for the Fund.
The Custodian shall not be responsible for any loss of the Fund, if
such loss arises by reason of any cause or circumstances beyond the control of
the Custodian or any sub-custodian or agent acting on behalf of the Custodian,
including acts of civil or military authority, expropriation, national
emergency, Acts of God, insurrection, war, riots, or failure of transportation,
communication or power supply, or the failure of any person, firm or corporation
(other than the Custodian or any subcustodian or agent acting on behalf of the
Custodian) to perform any obligation if such failure results in any such loss.
14. Effective Period. Termination and Amendment. This Agreement shall
become effective as of its execution, shall continue in full force and effect
until terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after the date
of such delivery or mailing; provided, however, that the Custodian shall not act
under Section 2.8 or Section 3.1 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors of the Company has approved (a) in the case of Section 2.8, the use of
a particular Securities System as required in Rule 17f-4 under the Investment
Company Act of 1940, as amended, and (b) in the case of Section3.1, the use of
certain foreign banking institutions, foreign securities depositories and
foreign clearing agencies as required in Rule 17f-5 under the Investment Company
Act of 1940, as amended; provided further, however, that the Company shall not
amend or terminate this Agreement in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation; and
further provided, that the Company may at any time by action of its Board of
Directors (a) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (b) immediately terminate
this Agreement in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Company shall pay to the
Custodian such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
Any notice or other communication authorized or required by this
Agreement to be given to the parties shall be sufficiently given if addressed to
such party and mailed postage prepaid or delivered to it at its office at the
address set forth below:
In the case of the Company: VAM Institutional Funds, Inc.
90 South Seventh Street
Suite 4400
Minneapolis, Minnesota 55402
In the case of the Custodian: First Bank National Association
First Trust Center
180 East Fifth Street, 4th Floor
St. Paul, Minnesota 55101
Attn: Global Custody Division
15. Successor Custodian. If a successor custodian shall be appointed by
the Board of Directors of the Company, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities then held by it hereunder
and shall transfer to an account of the successor custodian all of the Fund's
securities held in a Securities System. If no such successor custodian shall be
appointed, the Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors of the Company, deliver at the office of the
Custodian and transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in the United States, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Agreement and to transfer to an account of
such successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Company to procure the certified copy of the vote referred to or
of the Board of Directors to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties, and
the provision of this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions, Amendment. In connection
with the operation of this Agreement, the Custodian and the Company may from
time to time agree on such provisions interpretive of or in addition to the
provisions of this Agreement as may in their joint opinion be consistent with
the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
Articles of Incorporation of the Company. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement. No provisions of this Agreement may be amended or
modified except by a written agreement executed by all parties hereto and
authorized or approved by the Board of Directors of the Company.
17. Minnesota Law to Apply. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with laws of the State of
Minnesota.
18. Prior Agreements, Non-Assignability of Agreement. This Agreement
supersedes and terminates, as of the date hereof, all prior agreements between
the Company and the Custodian relating to the custody of the Fund's assets. This
Agreement shall not be assignable by any party hereto; provided, however, that
any entity in to which the Company or the Custodian, as the case may be, may be
merged or converted or with which it may be consolidated, or any entity
succeeding to all or substantially all of the business of the Company or the
custody business of the Custodian, shall succeed to the respective rights and
shall assume the respective duties of the Company or the Custodian, as the case
may be, hereunder.
19. General. Nothing expressed or mentioned in or to be implied from
any provision of this Agreement is intended to, or shall be construed to give
any person or corporation other than the parties hereto, any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any covenant,
condition or provision herein contained, this Agreement and all of the
covenants, conditions and provisions hereof being intended to be and being for
the sole and exclusive benefit of the parties hereto and their respective
successors and assigns.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the ____ day of _________, 1995.
ATTEST VAM INSITUTIONAL FUNDS, INC.
______________________________ By: ______________________________
ATTEST FIRST BANK NATIONAL
ASSOCIATION
______________________________ By: ______________________________
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is made and entered into this 23rd day of January 1995,
by and between VAM Institutional Funds, Inc., a Minnesota corporation (the
"Company"), on behalf of each Fund of the Company represented by a series of
shares of common stock of the Company that adopts this Agreement (each, a "Fund"
and, collectively, the "Funds") (the Funds, together with the date each Fund
adopts this Agreement, are set forth in Exhibit A hereto, which shall be updated
from time to time to reflect additions, deletions or other changes thereto), and
Voyageur Fund Managers, Inc., a Minnesota corporation ("Voyageur").
1. DIVIDEND DISBURSING, ADMINISTRATIVE, ACCOUNTING AND TRANSFER AGENCY
SERVICES; COMPLIANCE SERVICES.
(a) The Company on behalf of each Fund hereby engages Voyageur, and
Voyageur hereby agrees, to provide to each Fund all dividend disbursing,
administrative and accounting services required by each Fund, including, without
limitation, the following:
(i) The calculation of net asset value per share at such times
and in such manner as specified in each Fund's current Prospectus and
Statement of Additional Information and at such other times as the
parties hereto may from time to time agree upon;
(ii) Upon the receipt of funds for the purchase of Fund shares
or the receipt of redemption requests with respect to Fund shares
outstanding, the calculation of the number of shares to be purchased or
redeemed, respectively;
(iii) Upon the Fund's distribution of dividends, (A) the
calculation of the amount of such dividends to be received per Fund
share, (B) the calculation of the number of additional Fund shares to
be received by each Fund shareholder, other than any shareholder who
has elected to receive such dividends in cash and (C) the mailing of
payments with respect to such dividends to shareholders who have
elected to receive such dividends in cash;
(iv) The provision of transfer agency services as described
below:
(1) Voyageur shall make original issues of shares of
each Fund in accordance with each Fund's current Prospectus
and Statement of Additional Information and with instructions
from the Company.
(2) Prior to the daily determination of net asset
value of each Fund in accordance with the each Fund's current
Prospectus and Statement of Additional Information, Voyageur
shall process all purchase orders received since the last
determination of each Fund's net asset value.
(3) Transfers of shares shall be registered and new
Fund share certificates shall be issued by Voyageur upon
surrender of properly endorsed outstanding Fund share
certificates with all necessary signature guarantees and
satisfactory evidence of compliance with all applicable laws
relating to the payment or collection of taxes.
(4) Voyageur may issue new Fund share certificates in
place of Fund share certificates represented to have been
lost, destroyed or stolen, upon receiving indemnity
satisfactory to Voyageur and may issue new Fund share
certificates in exchange for, and upon surrender of, mutilated
Fund share certificates.
(5) Voyageur will maintain stock registry records in
the usual form in which it will note the issuance, transfer
and redemption of Fund shares and the issuance and transfer of
Fund share certificates, and is also authorized to maintain an
account in which it will record the Fund shares and fractions
issued and outstanding from time to time for which issuance of
Fund share certificates is deferred.
(6) Voyageur will, in addition to the duties and
functions above-mentioned, perform the usual duties and
functions of a stock transfer agent for a registered
investment company.
(v) The creation and maintenance of such records relating
to the business of each Fund as each Fund may from time to time
reasonably request;
(vi) The preparation of tax forms, reports, notices, proxy
statements, proxies and other Fund shareholder communications, and the
mailing thereof to Fund shareholders; and
(vii) The provision of such other dividend disbursing,
administrative and accounting services as the parties hereto may from
time to time agree upon.
(b) The Company also hereby engages Voyageur to perform, and Voyageur
hereby agrees to perform, such regulatory reporting and compliance related
services and tasks for the Company or any Fund as the Company may reasonably
request. Without limiting the generality of the foregoing, Voyageur shall:
(i) Prepare or assist in the preparation of prospectuses,
statements of additional information and registration statements for
the Funds, and assure the timely filing of all required amendments
thereto.
(ii) Prepare such reports, applications and documents as may
be necessary to register the Funds' shares with state securities
authorities; monitor sales of Fund shares for compliance with state
securities laws; and file with the appropriate state securities
authorities the registration statement for each Fund and all amendments
thereto, required reports regarding sales and redemptions of Fund
shares and such other reports as may be necessary to register each Fund
and its shares with state securities authorities and keep such
registrations effective.
(iii) Develop and prepare communications to shareholders,
including each Fund's annual and semi-annual report to shareholders.
(iv) Obtain and keep in effect fidelity bonds and directors
and officers/errors and omissions insurance policies for the Funds in
accordance with the requirements of Rules 17g-1 and 17d-1(7) under the
Investment Company Act of 1940 as such bonds and policies are approved
by the Funds' Board of Directors.
(v) Prepare and file with the Securities and Exchange
Commission each Fund's semi-annual reports on Form N-SAR and all
required notices pursuant to Rule 24f-2 under the Investment Company
Act of 1940.
(vi) Prepare materials (including, but not limited to,
agendas, proposed resolutions and supporting materials) in connection
with meetings of the Company's Board of Directors;
(vii) Prepare or assist in the preparation of proxy and other
materials in connection with meetings of the shareholders of the
Company or any Fund;
(viii) Prepare and file tax returns for the Funds;
(ix) Concur with Fund counsel in connection with the
development and preparation of any of the foregoing; and
(x) Perform such other compliance related services and tasks
upon which the parties hereto may from time to time agree.
(c) Voyageur hereby acknowledges that all records necessary in the
operation of the Fund are the property of the Company, and in the event that a
transfer of any of the responsibilities set forth herein to someone other than
Voyageur should ever occur, Voyageur will promptly, and at its own cost, take
all steps necessary to segregate such records and deliver them to the Company.
2. COMPENSATION
(a) As compensation for the dividend disbursing, administrative,
accounting and compliance services to be provided by Voyageur hereunder, each
Fund shall pay to Voyageur a monthly fee as set forth in Exhibit A hereto, which
fee shall be paid to Voyageur not later than the fifth business day following
the end of each month in which said services were rendered. For purposes of
calculating each Fund's average daily net assets, as such term is used in this
Agreement, the Fund's net assets shall equal its total assets minus (i) its
total liabilities and (ii) its net orders receivable from dealers.
(b) In addition to the compensation provided for in Section 2(a) hereof
and as set forth in Exhibit A hereto, each Fund shall reimburse Voyageur for all
out-of-pocket expenses incurred by Voyageur in connection with its provision of
services hereunder, including, without limitation, postage, stationery and
mailing expenses. Said reimbursement shall be paid to Voyageur not later than
the fifth business day following the end of each month in which said expenses
were incurred.
(c) For purposes of calculating the compensation to be paid to Voyageur
pursuant to Section 2(a) above, "house accounts" with brokerage firms which hold
shares in a Fund will be treated as separate accounts for fee calculation
purposes (based upon the number of shareholder accounts within the "house
account"), where Voyageur's work in connection with servicing such house
accounts is substantially the same as if such accounts did not exist, and
Voyageur had to directly service the shareholder accounts underlying such house
accounts.
3. FREEDOM TO DEAL WITH THIRD PARTIES.
Voyageur shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.
4. EFFECTIVE DATE, DURATION, AMENDMENT AND TERMINATION OF AGREEMENT.
(a) The effective date of this Agreement with respect to each Fund
shall be the date set forth on Exhibit A hereto.
(b) Unless sooner terminated as hereinafter provided, this Agreement
shall continue in effect with respect to each Fund for a period more than two
years from the date of its execution but only as long as such continuance is
specifically approved at least annually by (i) the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of the
applicable Fund, and (ii) by the vote of a majority of the directors of the
Company who are not parties to this Agreement or "interested persons", as
defined in the Investment Company Act of 1940 (as amended, the "Act"), of the
Adviser or of the Company cast in person at a meeting called for the purpose of
voting on such approval.
(c) This Agreement may be terminated with respect to any Fund at any
time, without the payment of any penalty, by the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of
such Fund, or by Voyageur, upon 60 days' written notice to the other party.
(d) This agreement shall terminate automatically in the event of its
"assignment" (as defined in the Act) unless such assignment is approved in
advance by the Board of Directors, including a majority of the directors of the
Company who are not parties to this Agreement or "interested persons" (as
defined in the Act) of the Adviser or of the Company, and, if and to the extent
required by the Act, the approval of the shareholders of each Fund.
(e) No amendment to this Agreement shall be effective with respect to
any Fund until approved by the vote of a majority of the directors of the
Company who are not parties to this Agreement or "interested persons" (as
defined in the Act) of the Adviser or of the Company cast in person at a meeting
called for the purpose of voting on such approval and, if and to the extent
required by the Act, a majority of the outstanding voting securities of the
applicable Fund.
5. NOTICES.
Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.
6. INTERPRETATION; GOVERNING LAW.
This Agreement shall be subject to and interpreted in accordance with
all applicable provisions of law including, but not limited to, the Act and the
rules and regulations promulgated thereunder. To the extent that the provisions
herein contained conflict with any such applicable provisions of law, the latter
shall control. The laws of the State of Minnesota shall otherwise govern the
construction, validity and effect of this Agreement.
IN WITNESS WHEREOF, the Company and Voyageur have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
VAM INSTITUTIONAL FUNDS, INC.
By /s/
Its
VOYAGEUR FUND MANAGERS, INC.
By /s/
Its
EXHIBIT A
TO
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
VOYAGEUR FUND MANAGERS, INC.
AND
VAM INSTITUTIONAL FUNDS, INC.
<TABLE>
<CAPTION>
MONTHLY
SERVICE FEES
(as a % of average
FUND EFFECTIVE DATE daily net assets)
<S> <C> <C>
Series A--VAM Global Fixed Income Fund August 1, 1995 .012500%
Series B--VAM Short Government Agency Fund January 23, 1995 .008333%
Series C--VAM Intermediate Government Agency Fund January 23, 1995 .008333%
Series D--VAM Government Mortgage Fund January 23, 1995 .008333%
Series E--VAM Short Duration Total Return Fund January 23, 1995 .008333%
Series F--VAM Intermediate Duration Total Return Fund January 23, 1995 .008333%
Series G--VAM Intermediate Municipal Fund January 23, 1995 .008333%
</TABLE>
VAM INSTITUTIONAL FUNDS, INC.
SERVICE PLAN
FOR INSTITUTIONAL SERVICE CLASS SHARES
January 23, 1995
WHEREAS, VAM Institutional Funds, Inc. (the "Company") engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended:
WHEREAS, the Company currently offers its shares in six series, each of
which is a separate pool of assets with its own investment policies (the
"Funds") and each Fund's shares are divided into two separate classes, the
Institutional Class Shares and the Institutional Service Class Shares (the
"Service Shares");
WHEREAS, the Company, on behalf of the Service Shares of each Fund,
desires to adopt a Service Plan and the Board of Directors of the Company has
determined that there is a reasonable likelihood that adoption of this Service
Plan will benefit each Fund and its shareholders; and
WHEREAS, the Company, on behalf of the Service Shares of each Fund,
employs institutions (the "Service Organizations") to act as nominees and record
holders of Service Shares for their respective customers who are or may become
beneficial owners of such Service Shares (the "Customers") and to perform
certain account administration and shareholder liaison services with respect to
the Customers pursuant to Service Agreements between the Company on behalf of
the Service Shares of each Fund and such Service Organizations (the
"Agreements").
NOW, THEREFORE, the Company, on behalf of the Service Shares of each
Fund, hereby adopts this Service Plan (the "Plan") on the following terms and
conditions:
1. (a) The Company, on behalf of the Service Shares of each Fund, is
authorized to pay each Service Organization the monthly or quarterly service fee
specified in the Agreement with such Service Organization for administration,
personal and account maintenance services performed and expenses incurred by the
Service Organization in connection with such Fund's Service Shares. The fee paid
for such services during any one year shall not exceed .25% of the average daily
net asset value of the Service Shares of such Fund which are owned beneficially
by the Customers of such Service Organization during the period.
(b) Administration, personal and account maintenance services and
expenses for which a Service Organization may be compensated under this Plan
include, without limitation, receiving, aggregating and processing shareholder
orders; furnishing shareholder sub-accounting; providing and maintaining
elective shareholder services such as check writing and wire transfer services;
providing and maintaining pre-authorized investment plans; communicating
periodically with shareholders; acting as the sole shareholder of record and
nominee for shareholders; maintaining account records for shareholders;
answering questions and handling correspondence from shareholders about their
accounts; issuing confirmations for transactions by shareholders; and performing
similar account administrative services.
(c) Appropriate adjustments to payments made pursuant to clause (a)
of this paragraph 1 shall be made whenever necessary to ensure that no payment
is made by the Company on behalf of a Fund in excess of the applicable maximum
cap imposed on asset based, front-end and deferred sales charges by subsection
(d) of Section 26 of Article III of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
2. This Plan shall not take effect as to any Fund until the Plan,
together with any related agreements, has been approved for such Fund by votes
of a majority of both (a) the Board of Directors of the Company and (b) those
Directors of the Company who are not "interested persons" of the Company and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it (the "non-interested Directors") cast in person at
a meeting (or meetings) called for the purpose of voting on the Plan and such
related agreements.
3. After approval as set forth in paragraph 2, this Plan shall take
effect. The Plan shall continue in full force and effect for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in paragraph 2.
4. The President, Vice President, Treasurer or any Assistant Treasurer
of the Company shall provide the Board of Directors of the Company and the Board
shall review, at least quarterly, a written report of services performed by and
fees paid to each Service Organization under the Agreements and this Plan.
5. This Plan may be terminated as to the Service Shares of any Fund at
any time by vote of the Directors of the Company, or by vote of a majority of
the non-interested Directors.
6. No material amendments to the Plan shall be made unless approved in
the manner provided in paragraph 2 hereof.
7. While the Plan is in effect the selection and nomination of the
non-interested Directors of the Company shall be committed to the discretion of
the non-interested Directors.
8. The Company shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 4 hereof, for a period of
not less than six years from the date of the Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
VAM Institutional Funds, Inc.
90 South Seventh Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
We have acted as counsel to VAM Institutional Funds, Inc., a Minnesota
corporation (the "Fund"), in connection with a Registration Statement on Form
N-1A (File No. 2-95930) (the "Registration Statement") relating to the sale by
the Fund of an indefinite number of the Series B, Series C, Series D, Series E,
Series F and Series G Institutional Class and Institutional Service Class shares
of common stock of the Fund, par value $.01 per share (the "Series B through
Series G Common Shares").
We have examined such documents and have reviewed such questions of law
as we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Fund, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Fund and of public officials. We have also
assumed that the Series B through Series G Common Shares will be issued and sold
as described in the Registration Statement.
Based on the foregoing, we are of the opinion that the Series B through
Series G Common Shares to be sold by the Fund pursuant to the Registration
Statement have been duly authorized by all requisite corporate action and, upon
issuance, delivery and payment therefore as described in the Registration
Statement, will be validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"Legal Counsel" on the back cover of the Prospectus constituting part of the
Registration Statement.
Dated: January 20, 1995
Very truly yours,
KLP
VAM Institutional Funds, Inc.
90 South Seventh Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
We have acted as counsel to VAM Institutional Funds, Inc., a Minnesota
corporation (the "Fund"), in connection with a Registration Statement on Form
N-1A (File No. 2-95930) (the "Registration Statement") relating to the sale by
the Fund of an indefinite number of the Series A Institutional Class shares of
common stock of the Fund, par value $.01 per share.
We have examined such documents and have reviewed such questions of law
as we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Fund, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Fund and of public officials. We have also
assumed that the Series A Common Shares will be issued and sold as described in
the Registration Statement.
Based on the foregoing, we are of the opinion that the Series A Common
Shares to be sold by the Fund pursuant to the Registration Statement have been
duly authorized by all requisite corporate action and, upon issuance, delivery
and payment therefore as described in the Registration Statement, will be
validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"Legal Counsel" on the back cover of the Prospectus constituting part of the
Registration Statement.
Dated: July 31, 1995
Very truly yours,
KLP
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
VAM Institutional Funds, Inc.:
We consent to the use of our report included herein and the reference to our
Firm under the heading "ADDITIONAL INFORMATION - Custodian; Counsel; Independent
Auditors" in Part B of the Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 26, 1995
LETTER OF INVESTMENT INTENT
January 20, 1995
VAM Institutional Funds, Inc.
90 South Seventh Street
Minneapolis, MN 55402
Dear Sir/Madam:
In connection with the purchase by Voyageur Fund Managers, Inc. (the
"Purchaser") of 10,000 Series B Institutional Class Shares, 100 Series B Service
Class Shares, 50 Series C Institutional Class Shares, 50 Series C Service Class
Shares, 50 Series D Institutional Class Shares, 50 Series D Service Class
Shares, 50 Series E Institutional Class Shares, 50 Series E Service Class
Shares, 50 Series F Institutional Class Shares, 50 Series F Service Class
Shares, 50 Series G Institutional Class Shares and 50 Series G Service Class
Shares of VAM Institutional Funds, Inc. (the "Shares"), the Purchaser hereby
represents that it is acquiring the Shares for investment with no intention of
reselling or otherwise distributing the Shares. The Purchaser hereby further
agrees that any transfer of any of the Shares or any interest in it shall be
subject to the following conditions:
1. The Purchaser shall furnish you and counsel satisfactory to
you, prior to the time of transfer, a written description of the
proposed transfer specifying its nature and consequence and giving the
name of the proposed transferee.
2. You shall have obtained from your counsel a written opinion
stating whether in the opinion of such counsel the proposed transfer
may be effected without registration under the Securities Act of 1933.
If such opinion states that such transfer may be so effected, the
Purchaser shall then be entitled to transfer the Shares in accordance
with the terms specified in its description of the transaction to you.
If such opinion states that the proposed transfer may not be so
effected, the Purchaser will not be entitled to transfer its Shares
unless such Shares are registered.
The Purchaser hereby authorizes you to take such action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of Shares, including the imposition of a
requirement that any transferee of the Shares sign a letter agreement similar to
this one.
Very truly yours,
VOYAGEUR FUND MANAGERS, INC.
By __________________________
Its ________________________
VOYAGEUR FUNDS, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR MUTUAL FUNDS IV, INC.
POWER OF ATTORNEY
The undersigned, duly elected directors, trustees and/or officers of
Voyageur Funds, Inc., Voyageur Tax Free Funds, Inc., Voyageur Insured Funds,
Inc., Voyageur Intermediate Tax Free Funds, Inc., Voyageur Investment Trust,
Voyageur Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds
II, Inc., Voyageur Mutual Funds III, Inc. and Voyageur Mutual Funds IV, Inc.
(collectively, the "Funds") appoint John G. Taft, Kenneth R. Larsen, Theodore E.
Jessen and Thomas J. Abood, or any one of them, on their behalf as directors,
trustees and/or officers of the Funds, as attorney-in-fact for the purpose of
signing their names and filing with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary, notifications,
registration statements and other filings, and any and all amendments to said
notifications, registration statements and other filings, and all exhibits
thereto and other documents, for the purpose of registering the Funds under the
Investment Company Act of 1940, registering shares of common stock of the Funds
under the Securities Act of 1933 and filing all other documents as may be
required by any federal or state securities commission or otherwise.
<TABLE>
<CAPTION>
Registrant File No. Registrant File No.
<S> <C> <C> <C>
Voyageur Funds, Inc. 33-16270 Voyageur Investment Trust II 33-75112
Voyageur Tax Free Funds, Inc. 2-87910 Voyageur Mutual Funds, Inc. 33-63238
Voyageur Insured Funds, Inc. 33-11235 Voyageur Mutual Funds II, Inc. 33-11495
Voyageur Intermediate Tax Free Funds, Inc 2-99266 Voyageur Mutual Funds III, Inc. 2-95928
Voyageur Investment Trust 33-42827 Voyageur Mutual Funds IV, Inc. 2-95930
</TABLE>
<TABLE>
<S> <C>
John G. Taft Clarence G. Frame
President of all Funds Director/Trustee of all Funds
(except Voyageur Mutual Funds II, Inc.)
Kenneth R. Larsen James W. Nelson
Treasurer (Principal Financial and Director/Trustee of all Funds
Accounting Officer of all Funds)
Robert J. Odegard
Andrew M. McCullagh, Jr. Director/Trustee of all Funds
President of Voyageur Mutual Funds II, Inc.
Richard F. McNamara
Thomas F. Madison Director/Trustee of all Funds
Director/Trustee of all Funds
</TABLE>
Dated: January 24, 1995
