As filed with the Securities and Exchange Commission on September 1, 1995
File Nos. 2-95928
811-4547
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. 25
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 25
(Check appropriate box or boxes.)
VOYAGEUR MUTUAL FUNDS III, 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:
Michael J. Radmer, Esq.
Dorsey & Whitney
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 (date) pursuant to paragraph (b) of Rule 485
75 days after filing pursuant to paragraph (a) of Rule 485
on (specify 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 15,
1995.
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
(VOYAGEUR MUTUAL FUNDS III, INC.)
Item No. of
Form N-1A Caption in Prospectus
1 Cover Page
2 Fees and Fund Expenses
3 Financial Highlights
4 Investment Objectives and Policies; Risk Factors and
Special Considerations; General Information
5 Management; General Information
6 Distributions to Shareholders and Taxes; General
Information
7 How to Purchase Shares; Management; Determination of Net
Asset Value
8 How to Sell Shares; Reinstatement Privilege; Exchange
Privilege
9 Not Applicable
Caption in Statement of Additional Information
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Policies and Restrictions
14 Directors and Executive Officers of the Company
15 Directors and Executive Officers of the Company;
Additional Information
16 Directors and Executive Officers of the Company; The
Underwriter; Advisory, Sub-Advisory and Administrative
Services Agreements; Expenses; Distribution Expenses;
and Brokerage
17 The Underwriter; Advisory, Sub-Advisory and
Administrative Services Agreements; Expenses;
Distribution Expenses; and Brokerage
18 Not Applicable
19 Special Purchase Plans; Monthly Cash Withdrawal Plan;
Net Asset Value and Public Offering Price
20 Distributions to Shareholders and Taxes
21 The Underwriter; Advisory, Sub-Advisory and
Administrative Services Agreements; Expenses;
Distribution Expenses; and Brokerage
22 Calculation of Performance Data
23 Additional Information
EQUITY FUNDS
[LOGO]
VOYAGEUR GROWTH AND INCOME FUND
VOYAGEUR GROWTH STOCK FUND
VOYAGEUR INTERNATIONAL EQUITY FUND
VOYAGEUR AGGRESSIVE GROWTH FUND
TABLE OF CONTENTS
2 Purchase Information
3 Fees and Fund Expenses
4 Financial Highlights
5 Investment Objectives and Policies
14 Risk Factors and Special Considerations
16 How to Purchase Shares
21 Retirement Plans
21 How to Sell Shares
23 Reinstatement Privilege
23 Exchange Privilege
24 Management
27 Determination of Net Asset Value
28 Distributions to Shareholders and Taxes
29 Investment Performance
30 General Information
PROSPECTUS
Dated September 1, 1995
Voyageur Growth and Income Fund ("Growth and Income Fund"), Voyageur Growth
Stock Fund ("Growth Stock Fund"), Voyageur International Equity Fund
("International Equity Fund") and Voyageur Aggressive Growth Fund ("Aggressive
Growth Fund") (together the foregoing are referred to herein as the "Funds") are
series of Voyageur Mutual Funds III, Inc. (the "Company"), an open-end
diversified management investment company commonly referred to as a mutual fund.
Each Fund offers its shares in three classes: Class A, Class B and Class C. Each
class is sold pursuant to different sales arrangements and bears different
expenses.
Growth and Income Fund's investment objective is growth of capital with income
as a secondary objective. It invests primarily in a broadly diversified
portfolio of common stocks and other equity-type securities (such as preferred
stocks, securities convertible into or exchangeable for common stocks, and
warrants or rights to purchase common stocks). Growth Stock Fund's investment
objective is long-term capital appreciation through investment in equity
securities diversified among individual companies and industries. International
Equity Fund's investment objective is to achieve a high total return consistent
with reasonable risk, by investing primarily in a diversified portfolio of
equity securities of companies located in countries outside the United States
and Canada. Aggressive Growth Fund's investment objective is long-term capital
appreciation which the Fund attempts to achieve by investing primarily in equity
securities of companies which Voyageur believes have the potential for high
earnings growth. There is no assurance that any Fund's investment objective will
be achieved. Voyageur Fund Managers, Inc. ("Voyageur" or the "Adviser") serves
as investment adviser for the Funds. Voyageur employs Segall Bryant & Hamill
(the "Sub-Adviser"), a Chicago-based investment manager and an affiliate of
Voyageur as Growth and Income Fund's Sub-Adviser and Murray Johnstone
International Ltd. (the "Sub-Adviser") as International Equity Fund's
Sub-Adviser.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. AN
INVESTMENT IN ANY OF THE FUNDS INVOLVES CERTAIN RISKS AND REQUIRES CONSIDERATION
OF SUCH RISKS. IN ADDITION, AN INVESTMENT IN INTERNATIONAL EQUITY FUND INVOLVES
CERTAIN RISKS AND REQUIRES CONSIDERATION OF FACTORS NOT TYPICALLY ASSOCIATED
WITH INVESTMENT IN SECURITIES OF UNITED STATES ISSUERS. SEE "RISK FACTORS AND
SPECIAL CONSIDERATIONS."
This Prospectus sets forth certain information about the Funds that a
prospective investor ought to know before investing. The Funds have filed a
combined Statement of Additional Information (dated September 1, 1995) with the
Securities and Exchange Commission. The Statement of Additional Information is
available free of charge from the Funds by telephone and at the mailing address
below and is incorporated by reference into this Prospectus in accordance with
the Commission's rules.
Voyageur Growth and Income Fund Voyageur Growth Stock Fund
Voyageur International Equity Fund Voyageur Aggressive Growth Fund
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.
PURCHASE INFORMATION
The Funds offer investors the choice among three classes of shares which have
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances.
CLASS A SHARES
An investor who purchases Class A shares pays a sales charge at the time of
purchase. As a result, Class A shares are not subject to any charges when they
are redeemed (except for sales at net asset value in excess of $1 million which
carry no initial sales charge and which are subject to a contingent deferred
sales charge). The initial sales charge may be reduced or waived for certain
purchases. Class A shares are subject to a Rule 12b-1 fee payable at an annual
rate of .25% of the Fund's average daily net assets attributable to Class A
shares. See "How to Purchase Shares -- Class A Shares."
CLASS B SHARES
Class B shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 4% if redeemed within six years of
purchase. Class B shares are also subject to a higher Rule 12b-1 fee than Class
A shares. The Rule 12b-1 fee for Class B shares will be paid at an annual rate
of 1% of a Fund's average daily net assets attributable to Class B shares.
Class B shares will automatically convert to Class A shares at net asset value
approximately eight years after purchase. Class B shares provide an investor the
benefit of putting all of the investor's dollars to work from the time the
investment is made but until conversion will have a higher expense ratio and pay
lower dividends than Class A shares due to the higher Rule 12b-1 fee. See "How
to Purchase Shares -Class B Shares."
CLASS C SHARES
Class C shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge of 1% if redeemed within one year of purchase.
Class C shares are also subject to a higher Rule 12b-1 fee than Class A shares.
The Rule 12b-1 fee for Class C shares will be paid at an annual rate of 1% of a
Fund's average daily net assets attributable to Class C shares. Class C shares
provide an investor the benefit of putting all of the investor's dollars to work
from the time the investment is made, but will have a higher expense ratio and
pay lower dividends than Class A shares due to the higher Rule 12b-1 fee. See
"How to Purchase Shares -- Class C Shares." Class C shares do not convert to any
other class of shares.
The decision as to which class of shares provides a more suitable investment for
an investor depends on a number of factors, including the amount and intended
length of the investment. Investors making investments that qualify for reduced
sales charges might consider Class A shares. Other investors might consider
Class B or Class C shares because all of the purchase price is invested
immediately. Voyageur will treat orders for Class B shares for $250,000 or more
as orders for Class A shares or declined. Sales personnel may receive different
compensation depending on which class of shares they sell.
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.
FEES AND FUND EXPENSES
The purpose of the table below is to assist an investor in understanding the
various costs and expenses that a shareholder will bear directly or indirectly
in connection with an investment in a Fund.
<TABLE>
<CAPTION>
Shareholder Transaction
Expenses
Maximum Total Fund
CDSC Operating
Maximum Imposed on Annual Fund Operating Expenses Expenses Example of Expenses: An investor
Front End Redemptions (as a Percentage of Average Without would pay the following dollar
Sales Load as a % of Net Assets) After Fee Waivers Voluntary amount of expenses on a
Imposed on Original and Reimbursement Arrangements Waivers, $1,000 investment assuming a
Purchases Purchase Price Reimburse- 5% annual return and redemption
as a % of or Redemption Rule Total Fund ments and at the end of each period.
Offering Proceeds, as Management 12b-1 Other Operating Expense
Price Applicable Fee Fees Expenses Expenses Reductions[4]1 Year 3 Years 5 Years 10 Years
GROWTH AND INCOME FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 4.75% 1.00%[2] 0.75% 0.25% 0.75% 1.75% 2.97% $64 $100 $ -- $ --
Class B N/A[1] 4.00 0.75 1.00 0.75 2.50 3.50 65[+] 108[+] -- --
Class C N/A[1] 1.00[3] 0.75 1.00 0.75 2.50 3.50 35[+] 78 -- --
GROWTH STOCK FUND
Class A 4.75 1.00[2] 1.00 0.25 0.40 1.65 1.99 63 97 133 234
Class B N/A[1] 4.00 1.00 1.00 0.40 2.40 2.74 64[+] 105[+] 148[+] 255
Class C N/A[1] 1.00[3] 1.00 1.00 0.40 2.40 2.74 34[+] 75 128 274
INTERNATIONAL EQUITY FUND
Class A 4.75 1.00[2] 1.00 0.25 0.75 2.00 2.97 67 107 150 269
Class B N/A[1] 4.00 1.00 1.00 0.75 2.75 3.50 68[+] 115[+] 165[+] 290
Class C N/A[1] 1.00[3] 1.00 1.00 0.75 2.75 3.50 38[+] 85 145 308
AGGRESSIVE GROWTH FUND
Class A 4.75 1.00[2] 1.00 0.25 0.50 1.75 2.97 64 100 138 244
Class B N/A[1] 4.00 1.00 1.00 0.50 2.50 3.50 65[+] 108[+] 153[+] 265
Class C N/A[1] 1.00[3] 1.00 1.00 0.50 2.50 3.50 35[+] 78 133 284
</TABLE>
[1]Class B and Class C shares are sold without a front end sales charge, but
their Rule 12b-1 fees may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front end sales charges.
[2]A contingent deferred sales charge of up to 1% is imposed on certain
redemptions of Class A shares that were purchased without an initial sales
charge as part of an investment of $1 million or more. See "How to Purchase
Shares -- Class A Shares -- Front End Sales Charge Alternative."
[3]A contingent deferred sales charge of 1% is imposed on rdemptions of
Class C shares within one year of purchase.
[4]Up to the most restrictive state limitation in effect.
[+]Class B and Class C share expenses would be lower assuming no redemption at
the end of the period.
THE EXAMPLES CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Such information has been restated to reflect anticipated voluntary
expense reimbursements during fiscal 1996. After April 30, 1996 (April 30, 1997
with respect to Growth Stock Fund), such expense reimbursements may be
discontinued or modified by Voyageur and the Underwriter in their sole
discretion. For the fiscal period ended April 30, 1995, Voyageur and the
Underwriter voluntarily waived certain fees and absorbed certain expenses of
each Fund then in existence (except Growth Stock Fund). Absent such fee and
expense waivers, Total Fund Operating Expenses for such period would be
equivalent to the corresponding percentages disclosed under the column "Ratio of
Expenses to Average Net Assets Assuming No Voluntary Waivers" in the section
"Financial Highlights."
FINANCIAL HIGHLIGHTS
The following table shows certain per share data and selected information for a
share of capital stock outstanding during the indicated periods for each Fund.
This information has been audited by KPMG Peat Marwick LLP, independent
auditors, and should be read in conjunction with the financial statements of
each Fund contained in its annual report. An annual report of each Fund is
available without charge by contacting the Funds at 800-525-6584. In addition to
financial statements, the annual reports contain further information about
performance of the Funds. Per share data is not presented for all classes since
not all classes of shares were outstanding during the periods presented below.
No information is presented for Growth and Income Fund since it had not
commenced operations.
<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
Net
Realized Dividends
Net Asset Net and from Distrib- Net
Value Invest- Unrealized Net utions Asset Total
Beginning ment Gains Invest- from Value Invest-
of Income (Loss) on ment Capital End of ment
Voyageur Funds Period (Loss) Securities Income Gains Period Return[4]
GROWTH STOCK FUND[6]
<S> <C> <C> <C> <C> <C> <C> <C>
4/30/95 $17.51 $0.15 $2.77 ($0.13) ($0.39) $19.91 17.04%
4/30/94 17.81 0.07 (0.16) (0.06) (0.15) 17.51 (0.52)
4/30/93 23.81 0.05 0.22 -- (6.27) 17.81 1.51
4/30/92 19.36 (0.18) 4.81 -- (0.18) 23.81 23.86
4/30/91[3] 18.85 (0.11) 3.40 -- (2.78) 19.36 20.51
4/30/90 19.39 (0.08) 1.29 -- (1.75) 18.85 6.09
4/30/89 16.10 (0.15) 3.51 -- (0.07) 19.39 20.92
4/30/88 17.46 (0.13) (0.84) -- (0.39) 16.10 (5.33)
4/30/87 13.36 (0.07) 4.24 (0.05) (0.02) 17.46 31.37
4/30/86 10.23 0.18 3.11 (0.16) -- 13.36 32.19
International Equity Fund[5]
Class A - 4/30/95[1] 10.00 (0.05) (0.53) -- -- 9.42 (5.80)
Class C - 4/30/95[1] 9.99 (0.11) (0.52) -- -- 9.36 (6.31)
AGGRESSIVE GROWTH FUND[5]
Class A - 4/30/95[1] 10.00 (0.09) 0.49 -- -- 10.40 4.00
Class C - 4/30/95[1] 10.00 (0.16) 0.49 -- -- 10.33 3.30
[table continued]
Ratios/Supplemental Data
Ratio of
Expenses
to Average
Ratio Daily Net
of Net Assets Assuming
Net Ratio of Investment No Voluntary
Assets Expenses Income Waivers
End of to (Loss) Portfolio Reimbursements
Period Average to Average Turnover and Expense
Voyageur Funds (000s) Net Assets Net Assets Rate Reductions[7]
GROWTH STOCK FUND[6]
4/30/95 $23,651 1.90% 0.75% 21.80% 1.99%
4/30/94 28,518 1.90 0.40 34.15 2.13
4/30/93 26,784 1.90 0.26 16.51 2.70
4/30/92 19,351 2.25 (0.76) 142.63 2.86
4/30/91[3] 11,400 2.36 (0.67) 128.17 2.86
4/30/90 10,331 2.31 (0.66) 115.12 2.86
4/30/89 9,183 2.42 (0.69) 31.73 3.00
4/30/88 9,706 2.52 (0.76) 57.07 3.00
4/30/87 10,083 3.00 (0.84) 64.23 3.00
4/30/86 1,903 0.02[2] 3.45[2] 12.95 3.00
INTERNATIONAL EQUITY FUND[5]
Class A - 4/30/95[1] 2,009 1.99[2] (0.55)[2] 92.10 2.97[2]
Class C - 4/30/95[1] 20 2.74[2] (1.36)[2] 92.10 3.50[2]
AGGRESSIVE GROWTH FUND[5]
Class A - 4/30/95[1] 2,189 1.74[2] (1.21)[2] 88.30 2.97[2]
Class C - 4/30/95[1] 128 2.40[2] (1.80)[2] 88.30 3.50[2]
</TABLE>
Notes to Financial Highlights
[1] The information is for the period from each Fund's commencement of
operations to the Fund's year end. The classes of each Fund commenced
operations on the following dates:
International Equity Fund
Class A May 16, 1994
Class C May 20, 1994
Aggressive Growth Fund
Class A May 16, 1994
Class C May 20, 1994
[2] Adjusted to an annual basis.
[3] Effective September 1, 1990, Voyageur replaced Investment Advisers, Inc. as
the investment adviser and Wilke/Thompson Capital Management began acting
as Growth Stock Fund's sub-investment adviser until January 1, 1992 when
Voyageur became the sole investment adviser to the Fund.
[4] Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
[5] Per share amounts are presented based upon average fund shares outstanding.
[6] Effective April 30, 1995, Voyageur assumed responsibility for Aggressive
Growth Fund's investment management replacing George D. Bjurman, the Fund's
sub-adviser.
[7] Up to the most restrictive state limitation in effect.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
Growth and Income Fund
Growth and Income Fund's investment objective is growth of capital with income
as a secondary objective which the Fund attempts to achieve by investing
primarily in common stocks, convertible securities and other equity type
investments.
Growth Stock Fund
Growth Stock Fund has an objective of long-term capital appreciation. Growth
Stock Fund seeks to achieve its objective by investing in equity securities
diversified among individual companies and industries.
International Equity Fund
International Equity Fund's investment objective is to provide a high total
return consistent with reasonable risk by investing primarily in a diversified
portfolio of equity securities of companies in countries located outside the
United States and Canada.
Aggressive Growth Fund
Aggressive Growth Fund's investment objective is long-term capital appreciation
which the Fund attempts to achieve by investing primarily in equity securities
of companies which Voyageur believes have the potential for high earnings
growth. Although the Fund, in seeking its objective, may receive current income
from dividends and interest, income is only an incidental consideration in the
selection of the Fund's investments.
No assurance can be given that any Fund will be able to achieve its
investment objective.
INVESTMENT POLICIES
Growth and Income Fund
Segall Bryant & Hamill, Growth and Income Fund's Sub-Adviser, will attempt to
achieve the Fund's investment objective by investing primarily (at least 65% of
its total assets) in common stocks and other securities convertible to common
stocks (including preferred stocks and debentures). The Fund may also invest up
to 35% of total assets in debt securities. The Fund's portfolio includes
securities that offer income potential in addition to growth of capital and it
is designed to provide more dividend income than a portfolio focused exclusively
on growth.
Growth and Income Fund invests primarily in well-established companies. Although
Growth and Income Fund may invest in a broad range of securities, normally it
seeks to limit volatility by investing at least 65% of its total assets in the
equity securities of companies having market capitalizations in excess of $1
billion. The securities of such companies are believed by the Sub-Adviser to be
generally less volatile than those of companies with smaller capitalizations
because companies with larger capitalizations tend to be more established, with
a reputation for quality management, and tend to have broader, more highly
diversified product lines, broader and deeper resources and easier access to
credit.
Growth Stock Fund
In seeking to achieve its investment objective, Growth Stock Fund's policy is to
invest under normal market conditions not less than 80% of its total assets in
common stocks which Voyageur believes offer the potential for long-term capital
appreciation. Some of the factors Voyageur will consider in making the Fund's
investments are increasing demand for a company's products or services, the
belief that a company's securities are temporarily undervalued, the development
of new or improved products or services, the probability of increased operating
efficiencies, changes in management, emphasis on research and development,
cyclical conditions, or possible mergers or acquisitions. Growth Stock Fund
anticipates that, in normal market conditions, at least 75% of the Fund's
investments in common stocks will have received one of the two highest earnings
and dividend ratings (A+ or A) assigned by Standard & Poor's Ratings Group
("Standard & Poor's"). Growth Stock Fund also may invest up to 20% of its total
assets in preferred stocks and corporate bonds if they are accompanied by
warrants or are convertible into common stocks.
International Equity Fund
International Equity Fund will invest primarily (under normal circumstances, at
least 65% of its total assets) in common stocks of established foreign companies
believed by Murray Johnstone Ltd., the Fund's Sub-Adviser, to have potential for
capital growth, income or both. International Equity Fund may invest up to 35%
of its total assets in any other type of security including, but not limited to,
convertible securities, preferred stock, bonds, notes and other debt securities
of companies (including Euro-currency instruments and securities) or of any
international agency (such as the World Bank, Asian Development Bank or
Inter-American Development Bank) or obligations of domestic or foreign
governments and their political subdivisions and in foreign currency
transactions.
International Equity Fund will make investments in various countries. Under
normal circumstances, at least 65% of International Equity Fund's total assets
will be invested in the securities of issuers in no less than three countries.
International Equity Fund may, from time to time, have more than 25% of its
assets invested in any major industrial or developed country which in the view
of the Sub-Adviser poses no unique investment risk. The Sub-Adviser considers an
investment in a given foreign country to have "no unique investment risk" if
International Equity Fund's investment in that country is not disproportionate
to the relative size of the country's market versus the Morgan Stanley Capital
International Europe, Australia and Far East Index (EAFE) or Morgan Stanley
Capital International World Index ("World Index") or other comparable index, and
if the capital markets in that country are mature, and of sufficient liquidity
and depth. Under exceptional economic or market conditions, International Equity
Fund may invest substantially all of its assets in only one or two countries. In
determining the appropriate distribution of investments among various countries
and geographic regions, the Sub-Adviser ordinarily will consider the following
factors: prospects of relative economic growth among foreign countries; expected
levels of inflation; relative price levels of the various capital markets;
government policies influencing business conditions; the outlook for currency
relationships; and the range of individual investment opportunities available to
the global investor. International Equity Fund may make investments in
developing countries, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems which may be less stable. A country is considered by the Sub-Adviser to
be a developing country if it is not included in the World Index. Examples of
developing countries would currently include countries such as Argentina,
Brazil, Chile, India, Indonesia, Korea, Mexico, Malaysia, Taiwan and Turkey.
Investing in developing countries often involves risk of high inflation, high
sensitivity to commodity prices, and government ownership of the biggest
industries in that country. Investing in developing countries also involves a
higher probability of occurrence of the risks of investing in foreign securities
in general, including but not limited to, less financial information available,
relatively illiquid markets, and the possibility of adverse government action.
See "--Risk Factors and Special Considerations."
No more than 30% of International Equity Fund's net assets may be invested in
the securities of issuers located in developing countries. In the past, markets
of developing countries have been more volatile than the markets of developed
countries; however, such markets often have provided higher long-term rates of
return to investors. The Sub-Adviser believes that these characteristics may be
expected to continue in the future. Although International Equity Fund invests
primarily in equity securities, it may invest up to 35% of its net assets in
debt securities, excluding money market instruments.
The Sub-Adviser may from time to time invest in the debt instruments of foreign
sovereign governments. These may include short-term treasury bills, notes and
long-term bonds, and will only be considered for investment by International
Equity Fund if they have the full guarantee of the government in question. The
Sub-Adviser will not invest in foreign government securities with a rating by
Moody's Investors Service Inc. ("Moody's") lower than AA3.
Aggressive Growth Fund
Aggressive Growth Fund seeks to achieve its investment objective by investing
primarily (at least 65% of its total assets) in equity securities (including
covertible securities) of companies which Voyageur believes have the potential
for high earnings growth and which are U.S. companies with stock market
capitalizations of at least $300 million. Aggressive Growth Fund has been
designed to provide investors with potentially greater long-term rewards than
provided by an investment in a fund that seeks capital appreciation from common
stocks with more established earnings histories.
Aggressive Growth Fund will invest in equity securities of companies Voyageur
believes to be undervalued and to have the potential for high earnings growth.
Companies in which Aggressive Growth Fund invests generally will meet one or
more of the following criteria: high historical earnings-per-share ("EPS")
growth; high projected future EPS growth; an increase in research analyst
earnings estimates; attractive relative price to earnings ratios; and high
relative discounted cash flows. In selecting Aggressive Growth Fund's
investments, Voyageur also focuses on companies with capable management teams,
strong industry positions, sound capital structures, high returns on equity,
high reinvestment rates and conservative financial accounting policies.
In pursuing its objective, Aggressive Growth Fund anticipates that it will
invest substantially all, and under normal conditions not less than 65%, of its
assets in common stocks, preferred stocks, convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks and warrants or
rights. To the extent that Aggressive Growth Fund invests in convertible debt
securities, those securities will be purchased on the basis of their equity
characteristics, and ratings, if any, of those securities will not be an
important factor in their selection.
Up to 10% of Aggressive Growth Fund's assets may be invested in foreign
securities. Aggressive Growth Fund (as well as Growth and Income, Growth Stock
and International Equity Funds) may also invest in securities of foreign issuers
in the form of American Depositary Receipts ("ADRs"), which are U.S.
dollar-denominated receipts, typically issued by domestic banks or trust
companies, that represent the deposit with those entities of securities of a
foreign issuer, and Global Depositary Receipts ("GDRs"), which generally are
issued by foreign banks and evidence ownership of either foreign or domestic
securities. ADRs are publicly traded on exchanges or over-the-counter in the
United States and are issued through "sponsored" or "unsponsored" arrangements.
In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay
some or all of the depositary's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depositary's
transaction fees are paid directly by the ADR holders. In addition, less
information is available in the United States about an unsponsored ADR than
about a sponsored ADR. The Funds may invest in ADRs through both sponsored and
unsponsored arrangements.
At no time will the investments of Aggressive Growth Fund in bank obligations,
including time deposits, exceed 25% of the value of Aggressive Growth Fund's
assets.
INVESTMENT TECHNIQUES AND STRATEGIES
Except as provided below and in the Statement of Additional Information, each
Fund may engage in a number of investment techniques and strategies. A Fund is
under no obligation to use any of the techniques or strategies at any given time
or under any particular economic condition. In addition, no assurance can be
given that the use of any practice will have its intended result or that the use
of any practice is, or will be, available to a Fund.
Debt Securities
In pursuing its investment objective, each Fund may invest up to 35% of its
total assets (20% for Growth Stock Fund) in debt securities of corporate and
governmental issuers. The risks inherent in debt securities depend primarily on
the term and quality of the obligations in a Fund's portfolio as well as on
market conditions. A decline in the prevailing levels of interest rates
generally increases the value of debt securities, while an increase in rates
usually reduces the value of those securities.
Investments in debt securities by Growth and Income Fund, Growth Stock Fund and
Aggressive Growth Fund are limited to those that are within the four highest
grades (generally referred to as "investment grade") assigned by a nationally
recognized statistical rating organization or, if unrated, are deemed to be of
comparable quality by the Adviser. International Equity Fund may invest up to 5%
of its net assets in debt securities which may be rated lower than AAA by
Standard & Poor's or Aaa by Moody's, but in no event lower than BBB or Baa, or,
if unrated, then determined by the Sub-Adviser to be of equivalent credit
quality. If a change in credit quality after acquisition by a Fund causes a
security to no longer be investment grade, the Fund will dispose of the
security, if necessary, to keep its holdings to 5% or less of the Fund's net
assets. See "Investment Policies and Restrictions -Credit Quality" in the
Statement of Additional Information. Debt securities rated Baa by Moody's or BBB
by Standard & Poor's, although considered investment grade, have speculative
characteristics and changes in economic circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade bonds. The Sub-Adviser does not intend to purchase any bonds
for International Equity Fund rated lower than AAA unless the instrument
provides an opportunity to invest in an attractive company in which an equity
investment is not currently available or desirable.
When a Fund's Adviser or Sub-Adviser determines that adverse market or economic
conditions exist and considers a temporary defensive position advisable, the
Fund may invest without limitation in high-quality fixed income securities or
hold assets in cash or cash equivalents.
Illiquid Securities
Each Fund is authorized to invest up to 15% of its net assets in illiquid
securities, which are securities that cannot be disposed of by the Fund within
seven days in the ordinary course of business at approximately the amount at
which the Fund has valued the securities. Each Fund may invest in non-publicly
traded securities (commonly referred to as "restricted securities"), which are
securities that are subject to contractual or legal restrictions on transfer.
Restricted securities include securities that are not registered under the
Securities Act of 1933, as amended (the "1933 Act"), but that can be sold to
"qualified institutional buyers" in accordance with Rule 144A under the 1933 Act
("Rule 144A Securities"). Thus, restricted securities are not necessarily
illiquid. A Fund's investments in restricted securities will be considered
liquid only if the Adviser or Sub-Adviser determines that they are liquid under
guidelines established by the Company's Board of Directors.
Investments in Other Investment Companies
As a means of regulating a Fund's exposure to the equity markets, the Fund may
invest to the extent permitted by law in securities issued by other registered
investment companies, including those traded on securities exchanges, that
invest principally in securities in which the Fund is authorized to invest.
Currently under the Investment Company Act of 1940, as amended (the "1940 Act"),
a Fund may invest a maximum of 10% of its total assets in the securities of
other investment companies. In addition, under the 1940 Act, not more than 5% of
a Fund's total assets may be invested in the securities of any one investment
company, and a Fund may not own more than 3% of the securities of any investment
company.
Repurchase Agreements
Each Fund may engage in repurchase agreement transactions with respect to
instruments in which the Fund is authorized to invest. Although the amount of a
Fund's assets that may be invested in repurchase agreements terminable in less
than seven days is not limited, repurchase agreements maturing in more than
seven days, together with other illiquid securities, will not exceed 15% of the
Fund's net assets. Each Fund will engage in repurchase agreement transactions,
which are in the nature of secured loans by the Fund, with certain member banks
of the Federal Reserve System and with certain recognized securities dealers.
Each Fund will only engage in repurchase agreements with banks and dealers
determined to present minimal credit risk by Voyageur or the Sub-Adviser under
the direction and supervision of the Board of Directors. In addition, Voyageur
or the Sub-Adviser will monitor such creditworthiness on an ongoing basis. Under
the terms of a typical repurchase agreement, a Fund would acquire an underlying
debt obligation for a relatively short period (usually not more than seven days)
subject to an obligation of the seller to repurchase, and the Fund to resell,
the obligation at an agreed-upon price and time, thereby determining the yield
during the Fund's holding period. This arrangement results in a fixed rate of
return that is not subject to market fluctuations during the Fund's holding
period. The value of the securities underlying a repurchase agreement of the
Fund is monitored on an ongoing basis by Voyageur or the Sub-Adviser to ensure
that the value is at least equal at all times to the total amount of the
repurchase obligation, including interest.
When-Issued and Delayed-Delivery Securities
To secure prices deemed advantageous at a particular time, each Fund may
purchase securities on a when-issued or delayed-delivery basis, in which case
delivery of the securities occurs beyond the normal settlement period; payment
for or delivery of the securities would be made prior to the reciprocal delivery
or payment by the other party to the transaction. The Funds will enter into
when-issued or delayed-delivery transactions for the purpose of acquiring
securities and not for the purpose of leverage. When-issued securities purchased
by the Funds may include securities purchased on a "when, as and if issued"
basis under which the issuance of the securities depends on the occurrence of a
subsequent event, such as approval of a merger, corporate reorganization or debt
restructuring. Each Fund will establish with its custodian, or with a designated
sub-custodian, a segregated account consisting of cash, government securities or
other liquid high-grade debt obligations in an amount equal to the amount of its
when-issued or delayed-delivery purchase commitments.
Temporary Investments
Each Fund's reserves may be invested in domestic and, with respect to
International Equity Fund, foreign short-term money market instruments
including, but not limited to, U.S. government and agency obligations,
certificates of deposit, bankers' acceptances, time deposits, commercial paper,
short-term corporate debt securities, repurchase agreements and, with respect to
International Equity Fund only, foreign government and agency obligations and
obligations of supranational entities. During temporary defensive periods as
determined by Voyageur or the Sub-Adviser, each Fund may hold up to 100% of its
total assets in short-term obligations of the types described above.
Hedging Transactions
Each Fund may write covered call options and secured put options and purchase
call and put options on securities and security indices and, with respect to
International Equity Fund, foreign currencies. Each Fund may also engage in
transactions in financial futures contracts and related options for hedging
purposes. In addition, International Equity Fund may conduct foreign currency
exchange transactions. These investment techniques and the related risks are
summarized below and are described in more detail in the Statement of Additional
Information.
WRITING (SELLING) CALL AND PUT OPTIONS
A call option on a security, security index or a foreign currency gives the
purchaser of the option, in return for the premium paid to the writer (seller),
the right to buy the underlying security, index or foreign currency at the
exercise price at any time during the option period. Upon exercise by the
purchaser, the writer of a call option on an individual security or foreign
currency has the obligation to sell the underlying security or currency at the
exercise price. A call option on a securities index is similar to a call option
on an individual security, except that the value of the option depends on the
weighted value of the group of securities comprising the index and all
settlements are made in cash. A call option may be terminated by the writer
(seller) by entering into a closing purchase transaction in which it purchases
an option of the same series as the option previously written.
A put option on a security, security index, or foreign currency gives the
purchaser of the option, in return for the premium paid to the writer (seller),
the right to sell the underlying security, index, or foreign currency at the
exercise price at any time during the option period.
Upon exercise by the purchaser, the writer of a put option has the obligation to
purchase the underlying security or foreign currency at the exercise price. A
put option on a securities index is similar to a put option on an individual
security, except that the value of the option depends on the weighted value of
the group of securities comprising the index and all settlements are made in
cash.
Call options may be written on portfolio securities, securities indices, or
foreign currencies. Call options on portfolio securities will be covered since
the Fund will own the underlying securities. Call options on securities indices
will be written only to hedge, in an economically appropriate way, portfolio
securities which are not otherwise hedged with options or financial futures
contracts and will be "covered" by identifying the specific portfolio securities
being hedged. Options on foreign currencies will be covered by securities
denominated in that currency. Options on securities indices will be covered by
securities that substantially replicate the movement of the index. A Fund may
not write put options on more than 50% of its total assets. Each Fund presently
intends to cease writing options if and as long as 25% of its total assets are
subject to outstanding options contracts or if required under regulations of
state securities administrators.
A Fund may write call and put options in order to obtain a return on its
investments from the premiums received and will retain the premiums whether or
not the options are exercised. The risk involved in writing a put option is that
there could be a decrease in the market value of the underlying security caused
by rising interest rates or other factors. If this occurred, the option could be
exercised and the underlying security would then be sold to the Fund at a higher
price than its current market value. The risk involved in writing a call option
is that there could be an increase in the market value of the underlying
security. If this occurred, the option could be exercised and the underlying
security would then be sold by the Fund at a lower price than its current market
value. These risks could be reduced by entering into a closing transaction. A
Fund retains the premium received from writing a put or call option whether or
not the option is exercised.
Over-the-counter options are purchased or written by a Fund in privately
negotiated transactions. International Equity, Aggressive Growth and Growth and
Income Funds may purchase or write OTC options. Such OTC options may include
options on indices of securities representing various market segments. Such
options are generally considered illiquid and it may not be possible for a Fund
to dispose of an option it has purchased or terminate its obligations under an
option it has written at a time when Voyageur or the Sub-Adviser believes it
would be advantageous to do so.
Participation in the options market involves investment risks and transaction
costs to which the Funds would not be subject absent the use of this strategy.
If predictions of movements in the direction of the securities and interest rate
markets are inaccurate, the adverse consequences to a Fund may leave such Fund
in a worse position than if such strategy was not used. Risks inherent in the
use of options include (i) dependence on the ability of Voyageur or the
Sub-Adviser, as the case may be, to predict correctly movements in the direction
of interest rates and securities prices; (ii) imperfect correlation between the
price of options and movements in the prices of the securities being hedged;
(iii) the fact that the skills needed to use these strategies are different from
those needed to select portfolio securities; (iv) the possible absence of a
liquid secondary market for any particular instrument at any time; and (v) the
possible need to defer closing out certain hedged positions to avoid adverse tax
consequences. See "Investment Policies and Restrictions--Investment Techniques
and Strategies" and "Distributions to Shareholders and Taxes" in the Statement
of Additional Information for further discussion. Because option premiums paid
by a Fund are small in relation to the market value of the investments
underlying the options, buying options can result in large amounts of leverage.
The leverage offered by trading in options could cause a Fund's net asset value
to be subject to more frequent and wider fluctuations than would be the case if
such Fund did not invest in options.
PURCHASING CALL AND PUT OPTIONS, WARRANTS AND STOCK RIGHTS
In normal market conditions, each Fund may invest up to an aggregate of 5% of
its total assets in call and put options on securities and securities indices
and, with respect to International Equity Fund, foreign currencies. Purchases of
such options may be made for the purpose of hedging against changes in the
market value of the underlying securities or foreign currencies. Each Fund may
invest in call and put options whenever, in the opinion of Voyageur or the
Sub-Adviser, as the case may be, a hedging transaction is consistent with its
investment objective. A Fund may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or the sale
(in the case of a put) of the underlying security or foreign currency. Any such
sale would result in a net gain or loss depending on whether the amount received
on the sale is more or less than the premium and other transaction costs paid on
the call or put which is sold. Purchasing a call or put option involves the risk
that the Fund may lose the premium it paid plus transaction costs.
Warrants and stock rights are almost identical to call options in their nature,
use and effect except that they are issued by the issuer of the underlying
security rather than an option writer, and they generally have longer expiration
dates than call options. Each Fund may invest up to 5% of its net assets in
warrants and stock rights, but no more than 2% of its net assets in warrants and
stock rights not listed on a recognized foreign or domestic stock exchange.
FINANCIAL FUTURES AND RELATED OPTIONS
Each Fund may enter into financial futures contracts and related options as a
hedge against anticipated changes in the market value of its portfolio
securities or securities which it intends to purchase or in the exchange rate of
foreign currencies. Hedging is the initiation of an off-setting position in the
futures market which is intended to minimize the risk associated with a
position's underlying securities in the cash market.
Financial futures contracts consist of interest rate futures contracts, foreign
currency futures contracts and securities index futures contracts. An interest
rate futures contract obligates the seller of the contract to deliver, and the
purchaser to take delivery of, the interest rate securities called for in the
contract at a specified future time and at a specified price. A foreign currency
futures contract obligates the seller of the contract to deliver, and the
purchaser to take delivery of, the foreign currency called for in the contract
at a specified future time and at a specified price. See " -- Foreign Currency
Transactions" below. A securities index assigns relative values to the
securities included in the index, and the index fluctuates with changes in the
market values of the securities so included. A securities index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. An
option on a financial futures contract gives the purchaser the right to assume a
position in the contract (a long position if the option is a call and a short
position if the option is a put) at a specified exercise price at any time
during the period of the option.
Each Fund may purchase and sell financial futures contracts which are traded on
a recognized exchange or board of trade and may purchase exchange or
board-traded put and call options on financial futures contracts. The Funds will
engage in transactions in financial futures contracts and related options only
for hedging purposes and not for speculation, and will do so in accordance with
the rules and regulations of the Commodity Futures Trading Commission. At the
time of purchase of a futures contract or a call option on a futures contract,
an amount of cash, U.S. Government securities or other appropriate high-grade
debt obligations equal to the market value of the futures contract, minus the
Fund's initial margin deposit with respect thereto, will be deposited in a
segregated account with the Fund's custodian bank to collateralize fully the
position. The extent to which a Fund may enter into financial futures contracts
and related options may also be limited by requirements of the Internal Revenue
Code of 1986 for qualification as a regulated investment company. See
"Distributions to Shareholders and Taxes" in the Statement of Additional
Information.
Engaging in transactions in financial futures contracts involves certain risks,
such as the possibility of an imperfect correlation between futures market
prices and cash market prices and the possibility that Voyageur or the
Sub-Adviser, as the case may be, could be incorrect in its expectations as to
the direction or extent of various interest rate movements or foreign currency
exchange rates, in which case the Fund's return might have been greater had
hedging not taken place. There is also the risk that a liquid secondary market
may not exist. The risk in purchasing an option on a financial futures contract
is that the Fund will lose the premium it paid. Also, there may be circumstances
when the purchase of an option on a financial futures contract would result in a
loss to the Fund while the purchase or sale of the contract would not have
resulted in a loss.
FOREIGN CURRENCY TRANSACTIONS
The value of International Equity Fund's assets as measured in United States
dollars may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and International Equity Fund
may incur costs in connection with conversions between various currencies.
International Equity Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through forward contracts to purchase
or sell foreign currencies. 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. These contracts are
traded directly between currency traders (usually large commercial banks) and
their customers.
When International Equity Fund enters into a contract for the purchase or sale
of a security denominated in a foreign currency, it may want to establish the
United States dollar cost or proceeds, as the case may be. By entering into a
forward contract in United States dollars for the purchase or sale of the amount
of foreign currency involved in the underlying security transaction,
International Equity Fund is able to protect itself against a possible loss
between trade and settlement dates resulting from an adverse change in the
relationship between the United States dollar and such foreign currency.
However, this tends to limit potential gains which might result from a positive
change in such currency relationships. International Equity Fund may also hedge
its foreign currency exchange rate risk by engaging in currency financial
futures and options transactions.
When the Sub-Adviser believes that the currency of a particular foreign country
may suffer a substantial decline against the United States dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of International Equity Fund's portfolio securities
denominated in such foreign currency. The forecasting of short-term currency
market movement is extremely difficult and whether such a short-term hedging
strategy will be successful is highly uncertain.
It is impossible to forecast with precision the market values of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary for
International Equity Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
International Equity Fund is obligated to deliver.
If International Equity Fund retains the portfolio security and engages in an
offsetting transaction, it will incur a gain or a loss (as described below) to
the extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between International Equity Fund's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, it would realize
gains to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices increase,
the Fund would suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase. International
Equity Fund may have to convert its holdings of foreign currencies into United
States dollars from time to time. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies.
INVESTMENT RESTRICTIONS
Unless otherwise stated, the investment policies, techniques and strategies
discussed above represent "non-fundamental" policies of each Fund and may be
changed by action of the Board of Directors. Each Fund has also adopted certain
fundamental investment restrictions. These fundamental restrictions and each
Fund's investment objective may be changed only with the approval of a majority
of the respective Fund's outstanding voting securities, as defined in the 1940
Act. Included among each of Aggressive Growth, International Equity and Growth
and Income Fund's fundamental restrictions are the following:
1. The Fund will not borrow money, except that the Fund may borrow from banks
for temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests and cash payments of dividends and distributions that might
otherwise require the untimely disposition of securities, in an amount not to
exceed 20% of the value of the Fund's total assets (including the amount
borrowed) valued at market less liabilities (not including the amount borrowed)
at the time the borrowing is made. Whenever borrowings exceed 5% of the value of
the total assets of the Fund, the Fund will not make any additional investments.
2. The Fund will invest no more than 25% of the value of its total assets in
securities of issuers in any one industry. For purposes of this restriction, the
term industry will be deemed to include the government of any country other than
the United States, but not the U.S. Government.
Included among Growth Stock Fund's fundamental restrictions are the following:
The Fund may not (a) purchase more than 10% of any class of securities of any
one issuer or acquire more than 10% of the outstanding voting securities of an
issuer; (b) mortgage, pledge or hypothecate its assets except in an amount not
exceeding 10% of the value of its total assets to secure temporary or emergency
borrowing; and (c) invest more than 15% of its net assets in "illiquid
investments" (as described above). Growth Stock Fund may (a) invest up to 5% of
its total assets (at the time of investment) in securities of issuers which,
with their predecessors, have a record of less than three years' continuous
operation. (Securities of such issuers will not be deemed to fall within this
limitation if they are guaranteed by an entity in continuous operation for more
than three years.); (b) borrow money from banks for temporary or emergency
purposes in an amount not exceeding 5% of the value of the Fund's total assets;
and (c) mortgage, pledge or hypothecate its assets in an amount not exceeding
10% of the value of its total assets to secure such borrowing.
Certain other fundamental and non-fundamental investment restrictions adopted by
the Funds are described in the Statement of Additional Information.
Each Fund intends to operate as a "diversified" management investment company,
as defined in the 1940 Act, which means that at least 75% of its total assets
must be represented by cash and cash items (including receivables), government
securities, securities of other investment companies, and other securities for
the purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5% of the value of total assets of the Fund and
to not more than 10% of the outstanding voting securities of such issuer.
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.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Funds involves risks and special considerations, such as those
described below:
GENERAL
An investment in shares of the Funds should not be considered to be a complete
investment program. The value of a Fund's investments, and as a result the net
asset value of a Fund's shares, will fluctuate in response to changes in the
market and economic conditions as well as the financial condition and prospects
of issuers in which the Fund invests. Companies in which Aggressive Growth Fund
invests typically are subject to a greater degree of change in earnings and
business prospects than are companies with more established earnings patterns.
In light of these factors, Aggressive Growth Fund may be subject to greater
investment risk than that assumed by other investment companies. Because of the
risks associated with a Fund's investments, each Fund is intended to be a long
term investment vehicle and is not designed to provide investors with a means of
speculating on short-term stock market movements.
WARRANTS
Because a warrant, which is a security permitting, but not obligating, its
holder to subscribe for another security, does not carry with it the right to
dividends or voting rights with respect to the securities that the warrant
holder is entitled to purchase, and because a warrant does not represent any
rights to the assets of the issuer, a warrant may be considered more speculative
than certain other types of investments. In addition, the value of a warrant
does not necessarily change with the value of the underlying security and a
warrant ceases to have value if it is not exercised prior to its expiration
date.
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES
Non-publicly traded securities may be less liquid than publicly traded
securities. Although these securities may be resold in privately negotiated
transactions, the prices realized from these sales could be less than those
originally paid by a Fund. In addition, companies whose securities are not
publicly traded are not subject to the disclosure and other investor protection
requirements that may be applicable if their securities were publicly traded. A
Fund's investments in illiquid securities are subject to the risk that should
the Fund desire to sell any of these securities when a ready buyer is not
available at a price representative of their value, the value of a Fund's net
assets could be adversely affected.
RULE 144A SECURITIES
Certain Rule 144A Securities may be considered illiquid and, therefore, subject
to a Fund's limitation on the purchase of illiquid securities, unless Voyageur
or a Sub-Adviser, as the case may be, subject to the supervision of the Board of
Directors, determines on an ongoing basis that an adequate trading market exists
for the Rule 144A Securities. A Fund's purchase of Rule 144A Securities could
have the effect of increasing the level of illiquidity in the Fund to the extent
that qualified institutional buyers become uninterested for a time in purchasing
Rule 144A Securities held by the Fund. The Board of Directors will establish
standards and procedures for determining the liquidity of a Rule 144A Security
and will monitor implementation of the standards and procedures.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
To the extent a Fund invests in other investment companies, a Fund's
shareholders will incur certain duplicative fees and expenses, including
investment adviser fees. Exchange traded investment company securities typically
trade at prices that differ from the company's net asset value per share and
often trade at a discount to net asset value. Each Fund will purchase exchange
traded investment company securities only in the secondary market and not in an
initial offering.
REPURCHASE AGREEMENTS
In entering into a repurchase agreement, a Fund bears a risk of loss in the
event that the other party to the transaction defaults on its obligations and
the Fund is delayed or prevented from exercising its rights to dispose of the
underlying securities, including the risk of a possible decline in the value of
the underlying securities during the period in which the Fund seeks to assert
its rights to them, the risk of incurring expenses associated with asserting
those rights and the risk of losing all or a part of the income from the
agreement.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Securities purchased on a when-issued or delayed-delivery basis may expose a
Fund to risk because the securities may experience fluctuations in value prior
to their actual delivery. Purchasing securities on a when-issued or
delayed-delivery basis can involve the additional risk that the return available
in the market when the delivery takes place may be higher than that applicable
at the time of the purchase. This characteristic of when-issued and
delayed-delivery securities could result in exaggerated movements in the Fund's
net asset value.
ADDITIONAL FOREIGN SECURITIES AND INTERNATIONAL EQUITY FUND RISKS
International Equity Fund invests exclusively in foreign securities. Each of the
other Funds may invest up to 10% of its total assets in foreign securities.
Foreign securities may include ADRs and GDRs as described above under
"Investment Objectives and Policies -Investment Policies -- Aggressive Growth
Fund." There are substantial and different risks involved in investing in
foreign securities. An investor should consider these risks carefully. For
example, there is generally less publicly available information about foreign
companies than is available about companies in the U.S. Foreign companies are
not subject to uniform audit and financial reporting standards, practices and
requirements comparable to those in the U.S.
Foreign securities involve currency risks. The U.S. dollar value of a foreign
security tends to decrease when the value of the dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the dollar falls against such currency. Fluctuations in exchange
rates may also affect the earning power and asset value of the foreign entity
issuing the security. Dividend and interest payments may be returned to the
country of origin, based on the exchange rate at the time of disbursement, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies in connection with purchases
and sales of foreign securities.
Foreign stock markets are generally not as developed or efficient as those in
the U.S. In most foreign markets volume and liquidity are less than in the U.S.
and, at times, volatility of price can be greater than that in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges. There is generally less government supervision
and regulation of foreign stock exchanges, brokers and companies than in the
U.S.
There is also the possibility of adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, political or social instability, or diplomatic
developments which could adversely affect investments, assets or securities
transactions of a Fund in some foreign countries. The Funds are not aware of any
investment or exchange control regulations which might substantially impair
their operations as described, although this could change at any time.
The dividends and interest payable on certain foreign securities may be subject
to foreign withholding taxes, thus reducing the net amount available for
distribution to a Fund's shareholders. An investor should understand that the
expense ratio of International Equity Fund can be expected to be higher than
those of investment companies investing primarily in domestic securities since
the costs of operations are higher.
HOW TO PURCHASE SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS
The Funds offer investors the choice among three classes of shares which offer
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances. Page two of the Prospectus contains a
summary of these alternative purchase arrangements.
A broker-dealer may receive different levels of compensation depending on which
class of shares is sold. In addition, Voyageur Fund Distributors, Inc., the
Funds' principal underwriter (the "Underwriter"), from time to time pays certain
additional cash incentives of up to $100 and/or non cash incentives to its
investment executives and other broker-dealers and financial institutions in
consideration of their sales of Fund shares. In some instances, other incentives
may be made available only to selected broker-dealers and financial
institutions, based on objective standards developed by the Underwriter, to the
exclusion of other broker-dealers and financial institutions. The Underwriter in
its discretion may from time to time, pursuant to objective criteria established
by it, pay fees to qualifying brokers, dealers or financial intermediaries for
certain services or activities which are primarily intended to result in sales
of shares of a Fund.
GENERAL PURCHASE INFORMATION
The minimum initial investment in each Fund is $1,000, and the minimum
additional investment is $100. Each Fund's shares may be purchased at the public
offering price from the Underwriter, from other broker-dealers who are members
of the National Association of Securities Dealers, Inc. and who have selling
agreements with the Underwriter, and from certain financial institutions that
have selling agreements with the Underwriter. When orders are placed for shares
of a Fund, the public offering price used for the purchase will be the net asset
value per share next determined, plus the applicable sales charge, if any. If an
order is placed with the Underwriter or other broker-dealer, the broker-dealer
is responsible for promptly transmitting the order to the Fund. Each Fund
reserves the right, in its absolute discretion, to reject any order for the
purchase of its shares.
Shares of the Funds may be purchased by opening an account either by mail or by
phone. Shares are deemed to be purchased 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.
Automatic Investment Plan
Investors may make systematic investments in fixed amounts automatically on a
monthly basis through each Fund's Automatic Investment Plan. Additional
information is available from the Underwriter by calling 800-545-3863.
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 Fund, to:
NW 9369
P.O. Box 1450
Minneapolis, MN 55485-9369
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:
Norwest Bank Minnesota, N.A., ABA #091000019
For Credit of: (insert applicable Fund name)
Checking Account No.: 872-458
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 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 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 Fand mail it
to the Fund after making the initial telephone purchase.
CLASS A SHARES -- FRONT END SALES CHARGE ALTERNATIVE
The public offering price of Class A shares of each Fund is the net asset value
of the Fund's shares plus the applicable front end sales charge ("FESC"), which
will vary with the size of the purchase. The Fund receives the net asset value.
The FESC varies depending on the size of the purchase and is allocated between
the Underwriter and other broker-dealers. The current sales charges are:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Discount
as % of as % of as % of
Amount of Purchase Net Asset Value Offering Price Offering Price[1]
<S> <C> <C> <C>
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but less than $100,000 4.71 4.50 4.00
$100,000 but less than $250,000 3.90 3.75 3.25
$250,000 but less than $500,000 2.83 2.75 2.50
$500,000 but less than $1,000,000 2.30 2.25 2.00
$1,000,000 or more[2] NAV[3] NAV[3] 1.00[2]
</TABLE>
[1] Brokers and dealers who receive 90% or more of the sales charge may be
considered to be underwriters under the Securities Act of 1933, as amended.
[2] The Underwriter intends to pay its investment executives and other
broker-dealers and banks that sell Fund shares, out of its own assets, a
fee of up to 1% of the offering price of sales of $1,000,000 or more, other
than sales not subject to a contingent deferred sales charge.
[3] Purchases of $1,000,000 or more may be subject to a contingent deferred
sales charge at the time of redemption. See "How to Sell Shares --
Contingent Deferred Sales Charge."
In connection with the distribution of the Funds' Class A shares, the
Underwriter is deemed to receive all applicable sales charges. The Underwriter,
in turn, pays its investment executives and other broker-dealers selling such
shares a "dealer discount," as set forth above. In the event that shares are
purchased by a financial institution acting as agent for its customers, the
Underwriter or the broker-dealer with whom such order was placed may pay all or
part of its dealer discount to such financial institution in accordance with
agreements between such parties.
Special Purchase Plans -- Reduced Sales Charges
Certain investors (or groups of investors) may qualify for reductions in the
sales charges shown above. Investors should contact their broker-dealer or the
Funds for details about the Funds' Combined Purchase Privilege, Cumulative
Quantity Discount and Letter of Intention plans. Descriptions are also included
with the general authorization form and in the Statement of Additional
Information. Any of the above special purchase plans may be amended or
eliminated at any time by the Underwriter without notice to existing Fund
shareholders.
Rule 12b-1 Fees
Class A shares are subject to a Rule 12b-1 fee payable at an annual rate of .25%
of the average daily net assets of a Fund attributable to Class A shares. All or
a portion of such fees are paid to financial institutions and service providers
with respect to average daily net assets of a Fund attributable to shares sold
or serviced by such institutions and service providers beginning the 13th month
after the date of purchase. For additional information about this fee, see
"Management -- The Underwriter; Plan of Distribution," below.
Contingent Deferred Sales Charges
Although there is no initial sales charge on purchases of Class A shares of
$1,000,000 or more, the Underwriter pays investment dealers out of its own
assets, a fee of up to 1% of the offering price of such shares. If these shares
are redeemed within a certain period of time after purchase, the redemption
proceeds will be reduced by a contingent deferred sales charge ("CDSC"). For
additional information, see "How to Sell Shares -- Contingent Deferred Sales
Charge." The amount of the CDSC will depend on the number of years since the
purchase was made according to the following table:
CDSC as a % of Amount Redeemed for
Investments of $1,000,000 or More
First year after purchase 1.0%
Second year after purchase 0.5%
Thereafter 0.0
Waiver of Sales Charges
A limited group of institutional and other investors may qualify to purchase
Class A shares at net asset value, with no front-end or deferred sales charges.
The investors qualifying to purchase such shares are: (1) officers and directors
of the Funds; (2) officers, directors and full-time employees of Voyageur
Companies, Inc., Voyageur, Voyageur Asset Management Group, Inc., ("VAMG"), the
Underwriter and Pohlad Companies, and officers, directors and full-time
employees of parents and subsidiaries of the foregoing companies; (3) officers,
directors and full-time employees of investment advisers of other mutual funds
subject to a sales charge and included in any other family of mutual funds that
includes any Voyageur Fund as a member ("Other Load Funds"), and officers,
directors and full-time employees of parents, subsidiaries and corporate
affiliates of such investment advisers; (4) spouses and lineal ancestors and
descendants of the officers, directors/trustees and employees referenced in
clauses (1), (2) and (3), and lineal ancestors and descendants of their spouses;
(5) investment executives and other employees of banks and dealers that have
selling agreements with the Underwriter and parents, spouses and children under
the age of 21 of such investment executives and other employees; (6) trust
companies and bank trust departments for funds held in a fiduciary, agency,
advisory, custodial or similar capacity; (7) any state or any political
subdivision thereof or any instrumentality, department, authority or agency of
any state or political subdivision thereof; (8) partners and full-time employees
of the Funds' general counsel; (9) managed account clients of Voyageur, clients
of investment advisers affiliated with Voyageur and other registered investment
advisers and their clients; (10) "wrap accounts" for the benefit of clients of
financial planners adhering to certain standards established by Voyageur; (11)
tax-qualified employee benefit plans for employees of Voyageur Companies, Inc.,
Voyageur, VAMG and the Underwriter and (12) employee benefit plans qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") (which does not include Individual Retirement Accounts) and custodial
accounts under Section 403(b)(7) of the Code (also known as tax-sheltered
annuities).
Class A shares will also be issued at net asset value, without a front-end or
deferred sales charge, if the purchase of such shares is funded by the proceeds
from the redemption of shares of any unrelated open-end investment company that
charges an FESC, and, in certain circumstances, a CDSC. In order to exercise
this privilege, the purchase order must be received by the Fund within 60 days
after the redemption of shares of the unrelated investment company.
Class B Shares -- Contingent Deferred Sales Charge Alternative
The public offering price of Class B shares of each Fund is the net asset value
of the Fund's shares. Class B shares are sold without an initial sales charge so
that the Fund receives the full amount of the investor's purchase. However, a
CDSC of up to 4% will be imposed if shares are redeemed within six years of
purchase. For additional information, see "How to Sell Shares -- Contingent
Deferred Sales Charge." In addition, Class B shares are subject to higher Rule
12b-1 fees as described below. The amount of the CDSC will depend on the number
of years since the purchase was made and the dollar amount being redeemed,
according to the following table:
CDSC as a % of Amount Redeemed
1st year after purchase 4%
2nd year after purchase 4
3rd year after purchase 3
4th year after purchase 3
5th year after purchase 2
6th year after purchase 1
Thereafter 0
Proceeds from the CDSC are paid to the Underwriter and are used to defray
expenses of the Underwriter related to providing distribution related services
to the Funds in connection with the sale of Class B shares, such as the payment
of compensation to selected broker dealers, and for selling Class B shares. The
combination of the CDSC and the Rule 12b-1 fee enables the Funds to sell the
Class B shares without deduction of a sales charge at the time of purchase.
Although Class B shares are sold without an initial sales charge, the
Underwriter pays broker dealers a fee of 3% of the amount invested at the time
of the initial purchase, and pays an ongoing annual servicing fee of .15% (paid
quarterly) of the net asset value of amount invested that begins to accrue for
the account of the dealer 13 months after the initial purchase.
Rule 12b-1 Fees
Class B shares are subject to a Rule 12b-1 fee payable at an annual rate of
1% of the average daily net assets of a Fund attributable to Class B shares.
The higher 12b-1 fee will cause Class B shares to have a higher expense ratio
and to pay lower dividends than Class A shares. For additional information about
this fee, see "Fees and Expenses" above and "Management -- The Underwriter; Plan
of Distribution" below.
Conversion Features
On the first business day of the month eight years after the purchase date,
Class B shares will automatically convert to Class A shares and will no longer
be subject to a higher Rule 12b-1 fee. Such conversion will be on the basis of
the relative net asset values of the two classes. Class A shares issued upon
such conversion will not be subject to any FESC or CDSC. Class B shares acquired
by exchange from Class B shares of another Voyageur Fund will convert into Class
A shares based on the time of the initial purchase. Similarly, Class B shares
acquired by exercise of the Reinstatement Privilege will convert into Class A
shares based on the time of the original purchase of Class B shares. See
"Reinstatement Privilege." Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date of issuance of
such shares.
CLASS C SHARES -- LEVEL LOAD ALTERNATIVE
The public offering price of Class C shares of each Fund is the net asset value
of the Fund's shares. Class C shares are sold without an initial sales charge so
that the Fund receives the full amount of the investor's purchase. However, a
CDSC of 1% will be imposed if shares are redeemed within one year of purchase.
For additional information, see "How to Sell Shares -- Contingent Deferred Sales
Charge." In addition, Class C shares are subject to higher annual Rule 12b-1
fees as described below.
Proceeds from the CDSC are paid to the Underwriter and are used to defray
expenses of the Underwriter related to providing distribution related services
to the Funds in connection with the sale of Class C shares, such as the payment
of compensation to selected broker dealers, and for selling Class C shares. The
combination of the CDSC and the Rule 12b-1 fee enables the Funds to sell the
Class C shares without deduction of a sales charge at the time of purchase.
Although Class C shares are sold without an initial sales charge, the
Underwriter pays broker dealers a fee of 1% of the amount invested at the time
of initial purchase, and pays an ongoing annual fee of .75% (paid quarterly) of
the net asset value of the amount invested that begins to accrue for the
account of the dealer 13 months after the initial purchase.
Rule 12b-1 Fees
Class C shares are subject to a Rule 12b-1 fee payable at an annual rate of 1%
of the average daily net assets of a Fund attributable to Class C shares. The
higher Rule 12b-1 fee will cause Class C shares to have a higher expense ratio
and to pay lower dividends than Class A shares. For additional information about
this fee, see "Fees and Fund Expenses" above and "Management -- The Underwriter;
Plan of Distribution," below.
RETIREMENT PLANS
Shares of the Funds may be an appropriate investment medium for retirement
plans, including: (a) Keogh (HR-10) plans (for self-employed individuals); (b)
qualified corporate pension and profit sharing plans (for employees); (c)
Individual Retirement Accounts (IRAs) (for employees and their spouses); and (d)
tax-deferred investment plans (for employees of public school systems and
certain types of charitable organizations).
Persons desiring information about such plans, including their availability,
should contact the Funds. All retirement plans summarized above involve a
long-term commitment of assets and are subject to various legal requirements and
restrictions. The legal and tax implications may vary according to the
circumstances of the individual investor. Therefore, the investor is urged to
consult with an attorney or tax adviser prior to the establishment of such a
plan.
HOW TO SELL SHARES
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
(see below). 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 $250. 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.
CONTINGENT DEFERRED SALES CHARGES
The CDSC will be calculated on an amount equal to the lesser of the net asset
value of the shares at the time of purchase or their net asset value at the time
of redemption. The Funds will not impose a charge on increases in net asset
value above the initial purchase price. In addition, the Funds will not assess a
charge on shares derived from reinvestment of dividends or capital gains
distributions or on shares held for longer than the applicable CDSC Period.
In determining whether a CDSC is payable with respect to any redemption, the
Funds will calculate such CDSC in the manner that results in the lowest rate
being charged. Therefore, it will be assumed that shares that are not subject to
the CDSC are redeemed first, shares subject to the lowest level of CDSC are
redeemed next and so forth.
The CDSC does not apply to: (1) a redemption of shares when a Fund exercises its
right to liquidate accounts which are less than the minimum account size and (2)
redemptions in the event of the death or disability of the shareholder within
the meaning of Section 72(m)(7) of the Internal Revenue Code.
If a shareholder exchanges Class A, Class B or Class C shares subject to a CDSC
for Class A, Class B or Class C shares, respectively, of a different Voyageur
Fund, the transaction will not be subject to a CDSC. However, when shares
acquired through the exchange are redeemed, the shareholder will be treated as
if no exchange took place for the purpose of determining the CDSC.
The Underwriter, upon notification, intends to provide, out of its own assets, a
pro rata refund of any CDSC paid in connection with a redemption of Class A or
Class B shares of any Fund (by crediting such refunded CDSC to such
shareholder's account) if, within 90 days of redemption, all or any portion of
the redemption proceeds are reinvested in shares of the same class in any of the
Voyageur Funds. Any reinvestment within 90 days of a redemption to which the
CDSC was paid will be made without the imposition of a FESC but will be subject
to the same CDSC to which such amount was subject prior to the redemption. The
amount of the CDSC will be calculated from the original investment date.
EXPEDITED REDEMPTIONS
Each Fund offers several expedited redemption procedures, described below, which
allow a shareholder to redeem Fund shares at net asset value determined on the
same day that the shareholder places the request for redemption of those shares.
Pursuant to these expedited redemption procedures, each Fund will redeem its
shares at their net asset value next determined following the Fund's receipt of
the redemption request. Each Fund reserves the right at any time to suspend or
terminate the expedited redemption procedures or to impose a fee for this
service. There is currently no additional charge to the shareholder for use of
the Funds' expedited redemption procedures.
Expedited Telephone Redemption
Shareholders redeeming at least $1,000 and no more than $50,000 of shares (for
which certificates have not been issued) may redeem by telephoning the Fund
directly at 612-376-7014 or 800-545-3863. The applicable section of the general
authorization form must have been completed by the shareholder and filed with
the Fund before the telephone request is received. 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 general authorization form. A Fund employing such procedures will not be
liable for following instructions communicated by telephone that they reasonably
believe to be genuine.
Expedited Redemptions Through Certain Broker Dealers
Certain broker-dealers who have sales agreements with the Underwriter may allow
their customers to effect a redemption of shares of a Fund purchased through
such broker-dealer by notifying the broker-dealer of the amount of shares to be
redeemed. The broker-dealer is then responsible for promptly placing the
redemption request with the Fund on the customer's behalf. The Fund will pay the
shareholder by check or wire sent to the broker-dealer. Broker-dealers offering
this service may impose a fee or additional requirements for such redemptions.
GOOD ORDER
"Good order" means that stock certificates, if issued, must accompany the
written request for redemption and must be duly endorsed for transfer, or must
be accompanied by a duly executed stock power. If no stock certificates have
been issued, a written request to redeem must be made. The Funds will not issue
stock certificates for Class B or Class C shares. In any case, the shareholder
must execute the redemption request 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, for example, to redeem more than $50,000 or to have a check
mailed other than to the shareholder's address of record. See "Other
Information" in the Statement of Additional Information. 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 the Fund to an unusual degree
of risk.
MONTHLY CASH WITHDRAWAL PLAN
An investor who owns or buys shares of any Fund valued at $10,000 or more at the
current offering price may open a Withdrawal Plan and have a designated sum of
money paid monthly to the investor or another person. Deferred sales charges may
apply to monthly redemptions of Class B or Class C shares. See "Monthly Cash
Withdrawal Plan" in the Statement of Additional Information and the general
authorization form.
REINSTATEMENT PRIVILEGE
An investor in a Fund whose shares have been redeemed and who has not
previously exercised the Reinstatement Privilege as to such Fund may reinvest
the proceeds of such redemption in Fund shares of the same class by exercise of
the Reinstatement Privilege. Reinvestment will be at the net asset value of Fund
shares next determined after the Underwriter receives a check along with a
letter requesting reinstatement. The Underwriter must receive the letter
requesting reinstatement within 365 days following the redemption. Investors who
desire to exercise the Privilege should contact their broker-dealer or the Fund.
Exercise of the Reinstatement Privilege does not alter the income tax treatment
of any capital gains realized on a sale of shares of a Fund, but to the extent
that any shares are sold at a loss and the proceeds are reinvested within 30
days in shares of the same Fund, some or all of the loss may not be allowed as a
deduction, depending upon the number of shares reacquired.
EXCHANGE PRIVILEGE
Except as described below, shareholders may exchange some or all of their Fund
shares for shares of another Voyageur Fund, provided that the shares to be
acquired in the exchange are eligible for sale in the shareholder's state of
residence. Class A shareholders may exchange their shares for Class A shares of
other Voyageur Funds, Class B shareholders may exchange their shares for Class B
shares of other Voyageur Funds and Class C shareholders may exchange their
shares for Class C shares of other Voyageur Funds.
The minimum amount which may be exchanged is $1,000. The Funds will execute the
exchange on the basis of the relative net asset values next determined after
receipt by the Fund in which the investor owns shares. For a discussion of
issues relating to the contingent deferred sales charge upon such exchanges, see
"How to Sell Shares -- Contingent Deferred Sales Charge." There is no specific
limit on exchange frequency; however, the Funds are intended for long term
investment and not as a trading vehicle. The Adviser reserves the right to
prohibit excessive exchanges (more than four per quarter). 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 a sale of shares on which the investor may realize a
capital gain or loss for income tax purposes. A shareholder may place exchange
requests directly with the Fund in which the investor owns shares, through the
Underwriter or through other broker-dealers. An investor considering an exchange
should obtain a prospectus of the acquired Fund and should read such prospectus
carefully. Contact the Fund, the Underwriter or any of such other broker-dealers
for further information about the exchange privilege.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND
Under the laws of the State of Minnesota, the Board of Directors is responsible
for managing the business and affairs of the Company. The names, addresses,
principal occupations and other affiliations of the Directors and executive
officers of the Company are set forth in the Statement of Additional
Information.
INVESTMENT ADVISER
Voyageur 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. Voyageur 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 DFG's Chairman of the Board and Chief Executive Officer 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 August 1, 1995,
Voyageur served as the manager to six closed-end and ten open-end investment
companies (comprising 26 separate investment portfolios), administered numerous
private accounts and managed approximately $7.5 billion in assets. Voyageur's
principal business address is 90 South Seventh Street, Suite 4400, Minneapolis,
Minnesota 55402.
Growth and Income Fund pays Voyageur a monthly investment advisory fee
equivalent on an annual basis to 0.75% of its average daily net assets. Growth
Stock Fund, Aggressive Growth Fund and International Equity Fund each pay
Voyageur a monthly investment advisory fee equivalent on an annual basis to
1.00% of their average daily net assets.
James King currently has day-to-day portfolio management responsibility for
Growth Stock Fund. Mr. King was a director of Voyageur and the Underwriter from
1993 through 1995 and has been a Senior Equity Portfolio Manager of Voyageur
since 1990. Mr. King currently has over 29 years of investment experience. Tony
Elavia acts as the primary portfolio manager of Aggressive Growth Fund. Mr.
Elavia is a Senior Equity Portfolio Manager of Voyageur. Prior to March 1995,
Mr. Elavia had been a Senior Vice President of Piper Capital Management
Incorporated, Minneapolis, Minnesota since 1991 and a Vice President since 1989.
Mr. Elavia currently has over 8 years of investment experience.
SUB-ADVISERS -- PORTFOLIO MANAGEMENT
Segall Bryant & Hamill ("Segall Bryant") is the Sub-Adviser to Growth and Income
Fund. Its business office is located at 10 South Wacker Drive, Suite 2150,
Chicago, IL 60606. Segall Bryant is a Minnesota partnership which is 50% owned
by Voyageur Advisory Services, Inc., an affiliate of Voyageur. Murray Johnstone
International, Ltd. ("Murray Johnstone") is the Sub-Adviser to International
Equity Fund. Its business office in the U.S. is 875 N. Michigan Avenue, Suite
3415, Chicago, Illinois 60611. Murray Johnstone is a wholly-owned subsidiary of
United Asset Management Corporation. Each Sub-Adviser manages the investment and
reinvestment of the assets of the relevant Fund, although Voyageur monitors and
evaluates the performance and investment style of each Sub-Adviser.
The Sub-Advisory Agreement between Voyageur and Segall Bryant provides that
Segall Bryant is entitled to a sub-advisory fee of .75% of Growth and Income
Fund's average daily net assets managed by Segall Bryant. The Sub-Advisory
Agreement between Voyageur and Murray Johnstone provides that Murray Johnstone
is entitled to a sub-advisory fee of 0.50% of International Equity Fund's
average daily net assets managed by Murray Johnstone. Each Sub-Adviser's fee is
paid by the Adviser, not the Fund.
Investment selections for the Funds are made by the respective Sub-Adviser.
Ralph Segall, Managing Director of Segall Bryant & Hamill, will be primarily
responsible for the day-to-day management of Growth and Income Fund's portfolio.
Mr. Segall became a founding member of Segall Bryant in October 1994. Prior to
October 1994, Mr. Segall had been a senior portfolio manager with Stein Roe &
Farnham Incorporated where he had over 18 years experience. Rodger Scullion,
Chief Investment Officer for Murray Johnstone, is primarily responsible for the
day-to-day management of International Equity Fund's portfolio. Mr. Scullion is
also the Managing Director of Murray Johnstone and has 22 years of investment
experience, the last of which have been at Murray Johnstone. His tenure at
Murray Johnstone has included portfolio management responsibilities for
investments in the U.S., Europe, Japan and the Far East and his primary role now
is country allocation.
Although investment decisions for the Funds are made independently from those of
the other accounts managed by the Adviser and each Sub-Adviser, investments of
the type the Funds may make also may be made by those other accounts. When the
Funds and one or more other accounts managed by the Adviser or a Sub-Adviser, as
the case may be, are prepared to invest in, or desire to dispose of, the same
security, available investments or opportunities for sales are allocated in a
manner believed by the Adviser or a Sub-Adviser, as the case may be, to be
equitable to the Fund. In some cases, this procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund.
PLAN OF DISTRIBUTION
Each Fund has adopted a Plan of Distribution under the 1940 Act (the "Plan") and
has entered into a Distribution Agreement with Voyageur Fund Distributors, Inc.
(the "Underwriter"). Pursuant to each Fund's Plan, the Fund pays the Underwriter
a Rule 12b-1 fee, at an annual rate of .25% of the Fund's average daily net
assets attributable to Class A shares and 1.00% of the Fund's average daily net
assets attributable to each of Class B and Class C shares for servicing of
shareholder accounts and distribution related services. Payments made under the
Plan are not tied exclusively to expenses actually incurred by the Underwriter
and may exceed such expenses.
All of the Rule 12b-1 fee attributable to Class A shares, and a portion of the
fee equal to .25% of the average daily net assets of the Fund attributable to
each of Class B shares and Class C shares constitutes a shareholder servicing
fee designed to compensate the Underwriter for the provision of certain services
to the shareholders. The services provided may include personal services
provided to shareholders, such as answering shareholder inquiries regarding the
Funds and providing reports and other information, and services related to the
maintenance of shareholder accounts. The Underwriter may use such Rule 12b-1 fee
or portion thereof to make payments to qualifying broker-dealers and financial
institutions that provide such services.
That portion of the Rule 12b-1 fee equal to .75% of the average daily net assets
of the Fund attributable to Class B shares and Class C shares, respectively,
constitutes a distribution fee designed to compensate the Underwriter for
advertising, marketing and distributing the Class B shares and Class C shares of
each Fund. In connection therewith, the Underwriter may provide initial and
ongoing sales compensation to its investment executives and other broker-dealers
for sales of Class B shares and Class C shares and may pay for other advertising
and promotional expenses in connection with the distribution of Class B shares
and Class C shares. The distribution fee attributable to Class B shares and
Class C shares is designed to permit an investor to purchase such shares through
investment executives of the Underwriter and other broker-dealers without the
assessment of an initial sales charge and at the same time to permit the
Underwriter to compensate its investment executives and other broker-dealers in
connection with the sale of such shares.
CUSTODIAN; DIVIDEND DISBURSING, TRANSFER, ADMINISTRATIVE AND ACCOUNT SERVICES
AGENT
Norwest Bank Minnesota, N.A. ("Norwest") serves as the custodian of each Fund's
portfolio securities and cash.
Norwest has entered into a Sub-Custodian Agreement with Morgan Stanley Trust
Company with respect to the Company's foreign portfolio securities and related
cash. Rule 17f-5 adopted under the 1940 Act permits the Company to maintain such
securities and cash in the custody of certain eligible foreign banks and foreign
securities depositories. A Fund's foreign securities are held by such entities
who are approved by the Board of Directors in accordance with such rules.
Determinations are made pursuant to such rules following consideration of a
number of factors including, but not limited to, the reliability and financial
stability of the institutions; the ability of the institutions to perform
custodial services for a Fund; the reputation of the institutions in national
markets; the countries in which the institutions are located and the risks of
potential nationalization or expropriation of assets of a Fund.
Voyageur acts as each Fund's dividend disbursing, transfer, administrative and
account services agent to perform dividend-paying functions, to calculate the
Fund's daily share price and to maintain shareholder records. The fees paid for
these services are based on each Fund's assets and include reimbursement of
out-of-pocket expenses. Voyageur receives a monthly fee from each Fund equal to
the sum of (1) $1.25 per shareholder account per month ($1.33 for International
Equity Fund), (2) a monthly fee ranging from $1,000 to $1,500 based on the
average daily net assets of the Fund ($3,000 to $5,000 for International Equity
Fund) and (3) a percentage of average daily net assets which ranges from 0.11%
to 0.035% based on the average daily net assets of the Fund (0.11% to 0.02% for
International Equity Fund). See "The Investment Adviser, Sub-Adviser and
Underwriter -- Expenses of the Fund" in the Statement of Additional Information.
Certain institutions may act as sub-administrators for the Funds pursuant to
contracts with Voyageur, whereby the institutions will provide shareholder
services to their customers. Voyageur will pay the sub-administrators' fees out
of its own assets. The fee paid by Voyageur to any sub-administrator will be a
matter of negotiation between the institution and Voyageur based on the extent
and quality of the services provided.
EXPENSES OF THE FUNDS
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 stock
certificates 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.
Voyageur and the Underwriter reserve the right to voluntarily waive their fees
in whole or part and to voluntarily absorb certain other of each Fund's
expenses. Voyageur and the Underwriter have agreed to reimburse certain expenses
with respect to the Funds for the fiscal year ending April 30, 1996 (April 30,
1997 for Growth Stock Fund), in such a manner as will result in each Fund being
charged fees and expenses that approximate those set forth in the section "Fees
and Fund Expenses." After April 30, 1996 (April 30, 1997, for Growth Stock Fund)
such voluntary expense reimbursements may be discontinued or modified by
Voyageur and the Underwriter in their sole discretion.
PORTFOLIO TRANSACTIONS
No Fund will effect brokerage transactions in its portfolio securities with any
broker-dealer affiliated directly or indirectly with Voyageur 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 Fund. It is not anticipated that any Fund will effect any
brokerage transactions with any affiliated broker-dealer, including the
Underwriter, unless it would be to the Fund's advantage. Voyageur may consider
sales of shares of the Fund or other Voyageur Funds as a factor in the selection
of broker-dealers to execute the Fund's 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 primary 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).
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. Other securities
and assets also 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 a 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.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
DISTRIBUTIONS
Each Fund's policy is to make annual dividend distributions from net investment
income, if and when available, and annual distributions of any net realized
capital gains during the quarter following the end of its fiscal year (April
30). However, provisions of the Internal Revenue Code of 1986, as amended (the
"Code") may result in additional capital gains distributions. Net investment
income includes dividends and interest accrued less accrued expenses.
Distributions paid by a Fund, if any, with respect to Class A, Class B and Class
C shares will be calculated in the same manner, at the same time, on the same
day and will be in the same amount, except that the higher Rule 12b-1 fees
applicable to Class B and Class C shares will be borne exclusively by such
shares. Shareholders will receive distributions from investment income and
capital gains distributions in additional shares of the class owned by such
shareholders at net asset value, without any sales charge, unless they elect
otherwise. If cash payment is requested, a check will be mailed within three
business days after the payment date.
TAXES
Each Fund intends to qualify as a regulated investment company under Subchapter
M of the Code in order to be relieved of payment of federal income taxes to the
extent it distributes its taxable income to shareholders.
Distributions by a Fund are generally taxable to the shareholders, whether
received in cash or additional shares. Dividends paid from the net investment
income of a Fund will be taxable to shareholders as ordinary income. Individual
shareholders may not exclude from gross income any distributions by the Fund
which are attributable to dividends. Such dividend distributions generally are
eligible for the 70% dividends- received deduction for corporations to the
extent they are paid from dividends paid to a Fund by domestic corporations. It
is expected that dividends paid by International Equity Fund will not be
eligible for the 70% dividends-received deduction because the Fund's income will
not consist of dividends paid by domestic corporations.
Dividends paid from the net capital gains of a Fund and designated as capital
gain dividends will be taxable to shareholders as long-term capital dividends,
regardless of the length of time for which they have held their shares in the
Fund.
Generally, gain or loss on the sale or exchange of a share of a Fund will be
capital gain or loss, which will be long-term if the share is held for more than
one year. A loss realized on a sale or exchange will be disallowed if the shares
disposed of are replaced within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of. If a shareholder realizes a
loss on the sale or exchange of a share held for six months or less and such
shareholder has previously received a capital gain distribution with respect to
the share, the loss must be treated as a long-term capital loss to the extent of
the amount of such prior capital gain distribution.
Each Fund sends its shareholders an annual statement detailing federal tax
information, including information about distributions paid during the preceding
year. Distributions by each Fund, including the amount of any redemptions, are
reported to Fund shareholders and to the Internal Revenue Service to the extent
required by the Code.
International Equity Fund 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 investment income. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes. If at the end of
International Equity Fund's fiscal year more than 50% of its total assets
consist of securities of foreign corporations, the Fund will be eligible to file
an election with the Internal Revenue Service pursuant to which the Fund may
"pass through" to the shareholders the amount of foreign income taxes paid by
the Fund with respect to its direct holdings of stock or securities in foreign
corporations. If this election is made, shareholders of International Equity
Fund will be required to include their respective pro rata portions of such
withholding taxes as gross income, treat such amounts as foreign taxes paid by
them, and deduct such amounts in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their federal income
taxes. International Equity Fund will make such an election only if it deems
such election to be in the best interests of its shareholders.
This is a general summary of the federal tax law in effect as of the date of
this Prospectus. See the Statement of Additional Information for further
details. Before investing in the Funds, you should check the consequences of
your local and state tax laws.
INVESTMENT PERFORMANCE
Advertisements and other sales literature for the Funds may refer to average
annual total return and cumulative total return and may compare such performance
quotations with published indices and comparable quotations of other funds.
Performance quotations are computed separately for Class A, Class B and Class C
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 Class
A, Class B and Class C 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 of the Funds will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average annual total return is the average annual compounded rate of return on 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 the 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 load is deducted.
In reports or other communications to Fund shareholders and in advertising
material, the Funds may compare their performance with (1) the performance of
other mutual funds (or classes thereof) as listed in rankings prepared by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. or similar
investment services that monitor the performance of mutual funds or as set out
in the nationally recognized publications listed below, (2) the Dow Jones
Industrial Average, the Standard & Poor's 500 Composite Stock Price Index, the
Russell 2000 and the Russell 5000, each of which is an unmanaged index of common
stocks or (3) other appropriate indexes of investment securities or with data
derived from those indexes. The Funds may also include in communications to Fund
shareholders evaluations of a Fund published by nationally recognized ranking
services and by financial publications that are nationally recognized, such as
Barron's, Business Week, Forbes, Institutional Investor, Investor's Daily,
Money, Kiplinger's Personal Finance Magazine, Morningstar Mutual Fund Values,
The New York Times, USA Today and The Wall Street Journal. Performance
comparisons should not be considered as representative of a Fund's performance
for any future period.
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 a Fund's average annual total return and cumulative total
return, see "Calculation of Performance Data" in the Statement of Additional
Information.
GENERAL INFORMATION
Each Fund sends its shareholders six-month unaudited and annual audited
financial statements which include a list of investment securities held by the
Fund.
Growth and Income Fund was organized as Series D of Voyageur Mutual Funds III,
Inc. (the "Company") in April 1995. Growth Stock Fund was organized in January
1985 and was converted to Series A of the Company in October 1993. Aggressive
Growth and International Equity Funds were established in 1994 as Series B and C
of the Company. The Company was converted to a series fund and the name changed
in October 1993. The Company's Amended and Restated Articles of Incorporation
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.
Each Fund currently offers its shares in three classes, each with different
sales arrangements and bearing different expenses. Class A, Class B and Class C
shares each represent interests in the assets of the Fund and have identical
voting, dividend, liquidation and other rights on the same terms and conditions
except that expenses related to the distribution of each class are borne solely
by such class and each class of shares has exclusive voting rights with respect
to provisions of the Fund's Rule 12b-1 distribution plan which pertain to a
particular class and other matters for which separate class voting is
appropriate under applicable law.
Fund shares are freely transferable, are entitled to dividends as declared by
the Board of Directors, and, in liquidation of a Fund, are entitled to receive
the net assets of the applicable 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
values of the 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 or class, the shares of the affected series or class vote as a
separate series or class. An example of such an issue would be a fundamental
investment restriction pertaining to only one 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 or such
other method as the Directors, or Voyageur with the supervision of the
Directors, may determine.
The Company's Amended and Restated Articles of Incorporation limit liability of
the Company's Directors to the fullest extent permitted by law. For a further
discussion of the above matters, see "Additional Information" in the Statement
of Additional Information.
NO DEALER, SALES REPRESENTATIVE OR OTHER 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
VOYAGEUR GROWTH AND INCOME FUND
VOYAGEUR GROWTH STOCK FUND
VOYAGEUR INTERNATIONAL EQUITY FUND
VOYAGEUR AGGRESSIVE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 1, 1995
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Prospectus of the Funds dated September 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.
TABLE OF CONTENTS
Page
Investment Policies And Restrictions B-2
Directors And Executive Officers of The Company B-21
The Underwriter; Advisory, Sub-Advisory and Administrative
Services Agreements; Expenses; Distribution Expenses; And Brokerage B-24
Distributions to Shareholders And Taxes B-33
Net Asset Value And Public Offering Price B-35
Special Purchase Plans B-36
Calculation of Performance Data B-40
Monthly Cash Withdrawal Plan B-41
Additional Information B-42
Appendix A -- Common Stock, Corporate Bond, Preferred Stock
and Commercial Paper Ratings A-1
Appendix B -- Stock Index Futures Contracts and Related Options B-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 September 1, 1995, and, if given or made,
such information or representations may not be relied upon as having been
authorized by the Fund. 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 a Fund since the date hereof.
INVESTMENT POLICIES AND RESTRICTIONS
The investment objectives and policies of Voyageur Growth and Income Fund
("Growth and Income Fund"), Voyageur Growth Stock Fund ("Growth Stock Fund"),
Voyageur International Equity Fund ("International Equity Fund") and Voyageur
Aggressive Growth Fund (the "Aggressive Growth Fund") (collectively, the
"Funds") are set forth in the combined Prospectus relating to the Funds. Each
Fund is a series of Voyageur Mutual Funds III, Inc. (the "Company"), an open-end
investment company which currently offers its shares in four series.
Supplemental information is set out below concerning certain of the securities
and other instruments in which the Funds may invest, the investment techniques
and strategies that the Funds may utilize and certain risks involved with those
investments, techniques and strategies.
GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("Government Securities") in which the Funds may invest
include debt obligations of varying maturities issued by the U.S. Treasury or
issued or guaranteed by an agency or instrumentality of the U.S. Government,
including the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration,
Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks, Federal National Mortgage Association, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Student Loan Marketing Association and Resolution Trust Corporation. Direct
obligations of the United States Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. Because the
U.S. Government is not obligated by law to provide support to an instrumentality
that it sponsors, each Fund invests in obligations issued by an instrumentality
of the U.S. Government only if the Fund's investment sub-adviser ("the
Sub-Adviser") (in the case of Growth and Income Fund and International Equity
Fund), or Voyageur Fund Managers, Inc., the Fund's investment adviser
("Voyageur" or the "Adviser"), determines that the instrumentality's credit risk
does not make its securities unsuitable for investment by a Fund.
REPURCHASE AGREEMENTS
The Funds may invest in repurchase agreements. When investing in a
repurchase agreement, a Fund purchases a security and obtains a simultaneous
commitment from the seller to repurchase the security at an agreed upon price
and date. The resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the purchased security.
Generally, repurchase agreements are of short duration--usually less than a
week--but on occasion may be for longer periods. Such transactions afford the
Funds the opportunity to earn a return on temporarily available cash. While the
underlying security may be a bill, certificate of indebtedness, note or bond
issued by an agency, authority or instrumentality of the U. S. Government, the
obligation of the seller is not guaranteed by the U. S. Government and there is
a risk that the seller may fail to repurchase the underlying security. In such
event, the respective Fund would attempt to dispose of the underlying security
in the market or would hold the underlying security until maturity. However, in
the case of a repurchase agreement construed by the courts as a collateralized
loan or an executory contract, the respective Fund may be subject to various
delays and risks of loss in attempting to dispose of the underlying security,
including (a) possible declines in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (b) possible
reduced levels of income and lack of access to income during this period, and
(c) expenses involved in the enforcement of the Fund's rights.
The Funds' custodian will hold the securities underlying any repurchase
agreement or such securities may 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 respective Fund will promptly receive
additional collateral (so the total collateral is an amount at least equal to
the repurchase price plus accrued interest).
The use of repurchase agreements also involves certain risks. For example,
if the seller of the agreement defaults on its obligation to repurchase the
underlying securities at a time when the value of those securities has declined,
the respective Fund may incur a loss upon their disposition. In addition, if the
seller of the agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court may
determine that the underlying securities are collateral not within the control
of the respective Fund and therefore subject to sale by the trustee in
bankruptcy.
Investments in repurchase agreements by the Funds will be only for
defensive or temporary purposes. Each Fund will limit its investment in
repurchase agreements with a maturity of more than seven days to 15% of the
Fund's net assets (subject to the Fund's collective 15% limitation regarding
illiquid investments). See "Investment Policies and Limitations--Illiquid
Investments," below.
ILLIQUID INVESTMENTS
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 acknowledged
that a market exists for certain restricted securities (for example, securities
qualifying for resale to certain "qualified institutional buyers" pursuant to
Rule 144A under the 1933 Act, certain forms of interest-only and principal-only,
mortgaged-backed U.S. Government securities and commercial paper issued pursuant
to the private placement exemption of Section 4(2) of the 1933 Act). Each Fund
may invest without limitation in these forms of restricted securities if such
securities are deemed by the Adviser or the Sub-Adviser, as the case may be, to
be liquid in accordance with standards established by the Fund's Board of
Directors. Under these guidelines, the Adviser or the Sub-Adviser must consider
(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.
INVESTMENT TECHNIQUES AND STRATEGIES
Each Fund may purchase put and call options and engage in the writing of
covered call options and secured put options, and employ a variety of other
investment techniques. Specifically, each Fund may engage in the purchase and
sale of stock index future contracts, interest rate futures contracts, and
options on such futures, and International Equity Fund may engage in the
purchase and sale of foreign currency futures contracts, all as described more
fully below. Such investment policies and techniques may involve a greater
degree of risk than those inherent in more conservative investment approaches.
The Funds will engage in such transactions only to hedge existing
positions. They will not engage in such transactions for the purposes of
speculation or leverage.
The Funds will not engage in such options or futures transactions unless
they receive any necessary regulatory approvals permitting them to engage in
such transactions.
Options on Securities. To hedge against adverse market shifts, a Fund may
purchase put and call options on securities held in its portfolio. In addition,
a Fund may seek to increase its income in an amount designed to meet operating
expenses or may hedge a portion of its portfolio investments through writing
(that is, selling) "covered" put and call options. A put option provides its
purchaser with the right to compel the writer of the option to purchase from the
option holder an underlying security at a specified price at any time during or
at the end of the option period. In contrast, a call option gives the purchaser
the right to buy the underlying security covered by the option from the writer
of the option at the stated exercise price. A covered call option contemplates
that, for so long as the Fund is obligated as the writer of the option, it will
own (1) the underlying securities subject to the option or (2) securities
convertible into, or exchangeable without the payment of any consideration for,
the securities subject to the option. The value of the underlying securities on
which covered call options will be written at any one time by a Fund will not
exceed 25% of the Fund's total assets. 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.
Each Fund may purchase options on securities that are listed on securities
exchanges or, with respect to Growth and Income, International Equity and
Aggressive Growth Funds, that are traded over-the-counter. As the holder of a
put option, a Fund has the right to sell the securities underlying the option
and as the holder of a call option, a Fund has the right to purchase the
securities underlying the option, in each case at the option's exercise price at
any time prior to, or on, the option's expiration date. A Fund may choose to
exercise the options it holds, permit them to expire or terminate them prior to
their expiration by entering into closing sale transactions. In entering into a
closing sale transaction, a Fund would sell an option of the same series as the
one it has purchased.
A Fund receives a premium when it writes call options, which increases the
Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, a Fund limits its
opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Fund's
obligation as writer of the option continues. A Fund receives a premium when it
writes put options, which increases such Fund's return on the underlying
security in the event the option expires unexercised or is closed out at a
profit. By writing a put, a Fund limits its opportunity to profit from an
increase in the market value of the underlying security above the exercise price
of the option for as long as the Fund's obligation as writer of the option
continues. Thus, in some periods, a Fund will receive less total return and in
other periods greater total return from its hedged positions than it would have
received from its underlying securities if unhedged.
In purchasing a put option, a Fund seeks to benefit from a decline in the
market price of the underlying security, whereas in purchasing a call option, a
Fund seeks to benefit from an increase in the market price of the underlying
security. If an option purchased is not sold or exercised when it has remaining
value, or if the market price of the underlying security remains equal to or
greater than the exercise price, in the case of a put, or remains equal to or
below the exercise price, in the case of a call, during the life of the option,
the Fund will lose its investment in the option. For the purchase of an option
to be profitable, the market price of the underlying security must decline
sufficiently below the exercise price, in the case of a put, and must increase
sufficiently above the exercise price, in the case of a call, to cover the
premium and transaction costs. Because option premiums paid by the Fund are
small in relation to the market value of the investments underlying the options,
buying options can result in large amounts of leverage. The leverage offered by
trading in options could cause the Fund's net asset value to be subject to more
frequent and wider fluctuations than would be the case if the Fund did not
invest in options.
Over-the-Counter ("OTC") Options. Each of Growth and Income, International
Equity and Aggressive Growth Funds may purchase OTC options. OTC options differ
from exchange-traded options in several respects. They are transacted directly
with dealers and not with a clearing corporation, and there is a risk of
non-performance by the dealer. However, the premium is paid in advance by the
dealer. OTC options are available for a greater variety of securities and
foreign currencies, and in a wider range of expiration dates and exercise prices
than exchange-traded options. Since there is no exchange, pricing is normally
done by reference to information from a market maker, which information is
carefully monitored or caused to be monitored by Voyageur or the Sub-Adviser, as
the case may be, and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options, there
can be no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Fund writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which it originally wrote the option. If a
covered call option writer cannot effect a closing transaction, it cannot sell
the underlying security or foreign currency until the option expires or the
option is exercised. Therefore, the writer of a covered OTC call option may not
be able to sell an underlying security even though it might otherwise be
advantageous to do so. Likewise, the writer of a covered OTC put option may be
unable to sell the securities pledged to secure the put for other investment
purposes while it is obligated as a put writer. Similarly, a purchaser of an OTC
put or call option might also find it difficult to terminate its position on a
timely basis in the absence of a secondary market.
A Fund may purchase and write over-the-counter ("OTC") put and call options
in negotiated transactions. The staff of the Securities and Exchange Commission
has previously taken the position that the value of purchased OTC options and
the assets used as "cover" for written OTC options are illiquid securities and,
as such, are to be included in the calculation of a Fund's 15% limitation on
illiquid securities. However, the staff has eased its position somewhat in
certain limited circumstances. A Fund will attempt to enter into contracts with
certain dealers with which it writes OTC options. Each such contract will
provide that the Fund has the absolute right to repurchase the options it writes
at any time at a repurchase price which represents the fair market value, as
determined in good faith through negotiation between the parties, but which in
no event will exceed a price determined pursuant to a formula contained in the
contract. Although the specific details of such formula may vary among
contracts, the formula will generally be based upon a multiple of the premium
received by the Fund for writing the option, plus the amount, if any, of the
option's intrinsic value. The formula will also include a factor to account for
the difference between the price of the security and the strike price of the
option. If such a contract is entered into, the Fund will count as illiquid only
the initial formula price minus the option's intrinsic value.
A Fund will enter into such contracts only with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York. Moreover,
such primary dealers will be subject to the same standards as are imposed upon
dealers with which the Fund enters into repurchase agreements.
Securities Index Options. In seeking to hedge all or a portion of its
investment, a Fund may purchase and write put and call options on securities
indexes listed on securities exchanges, which indexes include securities held in
the Fund's portfolio.
A securities index measures the movement of a certain group of stocks or
debt securities by assigning relative values to the securities included in the
index. Options on securities indexes are generally similar to options on
specific securities. Unlike options on specific securities, however, options on
securities indexes do not involve the delivery of an underlying security; the
option in the case of an option on a stock index represents the holder's right
to obtain from the writer in cash a fixed multiple of the amount by which the
exercise price exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying stock index on the exercise date.
When a Fund writes an option on a securities index, it will establish a
segregated account with its custodian, or a designated sub-custodian, in which
the Fund will deposit cash, U.S. Government Securities or other liquid high
grade debt obligations in an amount equal to the market value of the option, and
will maintain the account while the option is open.
Securities index options are subject to position and exercise limits and
other regulations imposed by the exchange on which they are traded. If a Fund
writes a securities index option, it may terminate its obligation by effecting a
closing purchase transaction, which is accomplished by purchasing an option of
the same series as the option previously written. The ability of a Fund to
engage in closing purchase transactions with respect to securities index options
depends on the existence of a liquid secondary market. Although a Fund generally
purchases or writes securities index options only if a liquid secondary market
for the options purchased or sold appears to exist, no such secondary market may
exist, or the market may cease to exist at some future date, for some options.
No assurance can be given that a closing purchase transaction can be effected
when the Fund desires to engage in such a transaction.
Risks Relating to Purchase and Sale of Options on Stock Indexes. Purchase
and sale of options on stock indexes by a Fund are subject to certain risks that
are not present with options on securities. Because the effectiveness of
purchasing or writing stock index options as a hedging technique depends upon
the extent to which price movements in the Fund's portfolio correlate with price
movements in the level of the index rather than the price of a particular stock,
whether the Fund will realize a gain or loss on the purchase or writing of an
option on an index depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indexes, in an industry or
market segment, rather than movements in the price of a particular stock.
Accordingly, successful use by a Fund of options on indexes will be subject to
the ability of Voyageur or the Sub-Adviser, as the case may be, to correctly
predict movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks. In the event a Fund's
adviser is unsuccessful in predicting the movements of an index, such Fund could
be in a worse position than had no hedge been attempted.
Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, a Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, might be unable to exercise an option it holds, which
could result in substantial losses to such Fund. However, it will be each Fund's
policy to purchase or write options only on indexes which include a sufficient
number of stocks so that the likelihood of a trading halt in the index is
minimized.
Short Sales Against the Box. Each Fund may sell securities "short against
the box." Whereas a short sale is the sale of a security the Fund does not own,
a short sale is "against the box" if at all times during which the short
position is open, the Fund owns at least an equal amount of the securities or
securities convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities sold short. Short sales against
the box are typically used by sophisticated investors to defer recognition of
capital gains or losses.
Futures Contracts and Options on Futures Contracts. Each Fund may purchase
and sell stock index futures contracts. The purpose of the acquisition or sale
of a futures contract by a Fund is to hedge against fluctuations in the value of
its portfolio without actually buying or selling securities. The futures
contracts in which a Fund may invest have been developed by and are traded on
national commodity exchanges. Stock index futures contracts may be based upon
broad-based stock indexes such as the S&P 500 or upon narrow-based stock
indexes. A buyer entering into a stock index futures contract will, on a
specified future date, pay or receive a final cash payment equal to the
difference between the actual value of the stock index on the last day of the
contract and the value of the stock index established by the contract. The Fund
may assume both "long" and "short" positions with respect to futures contracts.
A long position involves entering into a futures contract to buy a commodity,
whereas a short position involves entering into a futures contract to sell a
commodity.
The purpose of trading futures contracts is to protect a Fund from
fluctuations in value of its investment securities without necessarily buying or
selling the securities. Because the value of a Fund's investment securities will
exceed the value of the futures contracts sold by a Fund, an increase in the
value of the futures contracts could only mitigate, but not totally offset, the
decline in the value of the Fund's assets. No consideration is paid or received
by a Fund upon trading a futures contract. Upon trading a futures contract, a
Fund will be required to deposit in a segregated account with its custodian, or
designated sub-custodian, an amount of cash, short-term Government Securities or
other U.S. dollar-denominated, high-grade, short-term money market instruments
equal to approximately 1% to 10% of the contract amount (this amount is subject
to change by the exchange on which the contract is traded and brokers may charge
a higher amount). This amount is known as "initial margin" and is in the nature
of a performance bond or good faith deposit on the contract that is returned to
the Fund upon termination of the futures contract, assuming that all contractual
obligations have been satisfied; the broker will have access to amounts in the
margin account if the Fund fails to meet its contractual obligations. Subsequent
payments, known as "variation margin," to and from the broker, will be made
daily as the price of the currency or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract more or
less valuable, a process known as "marking-to-market." At any time prior to the
expiration of a futures contract, a Fund may elect to close a position by taking
an opposite position, which will operate to terminate the Fund's existing
position in the contract.
Each short position in a futures or options contract entered into by a Fund
is secured by the Fund's ownership of underlying securities. The Funds do not
use leverage when they enter into long futures or options contracts; each Fund
places in a segregated account with its custodian, or designated sub-custodian,
with respect to each of its long positions, cash or money market instruments
having a value equal to the underlying commodity value of the contract.
The Funds may trade stock index futures contracts to the extent permitted
under rules and interpretations adopted by the Commodity Futures Trading
Commission (the "CFTC"). U.S. futures contracts have been designed by exchanges
that have been designated as "contract markets" by the CFTC, and must be
executed through a futures commission merchant, or brokerage firm, that is a
member of the relevant contract market. Futures contracts trade on a number of
contract markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing members of the
exchange.
The Funds intend to comply with CFTC regulations and avoid "commodity pool
operator" status. These regulations require that a Fund use futures and options
positions (a) for "bona fide hedging purposes" (as defined in the regulations)
or (b) for other purposes so long as aggregate initial margins and premiums
required in connection with non-hedging positions do not exceed 5% of the
liquidation value of the Fund's portfolio. The Funds currently do not intend to
engage in transactions in futures contracts or options thereon for speculation,
but will engage in such transactions only for bona fide hedging purposes.
Risks of Transactions in Futures Contracts and Options on Futures
Contracts.
Holding Risks in Futures Contracts Transactions. There are several risks in
using stock index futures contracts as hedging devices. 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 or
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 stock index futures contracts, the risk of
imperfect correlation increases as the composition of a Fund's portfolio
diverges from the securities included in the applicable stock index. It is
possible that a Fund might sell stock index futures contracts to hedge its
portfolio against a decline in the market, only to have the market advance and
the value of securities held in the Fund's portfolio decline. If this occurred,
the Fund would lose money on the contracts and also experience a decline in the
value of its portfolio securities. While this could occur, Voyageur and the
Sub-Advisers believe that over time the value of a Fund's portfolio will tend to
move in the same direction as the market indexes and will attempt to reduce this
risk, to the extent possible, by entering into futures contracts on indexes
whose movements they believe will have a significant correlation with movements
in the value of the Fund's portfolio securities sought to be hedged.
Successful use of futures contracts by a Fund is subject to the ability of
Voyageur or the Sub-Adviser, as the case may be, to predict correctly movements
in the direction of interest rates or the 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 would 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
a 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. A 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, a 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 and Special Considerations of Options on Futures Contracts. The use
of options 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 on futures contracts 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 on a futures
contract generates a premium which may partially offset a decline in the value
of a Fund's portfolio assets. By writing a call option, a Fund becomes obligated
to sell a futures contract, which may have a value higher than the exercise
price. Conversely, the writing of a put option on a futures contract generates a
premium, but the Fund becomes obligated to purchase a futures contract, which
may have a value lower than the exercise price. Thus, the loss incurred by a
Fund in writing options on futures contracts 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 Voyageur or
the Sub-Adviser deems it desirable to do so. Although a Fund will enter into an
option position only if Voyageur, or the Sub-Adviser, as the case may be,
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 on futures contracts will
be based upon predictions as to anticipated interest rates or market trends by
Voyageur or the Sub-Adviser, which could prove to be inaccurate. Even if the
expectations of the adviser or sub-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.
Investments in futures contracts and related options by their nature tend
to be more short-term than other equity investments made by the Funds. Each
Fund's ability to make such investments, therefore, may result in an increase in
such Fund's portfolio activity and thereby may result in the payment of
additional transaction costs.
The Internal Revenue Code of 1986, as amended (the "Code"), forbids each
Fund from earning more than 30% of its gross income from the sale or other
disposition of certain investments, including futures contracts and options
thereon, which are owned for less than three months. The likelihood of violating
this 30% test is increased by the amount of investing a Fund does in futures
contracts and related options. Additionally, the Code requires each Fund to
diversify its investment holdings. The Internal Revenue Service position
regarding the treatment of futures contracts and related options for
diversification purposes is not clear, and the extent to which a Fund may engage
in these transactions may be limited by this requirement. The Code also provides
that, with respect to certain futures contracts and options held by a Fund at
the end of its taxable year, unrealized gain or loss on such contracts may have
to be recognized for tax purposes under a special system within the Code. The
actual gain or loss recognized by the Fund in an eventual disposition of such
contract, however, will be adjusted by the amount of the gain or loss recognized
earlier under the Code's system. See "Distributions to Shareholders and Taxes."
For more information on stock index futures contracts and related options, see
Appendix B.
FOREIGN CURRENCY TRANSACTIONS
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. These contracts are traded directly
between currency traders (usually large commercial banks) and their customers.
International Equity Fund will not enter into such forward contracts or
maintain a net exposure in such contracts where it would be obligated to deliver
an amount of foreign currency in excess of the value of its portfolio securities
and other assets denominated in that currency. The Sub-Adviser believes that it
is important to have the flexibility to enter into such forward contracts when
it determines that to do so is in the Fund's best interests.
A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price at a specified
date or during the option period. A call option gives its owner the right, but
not the obligation, to buy the currency, while a put option gives its owner the
right, but not the obligation, to sell the currency. The option seller (writer)
is obligated to fulfill the terms of the option sold if it is exercised.
However, either seller or buyer may close its position during the option period
for such options any time prior to expiration.
LENDING PORTFOLIO SECURITIES.
Although International Equity Fund has no current intention to do so, the
Fund may lend its portfolio securities to member firms of the New York Stock
Exchange and commercial banks with assets of one billion dollars or more,
provided the value of the securities loaned from the Fund will not exceed 10% of
the Fund's assets. Any such loans must be secured continuously in the form of
cash or cash equivalents such as U.S. Treasury bills, the amount of the
collateral must on a current basis equal or exceed the market value of the
loaned securities, and the Fund must be able to terminate such loans upon notice
at any time. The Fund will exercise its right to terminate a securities loan in
order to preserve its right to vote upon matters of importance affecting holders
of the securities.
The advantage of such loans is that the Fund continues to receive the
equivalent of the interest earned or dividends paid by the issuers on the loaned
securities while at the same time earning interest on the cash equivalent
collateral which may be invested in accordance with the Fund's investment
objective, policies and restrictions.
Securities loans are usually made to broker-dealers and other financial
institutions to facilitate their delivery of such securities. As with any
extension of credit, there may be risks of delay in recovery and possibly loss
of rights in the loaned securities should the borrower of the loaned securities
fail financially. However, the Fund will make loans of its portfolio securities
only to those firms the Adviser or Sub-Adviser deems creditworthy and only on
such terms the Adviser or Sub-Adviser believes should compensate for such risk.
On termination of the loan the borrower is obligated to return the securities to
the Fund. The Fund will realize any gain or loss in the market value of the
securities during the loan period. The Fund may pay reasonable custodial fees in
connection with the loan.
FOREIGN SECURITIES
International Equity Fund invests primarily in foreign securities.
Additional costs may be incurred which are related to any international
investment, since foreign brokerage commissions and the custodial costs
associated with maintaining foreign portfolio securities are generally higher
than in the United States. Fee expense may also be incurred on currency
exchanges when the Fund changes investments from one country to another or
converts foreign securities holdings into U.S. dollars. Foreign companies and
foreign investment practices are not subject to uniform accounting, auditing and
financial reporting standards and practices or regulatory requirements
comparable to those applicable to United States companies. There may be less
public information available about foreign companies.
United States Government policies have at times in the past, through
imposition of interest equalization taxes and other restrictions, discouraged
United States investors from making certain investments abroad. While such taxes
or restrictions are not presently in effect they may be reinstituted from time
to time as a means of fostering a favorable United States balance of payments.
In addition, foreign countries may impose withholding and taxes on dividends and
interest. See "Risk Factors and Special Considerations" in the Prospectus.
CREDIT QUALITY
Any bond in which the Funds invest will be rated investment grade. As has
been the industry practice, this determination of credit quality is made at the
time a Fund acquires the bond. However, because it is possible that subsequent
downgrades could occur, if a bond held by a Fund is later downgraded, Voyageur
or the Fund's Sub-Adviser, as the case may be, under the supervision of the
Board of Directors, will consider whether it is in the best interest of the
Fund's shareholders to hold or to dispose of the bond. Among the criteria that
may be considered by Voyageur or the Sub-Adviser, as the case may be, and the
Board are the probability that the bonds will be able to make scheduled interest
and principal payments in the future, the extent to which any devaluation of the
bond has already been reflected in the Fund's net asset value, and the total
percentage, if any, of bonds currently rated below investment grade held by the
Fund. In no event, however, will a Fund invest more than 5% of its net assets in
bonds rated lower than investment grade.
Non-investment grade securities have moderate to poor protection of
principal and interest payments and have speculative characteristics. They
involve greater risk of default or price declines due to changes in the issuer's
creditworthiness than investment-grade debt securities. Because the market for
lower-rated securities may be thinner and less active than for higher-rated
securities, there may be market price volatility for these securities and
limited liquidity in the resale market. Market prices for these securities may
decline significantly in periods of general economic difficulty or rising
interest rates.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions. Certain of these
restrictions are fundamental policies of a Fund. Under the Investment Company
Act of 1940, as amended (the "1940 Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the 1940 Act.
The following investment restrictions have been adopted by each of the
Aggressive Growth and Growth and Income Funds as fundamental policies:
1. The Fund will not borrow money, except that the Fund may borrow
from banks for temporary or emergency (not leveraging) purposes, including
the meeting of redemption requests and cash payments of dividends and
distributions that might otherwise require the untimely disposition of
securities, in an amount not to exceed 20% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made.
Whenever borrowings exceed 5% of the value of the total assets of the Fund,
the Fund will not make any additional investments.
2. The Fund will not lend money to other persons, except through
purchasing debt obligations, lending portfolio securities and entering into
repurchase agreements.
3. The Fund will invest no more than 25% of the value of its total
assets in securities of issuers in any one industry. For purposes of this
restriction, the term industry will be deemed to include the government of
any country other than the United States, but not the U.S. Government.
4. The Fund will not purchase or sell real estate or real estate
limited partnership interests, except that the Fund may purchase and sell
securities of companies that deal in real estate or interests in real
estate.
5. The Fund will not purchase or sell commodities or commodity
contracts, except futures contracts and related options and other similar
contracts.
6. The Fund will not act as an underwriter of securities, except that
the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for
purposes of the Securities Act of 1933, as amended.
Aggressive Growth and Growth and Income Funds have adopted the following
operating (i.e. non-fundamental) investment policies and restrictions which may
be changed by the Board of Directors without shareholder approval. In each case:
1. The Fund will not invest in oil, gas or other mineral leases or
exploration or development programs.
2. The Fund will not purchase any investment company security, other
than a security acquired pursuant to a plan of reorganization or an offer
of exchange, if as a result of the purchase (a) the Fund would own more
than 3% of the total outstanding voting securities of any investment
company, (b) more than 5% of the value of the Fund's total assets would be
invested in securities of any one investment company or (c) more than 10%
or the Fund's total assets would be invested in securities issued by
investment companies.
3. The Fund will not participate on a joint or joint-and-several basis
in any securities trading account.
4. The Fund will not make investments for the purpose of exercising
control or management.
5. The Fund will not purchase any security, if as a result of the
purchase, the Fund would then have more than 5% of its total assets
invested in securities of companies (including predecessors) that have been
in continuous operation for fewer than three years.
6. The Fund will not purchase or retain securities of any issuer if,
to the knowledge of the Fund, any of the Company's Directors or officers or
any officer or director of the Adviser or Sub-Adviser individually owns
more than 0.5% of the outstanding securities of the company and together
they own beneficially more than 5% of the securities.
7. The Fund will not invest in warrants (other than warrants acquired
by the Fund as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower of cost or
market) would exceed 5% of the value of the Fund's net assets of which not
more than 2% of the Fund's net assets may be invested in warrants not
listed on a recognized foreign or domestic stock exchange.
8. The Fund will not purchase securities on margin, except that the
Fund may obtain any short-term credits necessary for the clearance of
purchases and sales of securities. For purposes of this restriction, the
deposit or payment of initial or variation margin in connection with
futures contracts or options on futures contracts will not be deemed to be
a purchase of securities on margin.
9. The Fund will not make short sales of securities or maintain a
short position, unless at all times when a short position is open, the Fund
owns an equal amount of the securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities
of the same issue as, and equal in amount to, the securities sold short.
In addition, subject to the Aggressive Growth Fund's investment policies
and restrictions as set forth in the Prospectus and in this Statement of
Additional Information, as a nonfundamental policy, the Fund may not invest more
than 15% of its assets, collectively, in illiquid investments and securities of
foreign issuers which are not listed on a recognized domestic or foreign
securities exchange.
The Growth Stock Fund has adopted the following investment restrictions as
fundamental policies. The Growth Stock Fund may not:
1. Invest more than 5% of the value of its total assets in the
securities of any one issuer (other than securities of the U. S. Government
or its agencies or instrumentalities).
2. Purchase more than 10% of any class of securities of any one issuer
(taking all preferred stock issues of an issuer as a single class and all
debt issues of an issuer as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer.
3. Concentrate its investments in any particular industry; however, it
may invest up to 25% of the value of its total assets in the securities of
issuers conducting their principal business activities in any one industry.
4. Invest more than 5% of the value of its total assets in the
securities of any issuers which, with their predecessors, have a record of
less than three years' continuous operation. (Securities of such issuers
will not be deemed to fall within this limitation if they are guaranteed by
an entity in continuous operation for more than three years.)
5. Issue any senior securities (as defined in the 1940 Act), except to
the extent that using options and futures contracts may be deemed to
constitute issuing a senior security.
6. Borrow money, except from banks for temporary or emergency purposes
in an amount not exceeding 5% of the value of the Fund's total assets.
7. Mortgage, pledge or hypothecate its assets except in an amount not
exceeding 10% of the value of its total assets, to secure temporary or
emergency borrowing. For purposes of this policy, collateral arrangements
for margin deposits on futures contracts or with respect to the writing of
options are not deemed to be a pledge of assets.
8. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter under federal securities laws.
9. Purchase or sell real estate or real estate mortgage loans, except
the Fund may purchase or sell securities issued by companies owning real
estate or interests therein.
10. Purchase or sell oil, gas or other mineral leases, rights or
royalty contracts, except the Fund may purchase or sell securities of
companies investing in the foregoing.
11. Purchase or sell commodities or commodities futures contracts,
except that it may enter into financial futures contracts and engage in
related options transactions.
12. Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, those officers or directors of the Fund or its affiliates or of
its investment adviser or sub-adviser who individually own beneficially
more than 0.5% of the outstanding securities of such issuer, together own
beneficially more than 5% of such outstanding securities.
13. Make loans to other persons, except to the extent that repurchase
agreements are deemed to be loans under the 1940 Act, and except that it
may purchase debt securities as described in the Prospectus under
"Investment Objectives and Policies." The purchase of a portion of an issue
of bonds, debentures or other debt securities distributed to the public or
to financial institutions will not be considered the making of a loan.
14. Purchase securities on margin, except that it may obtain such
short-term credits as may be necessary for the clearance of purchases or
sales of securities and except that it may make margin deposits in
connection with futures contracts.
15. Participate on a joint or a joint and several basis in any
securities trading account.
16. Write, purchase or sell puts, calls or combinations thereof,
except that it may (a) purchase or write put and call options on stock
indexes listed on national securities exchanges, (b) write and purchase put
and call options with respect to the securities in which it may invest and
(c) engage in financial futures contracts and related options transactions.
17. Make short sales except where, by virtue of ownership of other
securities, it has the right to obtain without payment of further
consideration, securities equivalent in kind and amount to those sold.
18. Invest for the purpose of exercising control or management.
19. Invest more than 5% of the value of its total assets in the
securities of any single investment company or more than 10% of the value
of its total assets in the securities of two or more investment companies
except as part of a merger, consolidation or acquisition of assets.
20. Invest more than 15% of its net assets in illiquid investments.
International Equity Fund has adopted the following restrictions as
fundamental policies. International Equity Fund may not:
1. 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 United States
Government or its agencies and instrumentalities, and repurchase agreements
secured thereby.
2. Make loans, except through loaned portfolio securities, the
purchase of debt obligations in which the Fund may invest in accordance
with its investment objective and policies or repurchase agreements.
3. 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.
4. Borrow money, except from banks for temporary or emergency purposes
and then only in an amount up to 20% of the value of the Fund's total
assets. In order to secure any permitted borrowings under this section, the
Fund may pledge, mortgage or hypothecate its assets.
5. Issue any senior securities, as defined in the 1940 Act, other than
as set forth in restriction #4 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.
6. 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.
The Fund has adopted the following operating (i.e., non-fundamental)
investment policies and restrictions which may be changed by the Board of
Directors without shareholder approval. The Fund may not:
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. The Fund may buy
and sell securities outside the U.S. that are not registered with the
Securities and Exchange Commission or marketable in the U.S.
3. Purchase or retain securities of any issuer if the officers and
directors of the Fund or its Adviser and Sub-Adviser, owning beneficially
more than 1/2 of 1% of the securities of such issuer, together own
beneficially more than 5% of 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 or if more than 2% of the
Fund's net assets would be invested in warrants not listed on a recognized
foreign or domestic stock exchange.
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 program.
6. Invest more than 5% of its total assets in securities of any single
investment company, or more than 10% of its total assets in securities of
two or more investment companies, except as part of a merger, consolidation
or acquisition of assets.
7. Purchase any securities on margin except that the 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 the 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.
Each Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of the Fund's shares in certain states.
Should a Fund determine that a commitment is no longer in the best interests of
the Fund and its shareholders, the Fund will revoke the commitment by
terminating the sale of the Fund's shares in the state involved.
For purposes of a Fund's concentration policy, each Fund intends 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.
Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the applicable percentage occurs immediately after an acquisition of
securities or utilization of assets and such excess results therefrom.
DIVERSIFICATION
Each Fund intends to operate as a "diversified" management investment
company, as defined in the 1940 Act, which means that at least 75% of its total
assets must be represented by cash and cash items (including receivables), U.S.
Government securities, securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of total assets of
such Fund and to not more than 10% of the outstanding voting securities of such
issuer.
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 such 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 such 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 Fund's investment adviser or sub-adviser, as the case
may be. Frequent portfolio trades may result in higher transaction and other
costs for a Fund.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Directors and officers of 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 or officers
of various closed-end and open-end investment companies managed by Voyageur.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S) DURING
NAME, ADDRESS, AND AGE POSITION PAST FIVE YEARS AND OTHER AFFILIATIONS
<S> <C> <C>
Clarence G. Frame, 76 Director Of counsel, Briggs & Morgan law firm.
First National Bank
Building, W-875
332 Minnesota Street
St. Paul, Minnesota 55101
Richard F. McNamara, 61 Director Chief Executive Officer of Activar, Inc., a
7808 Creekridge Circle, #200 Minneapolis-based holding company consisting of seventeen
Minneapolis, Minnesota 55439 companies in industrial plastics, sheet metal, automotive
aftermarket, construction supply, electronics and
financial services, since 1966.
Thomas F. Madison*, 58 Director Vice Chairman-Office of the CEO, Minnesota Mutual Life
200 South Fifth Street Insurance Company since February 1994; President and CEO
Suite 2100 of MLM Partners, Inc. since January 1993; previously,
Minneapolis, Minnesota 55402 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, 52 Director Chairman and Chief Executive Officer of Eberhardt Holding
81 South Ninth Street Company and its subsidiaries since 1990.
Suite 400
Minneapolis, Minnesota 55440
Robert J. Odegard, 73 Director Special Assistant to the President of the University of
University of Minnesota Minnesota since 1990.
Foundation
1300 South Second Street
Minneapolis, Minnesota 55454
John G. Taft, 40 President President (since 1991) and Director (since 1993) of
90 South Seventh Street the Adviser; Director (since 1993) and Executive Vice
Suite 4400 President (since 1995) of the Underwriter; Management
Minneapolis, Minnesota 55402 committee member of the Adviser from 1991 to 1993;
Managing Director at Piper, Jaffray & Hopwood Incorporated
in Minneapolis, Minnesota from 1986 to 1991.
Jane M. Wyatt, 40 Executive Vice Chief Investment Officer (since 1993) and
90 South Seventh Street President Portfolio Manager (since 1989) of the Adviser;
Suite 4400 Director of the Adviser and the Underwriter since 1993.
Minneapolis, Minnesota 55402
Andrew M. McCullagh, Jr., 46 Executive Vice Portfolio Manager of the Adviser since 1990; previously,
717 Seventeenth Street President Director of the Adviser and the Underwriter from 1993 to
Denver, Colorado 1995.
80202
Elizabeth H. Howell, 32 Vice President Portfolio Manager of the Adviser since 1991; previously,
90 South Seventh Street portfolio manager for Windsor Financial Group,
Suite 4400 Minneapolis, Minnesota from 1988 to 1991.
Minneapolis, Minnesota 55402
James C. King, 54 Vice President Portfolio Manager of the Adviser since 1990; previously,
90 South Seventh Street Director of the Adviser and the Underwriter from 1993 to
Suite 4400 1995.
Minneapolis, Minnesota 55402
Richard Vandenberg, 45 Vice President Portfolio Manager of the Adviser since October 1992;
90 South Seventh Street previously, Proprietary Trader with Norwest Bank from
Suite 4400 March 1992 to October 1992; President of Ravan
Minneapolis, Minnesota 55402 Corporation, a commodity trading adviser in Excelsior,
Minnesota from 1990 to March 1992.
Kenneth R. Larsen, 32 Treasurer Treasurer of the Adviser and the Underwriter since 1990;
90 South Seventh Street previously, Chief Financial Officer (from 1991 to 1995),
Suite 4400 Director (from 1993 to 1995), Secretary (from
Minneapolis, Minnesota 55402 1990 to 1993) and Controller (from 1988 to 1990)
of the Adviser and the Underwriter.
Thomas J. Abood, 31 Secretary General Counsel of the Adviser and the Underwriter since
90 South Seventh Street October 1994; previously, associated with the law firm of
Suite 4400 Skadden, Arps, Slate, Meagher & Flom, Chicago, Illinois
Minneapolis, Minnesota 55402 from 1988 to 1994.
</TABLE>
*"Interested person" of the Funds as such term is defined in the 1940 Act.
The Company does not compensate its officers. Each director (who is not an
employee of Voyageur or any of its affiliates) received 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 Voyageur 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 26 series or funds and six closed-end investment companies. In
addition, each director or trustee who is not an employee of Voyageur or any of
its affiliates is reimbursed for expenses incurred in connection with attending
meetings. Mr. Harley Danforth received $18,000 for service as a director/trustee
of the Fund complex through the fiscal year ended April 30, 1995. Mr. Danforth
has resigned as a member of the Board of the Funds, but has been retained as a
consultant by the Fund Complex for the period ending January 1996. He will
receive $20,000 from the Fund complex for his services as a consultant. 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 form the Fund complex during the calendar
year ended December 31, 1994.
<TABLE>
<CAPTION>
Pension or Retirement
Benefits Estimated Total
Aggregate Accrued as Part Annual Benefits Compensation
Compensation of Fund Upon from Fund
Director from the Funds Expenses Retirement Complex
<S> <C> <C>
Clarence G. Frame $258 None None $22,500
Richard F. McNamara $258 None None $22,500
Thomas F. Madison $258 None None $16,000
James W. Nelson $258 None None $22,500
Robert J. Odegard $258 None None $22,500
</TABLE>
THE UNDERWRITER; ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE
SERVICES AGREEMENTS; EXPENSES; DISTRIBUTION EXPENSES; AND BROKERAGE
UNDERWRITER
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 and Mr. Taft and Ms. Wyatt are each
executive vice presidents and directors. Mr. Larsen is treasurer of the
Underwriter.
INVESTMENT ADVISORY AGREEMENT
Pursuant to the Advisory Agreement, each Fund has engaged Voyageur to act
as investment adviser for such Fund. As compensation for Voyageur's services,
each Fund is obligated to pay to Voyageur a monthly investment advisory fee
equivalent on an annual basis to (i) 1% of its average daily net assets with
respect to Growth Stock, Aggressive Growth and International Equity Funds and
(ii) 0.75% of its average daily net assets with respect to Growth and Income
Fund. The percentage fee is based on the average daily value of the 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 Advisory Agreement, each Fund's
net assets equal its total assets minus its total liabilities. The Advisory
Agreement requires Voyageur to furnish, at its own expense, office facilities,
equipment and personnel for servicing the investments of the Funds. Voyageur has
agreed to arrange for officers and employees of Voyageur to serve without
compensation from the Funds as Directors, officers or employees of the Funds if
duly elected to such positions by the shareholders or Directors of the Funds.
The Advisory Agreement continues from year to year with respect to a Fund
only if approved annually (a) by the Company's Board of Directors or by a vote
of a majority of the outstanding voting securities of the Fund and (b) by vote
of a majority of Directors of the Company who are not parties to such 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 of the Company called for
the purpose of voting on such approval. The Advisory Agreement may be terminated
with respect to any Fund by either party on 60 days' notice to the other party
and terminates automatically upon its assignment. The 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 Voyageur or the Company), unless the 1940 Act requires
that any such amendment must be submitted for approval by the Funds'
shareholders and that all proposed assignments of such agreement are subject to
approval by the Company's Board of Directors (unless the Act otherwise requires
shareholder approval thereof).
SUB-ADVISORY AGREEMENTS
Segall Bryant & Hamill ("Segall Bryant") is the Sub-Adviser to the Growth
and Income Fund. Its business office is located at 10 South Wacker Drive, Suite
2150, Chicago, IL 60606. Segall Bryant is a Minnesota partnership which is 50%
owned by Voyageur Advisory Services, Inc. an affiliate of Voyageur. Murray
Johnstone International, Ltd. ("Murray Johnstone") is the Sub-Adviser to the
International Equity Fund. Its business office in the U.S. is 875 N. Michigan
Avenue, Suite 3415, Chicago, Illinois 60611. Murray Johnstone is a wholly-owned
subsidiary of United Asset Management Corporation. Each Sub-Adviser manages the
investment and reinvestment of the assets of the relevant Fund, although
Voyageur monitors and evaluates the performance and investment style of each
Sub-Adviser.
The Sub-Advisory Agreement between Voyageur and Murray Johnstone provides
that Murray Johnstone is entitled to a sub-advisory fee of .50% of the
International Equity Fund's average daily net assets managed by Murray
Johnstone. The Sub-Advisory Agreement between Voyageur and Segall Bryant
provides that Segall Bryant is entitled to a sub-advisory fee of .75% of Growth
and Income Fund's average daily net assets managed by Segall Bryant. Each
Sub-Adviser's fee is paid by the Adviser, not the Fund. Under each Sub-Advisory
Agreement, the Sub-Adviser determines investment selections for its respective
Fund and is responsible for the placement of brokerage transactions in
connection therewith. Under each 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 respective Fund to its
investment objective, policies and restrictions. The Sub-Advisory Agreements
also require the Sub-Advisers to provide all office space, personnel and
facilities necessary and incident to their performance of services under the
Sub-Advisory Agreements. George D. Bjurman & Associates acted as Sub-Adviser for
the Aggressive Growth Fund through April 30, 1995.
Since December 31, 1991, Voyageur has served as Growth Stock Fund's
investment adviser. From September 1, 1990 to December 31, 1991, Wilke/Thompson
Capital Management ("Wilke/Thompson") served as Growth Stock Fund's sub-adviser
and, prior to September 1, 1990, Investment Advisers, Inc. ("IAI") served as the
Growth Stock Fund's investment adviser.
ADMINISTRATIVE SERVICES AGREEMENT
Voyageur 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 Voyageur
and the Company. Pursuant to the Administrative Services Agreement, Voyageur
provides to a Fund all dividend disbursing, transfer agency, administrative and
accounting services required by the Fund including, without limitation, the
following: (i) the calculation of net asset value per share (including the
pricing of the 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 the Fund's
shares or the receipt of redemption requests with respect to the Fund's shares
outstanding, the calculation of the number of shares to be purchased or
redeemed, respectively, (iii) upon the 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 the Fund to be received by
each shareholder of the 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 the Fund as the 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 the Fund, and (vii) the provision of such other
dividend disbursing, transfer agency, administrative and accounting services as
the Fund and Voyageur may from time to time agree upon.
As compensation for these services, each Fund pays Voyageur a monthly fee
based upon the Fund's average daily net assets and the number of shareholder
accounts then existing. With respect to Growth and Income, Growth Stock and
Aggressive Growth Funds, this fee is equal to the sum of (i) $1.25 per
shareholder account per month, (ii) $1,000 per month if the Fund's average daily
net assets do not exceed $50 million, $1,250 per month if the Fund's average
daily net assets are greater than $50 million but do not exceed $100 million,
and $1,500 per month if the Fund's average daily net assets exceed $100 million
and (iii) 0.11% per annum of the first $20 million of the Fund's average daily
net assets, 0.06% per annum of the next $80 million of the Fund's average daily
net assets, and 0.035% per annum of average daily net assets in excess of $100
million. With respect to International Equity Fund, this fee is equal to the sum
of (i) $1.33 per shareholder account per month, (ii) $3,000 per month if the
Fund's average daily net assets do not exceed $50 million, $4,000 per month if
the Fund's average daily net assets are greater than $50 million but do not
exceed $100 million, and $5,000 per month if the Fund's average daily net assets
exceed $100 million and (iii) 0.11% per annum of the first $50 million of the
Fund's average daily net assets, 0.06% per annum of the next $100 million of the
Fund's average daily net assets, 0.035% per annum of the next $250 million of
the Fund's average daily net assets, 0.03% per annum of the next $300 million of
the Fund's average daily net assets and 0.02% per annum of average daily net
assets in excess of $700 million. For purposes of calculating average daily net
assets, as such term is used in the Administrative Services Agreement, a Fund's
net assets equal its total assets minus (i) its total liabilities and (ii) its
net orders receivable from dealers. The Funds also reimburses Voyageur for its
out-of-pocket expenses in connection with Voyageur's provision of services under
the Funds' Administrative Services Agreements.
The Funds' Administrative Services Agreement is renewable from year to year
if the Directors (including a majority of the disinterested Directors) approve
the continuance of the Agreement. The Company or Voyageur can terminate the
Administrative Services Agreement with respect to any Fund 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 (including a majority of the Directors who are not interested persons
of Voyageur or the Company), 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 Board
of Directors (unless the Act otherwise requires shareholder approval thereof).
EXPENSES OF THE FUNDS
Voyageur reserves the right to voluntarily waive its fees in whole or part
and to voluntarily absorb certain other of a Fund's expenses. The Adviser
intends to reimburse expenses to the extent set forth in the Prospectus and
reserves the right to discontinue expense reimbursements.
All costs and expenses (other than those expressly assumed by Voyageur or
the Underwriter) incurred in the operation of a Fund are borne by such Fund.
These expenses include, among others, fees of the Directors who are not
employees of Voyageur 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 the 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 such Fund,
association membership dues, charges of a 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.
Set forth below is certain information regarding the investment advisory
and administrative services fees incurred by each Fund during the indicated
fiscal periods.
GROWTH STOCK FUND
Investment Administrative
Advisory Fees Services Fees
5/1/94 - 4/30/95 $123,185 $74,127
5/1/93 - 4/30/94 153,121 92,006
5/1/92 - 4/30/93 114,840 67,071
INTERNATIONAL EQUITY FUND
Investment Administrative Fees Absorbed
Advisory Services or
Fees Fees Waived
5/16/94 - 4/30/95 $15,991(1) $41,580 $57,571
AGGRESSIVE GROWTH FUND
Investment Administrative Fees Absorbed
Advisory Services or
Fees Fees Waived
5/16/94 - 4/30/95 $16,102(2) $21,447 $37,549
(1) Voyageur paid $7,996 in sub-advisory fees under the Sub-Advisory Agreement
with Murray Johnstone for the fiscal period ended April 30, 1995.
(2) Voyageur paid $12,077 in sub-advisory fees under the Sub-Advisory Agreement
with George D. Bjurman & Associates for the fiscal period ended April 30,
1995.
PLAN OF DISTRIBUTION AND DISTRIBUTION AGREEMENT
The Company has adopted a Plan of Distribution on behalf of each Fund
relating to the payment of certain expenses pursuant to Rule 12b-1 under the
1940 Act. Rule 12b-1(b) provides that any payments made by a Fund in connection
with the distribution of its shares may only be made pursuant to a written plan
describing all material aspects of the proposed financing of distribution and
also requires that all agreements with any person relating to implementation of
the plan must be in writing. In addition, Rule 12b-1(b)(1) requires that such
plan be approved by a vote of at least a majority of the Fund's outstanding
shares, and Rule 12b-1(b)(2) requires that such plan, together with any related
agreements, be approved by a vote of the Board of Directors and the Directors
who are not interested persons of the Company and have no direct or indirect
financial interest in the operation of the plan or in any agreements related to
the plan, cast in person at a meeting called for the purpose of voting on such
plan or agreements. Rule 12b-1(b)(3) requires that the plan or agreement
provide, in substance: (1) that it shall continue in effect for a period of more
than one year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner described
in paragraph (b)(2) of Rule 12b-1; (2) that any person authorized to direct the
disposition of monies paid or payable by a Fund pursuant to its plan or any
related agreement shall provide to the Board of Directors, and the Directors
shall review, at least quarterly, a written report of the amount so expended and
the purposes for which such expenditures were made; and (3) in the case of a
plan, that it may be terminated at any time by vote of a majority of the members
of the Board of Directors who are not interested persons of the Company and have
no direct or indirect financial interest in the operation of the plan or in any
agreements related to the plan or by vote of a majority of the outstanding
voting securities of the Fund.
Rule 12b-1(b)(4) requires that such plans may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and that all material amendments of the plan must be approved in the manner
described in paragraph (b)(2) of Rule 12b-1. Rule 12b-1(c) provides that the
Company may rely upon Rule 12b-1(b) only if selection and nomination of the
Company's disinterested Directors are committed to the discretion of such
disinterested Directors. Rule 12b-1(e) provides that a Fund may implement or
continue a plan pursuant to Rule 12b-1(b) only if the Directors who vote to
approve such implementation or continuation conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under state
law, and under Section 36(a) and (b) of the 1940 Act, that there is a reasonable
likelihood that the plan will benefit the Fund and its shareholders.
The Company has entered into a Distribution Agreement (on behalf of each
Fund) with the Underwriter, pursuant to which the Underwriter acts as the
principal underwriter of each Fund's shares. The Distribution Agreement and Plan
provide that the Underwriter agrees to provide, and shall pay costs which it
incurs in connection with providing, administrative or accounting services to
shareholders of the Funds (such costs are referred to as "Shareholder Servicing
Expenses") and that the Underwriter shall also pay all costs of distributing the
shares of the Fund ("Distribution Expenses"). Shareholder Servicing Expenses
include all expenses of the Underwriter incurred in connection with providing
administrative or accounting services to shareholders of a Fund, including, but
not limited to, an allocation of the Underwriter's overhead and payments made to
persons, including employees of the Underwriter, who respond to inquiries of
shareholders regarding their ownership of Fund shares, or who provide other
administrative or accounting services not otherwise required to be provided by
the Fund's investment adviser or transfer agent. Distribution Expenses include,
but are not limited to, initial and ongoing sales compensation (in addition to
sales loads) 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; an allocation of the
Underwriter's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution-related expenses.
Pursuant to the provisions of the Distribution Agreement, the Underwriter
is entitled to receive a total fee each quarter at an annual rate of .25% of the
average daily net assets attributable to each Fund's Class A shares, 1.00% of
the average daily net assets attributable to each Fund's Class B shares and
1.00% of the average daily net assets attributable to each Fund's Class C shares
to pay distribution expenses. As determined from time to time by the Board, a
portion of such fees shall be designated as a "shareholder servicing fee" and a
portion shall be designated as a "distribution fee." The Board has determined
that all of the fee payable with respect to Class A shares shall be designated a
shareholder servicing fee. With respect to fees payable with respect to Class B
shares and Class C shares, that portion of the fee equal to .25% of average
daily net assets attributable to a Fund's Class B shares or Class C shares is
designated a shareholder servicing fee and that portion of the fee equal to .75%
of average daily net assets attributable to a Fund's Class B shares or Class C
shares is designated a distribution fee. Amounts payable to the Underwriter
under the Distribution Agreement may exceed or be less than the Underwriter's
actual distribution expenses and shareholder servicing expenses. In the event
such distribution expenses and shareholder servicing expenses exceed amounts
payable to the Underwriter under the Plan, the Underwriter shall not be entitled
to reimbursement by the Funds. In addition to being paid shareholder servicing
and distribution fees, the Underwriter also receives for its services the sales
charge on sales of Fund shares set forth in each Prospectus.
The Distribution Agreement is renewable from year to year if the Company's
Directors approve such Plan and Distribution Agreement. The Company or the
Underwriter can terminate the Distribution Agreement on 60 days' notice to the
other party, and the Distribution Agreement terminates automatically upon its
assignment. In the Distribution Agreement, the Underwriter agrees to indemnify
each Fund against all costs of litigation and other legal proceedings and
against any liability incurred by or imposed on the Fund in any way arising out
of or in connection with the sale or distribution of the Fund's shares, except
to the extent that such liability is the result of information which was
obtainable by the Underwriter only from persons affiliated with the Fund but not
the Underwriter.
For the fiscal periods ended April 30, 1995, 1994, and 1993, the Funds paid
the following Rule 12b-1 fees and the Underwriter waived the following Rule
12b-1 fees:
1995 1994 1993
Amount Amount
12b-1 Fee 12b-1 Fee Waived 12b-1 Fee Waived
Growth Stock Fund
Class A $246,598 $306,242 $37,127 $229,680 $183,000
International Equity Fund
Class A 3,979 N/A N/A N/A N/A
Class C 83 N/A N/A N/A N/A
Aggressive Growth Fund
Class A 3,885 N/A N/A N/A N/A
Class C 562 N/A N/A N/A N/A
The following table sets forth the aggregate dollar amount of underwriting
commissions paid by each Fund for the fiscal periods indicated and the amount of
such commissions retained by the Underwriter.
<TABLE>
<CAPTION>
Underwriting Commissions
Total Underwriting Commissions Retained by Underwriter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Year Year Year Year Year Year
4/30/95 4/30/94 4/30/93 4/30/95 4/30/94 4/30/93
<S> <C> <C> <C> <C> <C> <C>
Growth Stock Fund $34,138 $96,624 $226,266 $5,137 $14,237 $41,982
International Equity Fund 6,234 N/A N/A 979 N/A N/A
Aggressive Growth Fund 8,965 N/A N/A 1,297 N/A N/A
</TABLE>
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Pursuant to conditions set forth in the rules of the Securities and
Exchange Commission, each Fund may effect brokerage transactions in its
portfolio securities with a broker or dealer affiliated directly or indirectly
with the Adviser or the Fund's Sub-Adviser, as the case may be. In determining
the commissions to be paid to an affiliated broker-dealer acting as an agent on
behalf of a Fund, it is the policy of each Fund that such commissions will, in
the judgment of the Adviser or Sub-Adviser, subject to review by the Board of
Directors, be both (i) 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 a securities exchange during a
comparable period of time, and (ii) at least as favorable as commissions
contemporaneously charged by such affiliated broker-dealers on comparable
transactions for their most favored comparable unaffiliated customers. While the
Funds do not deem it practicable and in their 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.
Decisions with respect to placement of a Fund's portfolio transactions are
made by the Adviser or the Fund's Sub-Adviser, as the case may be. In selecting
brokers to execute portfolio transactions, the Adviser and the Sub-Advisers each
seeks to obtain the best price and execution of orders. Commission rates, being
a component of price, are considered together with other relevant factors. When
consistent with these criteria, business may be placed with broker-dealers who
furnish investment research services to the Sub-Advisers or the Adviser;
provided, however, that the provision of research and brokerage services may not
be considered in selecting dealers to execute futures contracts and related
options. 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 each of the Adviser and the Sub-Advisers to supplement
its own investment research activities by obtaining the views and information of
individuals and research staffs of many different securities research firms
prior to making investment decisions for a Fund. To the extent portfolio
transactions are effected with broker-dealers who furnish research services,
each of the Adviser and Sub-Advisers receives 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, and do not
maintain any "formula" which must be followed in connection with the placement
of Fund portfolio transactions in exchange for research services, except as
noted below. However, the Adviser and Sub-Advisers may, from time to time,
maintain an informal list of broker-dealers which may be used as a general guide
in the placement of Fund business in order to encourage certain broker-dealers
to provide research services. Because the list is merely a general guide which
is to be used only after the primary criteria for the selection of
broker-dealers (discussed above) have been met, substantial deviations from the
list are permissible and may be expected to occur. The Adviser and Sub-Advisers
will authorize a Fund to pay to a broker-dealer 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-Advisers 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 their overall
responsibilities with respect to the accounts as to which the Adviser or
Sub-Adviser exercise investment discretion.
It is expected each Fund will purchase most foreign equity securities in
the over-the-counter markets or stock exchanges located in the countries in
which the respective principal offices of the issuers of the various securities
are located if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commission on United States transactions. There generally is less
governmental supervision and regulation of foreign stock exchanges than in the
United States. Foreign securities settlements may in some instances be subject
to delays and related administrative uncertainties.
Foreign equity securities may be held in the form of American Depositary
Receipts, or ADRs, Global Depositary Receipts, or GDRs, or securities
convertible into foreign equity securities. ADRs and GDRs may be listed on stock
exchanges or traded in the over-the-counter markets in the United States or
overseas, as the case may be. ADRs, like other securities traded in the United
States, will be subject to negotiated commission rates. The foreign and domestic
debt securities and money market instruments in which the Funds may invest are
generally traded in over-the-counter markets.
Voyageur believes that most research services obtained by Voyageur or the
Sub-Advisers will generally benefit one or more of the investment companies
which they manage and will also benefit accounts which they manage. Normally
research services obtained through commissions paid by the managed funds and
accounts investing in debt securities would primarily benefit such funds and
accounts; similarly, services obtained from transactions in common stocks would
be of greater benefit to the managed funds and accounts investing in common
stocks.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to the policies set forth above and such
other policies as the Funds' directors may determine, Voyageur or the
Sub-Advisers may consider sales of shares of the Fund as a factor in the
selection of broker-dealers to execute the Fund's securities transactions.
Pursuant to conditions set forth in rules of the Securities and Exchange
Commission, each Fund 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, particularly those Directors who are not interested persons of the
Company.
When two or more clients of the Adviser or Sub-Advisers are simultaneously
engaged in the purchase or sale of the same security, the prices and amounts are
allocated in accordance with a formula considered by the Adviser or Sub-Adviser
to be equitable to each client. In some cases, this system could have a
detrimental effect on the price or volume of the security as far as each client
is concerned. In other cases, however, the ability of the clients to participate
in volume transactions will produce better executions for each client.
The following table presents certain commission payment information with
respect to the Funds (except Growth and Income Fund which has not commenced
investment operations as of the date hereof):
Brokerage Commissions Paid
1995 1994 1993
Growth Stock Fund $29,040 $35,427 $34,535
Aggressive Growth Fund 4,740 N/A N/A
International Equity Fund 15,290 N/A N/A
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
It is each Fund's policy to distribute annually all net investment income.
Each Fund distributes annually all net realized capital gains, if any, after
offsetting any capital loss carryovers. Distributions are payable in full and
fractional shares of the Fund based upon the next determined net asset value on
the payment date for each distribution. A shareholder may, however, elect by
written application received by the Underwriter or such shareholder's financial
institution on or prior to the record date to receive net investment income
distributions or both net investment income and net capital gains distributions
in cash.
Under the Internal Revenue Code of 1986, as amended (the "Code") each Fund
will be subject to a non-deductible excise tax equal to 4% of the excess, if
any, of the amount required to be distributed for each calendar year over the
amount actually distributed. In order to avoid the imposition of this excise
tax, each Fund generally must declare dividends by the end of a 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 capital gains) for
the 12-month period ending October 31 of the calendar year. The 4% excise tax
does not apply to amounts with respect to which each Fund has paid a
corporate-level income tax.
For individuals, long-term capital gains are subject to a maximum tax rate
of 28% while ordinary income is subject to a maximum effective rate in excess of
39.6% (resulting from a combination of a nominal 39.6% rate, a phase-out of
personal exemptions for individuals filing single returns with adjusted gross
income in excess of $114,700 and for married couples filing joint returns with
adjusted gross income in excess of $172,500, and a partial disallowance of
itemized deductions for individuals with adjusted gross income in excess of
$114,700). For corporations, both ordinary income and capital gains are
currently subject to a maximum rate of 35%.
Ordinarily, distributions and redemption proceeds earned by a Fund
shareholder are not subject to withholding of federal income tax. However, 31%
of Fund distributions and redemption proceeds may be withheld upon the
occurrence of certain events specified in Section 3406 of the Code and
regulations promulgated thereunder. These events include the failure of a Fund
shareholder to supply the Fund or its agent with such shareholder's taxpayer
identification number. Withholding may also occur if a Fund shareholder who is
otherwise exempt from withholding fails to properly document such shareholder's
status as an exempt recipient.
If a taxpayer exchanges shares in a Fund for shares in another fund managed
by Voyageur pursuant to the exchange privilege (see "Exchange Privilege" in the
Prospectus), the exchange is a taxable event that may give rise to capital gain
or loss. Furthermore, if a shareholder uses the exchange privilege within 90
days of investing shares in the Fund, the shareholder may not take the sales
charge paid on purchase of the Fund shares into account in determining gain or
loss on the exchange (to the extent that the sales charge on the latter purchase
was reduced). Similarly, if a taxpayer redeems shares in the Fund within 90 days
of purchasing them and then repurchases shares in the Fund pursuant to the
reinstatement privilege (see "Reinstatement Privilege" in the Prospectus), the
shareholder may not take the sales charge paid on the initial purchase of Fund
shares into account in determining gain or loss on the sale of the first
acquired shares. However, in both cases the amount of the disallowed sales
charge may be taken into account in determining gain or loss on the eventual
disposition of the later acquired shares.
Each Fund intends to qualify each year as a "regulated investment company"
under Subchapter M of the Code. To qualify as a regulated investment company the
Fund must, among other things, receive at least 90% of its gross income each
year from dividends, interest, gains from the sale or other disposition of
securities and certain other types of income, including income from options and
futures contracts.
The Code forbids a regulated investment company from earning 30% or more of
its gross income from the sale or other disposition of stock, securities,
options, futures, and certain foreign currencies held less than three months.
This restriction may limit the extent to which a Fund may purchase futures
contracts and options. To the extent a Fund engages in short-term trading and
enters into futures and options transactions, the likelihood of violating this
30% requirement is increased.
The Code also requires a regulated investment company to diversify its
holdings. The Internal Revenue Service has not made its position clear regarding
the treatment of futures contracts and options for purposes of the
diversification test, and the extent to which a Fund could buy or sell futures
contracts and options may be limited by this requirement.
Gain or loss on futures contracts and options is taken into account when
realized by entering into a closing transaction or by exercise. In addition,
with respect to many types of futures contracts and options held at the end of a
Fund's 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 futures 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 futures contracts will be adjusted to reflect
any capital gain or loss taken into account by such 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 futures contracts,
each Fund may make an election that will have the effect of exempting all or a
part of those identified futures contracts from being treated for federal income
tax purposes as sold on the last business day of such Fund's taxable year. All
or part of any loss realized by a Fund on any closing of a futures contract may
be deferred until all of such Fund's offsetting positions with respect to the
futures contract are closed. As a result of trading in futures contracts, a Fund
may realize net capital gains which, when distributed to shareholders, would be
taxable in the hands of the shareholders.
Code Section 988 may 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 Fund will attempt to monitor Section 988 transactions to avoid
an adverse tax impact.
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.
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 a 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.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the net asset value of Fund shares is summarized
in the Funds' prospectus in "Determination of Net Asset Value." The public
offering price of Class A shares is the net asset value of Fund shares plus the
applicable front end sales charge, if any. The maximum front end sales charge is
4.99% of the net asset value. The public offering price of Class B and Class C
shares is the net asset value of Fund shares. The portfolio securities in which
a Fund invests fluctuate in value, and, therefore, the net asset value per share
of a Fund also fluctuates.
As of April 30, 1995, the net asset value per share of each Fund which had
commenced investment operations was calculated as follows:
Growth Stock Fund
Class A
Net Assets ($23,651,404) = Net Asset Value Per Share ($19.91)
Shares Outstanding (1,188,057)
International Equity Fund
Class A
Net Assets ($2,008,747) = Net Asset Value Per Share ($9.42)
Shares Outstanding (213,245)
Class C
Net Assets ($20,203) = Net Asset Value Per Share ($9.36)
Shares Outstanding (2,159)
Aggressive Growth Fund
Class A
Net Assets ($2,189,491) = Net Asset Value Per Share ($10.40)
Shares Outstanding (210,454)
Class C
Net Assets ($127,529) = Net Asset Value Per Share ($10.33)
Shares Outstanding (12,341)
SPECIAL PURCHASE PLANS
Automatic Investment Plan. As a convenience to investors, shares may be
purchased through a preauthorized automatic investment plan. Such preauthorized
investments (at least $100) may be used to purchase shares of the Fund at the
public offering price next determined after the Fund receives the investment
(normally the 20th of each month, or the next business day thereafter). Further
information is available from the Underwriter.
Combined Purchase Privilege. The following persons (or groups of persons)
may qualify for reductions from the front end sales charge ("FESC") schedule for
Class A shares set forth in the Funds' Prospectus by combining purchases of any
class of shares of any one or more of the Voyageur Load Funds and Other Load
Funds (as defined in the Prospectus) if the combined purchase of all such funds
totals at least $50,000:
(i) an individual, or a "company" as defined in Section 2(a)(8) of the
1940 Act;
(ii) an individual, his or her spouse and their children under
twenty-one, purchasing for his, her or their own account;
(iii) a trustee or other fiduciary purchasing for a single trust
estate or single fiduciary account (including a pension, profit-sharing or
other employee benefit trust) created pursuant to a plan qualified under
Section 401 of the Code;
(iv) tax-exempt organizations enumerated in Section 501(c)(3) of the
Code;
(v) employee benefit plans of a single employer or of affiliated
employers;
(vi) any organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company, and provided that
the purchase is made through a central administration, or through a single
dealer, or by other means which result in economy of sales effort or
expense. An organized group does not include a group of individuals whose
sole organizational connection is participation as credit cardholders of a
company, policyholders of an insurance company, customers of either a bank
or broker-dealer, or clients of an investment adviser.
Cumulative Quantity Discount (Right of Accumulation). A purchase of shares
of any class may qualify for a Cumulative Quantity Discount. The applicable FESC
will then be based on the total of:
(i) the investor's current purchase; and
(ii) the net asset value (at the close of business on the previous
day) of shares of any class of Voyageur Load Funds and shares of Other Load
Funds held by the investor; and
(iii) the net asset value of shares of any class of Voyageur Load
Funds and shares of Other Load Funds owned by another shareholder eligible
to participate with the investor in a "Combined Purchase Privilege" (see
above).
For example, if an investor owned shares worth $25,000 at the then current
net asset value and purchased an additional $40,000 of shares, the sales charge
for the $40,000 purchase would be at the rate applicable to a single $65,000
purchase.
To qualify for the Combined Purchase Privilege or to obtain the Cumulative
Quantity Discount on a purchase through an investment dealer, when each purchase
is made the investor or dealer must provide the Fund whose shares are being
purchased with sufficient information to verify that the purchase qualifies for
the privilege or discount at the time of each such purchase.
Letter of Intention. Investors may also obtain the reduced front end sales
charges for Class A shares shown in the Prospectus by means of a written Letter
of Intention, which expresses the investor's intention to invest at least
$50,000 (including certain "credits," as described below) within a period of 13
months in shares of any class of Voyageur Load Funds and shares of Other Load
Funds. Each purchase of shares under a Letter of Intention will be made at the
public offering price applicable at the time of such purchase to a single
transaction of the dollar amount indicated in the Letter. A Letter of Intention
may include purchases of shares made not more than 90 days prior to the date
that an investor signs a Letter; however, the 13-month period during which the
Letter is in effect will begin on the date of the earliest purchase to be
included. Investors qualifying for the Combined Purchase Privilege described
above may purchase shares under a single Letter of Intention.
If, for example, on the date an investor signs a Letter of Intention to
invest at least $50,000 as set forth above and the investor and the investor's
spouse and children under twenty-one have previously invested $30,000 in shares
which are still held by such persons, it will only be necessary to invest a
total of $20,000 during the 13 months following the first date of purchase of
such shares in order to qualify for the sales charges, on the $20,000 purchase,
applicable to investments of $50,000.
The Letter of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intention is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased. When the full amount indicated has been purchased, the escrow will be
released. To the extent that an investor purchases more than the dollar amount
indicated on the Letter of Intention and qualifies for further reduced sales
charges, the sales charges will be adjusted for the entire amount purchased at
the end of the 13-month period. The difference in sales charges will be used to
purchase additional shares at the then current offering price applicable to the
actual amount of the aggregate purchases.
Investors electing to take advantage of the Letter of Intention should
carefully review the appropriate provisions on the authorization form attached
to the Prospectus.
Other Load Funds. Shares of Other Load Funds will be included with any
class of Voyageur Load Fund shares in a Combined Purchase Privilege, Cumulative
Quantity Discount or Letter of Intention only if such Other Load Fund shares are
owned by customers of dealers that Voyageur or the Underwriter has engaged to
provide administration or accounting services to Voyageur Load Fund omnibus
accounts in connection with the offering of the Voyageur Load Funds as part of
the Other Load Funds' family of funds. Additionally, the maximum reduction of
the applicable Voyageur Load Fund's FESC that may result from the inclusion of
shares of Other Load Funds in a Combined Purchase Privilege, Cumulative Quantity
Discount or Letter of Intention shall be a reduction to the front-end sales
charge applicable to purchases of $500,000 but less than $1,000,000 (as set
forth in the sales charge table in the Prospectus).
OTHER INFORMATION
Conversion of Class B Shares. In addition to information regarding
conversion set forth in the prospectus, the conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service or an opinion of counsel that payment of different
dividends by each of the classes of shares does not result in the Funds'
dividends or distributions constituting "preferential dividends" under the Code
and that such conversions do not constitute taxable events for Federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B shares to Class A shares will not occur
if such ruling or opinion will not be available. In such event, Class B shares
would continue to be subject to higher expenses than Class A shares for an
indefinite period.
Signature Guaranty. In addition to information regarding redemption of
shares and signature guaranty set forth in the Prospectus, a signature guaranty
will be required when redemption proceeds: (1) exceed $50,000 (unless proceeds
are being wired to a pre-authorized bank account, in which case a guarantee is
not required), (2) are to be paid to someone other than the registered
shareholder or (3) are 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 of the type previously listed, each
signature must be guaranteed. A signature guarantee may not be provided by a
notary public. Please contact your investment executive for instructions as to
what institutions constitute eligible signature guarantors.
Valuation of Portfolio Securities. Generally, trading in certain 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 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
Voyageur in accordance with procedures adopted by the Board.
Bank Purchases. Banks, acting as agents for their customers and not for the
Funds or the Underwriter, from time to time may purchase Fund shares for the
accounts of such customers. Generally, the Glass-Steagall Act prohibits banks
from engaging in the business of underwriting, selling or distributing
securities. Should the activities of any bank, acting as agent for its customers
in connection with the purchase of any Fund's shares, be deemed to violate the
Glass-Steagall Act, management will take whatever action, if any, is appropriate
in order to provide efficient services for the Funds. Management does not
believe that a termination in the relationship with a bank would result in any
material adverse consequences to the Funds. In addition, state securities laws
on this issue may differ and banks and financial institutions may be required to
register as dealers pursuant to state law. Fund 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.
CALCULATION OF PERFORMANCE DATA
Average Annual Total Return. Advertisements and other sales literature for
a Fund may refer to "average annual total return." Average annual total return
figures are 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 gains
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 to all shareholder accounts.
<TABLE>
<CAPTION>
Average Annual Total Return
Absent Voluntary
Fee Waivers and
Actual Expense Reimbursement
Since Since
1 Year 5 Year Inception 1 Year 5 Year Inception
<S> <C> <C> <C> <C> <C> <C>
Growth Stock Fund
Class A (Inception 8/1/85) 11.48% 10.94% 14.09% 11.48% 10.67% 13.96%
International Equity Fund
Class A (Inception 5/16/94) N/A N/A (10.27)% N/A N/A (13.13)%
Class C (Inception 5/20/94) N/A N/A (6.31)% N/A N/A (7.71)%
Aggressive Growth Fund
Class A (Inception 5/16/94) N/A N/A (0.94)% N/A N/A (2.65)%
Class C (Inception 5/20/94) N/A N/A 3.30% N/A N/A 2.20%
</TABLE>
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.
Cumulative Total Return Since Inception
Absent Voluntary Fee
Waivers and Expense
Actual Reimbursements
Growth Stock Fund
Class A (Inception 8/1/85) 261.58% 257.41%
International Equity Fund
Class A (Inception 5/16/94) (10.27)% (13.13)%
Class C (Inception 5/20/94) (6.31)% (7.71)%
Aggressive Growth Fund
Class A (Inception 5/16/94) (0.94)% (2.65)%
Class C (Inception 5/20/94) 3.30% 2.20%
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 to all shareholder accounts.
MONTHLY CASH WITHDRAWAL PLAN
Any investor who owns or buys shares of any Fund valued at $10,000 or more
at the current offering price may open a Withdrawal Plan and have a designated
sum of money paid monthly to the investor or another person. Shares are
deposited in a Withdrawal Plan account and all distributions are reinvested in
additional shares of such Fund at net asset value. Shares in a Withdrawal Plan
account are then redeemed at net asset value to make each withdrawal payment.
Deferred sales charges may apply to monthly redemptions of Class B or Class C
shares. Redemptions for the purpose of withdrawal are made on the 25th of the
month (or on the preceding business day if the 25th falls on a weekend or is a
holiday) at that day's closing net asset value and checks are mailed on the next
business day. Payments will be made to the registered shareholder. As withdrawal
payments may include a return on principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor. The redemption of
shares in connection with a Withdrawal Plan may result in a gain or loss for tax
purposes. Continued withdrawals in excess of income will reduce and possibly
exhaust invested principal, especially in the event of a market decline. The
maintenance of a Withdrawal Plan concurrently with purchases of additional
shares of a class of Fund shares which imposes a FESC would normally be
disadvantageous to the investor because of the FESC payable on such purchases.
For this reason, an investor may not maintain a plan for the accumulation of
Class A shares of a Fund (other than through reinvestment of distributions) and
a Withdrawal Plan at the same time. The cost of administering the Withdrawal
Plan is borne by each Fund as an expense of all shareholders. Each Fund or the
Underwriter may terminate or change the terms of the Withdrawal Plan at any
time. The Withdrawal Plan is fully voluntary and may be terminated by the
shareholder at any time without the imposition of any penalty.
Since the Withdrawal Plan may involve invasion of capital, investors should
consider carefully with their own financial advisers whether the Withdrawal Plan
and the specified amounts to be withdrawn are appropriate in their
circumstances. The Funds make no recommendations or representations in this
regard.
ADDITIONAL INFORMATION
CUSTODIAN; COUNSEL; INDEPENDENT AUDITORS
Norwest Bank Minnesota, N.A., Sixth Street & Marquette Avenue, Minneapolis,
Minnesota 55479, acts as custodian of each Fund's assets and portfolio
securities.
Dorsey & Whitney P.L.L.P., 220 South Sixth Street, Minneapolis, Minnesota
55402, serves as General Counsel for the Company.
KPMG Peat Marwick LLP, 4200 Norwest Center, Minneapolis, Minnesota 55402,
serves as the Company's independent auditors.
LIMITATION OF DIRECTOR LIABILITY
Under Minnesota law, each director of the Fund owes certain fiduciary
duties to the 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 a director
(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 director derived an improper
personal benefit. The Company's Articles of Incorporation limit the liability of
it's 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 prohibits any provisions which purport to limit the liability of
directors arising from such directors' willful misfeasance, bad 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 (including the liability of directors who serve as officers
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 the Securities Act of
1933 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.
SHAREHOLDER MEETINGS
The Company is not required under Minnesota law 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 corporation law provides for the Board of Directors
to convene shareholder meetings when it deems appropriate. In addition, if a
regular meeting of shareholders has not been held during the immediately
preceding fifteen months, a shareholder or shareholders holding three percent or
more of the voting shares of a Fund may demand a regular meeting of shareholders
of the Fund by written notice of demand given to the chief executive officer or
the chief financial officer of the Fund. Within ninety days after receipt of the
demand, a regular meeting of shareholders must be held at the expense of the
Fund. 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.
ORGANIZATION AND CAPITALIZATION OF THE FUNDS
Each Fund is a series of Voyageur Mutual Funds III, Inc. which was
incorporated under the laws of the State of Minnesota in January 1985.
Each Fund's fiscal year ends on April 30 of each year.
APPENDIX A
COMMON STOCK, CORPORATE BOND, PREFERRED STOCK AND
COMMERCIAL PAPER RATINGS
EARNINGS AND DIVIDEND RANKINGS FOR COMMON STOCKS
Standard & Poors Corporation. The investment process involves assessment of
various factors -- such as product and industry position, corporate resources
and financial policy -with results that make some common stocks more highly
esteemed than others. In this assessment, Standard & Poor's believes that
earnings and dividend performance is the end result of the interplay of these
factors and that, over the long run, the record of this performance has a
considerable bearing on relative quality. The rankings, however, do not pretend
to reflect all of the factors, tangible or intangible, that bear on stock
quality.
Relative quality of bonds or other debt, that is, degrees of protection for
principal and interest, called creditworthiness, cannot be applied to common
stocks, and therefore rankings are not to be confused with bond quality ratings
which are arrived at by a necessarily different approach.
Growth and stability of earnings and dividends are deemed key elements in
establishing Standard & Poor's earnings and dividend rankings for common stocks,
which are designed to capsulize the nature of this record in a single symbol. It
should be noted, however, that the process also takes into consideration certain
adjustments and modifications deemed desirable in establishing such rankings.
The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the most
recent ten years -- a period deemed long enough to measure significant time
segments of secular growth, to capture indications of basic change in trend as
they develop, and to encompass the full peak-to-peak range of the business
cycle. Basic scores are computed for earnings and dividends, then adjusted as
indicated by a set of predetermined modifiers for growth, stability within
long-term trend, and cyclicality. Adjusted scores for earnings and dividends are
then combined to yield a final score.
Further, the ranking system makes allowance for the fact that, in general,
corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate sales volume)
are set for the various rankings, but the system provides for making exceptions
where the score reflects an outstanding earnings-dividend record.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample of
stocks. The range of scores in the array of this sample has been aligned with
the following ladder of rankings:
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower
NR signifies no ranking because of insufficient data or because the stock
is not amenable to the ranking process.
The positions as determined above may be modified in some instances by
special considerations, such as natural disasters, massive strikes, and
non-recurring accounting adjustments.
A ranking is not a forecast of future market price performance, but is
basically an appraisal of past performance of earnings and dividends, and
relative current standing. These rankings must not be used as market
recommendations; a high-score stock may at times be so overpriced as to justify
its sale, while a low-score stock may be attractively priced for purchase.
Rankings based upon earnings and dividend records are no substitute for complete
analysis. They cannot take into account potential effects of management changes,
internal company policies not yet fully reflected in the earnings and dividend
record, public relations standing, recent competitive shifts, and a host of
other factors that may be relevant to investment status and decision.
COMMERCIAL PAPER RATINGS
Standard & Poor's Corporation. Commercial paper ratings are graded into
four categories, ranging from "A" for the highest quality obligations to "D" for
the lowest. Issues assigned the A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
designation 1, 2, and 3 to indicate the relative degree of safety. The "A-1"
designation indicates that the degree of safety regarding timely payment is very
strong.
Moody's Investors Service, Inc. Moody's commercial paper ratings are
opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation that such obligations are exempt from registration under
the Securities Act of 1933, nor does it represent that any specific note is a
valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 Superior capacity for repayment of short-term promissory
obligations.
Prime-2 Strong capacity for repayment of short-term promissory
obligations.
Prime-3 Acceptable capacity for repayment of short-term promissory
obligations.
CORPORATE BOND RATINGS
Standard & Poor's Corporation. Its ratings for corporate bonds have the
following definitions:
Investment grade:
Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
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.
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.
Speculative Grade:
Debt rated "BB," "B," "CCC" and "CC" and "C" is regarded, as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
generally are regarded as eligible for bank investment. Also, the laws of
various states governing legal investments impose certain rating or other
standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
Moody's Investors Service, Inc. Its ratings for corporate bonds include the
following:
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.
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 risk appear somewhat larger than in Aaa securities.
Bonds which are rated "A" possess many favorable 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.
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.
Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot 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.
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.
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.
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.
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.
PREFERRED STOCK RATING
Standard& Poor's Corporation. Its ratings for preferred stock have the
following definitions:
An issue rated "AAA" has the highest rating that may be assigned by
Standard& Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
A preferred stock issue rated "AA" also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated "AAA."
An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
Preferred stock rate "BB," "B," and "CCC" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. "BB" indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
A preferred stock rated "C" is a non-paying issue.
A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
"NR" indicates that 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.
Moody's Investors Service, Inc. Its ratings for preferred stock include the
following:
An issue which is rated "aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
An issue which is rate "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
An issue which is rated "baa" is considered to be medium-grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
An issue which is rated "ba" is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
An issue which is rated "ca" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.
An issue rated "c" is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
APPENDIX B
STOCK INDEX FUTURES CONTRACTS AND RELATED OPTIONS
Stock Index Futures Contracts
To the extent described in the Prospectus and Statement of Additional
Information, each Fund may purchase and sell stock index futures contracts,
options thereon and options on stock indexes. Stock index futures contracts are
commodity contracts listed on commodity exchanges. They presently include
contracts on the Standard & Poor's 500 Stock Index (the "S&P 500 Index") and
such other broad stock market indexes as the New York Stock Exchange Composite
Stock Index and the Value Line Composite Stock Index, as well as narrower
"sub-indexes" such as the S&P 100 Energy Stock Index and the New York Stock
Exchange Utilities Stock Index. A stock index assigns relative values to common
stocks included in the index and the index fluctuates with the value of the
common stocks so included. A futures contract is a legal agreement between a
buyer or seller and the clearing house of a futures exchange in which the
parties agree to make a cash settlement on a specified future date in an amount
determined by the stock index on the last trading day of the contract. The
amount is a specified dollar amount (usually $100 or $500) times the difference
between the index value on the last trading day and the value on the day the
contract was struck.
For example, the S&P 500 Index consists of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500 Index assigns
relative weightings to the common stocks included in the Index, and the Index
fluctuates with changes in the market values of those common stocks. In the case
of S&P 500 Index futures contracts, the specified multiple is $500. Thus, if the
value of the S&P 500 Index were 150, the value of one contract would be $75,000
(150 x $500). Unlike other futures contracts, a stock index futures contract
specifies that no delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the termination of the
contract with the settlement amount being the difference between the contract
price and the actual level of the stock index at the expiration of the contract.
For example (excluding any transaction costs), if a Fund enters into one futures
contract to buy the S&P 500 Index at a specified future date at a contract value
of 150 and the S&P 500 Index is at 154 on that future date, the Fund will gain
$500 x (154-150) or $2,000. If a Fund enters into one futures contract to sell
the S&P 500 Index at a specified future date at a contract value of 150 and the
S&P 500 Index is at 152 on that future date, the Fund will lose $500 x (152-150)
or $1,000.
Unlike the purchase or sale of an equity security, no price would be paid
or received by a Fund upon entering into stock index futures contracts. Upon
entering into a contract, a Fund would be required to deposit with its custodian
in a segregated account in the name of the futures broker an amount of cash or
U.S. Treasury bills equal to a portion of the contract value. This amount is
known as "initial margin." The nature of initial margin in futures transactions
is different from that of margin in security transactions in that futures
contract margin does not involve borrowing funds by the Fund to finance the
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract that is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied.
Subsequent payments, called "variation margin," to and from the broker
would be made on a daily basis as the price of the underlying stock index
fluctuates, making the long and short positions in the contract more or less
valuable, a process known as "marking to the market." For example, when a Fund
enters into a contract in which it benefits from a rise in the value of an index
and the price of the underlying stock index has risen, such Fund will receive
from the broker a variation margin payment equal to that increase in value.
Conversely, if the price of the underlying stock index declines, such Fund would
be required to make a variation margin payment to the broker equal to the
decline in value.
Each Fund intends to use stock index futures contracts and related options
for hedging and not for speculation. Hedging permits a Fund to gain rapid
exposure to or protect itself from changes in the market. For example, a Fund
may find itself with a high cash position at the beginning of a market rally.
Conventional procedures of purchasing a number of individual issues entail the
lapse of time and the possibility of missing a significant market movement. By
using futures contracts, the Fund can obtain immediate exposure to the market
and benefit from the beginning stages of a rally. The buying program can then
proceed, and once it is completed (or as it proceeds), the contracts can be
closed. Conversely, in the early stages of a market decline, market exposure can
be promptly offset by entering into stock index futures contracts to sell units
of an index and individual stocks can be sold over a longer period under cover
of the resulting short contract position.
Each Fund may enter into contracts with respect to any stock index or
sub-index. To hedge a Fund's portfolio successfully, however, such Fund must
enter into contracts with respect to indexes or sub-indexes whose movements will
have a significant correlation with movements in the prices of such Fund's
portfolio securities.
Options on Stock Index Futures Contracts
To the extent described in the Prospectus and Statement of Additional
Information each Fund may purchase and sell put and call options on stock index
futures contracts which are traded on a recognized exchange or board of trade as
a hedge against changes in the market, and will enter into closing transactions
with respect to such options to terminate existing positions. An option on a
stock index futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a stock index futures contract at a
specified exercise price at any time prior to the expiration date of the option.
A call option gives the purchaser of such option the right to buy, and it
obliges its writer to sell, a specified underlying futures contract at a
specified exercise price at any time prior to the expiration date of the option.
A purchaser of a put option has the right to sell, and the writer has the
obligation to buy, such contract at the exercise price during the option period.
Upon exercise of an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's future margin account, which represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract. If an option is exercised on the last trading day prior
to the expiration date of the option, the settlement will be made entirely in
cash equal to the difference between the exercise price of the option and the
closing price of the stock index futures contract on the expiration date. Each
Fund will pay a premium for purchasing options on stock index futures contracts.
Because the value of the option is fixed at the point of sale, there are no
daily cash payments to reflect changes in the value of the underlying contract;
however, the value of the option does change daily and that change would be
reflected in the net asset value of a Fund. In connection with the writing of
options on stock index futures contracts, a Fund will make initial margin
deposits and make or receive maintenance margin payments that reflect changes in
the market value of such options. Premiums received from the writing of an
option are included in initial margin deposits.
Purchase of Put Options on Futures Contracts. Each Fund will purchase put
options on futures contracts if the Fund's investment adviser or sub-adviser
anticipates a market decline. A put option on a stock index futures contract
becomes more valuable as the market declines. By purchasing put options on stock
index futures contracts at a time when a Fund's investment adviser or
sub-adviser expects the market to decline, such Fund will seek to realize a
profit to offset the loss in value of its portfolio securities.
Purchase of Call Options on Futures Contracts. A Fund will purchase call
options on stock index futures contracts if the Fund's investment adviser
anticipates a market rally. The purchase of a call option on a stock index
futures contract represents a means of obtaining temporary exposure to market
appreciation at limited risk. A call option on such a contract becomes more
valuable as the market appreciates. A Fund will purchase a call option on a
stock index futures contract to hedge against a market advance when the Fund is
holding cash. A Fund can take advantage of the anticipated rise in the value of
equity securities without actually buying them until the market is stabilized.
At that time, the options can be liquidated and the Fund's cash can be used to
buy portfolio securities.
Writing Call Options on Futures Contracts. A Fund will write call options
on stock index futures contracts if the Fund's investment adviser anticipates a
market decline. As the market declines, a call option on such a contract becomes
less valuable. If the futures contract price at expiration of the option is
below the exercise price, the option will not be exercised and the Fund will
retain the full amount of the option premium. Such amount provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
securities.
Writing Put Options on Futures Contracts. A Fund will write put options on
stock index futures contracts if the Fund's investment adviser anticipates a
market rally. As the market appreciates, a put option on a stock index futures
contract becomes less valuable. If the futures contract price at expiration of
the option has risen due to market appreciation and is above the exercise price,
the option will not be exercised and the Fund will retain the full amount of the
option premium. Such amount can then be used by a Fund to buy portfolio
securities when the market has stabilized.
Risks Relating to Options on Stock Index Futures Contracts. Compared to the
purchase or sale of futures contracts, the purchase of call or put options on
futures contracts involves less potential risk to a Fund because the maximum
amount at risk is the premium paid for the options (plus transaction costs).
However, there may be circumstances when a purchase of a call or put option on a
futures contract would result in a loss to a Fund when the purchase or sale of a
futures contract would not result in a loss, such as when there is no movement
in the underlying index.
The writing of a put or call option on a futures contract involves risks
similar to those relating to transactions in futures contracts as described in
the Prospectus and Statement of Additional Information. By writing a call
option, a Fund, in exchange for the receipt of a premium, becomes obligated to
sell a futures contract, which may have a value higher than the exercise price.
Conversely, the writing of a put option on a futures contract generates a
premium, but the Fund becomes obligated to purchase a futures contract, which
may have a value lower than the exercise price. The loss incurred by the Fund in
writing options on futures contracts may exceed the amount of the premium
received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.
Finally, a Fund's purchase or sale of put or call options on stock index
futures contracts will be based upon predictions as to anticipated market
trends by the Fund's investment adviser or sub-adviser, which could prove to be
inaccurate. Even if the expectations of the Fund's investment adviser or
sub-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.
PART C
VOYAGEUR MUTUAL FUNDS III, INC.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial statements - are incorporated by reference from Registrant's
Annual Report filed with the Commission on June 13, 1995.
(b) Exhibits
1.1 Amended and Restated Articles of Incorporation *
1.2 Certificate of Designation of Series B and C *
1.3 Certificate of Designation of Series D *
1.4 Certificate of Designation of Classes B and C of Series A, B
and C *
1.5 Articles of Correction (7/27/94) to Amended and Restated
Articles of Incorporation *
2 Amended Bylaws (as of 4/25/94) *
5.1 Investment Advisory Agreement *
5.2 Sub-Advisory Agreement (Series B) *
5.3 Sub-Advisory Agreement (Series D) *
6.1 Distribution Agreement *
6.2 Form of Dealer Sales Agreement *
6.3 Form of Bank Agreement *
8.1 Custodian Agreement *
8.2 Administrative Services Agreement *
10 Opinion and Consent of Dorsey & Whitney P.L.L.P. *
11 Consent of KPMG Peat Marwick LLP*
15 Plan of Distribution *
16 Calculations of Yield *
17 Master Power of Attorney **
________________
* Filed herewith.
** Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement of VAM Institutional Funds, Inc. filed
August 1, 1995.
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.
Voyageur Minnesota Municipal Income Fund III, 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 California Insured Tax Free Fund
Voyageur Florida 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
The following table sets forth the number of holders of common shares, each
with a par value of $.01, of the Registrant as of August 25, 1995.
Class A Class B Class C
Common Common Common
Name of Fund Shares Shares Shares
Voyageur Growth and Income Fund ** ** **
Voyageur Growth Stock Fund 1,820 ** **
Voyageur International Equity Fund 78 ** 8
Voyageur Aggressive Growth Fund 83 ** 23
** Not in existence as of August 25, 1995
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
Investment Officer the Registration Statement.
Edward J. Kohler Director and Executive Director and Executive Vice President of
Vice President the 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
Vice President since 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
Financial Officer Dougherty, 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 Registrant's Adviser is contained in the
section of the Prospectus entitled "Management" 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 the Registrant is Norwest Bank Minnesota, N.A., Sixth
Street & Marquette Avenue, Minneapolis, Minnesota 55402. The dividend
disbursing, administrative and accounting services agent of the 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, on behalf of Voyager Growth and Income Fund, undertakes
to file a Post-Effective Amendment, using financial statements which need not be
certified, within four to six months after the commencement of operations of
such series.
(b) 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 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, State of
Minnesota, on the 25th day of August 1995.
VOYAGEUR MUTUAL FUNDS III, INC.
By /s/John G. Taft
John G. Taft, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
John G. Taft * President (Principal August 25, 1995
Executive Officer)
Kenneth R. Larsen * Treasurer (Principal Financial August 25, 1995
and Accounting Officer)
James W. Nelson* Director
Clarence G. Frame* Director
Robert J. Odegard* Director
Richard F. McNamara* Director
Thomas F. Madison * Director
* /s/ Thomas J. Abood Attorney-in-Fact August 25, 1995
Thomas J. Abood
(Pursuant to Powers of Attorney dated January 24, 1995)
EXHIBIT INDEX
(Voyageur Mutual Funds III, Inc.)
Exhibit Description Page Number
1.1 Amended and Restated Articles of Incorporation
1.2 Certificate of Designation of Series B and C
1.3 Certificate of Designation of Series D
1.4 Certificate of Designation of Classes B and C
of Series A, B and C
1.5 Articles of Correction (dated 7/27/94) to the
Amended and Restated Articles of Incorporation
2 Amended Bylaws as of 4/25/94
5.1 Investment Advisory Agreement
5.2 Sub-Advisory Agreement of Series B
5.3 Sub-Advisory Agreement of Series D
6.1 Distribution Agreement
6.2 Form of Dealer Sales Agreement
6.3 Form of Bank Agreement
8.1 Custodian Agreement
8.2 Administrative Services Agreement
10 Opinion and consent of Dorsey & Whitney P.L.L.P
11 Consent of KPMG Peat Marwick LLP
15 Plan of Distribution
16 Calculations of Yield
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
VOYAGEUR GROWTH STOCK FUND, INC.
The undersigned, John G. Taft and Theodore E. Jessen, President and
Secretary, respectively, of Voyageur Growth Stock Fund, Inc. (the
"Corporation"), a Minnesota corporation, hereby certify as follows:
1. The name of the Corporation is Voyageur Growth Stock Fund, Inc.
2. At meetings duly called and held (pursuant to the requirements of the
Minnesota Statutes, Chapter 302A) on July 21 and October 13, 1993, the
Corporation's Board of Directors and shareholders, respectively,
adopted and approved the following Amended and Restated Articles of
Incorporation of the Corporation to replace the Corporation's existing
Articles of Incorporation (as amended) 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.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
VOYAGEUR MUTUAL FUNDS III, 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 Voyageur Mutual Funds
III, 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
(10,000,000,000,000), all of which shall be common shares of the par value of
$.01 per share (individually, a "Share" and collectively, the "Shares"). 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.
(a) Ten billion (10,000,000,000) of the Shares may be issued by the
Corporation in a series designated "Series A Common Shares," and the
remaining nine trillion, nine hundred ninety billion (9,990,000,000,000)
Shares authorized by this Article 5 shall initially be undesignated Shares
(the "Undesignated Shares"). Any series of the Shares shall be referred to
herein individually as a "Series" and collectively herein, together with
any further series from time to time created by the Board of Directors, 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 any 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. Each 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. Such investment
portfolios in which Shares of the Series represent interests are also
hereinafter referred to as "Series."
(b) The Shares of each Series may be classified by the Board of
Directors in one or more classes (individually, a "Class" and,
collectively, together with any other class or classes within any Series,
the "Classes") with such relative rights and preferences as shall be stated
or expressed in a resolution or resolutions providing for the issue of any
such Class or Classes 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.
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 President and
Secretary of the Corporation have executed this Certificate of Amendment to the
Articles of Incorporation on this 22nd day of November, 1993.
__________________________________
John G. Taft
President
__________________________________
Theodore E. Jessen
Secretary
CERTIFICATE OF DESIGNATION
OF
SERIES B AND SERIES C COMMON SHARES
OF
VOYAGEUR MUTUAL FUNDS III, INC.
The undersigned duly elected Secretary of Voyageur Mutual Funds III, Inc.,
a Minnesota corporation (the "Corporation"), hereby certifies that the following
is a true, complete and correct copy of resolutions duly adopted by a majority
of the directors of the Board of Directors of the Corporation on March 11, 1994:
WHEREAS, the total authorized number of shares of the Corporation is ten
trillion, all of which shares are common shares, par value $.01 per share, as
set forth in the Corporation's Amended and Restated Articles of Incorporation
(the "Articles");
WHEREAS, ten billion of such shares have been designated in the Articles as
Series A Common Shares; and
WHEREAS, the Articles set forth that the balance of nine trillion, nine
hundred ninety billion shares may be issued in such series and classes and 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
any series or class of common shares as may be adopted from time to time by the
Board of Directors of the Corporation.
NOW, THEREFORE, BE IT RESOLVED, that of the remaining authorized common
shares of the Corporation, five billion are hereby designated as Series B, Class
A Common Shares, five billion are hereby designated as Series B, Class C Common
Shares, five billion are hereby designated as Series C, Class A Common Shares,
and five billion are hereby designated as Series C, Class C Common shares, and
Series B and Series C shall each represent 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.
FURTHER RESOLVED, that the Common Shares designated by these resolutions
shall have the preferences and relative, participating, optional or other
special rights, and qualifications, limitations and restrictions thereof, set
forth in the Articles. Any Class of a Series of Common Shares designated by
these resolutions may be subject to such charges and expenses (including, by way
of example but not by way of limitation, such front-end and deferred sales
charges as may be permitted under the 1940 Act and the rules of the National
Association of Securities Dealers, Inc., and expenses under Rule 12b_1 plans,
administrative plans, service plans or other plans or arrangements, however
designated) adopted from time to time by the Board of Directors of the
Corporation in accordance, to the extent applicable, with 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 determining
the net asset value and the amounts payable with respect to dividends and
distributions on, and redemptions or liquidation of, such Class.
FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed to file with the office of the Secretary of State of
Minnesota a Certificate of Designation setting forth the relative rights and
preferences of the Series B, Class A and Class C Common Shares and the Series C,
Class A and Class C Common Shares, as required by Section 302A.401, Subd. 3(b)
of the Minnesota Statutes.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation on behalf of the Corporation this day of April, 1994.
__________________________________
Theodore E. Jessen, Secretary
CERTIFICATE OF DESIGNATION
OF
SERIES D COMMON SHARES
OF
VOYAGEUR MUTUAL FUNDS III, INC.
The undersigned duly elected Secretary of Voyageur Mutual Funds III, Inc.,
a Minnesota corporation (the "Corporation"), hereby certifies that the following
is a true, complete and correct copy of resolutions duly adopted by a majority
of the directors of the Board of Directors of the Corporation on April 21, 1995:
WHEREAS, the total authorized number of shares of the Corporation is
ten trillion, all of which shares are common shares, par value $.01 per
share, as set forth in the Corporation's Amended and Restated Articles of
Incorporation (the "Articles");
WHEREAS, pursuant to Section 5(a) of such Articles, ten billion each
of such shares have been designated as Series A, Series B and Series C
Common Shares; and
WHEREAS, the Articles set forth that the balance of nine trillion,
nine hundred seventy billion shares may be issued in such series and
classes and 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 any series or class of
common shares as may be adopted from time to time by the Board of Directors
of the Corporation.
NOW, THEREFORE, BE IT RESOLVED, that of the remaining authorized
common shares of the Corporation, ten billion are hereby designated as
Series D Common Shares, one billion of which are hereby designated as
Series D, Class A Common Shares, one billion of which are hereby designated
as Series D, Class B Common Shares and one billion of which are hereby
designated as Series D, Class C Common shares and seven billion of which
shall remain undesignated as to class.
FURTHER RESOLVED, that the Common Shares designated by these
resolutions shall have the preferences and relative, participating,
optional or other special rights, and qualifications, limitations and
restrictions thereof, set forth in the Articles. The Series designated by
these resolutions shall represent 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. Any Class of a Series of
Common Shares designated by these resolutions may be subject to such
charges and expenses (including, by way of example but not by way of
limitation, such front-end and deferred sales charges as may be permitted
under the 1940 Act and the rules of the National Association of Securities
Dealers, Inc., and expenses under Rule 12b_1 plans, administrative plans,
service plans or other plans or arrangements, however designated) adopted
from time to time by the Board of Directors of the Corporation in
accordance, to the extent applicable, with 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
determining the net asset value and the amounts payable with respect to
dividends and distributions on, and redemptions or liquidation of, such
Class.
FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed to file with the office of the Secretary of State
of Minnesota amended and restated organizational documents as set forth
herein.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation on behalf of the Corporation this 24th day of August 1995.
/s/ Thomas J. Abood
Thomas J. Abood, Secretary
CERTIFICATE OF DESIGNATION
OF
CLASS B AND C COMMON SHARES OF SERIES A, SERIES B AND SERIES C
OF
VOYAGEUR MUTUAL FUNDS III, INC.
The undersigned duly elected Secretary of Voyageur Mutual Funds III, Inc.,
a Minnesota corporation (the "Corporation"), hereby certifies that the following
is a true, complete and correct copy of resolutions duly adopted by a majority
of the directors of the Board of Directors of the Corporation on June 27, 1995:
WHEREAS, the total authorized number of shares of the Corporation is
ten trillion, all of which shares are common shares, par value $.01 per
share, as set forth in the Corporation's Amended and Restated Articles of
Incorporation (the "Articles");
WHEREAS, pursuant to Section 5(a) of such Articles, ten billion each
of such shares have been designated as Series A, Series B, Series C and
Series D Common Shares; and
WHEREAS, pursuant to Section 5(b) of the Articles, the shares of each
Series may be classified by the Board of Directors in one or more classes
with such relative rights and preferences as shall be stated or expressed
in a resolution or resolutions providing for the issue of any such class or
classes as may be adopted from time to time by the Board of Directors of
the Corporation; and
WHEREAS, of the ten billion Shares designated as Series A Common
Shares, the Board of Directors previously has not designated classes of
such Series; of the ten billion Shares designated as Series B Common
Shares, the Board of Directors previously has designated one billion as
Series B, Class A Common Shares and one billion as Series B, Class C Common
Shares of the ten billion Shares designated as Series C Common Shares, the
Board of Directors previously has designated one billion as Series C, Class
A Common Shares and one billion as Series C, Class C Common Shares.
NOW, THEREFORE, BE IT RESOLVED, that of Series A Common Shares
remaining undesignated as to class, one billion are hereby designated as
Series A, Class A Common Shares, one billion are hereby designated as
Series A, Class B Common Shares, one billion are hereby designated as
Series A, Class C Common Shares, the remaining Series A Common Shares shall
remain undesignated as to class and the currently issued and outstanding
Common Shares of Series A are hereby redesignated as Series A, Class A
Common Shares, of the eight billion Series B Common Shares remaining
undesignated as to class, one billion are hereby designated as Series B,
Class B Common Shares and the remaining seven billion Series B Common
Shares shall remain undesignated as to class and of the eight billion
Series C Common Shares remaining undesignated as to class, one billion are
hereby designated as Series C, Class B Common Shares and remaining seven
billion Series C Common Shares shall remain undesignated as to class.
FURTHER RESOLVED, that the Class A, Class B and Class C Common Shares
designated by these resolutions shall have the relative rights and
preferences set forth in the Articles. As provided in the Articles, Class
A, Class B and Class C Common Shares designated by these resolutions may be
subject to such charges and expenses (including, by way of example but not
by way of limitation, such front-end and deferred sales charges as may be
permitted under the Investment Company Act of 1940 (the "1940 Act") and the
rules of the National Association of Securities Dealers, Inc., and expenses
under Rule 12b_1 plans, administrative plans, service plans or other plans
or arrangements, however designated) adopted from time to time by the Board
of Directors of the Corporation in accordance, to the extent applicable,
with 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 determining the net asset value and the
amounts payable with respect to dividends and distributions on, and
redemptions or liquidation of, such Class.
FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed to file with the office of the Secretary of State
of Minnesota amended and restated organizational documents as set forth
herein.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation on behalf of the Corporation this 25th day of August 1995.
/s/ Thomas J. Abood
Thomas J. Abood, Secretary
ARTICLES OF CORRECTION OF
VOYAGEUR MUTUAL FUNDS III, INC.
In order to correct the Certificate of Designation of Voyageur Mutual Funds
III, Inc., as filed with the Minnesota Secretary of State on April 29, 1994, the
undersigned hereby makes the following statements:
1. The name of the person who filed the instrument is Theodore E. Jessen.
2. The instrument to be corrected is the Certificate of Designation filed
with the Minnesota Secretary of State on April 29, 1994.
3. The errors to be corrected are the designation of shares contained in
the fifth paragraph of such Certificate.
4. The fifth paragraph of the Certificate of Designation of Voyageur Mutual
Funds III, Inc. is hereby set forth in its corrected form in its entirety as
follows:
NOW, THEREFORE, BE IT RESOLVED, that of the remaining authorized common
shares of the Corporation, (a) ten billion are hereby designated as Series B
Common Shares, one billion of which are hereby designated as Series B, Class A
Common Shares, one billion of which are hereby designated as Series B, Class C
Common Shares, and eight billion of which shall remain undesignated as to class,
and (b) ten billion are hereby designated as Series C Common Shares, one billion
of which are hereby designated as Series C, Class A Common Shares, one billion
of which are hereby designated as Series C, Class C Common Shares, and eight
billion of which shall remain undesignated as to class; and Series B and Series
C shall each represent 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.
Dated: July 27, 1994
__________________________________
Theodore E. Jessen, Secretary
BYLAWS
OF
VOYAGEUR MUTUAL FUNDS III, INC.
(AS AMENDED BY THE BOARD OF DIRECTORS ON APRIL 25, 1994)
ARTICLE I
OFFICES, CORPORATE SEAL
Section 1.01. Name. The name of the corporation is "Voyageur Mutual Funds
III, Inc." The name of the series represented by the corporation's Series A
Common Shares is "Voyageur Growth Stock Fund." The name of the series
represented by the corporation's Series B Common Shares is "Voyageur Aggressive
Growth Fund." The name of the series represented by the corporation's Series C
Common Shares is "Voyageur International Equity 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 1st day of November, l993, by and between
Voyageur Mutual Funds III, 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.
VOYAGEUR MUTUAL FUNDS III, INC.
By ____________________________
Its _________________________
VOYAGEUR FUND MANAGERS, INC.
By ____________________________
Its _________________________
Exhibit A
to
Investment Advisory Agreement
between
Voyageur Fund Managers, Inc.
and
Voyageur Mutual Funds III, Inc.
MONTHLY
ADVISORY FEE
(as % of average
FUND EFFECTIVE DATE daily net assets)
Series A--Voyageur Growth Stock Fund November 1, 1993 .083333%
Series B--Voyageur International
Equity Fund May 16, 1994 .083333%
Series C--Voyageur Agressive Growth
Fund May 16, 1994 .083333%
Series D--Voyageur Growth and
Income Fund September 1, 1995 .062500%
SUB-ADVISORY AGREEMENT
Agreement, dated May 16, 1994, by and between Voyageur Fund Managers, Inc.
(the "Adviser"), a Minnesota corporation, and Murray Johnstone International
Limited, a foreign corporation organized under the laws of Scotland (the
"SubAdviser").
WHEREAS, Voyageur Mutual Funds III, Inc., a Minnesota corporation
(the"Company"), on behalf of Voyageur International Equity 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
SubAdviser 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). 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 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 a 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 make all determinations with respect to managing the
investment 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 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 SubAdviser 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
SubAdviser 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 SubAdviser 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.
The Adviser shall provide the Sub-Adviser, upon request, with a list of all
known "affiliated persons" of the Company, the Adviser, and any affiliated
persons of such "affiliated persons" or any affiliated person of any principal
underwriter to the Company. The Adviser agrees to update such list as necessary.
(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
SubAdviser a monthly management fee at the annual rate of .50% of the Fund's
average daily net assets. 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.
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 and
(ii) 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, applicable 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. The Adviser will provide the SubAdviser, upon request, with a
copy of the Adviser's Form ADV and any amendments thereto.
(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. The Adviser represents, warrants and agrees that:
(a) It has been duly authorized by the Board of Directors of the Company to
delegate to the Sub-Adviser the provision of the services contemplated hereby.
(b) The Adviser and the Company are currently in compliance and shall at
all times continue to comply with the requirements imposed upon the Adviser and
the Company by applicable law and regulations.
11. 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.
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.
12. 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.
13. This Agreement shall be binding upon, and inure to the benefit of, the
Adviser and the Sub-Adviser, and their respective successors.
14. 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.
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.
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:
MURRAY JOHNSTONE
INTERNATIONAL, LTD.
By ________________________
Name:
Title:
SUB-ADVISORY AGREEMENT
Agreement, dated September 1, 1995, by and between Voyageur Fund Managers,
Inc. (the "Adviser"), a Minnesota corporation, and Segall Bryant & Hamill, a
Minnesota general partnership, (the "Sub-Adviser").
WHEREAS, Voyageur Mutual Funds III, Inc., a Minnesota corporation (the
"Company"), on behalf of Voyageur Growth and 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). 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 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 a 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 make all determinations with respect to managing the
investment 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 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 .75% of the Fund's
average daily net assets. 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 .50% 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 and (ii) 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, applicable 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.
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. 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.
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:
SEGALL BRYANT & HAMILL
By
Name:
Title:
VOYAGEUR MUTUAL FUNDS III, INC.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of September
1995, by and between Voyageur Mutual Funds III, 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 each
class of shares offered by the following Funds:
Voyageur Growth and Income Fund (currently offering Classes A, B and C
shares)
Voyageur Growth Stock Fund (currently offering Classes A, B and C shares)
Voyageur Aggressive Growth Fund (currently offering Classes A, B and C
shares)
Voyageur International Equity Fund (currently offering Classes A, B and C
shares)
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 shares of each class 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) In connection with certain sales of shares, a contingent deferred
sales charge will be imposed in the event of a redemption transaction
occurring within a certain period of time following such a purchase,
as described in the applicable currently effective Prospectus and
Statement of Additional Information.
(d) The front-end sales charge, if any, for any class of shares of a Fund
may, at the discretion of the Company and the Underwriter, be reduced
or eliminated as permitted by the Investment Company Act of 1940, and
the rules and regulations thereunder, as they may be amended from time
to time (the "1940 Act"), provided that such reduction or elimination
shall be set forth in the Prospectus for such class, and provided that
the Company shall in no event receive for any shares sold an amount
less than the net asset value thereof. In addition, any contingent
deferred sales charge for any class of shares of a Fund may, at the
discretion of the Company and the Underwriter, be reduced or
eliminated in accordance with the terms of an exemptive order received
from, or any applicable rule or rules promulgated by, the Securities
and Exchange Commission, provided that such reduction or elimination
shall be set forth in the Prospectus for such class of shares.
(e) 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 agrees to provide, and shall pay costs which
it incurs in connection with providing, administrative or accounting services to
shareholders of each Fund (such costs are referred to as "Shareholder Servicing
Costs"). Shareholder Servicing Costs include all expenses of the Underwriter
incurred in connection with providing administrative or accounting services to
shareholders of each Fund, including, but not limited to, an allocation of the
Underwriter's overhead and payments made to persons, including employees of the
Underwriter, who respond to inquiries of shareholders regarding their ownership
of Fund shares, or who provide other administrative or accounting services not
otherwise required to be provided by the applicable Fund's investment adviser or
transfer agent. The Underwriter shall also pay all costs of distributing the
shares of each Fund ("Distribution Expenses"). Distribution Expenses include,
but are not limited to, initial and ongoing sales compensation (in addition to
sales loads) 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; an allocation of the
Underwriter's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distributionrelated expenses.
6. COMPENSATION TO THE UNDERWRITER
As compensation for all of its services provided and its costs assumed
under this Agreement, the Underwriter shall receive the following forms and
amounts of compensation:
(a) The Underwriter shall be entitled to receive or retain any front-end
sales charge imposed in connection with sales of shares of each Fund,
as set forth in the applicable current Prospectus. Up to the entire
amount of such front-end sales charge may be reallowed by the
Underwriter to broker-dealers and participating financial institutions
in connection with their sale of Fund shares. The amount of the
front-end sales charge (if any) may be retained or deducted by the
Underwriter from any sums received by it in payment for shares so
sold. If such amount is not deducted by the Underwriter from such
payments, such amount shall be paid to the Underwriter by the Company
not later than five business days after the close of any calendar
quarter during which any such sales were made by the Underwriter and
payment received by the Company.
(b) The Underwriter shall be entitled to receive or retain any contingent
deferred sales charge imposed in connection with any redemption of
shares of each Fund, as set forth in the applicable current
Prospectus.
(c) Pursuant to the Company's Plan of Distribution adopted in accordance
with Rule 12b- 1 under the 1940 Act (the "Plan"):
(i) Class A of each Fund is obligated to pay the Underwriter a total
fee in connection with the servicing of shareholder accounts of
such class and in connection with distribution-related services
provided in respect of such class, calculated and payable
quarterly, at the annual rate of .25% of the value of the average
daily net assets of such class. All or any portion of such total
fee may be payable as a Shareholder Servicing Fee, and all or any
portion of such total fee may be payable as a Distribution Fee,
as determined from time to time by the Company's Board of
Directors. Until further action by the Board of Directors, all of
such fee shall be designated and payable as a Shareholder
Servicing Fee.
(ii) Class B of each Fund offering shares of such class is obligated
to pay the Underwriter a total fee in connection with the
servicing of shareholder accounts of such class and in connection
with distribution-related services provided in respect of such
class, calculated and payable quarterly, at the annual rate of
1.00% of the value of the average daily net assets of such class.
All or any portion of such total fee may be payable as a
Shareholder Servicing Fee, and all or any portion of such total
fee may be payable as a Distribution Fee, as determined from time
to time by the Company's Board of Directors. Until further action
by the Board of Directors, a portion of such total fee equal to
.25% per annum of the average net assets of such class shall be
designated and payable as a Shareholder Servicing Fee and the
remainder of such fee shall be designated as a Distribution Fee.
(iii) Class C of each Fund offering shares of such class is obligated
to pay the Underwriter a total fee in connection with the
servicing of shareholder accounts of such class and in connection
with distribution-related services provided in respect of such
class, calculated and payable quarterly, at the annual rate of
1.00% of the value of the average daily net assets of such class.
All or any portion of such total fee may be payable as a
Shareholder Servicing Fee, and all or any portion of such total
fee may be payable as a Distribution Fee, as determined from time
to time by the Company's Board of Directors. Until further action
by the Board of Directors, a portion of such total fee equal to
.25% per annum of the average daily net assets of such class
shall be designated and payable as a Shareholder Servicing Fee
and the remainder of such fee shall be designated as a
Distribution Fee.
Average daily net assets shall be computed in accordance with the
applicable currently effective Prospectus. Amounts payable to the
Underwriter under the Plan may exceed or be less than the
Underwriter's actual Distribution Expenses and Shareholder
Servicing Costs. In the event such Distribution Expenses and
Shareholder Servicing Costs exceed amounts payable to the
Underwriter under the Plan, the Underwriter shall not be entitled
to reimbursement by the Company.
(d) In each year during which this Agreement remains in effect, the
Underwriter will prepare and furnish to the Board of Directors of the
Company, and the Board will review, on a quarterly basis, written
reports complying with the requirements of Rule 12b-1 under the 1940
Act that set forth the amounts expended under this Agreement and the
Plan, on a class by class basis as applicable, and the purposes for
which those expenditures were made.
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 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
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 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 the Plan or
in any agreement related to the Plan (including, without limitation,
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
or class thereof 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 the Plan or in any agreement related to the Plan
(including, without limitation, 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.
VOYAGEUR MUTUAL FUNDS III, INC.
By /s/
Its
VOYAGEUR FUND DISTRIBUTORS, INC.
By /s/
Its
VOYAGEUR FUND DISTRIBUTORS, INC.
90 South Seventh Street
Minneapolis, MN 55402
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%
B. For money market shares sold by a dealer not participating in the Voyageur
Cash Advantage Program*:
Average Annual
Fund Aggregate Balance Annual Fee
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.
FORM OF VOYAGEUR
BANK SALES AGREEMENT
THIS AGREEMENT, made this ________ day of __________, 1995, by and between
Voyageur Fund Distributors, Inc. ("Voyageur"), having its principal office at 90
South Seventh Street, Suite 4300, Minneapolis, Minnesota 55402, and
_______________________ (the "Bank"), having its principal office at
_______________________________________________________________________________.
WHEREAS, Voyageur is engaged in certain distribution and marketing
activities for certain registered investment companies including open-end
investment companies and unit investment trusts (the "Funds"); and
WHEREAS, the parties hereto desire that the Bank be enabled to purchase
shares or units of the Funds' securities solely upon the order of, and for the
account of, customers of the Bank, as agent for such customers;
NOW, THEREFORE, the Bank hereby offers to purchase shares or units of the
Funds' securities and to render certain shareholder services, subject to the
following terms and conditions.
1. Customers. The customers referred to in this Agreement are the Bank's
customers and not customers of Voyageur. Voyageur shall execute
transactions for the Bank's customers only upon the Bank's authorization,
it being understood in all cases that (a) the Bank is at all times acting
as the agent of the customer and not of the funds or Voyageur; (b) the
transactions are without recourse against the Bank by the customer; (c) as
between the Bank and the customer, the customer will have full beneficial
ownership of the securities; (d) each transaction is initiated solely upon
the order of the customer without any investment discretion by the Bank;
and (e) each transaction is for the account of the customer and not for the
Bank's account. It is understood and agreed that whether securities are
registered in the purchaser's name, in the Bank's name, or in the name of
the Bank's nominee, the customer will have full beneficial ownership of the
securities. The Bank agrees that it will not withhold placing orders
received from its customers so as to profit itself as a result of such
withholding, and the Bank will place orders for purchases and redemptions
promptly upon receipt from its clients.
2. Acceptance of Subscriptions. Purchases made by the Bank on behalf of its
customers will be accepted only at the price, in the amounts, and on the
terms which are set forth in the then current Prospectus (and/or Statement
of Additional Information) of the respective Fund.
3. Bank Discount and Other Compensation. The Bank shall receive, for each
purchase of shares or units of any of the Funds for customers of the Bank,
as agent for such customers, the applicable Dealer Discount or other
compensation as set forth in the relevant Prospectus (and on Schedule A
hereto with respect to sales of money market funds). Additionally, with
respect to certain of the Funds, the Bank may be entitled to receive
additional compensation upon such terms and conditions and in such amounts
as set forth in the Prospectus 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 Fund's
investment adviser or transfer agent ("Service Fees") or (in addition to
the aforementioned Dealer Discount) for sales of shares or units of the
applicable Funds' securities ("Distribution Fee"). Schedule A may be
amended in whole or in part without notice from time to time by Voyageur.
4. Orders. Orders to purchase shares or units of the Funds shall be placed as
described in the then current Prospectus (and/or Statement of Additional
Information) of the respective Fund and as instructed from time to time by
Voyageur. Orders shall be placed promptly upon receipt, and there shall be
no postponement of orders received so as to profit the Bank by reason of
such postponement. Each order shall be confirmed by the Bank in writing on
the day such order was placed.
5. General. In purchasing shares or units of the Funds for customers of the
Bank, as agent for such customers, the Bank shall act as an independent
contractor and not as an agent of Voyageur or the Funds. The Bank
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 and Statement of
Additional Information) shall not be included in the Bank'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 Voyageur.
6. Bank's Undertakings. No person is authorized to make any representation
concerning shares or units of the Funds except those contained in the then
current Prospectus (and/or Statement of Additional Information) of the
respective Fund; provided that all prospective purchasers of Fund shares or
units, prior to the Bank's submission of an order for Fund shares or units
on behalf of such person, shall be informed that an investment in Fund
shares or units is not an obligation of the Bank, and such an investment is
not protected or covered by any deposit insurance. The Bank shall not
purchase shares or units of the Funds for customers of the Bank, as agent
for such customers, pursuant to this Agreement unless the then current
Prospectus of the respective Fund is furnished to the customer prior to the
offer and sale. The Bank shall not use any supplemental sales literature of
any kind without prior written approval of Voyageur unless it is furnished
by Voyageur for such purpose. In purchasing shares or units of the Funds
for customers of the Bank, as agent for such customers, the Bank will rely
solely on the representations contained in the then current Prospectus
(and/or Statement of Additional Information) of the respective Fund. With
respect to any Fund offering multiple classes of shares, the Bank 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.
7. Representations and Agreements of the Bank. By accepting this Agreement,
the Bank (i) represents that it is a national bank or State bank or trust
company (whether or not a member of the Federal Reserve System) or other
financial institution or private banker (all as defined in Chapter 3 of
Title 12 of United States Code) and (ii) agrees that it will comply with
all applicable federal laws, rules and regulations including, but not
limited to, the Glass-Steagall Act (codified at 12 U.S.C. 24(7), 78, 377
and 378) and all laws, rules and regulations of any jurisdiction applicable
to the Bank's provision of services hereunder. The Bank shall promptly
answer all written complaints and other correspondence relating to accounts
or forward such complaints to Voyageur.
8. Bank's Employees. By accepting this Agreement, the Bank assumes full
responsibility for thorough and prior training of its representatives
concerning the methods to be used in connection with purchasing shares or
units of the Funds for customers of the Bank, as agent for such customers,
giving special emphasis to the principles of full and fair disclosure to
prospective investors.
9. Bank's Indemnification. The Bank hereby agrees to indemnify and to hold
harmless the Funds and Voyageur and each person, if any, who controls the
Funds or Voyageur within the meaning of Section 15 of the Securities Act of
1933 (the "Act"), from and against any and all losses, claims, demands or
liabilities to which the Funds or Voyageur may become subject under the
Act, or otherwise, insofar as such losses, claims, demands or liabilities
(or actions in respect thereof) arise out of or are based upon any
unauthorized use of sales materials by the Bank or its representatives or
upon alleged misrepresentations or omission to state material facts in
connection with statements made by the Bank or its representatives orally
or by other means; and the Bank will reimburse the Funds and Voyageur for
any legal or other expenses reasonably incurred in connection with the
investigation or defense or any such action or claim. Voyageur shall, after
receiving the first summons or other legal process disclosing the nature of
the action being served upon Voyageur or the Funds, in any proceeding in
respect of which indemnity may be sought by the Funds or Voyageur
hereunder, notify the Bank in writing of the commencement thereof within a
reasonable time. In case any such litigation be brought against the Funds
or Voyageur, Voyageur shall notify the Bank of the commencement thereof and
the Bank shall be entitled to participate in (and to the extent the Bank
shall wish, to direct) the defense thereof at the Bank's expense, but such
defense shall be conducted by counsel of good-standing satisfactory to the
Funds and Voyageur. If the Bank shall fail to provide such defense,
Voyageur or the Funds may defend such action at the Bank's cost and
expense. The Bank's obligation under this paragraph shall survive the
termination of this Agreement.
10. Assignment. This Agreement may not be assigned by the Bank without consent
of Voyageur.
11. Termination. Either party may terminate this Agreement at any time upon
giving written notice to the other party hereto.
12. Waiver. No failure, neglect or forbearance on the part of Voyageur to
require strict performance of this Agreement shall be construed as a waiver
of the rights or remedies of Voyageur hereunder.
13. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Minnesota without reference to its choice of laws
principles.
14. Suspending sales, amending or canceling this Agreement. The Underwriter
may, at any time, without notice, suspend sales or withdraw any offering of
shares or units entirely. The Underwriter reserves the right to amend or
cancel this Agreement upon notice to you. The Bank agrees that any order to
purchase shares or units of funds placed after notice of any amendment to
this Agreement has been sent to the Bank shall constitute the Bank's
agreement to any such amendment.
BANK:
________________________ __________________________
(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)
Accepted by
VOYAGEUR FUND DISTRIBUTORS, INC.
Date of acceptance: _____________, 19__
By ___________________________________________
(Signature)
Its __________________________________________
(Title)
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%
B. For money market shares sold by a dealer not participating in the Voyageur
Cash Advantage Program*:
Average Annual
Fund Aggregate Balance Annual Fee
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 CONTRACT
between
Voyageur Mutual Funds III, Inc.
and
NORWEST BANK MINNESOTA, N.A.
TABLE CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States 1
2.1 Holding Securities 1
2.2 Delivery of Securities 1
2.3 Registration of Securities 3
2.4 Bank Accounts 3
2.5 Payments for Shares 3
2.6 Availability of Federal Funds 3
2.7 Collection of Income 3
2.8 Payment of Company Monies 3
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased 4
2.10 Payments for Repurchases or Redemptions of Shares of a Fund 4
2.11 Appointment of Agents 4
2.12 Deposit of Fund Assets in Securities System 4
2.13 Segregated Account 5
2.14 Ownership Certificates for Tax Purposes 6
3. Duties of Custodian with Respect to Fund Property Held Outside
of the United States 6
3.1 Appointment of Foreign Sub-Custodians 6
3.2 Assets to be Held 6
3.3 Segregation of Securities 6
3.4 Agreement with Foreign Banking Institution 6
3.5 Access of Independent Accountants of the Company 7
3.6 Reports by Custodian 7
3.7 Foreign Securities Transactions 7
3.8 Foreign Securities Lending 8
3.9 Liability of Foreign Sub-Custodians 8
3.10 Monitoring Responsibilities 8
3.11 Branches of United States Banks 8
3.12 Expropriation Insurance 8
4. Proxies 9
5. Communications Relating to Fund Portfolio Securities 9
6. Proper Instructions 9
7. Actions Permitted Without Express Authority 9
8. Evidence of Authority 9
9. Class Actions 10
10. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 10
11. Records 10
12. Opinion of Company's Independent Accountant 10
13. Reports to Company by Independent Public Accountant 10
14. Compensation of Custodian 11
15. Responsibility of Custodian 11
16. Effective Period, Termination and Amendment 11
17. Successor Custodian 12
18. Interpretive and Additional Provisions 12
19. Minnesota Law to Apply 12
20. Prior Contracts 12
21. General 13
CUSTODIAN CONTRACT
This AGREEMENT made as of the 16th of May, 1994 by and between Voyageur
Mutual Funds III, Inc., Minnesota corporation having its principal office and
place of business at 90 South Seventh Street, Suite 4400, Minneapolis, Minnesota
(the "Company"), and Norwest Bank Minnesota, N.A., a National Banking
Association having its principal office and place of business at Sixth and
Marquette, Minnesota, MN 55479 (the "Custodian").
WHEREAS, the Company is a mutual fund whose shares are currently offered in
the following series (which, together with each future series of the Company
that adopts this contract are hereafter referred to individually as a "Fund" and
collectively as the "Funds"): Voyageur Growth Stock Fund, Voyageur International
Equity Fund, Voyageur Agressive Growth Fund.
WHEREAS, the Company desires to appoint the Bank as the custodian for each
Fund, and the Bank desires to accept such appointment;
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
each Fund, including securities the Company desires to be held in places within
the United States ("domestic securities") and securities the Company desires to
be held outside of the United States ("foreign securities"). The Company agrees
to deliver to the Custodian all securities and cash owned by each Fund, and all
payments of income, payments of principal or capital distributions received by
the Fund with respect to all securities owned by the Fund from time to time, and
the cash consideration received by the Fund for such new or treasury shares of
capital stock ("Shares") of the Fund as may be issued or sold from time to time.
The Custodian shall not be responsible for any property of a Fund held or
received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 6),
the Custodian shall from time to time employ one or more sub-custodians, but
only in accordance with any necessary approvals by the Board of Directors of the
Company, and provided that the appointment by the Custodian of any
sub-custodians shall not relieve the Custodian of any of its responsibilities or
liabilities hereunder.
2. Duties of the Custodian with Respect to Fund Property held by the Custodian
in the United States.
2.1 Holding Securities.
The Custodian shall hold and physically segregate for the account of each
of the Funds all non-cash property, including all securities owned by the Funds,
other than (a) securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a Federal Reserve
Bank, as Custodian may select, and to permit such deposited Assets to be
registered in the name of Custodian or Custodian's agent or nominee on the
records of such Federal Reserve Bank or such registered clearing agency or the
nominee of either, and to employ and use securities depositories, clearing
agencies, clearance systems, sub-custodians or agents located outside the United
States in connection with transactions involving foreign securities,
collectively referred to herein as a "Securities System".
2.2 Delivery of Securities.
The Custodian shall release and deliver securities owned by the Company for
the account of a 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:
1) Upon sale of such securities for the account of a Fund and receipt of
payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Company on
behalf of a Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of a Fund;
5) To the issuer thereof or its agent when such securities are 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;
6) To the issuer thereof, or its agent, for transfer into the name of the
Company for the account of a 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 2.11 or into the name or nominee
name of any sub-custodian 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;
7) Upon the sale of such securities for the account of a 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;
8) For exchange or conversion pursuant to any plan or 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;
9) 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 of 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;
10) For delivery in connection with any loans of securities made by the
Company on behalf of a 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 or obligations issued by the
United States government, its agencies or instrumentalities, except
that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of securities owned
by a Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Company on behalf of a Fund requiring a pledge of assets by the
Company on behalf of such Fund, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Company on behalf of a Fund, 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 the 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;
13) For delivery in accordance with the provisions of any agreement among
the Company on behalf of a Fund, 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 on behalf of a Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the applicable Fund, for delivery to such Transfer Agent
or to the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares for
repurchase or redemptions; and
15) 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 of the Company signed by an officer of the
Company and certified by the Secretary or an 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 Company for the account of the applicable
Fund(s) or in the name of any nominee of the Company or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Company's, unless
the Company has authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same investment
advisor as the applicable Fund(s), or in the name of nominee name of any agent
appointed pursuant to Section 2.11 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted by the
Custodian on behalf of the Company under the terms of this Contract shall be in
Street named or other good delivery form.
2.4 Bank Accounts.
The Custodian shall open and maintain a separate bank account or accounts
in the name of each Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of each applicable Fund, other than cash maintained by the
applicable Fund in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Cash hold by the Custodian for
each Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust company as it may in
its discretion doom necessary or desirable; provided, however, that every such
bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company and the
cash to be deposited with each such bank or trust company shall be approved by
vote of a majority of the Board of Directors of the Company. Such cash shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Payments for Shares.
The Custodian shall receive from the distributor for each Fund Shares or
from the Transfer Agent of each Fund and deposit into the Fund account such
payments as are received for Shares of the Fund issued or sold from time to time
by the Fund. The Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the Funds.
2.6 Availability of Federal Funds.
Upon mutual agreement between the Company and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions, make federal funds available to
the Funds as of specified times agreed upon from time to time by the Company and
the Custodian in the amount of checks received in payment for Shares of the
Funds which are deposited into the Funds' accounts.
2.7 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 registered
securities held hereunder to which each Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a timely
basis ad income and other payments with respect to bearer securities if, on the
date of payment by the issuer, such securities are held by the Custodian or its
agent or sub-custodian and shall credit such income, as collected, to the
applicable 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 and shad
collect interest when due on securities hold hereunder. Unless the Custodian is
the lending agent in connection with securities loaned by the Fund, income due
each Fund on securities loaned pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Company. 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 each Fund is
properly entitled.
2.8 Payment of Company Monies.
Upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies of
each Fund in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of each Fund but only
(a) against the delivery of such securities or evidence of title to
such options, 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 to act as a custodian and has been
designated by the Custodian as its agent for this purpose) registered
in the name of the Company for the account of a Fund or in the name of
a nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer, (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions sot
forth in Section 2.12 hereof or (c) in the case of the repurchase
agreements entered into between the Company and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i)
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 or (ii) against delivery of the
receipt evidencing purchase by the Company for the account of a Fund
of securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities from a
Fund;
2) In connection with conversion, exchange or surrender of securities
owned by a Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by a Fund as set
forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by a Fund,
including but not limited to the following payments for the account of
such Fund: interest, taxes, management, accounting, transfer agent and
legal fees, ad operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of ny dividends declared pursuant to the governing
documents of the Company and the applicable Fund;
6) For payment of the amount of dividends received in respect of
securities sold short; or
7) 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 purpose 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.
2.9 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 a 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 a 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
absolutely liable to the Company (for the account of the Fund) for such
securities to the same extent as if the securities had been received by the
Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation or Bylaws and any applicable votes
of the Board of Directors of the Company, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of a Fund, the Custodian shall honor checks drawn on the
Custodian by a holder of Shares, which checks have been furnished by the Company
to the holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Company and the Custodian.
2.11 Appointment of Agents.
The Custodian may at any 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 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 any of its responsibilities or liabilities
hereunder.
2.12 Deposit of Fund Assets in Securities Systems.
The Custodian may deposit and/or maintain domestic securities owned by any
Fund in a clearing agency registered with the Securities and Exchange commission
under Section 17A of the Exchange Act, which acts as a securities depository, or
in Federal Reserve Bank, as Custodian may select, and to permit such deposited
Assets to be registered in the name of Custodian or Custodian's agent or nominee
on the records of such Federal reserve Bank or such registered clearing agency
or the nominee of either (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:
1) The Custodian may keep domestic securities of a 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 hold as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to domestic securities of a
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to such Fund;
3) The Custodian shall pay for domestic securities purchased for the
account of a Fund upon (i) the simultaneous 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 a Fund upon (i) the simultaneous receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) 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 advices from the Securities System
of transfers of securities for the account of a Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be provided
to the Company at its request. Upon request, the Custodian shall
furnish the Company confirmation of each transfer to or from the
account of a Fund in the form of a written advice or notice and shall
furnish to the Company copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account of
each Fund.
4) 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 securities
deposited in the Securities System;
5) The Custodian shall have received the initial or annual certificate,
as the case may be, required by Article 16 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Company (for the account of each
Fund) for any loss or damage to the applicable Fund(s) 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
or employee 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 consequent of any such loss or damage if
and to the extent that the applicable Funds have not been made whole
for any such loss or damage.
2.13 Segregated Account.
The Custodian shall upon receipt of Proper Instructions establish and
maintain a segregated account or accounts for and on behalf of each 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 2.12
hereof, (i) 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 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 account of
any Fund, (ii) for the purpose of segregating cash or government securities in
connection with options purchased, sold or written by the Company for the
account of any Fund or commodity futures contracts or options thereon purchased
or sold by the Company for the account of any Fund, (iii) for the purpose 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 compares and (iv) for other proper corporate purposes, but
only, in the case of the clause (iv), 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 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.
2.14 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 each Fund held by it and
in connection with transfers of securities.
3. Duties of the Custodian with Respect to Fund Property Held Outside of the
United States.
3.1 Appointment of Foreign Sub-Custodians.
The Custodian is authorized and instructed, either directly or indirectly
(through one or more sub custodian U.S. banks), to employ as sub-custodians for
any Fund's securities and other assets maintained outside of the United States
the foreign banking institutions, foreign securities depositories and foreign
clearing agencies designated on Exhibit A hereto ("foreign sub-custodians");
provided, however, that, notwithstanding the contents of Exhibit A hereto, the
Custodian (including any of its agents and sub-custodians) is authorized to
directly or indirectly employ or retain any sub-custodian, depository or
clearing agency only if said employed or retained institution qualifies as
either (a) an Eligible foreign custodian", as defined in Rule 17f-5 under the
Investment Company Act of 1940, or (b) a "bank", as defined in Section 2(a)(5)
of the Investment Company Act of 1940, that in turn qualifies as an eligible
domestic custodian under Section 17(f) of the Investment Company Act of 1940;
and provided further that the Custodian shall be liable to the Company for any
loss of any Fund assets custodied with any institution directly or indirectly
employed or retained by the Custodian (or any of its agents or sub-custodians)
that does not meet the qualifications of either clause (a) of (b) of the
preceding proviso. The Custodian will monitor the status of each such
sub-custodian as Eligible foreign custodian and alert the Company with respect
to a change in such status by any such sub-custodian.
Upon receipt of Proper Instructions, together with a certified resolution
of the Company's Board of Directors, the Custodian and the Company may agree to
amend Schedule A hereto from time to time to designate additional or alternative
foreign banking institutions, foreign securities depositories and foreign
clearing agencies to act as sub-custodians. 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 promptly cease the employment of any one or more of such
sub-custodians for maintaining custody of the assets of the applicable Fund(s).
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 foreign securities
transactions of the applicable Fund(s).
3.3 Segregation of Securities.
The Custodian shall identify on its books as belonging to the Company for
the account of one or more of the Fund(s), the foreign securities of each such
Fund held by each foreign sub-custodian. Each agreement pursuant to which the
Custodian or its duly appointed U.S. sub-custodian employs a foreign banking
institution shall require that such institution establish a custody account for
the Custodian (or its U.S. sub-custodian, as the case may be) 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 a
Fund's securities in a foreign securities depository, the sub-custodian shall
identify on its books as belonging to the Custodian (or its U.S. sub-custodian,
as the case may be), 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)
each Fund's assets will not be subject to any right, charge, security interest,
lion or claim or 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 each 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 Custodian; (d) officers of or auditors employed by, or other representatives
of the Custodian, including independent public accountants for each Fund, 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
each Fund held by the foreign sub-custodian will be subject only to the
instructions of the Company, the Custodian or their 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
sub-custodian insofar as such books and records relate to the performance of
such foreign banking institutions under its agreement with the Custodian (or its
U.S. sub-custodian, as the case may be).
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 each
Fund hid by foreign sub-custodians, including but not limited to an
identification of entities having possession of each applicable 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 each applicable 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.
1) Upon receipt of Proper Instruction, 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 owned by the Company for the account of a
Fund, but except to the extent explicitly provided herein only in any
of the cases specified in Section 2.2.
2) 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
a Fund, but except to the extent explicitly provided herein only in
any of the cases specified in Section 2.8.
3) Settlement and payment for securities received for the account of a
Fund and delivery of securities maintained for the account of a 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.
4) With respect to any transaction involving foreign securities, the
Custodian or any sub-custodian in its discretion may cause a Fund's
account 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 applicable 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 such 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. 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 dab 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 reasonable 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.
5) 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 Contract and the Fund agrees to hold
any such nominee harmless from any liability as a holder of record of
such securities.
6) 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 each applicable
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 a 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 each applicable Fund's account, and 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 Contract, 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,
(i) marking to market values for such loaned securities.
(ii) collection of dividends, interest or other disbursements or
distributions made with respect to such loaned securities
(iii) receipt of corporate action notices, communications, proxies or
instruments with respect to such loaned securities, and
(iv) 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 applicable Fund's lending agent in
connection with a specific securities loan, 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 (or its U.S. sub-custodian
bank, as applicable) employs foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the Custodian and
Custodian's customers from and against any loss, damage, cost, expense,
liability or claim arising out of such sub-custodian'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 the Custodian's U.S. sub-custodian
bank (if any) or a foreign banking institution as a consequence of any such
loss, damage, cost, expense, liability or claim if and to the extent that the
Company 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 sub-custodians employed by the Custodian (or its U.S. sub-custodian
bank, as applicable). Such information shall be similar in kind and scope to
that furnished to the Company in connection with the initial approval of this
Contract (and any contracts with U.S. and foreign sub-custodians entered into
pursuant hereto). 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 sub-custodian or is notified by the Custodian's
U.S. sub-custodian bank (if any) or a foreign banking institution employed as
foreign sub-custodian 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 Contract, the provisions hereof shall
not apply where the custody of any Fund's assets 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 Contract.
3.12 Expropriation Insurance.
The Custodian represents that it does not intend to obtain any insurance
for the benefit of the Company or any 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 is organized or in which securities are held for safekeeping either
by Custodian or any sub custodians 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. Proxies.
The Custodian shall, with respect to the securities held hereunder, cause
to be promptly executed by the registered holder of such securities, if the
securities are registered otherwise than in the name of the Company or a nominee
of the Company, all proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the Company such proxies,
all proxy soliciting materials and all notices relating to such securities.
5. Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Company all written
information (including, without limitation, dependency of calls and maturities
of securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Company) received by the Custodian
from issuers of the securities being held for each Fund. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Company all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Company desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the Company
shall notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
6. Proper Instructions.
Proper Instructions as used in this Contract means a writing signed or
initialed by one or more person or persons as the Board of Directors of the
Company 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 Assistant Secretary as to the authorization by the Board
of Directors of the Company accompanied by detailed description of procedures
approved by the Board of Directors, Proper Instructions may include
communications effected directly between election mechanical or electronic
devices provided that the Board of Directors and the Custodian are satisfied
that such procedures afford adequate safeguards for each Fund's assets.
7. Actions Permitted Without Express Authority.
The Custodian may in its discretion, without express authority from the
Company:
1) Make payments to itself or others for minor expenses of handling
securities provided that all such payments shall be accounted for to
the Company;
2) Surrender securities in temporary form for securities in definitive
form;
3) Endorse for collection, in the names of the applicable Fund, checks,
drafts and other negotiable instruments; and
4) 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 Company except as
otherwise directed by the Board of Directors of the Company.
8. Evidence of Authority.
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument of paper believed by it to be
genuine and to have been properly executed by or on behalf of the Company. The
Custodian may receive and accept 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) or any determination or of any
action duly made or taken by the Board of Directors 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.
9. Class Actions. The Custodian shall transmit promptly to the Company all
notices or other communications received by it in connection with any class
action lawsuit relating to securities currently or previously held for one or
more of the Funds. Upon being directed by the Company to do so, the Custodian
shall furnish to the Company any and all written materials which establish the
holding/ownership, amount held/owned, and period of holding/ownership of the
securities in question.
10. 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 each Fund and/or compute the net asset value per share
of the outstanding shares of each Fund or, if directed in writing to do so by
the Company, shall itself keep such books of account and/or compute such net
asset values per share. If so directed, the Custodian shall also calculate daily
the net income of each Fund as described in the Fund's currently effective
prospectus and shall advise the Company and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an officer of
the Company to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The calculations of
the net asset value per share and the daily income of each Fund shall be made at
the time or times described from time to time in the applicable Fund's currently
effective prospectus.
11. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Company and each Fund under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rule 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 which may be applicable to the Company and
the Funds. 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 Company
for the account of the applicable Fund(s). 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 authority 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. The
Custodian shall furnish to the Company, and its agents as directed by the
Company, as of the close of business an the last day of each month a statement
showing all transactions and entries for the account of the Company 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 term nation 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.
12. Opinion of Company's Independent Accountant.
The Custodian shall take all reasonable action, as the Company may from
time to time request, to obtain from year to year favorable opinions from the
Company's independent accountants with respect to its activities hereunder in
connection with the preparation of the Company's Form N-IA and Form N-SAR or
other reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
13. 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 system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; 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.
14. Compensation of Custodian.
For performance by the Custodian pursuant to this Agreement, the Company,
out of the assets of each applicable Fund, agrees to pay the Custodian annual
asset fees and supplemental charges as set out in Exhibit B. Fees and
supplemental charges may be changed from time to time subject to mutual written
agreement between the Company and the Custodian.
15. 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 Contract 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 Contract, but shall be kept indemnified by and shall be without liability
to the Company or any Fund for any action taken or omitted by it in good faith
and without negligence. It shall be entitled to rely on and may act upon advice
of counsel of, or reasonably acceptable to, the Company on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice. Notwithstanding the foregoing, the responsibility of the
Custodian with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the Company.
If the Company requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to the Company being liable for the payment of money or incurring
liability of some other form, the Company, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form reasonably satisfactory to it.
If the Company requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of a Fund shall be
security therefor and should the Company fail to repay the Custodian promptly
with respect to any Fund, the Custodian shall be entitled to utilize available
cash and to dispose of assets to the extent necessary to obtain reimbursement.
The Custodian shall not be liable for any loss or damage to the Company or
any 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 depositor
or from use of a sub-custodian or agent. Anything in this Contract 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 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 Company and each applicable Fund harmless from and
against any loss which shall occur as a result of the failure of a foreign
sub-custodian holding the securities and cash to provide a level of safeguards
for maintaining any 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.
The Custodian agrees to indemnify and hold the Company and each of the
Funds harmless for any and all loss, liability and expense, including reasonable
legal fees and expenses, arising out of the Custodian's own negligence or
willful misconduct or that of its officers, agents, sub-custodians or employees
in the performance of the Custodian's duties and obligations under this
Contract.
16. Effective Period. Termination and Amendment.
The Contract shall become effective as of the date first above written,
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 patty by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or mailing;
provided, however, that the Custodian shall not act under Section 2.12 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 the
initial use of a particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has reviewed the use by each Fund of such Securities System, as
required in each case by Rule 17f4 under the Investment Company Act of 1940,
provided further, however, that the Company shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of its Articles of Incorporation, and further provided, that the
Company may at any time by action of its Board of Directors, with respect to any
Fund (i) substitute another bank or trust company for the Custodian by giving
notice as described above to the Custodian, or (ii) immediately terminate this
Contract 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 Contract, the Company on behalf of each Fund 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.
17. 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 to an account of the successor custodian each 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, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $100,000,000, all
securities, funds and other properties hold by the Custodian and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor custodian all of
each Fund's securities held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under and pursuant to this
Contract.
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 provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
18. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Company may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. 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 ~11
contravene any applicable federal or state regulations or any provision of the
Articles of Incorporation or Bylaws of the Company. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
19. Minnesota Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the State of Minnesota.
20. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Company and the Custodian relating to the custody of each
Fund's assets. This Contract shall not be assignable by any party hereto;
provided however, that any entity into 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.
21. General.
Nothing expressed or mentioned in or to be implied from any provision of
this Contract 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 to this Contract, or any covenant, condition and
provision herein contained, this Contract and all of the covenants, conditions
and provisions hereof being intended to be and being the solo 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 officers as of the day
and year first above written.
Voyageur Mutual Funds III, Inc.
By /s/ _________________________
ATTEST
By /s/ _________________________
NORWEST BANK MINNESOTA, N.A.
By /s/ _________________________
ATTEST
By /s/ _________________________
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is made and entered into this 27th day of October 1994, by
and between Voyageur Mutual Funds III, 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.
VOYAGEUR MUTUAL FUNDS III, INC.
By ____________________________
Its _________________________
VOYAGEUR FUND MANAGERS, INC.
By ____________________________
Its _________________________
EXHIBIT A
TO
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
VOYAGEUR FUND MANAGERS, INC.
AND
VOYAGEUR MUTUAL FUNDS III, INC.
FUND EFFECTIVE DATE
Series A - Voyageur Growth Stock Fund October 27, 1994
Series B - Voyageur International Equity Fund October 27, 1994
Series C - Voyageur Aggressive Growth Fund October 27, 1994
Series D - Voyageur Growth and Income Fund September 1, 1995
COMPENSATION
Series B
The sum of (i) $1.33 per shareholder account per month; (ii) $3,000 per month if
the Fund's average daily net assets do not exceed $50 million, $4,000 per month
if the Fund"s average daily net assets are greater than $50 million but do not
exceed $100 million, and $5,000 per month if the Fund's average daily net assets
are greater than $100 million; and (iii) 0.11% per annum of the first $50
million of the Fund's average daily net assets, .06% per annum of the next $100
million of the Fund's average daily net assets, .035% per annum of the next $250
million of the Fund's average daily net assets, .03% per annum of the next $300
million of the Fund's average daily net assets, and .02% per annum of the Fund's
average daily net assets in excess of $700 million.
Series A, C and D
The sum of (i) $1.25 per shareholder account per month; (ii) $1,000 per month if
the Fund's average daily net assets do not exceed $50 million, $1,250 per month
if the Fund"s average daily net assets are greater than $50 million but do not
exceed $100 million, and $1,500 per month if the Fund's average daily net assets
are greater than $100 million; and (iii) 0.11% per annum of the first $20
million of the Fund's average daily net assets, .06% per annum of the next $80
million of the Fund's average daily net assets and .035% per annum of the Fund's
average daily net assets in excess of $100 million.
Voyageur Mutual Funds III, Inc.
90 South Seventh Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
We have acted as counsel to Voyageur Mutual Funds III, Inc., a Minnesota
corporation (the "Fund"), in connection with a Registration Statement on Form
N-1A (File No. 2-95928) (the "Registration Statement") relating to the sale by
the Fund of an indefinite number of the Class A, B and C shares of Series A,
Series B, Series C and Series D of the Fund's common stock, par value $.01 per
share (the "Series A through Series D 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 A through Series D 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 through
Series D 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: August 31, 1995
Very truly yours,
KLP
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Voyageur Mutual Funds III, Inc.
We consent to the use of our report included herein and the references to our
Firm under the heading "Financial Highlights" in Part A and "ADDITIONAL
INFORMATION - Custodian; Counsel; Independent Auditors" in Part B of the
Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 25, 1995
VOYAGEUR MUTUAL FUNDS III, INC.
PLAN OF DISTRIBUTION
This Plan of Distribution (the "Plan") is adopted pursuant to Rule 12b-1
(the "Rule") under the Investment Company Act of 1940 (as amended, the "1940
Act") by Voyageur Mutual Funds III, Inc., a Minnesota corporation (the
"Company"), for and on behalf of each class (each class is referred to
hereinafter as a "Class") of each series (each series is referred to hereinafter
as a "Fund") thereof. The Classes of each Fund that currently have adopted this
Plan, and the effective dates of such adoptions, are as follow:
Voyageur Growth and Income Fund, Class A September 1, 1995
Voyageur Growth and Income Fund, Class B September 1, 1995
Voyageur Growth and Income Fund, Class C September 1, 1995
Voyageur Growth Stock Fund, Class A September 1, 1995
Voyageur Growth Stock Fund, Class B September 1, 1995
Voyageur Growth Stock Fund, Class C September 1, 1995
Voyageur Aggressive Growth Fund, Class A May 16, 1994
Voyageur Aggressive Growth Fund, Class B September 1, 1995
Voyageur Aggressive Growth Fund, Class C May 16, 1994
Voyageur International Equity Fund, Class A May 16, 1994
Voyageur International Equity Fund, Class B September 1, 1995
Voyageur International Equity Fund, Class C May 16, 1994
1. Compensation
Class A of each Fund is obligated to pay the principal underwriter of the
Fund's shares (the "Underwriter") a total fee in connection with the servicing
of shareholder accounts of such Class and in connection with distribution-
related services provided in respect of such Class, calculated and payable
quarterly, at the annual rate of .25% of the value of the average daily net
assets of such Class. All or any portion of such total fee may be payable as a
Shareholder Servicing Fee, and all or any portion of such total fee may be
payable as a Distribution Fee, as determined from time to time by the Company's
Board of Directors. Until further action by the Board of Directors, all of such
fee shall be designated and payable as a Shareholder Servicing Fee.
Class B of each Fund offering shares of such Class is obligated to pay the
Underwriter a total fee in connection with the servicing of shareholder accounts
of such Class and in connection with distribution-related services provided in
respect of such Class, calculated and payable quarterly, at the annual rate of
1.00% of the value of the average daily net assets of such Class. All or any
portion of such total fee may be payable as a Shareholder Servicing Fee, and all
or any portion of such total fee may be payable as a Distribution Fee, as
determined from time to time by the Company's Board of Directors. Until further
action by the Board of Directors, a portion of such total fee equal to .25% per
annum of Class B's average net assets shall be designated and payable as a
Shareholder Servicing Fee and the remainder of such fee shall be designated as a
Distribution Fee.
Class C of each Fund offering shares of such Class is obligated to pay the
Underwriter a total fee in connection with the servicing of shareholder accounts
of such Class and in connection with distribution-related services provided in
respect of such Class, calculated and payable quarterly, at the annual rate of
1.00% of the value of the average daily net assets of such Class. All or any
portion of such total fee may be payable as a Shareholder Servicing Fee, and all
or any portion of such total fee may be payable as a Distribution Fee, as
determined from time to time by the Company's Board of Directors. Until further
action by the Board of Directors, a portion of such total fee equal to .25% per
annum of Class C's average net assets shall be designated and payable as a
Shareholder Servicing Fee and the remainder of such fee shall be designated as a
Distribution Fee.
2. Expenses Covered by the Plan
(a) The Shareholder Servicing Fee may be used by the Underwriter to provide
compensation for ongoing servicing and/or maintenance of shareholder accounts.
Compensation may be paid by the Underwriter to persons, including employees of
the Underwriter, and institutions who respond to inquiries of Fund shareholders
regarding their ownership of shares or their accounts with the Company or who
provide other administrative or accounting services not otherwise required to be
provided by the Company's investment adviser, transfer agent or other agent of
the Company.
(b) The Distribution Fee may be used by the Underwriter to provide initial
and ongoing sales compensation to its investment executives and to other
broker-dealers in respect of sales of Fund shares and to pay for other
advertising and promotional expenses in connection with the distribution of Fund
shares. These advertising and promotional expenses include, by way of example
but not by way of limitation, costs of printing and mailing prospectuses,
statements of additional information and shareholder reports to prospective
investors; preparation and distribution of sales literature; advertising of any
type; an allocation of overhead and other expenses of the Underwriter related to
the distribution of Fund shares; and payments to, and expenses of, officers,
employees or representatives of the Underwriter, of other broker-dealers, banks
or other financial institutions, and of any other persons who provide support
services in connection with the distribution of Fund shares, including travel,
entertainment, and telephone expenses.
(c) Payments under the Plan are not tied exclusively to the expenses for
shareholder servicing and distribution related activities actually incurred by
the Underwriter, so that such payments may exceed expenses actually incurred by
the Underwriter. The Company's Board of Directors will evaluate the
appropriateness of the Plan and its payment terms on a continuing basis and in
doing so will consider all relevant factors, including expenses borne by the
Underwriter and amounts it receives under the Plan.
3. Additional Payments by Adviser and the Underwriter
The Company's investment adviser and the Underwriter may, at their option
and in their sole discretion, make payments from their own resources to cover
the costs of additional distribution and shareholder servicing activities.
4. Approval by Shareholders
The Plan will not take effect with respect to any Class of a Fund offering
multiple classes of shares or, if a Fund offers only one class of shares, with
respect to such Fund, and no fee will be payable in accordance with Section 1 of
the Plan, until the Plan has been approved by a vote of at least a majority of
the outstanding voting securities of such Class or Fund.
5. Approval by Directors
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Directors of the Company and
(b) those Directors who are not interested persons of the Company and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Independent Directors"), cast in person at a
meeting called for the purpose of voting on the Plan and the related agreements.
6. Continuance of the Plan
The Plan will continue in effect from year to year so long as its
continuance is specifically approved annually by vote of the Company's Board of
Directors in the manner described in Section 5 above.
7. Termination
The Plan may be terminated at any time with respect to any Class, without
penalty, by vote of a majority of the Independent Directors or by a vote of a
majority of the outstanding voting securities of such Fund or Class.
8. Amendments
The Plan may not be amended with respect to any Class to increase
materially the amount of the fees payable pursuant to the Plan, as described in
Section 1 above, unless the amendment is approved by a vote of at least a
majority of the outstanding voting securities of that Class (and, if applicable,
of any other affected Class or Classes), and all material amendments to the Plan
must also be approved by the Company's Board of Directors in the manner
described in Section 5 above.
9. Selection of Certain Directors
While the Plan is in effect, the selection and nomination of the Company's
Directors who are not interested persons of the Company will be committed to the
discretion of the Directors then in office who are not interested persons of the
Company.
10. Written Reports
In each year during which the Plan remains in effect, the Underwriter and
any person authorized to direct the disposition of monies paid or payable by the
Company pursuant to the Plan or any related agreement will prepare and furnish
to the Company's Board of Directors, and the Board will review, at least
quarterly, written reports, complying with the requirements of the Rule, which
set out the amounts expended under the Plan, on a Class by Class basis if
applicable, and the purposes for which those expenditures were made.
11. Preservation of Materials
The Company will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 10 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
12. Meaning of Certain Terms
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the 1940
Act, subject to any exemption that may be granted to the Company under the 1940
Act by the Securities and Exchange Commission.
PERFORMANCE CALCULATIONS
VOYAGEUR MUTUAL FUNDS III, INC.
Voyageur Mutual Funds III, Inc. is currently comprised of four series, all of
which offer Class A, Class B and Class C shares. All classes of Series D, the
Class B shares of Series B and C and the Class B and C shares of Series A become
effective with the filing of Post-Effective Amendment No. 25, in which this
exhibit is included. The performance calculations contained in this exhibit are
for the Class A shares of Series C (Aggressive Growth Fund), assuming the
maximum sales charge.
As disclosed in the Statement of Additional Information, total return is the
percentage change between the public offering price of one Fund share at the
beginning of a period and the net asset value of that share at the end of the
period with income and capital gain distributions treated as reinvested at net
asset value on the payable date. The computerized data base file for each Series
is updated on a monthly basis with ending net asset value, income and capital
gain distribution amounts per share and reinvestment value. From this
information, ending total values are calculated for any requested period and
total returns are calculated according to the following formula:
Total Return = (Ending Total Value - Initial Amount Invested) /
(Initial Amount Invested)
Based on an initial $1,000 investment at the maximum sales charge made May 16,
1994, and the net asset value and distribution information attached, the value
of that investment as of April 30, 1995, and total return for that period since
inception, are as follows:
Ending Total
Value Return
$990.60 ($990.60 - 1,000) / $1,000 = (0.94)%
Total return for a one-year period and a ten-year period cannot be calculated at
this time.
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
P(1+T)(nth power) = ERV.
Average annual total return (T) for the period above (5/16/85 - 4/30/95) is as
follows:
$1,000(1+___)(nth power) = $990.60
T --- (0.94)%
Net Dividend/
Date Asset Value Share # / Shares Value
5/94 $ 10.00 95.250 $ 952.50
5/94 $ 9.92 95.250 $ 944.88
6/94 $ 9.22 95.250 $ 878.21
7/94 $ 9.27 95.250 $ 882.97
8/94 $ 10.24 95.250 $ 975.36
9/94 $ 10.13 95.250 $ 964.88
10/94 $ 10.52 95.250 $ 1,002.03
11/94 $ 10.02 95.250 $ 954.41
12/94 $ 9.90 95.250 $ 942.98
1/95 $ 9.51 95.250 $ 905.83
2/95 $ 9.88 95.250 $ 941.07
3/95 $ 10.34 95.250 $ 984.89
4/95 $ 10.40 95.250 $ 990.60
