AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1996
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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. 26 [ ]
and/or
REGISTRATIONSTATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 26
(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)
THOMAS J. ABOOD
90 SOUTH SEVENTH STREET, SUITE 4400, MINNEAPOLIS, MINNESOTA 55402
(Name and Address of Agent for Service)
Copy to:
Kathleen L. Prudhomme, 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 (specify date) pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on (specify date) pursuant to paragraph (a)(1) of Rule 485
/ / 75 days after filing pursuant to paragraph (a) (2) of Rule 485
/ / on (specify date) pursuant to paragraph (a) (2) 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 June 26,
1996
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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 Investment
Adviser, Sub-Adviser and Underwriter
17 The Investment Adviser, Sub-Adviser and Underwriter
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 Investment Adviser, Sub-Adviser and Underwriter
22 Calculation of Performance Data
23 Additional Information
EQUITY FUNDS
[GRAPHIC OMITTED]
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VOYAGEUR GROWTH AND INCOME FUND
VOYAGEUR GROWTH STOCK FUND
VOYAGEUR INTERNATIONAL EQUITY FUND
VOYAGEUR AGGRESSIVE GROWTH FUND
VOYAGEUR FUNDS (NOT PART OF PROSPECTUS)
TABLE OF CONTENTS
2 Purchase Information
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3 Fees and Fund Expenses
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4 Financial Highlights
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6 Investment Objectives and Policies
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17 Risk Factors and Special Considerations
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19 How to Purchase Shares
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25 Retirement Plans
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25 How to Sell Shares
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27 Reinstatement Privilege
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28 Exchange Privilege
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28 Management
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32 Determination of Net Asset Value
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33 Distributions to Shareholders and Taxes
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34 Investment Performance
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35 General Information
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VOYAGEUR FUNDS (NOT PART OF PROSPECTUS)
PROSPECTUS
Dated August 29, 1996
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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 Voyageur International
Asset Managers, Ltd., an Edinburgh, Scotland-based investment manager and an
affiliate of Voyageur (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 August 29, 1996) 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.
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Voyageur Growth and Income Fund Voyageur Growth Stock Fund
Voyageur International Equity Fund Voyageur Aggressive Growth Fund
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90 SOUTH SEVENTH STREET, SUITE 4400
MINNEAPOLIS, MINNESOTA 55402
612.376.7000 OR 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
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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
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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
CDSC TOTAL FUND EXAMPLE OF EXPENSES:
IMPOSED ON OPERATING AN INVESTOR WOULD PAY
MAXIMUM REDEMPTIONS ANNUAL FUND OPERATING EXPENSES EXPENSES THE FOLLOWING DOLLAR AMOUNT
FRONT END AS A % (AS A PERCENTAGE OF AVERAGE NET ASSETS)WITHOUT OF EXPENSES ON A $1,000
SALES LOAD OF ORIGINAL AFTER FEE WAIVERS AND VOLUNTARY INVESTMENT ASSUMING
IMPOSED ON PURCHASE REIMBURSEMENT ARRANGEMENTS WAIVERS, A 5% ANNUAL RETURN AND
PURCHASES PRICE OR ____________________________________ REIMBURSE- REDEMPTION AT THE END
AS A % OF REDEMPTION MANAGE- RULE TOTAL FUND MENTS AND OF EACH PERIOD.
OFFERING PROCEEDS,AS MENT 12B-1 OTHER OPERATING EXPENSE RE- ____________________________________
Voyageur Funds Price APPLICABLE FEE FEES EXPENSES EXPENSES DUCTIONS(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>
Class A 4.75% 1.00%(2) 0.75% 0.25% 0.75% 1.75% 2.97% $64 $100 $138 $244
Class B N/A(1) 4.00 0.75 1.00 0.75 2.50 3.50 65+ 108+ 153+ 265
Class C N/A(1) 1.00(3) 0.75 1.00 0.75 2.50 3.50 35+ 78 133 284
GROWTH STOCK FUND
Class A 4.75 1.00(2) 1.00 0.25 0.50 1.75 1.87 64 100 138 244
Class B N/A(1) 4.00 1.00 1.00 0.50 2.50 2.50 65+ 108+ 153+ 265
Class C N/A(1) 1.00(3) 1.00 1.00 0.50 2.50 2.43 35+ 78 133 284
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 2.74 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
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</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 redemptions 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 1997. After April 30, 1997, such expense
reimbursements may be discontinued or modified by Voyageur and the Underwriter
in their sole discretion. For the fiscal period ended April 30, 1996, Voyageur
and the Underwriter voluntarily waived certain fees and absorbed certain
expenses of each 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
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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.
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
RATIO OF
EXPENSES TO
AVERAGE
DAILY NET
INCOME FROM ASSETS
INVESTMENT ASSUMING
OPERATIONS LESS DISTRIBUTIONS RATIO NO
---------------- --------------------- OF NET VOLUN-
NET DIVI- RATIO INVEST- TARY
NET REALIZED DENDS OF MENT WAIVERS,
ASSET NET AND UN- FROM DISTRI- NET NET EXPENSES INCOME PORT- REIMBUR-
VALUE INVEST- REALIZED NET BUTIONS ASSET TOTAL ASSETS TO (LOSS) TO FOLIO SEMENTS &
BEGIN- MENT GAINS INVEST- FROM VALUE INVEST- END OF AVERAGE AVERAGE TURN- EXPENSE
NING OF INCOME (LOSS) ON MENT CAPITAL END OF MENT PERIOD NET NET OVER REDUC-
VOYAGEUR FUNDS PERIOD (LOSS) SECURITIES INCOME GAINS PERIOD RETURN(4) (000S) ASSETS(8)ASSETS RATE TIONS(7)
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - 4/30/96(1) $10.00 $0.02 $1.24 ($0.02) -- $11.24 12.64% $3,962 1.98%(2) 0.36%(2) 56.1% 2.97%(2)
Class B - 4/30/96(1) 10.64 (0.01) 0.58 -- -- 11.21 5.36 11 2.68(2) (0.37)(2) 56.1 3.50(2)
GROWTH STOCK
Class A - 4/30/96 19.91 0.08 4.82 (0.11) (1.04) 23.66 25.00 28,956 1.78 0.36 36.6 1.87
Class B - 4/30/96(1) 21.64 0.06 2.96 (0.23) (1.04) 23.39 14.37 454 2.41(2) (0.62)(2) 36.6 2.50(2)
Class C - 4/30/96(1) 22.61 0.11 2.00 (0.25) (1.04) 23.43 9.72 104 2.35(2) (0.65)(2) 36.6 2.43(2)
Class A - 4/30/95 17.51 0.15 2.77 (0.13) (0.39) 19.91 17.04 23,651 1.90 0.75 21.8 1.99
Class A - 4/30/94 17.81 0.07 (0.16) (0.06) (0.15) 17.51 (0.52) 28,518 1.90 0.40 34.2 2.13
Class A - 4/30/93 23.81 0.05 0.22 -- (6.27) 17.81 1.51 26,784 1.90 0.26 16.5 2.70
Class A - 4/30/92 19.36 (0.18) 4.81 -- (0.18) 23.81 23.86 19,351 2.25 (0.76) 142.6 2.86
Class A - 4/30/91(3) 18.85 (0.11) 3.40 -- (2.78) 19.36 20.51 11,400 2.36 (0.67) 128.2 2.86
Class A - 4/30/90 19.39 (0.08) 1.29 -- (1.75) 18.85 6.09 10,331 2.31 (0.66) 15.1 2.86
Class A - 4/30/89 16.10 (0.15) 3.51 -- (0.07) 19.39 20.92 9,183 2.42 (0.69) 31.7 3.00
Class A - 4/30/88 17.46 (0.13) (0.84) -- (0.39) 16.10 (5.33) 9,706 2.52 (0.76) 57.1 3.00
Class A - 4/30/87 13.36 (0.07) 4.24 (0.05) (0.02) 17.46 31.37 10,083 3.00 (0.84) 64.2 3.00
INTERNATIONAL EQUITY FUND (5,6)
Class A - 4/30/96(9) 9.42 -- 1.01 (0.01) -- 10.41 10.74 2,792 2.40 0.07 66.8 2.97
Class B - 4/30/96(1) 9.97 -- 0.43 -- -- 10.40 4.31 24 3.10(2) (0.84)(2) 66.8 3.50(2)
Class C - 4/30/96 9.36 (0.05) 0.98 -- -- 10.29 9.94 29 3.15 (0.69) 66.8 3.50
Class A - 4/30/95(1) 10.00 (0.05) (0.53) -- -- 9.42 (5.80) 2,009 1.99(2) (0.55)(2) 92.1 2.97(2)
Class C - 4/30/95(1) 9.99 (0.11) (0.52) -- -- 9.36 (6.31) 20 2.74(2) (1.36)(2) 92.1 3.50(2)
AGGRESSIVE GROWTH FUND (5,6)
Class A - 4/30/96(9) 10.40 (0.10) 3.27 -- (0.40) 13.08 31.02 4,334 2.01 (1.00) 165.5 2.74
Class B - 4/30/96(1) 11.91 (0.01) 1.16 -- -- 13.06 9.66 0 1.86(2) (1.39)(2) 165.5 1.86(2)
Class C - 4/30/96(9) 10.33 (0.21) 3.25 -- (0.40) 12.88 29.96 150 2.77 (1.73) 165.5 3.50
Class A - 4/30/95(1) 10.00 (0.09) 0.49 -- -- 10.40 4.00 2,189 1.74(2) (1.21)(2) 88.3 2.97(2)
Class C - 4/30/95(1) 10.00 (0.16) 0.49 -- -- 10.33 3.30 128 2.40(2) (1.80)(2) 88.3 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:
GROWTH AND INCOME FUND GROWTH STOCK FUND
Class A September 7, 1995 Class B September 8, 1995
Class B December 28, 1995 Class C October 21, 1995
INTERNATIONAL EQUITY FUND AGGRESSIVE GROWTH FUND
Class A May 16, 1994 Class A May 16, 1994
Class B January 16, 1996 Class B April 16, 1996
Class C May 20, 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 May 1, 1995, Voyageur assumed responsibility for Aggressive
Growth Fund's investment management replacing George D. Bjurman, the Fund's
sub-adviser and effective August 15, 1996, Voyageur International Asset
Managers, Ltd. assumed responsibility for International Equity Fund's
management replacing Murray Johnstone International Ltd.
7 Up to the most restrictive state limitation in effect.
8 Beginning in the period ended April 30, 1996, the expense ratio reflects
the effect of gross expenses attributable to earnings credits on uninvested
cash balances received by the Fund. Prior period expense ratios have not
been adjusted.
9 For the fiscal year ended April 30, 1996, Distributions from Return of
Capital were $0.01 for Class A Shares of International Equity Fund and
$0.09 for each of Class A Shares and Class C Shares of Aggressive Growth
Fund.
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 at the time of investment 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 Voyageur International Asset Managers 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
convertible 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 at the time of
investment 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
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
not to exceed 1.25% of a Fund's net assets (such as payments related to
retention of shares sold by a particular broker-dealer or financial institution
for a specified period of time), will be made available only to selected
broker-dealers and financial institutions, who meet certain objective standards
developed by the Underwriter, to the exclusion of other broker-dealers and
financial institutions who do not meet such criteria.
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. Dividend income begins to accrue as of the opening of the New York
Stock Exchange (the "Exchange") on the day that payment is received. If payment
is made by check, payment is considered received on the day the check is
received if the check is drawn upon a member bank of the Federal Reserve System
within the Ninth Federal Reserve District (Michigan's Upper Peninsula,
Minnesota, Montana, North Dakota, South Dakota and northwestern Wisconsin). In
the case of other checks, payment is considered received when the check is
converted into "Federal Funds," i.e., monies of member banks within the Federal
Reserve System that are on deposit at a Federal Reserve Bank, normally within
two days after receipt.
An investor who may be interested in having shares redeemed shortly after
purchase should consider making unconditional payment by certified check, by
transmitting Federal Funds by wire or other means approved in advance by the
Underwriter. Payment of redemption proceeds will be delayed as long as necessary
to verify by expeditious means that the purchase payment has been or will be
collected. Such period of time typically will not exceed 15 days.
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, designate an investment dealer or other financial institution
on the form, 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 and 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>
DEALER
DISCOUNT
SALES CHARGE SALES CHARGE AS % OF
AS % OF AS % OF OFFERING
AMOUNT OF PURCHASE NET ASSET VALUE OFFERING PRICE PRICE1
- ----------------------------------------------------------------------------------------------
<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 more2 NAV3 NAV3 1.002
- ----------------------------------------------------------------------------------------------
</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. These 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--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 (the Funds may be available
through a broker-dealer which charges a transaction fee for purchases and
sales); (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 initial purchase, and pays an ongoing annual servicing fee of .15% (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 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--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--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. Fund shares
are exchangeable for shares of any money market fund available through Voyageur.
No CDSC will be imposed at the time of any such exchange; however, the shares
acquired in any such exchange will remain subject to the CDSC and the period
during which such shares represent shares of the money market fund will not be
included in determining how long the shares have been held. Any CDSC due upon a
redemption of Fund shares will be reduced by the amount of any Rule 12b-1
payments made by such money market fund with respect to such shares.
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. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine, including requiring that
payment be made only to the shareholder's address of record or to the bank
account designated on the authorization form and requiring certain means of
telephonic identification. The Fund's Adviser and Distributor will not be liable
for following instructions which are reasonably believed 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. Payment will be made
to 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. Stock certificates will
not be issued 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. Voyageur 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 Voyageur 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
A n 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. Shares of each class may also
be exchanged for shares of any money market fund available through Voyageur.
The minimum amount which may be exchanged is $1,000. The exchange will be
made on the basis of the relative net asset values next determined after receipt
of the exchange request, plus the amount, if any, by which the applicable sales
charge exceeds the sum of all sales charges previously paid in connection with
the prior investment. 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). Voyageur also 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.
Exchange requests may be placed 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
U nder 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, 1996,
Voyageur served as the manager to six closed-end and ten open-end investment
companies (comprising 33 separate investment portfolios), administered numerous
private accounts and together with its affiliates managed approximately $11.5
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 30 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. Mr. Elavia currently has over 9
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. Voyageur
International Asset Managers, Ltd. ("Voyageur International") is the Sub-Adviser
to International Equity Fund. Its business office in the U.S. is the same as
Voyageur's. Voyageur International is based in Edinburgh, Scotland and is owned
65% by Voyageur Companies, Inc. (an indirect parent of Voyageur) and
approximately 17.5% each by Mr. Neil Dunn and Mr. Edward J. Kohler. 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 Voyageur International provides that Voyageur
International is entitled to a sub-advisory fee of 0.50% of International Equity
Fund's average daily net assets managed by Voyageur International. 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. A. Millar Law,
Investment Officer for Voyageur International, is primarily responsible for the
day-to-day management of International Equity Fund's portfolio. Mr. Law has 20
years of investment experience, the last 4 years of which have been at Voyageur
International and its predecessors.
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 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 or be less than
expenses actually incurred by the Underwriter.
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 ACCOUNTSERVICES
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 Underwriter; Advisory, Sub-Advisory and
Administrative Services Agreements; Expenses; Distribution Expenses; and
Brokerage" 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 April30, 1997, 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
April30, 1997, 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 3:00p.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 present policy is to make annual dividend
distributions from net investment income, if and when available, and annual
distributions of any net realized capital gains. 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 receive distributions from investment income and capital gains
distributions in additional shares of the Fund and 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.
(This page has been left blank intentionally.)
PART B
VOYAGEUR GROWTH AND INCOME FUND
VOYAGEUR GROWTH STOCK FUND
VOYAGEUR INTERNATIONAL EQUITY FUND
VOYAGEUR AGGRESSIVE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
DATED AUGUST 29, 1996
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Prospectus of the Funds dated August 29, 1996. 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
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Policies and Restrictions.............................................B-2
Directors and Executive Officers of the Company..................................B-21
The Underwriter; Advisory, Sub-Advisory and Administrative
Services Agreement; Expenses; Distribution Expenses and Brokerage.........B-24
Distributions to Shareholders and Taxes..........................................B-33
Net Asset Value and Public Offering Price........................................B-36
Special Purchase Plans...........................................................B-37
Calculation of Performance Data..................................................B-40
Monthly Cash Withdrawal Plan.....................................................B-42
Additional Information...........................................................B-43
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
</TABLE>
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information or the Prospectus dated August 29, 1996, 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&P500 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.I
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, 78 Director Of counsel, Briggs & Morgan law firm. Mr. Frame currently
First National Bank serves on the board of directors of Tosco Corporation (an
Building, W-875 oil refining and marketing company), Milwaukee Land Company,
332 Minnesota Street and Independence One Mutual Funds.
St. Paul, Minnesota 55101
Richard F. McNamara, 63 Director Chief Executive Officer of Activar, Inc., a
7808 Creekridge Circle Minneapolis-based holding company consisting of seventeen
#200 companies in industrial plastics, sheet metal, automotive
Minneapolis, Minnesota aftermarket, construction supply, electronics and financial
55439 services, since 1966. Mr. McNamara currently serves on the
board of directors of Rimage (electronics manufacturing) and
Interbank.
Thomas F. Madison, 60 Director President and CEO of MLM Partners, Inc. since January 1993;
200 South Fifth Street previously, Vice Chairman-- Office of the CEO, The Minnesota
Suite 2100 Mutual Life Insurance Company from February to September
Minneapolis, Minnesota 1994; President of U.S. WEST Communications--Markets from
55402 1988 to 1993. Mr. Madison currently serves on the board of
directors of Valmont Industries, Inc. (metal manufacturing),
Eltrax Systems, Inc. (data communications integration),
Minnesgasco, Lutheran Health Systems, Communications
Holdings, Inc., Alexander and Alexander (insurance and risk
management), Span Link Communications (telecommunications),
Medical Benefits Administrators, D&D Farms, AetherWorks
(software applications), Digital River (digital data
provider) and various civic and educational organizations.
James W. Nelson, 54 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, 75 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, 41 President President (since 1991) and Director (since 1993) of the
90 South Seventh Street Adviser; Director (since 1993) and Executive Vice President
Suite 4400 (since 1995) of the Underwriter; Management committee member
Minneapolis, Minnesota of the Adviser from 1991 to 1993.
55402
Jane M. Wyatt, 41 Executive Chief Investment Officer (since 1993) and Portfolio Manager
90 South Seventh Street Vice (since 1989) of the Adviser; Director of the Adviser and the
Suite 4400 President Underwriter since 1993; Executive Vice President and
Minneapolis, Minnesota Portfolio Manager of the Adviser from 1992 to 1993; Vice
55402 President and Portfolio Manager from 1989 to 1992.
Andrew M. McCullagh, Jr., Executive Portfolio Manager of the Adviser since 1990; previously,
47 Vice Director of the Adviser and the Underwriter from 1993 to
717 Seventeenth Street President 1995.
Denver, Colorado 80202
Elizabeth H. Howell, 34 Vice Senior Tax Exempt Portfolio Manager of the Adviser since
90 South Seventh Street President 1991.
Suite 4400
Minneapolis, Minnesota
55402
James C. King, 55 Vice Senior Equity Portfolio Manager of the Adviser since 1990;
90 South Seventh Street President previously, Director of the Adviser and the Underwriter from
Suite 4400 1993 to 1995.
Minneapolis, Minnesota
55402
Steven P. Eldredge, 40 Vice Senior Tax Exempt Portfolio Manager of the Adviser since
90 South Seventh Street President 1995; previously, portfolio manager for ABT Mutual Funds
Suite 4400 from 1989 to 1995.
Minneapolis, Minnesota
55402
Kenneth R. Larsen, 33 Treasurer Treasurer of the Adviser and the Underwriter; previously,
90 South Seventh Street Director, Secretary and Treasurer of the Adviser and the
Suite 4400 Underwriter from 1993 to 1995.
Minneapolis, Minnesota
55402
Thomas J. Abood, 32 Secretary Senior Vice President (since 1995) and General Counsel
90 South Seventh Street (since October 1994) of the Adviser, the Underwriter and
Suite 4400 Voyageur Companies, Inc.; previously, Vice President of the
Minneapolis, Minnesota Adviser and Voyageur Companies, Inc. from 1994 to 1995;
55402 associated with the law firm of Skadden, Arps, Slate,
Meagher & Flom, Chicago, Illinois from 1988 to 1994.
</TABLE>
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
$26,000 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 33 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. The following table sets forth the aggregate compensation received by
each director from the Fund Complex during the calendar year ended December 31,
1995.
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION TOTAL COMPENSATION
DIRECTOR FROM THE FUNDS FROM FUND COMPLEX
- -------- -------------- -----------------
<S> <C> <C>
Clarence G. Frame $379 $24,500
Richard F. McNamara $379 $24,500
Thomas F. Madison $379 $24,500
James W. Nelson $379 $24,500
Robert J. Odegard $379 $24,500
</TABLE>
THE UNDERWRITER; ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE
SERVICES AGREEMENT; 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. Voyageur
International Asset Managers, Ltd. ("Voyageur International") is the Sub-Adviser
to the International Equity Fund. Its business office in the U.S. is the same as
Voyageur's. Voyageur International is owned 65% by Voyageur Companies, Inc., the
indirect parent of Voyaguer and 17.5% each by Mr. Neil Dunn and Mr. Edward J.
Kohler. 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 Voyageur International
provides that Voyageur International is entitled to a sub-advisory fee of .50%
of the International Equity Fund's average daily net assets managed by Voyageur
International. 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. Murray Johnstone
International Ltd. acted as Sub-Adviser for International Equity Fund through
August 15, 1996.
Since December 31, 1991, Voyageur has served as Growth Stock Fund's
investment adviser. From September 1, 1990 to December31, 1991, Wilke/Thompson
Capital Management ("Wilke/Thompson") served as Growth Stock Fund's sub-adviser
and, prior to September1, 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.
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
----------------------
INVESTMENT ADMINISTRATIVE FEES ABSORBED
ADVISORY FEES SERVICES FEES OR WAIVED
------------- ------------- ---------
<S> <C> <C> <C>
9/7/95 - 4/30/96 $14,256(3) $16,750 $25,000
GROWTH STOCK FUND
-----------------
INVESTMENT ADMINISTRATIVE FEES ABSORBED
ADVISORY FEES SERVICES FEES OR WAIVED
------------- ------------- ---------
5/1/95 - 4/30/96 $222,957 $79,034 $25,000
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 FEES SERVICES FEES OR WAIVED
------------- ------------- ---------
5/1/95 - 4/30/96 $23,307(1) $50,336 $70,000
5/16/94 - 4/30/95 15,991(1) 41,580 57,571
AGGRESSIVE GROWTH FUND
----------------------
INVESTMENT ADMINISTRATIVE FEES ABSORBED
ADVISORY FEES SERVICES FEES OR WAIVED
------------- ------------- ---------
5/1/95 - 4/30/96 $34,256 $20,406 $25,000
5/16/94 - 4/30/95 16,102(2) 21,447 37,549
</TABLE>
(1) Voyageur paid $11,654 and $7,996 in sub-advisory fees under the
Sub-Advisory Agreement with Murray Johnstone for the fiscal periods ended
April 30, 1996 and 1995, respectively.
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.
(3) Voyageur paid $14,256 in sub-advisory fees under the Sub-Advisory Agreement
with Segall Bryant and Hamill for the fiscal period ended April 30, 1996.
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. Rule12b-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 Rule12b-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 Rule12b-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, 1996, 1995, and 1994, the Funds paid
the following Rule 12b-1 fees and the Underwriter waived the following Rule
12b-1 fees:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
AMOUNT
12B-1 FEE 12B-1 FEE 12B-1 FEE WAIVED
--------- --------- --------- ------
Growth and Income Fund
<S> <C> <C> <C> <C>
Class A $4,743 N/A N/A N/A
Class B 36 N/A N/A N/A
Growth Stock Fund
Class A 112,282 246,598 306,242 37,127
Class B 1,442 N/A N/A N/A
Class C 281 N/A N/A N/A
International Equity Fund
Class A 5,720 3,979 N/A N/A
Class B 66 N/A N/A N/A
Class C 239 83 N/A N/A
Aggressive Growth Fund
Class A 8,033 3,885 N/A N/A
Class B -- N/A N/A N/A
Class C 1,417 562 N/A N/A
</TABLE>
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
4/30/96 4/30/95 4/30/94 4/30/96 4/30/95 4/30/94
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $1,481 N/A N/A -- N/A N/A
Growth Stock Fund 44,067 34,138 96,624 6,662 5,137 14,237
International Equity Fund 9,027 6,234 N/A 1,358 979 N/A
Aggressive Growth Fund 4,299 8,965 N/A 608 1,297 N/A
</TABLE>
PORTFOLIO TRANSACTION 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:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS PAID
--------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund $7,303 N/A N/A
Growth Stock Fund 28,893 29,040 35,427
Aggressive Growth Fund 6,872 4,740 N/A
International Equity Fund 12,967 15,290 N/A
</TABLE>
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 Section988 may apply for forward currency contracts. Under Section988,
each foreign currency gain or loss is generally computed separately and treated
as ordinary income or loss. In the case of overlap between Sections1256 and 988,
special provisions determine the character and timing of any income, gain or
loss. The Fund will attempt to monitor Section988 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 October31, 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, 1996, the net asset value per share of each Fund was
calculated as follows:
<TABLE>
<CAPTION>
Growth and Income Fund
<S> <C> <C>
Class A
NET ASSETS ($3,962,412 = Net Asset Value Per Share ($11.24)
-----------------------
Shares Outstanding (352,525)
Class B
NET ASSETS ($11,144) = Net Asset Value Per Share ($11.21)
--------------------
Shares Outstanding (994)
Growth Stock Fund
Class A
NET ASSETS ($28,956,425) = Net Asset Value Per Share ($23.66)
------------------------
Shares Outstanding (1,223,980)
Class B
NET ASSETS ($453,968) = Net Asset Value Per Share ($23.39)
---------------------
Shares Outstanding (19,405)
Class C
NET ASSETS ($104,122) = Net Asset Value Per Share ($23.43)
---------------------
Shares Outstanding (4,443)
International Equity Fund
Class A
NET ASSETS ($2,792,376) = Net Asset Value Per Share ($10.41)
-----------------------
Shares Outstanding (268,131)
Class B
NET ASSETS ($23,777) = Net Asset Value Per Share ($10.40)
--------------------
Shares Outstanding (2,287)
Class C
NET ASSETS ($29,327) = Net Asset Value Per Share ($10.29)
--------------------
Shares Outstanding (2,850)
Aggressive Growth Fund
Class A
NET ASSETS ($4,334,167) = Net Asset Value Per Share ($13.08)
-----------------------
Shares Outstanding (331,381)
Class B
NET ASSETS ($328.96) = Net Asset Value Per Share ($13.06)
--------------------
Shares Outstanding (25.189)
Class C
NET ASSETS ($149,857) = Net Asset Value Per Share ($12.88)
---------------------
Shares Outstanding (11,633)
</TABLE>
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 investor's gross amount previously invested in shares of any
class of Voyageur Load Funds and shares of Other Load Funds held by the
investor; and
(iii) the investor's gross amount previously invested in 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 ending April 30, 1996 that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
n
p(1+T) = 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.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
ABSENT VOLUNTARY
FEE WAIVERS AND
ACTUAL EXPENSE REIMBURSEMENT
SINCE SINCE
1 YEAR 5 YEAR INCEPTION 1 YEAR 5 YEAR INCEPTION
------ ------ --------- ------ ------ ---------
Growth and Income Fund
<S> <C> <C> <C> <C> <C> <C>
Class A (Inception 9/7/95) N/A N/A 7.29% N/A N/A 6.62%
Class B (Inception 12/28/95) N/A N/A 4.36% N/A N/A 0.98%
Growth Stock Fund
Class A (Inception 8/1/85) 19.06% 11.75% 15.06% 18.92% 11.55% 14.85%
Class B (Inception 9/8/95) N/A N/A 10.37% N/A N/A 10.33%
Class C (Inception 10/21/95) N/A N/A 8.72% N/A N/A 8.72%
International Equity Fund
Class A (Inception 5/16/94) 5.48% N/A (0.33)% 4.67% N/A (1.90%)
Class B (Inception 1/16/96) N/A N/A 0.31% N/A N/A 0.01%
Class C (Inception 5/20/94) 9.94% N/A 1.53% 9.72% N/A 0.92%
Aggressive Growth Fund
Class A (Inception 5/16/94) 24.80% N/A 14.26% 23.87% N/A 13.26%
Class B (Inception 4/16/96) N/A N/A 5.66% N/A N/A 5.66%
Class C (Inception 5/20/94) 29.96% N/A 16.27% 28.78% N/A 15.21%
</TABLE>
CUMULATIVE TOTAL RETURN. Cumulative total return is computed by finding the
cumulative compounded rate of return over the period indicated in the
advertisement from inception date through April 30, 1996 that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
CRT = (ERV-P)
(-----) 100
( P )
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.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN SINCE INCEPTION
---------------------------------------
ABSENT VOLUNTARY FEE
WAIVERS AND EXPENSE
ACTUAL REIMBURSEMENTS
------ --------------
Growth and Income Fund
<S> <C> <C> <C>
Class A (Inception 9/7/95) 7.29% 6.62%
Class B (Inception 12/20/95) 1.36% 0.98%
Growth Stock Fund
Class A (Inception 8/1/85) 351.99% 348.24%
Class B (Inception 9/8/95) 10.37% 10.33%
Class C (Inception 10/21/95) 8.72% 8.72%
International Equity Fund
Class A (Inception 5/16/94) (0.64)% (3.69%)
Class B (Incpeiotn 1/16/96) 0.31% 0.01%
Class C (Inception 5/20/94) 3.00% 1.80%
Aggressive Growth Fund
Class A (Inception 5/16/94) 29.79% 27.64%
Class B (Inception 4/16/96) 5.66% 5.66%
Class C (Inception 5/20/94) 34.25% 31.78%
</TABLE>
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 LLP, 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.
Voyageur Growth Stock Fund
Voyageur International Equity Fund
Voyageur Aggressive Growth Fund
Voyageur Growth and Income Fund
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements --- Not applicable.
(b) Exhibits
1.1 Amended and Restated Articles of Incorporation, dated November 23,
1993, filed as an Exhibit to Post-Effective Amendment No. 25 to Form
N-1A on September 1, 1995, File Nos.2-95928 and and 811-5457, and
incorporated herein by reference.
1.2 Certification of Designation of Series B, and C filed as an Exhibit to
Post-Effective Amendment No. 25 to Form N-1A on September 1, 1995,
File Nos.2-95928 and and 811-5457, and incorporated herein by
reference.
1.3 Certification of Designation of Series D filed as an Exhibit to
Post-Effective Amendment No. 25 to Form N-1A on September 1, 1995,
File Nos.2-95928 and and 811-5457, and incorporated herein by
reference.
1.4 Certification of Designation of Classes B and C of Series A, B, and C
filed as an Exhibit to Post-Effective Amendment No. 25 to Form N-1A on
September 1, 1995, File Nos.2-95928 and and 811-5457, and incorporated
herein by reference.
1.5 Articles of Correction, dated July 28, 1994, filed as an Exhibit to
Post-Effective Amendment No. 25 to Form N-1A on September 1, 1995,
File Nos.2-95928 and and 811-5457, and incorporated herein by
reference.
2 Bylaws, as amended April 25, 1994, filed as an Exhibit to
Post-Effective Amendment No. 25 to Form N-1A on September 1, 1995,
File Nos.2-95928 and and 811-5457, and incorporated herein by
reference.
3 Not applicable.
4 Specimen copy of share certificate, filed as an Exhibit hereto.
5.1 Investment Advisory Agreement filed as an Exhibit to Post-Effective
Amendment No. 25 to Form N-1A on September 1, 1995, File Nos.2-95928
and and 811-5457, and incorporated herein by reference.
5.2 Investment Advisory Agreement with Segall Bryant & Hamill with respect
to Voyageur Growth and Income Fund, filed as an Exhibit to
Post-Effective Amendment No. 25 to form N-1A on September 1, 1995,
File Nos.2-95928 and and 811-5457, and incorporated herein by
reference.
5.3 Investment Sub-Advisory Agreement with Voyageur International Asset
Managers, Ltd. with respect to Voyageur International Equity Fund,
filed as an Exhibit hereto.
6.1 Distribution Agreement, filed as an Exhibit to Post-Effective
Amendment No. 25 to Form N-1A on September 1, 1995, File Nos.2-95928
and and 811-5457, and incorporated herein by reference.
6.2 Form of Dealer Sales Agreement, filed as an Exhibit to Post-Effective
Amendment No. 25 to Form N-1A on September 1, 1995, File Nos.2-95928
and and 811-5457, and incorporated herein by reference.
6.3 Form of Bank Agreement, filed as an Exhibit to Post-Effective
Amendment No. 25 to Form N-1A on September 1, 1995, File Nos.2-95928
and and 811-5457, and incorporated herein by reference.
7 Not applicable
8 Custodian Agreement, filed as an Exhibit to Post-Effective Amendment
No. 25 to Form N-1A on September 1, 1995, File Nos.2-95928 and and
811-5457, and incorporated herein by reference.
9.1 Administrative Services Agreement, filed as an Exhibit to
Post-Effective Amendment o. 25 to Form N-1A on September 1, 1995, File
Nos.2-95928 and and 811-5457, and incorporated herein by reference.
10 Opinion and Consent of Dorsey & Whitney LLP, filed as an Exhibit to
Post-Effective Amendment No. 25 to Form N-1A on September 1, 1995,
File Nos.2-95928 and and 811-5457, and incorporated herein by
reference.
11 Consent of KPMG Peat Marwick LLP, filed as an Exhibit hereto.
12 Not applicable
13 Letter of Investment Intent, incorporated by reference.
14 Not applicable
15 Plan of Distribution, filed as an Exhibit to Post-Effective Amendment
No. 25 to Form N-1A on September 1, 1995, File Nos.2-95928 and and
811-5457, and incorporated herein by reference.
16 Schedule for Computation of Fund Performance, Voyageur Growth Stock
Fund, Voyageur International Equity Fund, Voyageur Aggressive Growth
Fund, and Voyageur Growth and Income Fund, Class A, B, And C Shares,
filed as an Exhibit hereto.
17.1 Power of Attorney dated January 24, 1995, filed as an Exhibit filed as
an Exhibit to Voyageur Mutual Funds, Inc. Post-Effective Amendment
Nos. 8 and 9 to Form N-1A on April 30, 1996, File Nos 33-63238 and
811-7742 respectively, and incorporated herein by reference.
17.2 Financial Data Schedule Voyageur Growth Stock Fund, filed
electronically as Exhibit 27.1 pursuant to Rule 401 of Regulation S-T.
17.3 Financial Data Schedule Voyageur International Equity Fund, filed
electronically as Exhibit 27.2 pursuant to Rule 401 of Regulation S-T.
17.4 Financial Data schedule Voyageur Aggressive Growth Fund, filed
electronically as Exhibit 27.3 pursuant to Rule 401 of Regulation S-T.
17.5 Financial Data schedule Voyageur Growth and Income Fund, filed
electronically as Exhibit 27.4 pursuant to Rule 401 of Regulation S-T.
18 Plan pursuant to Rule 18f-3 under the Investment Company Act of 1940,
filed as an Exhibit filed as an Exhibit to Voyageur Mutual Funds, Inc.
Post-Effective Amendment Nos. 8 and 9 to Form N- 1A on April 30, 1996,
File Nos 33-63238 and 811-7742 respectively, and incorporated herein
by reference.
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 Financial Institutions Short Duration Portfolio
Voyageur Financial Institutions Intermediate Duration
Portfolio
Voyageur Financial Institutions Core Portfolio
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 Minnesota High Yield Municipal Bond 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 Government Agency Fund
VAM Intermediate Government Agency Fund
VAM Government Mortgage Fund
VAM Short Duration Total Return Fund
VAM Intermediate Duration Total Return Fund
VAM Intermediate 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 July 31, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON COMMON COMMON
NAME OF FUND SHARES SHARES SHARES
------------ ------ ------ ------
<S> <C> <C>
Voyageur Growth and Income Fund 280 5 **
Voyageur Growth Stock Fund 2,224 44 26
Voyageur International Equity Fund 138 12 9
Voyageur Aggressive Growth Fund 182 2 32
** Not in existence as of July 31, 1996
</TABLE>
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, Incorporated ("DDI").
John G. Taft Director and President See biographical information in Part B of the
Registration Statement.
Jane M. Wyatt Director and Chief See biographical information in Part B of the Registration
Investment Officer Statement.
Edward J. Kohler Director and Executive Director and Executive Vice President of the Adviser and
Vice President Director of the Underwriter since 1995;
previously, President and Director of Piper Capital
Management Incorporated from 1985 to 1995.
Frank C. Tonnemaker Director and Executive Director of Voyageur and the Underwriter since 1993;
Vice President 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 DDI; Chief
Financial Officer Financial Officer of DFG, the Underwriter and DDI
since 1995; previously, Treasurer of DFG and DDI
from 1990 to 1995.
</TABLE>
Information on the business of Registrants' Adviser is contained in the section
of the Prospectus entitled "Management" and in the section of the Statement of
Additional Information entitled "The Investment Adviser, Sub-Adviser,
Administrative Services, Expenses and Brokerage" filed as part of this
Registration Statement.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Voyageur Fund Distributors, Inc., the underwriter of the Registrant's
shares, is principal underwriter for the shares of Voyageur Tax Free Funds,
Inc., Voyageur Insured Funds, Inc., Voyageur Intermediate Tax Free Funds, Inc.,
Voyageur Investment Trust, Voyageur Investment Trust II, Voyageur Mutual Funds,
Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual Funds III, Inc. and VAM
Institutional Funds, Inc., affiliated open-end management investment companies.
(b) The directors of the Underwriter are the same as the directors of the
Adviser as set forth above in Item 28. Executive officers of the Underwriter
(who are not also directors of the Underwriter) and the positions of these
individuals with respect to the Registrant are:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---- ----------
<S> <C> <C>
Michael E. Dougherty Chairman None
Frank C. Tonnemaker President and Director None
John G. Taft Executive Vice President President
and Director
Edward J. Kohler Executive Vice President None
and Director
Jane M. Wyatt Executive Vice President Executive Vice President
and Director
Steven B. Johansen Secretary and Chief Financial None
Officer
Kenneth R. Larsen Treasurer Treasurer
Thomas J. Abood Senior Vice President and Secretary
General Counsel
</TABLE>
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.
(c) Each recipient of a prospectus of any series of the Registrant may
request the latest Annual Report of such series, and such Annual Report will be
furnished without charge.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the City of Minneapolis, State of
Minnesota, on the 29th day of August 1996.
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
/S/ JOHN G. TAFT President
- -------------------- (Principal August 29, 1996
John G. Taft Executive Officer)
/S/ KENNETH R. LARSEN Treasurer
- --------------------- (Principal Financial August 29, 1996
Kenneth R. Larsen 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 29, 1996
- --------------------
Thomas J. Abood
(Pursuant to a Power of Attorney dated January 24, 1995)
[The following is a prototype of the Registrant's share certificate. It is a
"two-sided" document. The facing page is in a "landscaped" position and bordered
with intricate, detailed graphics. This similar graphical detail is found
bordering boxes for the number and type of shares.]
VOYAGEUR
NUMBER SHARES
[VOID] [VOID]
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
THIS CERTIFIES THAT
VOID
is the owner and
registered holder of
------- -------
- -------------------- --------------------
------- -------
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this certificate properly
endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this certificate to be
signed by its duly authorized officers.
Dated:
SECRETARY [VOID] PRESIDENT [VOID]
(REVERSE SIDE)
________________________________________________________________________________
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UTMA - ________Custodian________
(Cust) (Minor)
TEN ENT - as tenants by entireties under Uniform Transfer to Minors
JT TEN - as joint tenants with right of survivorship Act _____________________
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
________________________________________________________________________________
FOR VALUE RECEIVED______HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(Box to insert information)
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE,
AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
___________________________________________________________________ATTORNEY TO
TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL
POWER OF SUBSTITUTION IN THE PREMISES.
DATED ________________________________________________
________________________________________________
NOTICE: The signature to this assignment must
correspond to the name as written upon the face
of the certificate in every particular without
alteration or enlargement or any change whatever
SIGNATURE GUARANTEED
SUB-ADVISORY AGREEMENT
Agreement, dated August 15, 1996, by and between Voyageur Fund Managers,
Inc. (the "Adviser"), a Minnesota corporation, and Voyageur International Asset
Managers, Ltd, a corporation organized under the laws of England, (the
"Sub-Adviser").
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
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 .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.
Pursuant to the Advisory Agreement, the Adviser receives monthly from the
Company compensation at the annual rate of 1.00% 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 date of approval of
shareholders of the Fund. 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/s/John G. Taft
--------------------------
Name: John G. Taft
Title: President
VOYAGEUR INTERNATIONAL ASSET
MANAGERS, LTD
By/s/Neil Dunn
--------------------------
Name: Neil Dunn
Title: Managing Director
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Voyageur Mutual Funds III, Inc.:
We consent to the use of our report incorporated herein by reference and to the
references to our firm under the headings "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 28, 1996
COMPUTATION OF PERFORMANCE QUOTATIONS
VOYAGEUR MUTUAL FUNDS III, INC.
Average annual total return figures for the current one year period, five year
period, and life of fund ending April 30, 1996, are calculated as follows:
1/n
Formula: P(1+T) = ERV or T = ERV/P -1
Where: P = hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
<TABLE>
<CAPTION>
AGRESSIVE GROWTH GROWTH INTERNATIONAL
GROWTH AND STOCK EQUITY
FUND INCOME FUND FUND FUND
---- ----------- ---- ----
Class A
One year period (includes 4.75% sales charge):
<S> <C> <C> <C>
ERV = 1,247.96 N/A 1,190.65 1,054.76
n = 1 N/A 1 1
T = 24.80 N/A 19.06 5.48
P = 1,000 N/A 1,000 1,000
Five year period:
ERV = N/A N/A 1,742.93 N/A
n = N/A N/A 5 N/A
T = N/A N/A 11.75 N/A
P = N/A N/A 1,000 N/A
Life of Class A (since May 16, 1994, September 7, 1995, August 1, 1985 and May 16, 1994):
ERV = 1,297.88 1,072.92 4,519.88 993.59
n = 1.9616 1 10.75 1
T = 14.26 7.29 15.06 (0.33)
P = 1,000 1,000 1,000 1,000
Class B
One year period
ERV = N/A N/A N/A N/A
n = N/A N/A N/A N/A
T = N/A N/A N/A N/A
P = N/A N/A N/A N/A
Five year period:
ERV = N/A N/A N/A N/A
n = N/A N/A N/A N/A
T = N/A N/A N/A N/A
P = N/A N/A N/A N/A
Life of Class B (since April 16, 1996, December 28, 1995, September 8, 1995 and January 16, 1996):
ERV = 1,096.56 1,053.57 1,143.74 1,043.13
n = 1 1 1 1
T = 9.66 5.36 14.37 4.31
P = 1,000 1,000 1,000 1,000
Class C
One year period
ERV = 1,299.57 N/A N/A 1,099.36
n = 1 N/A N/A 1
T = 29.96 N/A N/A 9.94
P = 1,000 N/A N/A 1,000
Five year period:
ERV = N/A N/A N/A N/A
n = N/A N/A N/A N/A
T = N/A N/A N/A N/A
P = N/A N/A N/A N/A
Life of Class C (since May 20, 1994, N/A, October 21, 1995 and May 20, 1994):
ERV = 1,341.94 N/A 1,097.20 1,030.03
n = 1.9507 N/A 1 1.9534
T = 16.27 N/A 9.72 1.53
P = 1,000 N/A 1,000 1,000
EXHIBIT 16.1
</TABLE>
COMPUTATION OF PERFORMANCE QUOTATIONS
VOYAGEUR MUTUAL FUNDS III, INC.
Cumulative total return figures for the periods ending April 30, 1996 are
calculated as follows:
Formula: CTR = ERV - P * 100
-------
P
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 the
period
P = initial payment of $1,000
<TABLE>
<CAPTION>
AGRESSIVE GROWTH GROWTH INTERNATIONAL
GROWTH AND STOCK EQUITY
FUND INCOME FUND FUND FUND
---- ----------- ---- ----
Class A (since May 16, 1994, September 7, 1995, August 1, 1985 and May 16, 1994)
<S> <C> <C> <C> <C>
P = 1,000 1,000 1,000 1,000
ERV = 1,297.88 1,072.92 4,519.88 993.59
CTR = 29.79 7.29 351.99 (0.64)
Class B (since April 16, 1996, December 28, 1995, September 8, 1995 and January 16, 1996)
P = 1,000 1,000 1,000 1,000
ERV = 1,096.56 1,053.57 1,143.74 1,043.13
CTR = 9.66 5.36 14.37 4.31
Class C (since May 20, 1994, N/A, October 21, 1995 and May 20, 1994)
P = 1,000 N/A 1,000 1,000
ERV = 1,341.94 N/A 1,097.20 1,030.03
CTR = 34.20 N/A 9.72 3.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT
OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, STATEMENT OF CHANGES IN NET
ASSETS AND THE FINANCIAL HIGHLIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763749
<NAME> Voyageur Mutual Funds III, Inc.
<SERIES>
<NUMBER> 1
<NAME> Voyageur Growth Stock Fund
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-START> May-01-1995
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 22,256,741
<INVESTMENTS-AT-VALUE> 28,714,250
<RECEIVABLES> 28,480
<ASSETS-OTHER> 1,462,760
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,205,490
<PAYABLE-FOR-SECURITIES> 662,770
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,205
<TOTAL-LIABILITIES> 690,975
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,139,168
<SHARES-COMMON-STOCK> 1,247,828
<SHARES-COMMON-PRIOR> 1,188,057
<ACCUMULATED-NII-CURRENT> 7,841
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 909,997
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,457,509
<NET-ASSETS> 29,514,515
<DIVIDEND-INCOME> 532,590
<INTEREST-INCOME> 8,787
<OTHER-INCOME> 0
<EXPENSES-NET> 448,699
<NET-INVESTMENT-INCOME> 92,678
<REALIZED-GAINS-CURRENT> 2,164,698
<APPREC-INCREASE-CURRENT> 3,458,567
<NET-CHANGE-FROM-OPS> 5,715,943
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 122,056
<DISTRIBUTIONS-OF-GAINS> 1,197,008
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 251,610
<NUMBER-OF-SHARES-REDEEMED> 247,501
<SHARES-REINVESTED> 55,662
<NET-CHANGE-IN-ASSETS> 5,863,111
<ACCUMULATED-NII-PRIOR> 37,219
<ACCUMULATED-GAINS-PRIOR> (57,693)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 222,957
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 487,433
<AVERAGE-NET-ASSETS> 25,959,183
<PER-SHARE-NAV-BEGIN> 19.91
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 4.82
<PER-SHARE-DIVIDEND> 0.11
<PER-SHARE-DISTRIBUTIONS> 1.04
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 23.66
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT
OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, STATEMENT OF CHANGES IN NET
ASSETS AND THE FINANCIAL HIGHLIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763749
<NAME> Voyageur Mutual Funds III, Inc.
<SERIES>
<NUMBER> 2
<NAME> Voyageur International Equity Fund
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-START> May-01-1995
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 2,365,800
<INVESTMENTS-AT-VALUE> 2,563,690
<RECEIVABLES> 12,003
<ASSETS-OTHER> 279,008
<OTHER-ITEMS-ASSETS> 22,001
<TOTAL-ASSETS> 2,876,702
<PAYABLE-FOR-SECURITIES> 17,274
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,948
<TOTAL-LIABILITIES> 31,222
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,646,172
<SHARES-COMMON-STOCK> 273,268
<SHARES-COMMON-PRIOR> 215,404
<ACCUMULATED-NII-CURRENT> 6,212
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,609)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 197,705
<NET-ASSETS> 2,845,480
<DIVIDEND-INCOME> 48,276
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 46,813
<NET-INVESTMENT-INCOME> 1,463
<REALIZED-GAINS-CURRENT> 55,295
<APPREC-INCREASE-CURRENT> 196,834
<NET-CHANGE-FROM-OPS> 253,592
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,259
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1,587
<NUMBER-OF-SHARES-SOLD> 81,697
<NUMBER-OF-SHARES-REDEEMED> 24,281
<SHARES-REINVESTED> 448
<NET-CHANGE-IN-ASSETS> 816,530
<ACCUMULATED-NII-PRIOR> 4,141
<ACCUMULATED-GAINS-PRIOR> 871
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23,307
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 126,237
<AVERAGE-NET-ASSETS> 2,329,315
<PER-SHARE-NAV-BEGIN> 9.42
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 1.01
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.01
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> 2.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT
OF ASSETS AND LIABILITIES, STATEMENT OF OPERATIONS, STATEMENT OF CHANGES IN NET
ASSETS AND THE FINANCIAL HIGHLIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763749
<NAME> Voyageur Mutual Funds III, Inc.
<SERIES>
<NUMBER> 3
<NAME> Voyageur Aggressive Growth Fund
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-START> May-01-1995
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 3,335,886
<INVESTMENTS-AT-VALUE> 4,316,778
<RECEIVABLES> 118,247
<ASSETS-OTHER> 43,390
<OTHER-ITEMS-ASSETS> 14,957
<TOTAL-ASSETS> 4,493,372
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,020
<TOTAL-LIABILITIES> 9,020
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,559,363
<SHARES-COMMON-STOCK> 343,039
<SHARES-COMMON-PRIOR> 222,795
<ACCUMULATED-NII-CURRENT> 4,223
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (60,126)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 980,892
<NET-ASSETS> 4,484,352
<DIVIDEND-INCOME> 25,662
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 60,832
<NET-INVESTMENT-INCOME> (35,170)
<REALIZED-GAINS-CURRENT> 217,654
<APPREC-INCREASE-CURRENT> 716,738
<NET-CHANGE-FROM-OPS> 899,222
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 121,249
<DISTRIBUTIONS-OTHER> 25,608
<NUMBER-OF-SHARES-SOLD> 163,440
<NUMBER-OF-SHARES-REDEEMED> 55,426
<SHARES-REINVESTED> 12,230
<NET-CHANGE-IN-ASSETS> 2,167,332
<ACCUMULATED-NII-PRIOR> 2,815
<ACCUMULATED-GAINS-PRIOR> 264,154
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 95,075
<AVERAGE-NET-ASSETS> 3,425,980
<PER-SHARE-NAV-BEGIN> 10.40
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 3.27
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.40
<RETURNS-OF-CAPITAL> 0.09
<PER-SHARE-NAV-END> 13.08
<EXPENSE-RATIO> 2.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
statement of assets and liabilities, statement of operations, statement of
changes in net assets and the financial highlights and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000763749
<NAME> Voyageur Mutual Funds III, Inc.
<SERIES>
<NUMBER> 4
<NAME> Voyageur Growth and Income Fund
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-START> May-01-1995
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 2,906,106
<INVESTMENTS-AT-VALUE> 3,208,478
<RECEIVABLES> 90,606
<ASSETS-OTHER> 672,213
<OTHER-ITEMS-ASSETS> 27,651
<TOTAL-ASSETS> 3,998,948
<PAYABLE-FOR-SECURITIES> 10,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,392
<TOTAL-LIABILITIES> 25,392
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,588,260
<SHARES-COMMON-STOCK> 353,519
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,494
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 78,430
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 302,372
<NET-ASSETS> 3,973,556
<DIVIDEND-INCOME> 22,356
<INTEREST-INCOME> 17,974
<OTHER-INCOME> 0
<EXPENSES-NET> 33,391
<NET-INVESTMENT-INCOME> 6,939
<REALIZED-GAINS-CURRENT> 78,430
<APPREC-INCREASE-CURRENT> 302,372
<NET-CHANGE-FROM-OPS> 387,741
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,699
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 373,616
<NUMBER-OF-SHARES-REDEEMED> 20,684
<SHARES-REINVESTED> 587
<NET-CHANGE-IN-ASSETS> 3,973,556
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62,782
<AVERAGE-NET-ASSETS> 2,948,584
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 1.24
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.24
<EXPENSE-RATIO> 1.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
