AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 15, 1996
================================================================================
File Nos. 33-16270
811-5267
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. 19
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 19
(Check appropriate box or boxes.)
VOYAGEUR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
90 SOUTH SEVENTH STREET, SUITE 4400, MINNEAPOLIS, MINNESOTA 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 376-7000
(Registrant's Telephone Number, including Area Code)
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 LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on March 20, 1996 pursuant to paragraph (b) of Rule 485
75 days after filing pursuant to paragraph (a) of Rule 485
on (date) pursuant to paragraph (a) of Rule 485
The Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice was filed by the Registrant on August
29, 1995.
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
ITEM NO.
OF FORM N-1A CAPTION IN PROSPECTUS
- ------------ ---------------------
1 Cover Page
2 Fund Expenses
3 Investment Performance
4 Investment Objectives and Policies; Risks and
Characteristics of Securities and
Investment Techniques; General Information
5 Management; General Information
6 Distributions to Shareholders and Taxes; General
Information
7 Purchase of Shares; Management; Determination of
Net Asset Value
8 Redemption of Shares
9 Not Applicable
CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Policies and Restrictions
14 Directors and Executive Officers
15 The Investment Advisers, Sub-Adviser,
Administrative Services, Expenses and Brokerage;
Additional Information
16 Directors and Executive Officers; The Investment
Advisers, Sub-Adviser, Administrative Services,
Expenses and Brokerage
17 The Investment Advisers, Sub-Adviser,
Administrative Services, Expenses and Brokerage
18 Additional Information
19 Redemptions; Net Asset Value and Public Offering
Price
20 Taxes
21 The Investment Advisers, Sub-Adviser,
Administrative Services, Expenses and Brokerage
Underwriter
22 Performance Comparisons
23 Not Applicable
VOYAGEUR FUNDS, INC.
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
(612) 376-7000
(800) 553-2143
---------------------------------
VFI SHORT DURATION PORTFOLIO
VFI INTERMEDIATE DURATION PORTFOLIO
VFI CORE PORTFOLIO
---------------------------------
Voyageur Financial Institutions ("VFI") Short Duration Portfolio, VFI
Intermediate Duration Portfolio and VFI Core Portfolio (the "Funds) are series
of Voyageur Funds, Inc. (the "Company"), an open-end mutual fund which offers
its shares in separate investment portfolios. Each Fund operates as a
diversified mutual fund.
Marquette Trust Company ("Marquette"), 13100 Wayzata Boulevard, Suite 100,
Minneapolis, Minnesota 55480, serves as investment adviser to VFI Intermediate
Duration Portfolio and VFI Core Portfolio. Marquette has retained Voyageur Fund
Managers, Inc. ("VFM") to act as sub-adviser to such Funds. Cadre Consulting
Services, Inc. ("Cadre), 905 Marconi Avenue, Ronkonkoma, New York 11779, serves
as investment adviser to VFI Short Duration Portfolio.
The investment objective of each Fund is to seek as high a level of current
income as is consistent with preservation of principal and the average duration
of its respective portfolio securities. A detailed description of the types of
securities in which each Fund may invest and of investment policies and
restrictions applicable to each Fund is set forth in this Prospectus. The Funds'
shares are eligible for purchase by national banks and federal credit unions
under current applicable federal law. See "Investment Objectives and Policies
- --Investments by National Banks and Federal Credit Unions." There is no
assurance that any Fund's investment objective will be achieved.
The Funds are no-load which means that there is no sales charge when you
buy or redeem shares.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THE
FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER FEDERAL
AGENCY. AN INVESTMENT IN ANY OF THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL DUE TO FLUCTUATIONS IN THE APPLICABLE FUND'S NET
ASSET VALUE.
This Prospectus sets forth certain information about the Funds that a
prospective investor ought to know before investing. A Statement of Additional
Information (dated March 20, 1996), as amended from time to time, has been filed
with the Securities and Exchange Commission. The Statement of Additional
Information is available free of charge by telephone and at the mailing address
below, and is incorporated in its entirety by reference into this Prospectus in
accordance with the Commission's rules.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated March 20, 1996
TABLE OF CONTENTS
PAGE
Fund Expenses.......................................................... 3
Investment Objectives and Policies..................................... 4
Risks and Characteristics of Securities and Investment Techniques...... 5
Investment Restrictions................................................ 9
Purchase of Shares..................................................... 9
Redemption of Shares................................................... 11
Exchange Privilege..................................................... 12
Management............................................................. 12
Determination of Net Asset Value....................................... 15
Distributions to Shareholders and Taxes................................ 16
Investment Performance................................................. 17
General Information.................................................... 18
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.
FUND EXPENSES
Each Fund is offered to investors on a no-load basis, without any sales
commissions or distribution ("12b-1 plan") charges.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchases....................................... None
Sales Load Imposed on Reinvested Dividends............................ None
Deferred Sales Load................................................... None
Redemption Fees....................................................... None
Exchange Fee.......................................................... None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
VFI
VFI Short Intermediate VFI
Duration Duration Core
Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees........................ .10% .35% .35%
Other Expenses.................................. .25% .15% .15%
Service Fees................................ .05% .05% .05%
Other....................................... .20% .10% .10%
Total Operating Expenses........................ .35% .50% .50%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and redemption at the end of each time period:
1 Year.......................................... $4 $5 $5
3 Years......................................... 11 16 16
THE EXAMPLES CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. The purpose of the above Fund Expenses table is to assist the
investor in understanding the various costs and expenses that investors in the
Funds will bear directly or indirectly. The Investment Advisory Fees set forth
in the table reflect the maximum amount payable by each Fund, and may be less
for VFI Intermediate Duration Portfolio and VFI Core Portfolio to the extent
either such Fund underperforms its benchmark index. Under their Investment
Advisory Agreements with the Company, each such Fund's investment adviser is
entitled to receive from the Fund a monthly advisory and management fee
equivalent on an annual basis to .20% of the average daily net assets of such
Fund, subject to a performance adjustment of up to +/-.15%. The investment
adviser for VFI Short Duration Portfolio is entitled to receive a monthly
advisory and management fee equivalent on an annual basis to .10% of the average
daily net assets of such Fund. The advisory fee for VFI Short Duration Portfolio
is not subject to a performance adjustment. See "Management -- Investment
Advisers." Each Fund also pays a monthly service fee equal, on an annual basis,
to .05% of the Fund's average daily net assets. Such fee is paid to Voyageur
Fund Distributors, Inc. (the "Underwriter") to compensate the Underwriter for
expenses incurred in connection with the servicing of Fund shareholder accounts.
See "Management -- The Underwriter."
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The investment objective of each Fund is to seek as high a level of current
income as is consistent with preservation of principal and the average duration
of its respective portfolio securities. The securities in which the Funds invest
and the investment techniques discussed in this section are described in greater
detail in the Prospectus under "Risks and Characteristics of Securities and
Investment Techniques" and in the Statement of Additional Information. VFI Short
Duration Portfolio ("Short Duration Portfolio") seeks to maintain an average
effective portfolio duration ranging from .5 to 1.5 years, VFI Intermediate
Duration Portfolio ("Intermediate Duration Portfolio") seeks to maintain an
average effective portfolio duration ranging from 1.5 to 3.5 years and VFI Core
Portfolio ("Core Portfolio") seeks to maintain an average effective portfolio
duration ranging from 3.5 to 5.5 years.
Each Fund's investment objective is fundamental, which means that it cannot
be changed without the vote of a majority of its respective shareholders as
provided in the Investment Company Act of 1940, as amended (the "1940 Act"). The
investment policies and techniques employed in pursuit of the Funds' objectives
may be changed without shareholder approval, unless otherwise noted. There are
risks in any investment program and there is no assurance that a Fund's
investment objective will be achieved. The value of each Fund's shares will
fluctuate with changes in the market value of its investments.
INVESTMENT POLICIES AND TECHNIQUES
Each Fund seeks to achieve its objective by investing exclusively in
securities issued or guaranteed by the United States government or its agencies
or instrumentalities ("U.S. Government Securities") and repurchase agreements
fully secured by U.S. Government Securities. The U.S. Government Securities in
which each Fund may invest include mortgage-related securities, such as
pass-through securities, collateralized mortgage obligations, and zero coupon
treasury securities. The Funds will not invest, however, in any mortgage-related
securities that are considered "high risk" under the supervisory policies of the
Office of the Comptroller of the Currency applicable to national banks. Each
Fund may purchase securities on a when-issued basis and purchase or sell
securities on a forward commitment basis. See "Risks and Characteristics of
Securities and Investment Techniques" for a description of these securities and
investment techniques and the risks involved in their use.
EFFECTIVE DURATION
Effective duration estimates the interest rate risk (price volatility) of a
security, I.E., how much the value of the security is expected to change with a
given change in interest rates. The longer a security's effective duration, the
more sensitive its price is to changes in interest rates. For example, if
interest rates were to increase by 1%, the market value of a bond with an
effective duration of five years would decrease by about 5%, with all other
factors being constant.
It is important to understand that, while a valuable measure, effective
duration is based on certain assumptions and has several limitations. It is most
useful as a measure of interest rate risk when interest rate changes are small,
rapid and occur equally across all the different points of the yield curve. In
addition, effective duration is difficult to calculate precisely for bonds with
prepayment options, such as mortgage-backed securities, because the calculation
requires assumptions about prepayment rates. For example, when interest rates go
down, homeowners may prepay their mortgages at a higher rate than assumed in the
initial effective duration calculation, thereby shortening the effective
duration of the Fund's mortgage-backed securities. Conversely, if rates
increase, prepayments may decrease to a greater extent than assumed, extending
the effective duration of such securities. For these reasons, the effective
durations of funds which invest a significant portion of their assets in
mortgage-backed securities can be greatly affected by changes in interest rates.
TEMPORARY INVESTMENTS
Each Fund may retain cash or invest in short-term money market instruments
when economic or market conditions are such that the Fund's investment adviser
or sub-adviser deems a temporary defensive position to be appropriate. In
addition, even when a Fund is fully invested, normally up to 5% of the Fund's
total assets will be held in short-term money market securities and cash to pay
redemption requests and Fund expenses. Investments in short-term money market
securities will be limited to U.S. Government Securities. See "Investment
Policies and Restrictions" in the Statement of Additional Information.
INVESTMENTS BY NATIONAL BANKS AND FEDERAL CREDIT UNIONS
The Funds' shares are eligible for purchase by national banks and federal
credit unions under current applicable federal law. Since the regulation of
financial institutions is a rapidly evolving area of law, however, it remains
the responsibility of each such institution and its board of directors to insure
that shares of the Funds are permissible investments and proper holdings for the
institution's investment portfolio.
RISKS AND CHARACTERISTICS OF SECURITIES
AND INVESTMENT TECHNIQUES
The following describes in greater detail different types of securities
and investment techniques used by the Funds, and discusses certain concepts
relevant to the investment policies of the Funds. Additional information about
the Funds' investments and investment practices may be found in the Statement of
Additional Information.
GENERAL
The Funds are subject to interest rate risk, which is the potential for a
decline in bond prices due to rising interest rates. In general, bond prices
vary inversely with interest rates. When interest rates rise, bond prices
generally fall. Conversely, when interest rates fall, bond prices generally
rise. Interest rate risk applies to U.S. Government Securities as well as other
bonds. U.S. Government Securities are guaranteed only as to the payment of
interest and principal. The current market prices for such securities are not
guaranteed and will fluctuate. In general, shorter term bonds are less sensitive
to interest rate changes, but longer term bonds generally offer higher yields.
The Funds also are subject to prepayment risk to the extent they invest in
mortgage-related securities. Certain types of investments and investment
techniques that may be used by the Funds are described in greater detail,
including the risks of each, in this section.
U.S. GOVERNMENT SECURITIES
Each Fund invests in U.S. Government Securities. U.S. Government Securities
are issued or guaranteed as to payment of principal and interest by the U.S.
Government, its agencies or instrumentalities. THE CURRENT MARKET PRICES FOR
SUCH SECURITIES ARE NOT GUARANTEED AND WILL FLUCTUATE AS WILL THE NET ASSET
VALUE OF THE FUNDS. The Funds may invest in direct obligations of the U.S.
Treasury, such as U.S. Treasury bills, notes and bonds, and in obligations of
U.S. Government agencies or instrumentalities in which both national banks and
federal credit unions may invest directly without limitation. These include ,
among others, obligations of Federal Home Loan Banks, the Federal National
Mortgage Association, the Government National Mortgage Association, the Federal
Home Loan Mortgage Corporation, the Financing Corporation and the Student Loan
Marketing Association.
Obligations of U.S. Government agencies or instrumentalities are backed in
a variety of ways by the U.S. Government or its agencies or instrumentalities.
Some of these obligations, such as Government National Mortgage Association
mortgage-backed securities, are backed by the full faith and credit of the U.S.
Treasury. Others, such as obligations of the Federal Home Loan Banks, are backed
by the right of the issuer to borrow from the Treasury. Still others, such as
those issued by the Federal National Mortgage Association, are backed by the
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality. Finally, obligations of other agencies or
instrumentalities are backed only by the credit of the agency or instrumentality
issuing the obligations.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are securities that, directly or indirectly,
represent participations in, or are secured by and payable from, loans secured
by real property. The current issuers or guarantors of mortgage-related
securities in which the Funds may invest are the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-related securities,
as the term is used in this Prospectus, include government guaranteed mortgage
pass-through securities, adjustable rate mortgage securities and collateralized
mortgage obligations. The Funds will not invest in any mortgage-related
securities other than those issued or guaranteed by the U.S. government or its
agencies and instrumentalities.
(a) GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. The government guaranteed
mortgage pass-through securities in which each Fund may invest include
certificates issued or guaranteed by GNMA, FNMA and FHLMC, which represent
interests in underlying residential mortgage loans. These mortgage pass-through
securities provide for the pass-through to investors of their pro-rata share of
monthly payments (including any prepayments) made by the individual borrowers on
the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans. Each of GNMA, FNMA
and FHLMC guarantee timely distributions of interest to certificate holders.
GNMA and FNMA guarantee timely distributions of scheduled principal. FHLMC
generally guarantees only ultimate collection of principal of the underlying
mortgage loans. For a further description of these securities, see "Investment
Policies and Restrictions--Government Guaranteed Mortgage-Related Securities" in
the Statement of Additional Information.
(b) ADJUSTABLE RATE MORTGAGE SECURITIES. Each Fund may also invest in
adjustable rate mortgage securities ("ARMS"). ARMS are pass-through mortgage
securities collateralized by mortgages with interest rates that are adjusted
from time to time. The adjustments usually are determined in accordance with a
predetermined interest rate index and may be subject to certain limits. While
values of ARMS, like other fixed-income securities, generally vary inversely
with changes in market interest rates (increasing in value during periods of
declining interest rates and decreasing in value during periods of increasing
interest rates), the values of ARMS should generally be more resistant to price
swings than other fixed-income securities because the coupon rates of ARMS move
with market interest rates. The adjustable rate feature of ARMS will not,
however, eliminate fluctuations in the prices of ARMS, particularly during
periods of extreme fluctuations in interest rates. ARMS typically have caps
which limit the maximum amount by which the interest rate may be increased or
decreased at periodic intervals or over the life of the loan. To the extent
interest rates increase in excess of the caps, ARMS can be expected to behave
more like traditional fixed income securities and to decline in value to a
greater extent than would be the case in the absence of such caps. Also, since
many adjustable rate mortgages only reset on an annual basis, it can be expected
that the prices of ARMS will fluctuate to the extent that changes in prevailing
interest rates are not immediately reflected in the interest rates payable on
the underlying adjustable rate mortgages.
(c) COLLATERALIZED MORTGAGE OBLIGATIONS. Each Fund may invest, within the
limits discussed below, in CMOs (collateralized mortgage obligations and
multiclass pass-through securities unless the context otherwise indicates).
Collateralized mortgage obligations are debt instruments issued by special
purpose entities which are secured by pools of mortgage loans or other
mortgage-related securities. Multi-class pass-through securities are equity
interests in a trust composed of mortgage loans or other mortgage-related
securities. Payments of principal and interest on underlying collateral provide
the funds to pay debt service on the collateralized mortgage obligation or make
scheduled distributions on the multi-class pass-through security. CMOs may be
issued by agencies or instrumentalities of the U.S. Government or by private
organizations. The Funds will only invest in CMO's issued or guaranteed by
agencies or instrumentalities of the U.S. Government.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMO, often referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated
among the several tranches of a CMO in many ways. For example, certain tranches
may have variable or floating interest rates and others may be stripped
securities which provide only the principal or interest feature of the
underlying security. Generally, the purpose of the allocation of the cash flow
of a CMO to the various tranches is to obtain a more predictable cash flow to
certain of the individual tranches than exists with the underlying collateral of
the CMO. As a general rule, the more predictable the cash flow is on a CMO
tranche, the lower the anticipated yield will be on the tranche at the time of
issuance relative to prevailing market yields on mortgage-related securities. As
part of the process of creating more predictable cash flows on most of the
tranches of a CMO, one or more tranches generally must be created that absorb
most of the volatility in the cash flows on the underlying mortgage loans. The
yields on these tranches are generally higher than prevailing market yields on
mortgage-related securities with similar maturities. As a result of the
uncertainty of the cash flows of these tranches, the market prices of and yield
of these tranches generally may be more volatile. The Funds will not invest in
any tranche of a CMO that would be considered "high risk" under the supervisory
policies of the Office of the Comptroller of the Currency applicable to national
banks. See "Investment Policies and Restrictions" in the Statement of Additional
Information. For example, the Funds will not invest in "interest-only" or "IO"
tranches, "principal only" or "PO" tranches, "inverse floaters" or "inverse
IOs."
ZERO COUPON SECURITIES
The Funds may invest in "zero coupon" securities issued or guaranteed by
the United States government or its agencies or instrumentalities. The Funds
will not invest in any such securities that are "privately issued" (i.e., sold
by a bank or brokerage firm which itself separates the principal portions from
the coupon portions of the U.S. Treasury bonds and notes and holds such
instruments in a custodial or trust account). A zero coupon security pays no
interest to its holder during its life. Its value to an investor consists of the
difference between its face value at the time of maturity and the price for
which it was acquired, which is generally an amount significantly less than its
face value (sometimes referred to as a "deep discount" price). The Funds will
not purchase any zero coupon security with a maturity date that is more than ten
years from the settelement date for the purchase of such security.
Zero coupon securities do not entitle the holder to any periodic payments
of interest prior to maturity. Accordingly, these securities usually trade at a
deep discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities which make current distributions of
interest. In certain circumstances, a Fund could fail to recoup its initial
investment in zero coupon securities. Current federal tax law requires that a
holder of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year even though such holder receives no
interest payments in cash on the security during the year. In addition, as a
registered investment company, a Fund will be required to distribute this income
to shareholders. See "Distributions to Shareholders and Taxes." These
distributions will be made from the Fund's cash assets or, if necessary, from
the proceeds of sales of portfolio securities. A Fund will not be able to
purchase additional income producing securities with cash used to make such
distributions, and the Fund's current income ultimately may be reduced as a
result.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with respect to U.S.
Government Securities. A repurchase agreement involves the purchase by a Fund of
securities with the condition that after a stated period of time the original
seller (a member bank of the Federal Reserve System or a recognized securities
dealer) will buy back the same securities ("collateral") at a predetermined
price or yield. Repurchase agreements involve certain risks not associated with
direct investments in securities. While collateral will at all times be
maintained in an amount equal to the repurchase price under the agreement
(including accrued interest due thereunder), if a seller were to default on its
repurchase obligation, a Fund would suffer a loss to the extent proceeds from
the sale of collateral were less than the repurchase price. In the event of a
seller's bankruptcy, a Fund might be delayed in, or prevented from, selling the
collateral to the Fund's benefit. The Funds will not invest in repurchase
agreements maturing in more than seven days.
REVERSE REPURCHASE AGREEMENTS
Each Fund may engage in "reverse repurchase agreements" with banks and
securities dealers. Reverse repurchase agreements are ordinary repurchase
agreements in which the Fund is the seller of, rather than the investor in,
securities and agrees to repurchase them at an agreed upon time and price. Use
of a reverse repurchase agreement may be preferable to a regular sale and later
repurchase of the securities because it avoids certain market risks and
transactions costs. Because certain of the incidents of ownership of the
security are retained by the Fund, reverse repurchase agreements are considered
a form of borrowing by the Fund from the buyer, collateralized by the security.
Reverse repurchase agreements will not be used as a means of borrowing for
investment purposes but will be used by a Fund in order to meet redemption
requests without immediately selling portfolio securities. No more than
one-third of the total assets of each Fund will be subject to reverse repurchase
agreements. The Funds will only enter into fully covered reverse repurchase
agreements. See "Investment Policies and Restrictions -- Reverse Repurchase
Agreements" in the Statement of Additional Information.
BORROWING
Each of the Funds may borrow money from banks for temporary or emergency
purposes in an amount up to one-third of the value of its total assets in order
to meet redemption requests without immediately selling any of its portfolio
securities. If, for any reason, the current value of their Fund's total assets
falls below an amount equal to three times the amount of its indebtedness from
money borrowed, such Fund will, within three days, reduce its indebtedness to
the extent necessary. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so. Interest paid by
a Fund on borrowed funds would decrease the net earnings of that Fund. None of
the Funds will purchase portfolio securities while outstanding borrowings exceed
5% of the value of the Fund's total assets. Each Fund may mortgage, pledge or
hypothecate its assets to secure permitted temporary or emergency borrowing. The
policies set forth in this paragraph are fundamental and may not be changed with
respect to a Fund without the approval of a majority of that Fund's shares. The
Funds do not consider fully covered reverse repurchase agreements to be
borrowings for purposes of the investment policies set forth in this paragraph.
WHEN-ISSUED SECURITIES
Each Fund may purchase securities on a "when-issued" basis. In a
when-issued purchase, a Fund contracts to purchase securities in the period
between the announcement of the offering and the issuance of the securities. The
price is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. The Funds will not accrue income with
respect to when-issued securities prior to their stated delivery date. Pending
delivery of the securities, each Fund maintains in a segregated account cash or
liquid high-grade debt obligations in an amount sufficient to meet its purchase
commitments.
The purchase of securities on a when-issued basis exposes a Fund to risk
because the securities may decrease in value prior to their delivery. Purchasing
securities on a when-issued basis involves the additional risk that the return
available in the market when the delivery takes place will be higher than that
obtained in the transaction itself. Placing securities rather than cash in the
segregated account referred to in the previous paragraph may have a leveraging
effect on a Fund's net asset value per share; that is, to the extent that a Fund
remains substantially fully invested in securities at the same time that it has
committed to purchase securities on a when-issued or forward commitment basis,
greater fluctuations in its net asset value per share may occur than if it had
set aside cash to satisfy its purchase commitments.
SHORT SALES AGAINST-THE-BOX
The Funds may make short sales "against-the-box" for the purpose of
deferring realization of gain or loss for federal income tax purposes and for
the purpose of hedging against an anticipated decline in the value of the
underlying securities. A short sale "against-the-box" is a short sale in which
the Fund owns or has the right to obtain without payment of additional
consideration an equal amount of the same type of securities sold short.
PORTFOLIO TURNOVER
Each Fund will use short-term trading to benefit from yield disparities
among different issues of securities or otherwise to achieve its investment
objective. The portfolio turnover rate is not expected to exceed 200% for
Intermediate Duration Portfolio and Core Portfolio and 300% for Short Duration
Portfolio. Portfolio turnover in excess of 100% is generally considered to be
high. Higher portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which are borne directly by the Fund,
and may increase short-term capital gains which are taxable as ordinary income
when distributed to shareholders. The method of calculating portfolio turnover
rate is set forth in the Statement of Additional Information under "Investment
Policies and Restrictions--Portfolio Turnover."
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions in addition to those
set forth above, which are set forth in their entirety in the Statement of
Additional Information. Certain of these restrictions are fundamental and cannot
be changed without shareholder approval. Except for each Fund's policy regarding
borrowing, if a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from changes in
values or assets will not constitute a violation of such restriction.
PURCHASE OF SHARES
GENERAL
Shares of each Fund are purchased at the net asset value per share next
calculated after receipt of the purchase order, without a sales charge. The
minimum initial investment in the Funds is $500,000, in the aggregate, and the
minimum additional aggregate investment is $100,000. Purchases of Fund shares
will be made in full and fractional shares. In the interest of economy and
convenience, certificates for shares will generally not be issued. Each Fund
reserves the right, in its absolute discretion, to reject any order for the
purchase of its shares. Shares will be evidenced in book entry form. The Funds
do not expect to issue share certificates.
Interest income begins to accrue as of the opening of the New York Stock
Exchange (the "Exchange") on the day that payment is received. The date of
payment receipt may differ from the date of receipt of a purchase order. 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. Payments made by wire transfer of Federal Funds are
considered received when the Federal Funds are received.
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 up to 15 days from
the purchase date to verify by expeditious means that the purchase payment has
been or will be collected.
Shares of the Funds may be purchased by opening an account either by mail
or by phone.
PURCHASES BY MAIL
To open an account by mail, complete the general authorization form
attached to this Prospectus and mail it along with a check payable to the
appropriate Fund, to Voyageur Fund Distributors, Inc., 90 South Seventh Street,
Suite 4400, Minneapolis, Minnesota 55402.
PURCHASES BY TELEPHONE
To open an account by telephone, call (612) 376-7014 or (800) 545-3863 to
obtain an account number and instructions. Information concerning the account
will be taken over the phone. The investor must then request a commercial bank
with which such investor 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:
Marquette Bank, N.A. ABA #091016647
For credit of Marquette Trust Company as Custodian for: (insert
applicable Fund name)
VFI Funds Account No. 2100-206482
Account Number: (assigned by telephone)
Information on how to transmit Federal Funds by wire is available at any
national bank or any state bank that is a member of the Federal Reserve System.
The bank may charge the shareholder for the wire transfer. If the phone order
and Federal Funds are received before the primary close of trading on the
Exchange (4:00 p.m. Eastern time), the order will be deemed to become effective
at that time. Otherwise, the order will be deemed to become effective as of the
primary close of trading on the Exchange on the next day the Exchange is open
for trading. The investor will be required to complete the general authorization
form attached to this Prospectus and mail it to the appropriate Fund after
making the initial telephone purchase.
CONTRIBUTION IN KIND
For investments in excess of $500,000, the Funds may accept, in whole or in
part, a payment in kind of securities that are consistent with the Fund's
investment objectives and policies as payment for the Shares. Each Fund's
investment adviser will have sole discretion to determine whether the Fund will
accept a payment in kind for the Shares. Securities so accepted will be valued
in the same manner as the applicable Fund's securities.
REDEMPTION OF SHARES
WRITTEN REDEMPTIONS
Each Fund will redeem its shares in cash at the net asset value next
determined after receipt of a shareholder's written request for redemption in
"good order." "Good order" means that the redemption request must be executed
exactly as the shares are registered. If the redemption proceeds are to be paid
to the registered holder(s), a signature guarantee is not normally required. A
signature guarantee is required in certain other circumstances. See
"Redemptions" in the Statement of Additional Information.
TELEPHONE REDEMPTIONS
Shareholders may redeem shares of any Fund by telephoning (612) 376-7014 or
(800) 545-3863. The applicable section of the authorization form must have been
completed and filed with the Fund before the telephone request is received.
Shares will be redeemed at their net asset value next determined following a
Fund's receipt of the redemption request. The proceeds of the redemption will be
paid to the shareholder's address of record by wire transfer to the bank
designated on the authorization form.
The Funds will employ reasonable procedures to confirm that telephone
requests are genuine, including requiring that payment be made only to the
address of record or the bank account designated on the authorization form and
requiring certain means of telephonic identification. If a Fund follows such
procedures, it will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If a Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
Each Fund reserves the right at any time to suspend or terminate telephone
redemptions or to impose a fee for this service. There is currently no
additional charge to the shareholder for use of the telephone redemption
procedure.
REDEMPTION IN KIND
Redemption proceeds for redemption requests of $500,000 or more may be
paid, at the sole option of a Fund, in whole or in part by a distribution in
kind of securities or other assets held by such Fund. The determination of which
of a Fund's assets will be distributed to meet such redemption requests will be
made by the Fund's Adviser, in consultation with the redeeming shareholder.
Securities or other assets so distributed will be valued in the same manner as
the applicable Fund's securities. In order to dispose of such securities or
other assets, the redeeming Shareholder would most likely be required to bear
transaction costs, if any.
ADDITIONAL REDEMPTION INFORMATION
Shareholders who have submitted a request to one of the Funds for
redemption of their shares will not earn any income on such shares distributed
by the Fund on the redemption date. If shares for which payment has been
collected are redeemed, payment must be made within seven days. Each Fund may
suspend this right of redemption and may postpone payment only when the Exchange
is closed for other than customary weekends or holidays, or if permitted by the
rules of the Securities and Exchange Commission during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for such Fund to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Commission
for the protection of investors.
Each Fund reserves the right and currently plans to redeem Fund shares and
mail the proceeds to the shareholder if at any time the value of Fund shares in
the account falls below a specified value, currently set at $1,000, as a result
of redemptions or exchanges. Shareholders will be notified and will have 60 days
to bring the account up to the required value before any redemption action will
be taken by a Fund.
EXCHANGE PRIVILEGE
Shares of each Fund may be exchanged for shares of the other Funds and for
institutional class shares of any other of the Company's Funds which issue such
shares, provided that the shares to be acquired in the exchange are eligible for
sale in the shareholder's state of residence. The exchange will be made on the
basis of the relative net asset values next determined after receipt of the
exchange request. The Underwriter reserves the right, upon 60 days' prior
notice, to restrict the frequency of, or otherwise modify, condition, terminate
or impose charges upon, exchanges. An exchange is considered to be a sale of
shares on which the investor may realize a capital gain or loss for income tax
purposes. Exchange requests should be placed directly with the Fund by calling
(800) 545-3863.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE FUNDS
Under the laws of the State of Minnesota, the Board of Directors of the
Company is responsible for managing the business and affairs of the Funds. The
names, addresses, principal occupations and other affiliations of Directors and
executive officers of the Company are set forth in the Statement of Additional
Information.
INVESTMENT ADVISERS
Marquette and Cadre have been retained under investment advisory agreements
(the "Advisory Agreements") with the Company to act as the Funds' investment
advisers, subject to the authority of the Board of Directors. Cadre will act as
investment adviser to Short Duration Portfolio and Marquette will act as
investment adviser to Intermediate Duration Portfolio and Core Portfolio.
Marquette Trust Company, headquartered in Minneapolis, Minnesota, is the
lead Trust company for a $3.5 billion community bank organization under common
ownership. The bank group includes over 40 banks in ten different states.
Marquette provides investment management, custody, and Trust administration
services for over $400 million of assets in Minnesota, Wisconsin, Iowa, and
South Dakota. It has been providing Trust services for the past 50 years.
Marquette is owned by Marquette Bank Rochester, which is controlled by Carl and
Eloise Pohlad.
Cadre Consulting Services, Inc. was founded in 1982, and is based in Long
Island, New York. It specializes in investment management, administration, and
marketing for governmental entities. It currently provides these services for 21
different programs covering 10 states, with 2,500 clients. Cadre manages $2.2
billion of short term investment assets, and an additional $3.2 billion of fixed
rate/fixed term assets.
Short Duration Portfolio pays its investment adviser a monthly investment
advisory and management fee equivalent on an annual basis to .10% of the average
daily net assets of such Fund. Each of Intermediate Duration Portfolio and Core
Portfolio pays its investment adviser a monthly investment advisory and
management fee equivalent on an annual basis to .20% of the average daily net
assets of such Fund (the "Basic Fee"). The Basic Fee for each such Fund is
subject to adjustment as described below.
Adjustments to the Basic Fee for Intermediate Duration Portfolio and Core
Portfolio are made by comparison of the respective Fund's investment performance
for the applicable period with the investment record of a comparison index, as
described below (individually a "Comparison Index" and collectively the
"Comparison Indexes"). A Fund's Basic Fee for each month may be increased or
decreased by up to .15% (on an annualized basis) of the Fund's average daily net
assets depending upon the extent by which the Fund's performance varies from its
Comparison Index over the applicable performance period. For purposes of
calculation of the performance adjustment, average daily net assets are equal to
the Fund's average daily net assets during the month for which the calculation
is being made.
For each of Intermediate Duration Portfolio and Core Portfolio, no change
is made to the Basic Fee to the extent the Fund's performance falls within .05%
of the performance of the Fund's Comparison Index during the applicable
performance period. If a Fund's performance exceeds that of its Comparison Index
by .06% or more, the Basic Fee will be increased by the product of 20% and the
number of basis points by which the Fund's performance has exceeded that of its
Comparison Index, up to a maximum increase of .15% (on an annualized basis) for
performance which exceeds the Comparison Index by .75% or more. Thus, for Fund
performance which exceeds the Comparison Index by .06%, the Basic Fee will be
increased by .00012% (20% X .06%). Corresponding decreases will be made to the
Basic Fee to the extent the Fund's performance falls below that of its
Comparison Index by more than .05%, up to a maximum decrease of .15% for
performance which falls .75% or more below that of the Comparison Index.
The following table sets forth examples of resulting increases or decreases
to the Basic Fee on an annualized basis given various performance results:
<TABLE>
<CAPTION>
ADJUSTMENT
TO BASIC FEE
PERFORMANCE OF FUND RELATIVE TO COMPARISON INDEXES (ANNUALIZED)
- -------------------------------------------------- ------------
<S> <C>
+.75 percentage points or more.......................................................... +.15%
+.50.................................................................................... +.10%
+.25.................................................................................... +.05%
+.05.................................................................................... 0%
0.................................................................................... 0%
- -.05.................................................................................... 0%
- -.25.................................................................................... -.05%
- -.50.................................................................................... -.10%
- -.75 percentage points or more.......................................................... -.15%
</TABLE>
The Basic Fee, plus or minus the performance adjustments calculated as
described herein, is paid monthly. The applicable performance period is a
rolling 12-month period consisting of the most recent calendar month plus the
immediately preceding 11 months. No adjustments will be made in the first 12
months the Funds are under management.
In calculating the investment performance of a Fund as compared with the
investment record of its Comparison Index, dividends and other distributions of
the Fund and dividends and other distributions made with respect to component
securities of the Comparison Index during the performance period are treated as
having been reinvested. The investment performance of the Fund is calculated
based upon the total return of the Fund for the applicable period, which
consists of the total net asset value of the Fund at the end of the applicable
period, including reinvestment of dividends and distributions, less the net
asset value of the Fund at the commencement of the applicable period divided by
the net asset value of the Fund at the commencement of the applicable period.
Fractions of a percentage point are rounded to the nearest whole point (to the
higher whole point if exactly one-half).
Comparison Indexes for the Funds were chosen taking into account the
targeted duration ranges of the Funds and the types of securities in which the
Funds will invest.
The performance of VFI Intermediate Duration Portfolio will be compared to
that of the Lehman Brothers Mutual Fund (1-5 year) U.S. Government Index. This
index currently has a duration of 2.28 years and consists of all Treasury and
U.S. government agency issues maturing in one to five years (currently 775
issues). The performance of VFI Core Portfolio will be compared to that of the
Lehman Brothers Mutual Fund Government/Mortgage Index. This index currently has
a duration of 4.35 years and consists of all U.S. government, treasury, agency
and agency mortgage-backed securities.
SUB-ADVISER
VFM will act as the Sub-Adviser to VFI Intermediate Duration Portfolio and
VFI Core Portfolio. VFM and the Underwriter are each indirect wholly-owned
subsidiaries of Dougherty Financial Group Inc. ("DFG"), which is owned
approximately 49% by Michael E. Dougherty, 49% by Pohlad Companies and less than
1% by certain retirement plans for the benefit of DFG employees. Mr. Dougherty
co-founded the predecessor of DFG in 1977 and has served as Chairman of the
Board and Chief Executive officer of DFG since inception. Pohlad Companies is a
holding company owned in equal parts by each of James O. Pohlad, Robert C.
Pohlad and William M. Pohlad. VFM's principal business address is 90 South
Seventh Street, Suite 4400, Minneapolis, Minnesota 55402. As of February 29,
1996, VFM and its affiliates served as the manager to six closed-end and ten
open-end investment companies (comprising 29 separate investment portfolios),
administered numerous private accounts and managed approximately $8.5 billion in
assets.
The Sub-Advisory Agreement between Marquette and VFM provides that VFM is
entitled to a fee paid by Marquette , which is accrued daily and paid monthly,
equal to an annual rate of 50% of the Basic Fee plus or minus 50% of the
performance fee adjustment described above under "Management--Investment
Advisers."
PORTFOLIO MANAGEMENT
All investment decisions for the Funds will be made by a committee, and no
individual or individuals will be primarily responsible for making
recommendations to that committee.
THE UNDERWRITER
The shares of the Funds are distributed through Voyageur Fund Distributors,
Inc. (the "Underwriter") pursuant to a Distribution Agreement between the
Underwriter and the Company. Pursuant to the Distribution Agreement, the
Underwriter receives a monthly service fee from each Fund equal, on an annual
basis, to .05% of such Fund's average daily net assets. Such fee is intended to
compensate the Underwriter for expenses incurred in connection with the
servicing of Fund shareholder accounts. Such expenses may include the payment of
compensation by the Underwriter to persons and institutions who respond to
inquiries of Fund shareholders regarding their ownership of shares or their
accounts with the Funds or who provide other administrative or accounting
services not otherwise required to be provided by a Fund's investment adviser or
sub-adviser (if any), the Funds' transfer agent or any other agent of the Funds.
CUSTODIAN
Marquette serves as the custodian of each Fund's portfolio securities and
cash. Marquette receives no additional compensation for acting as the custodian
of VFI Intermediate Duration Portfolio and VFI Core Portfolio and a monthly fee
from VFI Short Duration Portfolio equal on an annual basis to .10% of such
Fund's average daily net assets for its services as custodian.
DIVIDEND DISBURSING, TRANSFER, ADMINISTRATIVE AND ACCOUNTING SERVICES AGENT
VFM acts as each Fund's dividend disbursing, transfer, administrative and
accounting services agent to perform dividend-paying functions, to calculate
each Fund's daily share price, to maintain shareholder records and to perform
certain regulatory reporting and compliance related services for the Funds. The
fees paid for these services are based on each Fund's assets and include
reimbursement of out-of-pocket expenses. VFM receives a monthly fee from each
Fund equal on an annual basis to .10% of each Fund's average daily net assets.
See "The Investment Advisers, Sub-Adviser, Administrative Services, Expenses and
Brokerage" in the Statement of Additional Information.
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 and
shareholder statements, association membership dues, charges of the Fund's
custodian (if any), 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. Marquette, Cadre, VFM and the Underwriter reserve the right, from
time to time, to voluntarily waive their fees in whole or part and to
voluntarily absorb certain other of the Funds' expenses.
PORTFOLIO TRANSACTIONS
No Fund will effect any brokerage transactions in its portfolio securities
with any broker-dealer affiliated directly or indirectly with Marquette, Cadre
or VFM unless such transactions, including the frequency thereof, the receipt of
commissions payable in connection therewith and the selection of the affiliated
broker-dealer effecting such transactions, are not unfair or unreasonable to the
shareholders of such Fund. It is not anticipated that any Fund will effect any
brokerage transactions with any affiliated broker-dealer, including the
Underwriter, unless such use would be to such Fund's advantage. Marquette, Cadre
and VFM may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute the Funds' securities transactions.
DETERMINATION OF NET ASSET VALUE
The net asset value of Fund shares is determined once daily, Monday through
Friday, as of 3:00 p.m., Minneapolis time (the regular close of trading on the
Exchange) on each business day the Exchange is open for trading, except on (i)
days on which changes in the value of a Fund's portfolio securities will not
materially affect the current net asset value of the Fund's shares, (ii) days
during which no Fund shares are tendered for redemption and no order to purchase
or sell Fund shares is received by the Fund or (iii) customary national business
holidays on which the Exchange is closed for trading (as of the date hereof, New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day).
For each Fund, the net asset value per share is determined by dividing the
value of the securities, cash and other assets of the Fund less all liabilities
by the total number of shares outstanding. For the purpose of determining the
aggregate net assets of a Fund, cash and receivables will be valued at their
face amounts. Interest will be recorded as accrued.
The value of most fixed-income securities held by the Funds will be
provided by an independent pricing service, which determines these valuations at
a time earlier than the close of the Exchange. Pricing services consider such
factors as security prices, yields, maturities, call features, ratings and
developments relating to specific securities in arriving at securities
valuations. Occasionally events affecting the value of such securities may occur
between the time valuations are determined and the close of the Exchange. If
events materially affecting the value of such securities occur during such
period, or if a Fund's investment adviser or sub-adviser determines for any
other reason that valuations provided by the pricing service are inaccurate,
such securities will be valued at their fair value according to procedures
established in good faith by the Company's Board of Directors. Fixed-income
securities for which prices are not available from an independent pricing
service but where an active market exists will be valued using market
quotations, prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics in accordance with procedures established in good faith by the
Company's Board of Directors. Short-term securities with remaining maturities of
60 days or less are valued at amortized cost. In addition, any securities or
other assets of a Fund for which market prices are not readily available will be
valued at their fair value in accordance with procedures established in good
faith by the Company's Board of Directors.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
The present policy of each Fund is to declare a distribution from the net
investment income of the Fund on each day that the Fund is open for business.
Net investment income consists of interest accrued on portfolio investments of a
Fund, less accrued expenses, computed in each case since the most recent
determination of net asset value. Net realized long-term capital gains, if any,
are distributed at least annually, after utilization of any available capital
loss carryovers.
Shareholders of each Fund receive distributions from investment income and
capital gains in additional shares of the Fund at net asset value, without any
sales charge, unless they elect otherwise. The Funds will pay distributions not
reinvested to the shareholder of record via wire transfer. Each Fund sends
monthly statements to its shareholders with details of any reinvested dividends.
FEDERAL INCOME TAXATION
Each Fund is treated as a separate entity for federal income tax purposes.
Each Fund intends to qualify during its current taxable year as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). So long as a Fund so qualifies, it will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders. The following discussion of the federal income tax consequences of
investing in the Funds is based upon tax laws and regulations in effect on the
date of this Prospectus and is subject to change by legislative or
administrative action. For additional information, see "Taxes" in the Statement
of Additional Information. Certain states exempt mutual fund dividends
attributable to interest paid on certain U.S. Government Securities from income
taxation when received by banks that are shareholders in the mutual fund.
Prospective investors are advised to consult with their tax advisers concerning
the application of state and local tax laws to investments in and distributions
by the Funds. Shareholders will be notified annually as to the amount, nature
and federal income tax status of dividends and distributions.
If shares of any Fund are sold or otherwise disposed of, the shareholder
will realize a capital gain or loss equal to the difference between the purchase
price and the sales price of the shares disposed of, if, as is usually the case,
the shares are a capital asset in the hands of the shareholder. If the sale or
other disposition occurs more than one year after the shares were acquired, the
resulting capital gain or loss will be long-term. A special provision of the
Code states that, if a Fund's shares with respect to which a long-term capital
gain distribution has been made are held for six months or less, any loss on the
sale or other disposition of those shares will be a long-term capital loss to
the extent of such long-term capital gain distribution, unless such sale or
other disposition is made pursuant to a plan that provides for the periodic
liquidation of an investment in the Fund.
Distributions by the Funds are generally taxable to shareholders, whether
received in cash or in additional shares of the Fund. Distributions from a
Fund's net investment income and net short-term capital gains are taxable to
shareholders as ordinary income. Distributions from a Fund designated as
long-term capital gain distributions will be taxable to the shareholder as
long-term capital gains irrespective of how long the shareholder has held the
shares. Shareholders not subject to federal income taxation will not be taxed on
distributions by the Funds.
INVESTMENT PERFORMANCE
Advertisements and other sales literature for the Funds may refer to
"yield," "average annual total return," "cumulative total return," "current
distribution rate" and may compare such performance quotations with published
indices and comparable quotations of other 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. All such
figures are based on historical earnings and performance and are not intended to
be indicative of future performance. Additionally, performance information may
not provide a basis for comparison with other investments or other mutual funds
using a different method of calculating performance. The investment return on
and principal value of an investment in any Fund will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The advertised "yield" of a Fund will be based on a 30-day period in the
advertisement. Yield is calculated by dividing the net investment income per
share deemed earned during the period by the maximum offering price per share on
the last day of the period. The result is then "annualized" using a formula that
provides for semi-annual compounding of income.
The "average annual total return" is the average annual compounded rate of
return based upon a hypothetical $1,000 investment made at the beginning of the
advertised period. In calculating average annual total return, the maximum sales
charge is deducted from the hypothetical investment and all dividends and
distributions are assumed to be reinvested.
"Cumulative total return" is calculated by subtracting a hypothetical
$1,000 payment to a Fund from the ending redeemable value of such payment (at
the end of the relevant advertised period), dividing such difference by $1,000
and multiplying the quotient by 100. In calculating ending redeemable value, all
income and capital gain distributions are assumed to be reinvested in additional
Fund shares and the maximum sales charge is deducted.
Each Fund, from time to time, may also quote a "current distribution rate"
to shareholders. A current distribution rate as of a date is calculated by
determining the amount of distributions that would have been paid over the
twelve-month period ending on such date to the holder of one hypothetical Fund
share purchased at the beginning of such period, and dividing such amount by the
current maximum offering price per share (the net asset value per Fund share
plus the maximum sales charge).
In addition to advertising total return and yield, comparative performance
information may be used from time to time in advertising the Funds' shares,
including data from Lipper Analytical Services, Inc., Morningstar and other
entities or organizations which track the performance of investment companies.
Performance information for each Fund may also be compared to its Comparison
Index and to other unmanaged indices. Unmanaged indices generally do not reflect
deductions for administrative and management costs and expenses. For Fund
performance information and daily net asset value quotations, investors may call
(612) 376-7010 or (800) 525-6584.
For additional information regarding comparative performance information
and the calculation of each Fund's yield, average annual total return,
cumulative total return and current distribution rate, see "Performance
Comparisons" in the Statement of Additional Information.
GENERAL INFORMATION
Each Fund sends to its shareholders six-month unaudited and annual audited
financial statements which include a list of investment securities held by the
Fund.
All of the Funds were established in 1995, each as a separate series of
Voyageur Funds, Inc., a Minnesota corporation incorporated on Apri 15, 1987. The
Articles of Incorporation limit the liability of the Directors to the fullest
extent permitted by law. The Articles of Incorporation currently permit the
Directors to issue an unlimited number of full and fractional shares of four
distinct series, each of which evidences an interest in a separate portfolio of
investments with its own investment objective, policies and restrictions. The
Articles of Incorporation also permit the Directors, without shareholder
approval, to create additional series of shares and to subdivide any series into
various classes of shares with such dividend preferences and other rights as the
Directors may designate.
Each share of a Fund represents an equal proportionate interest in the
assets belonging to the Fund and has identical voting, dividend, liquidation and
other rights.
Fund shares are freely transferable, are entitled to dividends as declared
by the Directors, and, in liquidation of a Fund, are entitled to receive the net
assets of such Fund. The Funds do not generally hold annual meetings of
shareholders and will do so only when required by law. Shareholders may remove
Directors from office by votes cast in person or by proxy at a meeting of
shareholders or by written consent and, in accordance with Section 16(c) of the
1940 Act, the Directors shall promptly call a meeting of shareholders for the
purpose of voting upon the question of removal of any Director when requested to
do so by the record holders of not less than 10% of the outstanding shares.
Each share of a series has one vote irrespective of the relative net asset
value of the series' shares. On some issues, such as the election of Directors,
all shares of the Company vote together as one series. On an issue affecting
only a particular series, the shares of the affected series vote as a separate
series. An example of such an issue would be a fundamental investment
restriction pertaining to only one series.
The assets received by the Company for the issue or sale of shares of each
series or class thereof, and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are allocated to such series, and in
the case of a class, allocated to such class, and constitute the underlying
assets of such series or class. The underlying assets of each series or class
thereof are required to be segregated on the books of account, and are to be
charged with the expenses in respect to such series or class and with a share of
the general expenses of the Company. Any general expenses of the Company not
readily identifiable as belonging to a particular series or class shall be
allocated among the series or classes thereof, based upon the relative net
assets of the series or class at the time such expenses were accrued.
For a further discussion of the above matters, see "Additional Information"
in the Statement of Additional Information.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS (AND/OR IN THE
STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE COVER PAGE OF THIS
PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR VOYAGEUR FUND
DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN THE STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
PART B
VOYAGEUR FUNDS, INC.
VFI SHORT DURATION PORTFOLIO
VFI INTERMEDIATE DURATION PORTFOLIO
VFI CORE PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 20, 1996
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Prospectus of the Funds dated March 20, 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) 553-2134.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Investment Policies and Restrictions.................................................................... B-2
Directors and Executive Officers........................................................................ B-7
The Investment Advisers, Sub-Adviser, Administrative Services, Expenses and Brokerage................... B-9
Net Asset Value and Public Offering Price............................................................... B-13
Taxes ............................................................................................... B-13
Performance Comparisons................................................................................. B-14
Redemptions............................................................................................. B-16
Additional Information.................................................................................. B-16
</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 March 20, 1996, and, if given or made, such
information or representations may not be relied upon as having been authorized
by the Funds.
This Statement of Additional Information does not constitute an offer to
sell securities in any state or jurisdiction in which such offering may not
lawfully be made. The delivery of this Statement of Additional Information at
any time shall not imply that there has been no change in the affairs of the
Funds since the date hereof.
INVESTMENT POLICIES AND RESTRICTIONS
The investment objectives, policies and restrictions of Voyageur Financial
Institutions ("VFI") Short Duration Portfolio ("Short Duration Portfolio"), VFI
Intermediate Duration Portfolio ("Intermediate Duration Portfolio") and VFI Core
Portfolio ("Core Portfolio") (collectively, the "Funds") are set forth in the
Prospectus. Certain additional investment information is set forth below. All
capitalized terms not defined herein have the same meanings as set forth in the
Prospectus.
GOVERNMENT GUARANTEED MORTGAGE-RELATED SECURITIES
As set forth in the Prospectus, the Funds will invest solely in U.S.
Treasury bills, notes and bonds and other securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities ("U.S. Government
Securities") and repurchase agreements fully secured by U.S. Government
Securities. Included in the U.S. Government Securities the Funds may purchase
are pass-through securities and collateralized mortgage obligations ("CMOs").
Mortgages backing these securities purchased by the Funds include, among others,
conventional 30-year fixed rate mortgages, graduated payment mortgages, 15-year
mortgages and adjustable rate mortgages. The current issuers and guarantors of
mortgage-related securities in which the Funds may invest are the Government
National Mortgage Association, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Association. A description of the mortgage-related
securities in which the Funds may invest is contained in the Prospectus.
Additional information with respect to these mortgage-related securities is set
forth below.
GNMA PASS-THROUGH SECURITIES. The Government National Mortgage Association
("GNMA") issues mortgage-backed securities ("GNMA Certificates") which evidence
an undivided interest in a pool or pools of mortgages. GNMA Certificates that
the Funds purchase are the "modified pass-through" type, which entitle the
holder to receive timely payment of all interest and principal payments due on
the mortgage pool, net of fees paid to the "issuer" and GNMA, regardless of
whether the mortgagor actually makes the payment.
The National Housing Act authorizes GNMA to guarantee the timely payment of
principal and interest on securities backed by a pool of mortgages insured by
the Federal Housing Administration ("FHA") or guaranteed by the Veterans
Administration ("VA"). The GNMA guarantee is backed by the full faith and credit
of the United States. GNMA is also empowered to borrow without limitation from
the U.S. Treasury if necessary to make any payments required under its
guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the Fund has
purchased the certificates at a premium in the secondary market.
FHLMC PASS-THROUGH SECURITIES. The Federal Home Loan Mortgage Corporation
("FHLMC") was created in 1970 through enactment of Title III of the Emergency
Home Finance Act of 1970. Its purpose is to promote development of a nationwide
secondary market in conventional residential mortgages.
FHLMC issues two types of mortgage pass-through securities ("FHLMC
Certificates"), mortgage participation certificates ("PCS") and guaranteed
mortgage certificates ("GMCs"). PCS resemble GNMA Certificates in that each PCS
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FHLMC guarantees timely monthly payment of interest on
PCS and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semiannually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the United States.
FNMA PASS-THROUGH SECURITIES. The Federal National Mortgage Association
("FNMA") was established in 1938 to create a secondary market in mortgages
insured by the FHA.
FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates" ). FNMA Certificates resemble GNMA Certificates in that each FNMA
Certificate represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FNMA guarantees timely payment of interest
and principal on FNMA Certificates. The FNMA guarantee is not backed by the full
faith and credit of the United States.
ADJUSTABLE RATE MORTGAGE SECURITIES
Adjustable Rate Mortgage Securities ("ARMS") are mortgage-related
securities that, unlike fixed-rate mortgage securities, have periodic
adjustments in the coupons on the underlying mortgages. The interest rates on
ARMS are reset at periodic intervals (generally one year or less) to an
increment over some predetermined interest rate index. There are two main
categories of indexes: those based on U.S. Treasury securities and those derived
from a calculated measure such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indexes include the one-year and five-year
constant maturity Treasury note rates, the three-month Treasury bill rate, the
180-day Treasury bill rate, rates on longer-term Treasury securities, the 11th
District Federal Home Loan Bank Cost of Funds Index, the National Median Cost of
Funds, the one-month or three-month London Interbank Offered Rate ("LIBOR"), the
prime rate of a specific bank, or commercial paper rates. Some indices, such as
the one-year constant maturity Treasury note rate, closely mirror changes in
market interest rate levels. Others, such as the 11th District Home Loan Bank
Cost of Funds Index (often related to ARMS issued by FNMA), tend to lag changes
in market rate levels and tend to be somewhat less volatile. The investment
adviser or sub-adviser of a Fund will seek to diversify Fund investments in ARMS
among a variety of indices and reset periods so that such Fund is not at any one
time unduly exposed to the risk of interest rate fluctuations. In selecting a
type of ARMS for investment, the investment adviser or sub-adviser will also
consider the liquidity of the market for such ARMS.
The underlying adjustable rate mortgages which back ARMS in which the Funds
invest will frequently have caps and floors which limit the maximum amount by
which the loan rate to the residential borrower may change up or down (1) per
reset or adjustment interval and (2) over the life of the loan. Some residential
adjustable rate mortgage loans restrict periodic adjustments by limiting changes
in the borrower's monthly principal and interest payments rather than limiting
interest rate changes. These payment caps may result in negative amortization;
i.e., an increase in the balance of the mortgage loan.
ARMS, like other mortgage-related securities, differ from conventional
bonds in that principal is paid back over the life of the ARMS rather than at
maturity. As a result, the holder of the ARMS receives monthly scheduled
payments of principal and interest, and may receive unscheduled principal
payments representing prepayments on the underlying mortgages. When the holder
reinvests the payments and any unscheduled prepayments of principal it receives,
it may receive a rate of interest which is lower than the rate on the existing
ARMS. For this reason, ARMS are less effective than longer-term debt securities
as a means of "locking-in" long-term interest rates.
ARMS, while having less risk of price decline during periods of rapidly
rising rates than other investments of comparable maturities, will have less
potential for capital appreciation due to the likelihood of increased
prepayments of mortgages as interest rates decline. In addition, to the extent
ARMS are purchased at a premium, mortgage foreclosures and unscheduled principal
prepayments will result in some loss of the holders' principal investment to the
extent of the premium paid. On the other hand, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled prepayment of
principal will increase current and total returns and will accelerate the
recognition of income which, when distributed to shareholders, will be taxable
as ordinary income.
HIGH RISK MORTGAGE SECURITIES
As set forth in the Prospectus, no Fund will invest any of its assets in
mortgage-related securities that are considered "high risk" under applicable
supervisory policies of the Office of the Comptroller of the Currency" (the
"OCC"). After purchase of a non high-risk security, a Fund will determine no
less frequently than annually that such security remains outside the high-risk
category. In OCC Banking Circular 228 (Rev.) (January 10, 1992), the OCC
defined "high-risk mortgage security" as any mortgage derivative product that at
the time of purchase, or at a subsequent testing date, meets any of the
following three tests:
1. AVERAGE LIFE TEST. The mortgage derivative product has an expected
weighted average life greater than 10.0 years.
2. AVERAGE LIFE SENSITIVITY TEST. The expected weighted average life of the
mortgage derivative product:
a. Extends by more than 4.0 years, assuming an immediate and
sustained parallel shift in the yield curve of plus 300 basis
points, or
b. Shortens by more than 6.0 years, assuming an immediate and
sustained parallel shift in the yield curve of minus 300 basis
points.
3. PRICE SENSITIVITY TEST. The estimated change in the price of the
mortgage derivative product is more than 17%, due to an immediate and
sustained parallel shift in the yield curve of plus or minus 300 basis
points.
Examples of certain "high-risk mortgage securities" include "IO" and "PO"
classes of stripped mortgage-backed securities, inverse floating CMOs and
certain zero coupon Treasury securities.
REPURCHASE AGREEMENTS
Each of the Funds may invest in repurchase agreements. The Funds' custodian
will hold the securities underlying any repurchase agreement or such securities
will be part of the Federal Reserve Book Entry System. The market value of the
collateral underlying the repurchase agreement will be determined on each
business day. If at any time the market value of the collateral falls below the
repurchase price of the repurchase agreement (including any accrued interest),
the respective Fund will promptly receive additional collateral (so the total
collateral is an amount at least equal to the repurchase price plus accrued
interest). In entering into repurchase agreements, the Funds will comply with
the standards set forth by the OCC with respect to bank investments in
repurchase agreements. Accordingly, the Funds will enter into repurchase
agreements only with the primary reporting dealers that report to the Federal
Reserve Bank of New York or with banks that are among the 100 largest United
States commercial banks. The Board of Directors has established procedures,
which are periodically reviewed by the Board, pursuant to which a Fund's adviser
or sub-adviser, as appropriate, will monitor the creditworthiness of the banks
and dealers with which the Fund enters into repurchase agreement transactions.
REVERSE REPURCHASE AGREEMENTS
Each Fund may engage in "reverse repurchase agreements" with banks and
securities dealers. At the time a Fund enters into a reverse repurchase
agreement, cash or U.S. Government Securities having a value sufficient to make
payments for the securities to be repurchased will be segregated, and will be
maintained throughout the period of the obligation. When a Fund enters into a
reverse repurchase agreement, either the securities purchased with the funds
obtained from the transaction or the securities collateralizing the transaction
will have a maturity date not later than the settlement date for the reverse
repurchase transaction.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
Each of the Funds may purchase securities offered on a "when-issued" basis
and may purchase or sell securities on a "forward commitment" basis. When a Fund
purchases securities on a when-issued or forward commitment basis, it will
maintain in a segregated account with its custodian cash or liquid high-grade
debt obligations having an aggregate value equal to the amount of such purchase
commitments until payment is made; a Fund will likewise segregate securities it
sells on a forward commitment basis.
TEMPORARY INVESTMENTS
To the extent set forth in the Prospectus, the Funds may invest in
short-term money market securities that are obligations of the U.S. Government
and its agencies and instrumentalities. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities that mature within 397 days
are considered money market securities for purposes of the Funds' investment
policies.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following investment restrictions which, together
with the investment objective of such Fund, cannot be changed without approval
by holders of a majority of the outstanding voting shares of such Fund. As
defined in the 1940 Act, this means the lesser of the vote of (a) 67% of the
shares of such Fund at a meeting where more than 50% of the outstanding shares
of such Fund are present in person or by proxy or (b) more than 50% of the
outstanding shares of such Fund.
1. No Fund will operate in such a manner that it would no longer qualify
as a "diversified" management investment company, as defined under
Section 5 of 1940 Act. In connection therewith, no Fund will, with
respect to 75% of its total assets, purchase any securities (other
than obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities) if, as a result, more than 5% of the
Fund's total assets would then be invested in the securities of a
single issuer or if, as a result, the Fund would hold more than 10% of
the outstanding voting securities of any single issuer, or each Fund
will otherwise limit its investments as required in order to qualify
as a "diversified" management investment company as defined under
Section 5 of the 1940 Act.
2. No Fund will concentrate 25% or more of the value of its total assets
in any one industry; provided, however, that there is no limitation
with respect to investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities and repurchase
agreements secured thereby.
3. No Fund will make loans, except through the purchase of fixed-income
obligations in which such Fund may invest consistent with its
investment objective and policies and through repurchase agreements.
4. No Fund will underwrite the securities of other issuers except to the
extent that, in connection with the disposition of its portfolio
securities, the Fund may be deemed to be an underwriter.
5. No Fund will borrow money (provided that the Funds may enter into
reverse repurchase agreements) except from banks for temporary or
emergency purposes and then only in an amount not exceeding one-third
of the value of such Fund's total assets. No Fund will purchase
portfolio securities while outstanding borrowings (other than fully
covered reverse repurchase agreements) exceed 5% of the value of the
Fund's total assets. In order to secure any permitted borrowings under
this section, each Fund may pledge, mortgage or hypothecate its
assets.
6. No Fund will issue any senior securities (as defined in the 1940 Act),
except as set forth in investment restriction number 5 above, and
except to the extent that purchasing or selling securities on a
when-issued or forward commitment basis, or using similar investment
strategies may be deemed to constitute issuing a senior security.
7. No Fund will invest in commodities, commodities futures contracts or
real estate.
Each Fund has adopted the following operating (i.e., non-fundamental)
investment restrictions which may be changed by the Board of Directors at any
time without shareholder approval.
No Fund will:
1. Purchase the securities of any issuer with less than three years'
continuous operation if, as a result, more than 5% of the value of its
total assets would be invested in securities of such issuers.
2. Purchase illiquid securities.
3. Purchase or retain securities of any issuer if the officers and
directors of the Fund or its investment adviser or any sub-adviser,
owning beneficially more than 1/2 or 1% of the securities of such
issuer, together own beneficially more than 5% or such issuer's
securities.
4. Invest in warrants.
5. Invest in interests in oil, gas or other mineral exploration or
development programs or leases although it may invest in securities of
issuers which invest in or sponsor such programs.
6. Invest in the securities of an investment company, except to the
extent permitted by the 1940 Act and except as part of a merger,
consolidation or acquisition of assets.
7. Purchase any securities on margin except that each Fund may obtain
such short-term credits as may be necessary for the clearance of
purchases and sales of securities.
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.
10. Write, purchase or sell puts, calls or combinations thereof.
Any investment restriction or limitation which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or a utilization of assets and such excess results therefrom.
DIVERSIFICATION
As indicated by the first fundamental investment restriction set forth
above, each Fund operates as a "diversified" fund. Each Fund intends to conduct
its operations so that it will comply with diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
qualify as a "regulated investment company." In order to qualify as a regulated
investment company, each Fund must limit its investments so that, at the close
of each quarter of the taxable year, with respect to at least 50% of its total
assets, not more than 5% of its total assets will be invested in the securities
of a single issuer. In addition, the Code requires that not more than 25% in
value of each Fund's total assets may be invested in the securities of a single
issuer at the close of each quarter of the taxable year.
PORTFOLIO TURNOVER
Portfolio turnover is the ratio of the lesser of annual purchases or sales
of portfolio securities by a Fund to the average monthly value of portfolio
securities owned by the Fund, not including securities maturing in less than 12
months. A 100% portfolio turnover rate would occur, for example, if the lesser
of the value of purchases or sales of a Fund's portfolio securities for a
particular year were equal to the average monthly value of the portfolio
securities owned by the Fund during the year. Each Fund will dispose of
securities without regard to the time they have been held when such action
appears advisable to the Fund's investment adviser or subadviser. Frequent
portfolio trades may result in higher transaction and other costs for a Fund.
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and officers of the Company, their position with the Company
and their principal occupations during the past five years are set forth below.
In addition to the occupations set forth below, the directors and officers also
serve as directors and trustees or officers of various closed-end and open-end
investment companies managed by the Voyageur Fund Managers, Inc. ("VFM").
PRINCIPAL OCCUPATION(S) DURING
PAST FIVE YEARS AND OTHER
NAME, ADDRESS, AND AGE POSITION AFFILIATIONS
- ---------------------- -------- ----------------------------
Clarence G. Frame, 77 Director Of counsel, Briggs & Morgan
W-875 law firm since 1984.
First National Bank Building
332 Minnesota Street
St. Paul, Minnesota 55101
Richard F. McNamara, 63 Director Chief Executive Officer of
7808 Creekridge Circle, #200 Activar, Inc., a Minneapolis-
Minneapolis, Minnesota 55439 based holding company consist-
ing of seventeen companies in
industrial plastics, sheet
metal, automotive aftermarket,
construction supply, electron-
ics and financial services,
since 1966.
Thomas F. Madison*, 60 Director Vice Chairman-Office of the
200 South Fifth Street CEO, Minnesota Mutual Life
Suite 2100 Insurance Company since
Minnepolis, Minnesota 55402 February 1994; President and
CEO of MLM Partners, Inc.
since January 1993; previous-
ly, President of U.S. WEST
Communications-Markets from
1988 to 1993; Mr. Madison
currently serves on the board
of directors of Minnesota
Mutual Life Insurance Company,
Valmont Industries, Inc.,
Eltrax Systems, Inc and vari-
ous civic and educational
organizations.
James W. Nelson, 54 Director Chairman and Chief Executive
81 South Ninth Street Officer of Eberhardt Holding
Suite 4400 Company and its subsidiaries
Minneapolis, Minnesota 55402 since 1990.
Robert J. Odegard, 73 Director Special Assistant to the
University of Minnesota President of the University of
Foundation Minnesota since 1990.
1300 South Second Street
Minneapolis, Minnesota 55454
John G. Taft, 41 President President (since 1991) and
90 South Seventh Street Director (since 1993) of the
Suite 4400 Adviser; Director (since 1993)
Minneapolis, Minnesota 55402 and Executive Vice President
(since 1995) of the
Underwriter; previously,
President of the Underwriter
from 1991 to 1995; Management
committee member of the
Adviser from 1991 to 1993;
Managing Director at Piper,
Jaffray & Hopwood Incorporated
in Minneapolis, Minnesota from
1986 to 1991.
Andrew M. McCullagh, Jr., 47 Executive Portfolio Manager of the
90 South Seventh Street Vice Adviser since 1990; previous-
Suite 4400 President ly, Director of the Adviser
Minneapolis, Minnesota 55402 and the Underwriter from 1993
to 1995.
Jane M. Wyatt, 41 Executive Chief Investment Officer
90 South Seventh Street Vice (since 1993) and Portfolio
Suite 4400 President Manager (since 1989) of the
Minneapolis, Minnesota 55402 Adviser; Director of the
Adviser and the Underwriter
since 1993.
Elizabeth H. Howell, 34 Vice Portfolio Manger of the
90 South Seventh Street President Adviser since 1991; previous-
Suite 4400 ly, portfolio manager for
Minneapolis, Minnesota 55402 Windsor Financial Group,
Minneapolis, Minnesota from
1988 to 1991.
Steven P. Eldredge, 40 Vice Portfolio Manager of the
90 South Seventh Street President Adviser since 1995; previously
Suite 4400 portfolio manager for ABT
Minneapolis, Minnesota 55402 Mutual Funds from 1989 to
1995.
James C. King, 55 Vice Portfolio Manager of the
90 South Seventh Street President Adviser since 1990; previous-
Suite 4400 ly, Director of the Adviser
Minneapolis, Minnesota 55402 and the Underwriter from 1993
to 1995.
Kenneth R. Larsen, 33 Treasurer Treasurer of the Adviser and
90 South Seventh Street the Underwriter since 1990;
Suite 4400 previously, Chief Financial
Minneapolis, Minnesota 55402 Officer (from 1991 to 1995),
Director (from 1993 to 1995),
Secretary (from 1990 to 1993)
and Controller (from 1988 to
1990) of the Adviser and the
Underwriter.
Thomas J. Abood, 32 Secretary General Counsel of the
90 South Seventh Street Adviser and the Underwriter
Suite 4400 since October 1994; previous-
Minneapolis, Minnesota 55402 ly, associated with the law
firm of Skadden, Arps, Slate,
Meagher & Flom, Chicago,
Illinois from 1988 to 1994.
_________________________________
* Denotes a director of the Company who is an interested person of the Company,
an investment adviser or sub-adviser to a Fund and/or the Underwriter.
As of March 1, 1996, the officers and directors of the Company as a group
did not own any shares of the Funds.
The Company does not compensate its officers. Each director (who is not an
employee of VFM or any of its affiliates) receives a total annual fee of $26,000
for serving as a director or trustee for the Funds and each of the open-end and
closed-end investment companies (the "Fund Complex") for which VFM 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 10 open-end investment companies
comprising 43 series or funds and six closed-end investment companies. In
addition, each director who is not an employee of VFM or any of its affiliates
is reimbursed for expenses incurred in connection with attending meetings.
For the fiscal year ended December 31, 1995, the Fund Complex paid total
compensation of $24,500 to each of Messrs. Frame, McNamara, Nelson and Odegard
and $18,500 to Mr. Madison. Mr. Harley Danforth received $10,000 for his
services as a consultant. The following table sets forth the aggregate
compensation received by each director from the Funds for the most recently
ended fiscal year as well as the total compensation received by each director
from the Fund Complex during the calendar year ended December 31, 1995.
<TABLE>
<CAPTION>
PENSION OR ESTIMATED
RETIREMENT ANNUAL TOTAL
AGGREGATE BENEFITS ACCRUED BENEFITS COMPENSATION
COMPENSATION AS PART OF UPON FROM FUND
DIRECTOR FROM THE FUNDS* FUND EXPENSES RETIREMENT COMPLEX
- -------- --------------- ------------- ---------- -------
<S> <C> <C> <C> <C>
Clarence G. Frame $0 None None $24,500
Richard F. McNamara $0 None None $24,500
Thomas F. Madison $0 None None $18,500
James W. Nelson $0 None None $24,500
Robert J. Odegard $0 None None $24,500
* Funds did not have operations in 1995.
</TABLE>
Voyageur Fund Distributors, Inc. (the "Underwriter") is the principal
distributor of each Fund's shares. With regard to the Underwriter, Mr. Frank
Tonnemaker is the President and a director, Mr. Taft and Ms. Wyatt are each
Executive Vice Presidents and directors and Mr. Larsen is Treasurer.
THE INVESTMENT ADVISERS, SUB-ADVISER, ADMINISTRATIVE
SERVICES, EXPENSES AND BROKERAGE
GENERAL
Marquette Trust Company ("Marquette") and Cadre Consulting Services, Inc.
("Cadre") have been retained under investment advisory agreements (the "Advisory
Agreements") with the Company to act as investment advisers to the Funds,
subject to the authority of the Board of Directors. Cadre will act as investment
adviser to Short Duration Portfolio and Marquette will act as investment adviser
to Intermediate Duration Portfolio and Core Portfolio.
Marquette Trust Company is headquartered in Minneapolis, Minnesota. It is
the lead Trust company for a $3.5 billion community bank organization under
common ownership. The bank group includes over 40 banks in ten different states.
Marquette Trust Company provides investment management, custody, and Trust
administration services for over $400 million of assets in Minnesota, Wisconsin,
Iowa, and South Dakota. It has been providing Trust services for the past 50
years.
Cadre Consulting Services, Inc. was founded in 1982, and is based in Long
Island, New York. It specializes in investment management, administration, and
marketing for governmental entities. It currently provides these services for 21
different programs covering 10 states, with 2,500 clients. Cadre manages $2.2
billion of short term investment assets, and an additional $3.2 billion of fixed
rate/fixed term assets.
INVESTMENT ADVISORY AGREEMENTS
The Company, on behalf of the respective Funds, has contracted with
Marquette and Cadre for investment advice, research and management. Pursuant to
each Investment Advisory Agreement, the investment adviser has the sole and
exclusive responsibility for the management of the respective Fund's portfolio
and the making and execution of all investment decisions for such Fund subject
to the objectives and investment policies and restrictions of the Fund and
subject to the supervision of the Company's Board of Directors. However, under
the Company's Investment Advisory Agreement with Marquette, Marquette is
authorized to retain a sub-adviser to assist in furnishing investment advice to
the Company. Marquette is responsible for monitoring compliance by such
sub-adviser with the investment policies and restrictions of the respective
Funds and with such other limitations or directions as the Board of Directors of
the Company may from time to time prescribe. Each investment adviser furnishes,
at its own expense, office facilities, equipment and personnel for servicing the
investments of the respective Funds.
Each Investment Advisory Agreement continues from year to year only if
approved annually (a) by the Board of Directors of the Company or by vote of a
majority of the outstanding voting securities of each Fund and (b) by vote of a
majority of Directors of the Company who are not parties to such Investment
Advisory Agreement or interested persons (as defined in the 1940 Act) of any
such party, cast in person at a meeting of the Board of Directors called for the
purpose of voting on such approval. Each Investment Advisory Agreement may be
terminated by either party on 60 days' notice to the other party and terminates
automatically upon its assignment. Each Investment Advisory Agreement also
provides that amendments to the Agreement may be effected if approved by the
Board of Directors of the Company (including a majority of the Company's
disinterested directors), unless the 1940 Act requires that any such amendment
must be submitted for approval by the shareholders and that all proposed
assignments of such agreement are subject to approval by the Company's Board of
Directors (unless the 1940 Act otherwise requires shareholder approval thereof).
THE SUB-ADVISER
Voyageur Fund Managers, Inc. ("VFM") acts as the sub-adviser to
Intermediate Duration Portfolio and Core Portfolio pursuant to a Sub-Advisory
Agreement with Marquette. Under the Sub-Advisory Agreement, VFM provides
Intermediate Duration Portfolio and Core Portfolio with investment advice and
portfolio management. The Sub-Advisory Agreement requires VFM, among other
things, to report to Marquette or the Board of Directors regularly at such times
and in such detail as Marquette or the Board of Directors may from time to time
request in order to permit Marquette and the Board of Directors to determine the
adherence of the Funds to their investment objectives, policies and
restrictions. The Sub-Advisory Agreement also requires VFM to provide all office
space, personnel and facilities necessary and incident to VFM's performance of
its services under the Sub-Advisory Agreement.
ADMINISTRATIVE SERVICES AGREEMENT
VFM 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 VFM and the Company. Pursuant
to the Administrative Services Agreement, VFM provides each Fund all dividend
disbursing, transfer agency, administrative and accounting services required by
such Fund including, without limitation, the following: (i) the calculation of
net asset value per share (including the pricing of each Fund's portfolio of
securities) at such times and in such manner as is specified in the Fund's
current Prospectus and Statement of Additional Information, (ii) upon the
receipt of funds for the purchase of such Fund's shares or the receipt of
redemption requests with respect to such Fund's shares outstanding, the
calculation of the number of shares to be purchased or redeemed, respectively,
(iii) upon such Fund's distribution of dividends, the calculation of the amount
of such dividends to be received per share, the calculation of the number of
additional shares of such Fund to be received by each shareholder of such Fund
(other than any shareholder who has elected to receive such dividends in cash)
and the mailing of payments with respect to such dividends to shareholders who
have elected to receive such dividends in cash, (iv) the provision of transfer
agency services, (v) the creation and maintenance of such records relating to
the business of such Fund as such Fund may from time to time reasonably request,
(vi) the preparation of tax forms, reports, notices, proxy statements, proxies
and other shareholder communications, and the mailing thereof to shareholders of
such Fund, and (vii) the provision of such other dividend disbursing, transfer
agency, administrative and accounting services as such Fund and VFM may from
time to time agree upon. Pursuant to the Administrative Services Agreement, VFM
also provides such regulatory reporting and compliance related services and
tasks for the Company or any Fund as the Company may reasonably request.
As compensation for these services, each Fund pays VFM a monthly fee
equivalent on an annual basis to .10% of each Fund's average daily net assets.
For purposes of calculating average daily net assets, as such term is used in
the Administrative Services Agreements, each Fund's net assets equal its total
assets minus its total liabilities. Each Fund also reimburses VFM for its
out-of-pocket expenses in connection with VFM's provision of services under such
Fund's Administrative Services Agreement.
A majority of the disinterested directors of the Company specifically
found, in the course of their review of the Administrative Services Agreement,
that such agreement is in the best interests of the Fund and its shareholders,
the services to be performed pursuant to such agreement are services required
for the operation of the Fund, VFM can provide services the nature and quality
of which are at least equal to those provided by others offering the same or
similar services, and the fees for such services are fair and reasonable in
light of the usual and customary charges made by others for services of the same
nature and quality. The Administrative Services Agreement is renewable from year
to year if the Company's directors (including a majority of the Company's
disinterested directors) approve the continuance of the Agreement. The Company
or VFM can terminate the Administrative Services Agreement on 60 days' notice to
the other party. The Administrative Services Agreement also provides that
amendments to the Agreement may be effected if approved by the Board of
Directors of the Company (including a majority of the disinterested directors)
and that all proposed assignments of such Agreement are subject to approval by
the Company's Board of Directors.
EXPENSES OF THE FUNDS
Marquette, Cadre, VFM and the Underwriter reserve the right to voluntarily
waive their fees in whole or part and/or to voluntarily absorb certain other of
the Fund's expenses. Any such waiver or absorption, however, will be in their
sole discretion and may be lifted or reinstated at any time.
All costs and expenses (other than those specifically referred to as being
borne by Marquette, Cadre, VFM or the Underwriter) incurred in the operation of
each Fund are borne by such Fund. These expenses include, among others, fees of
the directors who are not employees of any investment adviser or sub-adviser or
any of their affiliates, expenses of directors' and shareholders' meetings,
including the cost of printing and mailing proxies, expenses of insurance
premiums for fidelity and other coverage, expenses of redemption of shares,
expenses of issue and sale of shares (to the extent not borne by the Underwriter
under its agreement with such Fund), expenses of printing and mailing stock
certificates representing shares of such Fund, association membership dues,
charges of such Fund's custodian, and bookkeeping, auditing and legal expenses.
Each Fund will also pay the fees and bear the expense of registering and
maintaining the registration of such Fund and its shares with the Securities and
Exchange Commission and registering or qualifying its shares under state or
other securities laws and the expense of preparing and mailing prospectuses,
reports and statements to shareholders.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
As the Funds' portfolios are composed exclusively of debt, rather than
equity securities, most of the Funds' portfolio transactions are effected with
dealers without the payment of brokerage commissions, but rather at net prices
which usually include a spread or markup. In effecting such portfolio
transactions on behalf of a Fund, such Fund's investment adviser or sub-adviser
seeks the most favorable net price consistent with the best execution. However,
frequently, such investment adviser or sub-adviser selects a dealer to effect a
particular transaction without contacting all dealers who might be able to
effect such transaction, because of the volatility of the bond market and the
desire of the investment adviser or sub-adviser to accept a particular price for
a security because the price offered by the dealer meets its guidelines for
profit, yield or both. No brokerage commissions are expected to be paid by the
Funds.
Decisions with respect to placement of a Fund's portfolio transactions are
made by such Fund's investment adviser or sub-adviser. The primary consideration
in making these decisions is efficiency in the execution of orders and obtaining
the most favorable net prices for such Fund. When consistent with these
objectives, business may be placed with broker-dealers who furnish investment
research services to the investment adviser or sub-adviser. Such research
services include advice, both directly and in writing, as to the value of
securities; the advisability of investing in, purchasing or selling securities;
and the availability of securities, or purchasers or sellers of securities; as
well as analyses and reports concerning issues, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. This
allows the investment adviser or sub-adviser to supplement its own investment
research activities and enables the investment adviser or sub-adviser to obtain
the views and information of individuals and research staffs of many different
securities firms prior to making investment decisions for a Fund. To the extent
portfolio transactions are effected with broker-dealers who furnish research
services to an investment adviser or sub-adviser, such investment adviser or
sub-adviser receive a benefit, not capable of evaluation in dollar amounts,
without providing any direct monetary benefit to the Fund from these
transactions.
The Funds' investment advisers and sub-adviser have not entered into any
formal or informal agreements with any broker-dealers, nor do they maintain any
"formula" which must be followed in connection with the placement of the Funds'
portfolio transactions in exchange for research services provided the investment
advisers or sub-advisers, except as noted below. However, each investment
adviser and sub-adviser maintains an informal list of broker-dealers, which is
used from time to time as a general guide in the placement of a Fund's business,
in order to encourage certain broker-dealers to provide such investment adviser
or sub-adviser with research services which the investment adviser or
sub-adviser anticipates will be useful to it. Because the list is merely a
general guide, which is to be used only after the primary criterion for the
selection of broker-dealers (discussed above) has been met, substantial
deviations from the list are permissible and may be expected to occur. The
investment advisers and sub-adviser will authorize the Funds to pay an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker-dealer would have charged only if the investment
adviser or sub-adviser determines in good faith that such amount of commission
is reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the investment adviser's or sub-adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion.
The Funds will not effect any brokerage transactions in their portfolio
securities with any broker-dealer affiliated directly or indirectly with an
investment adviser or sub-adviser, unless such transactions, including the
frequency thereof, the receipt of commissions payable in connection therewith
and the selection of the affiliated broker-dealer effecting such transactions
are not unfair or unreasonable to the shareholders of the Funds. In the event
any transactions are executed on an agency basis, the investment adviser or
sub-adviser will authorize the respective Fund to pay an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker-dealer would have charged only if the investment adviser or
sub-adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the investment adviser's or sub-adviser's overall
responsibilities with respect to the Fund or Funds as to which it exercises
investment discretion. If the Funds execute any transactions on an agency basis,
they will generally pay higher than the lowest commission rates available.
In determining the commissions to be paid to a broker-dealer affiliated
with an investment adviser or sub-adviser, it is the policy of the Funds that
such commissions will, in the judgment of the investment adviser or sub-adviser,
subject to review by the Board of Directors, be both (a) at least as favorable
as those which would be charged by other qualified brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time, and (b) at least as favorable as
commissions contemporaneously charged by such affiliated broker-dealers on
comparable transactions for their most favored comparable unaffiliated
customers. While each Fund does not deem it practicable and in its best interest
to solicit competitive bids for commission rates on each transaction,
consideration will regularly be given to posted commission rates as well as to
other information concerning the level of commissions charged on comparable
transactions by other qualified brokers.
Pursuant to conditions set forth in rules of the Securities and Exchange
Commission, the Funds may purchase securities from an underwriting syndicate of
which an affiliated broker-dealer is a member (but not directly from such
affiliated broker-dealer itself). Such conditions relate to the price and amount
of the securities purchased, the commission or spread paid and the quality of
the issuer. The rules further require that such purchases take place in
accordance with procedures adopted and reviewed periodically by the Board of
Directors of the Funds, particularly those directors who are not interested
persons of the Funds.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to the policies set forth in the preceding
paragraphs and such other policies as the Company's directors may determine, the
investment advisers and sub-adviser may consider sales of shares of the Funds as
a factor in the selection of broker-dealers to execute the Funds' securities
transactions.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of Fund shares, which
is equal to the net asset value per share, is summarized in the Prospectus. The
portfolio securities in which the Funds invest fluctuate in value and hence the
net asset value per share of each Fund also fluctuates. The net asset value of
each Fund's shares is determined on each day on which the New York Stock
Exchange is open, provided that the net asset value need not be determined on
days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The New York Stock Exchange is not open for business on the
following holidays (or on the nearest Monday or Friday if the holiday falls on a
weekend): New Year's Day, President's Day, Good Friday, Memorial Day, July 4th,
Labor Day, Thanksgiving and Christmas.
TAXES
GENERAL INFORMATION
To qualify under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") for tax treatment as a regulated investment company, each
Fund must, among other things: (a) distribute to its shareholders at least 90%
of its investment company taxable income (as that term is defined in the Code
determined without regard to the deduction for dividends paid); (b) derive less
than 30% of its annual gross income from the sale or other disposition of stock,
securities, options, futures, or forward contracts held for less than three
months; and (c) diversify its holdings so that, at the end of each fiscal
quarter of the Fund, (i) at least 50% of the market value of the Fund's assets
is represented by cash, cash items, U.S. Government securities and securities of
other regulated investment companies, and other securities, with these other
securities limited, with respect to any one issuer, to an amount no greater than
5% of the Fund's total assets and no greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the market value of the
Fund's total assets is invested in the securities of any one issuer (other than
U.S. Government securities or securities of other regulated investment
companies).
Each Fund will be subject to a nondeductible excise tax equal to 4% of the
excess, if any, of the taxable amount required to be distributed for each
calendar year over the amount actually distributed. In order to avoid this
excise tax, each Fund must declare dividends by the end of the calendar year
representing 98% of the Fund's ordinary income for the calendar year and 98% of
its capital gain net income (both long-term and short-term gains) for the
12-month period ending on October 31 of such year. For purposes of this
requirement, any income with respect to which a Fund has paid corporate income
tax is deemed to have been distributed. Each Fund intends to make sufficient
distributions each year to avoid the payment of the excise tax.
When shares of a Fund are sold or otherwise disposed of, the Fund
shareholder will realize a capital gain or loss equal to the difference between
the purchase price and the sale price of the shares disposed of, if, as is
usually the case, the Fund shares are a capital asset in the hands of the Fund
shareholder. In addition, pursuant to a special provision in the Code, if Fund
shares with respect to which a long-term capital gain distribution has been made
are held for six months or less, any loss on the sale or other disposition of
such shares will be a long-term capital loss to the extent of such long-term
capital gain distribution. Certain deductions otherwise allowable to financial
institutions and property and casualty insurance companies will be eliminated or
reduced by reason of the receipt of certain exempt-interest dividends.
Any loss on the sale or exchange of shares of a Fund generally will be
disallowed to the extent that a shareholder acquires or contracts to acquire
shares of the same Fund within 30 days before or after such sale or exchange.
Pursuant to the Code, distributions of net investment income by a Fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will generally be subject to U.S.
withholding tax (at a rate of 30% or lower treaty rate). Withholding will not
apply if a dividend paid by the Fund to a foreign shareholder is "effectively
connected" with a U.S. trade or business of such shareholder, in which case the
reporting and withholding requirements applicable to U.S. citizens or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year. Each Fund will report
annually to its shareholders the amount of any withholding. It is expected that
dividends paid by the Funds will not be eligible for the 70% deduction for
dividends received by corporations because the Funds' income will not consist of
dividends paid by U.S. corporations.
The foregoing relates only to federal income taxation and is a general
summary of the federal tax law in effect as of the date of this Statement of
Additional Information.
PERFORMANCE COMPARISONS
Advertisements and other sales literature for the Funds may refer to
"yield," "average annual total return," "cumulative total return" and "current
distribution rate." These amounts are calculated as described below. No
performance information is provided for the Funds because none of the Funds had
commenced operations as of the date of this Statement of Additional Information.
YIELD
Yield is computed by dividing the net investment income per share deemed
earned during the computation period by the maximum offering price per share on
the last day of the period, according to the following formula:
6
SEC YIELD = 2(((a-b) + 1) -1)
---
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of
the period.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
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 gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
CUMULATIVE TOTAL RETURN
Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CTR = ERV - P
------- 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.
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged as expenses to all shareholder accounts.
DISTRIBUTION RATE
A Fund's current distribution rate as of a specified date is calculated by
determining the amount of distributions that would have been paid over the
twelve-month period ending on such date to the holder of one hypothetical Fund
share purchased at the beginning of such period, and dividing such amount by the
current offering price per share.
PERFORMANCE COMPARISONS
Comparative performance information may be used from time to time in
advertising each Fund's shares, including data from Lipper Analytical Services,
Inc., Morningstar, Inc. and other entities or organizations which track the
performance of investment companies. Each Fund's performance also may be
compared to the performance of its Comparison Index, if any, as described in the
Prospectus, and to the performance of the following additional unmanaged
indices: Unmanaged indices generally do not reflect deductions for
administrative and management costs and expenses.
REDEMPTIONS
Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Funds of securities owned by them
is not reasonably practicable, or it is not reasonably practicable for the Funds
fairly to determine the value of their net assets, or (d) during any other
period when the Securities and Exchange Commission, by order, so permits,
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
A signature guarantee is required if a redemption: (1) exceeds $50,000
(unless it is being wired to a pre-authorized bank account, in which case a
guarantee is not required), (2) is to be paid to someone other than the
registered shareholder or (3) is to be mailed to an address other than the
address of record or wired to an account other than the pre-authorized bank or
brokerage account. On joint account redemptions, each signature must be
guaranteed. A signature guarantee may not be provided by a notary public. Please
contact the Underwriter for instructions as to what institutions constitute
eligible signature guarantors. The Underwriter may waive certain of these
redemption requirements at its own risk, but also reserves the right to require
signature guarantees on all redemptions, in contexts perceived by the
Underwriter to subject a Fund to an unusual degree of risk.
ADDITIONAL INFORMATION
COUNSEL; INDEPENDENT AUDITORS
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402,
serves as general counsel for the Funds.
KPMG Peat Marwick LLP, 4200 Norwest Center, Minneapolis, Minnesota 55402,
serves as the Funds' independent auditors.
SHAREHOLDER MEETINGS
The Company is not required under Minnesota law or under the Company's
Articles of Incorporation to hold annual or periodically scheduled regular
meetings of shareholders. Regular and special shareholder meetings are held only
at such times and with such frequency as required by law. Minnesota law and the
Company's Articles of Incorporation provide for the Board of Directors to
convene shareholder meetings when it deems appropriate. Additionally, the 1940
Act requires shareholder votes for all amendments to fundamental investment
policies and restrictions and for all investment advisory contracts and
amendments thereto.
LIMITATION OF DIRECTOR LIABILITY
Under Minnesota law, each director of the Company owes certain fiduciary
duties to each Fund and to its shareholders. Minnesota law provides that a
director "shall discharge the duties of the position of director in good faith,
in a manner the director reasonably believes to be in the best interest of the
corporation, and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances." Fiduciary duties of a director of a
Minnesota corporation include, therefore, both a duty of "loyalty" (to act in
good faith and act in a manner reasonably believed to be in the best interests
of the corporation) and a duty of "care" (to act with the care an ordinarily
prudent person in a like position would exercise under similar circumstances).
Minnesota corporations are authorized to eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of the fiduciary duty of "care". Minnesota law does not,
however, permit a corporation to eliminate or limit the liability of directors
(i) for any breach of the directors' duty of "loyalty" to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for authorizing a
dividend, stock repurchase or redemption or other distribution in violation of
Minnesota law or for violation of certain provisions of Minnesota securities
law, or (iv) for any transaction from which the directors derived an improper
personal benefit. The Articles of Incorporation of each of the Funds limits the
liability of such Funds' directors to the fullest extent permitted by Minnesota
statutes, except to the extent that such liability cannot be limited as provided
in the 1940 Act (which Act prohibits any provisions which purport to limit the
liability of directors arising from such directors' willful misfeasance, bath
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their role as directors).
Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Minnesota law, further, does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers). Minnesota law does not permit elimination or limitation of
the availability of equitable relief, such as injunctive or rescissionary
relief. Further, Minnesota law does not permit elimination or limitation of a
director's liability under the 1933 Act or the Securities Exchange Act of 1934,
and it is uncertain whether and to what extent the elimination of monetary
liability would extend to violations of duties imposed on directors by the 1940
Act and the rules and regulations adopted thereunder.
ORGANIZATION AND CAPITALIZATION OF THE FUNDS
Each Fund has a fiscal year end of October 31.
As described in the text of the Prospectus following the caption "General
Information," shares of the Funds are entitled to one vote per share (with
proportional voting for fractional shares) on such matters as shareholders are
entitled to vote. There will normally be no meetings of shareholders for the
purpose of electing directors, except insofar as elections are required under
the 1940 Act in the event that (i less than a majority of the directors have
been elected by shareholders, or (ii) if, as a result of a vacancy, less than
two-thirds of the directors have been elected by the shareholders, the vacancy
will be filled only by a vote of the shareholders. In addition, the directors
may be removed from office by a written consent signed by the holders of
two-thirds of the outstanding shares of the Funds and filed with the Funds'
custodian or by a vote of the holders of two-thirds of the outstanding shares of
the Funds at a meeting duly called for the purpose, which meeting shall be held
upon the written request of the holders of not less than 10% of the outstanding
shares. Upon written request by ten or more shareholders, who have been such for
at least six months, and who in the aggregate hold shares having a net asset
value of at least $25,000 or constituting 1% of the outstanding shares, stating
that such shareholders wish to communicate with the other shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a director, the Funds have undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). Except as set forth above, each director shall
continue to hold office and may appoint a successor.
The shares of the Funds constitute separate series of the parent entity
Voyageur Mutual Funds, Inc. (the "Company"), a Minnesota corporation, which
currently offers its shares in four series. Voyageur U.S. Government Securities
Fund currently is the only other series of the Company. All shares of each
series are non assessable and fully transferable when issued and paid for in
accordance with the terms thereof and possess no cumulative voting, preemptive
or conversion rights. The Company's Board is empowered to issue other series of
common stock or common shares of beneficial interest without shareholder
approval.
Each share of a series has one vote irrespective of the relative net asset
value of the shares. On some issues, such as the election of Board members, all
shares of the corporation vote together as one series of such corporation. On an
issue affecting only a particular series, the shares of the affected series vote
as a separate series. One such example would be a fundamental investment
restriction pertaining to only one series. Another example is the voting on the
Investment Advisory Agreements. Approval by the shareholders of a particular
series is necessary to make such agreement effective as to that series.
The assets received by the corporation for the issue or sale of shares of
each series, and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are allocated to such series and constitute the
underlying assets of such series. The underlying assets of each series are
required to be segregated on the books of account, and are to be charged with
the expenses in respect to such series and with a share of the general expenses
of the corporation or trust. Any general expenses of the corporation not readily
identifiable as belonging to a particular series shall be allocated among the
series, based upon the relative net assets of the series at the time such
expenses were accrued.
PART C
VOYAGEUR FUNDS, INC.
VFI SHORT DURATION PORTFOLIO
VFI INTERMEDIATE DURATION PORTFOLIO
VFI CORE PORTFOLIO
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
22, filed as an Exhibit to Post-Effective Amendment No. 17 to
Form N-1A on October 31, 1995, File Nos. 33-16270 and 811-5267,
and incorporated herein by reference.
1.2 Certification of Designation of Series B, C and D, filed as an
Exhibit hereto.
1.3 Articles of Correction, dated July 27, 1994, to the Amended and
Restated Articles of Incorporation, filed as an Exhibit to
Post-Effective Amendment No. 17 to Form N-1A on October 31, 1995,
File Nos. 33-16270 and 811-5267, and incorporated herein by
reference.
2 Bylaws, as amended October 24, 1995, filed as an Exhibit to
Post-Effective Amendment No. 18 to Form N-1A on January 3, 1996,
File Nos. 33-16270 and 811-5267 and incorporated herein by
reference.
3 Not applicable.
4 Specimen copy of share certificate, filed as an Exhibit to
Post-Effective Amendment No. 18 to Form N-1A on January 3, 1996,
File Nos. 33-16270 and 811-5267 and incorporated herein by
reference.
5.1 Investment Advisory Agreement with Marquette, filed as an Exhibit
hereto.
5.2 Form of Investment Advisory Agreement with Cadre, filed as an
Exhibit hereto.
5.3 Investment Sub-Advisory Agreement with Voyageur Funds Managers,
Inc., filed as an Exhibit hereto.
6 Distribution Agreement, filed as an Exhibit hereto.
7 Not applicable.
8 Custodian Agreement, filed as an Exhibit hereto.
9.1 Administrative Services Agreement, filed as an Exhibit
hereto.
9.2 Service Plan, filed as an Exhibit hereto.
10 Opinion and Consent of Dorsey & Whitney, filed as an Exhibit
hereto.
11 Not applicable.
12 Not applicable.
13 Letter of Investment Intent, filed as an Exhibit hereto.
14 Not applicable.
15 Plan of Distribution. Not applicable.
16 Schedule for Computation of Performance Data. Not applicable.
17.1 Power of Attorney, filed as an Exhibit to Post-Effective
Amendment No. 17 to Form N-1A on October 31, 1995, File Nos.
33-16270 and 811-5267, and incorporated herein by reference.
17.2 Financial Data Schedule to be filed electronically as Exhibit 27
pursuant to Rule 401 of Regulation S-T. Not applicable.
18 Not Applicable.
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 Florida Insured Tax Free Fund
Voyageur California Insured Tax Free Fund
Voyageur Kansas Tax Free Fund
Voyageur Missouri Insured Tax Free Fund
Voyageur New Mexico Tax Free Fund
Voyageur Oregon Insured Tax Free Fund
Voyageur Utah Tax Free Fund
Voyageur Washington Insured Tax Free Fund
Voyageur Florida Tax Free Fund
Voyageur Investment Trust II
Voyageur Florida Limited Term Tax Free Fund
Voyageur Tax Free Funds, Inc.
Voyageur Minnesota Tax Free Fund
Voyageur North Dakota Tax Free Fund
Voyageur Mutual Funds, Inc.
Voyageur Iowa Tax Free Fund
Voyageur Wisconsin Tax Free Fund
Voyageur Idaho Tax Free Fund
Voyageur Arizona Tax Free Fund
Voyageur California Tax Free Fund
Voyageur National Tax Free Fund
Voyageur Mutual Funds II, Inc.
Voyageur Colorado Tax Free Fund
Voyageur Mutual Funds III , Inc.
Voyageur Growth Stock Fund
Voyageur International Equity Fund
Voyageur Aggressive Growth Fund
Voyageur Growth and Income Fund
VAM Institutional Funds, Inc.
VAM Global Fixed Income Fund
VAM Short Duration Government Agency Fund
VAM Intermediate Duration Government Agency Fund
VAM Government Mortgage Fund
VAM Short Duration Total Return Fund
VAM Intermediate Duration Total Return Fund
VAM Intermediate Duration Municipal Fund
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
No information is presented for the Funds because they have not yet
commenced operations.
ITEM 27. INDEMNIFICATION
The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify such persons, for such expenses and liabilities, in
such manner, under such circumstances, and to such extent as permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereinafter amended, and any rules, regulations or releases promulgated
thereunder.
The Registrant may indemnify its officers and directors and other "persons"
acting in an "official capacity" (as such terms are defined in Section 302A.521)
pursuant to a determination by the board of directors or shareholders of the
Registrant as set forth in Section 302A.521, by special legal counsel selected
by the board or a committee thereof for the purpose of making such a
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of the Registrant, then such director generally
may not be counted for the purpose of determining either the presence of a
quorum or such director's eligibility to be indemnified.
In any case, indemnification is proper only if the eligibility determining
body decides that the person seeking indemnification has (a) not received
indemnification for the same conduct from any other party or organization; (b)
acted in good faith; (c) received no improper personal benefit; (d) in the case
of criminal proceedings, had no reasonable cause to believe the conduct was
unlawful; (e)reasonably believed that the conduct was in the best interest of
the Registrant, or in certain contexts, was not opposed to the best interest of
the Registrant; and (f) had not otherwise engaged in conduct which precludes
indemnification under either Minnesota or Federal law (including, but not
limited to, conduct constituting willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties as set forth in Section 17(h) and
(i) of the Investment Company Act of 1940).
If a person is made or threatened to be made a party to a proceeding, the
person is entitled, upon written request to the Registrant, to payment or
reimbursement by the Registrant of reasonable expenses, including attorneys'
fees and disbursements, incurred by the person in advance of the final
disposition of the proceeding, (a) upon receipt by the Registrant of a written
affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant, if it is ultimately determined that the criteria for indemnification
have not been satisfied, and (b) after a determination that the facts then known
to those making the determination would not preclude indemnification under
Section 302A.521. The written undertaking required by clause (a) is an unlimited
general obligation of the person making it, but need not be secured and shall be
accepted without reference to financial ability to make the repayment.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless, in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant undertakes to comply with the indemnification requirements
of Investment Company Release 7221 (June 9, 1972) and Investment Company Release
11330 (September 2, 1980).
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The name and principal occupation(s) during the past two fiscal years of
each director and executive officer of Marquette Trust Company, Adviser to
Voyageur Financial Institution Intermediate Duration Portfolio and Voyageur
Financial Institution Core Portfolio, are set forth below. The business address
of each is 13100 Wayzata Boulevard, Suite 100, Minneapolis, Minnesota 55480.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH ADVISER PRINCIPAL OCCUPATION(S)
- ---------------- --------------------- -----------------------
<S> <C> <C>
Albert J. Colianni, Jr. Director Chairman and Chief Executive Officer of
Marquette Bank, N.A. since January, 1995;
Executive Vice President and Chief Operating
Officer of Marquette Bancshares, Inc. Since
January 1993.
Thomas H. Jenkins Director President of Marquette Capital Bank since
June 1993; Senior Vice President of Marquette
Bancshares, Inc. since January, 1993.
Robert B. Bean Senior Vice President Senior Vice President for Institutional Trust
Services of Marquette Trust
Company since January 1, 1995;
previously Senior Vice President for
Institution Trust Services of
Marquette Bank Rochester from
January 1, 1994 to December 31, 1994.
Craig W. Huntley President and President and Chairman of the Board
Chairman of the Board of Marquette Trust Company since
April 1, 1994; previously Senior Vice
President, Sales and Marketing,
Commerce Bank of Kansas City
from February 1990 to April 1994.
James R. Bullard Director President of Marquette Bank N.A.,
Hutchinson office, since January 1,
1995; previously President of Marquette
Bank, Hutchinson from January 1, 1988
to January 1, 1995.
Jai L. Kim Director Vice President and Corporate Counsel Marquette
a/k/a Jay L. Kim Bancshares, Inc. since August, 1993.
</TABLE>
The name and principal occupation(s) during the past two fiscal years of
each director and executive officer of Cadre, Adviser to Voyageur Financial
Institution Short Duration Portfolio, are set forth below. The business address
of each is 905 Marconi Avenue, Ronkonkoma, New York 11779.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH ADVISER PRINCIPAL OCCUPATION(S)
- ---------------- --------------------- -----------------------
<S> <C> <C>
William T. Sullivan, Jr. Chairman of the Board Director and Chairman of the Board
of Cadre Securities, Inc. since 1986.
Francis X. Sullivan Director and President Director of Cadre Securities, Inc.
since 1986.
Joan M. Restivo Director and Executive Director of Cadre Securities, Inc.
Vice President since 1986.
Dr. Richard I. Bauer Director and Executive Director and President of Cadre
Vice President Securities, Inc. since 1986 and 1984
respectively.
Eileen M. McElroy Senior Vice President None
Beth A. Smith Director and Senior Vice Director and Senior Vice President
President of Cadre Securities Inc. since 1995
and 1993, respectively.
Ralph T. Cianchetti Vice President None
George J. Dittenhoefter Vice President None
William M. Sullivan Vice President None
Timothy P. Sullivan Vice President None
D. Joon Yoo Vice President Vice President of Cadre Consulting
Services, Inc. since 1994; previously,
Portfolio Manager for Aetna Life and
Casualty from 1981 to 1994.
</TABLE>
The name and principal occupations(s) during the past two fiscal years of
each director and executive officer of the Sub-Adviser, Voyageur Fund Managers,
Inc., to Voyageur Financial Institution Intermediate Duration Portfolio and
Voyageur Financial Institution Core Portfolio, 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, Inc.
John G. Taft President and Director See biographical information in Part B of the
Registration Statement.
Jane M. Wyatt Director and Chief See biographical information in Part B of the
Investment Officer Registration Statement.
Edward J. Kohler Director and Executive Director and Executive Vice President of the Adviser
Vice President and Director of the Underwriter since 1995;
previously, President and Director of Piper Capital
Management Incorporated from 1985 to 1995.
Frank C. Tonnemaker Director and Executive Director of Voyageur and the Underwriter
Vice President since 1993; Executive Vice President of
Voyageur since 1994; Vice President of
Voyageur from 1990 to 1994.
Thomas J. Abood General Counsel See biographical information in Part B of the
Registration Statement.
Kenneth R. Larsen Treasurer See biographical information in Part B of the
Registration Statement.
Steven B. Johansen Secretary and Chief Secretary of DFG, the Underwriter and
Financial Officer Dougherty Dawkins, Incorporated ("DDI");
Chief Financial Officer of DFG, the
Underwriter and DDI since 1995; previously,
Treasurer of DFG and DDI from 1990 to 1995
Steven P. Eldredge Vice President See biographical information in Part B of the
Registration Statement.
</TABLE>
Information on the business of Registrant's 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 and Underwriter" 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. The executive officers 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
Steven B. Johansen Secretary & CFO None
Kenneth R. Larsen Treasurer Treasurer
Thomas J. Abood General Counsel Secretary
Jane M. Wyatt Executive Vice President Executive Vice President
John G. Taft Executive Vice President President
</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 Registrant is Marquette Trust Company, 13100 Wayzata
Boulevard, Suite 100 , Minneapolis, Minnesota 55408. The dividend disbursing,
administrative and accounting services agent of Registrant is Voyageur Fund
Managers, Inc. The address of Voyageur Fund Managers, Inc. and the Registrant is
90 South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the commencement of operations of each respective series.
(c) Each recipient of a prospectus of any series of the Registrant may
request the latest Annual Report of such series, and such Annual
Report will be furnished by the Registrant without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis and State of Minnesota on the 20th
day of March, 1996.
VOYAGEUR FUNDS, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/John G. Taft
- ------------------------------ President (Principal March /s/20, 1996
John G. Taft Executive Officer)
/s/Kenneth R. Larsen
- ------------------------------ Treasurer (Principal Financial March /s/20, 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 March /s/20, 1996
------------------------------
Thomas J. Abood
(Pursuant to Powers of Attorney dated January 24, 1995)
</TABLE>
CERTIFICATE OF DESIGNATION
OF
SERIES B, C AND D COMMON SHARES
OF
VOYAGEUR FUNDS, INC.
The undersigned duly elected Secretary of Voyageur Funds, Inc., a Minnesota
corporation (the "Corporation"), hereby certifies that the following is a true,
complete and correct copy of resolutions duly adopted by a majority of the
directors of the Board of Directors of the Corporation on October 24, 1995:
WHEREAS, the total authorized number of shares of the Corporation is
ten trillion, all of which shares are common shares, par value $.01 per
share, as set forth in the Corporation's Amended and Restated Articles of
Incorporation (the "Articles");
WHEREAS, ten billion shares have been designated in the Articles as
Series A Common Shares; and
WHEREAS, the Articles set forth that the balance of nine trillion,
nine hundred ninety billion shares may be issued in such series and classes
and with such designations, preferences and relative, participating,
optional or other special rights, or qualifications, limitations or
restrictions thereof, as shall be stated or expressed in a resolution or
resolutions providing for the issue of any series or class of common shares
as may be adopted from time to time by the Board of Directors of the
Corporation.
NOW, THEREFORE, BE IT RESOLVED, that ten billion of the remaining
authorized but unissued common shares of the Corporation are hereby
designated as Series B Common Shares, ten billion of the remaining
authorized but unissued common shares of the Corporation are hereby
designated as Series C Common Shares, and ten billion of the remaining
authorized but unissued common shares of the Corporation are hereby
designated as Series D Common Shares; and Series B through Series D shall
each represent a separate and distinct portion of the Corporation's assets
which shall take the form of a separate portfolio of investment securities,
cash and other assets.
FURTHER RESOLVED, that the Common Shares designated by these
resolutions shall have the preferences and relative, participating,
optional or other special rights, and qualifications, limitations and
restrictions thereof, set forth in the Articles.
FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed to file with the office of the Secretary of State
of Minnesota a Certificate of Designation effectuating these resolutions.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation on behalf of the Corporation this /ss/8th day of /ss/March, 1996.
/s/Thomas J. Abood
------------------------------
Thomas J. Abood, Secretary
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This AGREEMENT, made as of this /s/20th day of /s/March, 1996, by and
between Voyageur Funds, Inc., a Minnesota corporation (the "Company"), and
Marquette Trust Company, a trust company organized under the laws of the State
of Minnesota (the "Adviser").
1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES. The Company hereby engages
the Adviser, and the Adviser hereby agrees to act as investment adviser for, and
to manage the affairs, business and the investment of the assets of the Voyageur
Financial Institutions ("VFI") Intermediate Duration Portfolio and the VFI Core
Portfolio series of the Company (each a "Fund" and, collectively, the "Funds").
The investment of the assets of each Fund shall at all times be subject to
the applicable provisions of the Articles of Incorporation and Bylaws of the
Company and the Registration Statement on Form N1-A of the Funds and any
representations contained in the Prospectus and Statement of Additional
Information of the Funds and shall conform to the policies and purposes of each
Fund as set forth in such Registration Statement, Prospectus and Statement of
Additional Information and (a) as interpreted from time to time by the Board of
Directors of the Company and (b) as may be amended or limited from time to time
by such Board of Directors and/or the shareholders of each Fund as permitted by
the Investment Company Act of 1940, as amended. Within the framework of the
investment policies of each Fund, and subject to such other limitations and
directions as the Board of Directors may from time to time prescribe, the
Adviser shall have the sole and exclusive responsibility for the management of
each Fund's assets and the making and execution of all investment decisions for
each Fund, provided that the Adviser shall be authorized to retain a sub-adviser
to assist the Adviser in furnishing investment advice to each Fund, and provided
further that the Adviser shall be responsible for monitoring compliance by the
sub-adviser with the investment policies and restrictions of each Fund and with
such other limitations or directions as the Board of Directors of the Company
may from time to time prescribe. The Adviser shall report to the Board of
Directors of the Company regularly at such times and in such detail as the Board
may from time to time determine to be appropriate, in order to permit the Board
to determine the adherence of the Adviser to the investment policies of each
Fund.
The Adviser shall, at its own expense, furnish the Company with suitable
office space, and all necessary office facilities, equipment and personnel for
servicing the investments of the Funds. The Adviser shall arrange, if requested
by the Company, for officers, employees or other Affiliated Persons (as defined
in Section 2(a)(3) of the Investment Company Act of 1940, as amended and the
rules, regulations and releases relating thereto) of the Adviser to serve
without compensation from the Company as directors, officers or employees of the
Company if duly elected to such positions by Fund shareholders or directors of
the Company.
The Adviser hereby acknowledges that all records necessary in the operation
of each Fund, including records pertaining to its shareholders and investments,
are the property of the Company, and in the event that a transfer of management
or investment advisory services to someone other than the Adviser should ever
occur, the Adviser will promptly, and at its own cost, take all steps necessary
to segregate such records and deliver them to the Company.
2. COMPENSATION FOR SERVICES. In payment for all services, facilities,
equipment and personnel, and for other costs of the Adviser hereunder, the
Company shall pay to the Adviser, from the assets of the respective Fund, a
monthly investment advisory fee equivalent on an annual basis to .20% of the
average daily net assets of each Fund (the "Basic Fee"). The Basic Fee shall be
subject to adjustment based on a comparison of the respective Fund's investment
performance for the applicable performance period to the investment records of a
comparison index (individually a "Comparison Index" and, collectively, the
"Comparison Indexes"), PROVIDED, HOWEVER, that the Basic Fee shall not be
subject to any performance adjustment for the first 12 full calendar months
following commencement of a Fund's operations. Following the expiration of such
period for a Fund, the Basic Fee for such Fund shall be subject to a performance
adjustment. For purposes of calculating such performance adjustment, the
applicable performance period shall be a rolling 12-month period comprised of
the most recent calendar month and the eleven immediately preceding calendar
months. The Basic Fee, plus or minus the performance adjustment, shall be
calculated and paid to the Adviser monthly. For each Fund, no change is made to
the Basic Fee to the extent the Fund's performance falls within _.05% of the
performance of the Fund's Comparison Index during the applicable performance
period. If a Fund's performance exceeds that of its Comparison Index by .06% or
more, the Basic Fee will be increased by the product of .002% and the number of
basis points by which the Fund's performance has exceeded that of its Comparison
Index, up to a maximum increase of .15% (on an annualized basis) for performance
which exceeds the Comparison Index by .75% or more. Corresponding decreases will
be made to the Basic Fee to the extent the Fund's performance falls below that
of its Comparison Index by more than .05%, up to a maximum decrease of .15% for
performance which falls .75% or more below that of the Comparison Index. The
Comparison Index for VFI Intermediate Duration Portfolio will be the Lehman
Brothers Mutual Fund (1-5 year) U.S. Government Index. The Comparison Index for
VFI Core Portfolio will be the Lehman Brothers Mutual Fund Government Mortgage
Index.
The following table sets forth examples of resulting increases or decreases
to the Basic Fee on an annualized basis given various performance results:
ADJUSTMENT
PERFORMANCE OF FUND RELATIVE TO BASIC FEE
TO COMPARISON INDEXES (ANNUALIZED)
--------------------- ------------
+.75 percentage +.15%
points or more
+.50 +.10
+.25 +.05
+.05 0
0 0
-.05 0
-.25 -.05
-.50 -.10
-.75 percentage -.15
points or more
In comparing the investment performance of a Fund to the investment record
of its Comparison Index, dividends and other distributions of the Fund and
dividends and other distributions made with respect to component securities of
the Comparison Index during the performance period will be treated as having
been reinvested. The investment performance of the Fund will be calculated based
on the total return of the Fund for the applicable period, which consists of the
total net asset value of the Fund at the end of the applicable period, including
reinvestment of dividends and distributions, less the net asset value of the
Fund at the commencement of the applicable period divided by the net asset value
of the Fund at the commencement of the applicable period. Fractions of a
percentage point are recorded to the nearest whole point (to the higher whole
point if exactly one-half).
For purposes of the calculation of such fee, "average daily net assets" for
a particular period shall be determined on the basis of a Fund's net assets as
determined as of the close of each business day of the month pursuant to the
currently effective prospectus of such Fund. Such fee shall be payable on the
fifth day of each calendar month for services performed hereunder during the
preceding month. If a Fund commences operations after the beginning of a month
or this agreement terminates prior to the end of a month, the fee for such Fund
shall be pro-rated according to the proportion which such portion of the month
bears to the full month.
3. ALLOCATION OF EXPENSES.
(a) In addition to the fee described in Section 2 hereof, each Fund shall
pay all its costs and expenses which are not assumed by the Adviser. These Fund
expenses include, by way of example, but not by way of limitation, fees of the
directors who are not employees of the investment adviser or subadviser of any
series of the Company or of any affiliate of any such investment adviser or
subadviser, 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 Voyageur Fund Distributors,
Inc. (the "Underwriter") under its agreement with such Fund), expenses of
printing and mailing stock certificates representing shares of such Fund,
association membership dues, charges of such Fund's custodian, and bookkeeping,
auditing and legal expenses. Each Fund will also pay the fees and bear the
expense of registering and maintaining the registration of such Fund and its
shares with the Securities and Exchange Commission and registering or qualifying
its shares under state or other securities laws and the expense of preparing and
mailing prospectuses, reports and statements to shareholders.
(b) The Underwriter shall bear all advertising and promotional expenses in
connection with the distribution of each Fund's shares, including paying for
prospectuses for new shareholders, except that a Fund may use its assets to
finance costs incurred in connection with the distribution of its shares except
pursuant to a Plan of Distribution adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (as amended, the "Act").
4. LIMIT ON EXPENSES. If the total expenses of a Fund for any fiscal year
(including the fees payable to the Adviser but excluding interest, taxes,
brokerage commissions or other costs of acquiring or disposing of any of such
Fund's portfolio securities, distribution fees, litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary course of
such Fund's business, all to the extent permitted by applicable state law and
regulation) exceed any expense limitation imposed by applicable state law, the
Adviser shall reimburse such Fund for such excess in the manner and to the
extent required by applicable state law; provided, however, that at no time
shall the Adviser be required to make reimbursements for any fiscal period in
excess of fees received pursuant to Section 2 hereof for that same period.
5. FREEDOM TO DEAL WITH THIRD PARTIES. The Adviser shall be free to render
services to others similar to those rendered under this Agreement or of a
different nature except as such services may conflict with the services to be
rendered or the duties to be assumed hereunder.
6. REPORTS TO DIRECTORS OF THE FUND. Appropriate officers of the Adviser
shall provide the directors of the Company with such information as is required
by any plan of distribution adopted by the Company on behalf of any Fund
pursuant to Rule 12b-1 under the Act.
7. EFFECTIVE DATE, DURATION AND TERMINATION OF Agreement. This Agreement
shall become effective with respect to each Fund on the effective date of the
post-effective amendment to the Company's Registration Statement on Form N1-A
first registering shares of the Funds. Wherever referred to in this Agreement,
the vote or approval of the holders of a majority of the outstanding shares of a
Fund shall mean the lesser of (i) the vote of 67% or more of the voting shares
of such Fund present at a regular or special meeting of shareholders duly
called, if more than 50% of the Fund's outstanding voting shares are present or
represented by proxy, or (ii) the vote of more than 50% of the outstanding
voting shares of such Fund.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect with respect to each Fund 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 (i) by the Board of
Directors of the Company or by the vote of the holders of a majority of the
outstanding voting securities of the applicable Fund, and (ii) by the vote of a
majority of the directors of the Company who are not parties to this Agreement
or "interested persons", as defined in the Act, of 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 with respect to either Fund at any time,
without the payment of any penalty, by the vote of the Board of Directors of the
Company or by the vote of the holders of a majority of the outstanding shares of
the respective Fund, or by the Adviser, upon sixty (60) days written notice to
the other party. Any such termination may be made effective with respect to both
the investment advisory and management services provided for in this Agreement
or with respect to either of such kinds of services. This Agreement shall
automatically terminate in the event of its assignment as defined in the
Investment Company Act of 1940 and the rules thereunder, provided, however, that
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 with respect to a Fund upon completion of the
dissolution, liquidation and winding up of such Fund.
8. LIMITATION OF LIABILITY. The Adviser will not be liable for any error of
judgment or mistake of law or for any loss suffered by any Fund or its
shareholders in connection with the performance of its duties under this
Agreement, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its duties under this Agreement.
9. AMENDMENTS TO AGREEMENT. No material amendment to this Agreement shall
be effective until approved by the vote of: (i) the majority of the directors of
the Company who are not parties to this Agreement or "interested persons" (as
defined in the Act) of the Adviser or of the Company cast in person at a meeting
called for the purpose of voting on such approval; and (ii) the holders of a
majority of the outstanding shares of the applicable Fund.
10. NOTICES. Any notice under this Agreement shall be in writing,
addressed, delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and the Adviser have caused this Agreement
to be executed by their duly authorized officers as of the day and year
indicated below.
VOYAGEUR FUNDS, INC.
Date: /s/03/20/96 By: /s/ John G. Taft
-------------------------
John G. Taft
Title: /s/ President
--------------------
President
MARQUETTE TRUST COMPANY
Date: /s/03/20/96 By /s/ Craig W. Huntley
--------------------------
Craig W. Huntley
Title: /s/ President
--------------------
President
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This AGREEMENT, made as of this /s/20th day of /s/March, 1996, by and
between Voyageur Funds, Inc., a Minnesota corporation (the "Company"), and Cadre
Consulting Services, Inc., a Sub-Chapter "S" corporation organized under the
laws of the State of New York (the "Adviser").
1. INVESTMENT ADVISORY AND MANAGEMENT SERVICES. The Company hereby engages
the Adviser, and the Adviser hereby agrees to act as investment adviser for, and
to manage the affairs, business and the investment of the assets of the Voyageur
Financial Institutions ("VFI") Short Duration Portfolio series of the Company
(the "Fund").
The investment of the assets of the Fund shall at all times be subject to
the applicable provisions of the Articles of Incorporation and Bylaws of the
Company and the Registration Statement on Form N1-A of the Fund and any
representations contained in the Prospectus and Statement of Additional
Information of the Fund and shall conform to the policies and purposes of the
Fund as set forth in such Registration Statement, Prospectus and Statement of
Additional Information and (a) as interpreted from time to time by the Board of
Directors of the Company and (b) as may be amended or limited from time to time
by such Board of Directors and/or the shareholders of the Fund as permitted by
the Investment Company Act of 1940, as amended. Within the framework of the
investment policies of the Fund, and subject to such other limitations and
directions as the Board of Directors may from time to time prescribe, the
Adviser shall have the sole and exclusive responsibility for the management of
the Fund's assets and the making and execution of all investment decisions for
the Fund. The Adviser shall report to the Board of Directors of the Company
regularly at such times and in such detail as the Board may from time to time
determine to be appropriate, in order to permit the Board to determine the
adherence of the Adviser to the investment policies of the Fund.
The Adviser shall, at its own expense, furnish the Company with suitable
office space, and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund. The Adviser shall arrange, if requested
by the Company, for officers, employees or other Affiliated Persons (as defined
in Section 2(a)(3) of the Investment Company Act of 1940, as amended and the
rules, regulations and releases relating thereto) of the Adviser to serve
without compensation from the Company as directors, officers or employees of the
Company if duly elected to such positions by Fund shareholders or directors of
the Company.
The Adviser hereby acknowledges that all records necessary in the operation
of the Fund, including records pertaining to its shareholders and investments,
are the property of the Company, and in the event that a transfer of management
or investment advisory services to someone other than the Adviser should ever
occur, the Adviser will promptly, and at its own cost, take all steps necessary
to segregate such records and deliver them to the Company.
2. COMPENSATION FOR SERVICES. In payment for all services, facilities,
equipment and personnel, and for other costs of the Adviser hereunder, the
Company shall pay to the Adviser, from the assets of the respective Fund, a
monthly investment advisory fee equivalent on an annual basis to .10% of the
average daily net assets of the Fund.
For purposes of the calculation of such fee, "average daily net assets" for
a particular period shall be determined on the basis of the Fund's net assets as
determined as of the close of each business day of the month pursuant to the
currently effective prospectus of the Fund. Such fee shall be payable on the
fifth day of each calendar month for services performed hereunder during the
preceding month. If the Fund commences operations after the beginning of a month
or this agreement terminates prior to the end of a month, such fee shall be
pro-rated according to the proportion which such portion of the month bears to
the full month.
3. ALLOCATION OF EXPENSES.
(a) In addition to the fee described in Section 2 hereof, the Fund shall
pay all its costs and expenses which are not assumed by the Adviser. These Fund
expenses include, by way of example, but not by way of limitation, fees of the
directors who are not employees of the investment adviser or sub-adviser of any
series of the Company or of any affiliate of any such investment adviser or
sub-adviser, 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 Voyageur Fund Distributors,
Inc. (the "Underwriter") under its agreement with the Fund), expenses of
printing and mailing stock certificates representing shares of the Fund,
association membership dues, charges of the Fund's custodian, and bookkeeping,
auditing and legal expenses. The Fund will also pay the fees and bear the
expense of registering and maintaining the registration of the Fund and its
shares with the Securities and Exchange Commission and registering or qualifying
its shares under state or other securities laws and the expense of preparing and
mailing prospectuses, reports and statements to shareholders.
(b) The Underwriter shall bear all advertising and promotional expenses in
connection with the distribution of the Fund's shares, including paying for
prospectuses for new shareholders, except that the Fund may use its assets to
finance costs incurred in connection with the distribution of its shares
pursuant to a Plan of Distribution adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (as amended, the "Act").
4. LIMIT ON EXPENSES. If the total expenses of the Fund for any fiscal year
(including the fees payable to the Adviser but excluding interest, taxes,
brokerage commissions or other costs of acquiring or disposing of any of the
Fund's portfolio securities, distribution fees, litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary course of
the Fund's business, all to the extent permitted by applicable state law and
regulation) exceed any expense limitation imposed by applicable state law, the
Adviser shall reimburse the Fund for such excess in the manner and to the extent
required by applicable state law; provided, however, that at no time shall the
Adviser be required to make reimbursements for any fiscal period in excess of
fees received pursuant to Section 2 hereof for that same period.
5. FREEDOM TO DEAL WITH THIRD PARTIES. The Adviser shall be free to render
services to others similar to those rendered under this Agreement or of a
different nature except as such services may conflict with the services to be
rendered or the duties to be assumed hereunder.
6. REPORTS TO DIRECTORS OF THE FUND. Appropriate officers of the Adviser
shall provide the directors of the Company with such information as is required
by any plan of distribution adopted by the Company on behalf of the Fund
pursuant to Rule 12b-1 under the Act.
7. EFFECTIVE DATE, DURATION AND TERMINATION OF Agreement. This Agreement
shall become effective with respect to the Fund on the effective date of the
post-effective amendment to the Company's Registration Statement on Form N1-A
first registering shares of the Fund. Wherever referred to in this Agreement,
the vote or approval of the holders of a majority of the outstanding shares of
the Fund shall mean the lesser of (i) the vote of 67% or more of the voting
shares of the Fund present at a regular or special meeting of shareholders duly
called, if more than 50% of the Fund's outstanding voting shares are present or
represented by proxy, or (ii) the vote of more than 50% of the outstanding
voting shares of the Fund.
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 (i) by the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of the
Fund, and (ii) by the vote of a majority of the directors of the Company who are
not parties to this Agreement or "interested persons", as defined in the Act, of
the 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, by the vote of the Board of Directors of the Company or by the vote of
the holders of a majority of the outstanding shares of the Fund, or by the
Adviser, upon sixty (60) days written notice to the other party. Any such
termination may be made effective with respect to both the investment advisory
and management services provided for in this Agreement or with respect to either
of such kinds of services. This Agreement shall automatically terminate in the
event of its assignment as defined in the Investment Company Act of 1940 and the
rules thereunder, provided, however, that 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 and winding up of the Fund.
8. LIMITATION OF LIABILITY. The Adviser will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or its
shareholders in connection with the performance of its duties under this
Agreement, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its duties under this Agreement.
9. AMENDMENTS TO AGREEMENT. No material amendment to this Agreement shall
be effective until approved by the vote of: (i) the majority of the directors of
the Company who are not parties to this Agreement or "interested persons" (as
defined in the Act) of the Adviser or of the Company cast in person at a meeting
called for the purpose of voting on such approval; and (ii) the holders of a
majority of the outstanding shares of the Fund.
10. NOTICES. Any notice under this Agreement shall be in writing,
addressed, delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and the Adviser have caused this Agreement
to be executed by their duly authorized officers as of the day and year
indicated below.
VOYAGEUR FUNDS, INC.
Date: By:
------------------------------
Title:
-------------------------
CADRE CONSULTING SERVICES, INC.
Date: By
-------------------------------
Title:
-------------------------
SUB-INVESTMENT ADVISORY AGREEMENT
This AGREEMENT, made as of this /s/20th day of /s/March, 1996, by and
between Marquette Trust Company, a trust company organized under the laws of the
State of Minnesota (the "Adviser") and Voyageur Fund Managers, Inc., a Minnesota
corporation (the "Sub-Adviser").
WHEREAS, Voyageur Funds Inc., a Minnesota corporation (the "Company"), on
behalf of Voyageur Financial Institutions ("VFI") Intermediate Duration
Portfolio and the VFI Core Portfolio, separately managed series of the Company
(each a "Fund" and, collectively, the "Funds"), has appointed the Adviser as the
Funds' investment adviser pursuant to an Investment Advisory and Management
Agreement dated as of /s/March 20, 1996 (the "Advisory Agreement");
WHEREAS, pursuant to the terms of the Advisory Agreement, the Adviser
desires to appoint the Sub-Adviser as sub-adviser to the Funds, 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 Funds.
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 with
respect to the assets of the Funds and to perform the services hereinafter set
forth. 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 Funds,
including, but not limited to, fees of the directors who are not employees of
the investment adviser or subadviser of any series of the Company or of any
affiliate of any such investment adviser or sub-adviser, 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 Voyageur Fund Distributors, Inc. (the "Underwriter") under its
agreement with such Fund), expenses of printing and mailing stock certificates
representing shares of such Fund, association membership dues, charges of such
Fund's custodian, and bookkeeping, auditing and legal expenses. Each Fund will
also pay the fees and bear the expense of registering and maintaining the
registration of such Fund and its shares with the Securities and Exchange
Commission and registering or qualifying its shares under state or other
securities laws and the expense of preparing and mailing prospectuses, reports
and statements to shareholders. 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 either Fund in any way or otherwise be deemed an agent of either Fund.
2. The Sub-Adviser shall direct the investment of each Fund's assets in
accordance with applicable law and the investment objectives, policies and
restrictions set forth in the respective Fund's then effective Registration
Statement under the Investment Company Act of 1940, as amended (the "1940 Act")
and 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, 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 reasonable
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
the management of the Funds' assets and resources. The Sub-Adviser 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 the investment of the assets of the Funds 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 Funds.
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, which reports may be distributed by the Adviser to
the Company at periodic meetings of the Company's Board of Directors and at such
other times as may be reasonably requested by the Company's 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 portfolio securities for the Funds and markets on or
in which such transactions will be executed and shall place, in the name of the
respective Funds or their nominees, 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 Funds. 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 Funds.
It is understood that certain other clients of the Sub-Adviser may have
investment objectives and policies similar to those of the respective Funds 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 a 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 applicable Fund. When two or
more of the clients of the Sub-Adviser (including either 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
either 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 for a Fund pursuant to Rule 17a-7 under the
1940 Act in compliance with such Fund's then-effective policies concerning such
transactions.
(c) The Sub-Adviser agrees that it will not execute any portfolio
transactions for either Fund with a broker or dealer 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 Funds under the Securities Act of 1933, as
amended, and the Funds' 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 respective Funds shall bear all brokerage
commissions in connection with purchases and sales of portfolio securities for
such 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
Funds 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 Funds, or in the discharge of the Sub-Adviser's overall
responsibilities with respect to the other accounts which it serves as
investment manager or investment adviser.
7. The Sub-Adviser shall cooperate with and make available to the Adviser,
each Fund and any agents engaged by either Fund, the Sub-Adviser's expertise
relating to matters affecting the respective Funds.
8. For the services to be rendered under this Agreement, and the facilities
to be furnished for each fiscal year of each Fund, the Adviser shall pay to the
Sub-Adviser a monthly management fee of 50% of the fee payable to the Adviser
pursuant to the Advisory Agreement with respect to such month.
9. The Sub-Adviser shall share with the Adviser the costs of assisting each
Fund in complying with all applicable state expense limitations by waiving its
rights to receive its sub-advisory fees in an amount which bears the same ratio
to total fee reductions absorbed by the Adviser under its Advisory Agreement
with the respective Fund as sub-advisory fees which the Sub-Adviser would
otherwise be entitled to receive during the applicable period bears to advisory
fees which the Adviser would be entitled to receive during such period had such
Fund not exceeded state expense limitations.
10. 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 such records are the property
of the Fund, 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 of 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(a) of the
Investment Company Act or any other applicable statute or regulation.
11. The Adviser represents, warrants and agrees that:
(a) It has been duly authorized by the Board of Directors of the Company to
delegate to the Sub-Adviser the provision of the services contemplated hereby.
(b) The Adviser and the Company are currently in compliance and shall at
all times continue to comply with the requirements imposed upon the Adviser and
the Company by applicable law and regulations.
12. The Sub-Adviser will not be liable for any error of judgment or mistake
of law or for any loss suffered by either Fund or its respective shareholders in
connection with the performance of its duties under this Agreement, except a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
duties under this Agreement.
13. This Agreement shall become effective with respect to each Fund on the
effective date of the post-effective amendment to the Company's Registration
Statement on Form N1-A first registering shares of the Funds. Wherever referred
to in this Agreement, the vote or approval of the holders of a majority of the
outstanding shares of a Fund shall mean the lesser of (i) the vote of 67% or
more of the voting shares of such Fund present at a regular or special meeting
of shareholders duly called, if more than 50% of the Fund's outstanding voting
shares are present or represented by proxy, or (ii) the vote of more than 50% of
the outstanding voting shares of such Fund.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect with respect to each Fund 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 (i) by the Board of
Directors of the Company or by the vote of the holders of a majority of the
outstanding voting securities of the applicable Fund, and (ii) by the vote of a
majority of the directors of the Company who are not parties to this Agreement
or "interested persons", as defined in the Act, of 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 with respect to either Fund 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
shares of the respective Fund, upon 60 days' written notice to the Adviser and
the Sub-Adviser, (b) by the Adviser, upon 60 days' written notice to the
Sub-Adviser and the Fund, or (c) by the Sub-Adviser, upon 60 days' written
notice to the Adviser and the Fund. Any such termination may be made effective
with respect to both the investment advisory and management services provided
for in this Agreement or with respect to either of such kinds of services. This
Agreement shall automatically terminate in the event of its assignment as
defined in the Investment Company Act of 1940 and the rules thereunder,
provided, however, that 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 with respect to a Fund upon
completion of the dissolution, liquidation and winding up of such Fund.
14. No amendment to or modification of this Agreement shall be effective
with respect to a Fund unless and until approved by the vote of a majority of
the outstanding shares of such Fund.
15. This Agreement shall be binding upon, and inure to the benefit of, the
Adviser and the Sub-Adviser, and their respective successors.
16. 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.
17. 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 on the date indicated 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.
MARQUETTE TRUST COMPANY
Date: /s/03/20/96 By: /s/Craig W. Huntley
------------------------------
Craig W. Huntley
Title: /s/President
-------------------------
President
VOYAGEUR FUND MANAGERS, INC.
Date: /s/03/20/96 By: /s/John G. Taft
------------------------------
John G. Taft
Title: /s/ Presient
-------------------------
Presdient
VOYAGEUR FUNDS, INC.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of this /s/20th day of March
1996, by and between Voyageur Funds, Inc., a Minnesota corporation (the
"Company"), for and on behalf of each series of the Company (each series is
referred to hereinafter as a "Fund") listed below and Voyageur Fund
Distributors, Inc., a Minnesota corporation (the "Underwriter"). This Agreement
shall apply to the following Funds:
Voyageur Financial Institutions Short Duration Portfolio
Voyageur Financial Institutions Intermediate Duration Portfolio
Voyageur Financial Institutions Core Portfolio
WITNESSETH:
1. UNDERWRITING SERVICES
The Company, on behalf of each Fund, hereby engages the Underwriter, and
the Underwriter hereby agrees to act, as principal underwriter for each Fund in
the sale and distribution of the shares of such Fund to the public, either
through dealers or otherwise. The Underwriter agrees to offer such shares for
sale at all times when such shares are available for sale and may lawfully be
offered for sale and sold.
2. SALE OF SHARES
The shares of each Fund are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance or
rejection by the Company. Any offer for or sale of shares shall be
conclusively presumed to have been accepted by the Company if the
Company shall fail to notify the Underwriter of the rejection of such
offer or sale prior to the computation of the net asset value of such
shares next following receipt by the Company of notice of such offer
or sale.
(b) No share of a Fund shall be sold by the Underwriter (i) for any
consideration other than cash or, pursuant to any exchange privilege
provided for by the applicable currently effective Prospectus or
Statement of Additional Information (hereinafter referred to
collectively as the "Prospectus"), shares of any other investment
company for which the Underwriter acts as an underwriter, or (ii)
except in instances otherwise provided for by the applicable currently
effective Prospectus, for any amount less than the public offering
price per share, which shall be determined in accordance with the
applicable currently effective Prospectus.
(c) The Underwriter shall require any securities dealer entering into a
selected dealer agreement with the Underwriter to disclose to
prospective investors the existence of all available classes of shares
of a Fund and to determine the suitability of each available class as
an investment for each such prospective investor.
3. REGISTRATION OF SHARES
The Company agrees to make prompt and reasonable efforts to effect and keep
in effect, at its expense, the registration or qualification of each Fund's
shares for sale in such jurisdictions as the Company may designate.
4. INFORMATION TO BE FURNISHED TO THE UNDERWRITER
The Company agrees that it will furnish the Underwriter with such
information with respect to the affairs and accounts of the Company (and each
Fund or class thereof) as the Underwriter may from time to time reasonably
require, and further agrees that the Underwriter, at all reasonable times, shall
be permitted to inspect the books and records of the Company.
5. ALLOCATION OF EXPENSES
During the period of this Agreement, the Company shall pay or cause to be
paid all expenses, costs and fees incurred by the Company which are not assumed
by the Underwriter. The Underwriter agrees to provide, and shall pay costs which
it incurs in connection with providing, administrative or accounting services to
shareholders of each Fund (such costs are referred to as "Shareholder Servicing
Costs"). Shareholder Servicing Costs include all expenses of the Underwriter
incurred in connection with providing administrative or accounting services to
shareholders of each Fund, including, but not limited to, an allocation of the
Underwriter's overhead and payments made to persons, including employees of the
Underwriter, who respond to inquiries of shareholders regarding their ownership
of Fund shares, or who provide other administrative or accounting services not
otherwise required to be provided by the applicable Fund's investment adviser or
transfer agent.
6. COMPENSATION TO THE UNDERWRITER
It is understood and agreed by the parties hereto that the sale of Fund
shares will benefit the Underwriter, which is an affiliate of the investment
sub-adviser for certain of the Funds, and therefore the Underwriter will receive
no additional compensation for services it performs hereunder in connection with
sales of Fund shares.
In connection with the Underwriter's ongoing servicing and/or maintenance
of shareholder accounts, each Fund is obligated to pay the Underwriter a service
fee, calculated and payable monthly, at the annual rate of .05% of the value of
the average daily net assets of such Fund. Average daily net assets shall be
computed in accordance with the applicable currently effective Prospectus.
7. LIMITATION OF THE UNDERWRITER'S AUTHORITY
The Underwriter shall be deemed to be an independent contractor and, except
as specifically provided or authorized herein, shall have no authority to act
for or represent any Fund or the Company.
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELED ORDERS
The Underwriter shall subscribe for the shares of a Fund only for the
purpose of covering purchase orders already received by it or for the purpose of
investment for its own account. In the event that an order for the purchase of
shares of a Fund is placed with the Underwriter by a customer or dealer and
subsequently canceled, the Underwriter shall forthwith cancel the subscription
for such shares entered on the books of the Fund, and, if the Underwriter has
paid the Fund for such shares, shall be entitled to receive from the Fund in
refund of such payment the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation by the
Underwriter.
9. INDEMNIFICATION OF THE COMPANY
The Underwriter agrees to indemnify each Fund and the Company against any
and all litigation and other legal proceedings of any kind or nature and against
any liability, judgment, cost, or penalty imposed as a result of such litigation
or proceedings in any way arising out of or in connection with the sale or
distribution of the shares of such Fund by the Underwriter. In the event of the
threat or institution of any such litigation or legal proceedings against any
Fund, the Underwriter shall defend such action on behalf of the Fund or the
Company at the Underwriter's own expense, and shall pay any such liability,
judgment, cost, or penalty resulting therefrom, whether imposed by legal
authority or agreed upon by way of compromise and settlement; provided, however,
the Underwriter shall not be required to pay or reimburse a Fund for any
liability, judgment, cost, or penalty incurred as a result of information
supplied by, or as the result of the omission to supply information by, the
Company to the Underwriter, or to the Underwriter by a director, officer, or
employee of the Company who is not an "interested person," as defined in the
provisions of the Investment Company Act of 1940, and the rules and regulations
thereunder, as they may be amended from time to time (the "1940 Act"), of the
Underwriter, unless the information so supplied or omitted was available to the
Underwriter or the Fund's investment adviser without recourse to the Fund or the
Company or any such person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES
The Underwriter shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
(a) The effective date of this Agreement is set forth in the first
paragraph of this Agreement. Unless sooner terminated as hereinafter provided,
this Agreement shall continue in effect for a period of one year after the date
of its execution, and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by a vote of the Board of
Directors of the Company, and of the directors who are not "interested persons"
(as defined in the provisions of the 1940 Act) of the Company and have no direct
or indirect financial interest in the operation of this Agreement, cast in
person at a meeting called for the purpose of voting on this Agreement.
(b) This Agreement may be terminated at any time with respect to any Fund,
without the payment of any penalty, by the vote of a majority of the members of
the Board of Directors of the Company who are not "interested persons" (as
defined in the provisions of the 1940 Act) of the Company and have no direct or
indirect financial interest in the operation of this Agreement, or by the vote
of a majority of the outstanding voting securities of such Fund (or class
thereof), or by the Underwriter, upon 60 days' written notice to the other
party.
(c) This Agreement shall automatically terminate in the event of its
"assignment" (as defined by the provisions of the 1940 Act).
12. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until approved
by the Underwriter and by vote of a majority of the Board of Directors of the
Company who are not interested persons of the Underwriter.
13. NOTICES
Any notice under this Agreement shall be in writing, addressed, delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and the Underwriter have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
VOYAGEUR FUNDS, INC.
By: /s/John G. Taft
---------------------------------
John G. Taft
Title: /s/President
---------------------------
President
VOYAGEUR FUND DISTRIBUTORS, INC.
By: /s/Frank C. Tonnemaker
---------------------------------
Frank C. Tonnemaker
Its /s/President
---------------------------
President
CUSTODIAN AGREEMENT
THIS AGREEMENT, made as of the day of March, 1996, by and between Voyageur
Funds, Inc., a Minnesota corporation (the "Fund"), for and on behalf of each
series of the Fund that adopts this Agreement (said series being hereinafter
referred to, individually, as a "Series" and, collectively, as the "Series"),
and Marquette Trust Compant, a trust company organized and existing under the
laws of the State of Minnesota (the "Custodian"). The name of each Series that
adopts this Agreement and the effective date of this Agreement with respect to
each such Series are set forth in Exhibit A hereto.
WITNESSETH:
WHEREAS, the Fund desires to appoint the Custodian as the custodian for the
assets of each Series, and the Custodian desires to accept such appointment,
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein made, the Fund and the Custodian agree as follows:
ARTICLE 1. DEFINITIONS
----------------------
The word "Securities" as used herein shall be construed to include, without
being limited to, shares, stocks, bonds, debentures, notes, scrip, participation
certificates, rights to subscribe, warrants, options, certificates of deposit,
bankers' acceptances, repurchase agreements, commercial paper, choses in action,
evidences of indebtedness, investment contracts, voting trust certificates,
certificates of indebtedness and certificates of interest of any and every kind
and nature whatsoever, secured and unsecured, issued or to be issued, by any
corporation, company, partnership (limited or general), association, trust,
entity or person, public or private, whether organized under the laws of the
United States, or any state, commonwealth, territory or possession thereof, or
organized under the laws of any foreign country, or any state, province,
territory or possession thereof, or issued or to be issued by the United States
government or any agency or instrumentality thereof, options on stock indexes,
stock index and interest rate futures contracts and options thereon, and other
futures contracts and options thereon.
The words "Written Order from the Fund" shall mean a writing signed or
initialed by one or more person or persons designated in the current certified
list referred to in Article 2, provided that if said writing is signed by only
one person, that person shall be an officer of the Fund designated in said
current certified list. "Written Order from the Fund' also may include a
communication effected directly between electro-mechanical or electronic devices
(including, but not limited to, facsimile transceivers) provided that management
of the Fund and the Custodian are satisfied that such procedures afford adequate
safeguards for the assets of each Series.
ARTICLE 2. NAMES, TITLES AND SIGNATURES OF FUND'S OFFICERS
----------------------------------------------------------
The Fund shall certify to the Custodian the names, titles and signatures of
officers and other persons who are authorized to give any Written Order from the
Fund on behalf of each Series. The Fund agrees that, whenever any change in such
authorization occurs, it will file with the Custodian a new certified list of
names, titles and signatures which shall be signed by at least one officer
previously certified to the Custodian if any such officer still holds an office
in the Fund. The Custodian is authorized to rely and act upon the names, titles
and signatures of the individuals as they appear in the most recent such
certified list which has been delivered to the Custodian as hereinbefore
provided.
ARTICLE 3. SUB-CUSTODIANS AND DEPOSITORIES
------------------------------------------
Notwithstanding any other provision in this Agreement to the contrary, all
or any of the cash and Securities of each Series may be held in the Custodian's
own custody or in the custody of one or more other banks or trust companies
selected by the Custodian or as directed in one or more Written Orders from the
Fund. Any such sub-custodian must have the qualifications required for
custodians under the Investment Company Act of 1940, as amended. The Custodian
or sub-custodian, as the case may be, may participate directly or indirectly in
one or more "securities depositories" (as defined in Rule 17f-4 under the
Investment Company Act of 1940, as amended, or in any successor provisions or
rules thereto). Any references in this Agreement to the delivery of Securities
by or to the Custodian shall, with respect to Securities custodied with one of
the aforementioned "securities depositories," be interpreted to mean that the
Custodian shall cause a bookkeeping entry to be made by the applicable
securities depository to indicate the transfer of ownership of the applicable
Security to or from the Fund, all as set forth in one or more Written Orders
from the Fund. Additionally, any references in this Agreement to the receipt of
proceeds or payments with respect to Securities transactions shall, with respect
to Securities custodied with one of the aforementioned "securities
depositories," be interpreted to mean that the Custodian shall have received an
advice from such securities depository that said proceeds or payments have been
received by such depository and deposited in the Custodian's account.
ARTICLE 4. RECEIPT AND DISBURSING OF MONEY
------------------------------------------
SECTION (1). The Fund shall from time to time cause cash owned by the Fund
to be delivered or paid to the Custodian for the account of any Series, but the
Custodian shall not be under any obligation or duty to determine whether all
cash of the Fund is being so deposited or to take any action or to give any
notice with respect to cash not so deposited. The Custodian agrees to hold such
cash, together with any other sum collected or received by it for or on behalf
of each Series of the Fund, in the account of such Series in conformity with the
terms of this Agreement. The Custodian shall be authorized to disburse cash from
the account of each Series only:
a) upon receipt of and in accordance with Written Orders from the Fund
stating that such cash is being used for one or more of the following
purposes, and specifying such purpose or purposes, provided, however, that
a reference in such Written Order from the Fund to the pertinent paragraph
or paragraphs of this Article shall be sufficient compliance with this
provision:
(i) the payment of interest;
(ii) the payment of dividends;
(iii) the payment of taxes;
(iv) the payment of the fees or charges to any investment adviser of
any Series;
(v) the payment of fees to a Custodian, stock registrar, transfer
agent or dividend disbursing agent for any Series;
(vi) the payment of distribution fees and commissions;
(vii) the payment of any operating expenses, which shall be deemed to
include legal and accounting fees and all other expenses not
specifically referred to in this paragraph (a);
(viii) payments to be made in connection with the conversion, exchange
or surrender of Securities owned by any Series;
(ix) payments on loans that may from time to time be due;
(x) payment to a recognized and reputable broker for Securities
purchased by the Fund through said broker (whether or not
including any regular brokerage fees, charges or commissions on
the transaction) upon receipt by the Custodian of such Securities
in proper form for transfer and after the receipt of a
confirmation from the broker or dealer with respect to the
transaction;
(xi) payment to an issuer or its agent on a subscription for
Securities of such issuer upon the exercise of rights so to
subscribe, against a receipt from such issuer or agent for the
cash so paid;
(b) as provided in Article 5 hereof; and
(c) upon the termination of this Agreement.
SECTION (2). The Custodian is hereby appointed the attorney-in-fact of the
Fund to use reasonable efforts to enforce and collect all checks, drafts or
other orders for the payment of money received by the Custodian for the account
of each Series and drawn to or to the order of the Fund and to deposit them in
the account of the applicable Series. Article 5. Receipt of Securities
The Fund agrees to place all of the Securities of each Series in its
account with the Custodian, but the Custodian shall not be under any obligation
or duty to determine whether all Securities of any Series are being so
deposited, or to require that such Securities be so deposited, or to take any
action or give any notice with respect to the Securities not so deposited. The
Custodian agrees to hold such Securities in the account of the Series designated
by the Fund, in the name of the Fund or of bearer or of a nominee of the
Custodian, and in conformity with the terms of this Agreement. The Custodian
also agrees, upon Written Order from the Fund, to receive from persons other
than the Fund and to hold in the account of the Series designated by the Fund
Securities specified in said Written Order of the Fund, and, if the same are in
proper form, to cause payment to be made therefor to the persons from whom such
Securities were received, from the funds of the applicable Series held by the
Custodian in said account in the amounts provided and in the manner directed by
the Written Order from the Fund.
The Custodian agrees that all Securities of each Series placed in its
custody shall be kept physically segregated at all times from those of any other
Series, person, firm or corporation, and shall be held by the Custodian with all
reasonable precautions for the safekeeping thereof. Upon delivery of any
Securities of any Series to a subcustodian pursuant to Article 3 of this
Agreement, the Custodian will create and maintain records identifying those
assets which have been delivered to the subcustodian as belonging to the
applicable Series.
ARTICLE 6. DELIVERY OF SECURITIES
---------------------------------
The Custodian agrees to transfer, exchange or deliver Securities as
provided in Article 7, or on receipt by it of, and in accordance with, a Written
Order from the Fund in which the Fund shall state specifically which of the
following cases is covered thereby:
(a) in the case of deliveries of Securities sold by the Fund, against
receipt by the Custodian of the proceeds of sale and after receipt of a
confirmation from a broker or dealer (or, in accordance with industry
practice with respect to "same day trades," acceptance of delivery of such
securities by the broker or dealer, which acceptance is followed up by
confirmation thereof within the normal settlement period) with respect to
the transaction;
(b) in the case of deliveries of Securities which may mature or be
called, redeemed, retired or otherwise become payable, against receipt by
the Custodian of the sums payable thereon or against interim receipts or
other proper delivery receipts;
(c) in the case of deliveries of Securities which are to be
transferred to and registered in the name of the Fund or of a nominee of
the Custodian and delivered to the Custodian for the account of the Series,
against receipt by the Custodian of interim receipts or other proper
delivery receipts;
(d) in the case of deliveries of Securities to the issuer thereof, its
transfer agent or other proper agent, or to any committee or other
organization for exchange for other Securities to be delivered to the
Custodian in connection with a reorganization or recapitalization of the
issuer or any split-up or similar transaction involving such Securities,
against receipt by the Custodian of such other Securities or against
interim receipts or other proper delivery receipts;
(e) in the case of deliveries of temporary certificates in exchange
for permanent certificates, against receipt by the Custodian of such
permanent certificates or against interim receipts or other proper delivery
receipts;
(f) in the case of deliveries of Securities upon conversion thereof
into other Securities, against receipt by the Custodian of such other
Securities or against interim receipts or other proper delivery receipts;
(g) in the case of deliveries of Securities in exchange for other
Securities (whether or not such transactions also involve the receipt or
payment of cash), against receipt by the Custodian of such other Securities
or against interim receipts or other proper delivery receipts;
(h) in the case of warrants, rights or similar Securities, the
surrender thereof in the exercise of such warrants, rights or similar
Securities or the surrender of interim receipts or temporary Securities for
definitive Securities;
(i) for delivery in connection with any loans of securities made by
the Fund for the benefit of any Series, but only against receipt of
adequate collateral as agreed upon from time to time by the Custodian and
the Fund;
(j) for delivery as security in connection with any borrowings by the
Fund for the benefit of any Series requiring a pledge of assets from the
applicable Series, but only against receipt of amounts borrowed;
(k) for delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a bank, broker-dealer or futures
commission merchant relating to compliance with applicable rules and
regulations regarding account deposits, escrow or other arrangements in
connection with transactions by the Fund for the benefit of any Series;
(l) in a case not covered by the preceding paragraphs of this Article,
upon receipt of a resolution adopted by the Board of Directors of the Fund,
signed by an officer of the Fund and certified to by the Secretary,
specifying the Securities and assets to be transferred, exchanged or
delivered, the purposes for which such delivery is being made, declaring
such purposes to be proper corporate purposes, and naming a person or
persons (each of whom shall be a properly bonded officer or employee of the
Fund) to whom such transfer, exchange or delivery is to be made; and
(m) in the case of deliveries pursuant to paragraphs (a) through (k)
above, the Written Order from the Fund shall direct that the proceeds of
any Securities delivered, or Securities or other assets exchanged for or in
lieu of Securities so delivered, are to be delivered to the Custodian.
ARTICLE 7. CUSTODIAN'S ACTS WITHOUT WRITTEN ORDERS FROM THE FUND
----------------------------------------------------------------
Unless and until the Custodian receives contrary Written Orders from the
Fund, the Custodian shall without order from the Fund:
(a) present for payment all bills, notes, checks, drafts and similar
items, and all coupons or other income items (except stock dividends), held
or received for the account of any Series, and which require presentation
in the ordinary course of business, and credit such items to the account of
the applicable Series conditionally, subject to final payment;
(b) present for payment all Securities which may mature or be called,
redeemed, retired or otherwise become payable and credit such items to the
account of the applicable Series conditionally, subject to final payment;
(c) hold for and credit to the account of any Series all shares of
stock and other Securities received as stock dividends or as the result of
a stock split or otherwise from or on account of Securities of the Series,
and notify the Fund, in the Custodian's monthly reports to the Fund, of the
receipt of such items;
(d) deposit or invest (as instructed from time to time by the Fund)
any cash received by it from, for or on behalf of any Series to the credit
of the account of the applicable Series;
(e) charge against the account for any Series disbursements authorized
to be made by the Custodian hereunder and actually made by it, and notify
the Fund of such charges at least once a month;
(f) deliver Securities which are to be transferred to and reissued in
the name of any Series, or of a nominee of the Custodian for the account of
any Series, and temporary certificates which are to be exchanged for
permanent certificates, to a proper transfer agent for such purpose against
interim receipts or other proper delivery receipts; and
(g) hold for disposition in accordance with Written Orders from the
Fund hereunder all options, rights and similar Securities which may be
received by the Custodian and which are issued with respect to any
securities held by it hereunder, and notify the Fund promptly of the
receipt of such items.
ARTICLE 8. SEGREGATED ACCOUNTS
------------------------------
Upon receipt of a Written Order from the Fund, the Custodian shall
establish and maintain one or more segregated accounts for and on behalf of the
Series specified in said Written Order from the Fund for purposes of segregating
cash and/or Securities (of the type agreed upon from time to time by the
Custodian and the Fund) for the purpose or purposes specified in said Written
Order from the Fund.
ARTICLE 9. DELIVERY OF PROXIES
------------------------------
The Custodian shall deliver promptly to the Fund all proxies, notices and
communications with relation to Securities held by it which it may receive from
sources other than the Fund.
ARTICLE 10. TRANSFER
--------------------
The Fund shall furnish to the Custodian appropriate instruments to enable
the Custodian to hold or deliver in proper form for transfer any Securities
which it may hold for the account of any Series of the Fund. For the purpose of
facilitating the handling of Securities, unless otherwise directed by Written
Order from the Fund, the Custodian is authorized to hold Securities deposited
with it under this Agreement in the name of its registered nominee or nominees
(as defined in the Internal Revenue Code and any regulations of the United
States Treasury Department issued thereunder or in any provision of any
subsequent federal tax law exempting such transaction from liability for stock
transfer taxes) and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. The Custodian shall, if requested by the Fund, advise the
Fund of the certificate number of each certificate so presented for transfer and
that of the certificate received in exchange therefor, and shall use its best
efforts to the end that the specific Securities held by it hereunder shall be at
all times identifiable.
ARTICLE 11. TRANSFER TAXES AND OTHER DISBURSEMENTS
--------------------------------------------------
The Fund, for and on behalf of each Series, shall pay or reimburse the
Custodian for any transfer taxes payable upon transfers of Securities made
hereunder, including transfers incident to the termination of this Agreement,
and for all other necessary and proper disbursements and expenses made or
incurred by the Custodian in the performance or incident to the termination of
this Agreement, and the Custodian shall have a lien upon any cash or Securities
held by it for the account of each applicable Series of the Fund for all such
items, enforceable, after thirty days' written notice by registered mail from
the Custodian to the Fund, by the sale of sufficient Securities to satisfy such
lien. The Custodian may reimburse itself by deducting from the proceeds of any
sale of Securities an amount sufficient to pay any transfer taxes payable upon
the transfer of Securities sold. The Custodian shall execute such certificates
in connection with Securities delivered to it under this Agreement as may be
required, under the provisions of any federal revenue act and any regulations of
the Treasury Department issued thereunder or any state laws, to exempt from
taxation any transfers and/or deliveries of any such Securities as may qualify
for such exemption.
ARTICLE 12 CUSTODIAN'S LIABILITY FOR PROCEEDS OF SECURITIES SOLD
----------------------------------------------------------------
If the mode of payment for Securities to be delivered by the Custodian is
not specified in the Written Order from the Fund directing such delivery, the
Custodian shall make delivery of such Securities against receipt by it of cash,
a postal money order or a check drawn by a bank, trust company or other banking
institution, or by a broker named in such Written Order from the Fund, for the
amount the Custodian is directed to receive. The Custodian shall be liable for
the proceeds of any delivery of Securities made pursuant to this Article, but
provided that it has complied with the provisions of this Article, only to the
extent that such proceeds are actually received.
ARTICLE 13. CUSTODIAN'S REPORT
------------------------------
The Custodian shall furnish the Fund, as of the close of business on the
last business day of each month, a statement showing all cash transactions and
entries for the account of each Series of the Fund. The books and records of the
Custodian pertaining to its actions as Custodian under this Agreement shall be
open to inspection and audit, at reasonable times, by officers of, and auditors
employed by, the Fund. The Custodian shall furnish the Fund with a list of the
Securities held by it in custody for the account of each Series of the Fund as
of the close of business on the last business day of each quarter of the Fund's
fiscal year.
ARTICLE 14. CUSTODIAN'S COMPENSATION
------------------------------------
The Custodian shall be paid compensation at such rates and at such times as
may from time to time be agreed on in writing by the parties hereto (as set
forth with respect to each Series in Exhibit B hereto), and the Custodian shall
have a lien for unpaid compensation, to the date of termination of this
Agreement, upon any cash or Securities held by it for the Series accounts of the
Fund, enforceable in the manner specified in Article 11 hereof.
ARTICLE 15. DURATION, TERMINATION AND AMENDMENT OF AGREEMENT
------------------------------------------------------------
This Agreement shall remain in effect with respect to each Series, as it
may from time to time be amended, until it shall have been terminated as
hereinafter provided, but no such amendment or termination shall affect or
impair any rights or liabilities arising out of any acts or omissions to act
occurring prior to such amendment or termination.
The Custodian may terminate this Agreement by giving the Fund ninety days'
written notice of such termination by registered mail addressed to the Fund at
its principal place of business.
The Fund may terminate this Agreement by giving ninety days' written notice
thereof delivered by registered mail to the Custodian at its principal place of
business. Additionally, this Agreement may be terminated with respect to any
Series of the Fund pursuant to the same procedures, in which case this Agreement
shall continue in full effect with respect to all other Series of the Fund.
Upon termination of this Agreement, the assets of the Fund, or Series
thereof, held by the Custodian shall be delivered by the Custodian to a
successor custodian upon receipt by the Custodian of a Written Order from the
Fund designating the successor custodian; and if no successor custodian is
designated in said Written Order from the Fund, the Custodian shall, upon such
termination, deliver all such assets to the Fund.
This Agreement may be amended or terminated at any time by the mutual
agreement of the Fund and the Custodian. Additionally, this Agreement may be
amended or terminated with respect to any Series of the Fund at any time by the
mutual agreement of the Fund and the Custodian, in which case such amendment or
termination would apply to such Series amending or terminating this Agreement
but not to the other Series of the Fund.
This Agreement may not be assigned by the Custodian without the consent of
the Fund, authorized or approved by a resolution of its Board of Directors.
ARTICLE 16. SUCCESSOR CUSTODIAN
-------------------------------
Any bank or trust company into which the Custodian or any successor
custodian may be merged or converted or with which it or any successor custodian
may be consolidated, or any bank or trust company resulting from any merger,
conversion or consolidation to which the Custodian or any successor custodian
shall be a party, or any bank or trust company succeeding to the business of the
Custodian, shall be and become the successor custodian without the execution of
any instrument or any further act on the part of the Fund or the Custodian or
any successor custodian.
Any successor custodian shall have all the power, duties and obligations of
the preceding custodian under this Agreement and any amendments thereof and
shall succeed to all the exemptions and privileges of the preceding custodian
under this Agreement and any amendments thereof.
ARTICLE 17. GENERAL
-------------------
Nothing expressed or mentioned in or to be implied from any provisions of
this Agreement is intended to give or shall be construed to give any person or
corporation other than the parties hereto any legal or equitable right, remedy
or claim under or in respect of this Agreement or any covenant, condition or
provision herein contained, this Agreement and all of the covenants, conditions
and provisions hereof being intended to be, and being, for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns.
It is the purpose and intention of the parties hereto that the Fund shall
retain all the power, rights and responsibilities of determining policy,
exercising discretion and making decisions with respect to the purchase, or
other acquisition, and the sale, or other disposition, of all of its Securities,
and that the duties and responsibilities of the Custodian hereunder shall be
limited to receiving and safeguarding the assets and Securities of each Series
of the Fund and to delivering or disposing of them pursuant to the Written Order
from the Fund as aforesaid, and the Custodian shall have no authority, duty or
responsibility for the investment policy of the Fund or for any acts of the Fund
in buying or otherwise acquiring, or in selling or otherwise disposing of, any
Securities, except as hereinbefore specifically set forth
The Custodian shall in no case or event permit the withdrawal of any money
or Securities of the Fund upon the mere receipt of any director, officer,
employee or agent of the Fund, but shall hold such money and Securities for
disposition under the procedures herein set forth.
ARTICLE 18. STANDARD OF CARE: INDEMNIFICATION
---------------------------------------------
In connection with the performance of its duties and responsibilities
hereunder, the Custodian (and each officer, employee, agent, sub-custodian and
depository of or engaged by the Custodian) shall at all times be held to the
standard of reasonable care. The Custodian shall be fully responsible for any
action taken or omitted by any officer, employee, agent, sub-custodian or
depository of or engaged by the Custodian to the same extent as if the Custodian
were to take or omit to take such action directly. The Custodian agrees to
indemnify and hold the Fund and each Series of the Fund harmless from and
against any and all loss, liability and expense, including reasonable legal fees
and expenses, arising out of the Custodian's own negligence, misfeasance, bad
faith or willful misconduct or that of any officer, employee, agent,
sub-custodian and depository of or engaged by the Custodian in the performance
of the Custodian's duties and obligations under this Agreement; provided,
however, that, notwithstanding any other provision in this Agreement, the
Custodian shall not be responsible for the following:
(a) any action taken or omitted in accordance with any Written Order
from the Fund reasonably believed by the Custodian-to be genuine and to be
signed by the proper party or parties; or
(b) any action taken or omitted in reasonable reliance on the advice
of counsel of or reasonably acceptable to the Fund relating to any of its
duties and responsibilities hereunder.
The Fund agrees to indemnify and hold the Custodian harmless from and
against any and all loss, liability and expense, including reasonable legal fees
and expenses, arising out of the performance by the Custodian (and each officer,
employee, agent, sub-custodian and depository of or engaged by the Custodian) of
its duties and responsibilities under this Agreement, but only to the extent
such loss, liability or expense is not caused by the failure of the Custodian
(or any officer, employee, agent, sub-custodian or depository of or engaged by
the Custodian, as applicable) to exercise reasonable care in the performance of
its duties and responsibilities under this Agreement.
ARTICLE 19. EFFECTIVE DATE
--------------------------
This Agreement shall become effective with respect to each Series that
adopts this Agreement when this Agreement shall have been approved with respect
to such Series by the Board of Directors of the Fund. The effective date with
respect to each Series shall be set forth on Exhibit A hereto. The Fund shall
transmit to the Custodian promptly after such approval by said Board of
Directors a copy of its resolution embodying such approval, certified by the
Secretary of the Fund.
ARTICLE 20. GOVERNING LAW
-------------------------
This Agreement is executed and delivered in Minneapolis, Minnesota, and the
laws of the State of Minnesota shall be controlling and shall govern the
construction, validity and effect of this contract.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement
to be executed in duplicate as of the date first above written by their duly
authorized officers.
ATTEST: VOYAGEUR FUNDS, INC.
/s/Thomas J. Abood By /s/John G. Taft
- -------------------- --------------------
Secretary John G. Taft
Its /s/President
------------------
President
ATTEST: MARQUETTE TRUST COMPANY
/s/Robert B. Bean By /s/Craig W. Huntley
- -------------------- --------------------
Trust Officer Craig W. Huntley
Its /s/President
------------------
President
EXHIBIT A
to
CUSTODIAN AGREEMENT
between
VOYAGEUR FUNDS, INC.
and
MARQUETTE TRUST COMPANY
NAME OF SERIES EFFECTIVE DATE
-------------- --------------
Voyageur Financial Institutions
Short Duration Portfolio March 20, 1996
Voyageur Financial Institutions
Intermediate Duration Portfolio March 20, 1996
Voyageur Funancial Institutions
Core Portfolio March 20, 1996
EXHIBIT B
to
CUSTODIAN AGREEMENT
between
VOYAGEUR FUNDS, INC.
and
MARQUETTE TRUST COMPANY
<TABLE>
<CAPTION>
NAME OF SERIES CUSTODIAN COMPENSATION
-------------- ----------------------
<S> <C>
Voyageur Financial Institutions Custodian shall be paid a monthly fee equivalent on an
Short Duration Portfolio annual basis to 0.10% of the average daily net assets of the
fund. "Average daily net assets" shall be determined on the
basis of the fund's net assets as of the close of each
business day of the month pursuant to fund's currently
effective prospectus. This fee shall be payable on or before
the fifth day of each month for services performed during
the previous month. If the fund commences operations after
the beginning of a month or the Custodian Agreement
terminates prior to the end of a month, the fee shall be
pro-rated based on that portion of the month during which
services are performed.
Voyageur Financial Institutions No fees shall be paid for this fund.
Intermediate Duration Portfolio
Voyageur Financial Institutions No fees shall be paid for this fund.
Core Portfolio
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is made and entered into this 27th day of October 1994, by
and between Voyageur Funds, Inc., a Minnesota corporation (the "Company"), on
behalf of each Fund of the Company represented by a series of shares of common
stock of the Company that adopts this Agreement (each, a "Fund" and,
collectively, the "Funds") (the Funds, together with the date each Fund adopts
this Agreement, are set forth in EXHIBIT A hereto, which shall be updated from
time to time to reflect additions, deletions or other changes thereto), and
Voyageur Fund Managers, Inc., a Minnesota corporation ("Voyageur").
1. DIVIDEND DISBURSING, ADMINISTRATIVE, ACCOUNTING AND TRANSFER AGENCY
---------------------------------------------------------------------------
SERVICES; COMPLIANCE SERVICES.
------------------------------
(a) The Company on behalf of each Fund hereby engages Voyageur, and
Voyageur hereby agrees, to provide to each Fund all dividend disbursing,
administrative and accounting services required by each Fund, including, without
limitation, the following:
(i) The calculation of net asset value per share at such times and in
such manner as specified in each Fund's current Prospectus and Statement of
Additional Information and at such other times as the parties hereto may
from time to time agree upon;
(ii) Upon the receipt of funds for the purchase of Fund shares or the
receipt of redemption requests with respect to Fund shares outstanding, the
calculation of the number of shares to be purchased or redeemed,
respectively;
(iii) Upon the Fund's distribution of dividends, (A) the calculation
of the amount of such dividends to be received per Fund share, (B) the
calculation of the number of additional Fund shares to be received by each
Fund shareholder, other than any shareholder who has elected to receive
such dividends in cash and (C) the mailing of payments with respect to such
dividends to shareholders who have elected to receive such dividends in
cash;
(iv) The provision of transfer agency services as described below:
(1) Voyageur shall make original issues of shares of each Fund in
accordance with each Fund's current Prospectus and Statement of
Additional Information and with instructions from the Company.
(2) Prior to the daily determination of net asset value of each
Fund in accordance with the each Fund's current Prospectus and
Statement of Additional Information, Voyageur shall process all
purchase orders received since the last determination of each Fund's
net asset value.
(3) Transfers of shares shall be registered and new Fund share
certificates shall be issued by Voyageur upon surrender of properly
endorsed outstanding Fund share certificates with all necessary
signature guarantees and satisfactory evidence of compliance with all
applicable laws relating to the payment or collection of taxes.
(4) Voyageur may issue new Fund share certificates in place of
Fund share certificates represented to have been lost, destroyed or
stolen, upon receiving indemnity satisfactory to Voyageur and may
issue new Fund share certificates in exchange for, and upon surrender
of, mutilated Fund share certificates.
(5) Voyageur will maintain stock registry records in the usual
form in which it will note the issuance, transfer and redemption of
Fund shares and the issuance and transfer of Fund share certificates,
and is also authorized to maintain an account in which it will record
the Fund shares and fractions issued and outstanding from time to time
for which issuance of Fund share certificates is deferred.
(6) Voyageur will, in addition to the duties and functions
above-mentioned, perform the usual duties and functions of a stock
transfer agent for a registered investment company.
(v) The creation and maintenance of such records relating to the
business of each Fund as each Fund may from time to time reasonably
request;
(vi) The preparation of tax forms, reports, notices, proxy statements,
proxies and other Fund shareholder communications, and the mailing thereof
to Fund shareholders; and
(vii) The provision of such other dividend disbursing, administrative
and accounting services as the parties hereto may from time to time agree
upon.
(b) The Company also hereby engages Voyageur to perform, and Voyageur
hereby agrees to perform, such regulatory reporting and compliance related
services and tasks for the Company or any Fund as the Company may reasonably
request. Without limiting the generality of the foregoing, Voyageur shall:
(i) Prepare or assist in the preparation of prospectuses, statements
of additional information and registration statements for the Funds, and
assure the timely filing of all required amendments thereto.
(ii) Prepare such reports, applications and documents as may be
necessary to register the Funds' shares with state securities authorities;
monitor sales of Fund shares for compliance with state securities laws; and
file with the appropriate state securities authorities the registration
statement for each Fund and all amendments thereto, required reports
regarding sales and redemptions of Fund shares and such other reports as
may be necessary to register each Fund and its shares with state securities
authorities and keep such registrations effective.
(iii) Develop and prepare communications to shareholders, including
each Fund's annual and semi-annual report to shareholders.
(iv) Obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Funds in
accordance with the requirements of Rules 17g-1 and 17d-1(7) under the
Investment Company Act of 1940 as such bonds and policies are approved by
the Funds' Board of Directors.
(v) Prepare and file with the Securities and Exchange Commission each
Fund's semi-annual reports on Form N-SAR and all required notices pursuant
to Rule 24f-2 under the Investment Company Act of 1940.
(vi) Prepare materials (including, but not limited to, agendas,
proposed resolutions and supporting materials) in connection with meetings
of the Company's Board of Directors;
(vii) Prepare or assist in the preparation of proxy and other
materials in connection with meetings of the shareholders of the Company or
any Fund;
(viii) Prepare and file tax returns for the Funds;
(ix) Concur with Fund counsel in connection with the development and
preparation of any of the foregoing; and
(x) Perform such other compliance related services and tasks upon
which the parties hereto may from time to time agree.
(c) Voyageur hereby acknowledges that all records necessary in the
operation of the Fund are the property of the Company, and in the event that a
transfer of any of the responsibilities set forth herein to someone other than
Voyageur should ever occur, Voyageur will promptly, and at its own cost, take
all steps necessary to segregate such records and deliver them to the Company.
2. COMPENSATION
------------
(a) As compensation for the dividend disbursing, administrative, accounting
and compliance services to be provided by Voyageur hereunder, each Fund shall
pay to Voyageur a monthly fee as set forth in EXHIBIT A hereto, which fee shall
be paid to Voyageur not later than the fifth business day following the end of
each month in which said services were rendered. For purposes of calculating
each Fund's average daily net assets, as such term is used in this Agreement,
the Fund's net assets shall equal its total assets minus (i) its total
liabilities and (ii) its net orders receivable from dealers.
(b) In addition to the compensation provided for in Section 2(a) hereof and
as set forth in EXHIBIT A hereto, each Fund shall reimburse Voyageur for all
out-of-pocket expenses incurred by Voyageur in connection with its provision of
services hereunder, including, without limitation, postage, stationery and
mailing expenses. Said reimbursement shall be paid to Voyageur not later than
the fifth business day following the end of each month in which said expenses
were incurred.
(c) For purposes of calculating the compensation to be paid to Voyageur
pursuant to Section 2(a) above, "house accounts" with brokerage firms which hold
shares in a Fund will be treated as separate accounts for fee calculation
purposes (based upon the number of shareholder accounts within the "house
account"), where Voyageur's work in connection with servicing such house
accounts is substantially the same as if such accounts did not exist, and
Voyageur had to directly service the shareholder accounts underlying such house
accounts.
3. FREEDOM TO DEAL WITH THIRD PARTIES.
-----------------------------------
Voyageur shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.
4. EFFECTIVE DATE, DURATION, AMENDMENT AND TERMINATION OF AGREEMENT.
-----------------------------------------------------------------
(a) The effective date of this Agreement with respect to each Fund shall be
the date set forth on EXHIBIT A hereto.
(b) Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect with respect to each Fund for a period more than two years
from the date of its execution but only as long as such continuance is
specifically approved at least annually by (i) the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of the
applicable Fund, and (ii) by the vote of a majority of the directors of the
Company who are not parties to this Agreement or "interested persons", as
defined in the Investment Company Act of 1940 (as amended, the "Act"), of the
Adviser or of the Company cast in person at a meeting called for the purpose of
voting on such approval.
(c) This Agreement may be terminated with respect to any Fund at any time,
without the payment of any penalty, by the Board of Directors of the Company or
by the vote of a majority of the outstanding voting securities of such Fund, or
by Voyageur, upon 60 days' written notice to the other party.
(d) This agreement shall terminate automatically in the event of its
"assignment" (as defined in the Act) unless such assignment is approved in
advance by the Board of Directors, including a majority of the directors of the
Company who are not parties to this Agreement or "interested persons" (as
defined in the Act) of the Adviser or of the Company, and, if and to the extent
required by the Act, the approval of the shareholders of each Fund.
(e) No amendment to this Agreement shall be effective with respect to any
Fund until approved by the vote of a majority of the directors of the Company
who are not parties to this Agreement or "interested persons" (as defined in the
Act) of the Adviser or of the Company cast in person at a meeting called for the
purpose of voting on such approval and, if and to the extent required by the
Act, a majority of the outstanding voting securities of the applicable Fund.
5. NOTICES.
--------
Any notice under this Agreement shall be in writing, addressed, delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
6. INTERPRETATION; GOVERNING LAW.
------------------------------
This Agreement shall be subject to and interpreted in accordance with all
applicable provisions of law including, but not limited to, the Act and the
rules and regulations promulgated thereunder. To the extent that the provisions
herein contained conflict with any such applicable provisions of law, the latter
shall control. The laws of the State of Minnesota shall otherwise govern the
construction, validity and effect of this Agreement.
IN WITNESS WHEREOF, the Company and Voyageur have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
VOYAGEUR FUNDS, INC.
By /s/John G. Taft
-------------------------
John G. Taft
Its /s/President
----------------------
President
VOYAGEUR FUND MANAGERS, INC.
By /s/John G. Taft
-------------------------
John G. Taft
Its /s/President
----------------------
President
EXHIBIT A
TO
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
VOYAGEUR FUND MANAGERS, INC.
AND
VOYAGEUR FUNDS, INC.
<TABLE>
<CAPTION>
FUND EFFECTIVE DATE
---- --------------
<S> <C>
Series A--Voyageur U. S. Government Securities Fund October 27, 1994
</TABLE>
COMPENSATION -- SERIES A
- ------------------------
The sum of (i) $1.33 per shareholder account per month; (ii) $1,000 per month if
the Fund's average daily net assets do not exceed $50 million, $1,250 per month
if the Fund's average daily net assets are greater than $50 million but do not
exceed $100 million, and $1,500 per month if the Fund's average daily net assets
are greater than $100 million; and (iii) 0.11% per annum of the first $20
million of the Fund's average daily net assets, .06% per annum of the next $20
million of the Fund's average daily net assets, .035% per annum of the next $60
million of the Fund's average daily net assets, .03% per annum of the next $400
million of the Fund's average daily net assets, and .02% per annum of the Fund's
average daily net assets in excess of $500 million.1
<TABLE>
<CAPTION>
MONTHLY
SERVICE FEES
(AS A % OF AVERAGE
FUND EFFECTIVE DATE DAILY NET ASSETS)
---- -------------- -----------------
<S> <C> <C>
Series B--VFI Short Duration Portfolio March 20, 1996 .008333%
Series C--VFI Intermediate Duration Portfolio March 20, 1996 .008333%
Series D--VFI Core Portfolio March 20 , 1996 .008333%
</TABLE>
______________________________
1/ Voyageur shall reimburse the Fund (Series A), in an amount not in excess of
the advisory and management fee payable under the Investment Advisory Agreement
and the administrative services fee payable hereunder, if, and to the extent
that, the aggregate operating expenses of the Fund (including the advisory and
management fee, the administrative services fee, deferred organizational costs
and Rule 12b-1 fees, if any, but excluding interest expense, taxes and brokerage
fees and commissions) are in excess of 1.25% of the average daily net assets of
the Fund on an annual basis (the "Expense Limit"). Voyageur shall first
reimburse the Fund the advisory and management fee payable and then, to the
extent necessary to reduce the Fund's expenses to the Expense Limit, shall
reimburse the administrative services fee payable hereunder.
VOYAGEUR FUNDS, INC.
SERVICE PLAN
FOR
VOYAGEUR FINANCIAL INSTITUTIONS SHORT DURATION PORTFOLIO
VOYAGEUR FINANCIAL INSTITUTIONS INTERMEDIATE DURATION PORTFOLIO
VOYAGEUR FINANCIAL INSTITUTIONS CORE PORTFOLIO
March 20, 1996
WHEREAS, Voyageur Financial Institutions Short Duration Portfolio, Voyageur
Financial Institutions Intermediate Duration Portfolio and Voyageur Financial
Institutions Core Portfolio (the "Funds") engage in business as portfolios of an
open-end management investment company, Voyageur Funds, Inc. (the "Company"),
and the Company is registered as such under the Investment Company Act of 1940,
as amended; and
WHEREAS, the Company, on behalf of each Fund, desires to adopt a Service
Plan and the Board of Directors of the Company has determined that there is a
reasonable likelihood that adoption of this Service Plan will benefit each Fund
and its shareholders.
NOW, THEREFORE, the Company, on behalf of each Fund, hereby adopts this
Service Plan (the "Plan") on the following terms and conditions:
1. (a) The Company, on behalf of each Fund, is authorized to pay to
Voyageur Fund Distributors, Inc. ("VFD") a service fee, calculated and payable
monthly, at an annual rate of .05% of the average daily net asset value of each
such Fund.
(b) The monthly service fee is intended to compensate VFD for the ongoing
servicing and/or maintenance of shareholder accounts. Compensation may be paid
by VFD to persons, including employees of VFD and related organizations, and
institutions who respond to inquiries of Fund shareholders regarding their
ownership of shares or their accounts with the Funds or who provide other
administrative or accounting services not otherwise required to be provided by
the Company's investment adviser, sub-adviser, transfer agent or other agent of
the Company.
2. This Plan shall not take effect as to any Fund until the Plan, together
with any related agreements, has been approved for such Fund by votes of a
majority of both (a) the Board of Directors of the Company and (b) those
Directors of the Company who are not "interested persons" of the Company and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it (the "non-interested Directors") cast in person at
a meeting (or meetings) called for the purpose of voting on the Plan and such
related agreements.
3. After approval as set forth in paragraph 2, this Plan shall take effect.
The Plan shall continue in full force and effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in paragraph 2.
4. The President, Vice President, Treasurer or any Assistant Treasurer of
the Company shall provide the Board of Directors of the Company and the Board
shall review, at least quarterly, a written report of services performed by and
fees paid to VFD under this Plan.
5. This Plan may be terminated for any Fund at any time by vote of the
Directors of the Company, or by vote of a majority of the non-interested
Directors.
6. No material amendments to the Plan shall be made unless approved in the
manner provided in paragraph 2 hereof.
7. While the Plan is in effect the selection and nomination of the
non-interested Directors of the Company shall be committed to the discretion of
the non-interested Directors.
8. The Company shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 4 hereof, for a period of
not less than six years from the date of the Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
DORSEY & WHITNEY LLP
ATTORNEYS AT LAW
PILLSBURY CENTER SOUTH
220 SOUTH SIXTH STREET
MINNEAPOLIS, MN 55402-1498
Voyageur Funds, Inc.
90 South Seventh Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
We have acted as counsel to Voyageur Funds, Inc., a Minnesota corporation
(the "Fund"), in connection with a Registration Statement on Form N-1A (File No.
33-16270) (the "Registration Statement") relating to the sale by the Fund of an
indefinite number of the Series B, Series C and Series D shares of common stock
of the Fund, par value $.01 per share (the "Series B through Series D Common
Shares").
We have examined such documents and have reviewed such questions of law as
we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Fund, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Fund and of public officials. We have also
assumed that the Series B through Series D Common Shares will be issued and sold
as described in the Registration Statement.
Based on the foregoing, we are of the opinion that the Series B through
Series D Common Shares to be sold by the Fund pursuant to the Registration
Statement have been duly authorized by all requisite corporate action and, upon
issuance, delivery and payment therefore as described in the Registration
Statement, will be validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"General Counsel" on the back cover of the Prospectus constituting part of the
Registration Statement.
Dated: March /s/15 , 1996
Very truly yours,
KLP /s/ Dorsey & Whitney LLP
LETTER OF INVESTMENT INTENT
October 2, 1987
Voyageur U.S. Government Securities
Fund, Inc.
100 South Fifth Street, Suite 2300
Minneapolis, Minnesota 55402
Dear Sir/Madam:
In connection with the purchase by Voyageur Asset Management Group, Inc.
(The "Purchaser") of 11,000 Common Shares, Series A, $.01 par value per share,
(the "Stock") of Voyageur U.S. Government securities Fund, Inc., the Purchaser
hereby represents that it is acquiring the Stock for investment with no
intention of selling or otherwise disposing or transferring it or any interest
in it. The Purchase[r] hereby further agrees that any transfer of any of the
Stock or any interest in it shall be subject to the following conditions:
1. The Purchaser shall furnish you and counsel satisfactory to you
prior to the time of transfer, a written description of the proposed
transfer specifying its nature and consequence and giving the name of the
proposed transferee.
2. You shall have obtained from your counsel a written opinion stating
whether in the opinion of such counsel the proposed transfer may be
effected without registration under the Securities Act of 1933. If such
opinion states that such transfer may be so effected, the Purchaser shall
then be entitled to transfer the stock in accordance with the terms
specified in its description of the transaction to you. If such opinion
states that the proposed transfer may not be so effected, the Purchaser
will not be entitled to transfer the Stock unless the Stock is registered.
3. The Purchaser further agrees that all certificates representing the
Stock shall contain on the face thereof the following legend:
"The shares represented by this certificate may not be
transferred without (I) the opinion of counsel satisfactory to
Voyageur U.S. Government Securities Fund, Inc. That the transfer may
be legally made without registration under the Federal Securities Act
of 1933; or (ii) such registration."
The Purchaser hereby authorizes you to take such other action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of the stock, including the imposition of a
requirement that any transferee of the Stock sign a letter agreement similar to
this one.
Very Truly yours,
VOYAGEUR ASSET MANAGEMENT
GROUP, INC.
/s/Kenneth E. Dawkins
-----------------------------
Kenneth E. Dawkins, President
