AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 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. 21 [ ]
REGISTRATIONSTATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 21
(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):
/X/ immediately upon filing pursuant to paragraph (b) of Rule 485
on (specify date) pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on (specify date) pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a) (2) of Rule 485
on (specify date) pursuant to paragraph (a) (2) of Rule 485
The Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice was filed by the Registrant on August
27, 1996.
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
(VOYAGEUR FUNDS, INC.)
ITEM NO.
OF FORM N-1A CAPTION IN PROSPECTUS
1 Cover Page
2 Fund Expenses
3 Financial Highlights
4 Investment Objective and Policies; General Information
5 Management; General Information
6 Distributions to Shareholders and Taxes; General Information
7 How to Purchase Shares; Management; Determination of Net
Asset Value
8 How to Sell Shares; Reinstatement Privilege
9 Not Applicable
CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Restrictions
14 Directors and Executive Officers
15 Directors and Executive Officers; Additional Information
16 Directors and Executive Officers; The Investment Adviser and
Underwriter
17 The Investment Adviser and Underwriter
18 Not Applicable
19 Special Purchase Plans; Monthly Cash Withdrawal Plan; Net
Asset Value and Public Offering Price
20 Taxes
21 The Investment Adviser and Underwriter
22 Calculation of Performance Data
23 Financial Statements
U.S. Government Securities Fund
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
VOYAGEUR FUNDS (NOT PART OF PROSPECTUS); DATED OCTOBER 28, 1996
TABLE OF CONTENTS
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2 Purchase Information
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3 Fund Expenses
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4 Financial Highlights
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5 Investment Objective and Policies
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8 How to Purchase Shares
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13 Retirement Plans
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13 How to Sell Shares
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16 Reinstatement Privilege
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16 Exchange Privilege
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17 Management
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19 Determination of Net Asset Value
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19 Distributions to Shareholders and Taxes
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20 Investment Performance
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21 General Information
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VOYAGEUR FUNDS (NOT PART OF PROSPECTUS); DATED OCTOBER 28, 1996
PROSPECTUS
Dated October 28, 1996
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Voyageur U.S. Government Securities Fund (the "Fund"), a series of Voyageur
Funds, Inc. (the "Company"), is an open-end diversified management investment
company, commonly known as a mutual fund. The Fund currently offers its shares
in four classes (Class A, Class B, Class C and Institutional Class), each sold
pursuant to different sales arrangements and expenses.
The Fund's investment objective is to provide its shareholders with a high
level of current income consistent with prudent investment risk. The Fund will
seek to achieve its investment objective by investing in U.S. Treasury bills,
notes, bonds and other obligations issued or unconditionally guaranteed by the
U.S. Government, or otherwise backed by the full faith and credit of the U.S.
Government, and repurchase agreements fully secured by such obligations. The
Fund invests a significant portion of its assets in mortgage participation
certificates guaranteed by the Government National Mortgage Association.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. AN
INVESTMENT IN THE FUND IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND IS 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 THE FUND INVOLVES INVESTMENT RISK
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL DUE TO FLUCTUATIONS IN THE FUND'S NET
ASSET VALUE.
This Prospectus sets forth certain information about the Fund that a
prospective investor should know before investing. A Statement of Additional
Information (dated October 28, 1996) has been filed with the Securities and
Exchange Commission. The Statement of Additional Information is available free
of charge from the Fund 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.
- --------------------------------------------------------------------------------
Voyageur U.S. Government Securities Fund
- --------------------------------------------------------------------------------
90 SOUTH SEVENTH STREET, SUITE 4400
MINNEAPOLIS, MINNESOTA 55402
612.376.7000 OR 800.553.2143
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PURCHASE INFORMATION
The Fund offers investors the choice among four classes of shares which offer
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances.
CLASS A SHARES
An investor who purchases Class A shares pays a sales charge at the time of
purchase. As a result Class A shares are not subject to any charges when they
are redeemed (except for sales at net asset value in excess of $1 million which
are subject to a contingent deferred sales charge). The initial sales charge may
be reduced or waived for certain purchases. Class A shares are subject to a Rule
12b-1 fee payable at an annual rate of .25% of the Fund's average daily net
assets attributable to Class A shares. See "How to Purchase Shares--Class A
Shares."
CLASS B SHARES
Class B shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 4% if redeemed within six years of
purchase. Class B shares are also subject to a higher Rule 12b-1 fee than Class
A shares. The Rule 12b-1 fee for Class B shares will be paid at an annual rate
of 1% of the Fund's average daily net assets attributable to Class B shares.
Class B shares will automatically convert to Class A shares at net asset value
approximately eight years after purchase. Class B shares provide an investor the
benefit of putting all of the investor's dollars to work from the time the
investment is made, but until conversion will have a higher expense ratio and
pay lower dividends than Class A shares due to the higher Rule 12b-1 fee. See
"How to Purchase Shares--Class B Shares."
CLASS C SHARES
Class C shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of 1% if redeemed within one year of purchase.
Class C shares are also subject to a higher Rule 12b-1 fee than Class A shares.
The Rule 12b-1 fee for Class C shares will be paid at an annual rate of 1% of
the Fund's average daily net assets attributable to Class C shares. Class C
shares provide an investor the benefit of putting all of the investor's dollars
to work from the time the investment is made, but will have a higher expense
ratio and pay lower dividends than Class A shares due to the higher Rule 12b-1
fee. See "How to Purchase Shares--Class C Shares."
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available to a limited group of investors with no
sales charge at the time of purchase and no contingent deferred sales charge
upon redemption. Institutional Class shares are subject to a Rule 12b-1 fee
payable at an annual rate of .25% of the Fund's average daily net assets
attributable to Institutional Class shares. See "How to Purchase
Shares--Institutional Class Shares."
Investors making investments that qualify for reduced sales charges might
consider Class A shares. Other investors might consider Class B or Class C
shares because all of the purchase price is invested immediately. Orders for
Class B shares for $250,000 or more will be treated as orders for Class A shares
or such orders will be declined. Sales personnel may receive different
compensation depending on which class of shares they sell.
SHARES OF THE FUND 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.
<TABLE>
<CAPTION>
FUND EXPENSES
Shareholder
Transaction Expenses
--------------------
Maximum
Deferred
Sales Charge
Maximum as a % of
Sales Charge Original
Imposed on Purchase Annual Fund Operating Expenses
Purchases Price on (as a Percentage of Average Net Assets)
as a % of Redemption Manage- Total Fund
Offering Proceeds, as ment Rule Other Operating
Price Applicable Fee 12b-1 Fees Expenses Expenses
----- ---------- --- ---------- -------- --------
U.S. GOVERNMENT SECURITIES FUND
<S> <C> <C> <C> <C> <C> <C>
Class A 4.75% 1.00%(2) 0.50% 0.25% 0.22% 0.97%
Class B N/A(1) 4.00 0.50 1.00 0.13 1.63
Class C N/A(1) 1.00 0.50 1.00 0.20 1.70
Institutional N/A N/A 0.50 0.25 0.22 0.97
Class
</TABLE>
<TABLE>
<CAPTION>
FUND EXPENSES (CONTINUED)
Examples of Expenses I: An investor would pay the following
dollar amount of expenses on a $1,000 investment assuming a
5% annual return and redemption at the end of each period.
-------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
U.S. GOVERNMENT SECURITIES FUND
<S> <C> <C> <C> <C>
Class A $57 $77 $99 $161
Class B 57 81 109 175
Class C 27 54 92 201
Institutional 10 31 54 119
Class
Example of Expenses II: An investor would pay the following
dollar amount of expenses on the same investment (as above)
in Class B and Class C shares, assuming no redemption at the
end of each period.
------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
U.S. GOVERNMENT SECURITIES FUND
Class B $17 $51 $89 $175
Class C 17 54 92 201
</TABLE>
1 Class B and Class C shares are sold without a front end sales charge, but
their Rule 12b-1 fees may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front end sales charges.
2 A contingent deferred sales charge of 1% is imposed on certain redemptions
of Class A shares that were purchased without an initial sales charge as
part of an investment of $1 million or more. See "How to Purchase
Shares--Class A Shares."
THE EXAMPLES CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. The purpose of the above Fund Expenses table is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The information set forth in the table reflects
actual expenses for all classes of shares except Class B. With respect to Class
B shares, the table reflects expenses that would have been incurred by Class B
shareholders during the past year absent voluntary fee waivers and
reimbursements. During the fiscal year ended June 30, 1996, Voyageur Fund
Managers, Inc. ("Voyageur") voluntarily waived fees and reimbursed expenses for
Class B shares such that Total Fund Operating Expenses incurred by shareholders
were 1.46%. Future expenses may be greater or less than those shown. Voyageur
and Voyageur Fund Distributors, Inc. (the "Underwriter") are contractually
obligated to pay certain operating expenses of the Fund (including the
investment advisory, administrative and Rule 12b-1 fees) which exceed on an
annual basis 1.25% of the Fund's average daily net assets attributable to Class
A and Institutional Class shares and 2.00% of the Fund's average daily net
assets attributable to Class B and Class C shares, up to the combined amount of
the investment advisory and administrative services fees received from the Fund.
FINANCIAL HIGHLIGHTS
The following table shows certain per share data and selected information for a
share of capital stock outstanding during the indicated periods for the Fund.
This information has been audited by KPMG Peat Marwick LLP, independent
auditors, and should be read in conjunction with the financial statements of the
Fund contained in its annual report. An annual report of the Fund can be
obtained without charge by contacting the Fund at 800-545-3863. In addition to
financial statements, the annual report contains further information about
performance of the Fund.
<TABLE>
<CAPTION>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------- ------------------
DIVI-
NET DENDS
NET REALIZED FROM DISTRIB- NET NET
ASSET NET AND UN- NET UTIONS ASSET TOTAL ASSETS
VALUE INVEST- REALIZED INVEST- FROM VALUE INVEST- END OF
VOYAGEUR BEGINNING MENT GAINS ON MENT CAPITAL END OF MENT(3) PERIOD
FUND OF PERIOD INCOME SECURITIES INCOME GAINS PERIOD RETURNS (000S)
- ---- --------- ------ ---------- ------ ----- ------ --------------
U.S. GOVERNMENT SECURITIES FUND
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/96 10.37 0.63 ($0.23) ($0.61) -- 10.16 3.88% $ 68,442
6/30/95 9.76 0.62 0.63 (0.62) (0.02) 10.37 13.45 75,886
6/30/94 10.99 0.55 (0.94) (0.55) (0.29) 9.76 (3.95) 84,660
6/30/93 10.46 0.61 0.83 (0.61) (0.30) 10.99 14.25 112,604
6/30/92 9.99 0.67 0.76 (0.67) (0.29) 10.46 14.68 53,332
6/30/91 9.77 0.78 0.32 (0.78) (0.10) 9.99 11.67 22,176
6/30/90 10.05 0.82 (0.07) (0.82) (0.21) 9.77 7.89 8,326
6/30/89 9.98 0.88 0.07 (0.88) -- 10.05 10.05 20,137
11/2/87 (2) - 10.00 0.58 (0.02) (0.58) -- 9.98 5.76 10,048
6/30/88
CLASS B
6/30/96 10.38 0.57 (0.23) (0.55) -- 10.17 3.32 1,780
6/30/95 9.75 0.56 0.65 (0.56) (0.02) 10.38 12.90 139
6/7/94(2)- 10.05 0.01 (0.28) (0.01) (0.02) 9.75 (2.68) 24
6/30/94
CLASS C
6/30/96 10.36 0.55 (0.23) (0.53) -- 10.15 3.11 224
1/10/95(2) 9.48 0.27 0.88 (0.27) -- 10.36 12.73 221
- - 6/30/95
INSTITUTIONAL CLASS
6/30/96 10.37 0.63 (0.23) (0.61) -- 10.16 3.88 41,688
6/30/95 9.75 0.62 0.64 (0.62) (0.02) 10.37 13.57 54,445
6/7/94(2) 10.05 0.01 (0.28) (0.01) (0.02) 9.75 (2.64) 49,898
- - 6/30/94
</TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
RATIOS/SUPPLEMENTAL DATA
------------------------
RATIO OF
EXPENSES TO
AVERAGE
DAILY
RATIO NET ASSETS
OF NET ASSUMING NO
INVEST- VOLUNTARY
RATIO OF MENT WAIVERS,
EXPENSES INCOME PORT- REIM-
TO TO FOLIO BURSEMENTS
AVERAGE AVERAGE TURNOVER AND EXPENSE
NET ASSETS NET ASSETS RATE REDUCTIONS
---------- ---------- ---- ----------
CLASS A
6/30/96 0.97% 6.07% 145.35% 0.97%
6/30/95 0.95 6.38 144.39 0.95
6/30/94 0.96 5.10 124.38 0.96
6/30/93 1.10 5.61 175.02 1.14
6/30/92 1.00 6.60 198.54 1.25
6/30/91 0.95 7.95 186.15 1.25
6/30/90 1.25 8.35 130.97 1.25
6/30/89 0.82 8.97 186.97 1.25
11/2/87 (2) - 0.25(4) 8.64(4) 119.01 1.25
6/30/88
CLASS B
6/30/96 1.46 5.55 145.35 1.63
6/30/95 1.54 5.56 144.39 1.69
6/7/94(2)- 0.30(1) 0.11(1) 124.38 0.30(1)
6/30/94
CLASS C
6/30/96 1.70 5.33 145.35 1.70
1/10/95(2) 1.62(4) 5.10(4) 144.39 1.65
- - 6/30/95
INSTITUTIONAL CLASS
6/30/96 0.97 6.07 145.35 0.97
6/30/95 0.94 6.39 144.39 0.94
6/7/94(2) 0.25(1) 0.16(1) 124.38 0.25(1)
- - 6/30/94
NOTES TO FINANCIAL HIGHLIGHTS
1 Ratios presented for the period from June 7, 1994 to June 30, 1994 are not
annualized as they are not indicative of anticipated annual results.
2 Commencement of investment operations.
3 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
4 Annualized.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide its shareholders with a high level
of current income consistent with prudent investment risk. The Fund will seek to
achieve its investment objective by investing in U.S. Treasury bills, notes,
bonds and other obligations issued or unconditionally guaranteed by the U.S.
Government, or otherwise backed by the full faith and credit of the U.S.
Government ("U.S. Government Securities"), and repurchase agreements fully
secured by such obligations. The Fund invests a significant portion of its
assets in mortgage participation certificates guaranteed by the Government
National Mortgage Association ("GNMA Certificates"). The Fund's investment
objective is fundamental and may not be changed without shareholder approval.
There can, of course, be no assurance that the Fund will achieve its objective.
The Board of Directors may change any of the investment policies below that are
not designated fundamental.
Securities guaranteed by the full faith and credit of the U.S. Government
include a variety of securities, which differ in their interest rates,
maturities and dates of issuance. For example, Treasury bills have maturities of
one year or less, Treasury notes have maturities of one to ten years and
Treasury bonds generally have maturities of greater than ten years at the date
of issuance. GNMA Certificates are also backed by the full faith and credit of
the U.S. Treasury. Certain other obligations issued by federal agencies or
instrumentalities may also be supported by the full faith and credit of the U.S.
Treasury, depending on the circumstances of the issue.
The Fund may purchase U.S. Government Securities on a when-issued or
delayed delivery basis. The settlement dates for these types of transactions are
determined by mutual agreement of the parties and may occur a month or more
after the parties have agreed to the transaction, except that in no case will
the period from the trade date to the settlement date exceed 120 days.
Securities purchased on a when-issued or delayed delivery basis are subject to
market fluctuation and may decrease in value prior to their maturity, and no
interest accrues to the purchaser during the period prior to settlement. See
"Investment Policies and Restrictions" in the Statement of Additional
Information.
Although the securities in the Fund's portfolio are guaranteed as to
principal and interest by the U.S. Government or otherwise backed by the full
faith and credit of the U.S. Government, the market value of these securities
upon which the Fund's daily net asset value is based will fluctuate and will
tend to vary inversely with changes in prevailing interest rates. As a result,
the price per share a shareholder receives on redemption may be more or less
than the price originally paid for the shares. The dividends per share paid by
the Fund may also vary. In general, shorter term bonds are less sensitive to
interest rate changes, but longer term bonds generally offer higher yields.
GNMA CERTIFICATES
GNMA Certificates are mortgage backed securities representing part ownership of
a pool of mortgage loans. GNMA Certificates differ from bonds in that principal
is scheduled to be paid back by the borrower over the length of the loan rather
than returned in a lump sum at maturity. The Fund purchases "modified
pass-through" type GNMA Certificates for which the payment of principal and
interest on a timely basis is guaranteed, rather than the "straight
pass-through" certificates for which such guarantee is not available. The Fund
may also purchase "variable rate" GNMA Certificates and may purchase other types
which may be issued with GNMA's guarantee.
GNMA Certificates are created by an "issuer," which is a Federal Housing
Administration ("FHA") approved lender, such as a mortgage banker, commercial
banker or a savings and loan association, and which meets criteria imposed by
GNMA. The issuer assembles a specific pool of mortgages insured by either the
FHA or the Farmers Home Administration or guaranteed by the Veterans
Administration. Upon application by the issuer, and after approval by GNMA of
the pool, GNMA provides its commitment to guarantee timely payment of principal
and interest on the GNMA Certificates secured by the mortgages included in the
pool. The GNMA Certificates, endorsed by GNMA, are then sold by the issuer
through securities dealers.
The yield and payment characteristics of GNMA Certificates differ from
traditional debt securities. When mortgages in the pool underlying a GNMA
Certificate are prepaid by mortgagors or foreclosed, such principal payments are
passed through to the Certificate holders (such as the Fund). Accordingly, the
life of the GNMA Certificate is likely to be substantially shorter than the
stated maturity of the mortgages in the underlying pool. Because of such
variation in prepayment rates, it is not possible to predict the life of a
particular GNMA Certificate.
Payments to holders of GNMA Certificates consist of the monthly
distributions of interest and principal less the GNMA and issuer's fees. The
portion of the monthly payment which represents a return of principal may be
reinvested by the Fund in then-available GNMA obligations which may bear
interest at a rate higher or lower than the obligation from which the payment
was received. The actual yield to be earned by the holder of a GNMA Certificate
is calculated by dividing such payments by the purchase price paid for the GNMA
Certificate (which may be at a premium or a discount from the face value of the
Certificate). Unpredictable prepayments of principal, however, can greatly
change realized yields and in a period of declining interest rates it is more
likely that mortgages contained in GNMA pools will be prepaid thus reducing the
effective yield. Moreover, any premium paid on the purchase of a GNMA
Certificate will be lost if the obligation is prepaid. In periods of falling
interest rates this potential for pre-payment may reduce the general upward
price increase of GNMAs which might otherwise occur. As with other debt
instruments, the price of GNMAs is likely to decrease in times of rising
interest rates. Price changes of the GNMAs held by the Fund have a direct impact
on the net asset value per share of the Fund.
The GNMA guarantee of timely payment of principal and interest on GNMA
Certificates is backed by the full faith and credit of the U.S. Government. GNMA
may borrow U.S. Treasury funds to the extent needed to make payments under its
guarantee.
ZERO COUPON SECURITIES
The Fund may invest in "zero coupon" Treasury securities, which are U.S.
Treasury bills, notes and bonds that have been stripped of their unmatured
interest coupons. Zero coupon securities do not entitle the holder to any
periodic payments of interest prior to maturity. Rather, such securities usually
trade at a deep discount from their face value, and pay their entire face value
at maturity. The difference between the face value of the security (at maturity)
and the amount at which the security was purchased (I.E., the "discount")
represents interest income to the holder. Current federal tax law requires that
a holder of a zero coupon security accrue a portion of such discount as interest
income each year the security is held even though the holder receives no
interest payment in cash on the security during the year. As a registered
investment company, the 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. Zero coupon securities generally are 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.
SHORT-TERM TRADING
The Fund intends to use short-term trading of its securities as a means of
managing its portfolio to achieve its investment objective. The Fund will engage
in short-term trading if it believes the transactions, net of costs (including
commission, if any), will result in improving the income or, secondarily,
appreciation potential of its portfolio. The successful use of short-term
trading will depend upon the ability of the Fund to evaluate particular
securities and anticipate relevant market factors, including interest rate
trends and variations from such trends. Short-term trading such as that
contemplated by the Fund places a premium upon the ability of the Fund to obtain
relevant information, evaluate it promptly and take advantage of its evaluations
by completing transactions on a favorable basis. As used herein, "short-term
trading" means selling securities held for a relatively brief period of time,
usually less than three months.
The Fund's short-term trading may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve the
payment by the Fund of dealer mark-ups or underwriting commissions and of
transaction costs on the sale of securities as well as on reinvestment of the
proceeds in other securities. In addition, frequent changes in the Fund's
portfolio securities may result in greater tax liability to the Fund's
shareholders by reason of more short-term capital gains. See "Distributions to
Shareholders and Taxes" in this Prospectus and "The Investment Adviser and
Underwriter--Portfolio Transactions and Allocation of Brokerage" in the
Statement of Additional Information.
REPURCHASE AGREEMENTS
The Fund will also seek to achieve its investment objective through investing in
repurchase agreements. A repurchase agreement is an instrument under which the
purchaser acquires ownership of an obligation, but the seller agrees, at the
time of sale, to repurchase such obligation at a mutually agreed upon time and
price. Investments in repurchase agreements present the risk that the seller may
fail to repurchase the obligation according to the terms of the agreement.
Should the seller of a repurchase agreement fail to repurchase the underlying
obligation or should the seller become insolvent or involved in a bankruptcy
proceeding, the Fund might incur disposition costs and a loss if the proceeds of
the sale of such obligation to a third party are less than the repurchase price.
In order to minimize these risks, Voyageur will review the creditworthiness of
prospective parties to repurchase agreements under established guidelines and
repurchase agreements will be fully collateralized by U.S. Government Securities
of the same type as those in which the Fund may invest directly. Such collateral
will be maintained on a daily basis at the repurchase price or better.
HOW TO PURCHASE SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers investors the choice among four classes of shares which offer
different sales charges and bear different expenses. These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances. Page 2 of this Prospectus contains a
summary of these alternative purchase arrangements.
A broker-dealer may receive different levels of compensation depending on
which class of shares is sold. In addition, the Fund's Underwriter from time to
time pays certain additional cash incentives of up to $100 and/or non-cash
incentives such as vacations or merchandise to its investment executives and
other broker-dealers and financial institutions in consideration of their sales
of Fund shares. In some instances, the Underwriter pays amounts not to exceed
1.25% of the Fund's net assets (such as payments related to retention of shares
sold by a particular broker-dealer or financial institution for a specified
period of time) to broker-dealers and financial institutions who meet certain
objective standards developed by the Underwriter.
GENERAL PURCHASE INFORMATION
The minimum initial investment is $1,000, and the minimum additional investment
is $100. The Fund's shares may be purchased at the public offering price from
the Underwriter, from other broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have selling agreements with the
Underwriter, and from certain financial institutions that have selling
agreements with the Underwriter.
When orders are placed for shares of the Fund, the public offering price
used for the purchase will be the net asset value per share next determined,
plus the applicable sales charge, if any (determined daily). If an order is
placed with the Underwriter or other broker-dealer, the broker-dealer is
responsible for promptly transmitting the order to the Fund. The Fund reserves
the right, in its absolute discretion, to reject any order for the purchase of
shares.
Shares of the Fund may be purchased by opening an account either by mail or
by phone. Dividend income begins to accrue as of the opening of the New York
Stock Exchange (the "Exchange") on the day that payment is received. If payment
is made by check, payment is considered received on the day the check is
received if the check is drawn upon a member bank of the Federal Reserve System
within the Ninth Federal Reserve District (Michigan's Upper Peninsula,
Minnesota, Montana, North Dakota, South Dakota and northwestern Wisconsin). In
the case of other checks, payment is considered received when the check is
converted into "Federal Funds," i.e., monies of member banks within the Federal
Reserve System that are on deposit at a Federal Reserve Bank, normally within
two days after receipt.
An investor who may be interested in having shares redeemed shortly after
purchase should consider making unconditional payment by certified check or
other means approved in advance by the Underwriter. Payment of redemption
proceeds will be delayed as long as necessary to verify by expeditious means
that the purchase payment has been or will be collected. Such period of time
typically will not exceed 15 days.
AUTOMATIC INVESTMENT PLAN
Investors may make systematic investments in fixed amounts automatically on a
monthly basis through the Fund's Automatic Investment Plan. Additional
information is available from the Underwriter by calling 800-545-3863.
PURCHASES BY MAIL
To open an account by mail, complete the general authorization form attached to
this Prospectus, designate an investment dealer or other financial institution
on the form and mail it, along with a check payable to the Fund, to:
NW 9369
P.O. BOX 1450
MINNEAPOLIS, MN 55485-9369
PURCHASES BY TELEPHONE
To open an account by telephone, call 612-376-7014 or 800-545-3863 to obtain an
account number and instructions. Information concerning the account will be
taken over the phone. The investor must then request a commercial bank with
which he or she has an account and which is a member of the Federal Reserve
System to transmit Federal Funds by wire to the Fund as follows:
NORWEST BANK MINNESOTA, N.A., ABA #091000019
FOR CREDIT OF: VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
CHECKING ACCOUNT NO.: 872-458
ACCOUNT NUMBER: (ASSIGNED BY TELEPHONE)
Information on how to transmit Federal Funds by wire is available at any
national bank or any state bank that is a member of the Federal Reserve System.
The bank may charge the shareholder for the wire transfer. If the telephone
order and Federal Funds are received before the primary close of trading on the
Exchange, the order will be deemed to become effective at that time. Otherwise,
the order will be deemed to become effective as of the primary close of trading
on the Exchange on the next day the Exchange is open for trading. The investor
will be required to complete the general authorization form attached to this
Prospectus and mail it to the Fund after making the initial telephone purchase.
CLASS A SHARES--FRONT END SALES CHARGE ALTERNATIVE
The public offering price of Class A shares of the Fund is the net asset value
of the Fund's shares plus the applicable front end sales charge ("FESC"), which
will vary with the size of the purchase. The Fund receives the net asset value.
The FESC varies depending on the size of the purchase and is allocated between
the Underwriter and other broker-dealers.
The current sales charges are:
<TABLE>
<CAPTION>
DEALER
DISCOUNT
SALES CHARGE SALES CHARGE AS % OF
AS % OF AS % OF OFFERING
AMOUNT OF PURCHASE NET ASSET VALUE OFFERING PRICE PRICE1
- ------------------ --------------- -------------- ------
<S> <C> <C> <C>
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but less than $100,000 4.71 4.50 4.00
$100,000 but less than $250,000 3.90 3.75 3.25
$250,000 but less than $500,000 2.83 2.75 2.50
$500,000 but less than $1,000,000 2.30 2.25 2.00
$1,000,000 or more NAV3 NAV3 1.002
</TABLE>
1 Brokers and dealers who receive 90% or more of the sales charge may be
considered to be underwriters under the Securities Act of 1933, as amended.
2 The Underwriter intends to pay its investment executives and other
broker-dealers and banks that sell Fund shares, out of its own assets, a
fee of 1% of the offering price of sales of $1,000,000 or more, other than
on sales not subject to a contingent deferred sales charge.
3 Purchases of $1,000,000 or more, may be subject to a contingent deferred
sales charge at the time of redemption. See "-- Contingent Deferred Sales
Charge" below.
In connection with the distribution of the Fund's Class A shares, the
Underwriter is deemed to receive all applicable sales charges. The Underwriter,
in turn, pays its investment executives and other broker-dealers selling such
shares a "dealer discount," as set forth above. In the event that shares are
purchased by a financial institution acting as agent for its customers, the
Underwriter or the broker-dealer with whom such order was placed may pay all or
part of its dealer discount to such financial institution in accordance with
agreements between such parties.
SPECIAL PURCHASE PLANS--REDUCED SALES CHARGES
Certain investors (or groups of investors) may qualify for reductions in the
sales charges shown above. Investors should contact their broker-dealer or the
Fund for details about the Combined Purchase Privilege, Cumulative Quantity
Discount and Letter of Intention plans. Descriptions are also included with the
general authorization form and in the Statement of Additional Information. These
special purchase plans may be amended or eliminated at any time by the
Underwriter without notice to existing Fund shareholders.
RULE 12B-1 FEES
Class A shares are subject to a Rule 12b-1 fee payable at an annual rate of .25%
of the average daily net assets of the Fund attributable to Class A shares. All
or a portion of such fees are paid quarterly to financial institutions and
service providers with respect to the average daily net assets of the Fund
attributable to shares sold or serviced by such institutions and service
providers. For additional information about this fee, see "Management--Plan of
Distribution" below.
CONTINGENT DEFERRED SALES CHARGE
Although there is no initial sales charge on purchases of Class A shares of
$1,000,000 or more, the Underwriter pays investment dealers, out of its own
assets, a fee of 1% of the offering price of such shares. If these shares are
redeemed within two years after purchase, the redemption proceeds will be
reduced by a contingent deferred sales charge ("CDSC") of 1%. For additional
information, see "How to Sell Shares--Contingent Deferred Sales Charge."
WAIVER OF SALES CHARGES
Class A shares will be issued at net asset value, without a front-end or
deferred sales charge, if the purchase of such shares is funded by the proceeds
from the redemption of shares of any unrelated open-end investment company that
charges a front-end sales charge and, in certain circumstances, a contingent
deferred sales charge. In order to exercise this privilege, the purchase order
must be received by the Fund within 60 days after the redemption of shares of
the unrelated investment company.
CLASS B SHARES--CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
The public offering price of Class B shares of the Fund is the net asset value
of such shares. Class B shares are sold without an initial sales charge so that
the Fund receives the full amount of the investor's purchase. However, a CDSC of
up to 4% will be imposed if shares are redeemed within six years of purchase.
For additional information, see "How to Sell Shares--Contingent Deferred Sales
Charge." In addition, Class B shares are subject to higher Rule 12b-1 fees as
described below. The CDSC will depend on the number of years since the purchase
was made, according to the following table:
CDSC AS A % OF
CDSC PERIOD AMOUNT REDEEMED (1)
- ----------- -------------------
1st year after purchase 4%
2nd year after purchase 4
3rd year after purchase 3
4th year after purchase 3
5th year after purchase 2
6th year after purchase 1
Thereafter 0
1 The CDSC will be calculated on an amount equal to the lesser of the net
asset value of the shares at the time of purchase or the net asset value at
the time of redemption.
Proceeds from the CDSC are paid to the Underwriter and are used to defray
expenses of the Underwriter related to providing distribution-related services
to the Fund in connection with the sale of Class B shares, such as the payment
of compensation to selected broker-dealers and for selling Class B shares. The
combination of the CDSC and the Rule 12b-1 fee enables the Fund to sell the
Class B shares without deduction of a sales charge at the time of purchase.
Although Class B shares are sold without an initial sales charge, the
Underwriter pays to brokers who sell Class B shares a sales commission equal to
3% of the amount invested and an ongoing annual servicing fee of .15% (paid
quarterly) calculated on the net assets attributable to sales made by such
broker-dealers.
RULE 12B-1 FEES
Class B shares are subject to a Rule 12b-1 fee payable at an annual rate of 1%
of the average daily net assets of the Fund attributable to Class B shares. The
higher Rule 12b-1 fee will cause Class B shares to have a higher expense ratio
and to pay lower dividends than Class A shares. For additional information about
this fee, see "Fund Expenses" and "Management--Plan of Distribution."
CONVERSION FEATURE
On the first business day of the month eight years after the purchase date,
Class B shares will automatically convert to Class A shares and will no longer
be subject to a higher Rule 12b-1 fee. Such conversion will be on the basis of
the relative net asset values of the two classes. Class A shares issued upon
such conversion will not be subject to any FESC or CDSC. Class B shares acquired
by exchange from Class B shares of another Voyageur Fund will convert into Class
A shares based on the time of the initial purchase. Similarly, Class B shares
acquired by exercise of the Reinstatement Privilege will convert into Class A
shares based on the time of the original purchase of Class B shares. See
"Reinstatement Privilege." Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date of issuance of
such shares.
CLASS C SHARES--LEVEL LOAD ALTERNATIVE
The public offering price of Class C shares of the Fund is the net asset value
of such shares. Class C shares are sold without an initial sales charge so that
the Fund receives the full amount of the investor's purchase. However, a CDSC of
1% will be imposed if shares are redeemed within one year of purchase. For
additional information, see "How to Sell Shares--Contingent Deferred Sales
Charge." In addition, Class C shares are subject to higher annual Rule 12b-1
fees as described below.
RULE 12B-1 FEES
Class C shares are subject to a Rule 12b-1 fee payable at an annual rate of 1%
of the average daily net assets of the Fund attributable to Class C shares. The
higher Rule 12b-1 fee will cause Class C shares to have a higher expense ratio
and to pay lower dividends than Class A shares. For additional information about
this fee, see "Fund Expenses" and "Management--Plan of Distribution."
Proceeds from the CDSC are paid to the Underwriter and are used to defray
expenses of the Underwriter related to providing distribution-related services
to the Fund in connection with the sale of Class C shares, such as the payment
of compensation to selected broker-dealers and for selling Class C shares. The
combination of the CDSC and the Rule 12b-1 fee enables the Fund to sell the
Class C shares without deduction of a sales charge at the time of purchase.
Although Class C shares are sold without an initial sales charge, the
Underwriter pays to brokers who sell Class C shares a sales commission equal to
1% of the amount invested and an ongoing annual servicing fee of .75% (paid
quarterly commencing in the thirteenth month after the sale of such shares)
calculated on the net assets attributable to sales made by such broker-dealers.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available to a limited group of investors with no
sales charge at the time of purchase and no contingent deferred sales charge
upon redemption. Institutional Class shares are subject to a Rule 12b-1 fee
payable at an annual rate of .25% of the Fund's average daily net assets
attributable to Institutional Class shares.
The investors who may purchase Institutional Class shares include: (a)
officers and directors of the Fund; (b) officers, directors and full-time
employees of Dougherty Financial Group, Inc., ("DFG"), and Pohlad Companies, and
officers, directors and full-time employees of parents and subsidiaries of the
foregoing companies; (c) officers, directors and full-time employees of
investment advisers of other mutual funds subject to a sales charge and included
in any other family of mutual funds that includes any Voyageur Fund as a member
("Other Load Funds"), and officers, directors and full-time employees of
parents, subsidiaries and corporate affiliates of such investment advisers; (d)
spouses and lineal ancestors and descendants of the officers, directors/trustees
and employees referenced in clauses (a), (b) and (c), and lineal ancestors and
descendants of their spouses; (e) investment executives and other employees of
banks and dealers that have selling agreements with the Underwriter and parents,
spouses and children under the age of 21 of such investment executives and other
employees; (f) trust companies and bank trust departments for funds held in a
fiduciary, agency, advisory, custodial or similar capacity; (g) any state or any
political subdivision thereof or any instrumentality, department, authority or
agency of any state or political subdivision thereof; (h) partners and full-time
employees of the Fund's counsel; (i) managed account clients of Voyageur,
clients of investment advisers affiliated with Voyageur and other registered
investment advisers and their clients (the Fund may be available through a
broker-dealer which charges a transaction fee for purchases and sales); (j)
"wrap accounts" for the benefit of clients of financial planners adhering to
certain standards established by Voyageur; (k) tax-qualified employee benefit
plans for employees of DFG and its subsidiaries and (l) employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") (which does not include Individual Retirement Accounts) and
custodial accounts under Section 403(b)(7) of the Code (also known as
tax-sheltered annuities).
RETIREMENT PLANS
Shares of the Fund may be an appropriate investment medium for retirement plans,
including: (a) Keogh (HR-10) plans (for self-employed individuals); (b)
qualified corporate pension and profit sharing plans (for employees); (c)
Individual Retirement Accounts (IRAs) (for employees and their spouses); and (d)
tax-deferred investment plans (for employees of public school systems and
certain types of charitable organizations). Certain retirement plans may qualify
to purchase Institutional Class shares at net asset value with no sales charge
at the time of purchase.
Persons desiring information about such plans, including their
availability, should contact the Fund. All retirement plans summarized above
involve a long-term commitment of assets and are subject to various legal
requirements and restrictions. The legal and tax implications may vary according
to the circumstances of the individual investor. Therefore, the investor is
urged to consult with an attorney or tax adviser prior to the establishment of
such a plan.
HOW TO SELL SHARES
The Fund will redeem its shares in cash at the net asset value next determined
after receipt of a shareholder's written request for redemption in good order
(see below). If shares for which payment has been collected are redeemed,
payment must be made within seven days. Shareholders will not earn any income on
redeemed shares on the redemption date. The 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 the 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.
The Fund reserves the right and currently plans to redeem Fund shares and
mail the proceeds to the shareholder if at any time the value of Fund shares in
the account falls below a specified value, currently set at $250. Shareholders
will be notified and will have 60 days to bring the account up to the required
value before any redemption action will be taken by the Fund.
CONTINGENT DEFERRED SALES CHARGE
The CDSC will be calculated on an amount equal to the lesser of the net asset
value of the shares at the time of purchase or their net asset value at the time
of redemption. No charge will be imposed on increases in net asset value above
the initial purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains distributions.
In determining whether a CDSC is payable with respect to any redemption,
the calculation will be determined in the manner that results in the lowest rate
being charged. Therefore, it will be assumed that shares that are not subject to
the CDSC are redeemed first, shares subject to the lowest level of CDSC are
redeemed next, and so forth. If a shareholder owns Class A and either Class B or
Class C shares, then absent a shareholder choice to the contrary, Class B or
Class C shares not subject to a CDSC will be redeemed in full prior to any
redemption of Class A shares not subject to a CDSC.
The CDSC does not apply to: (a) redemptions of Class B shares in connection
with the automatic conversion to Class A shares; (b) redemptions of shares when
the Fund exercises its right to liquidate accounts which are less than the
minimum account size; and (c) redemptions in the event of the death or
disability of the shareholder within the meaning of Section 72(m)(7) of the
Internal Revenue Code.
If a shareholder exchanges Class A, Class B or Class C shares subject to a
CDSC for Class A, Class B or Class C shares, respectively, of a different
Voyageur Fund, the transaction will not be subject to a CDSC. However, when
shares acquired through the exchange are redeemed, the shareholder will be
treated as if no exchange took place for the purpose of determining the CDSC.
Fund shares are exchangeable for shares of any money market fund available
through Voyageur. No CDSC will be imposed at the time of any such exchange;
however, the shares acquired in any such exchange will remain subject to the
CDSC and the period during which such shares represent shares of the money
market fund will not be included in determining how long the shares have been
held. Any CDSC due upon a redemption of Fund shares will be reduced by the
amount of any Rule 12b-1 payments made by such money market fund with respect to
such shares.
The Underwriter, upon notification, intends to provide, out of its own
assets, a pro rata refund of any CDSC paid in connection with a redemption of
Class A, Class B or Class C shares of the Fund (by crediting such refunded CDSC
to such shareholder's account) if, within 90 days of such redemption, all or any
portion of the redemption proceeds are reinvested in shares of the same class in
any of the Voyageur Funds. Any reinvestment within 90 days of a redemption to
which the CDSC was paid will be made without the imposition of an FESC but will
be subject to the same CDSC to which such amount was subject prior to the
redemption. The amount of CDSC will be calculated from the original investment
date.
EXPEDITED REDEMPTIONS
The Fund offers several expedited redemption procedures, described below, which
allow a shareholder to redeem Fund shares at net asset value determined on the
same day that the shareholder places the request for redemption of those shares.
Pursuant to these expedited redemption procedures, the Fund will redeem its
shares at their net asset value next determined following the Fund's receipt of
the redemption request. The Fund reserves the right at any time to suspend or
terminate the expedited redemption procedures or to impose a fee for this
service. There is currently no additional charge to the shareholder for use of
the Fund's expedited redemption procedures.
EXPEDITED TELEPHONE REDEMPTION
Shareholders redeeming at least $1,000 and no more than $50,000 (for which
certificates have not been issued) may redeem by telephoning the Fund directly
at 612-376-7014 or 800-545-3863. The applicable section of the general
authorization form must have been completed by the shareholder and filed with
the Fund before the telephone request is received. The proceeds of the
redemption will be paid by check mailed to the shareholder's address of record
or, if requested at the time of redemption, by wire to the bank designated on
the general authorization form. The Fund will employ reasonable procedures to
confirm that telephone instructions are genuine, including requiring that
payment be made only to the shareholder's address of record or to the bank
account designated on the authorization form and requiring certain means of
telephonic identification. Voyageur and the Distributor will not be liable for
following instructions which are reasonably believed to be genuine.
EXPEDITED REDEMPTIONS THROUGH CERTAIN BROKER-DEALERS
Certain broker-dealers who have sales agreements with the Underwriter may allow
their customers to effect a redemption of shares of the Fund purchased through
such a broker-dealer by notifying the broker-dealer of the amount of shares to
be redeemed. The broker-dealer is then responsible for promptly placing the
redemption request with the Fund on the customer's behalf. Payment will be made
to the shareholder by check or wire sent to the broker-dealer. Broker-dealers
offering this service may impose a fee or additional requirements for such
redemptions.
GOOD ORDER
"Good order" means that stock certificates, if issued, must accompany the
request for redemption and must be duly endorsed for transfer, or must be
accompanied by a duly executed stock power. If no stock certificates have been
issued, a written request to redeem must be made. Stock certificates will not be
issued for Class B, Class C or Institutional Class shares. In any case, the
shareholder must execute the redemption request exactly as the shares are
registered. If the redemption proceeds are to be paid to the registered
holder(s), a signature guarantee is not normally required. A signature guarantee
is required in certain other circumstances, for example, to redeem more than
$50,000 or to have a check mailed other than to the shareholder's address of
record. See "Other Information" in the Statement of Additional Information.
Voyageur may waive certain of these redemption requirements at its own risk, but
also reserves the right to require signature guarantees on all redemptions, in
contexts perceived by Voyageur to subject the Fund to an unusual degree of risk.
MONTHLY CASH WITHDRAWAL PLAN
An investor who owns or buys shares of the Fund valued at $10,000 or more at the
current offering price may open a Withdrawal Plan and have a designated sum of
money paid monthly to the investor or another person. Deferred sales charges may
apply to monthly redemptions of Class B or Class C shares. For additional
information see "Monthly Cash Withdrawal Plan" in the Statement of Additional
Information.
REINSTATEMENT PRIVILEGE
An investor in the Fund whose shares have been redeemed and who has not
previously exercised the Reinstatement Privilege as to the Fund may reinvest the
proceeds of such redemption in shares of the same class of any Voyageur Fund
eligible for sale in the shareholder's state of residence (provided that the
proceeds of a redemption of Institutional Class shares may be reinvested in
Class A shares of any Voyageur Fund). Reinvestment will be at the net asset
value of Fund shares next determined after the Underwriter receives a check
along with a letter requesting reinstatement. The Underwriter must receive the
letter requesting reinstatement within 365 days following the redemption.
Investors who desire to exercise the Privilege should contact their
broker-dealer or the Fund.
Exercise of the Reinstatement Privilege does not alter the income tax
treatment of any capital gains realized on a sale of Fund shares, but to the
extent that any shares are sold at a loss and the proceeds are reinvested within
30 days in shares of the Fund, some or all of the loss may not be allowed as a
deduction, depending upon the number of shares reacquired.
EXCHANGE PRIVILEGE
Except as described below, shareholders may exchange some or all of their Fund
shares for shares of another Voyageur Fund, provided that the shares to be
acquired in the exchange are eligible for sale in the shareholder's state of
residence. Class A and Institutional Class shareholders may exchange their
shares for Class A shares of other Voyageur Funds. Class B shareholders may
exchange their shares for the Class B shares of other Voyageur Funds and Class C
shareholders may exchange their shares for the Class C shares of other Voyageur
Funds. Shares of each class may also be exchanged for shares of any money market
fund available through Voyageur.
The minimum amount which may be exchanged is $1,000. The exchange will be
made on the basis of the relative net asset values next determined after receipt
of the exchange request. For a discussion of issues relating to the contingent
deferred sales charge upon such exchanges, see "How to Sell Shares--Contingent
Deferred Sales Charge." There is no specific limit on exchange frequency;
however, the Fund is intended for long term investment and not as a trading
vehicle. Voyageur reserves the right to prohibit excessive exchanges (more than
four per quarter). Voyageur also reserves the right, upon 60 days prior notice,
to restrict the frequency of, or otherwise modify, condition, terminate or
impose charges upon, exchanges. An exchange is considered to be a sale of shares
on which the investor may realize a capital gain or loss for income tax
purposes. Exchange requests may be placed directly with the fund in which the
investor owns shares, through the Adviser or through other broker-dealers. An
investor considering an exchange should obtain a prospectus of the fund to be
acquired and should read such prospectus carefully. Contact the Fund, the
Adviser or any of such other broker-dealers for further information about the
exchange privilege.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND
The Board of Directors of the Company is responsible for managing the business
and affairs of the Company. The names, addresses, principal occupations and
other affiliations of Directors and executive officers of the Company are set
forth in the Statement of Additional Information.
INVESTMENT ADVISER; PORTFOLIO MANAGEMENT
Voyageur has been retained under an investment advisory agreement (the "Advisory
Agreement") with the Company to act as the Fund's investment adviser, subject to
the authority of the Board of Directors. Voyageur and the Underwriter are each
indirect wholly-owned subsidiaries of Dougherty Financial Group, Inc. ("DFG"),
which is owned approximately 49% by Michael E. Dougherty, 49% by Pohlad
Companies and less than 1% by certain retirement plans for the benefit of DFG
employees. Mr. Dougherty co-founded the predecessor of DFG in 1977 and has
served as DFG's Chairman of the Board and Chief Executive Officer since
inception. Pohlad Companies is a holding company owned in equal parts by each of
James O. Pohlad, Robert C. Pohlad and William M. Pohlad. As of October 1, 1996,
Voyageur served as the manager to six closed-end and ten open-end investment
companies (comprising 33 separate investment portfolios), administered numerous
private accounts and together with its affiliates managed approximately $11.5
billion in assets. Voyageur's principal business address is 90 South Seventh
Street, Suite 4400, Minneapolis, Minnesota 55402.
The Fund pays Voyageur a monthly investment advisory and management fee
equivalent on an annual basis to .50% of its average daily net assets.
Jane M. Wyatt has had day-to-day portfolio management responsibility for
the Fund since 1990. Ms. Wyatt is an Executive Vice President of the Company and
has been Chief Investment Officer of Voyageur and a Director of Voyageur and the
Distributor since 1993. Previously, she had been an Executive Vice President of
Voyageur since 1992 and a Vice President of Voyageur from 1989 to 1992. Ms.
Wyatt has approximately twenty years of risk management experience.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution under the 1940 Act (the "Plan") and
has entered into a Distribution Agreement with Voyageur Fund Distributors, Inc.
(the "Underwriter"). Pursuant to the Plan, the Fund pays the Underwriter a Rule
12b-1 fee at an annual rate of .25% of the Fund's average daily net assets
attributable to Class A shares and Institutional Class shares and 1% of the
Fund's average daily net assets attributable to Class B and Class C shares for
servicing of shareholder accounts and distribution-related services. Payments
made under the Plan are not tied exclusively to expenses actually incurred by
the Underwriter and may exceed such expenses.
All of the Rule 12b-1 fee attributable to Class A shares and Institutional
Class shares, and a portion of the fee equal to .25% of the average daily net
assets of the Fund attributable to each of the Class B shares and Class C shares
constitutes a shareholder servicing fee designed to compensate the Underwriter
for the provision of certain services to shareholders. The services provided may
include personal services provided to shareholders, such as answering
shareholder inquiries and providing reports and other information, and services
related to the maintenance of shareholder accounts. The Underwriter may use the
Rule 12b-1 fee or a portion thereof to make payments to qualifying
broker-dealers and financial institutions that provide such services.
That portion of the Rule 12b-1 fee equal to .75% of the average daily net
assets of the Fund attributable to Class B shares and Class C shares,
respectively, constitutes a distribution fee designed to compensate the
Underwriter for advertising, marketing and distributing the Class B and Class C
shares. In connection therewith, the Underwriter may provide initial and ongoing
sales compensation to its investment executives and other broker-dealers for
sales of Class B and Class C shares and may pay for other advertising and
promotional expenses in connection with the distribution of Class B and Class C
shares. The distribution fee attributable to Class B and Class C shares is
designed to permit an investor to purchase such shares through investment
executives of the Underwriter and other broker-dealers without the assessment of
an initial sales charge and at the same time to permit the Underwriter to
compensate its investment executives and other broker-dealers in connection with
the sale of such shares.
CUSTODIAN; DIVIDEND DISBURSING, TRANSFER, ADMINISTRATIVE AND ACCOUNT SERVICES
AGENT
Norwest Bank Minnesota, N.A. serves as the custodian of the Fund's portfolio
securities and cash.
Voyageur acts as the Fund's dividend disbursing, transfer, administrative
and accounting services agent to perform dividend-paying functions, to calculate
the Fund's daily share price, to maintain shareholder records and to perform
certain regulatory and compliance related services for the Fund. The fees paid
for these services are based on the Fund's assets and include reimbursement of
out-of-pocket expenses. Voyageur receives a monthly fee from the Fund equal to
the sum of (a) $1.33 per shareholder account per month, (b) a monthly fee
ranging from $1,000 to $1,500 based on the average daily net assets of the Fund
and (c) a percentage of average daily net assets which ranges from 0.02% to
0.11% based on the average daily net assets of the Fund. See "The Investment
Adviser and Underwriter--Expenses of the Fund" in the Statement of Additional
Information.
Certain institutions may act as sub-administrators for the Fund pursuant to
contracts with Voyageur, whereby the institutions will provide shareholder
services to their customers. Voyageur will pay the sub-administrators' fees out
of its own assets. The fee paid by Voyageur to any sub-administrator will be a
matter of negotiation between the institution and Voyageur based on the extent
and quality of the services provided.
EXPENSES OF THE FUND
Voyageur is contractually obligated to pay certain operating expenses of the
Fund (including the investment advisory, administrative services and Rule 12b-1
fees but excluding interest expense, taxes, brokerage fees and commissions)
which exceed on an annual basis 1.25% of the Fund's average daily net assets
attributable to Class A and Institutional Class shares and 2.00% of the Fund's
average daily net assets attributable to Class B and Class C shares up to the
combined amount of the investment advisory and administrative services fees
received from the Fund. In addition, Voyageur and the Underwriter reserve the
right to voluntarily waive their fees in whole or part and to voluntarily absorb
certain other Fund expenses.
The Fund's expenses include, among others, fees of directors, expenses of
directors' and shareholders' meetings, insurance premiums, expenses of
redemption of shares, expenses of the issue and sale of shares (to the extent
not otherwise borne by the Underwriter), expenses of printing and mailing stock
certificates and shareholder statements, association membership dues, charges of
the Fund's custodian, bookkeeping, auditing and legal expenses, fees and
expenses of registering the Fund and its shares with the Securities and Exchange
Commission and registering or qualifying its shares under state securities laws
and expenses of preparing and mailing prospectuses and reports to existing
shareholders.
PORTFOLIO TRANSACTIONS
The Fund's portfolio transactions will generally be with the issuer or with
dealers acting on a principal basis. However, portfolio transactions for the
Fund which are executed on an agency basis may be effected through the
Underwriter or another broker-dealer affiliated directly or indirectly with
Voyageur, provided the commissions, fees or other remuneration received by such
affiliated broker-dealer are reasonable and fair compared to the commissions,
fees or other remuneration paid to other broker-dealers in connection with
comparable transactions involving similar securities being purchased or sold
during a comparable period of time. It is not anticipated that the Fund will
effect any brokerage transactions with any affiliated broker-dealer, including
the Underwriter, unless it would be to the Fund's advantage. Voyageur may
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute the Fund's securities transactions.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund's shares is determined once daily, Monday
through Friday, as of 3:00 p.m., Minneapolis time (the primary closing time of
the Exchange), on each business day on which the Exchange is open for trading.
Net asset value per share of each class of Fund shares is determined by
dividing the value of the securities, cash and other assets of the Fund
attributable to such class less all liabilities attributable to such class by
the total number of shares of such class outstanding. For purposes of
determining the net assets of the Fund, U.S. Government Securities are stated at
an institutionally determined valuation based generally upon the average of last
reported bid and asked prices. Short-term debt securities having remaining
maturities of 60 days or less are stated at amortized cost which approximates
market. All other securities and other assets are valued in good faith at fair
value by Voyageur in accordance with procedures adopted by the Board of
Directors.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
The Fund declares a distribution from net investment income on each day that the
Fund is open for business. Net investment income consists of interest accrued on
portfolio investments of the Fund, less accrued expenses. Distributions of net
investment income and realized short-term capital gains, if any, are paid
monthly. The distribution of short-term capital gains on a monthly basis could
potentially affect the future timing of investment purchases and sales. Net
realized long-term capital gains, if any, are distributed annually.
Distributions paid by the Fund, if any, with respect to Class A, Class B, Class
C and Institutional Class shares will be calculated in the same manner, at the
same time, on the same day and will be in the same amount, except that the
higher Rule 12b-1 fees applicable to Class B and Class C shares will be borne
exclusively by such shares. The per share distributions on Class B and Class C
shares will be lower than the per share distributions on Class A shares and
Institutional Class shares as a result of the higher Rule 12b-1 fees applicable
to Class B and Class C shares.
Shareholders receive distributions from net investment income and capital
gains in additional shares of the class owned by such shareholders at net asset
value, without any sales charge, unless they elect otherwise. If cash payment is
requested, a check will be mailed within three business days after the payment
date. The Fund sends its shareholders no less than quarterly statements with
details of any reinvested dividends.
The Fund qualified during its last taxable year and 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 it does so,
the Fund will not be liable for federal income taxes to the extent it
distributes its taxable income to its shareholders.
Distributions by the Fund are generally taxable to shareholders, whether
received in cash or in additional shares of the Fund. Distributions from the
Fund's net investment income and net short-term capital gains are taxable to
shareholders as ordinary income. Distributions from the Fund designated as
long-term capital gain distributions will be reportable by 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 Fund. Shareholders will be notified annually as to the
amount, nature and federal income tax status of dividends and distributions.
The foregoing discussion of federal income tax consequences is based upon
tax laws and regulations in effect on the date of this Prospectus and is subject
to change by legislative or administrative action. For additional information,
see "Taxes" in the Statement of Additional Information. Prospective investors
are advised to consult with their tax advisers concerning the application of
state and local tax laws to investments in and distributions by the Fund.
INVESTMENT PERFORMANCE
A dvertisements and other sales literature for the Fund may refer to "yield,"
"average annual total return," "cumulative total return" and "current
distribution rate" and may compare such performance quotations with published
indices and comparable quotations of other funds. Performance quotations are
computed separately for Class A, Class B, Class C and Institutional Class
shares. All such figures are based on historical earnings and performance and
are not intended to be indicative of future performance. Additionally,
performance information may not provide a basis for comparison with other
investments or other mutual funds using a different method of calculating
performance. The investment return on and principal value of an investment in
the Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. Cumulative total return is calculated by subtracting a hypothetical
$1,000 payment to the Fund from the redeemable value of such payment at the end
of the advertised period, dividing such difference by $1,000 and multiplying the
quotient by 100. In calculating average annual and cumulative total return, the
maximum sales charges is deducted from the hypothetical investment and all
dividends and distributions are assumed to be reinvested. Such total return
quotations may be accompanied by quotations which do not reflect the reduction
in value of the initial investment due to the sales charge, and which thus will
be higher.
In addition to advertising total return and yield, comparative performance
information may be used from time to time in advertising the Fund's shares,
including data from Lipper Analytical Services, Inc. and Morningstar.
For Fund performance information and daily net asset value quotations,
investors may call 612-376-7014 or 800-545-3863. For additional information
regarding the calculation of the Fund's yield, average annual total return,
cumulative total return and current distribution rate, see "Calculation of
Performance Data" in the Statement of Additional Information.
GENERAL INFORMATION
The Fund sends to its shareholders six-month unaudited and annual audited
financial statements.
The shares of the Fund constitute a separate series of Voyageur Funds,
Inc., a Minnesota corporation which issues shares of common stock with a $.01
par value per share. The Fund is represented by the Series A common shares of
the Company, incorporated on April 15, 1987. All shares of the Company 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 Board of Directors is empowered to issue other series of
common stock without shareholder approval.
The Fund currently offers its shares in four classes, each with different
sales arrangements and bearing different expenses. Class A, Class B, Class C and
Institutional Class shares each represent interests in the assets of the Fund
and have identical voting, dividend, liquidation and other rights on the same
terms and conditions except that expenses related to the distribution of each
class are borne solely by such class and each class of shares has exclusive
voting rights with respect to provisions of the Fund's Rule 12b-1 distribution
plan which pertain to that particular class and other matters for which separate
class voting is appropriate under applicable law.
Fund shares are freely transferable, are entitled to dividends as declared
by the Board, and, in liquidation, are entitled to receive the net assets, if
any, of the Fund. The Fund does not generally hold annual meetings of
shareholders and will do so only when required by law.
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, the
shares of all series and classes vote together as one. On an issue affecting
only a particular series or class, the shares of the affected series or class
vote as a separate series or class. An example of such an issue would be a
fundamental investment restriction pertaining to only one series.
The assets received by the Company for the issue or sale of shares of each
series or class thereof, and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are allocated to such series, and in
the case of a class, allocated to such class, and constitute the underlying
assets of such series or class. The underlying assets of each series, or class
thereof, are required to be segregated on the books of account, and are to be
charged with the expenses in respect to such series or class thereof, 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
are 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. The
Company's Articles of Incorporation limit the liability of the Board members to
the fullest extent permitted by law. For a further discussion of the above
matters, see "Additional Information" in the Statement of Additional
Information.
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS (AND/OR IN THE STATEMENT OF ADDITIONAL INFORMATION REFERRED TO
ON THE COVER PAGE OF THIS PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND
OR VOYAGEUR FUND DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN THE STATE IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
(This page has been left blank intentionally.)
PART B
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
A SEPARATELY MANAGED SERIES OF VOYAGEUR FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 28, 1996
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Fund's Prospectus dated October 28, 1996. A copy of
the Prospectus may be obtained free of charge by contacting the Fund at 90 South
Seventh Street, Suite 4400, Minneapolis, Minnesota 55402. Telephone:
612-376-7000 or 800-525-6584.
TABLE OF CONTENTS
PAGE
----
Investment Policies and Restrictions.........................................B-2
Directors and Executive Officers.............................................B-4
The Investment Adviser and Underwriter.......................................B-7
Net Asset Value and Public Offering Price...................................B-15
Taxes.......................................................................B-16
Bank Sales..................................................................B-17
Special Purchase Plans......................................................B-18
Calculation of Performance Data.............................................B-21
Monthly Cash Withdrawal Plan................................................B-24
Additional Information......................................................B-25
Financial Statements........................................................B-27
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 October 28, 1996 and, if given or made, such
information or representations may not be relied upon as having been authorized
by the Fund. This Statement of Additional Information does not constitute an
offer to sell securities in any state or jurisdiction in which such offering may
not lawfully be made. The delivery of this Statement of Additional Information
at any time shall not imply that there has been no change in the affairs of the
Fund since the date hereof.
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT POLICIES
WHEN ISSUED AND DELAYED DELIVERY SECURITIES. At the time the Fund commits
to purchase securities on a when-issued or delayed delivery basis, it will
record the transaction and thereafter reflect the value, each day, of such
security in determining its net asset value. At the time of delivery of the
securities, the value may be more or less than the purchase price. The Fund will
also establish a segregated account with its custodian in which it will maintain
cash or cash equivalents or other portfolio securities equal in value to its
commitments for such when-issued or delayed delivery securities. The Fund
generally will enter into agreements to purchase securities on a when-issued or
delayed delivery basis only with the intention of actually acquiring the
securities. The purchase of securities on a when-issued or delayed delivery
basis exposes the Fund to risk because the securities may decrease in value
prior to their delivery. Purchasing securities on a when-issued or delayed
delivery 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. Although the Fund dos not presently intend to do so, these
risks could result in increased volatility of the Fund's net asset value to the
extent that the Fund purchases securities on a when-issued or delayed delivery
basis while remaining substantially fully invested.
REPURCHASE AGREEMENTS. The Fund will also follow the collateral custody,
protection and perfection guidelines recommended by the Comptroller of the
Currency for the use of national banks in their direct repurchase agreement
activities. As an additional safety measure, the Fund will enter into repurchase
agreements only with primary dealers that report to the Federal Reserve Bank of
New York or with the 100 largest U. S. commercial banks, as measured by domestic
deposits.
PORTFOLIO TURNOVER. The portfolio turnover rate for a fiscal year is the
ratio of the lesser of purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities, excluding securities whose
maturities at acquisition were one year or less. The Fund's portfolio turnover
rate will not be a limiting factor when the Fund deems it desirable to sell or
purchase securities. As described in the Prospectus, the Fund's portfolio
turnover rate may exceed 100%, which may result in higher transaction costs for
the Fund.
INVESTMENT RESTRICTIONS
Voyageur U.S. Government Securities Fund (the "Fund"), a separately managed
series of Voyageur Funds, Inc. (the "Company"), has adopted certain investment
restrictions set forth below which, together with the investment objective of
the Fund, cannot be changed without approval by holders of a majority of the
outstanding voting shares of the Fund. As defined in the Investment Company Act
of 1940 (the "1940 Act"), this means the lesser of the vote of (a) 67% of the
shares of the Fund at a meeting where more than 50% of the outstanding shares of
the Fund are present in person or by proxy or (b) more than 50% of the
outstanding shares of the Fund. The Fund may not:
1. Borrow money, except from banks for temporary or emergency purposes in
an amount not exceeding 5% of the value of the Fund's total assets. The Fund
will not borrow for leverage purposes, and securities will not be purchased
while borrowings are outstanding. Interest paid on any money borrowed will
reduce the Fund's net income.
2. Pledge, hypothecate, mortgage or otherwise encumber its assets in excess
of 5% of its total assets (taken at the lower of cost or current value) and then
only to secure borrowings permitted by restriction (1) above.
3. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities.
4. 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.
5. Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under federal securities laws.
6. Purchase or sell real estate, although it may purchase securities which
are secured by or represent interests in real estate.
7. Purchase or sell commodities or commodity contracts.
8. Make loans, except by purchase of debt obligations in which the Fund may
invest consistent with its investment policies and through repurchase
agreements.
9. Invest in securities of any issuer if, to the knowledge of the Fund,
officers and directors of the Fund or officers and directors of the Fund's
investment adviser who beneficially own more than 1/2 of 1% of the securities of
that issuer together own more than 5%.
10. Purchase securities restricted as to resale.
11. Invest more than 25% of its assets in the securities of issuers in any
single industry; provided that there shall be no limitation on the purchase of
securities issued by banks and obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
12. Invest in (a) securities which in the opinion of the Fund's investment
adviser at the time of such investment are not readily marketable, and (b)
securities the disposition of which is restricted under federal securities laws
(as described in fundamental restriction (10) above).
13. Invest in securities of other investment companies, except as part of a
merger, consolidation or acquisition of assets.
14. Purchase options or puts, calls, straddles, spreads or combinations
thereof; in connection with the purchase of fixed-income securities, however,
the Fund may acquire attached warrants or other rights to subscribe for
securities of companies issuing such fixed-income securities or securities of
parents or subsidiaries of such companies. (The Fund's investment policies do
not currently permit it to exercise warrants or rights with respect to equity
securities.)
15. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
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.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company, their position with the Fund and
their principal occupations during the past five years are set forth below.
Unless indicated otherwise, all positions have been held more than five years.
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 Voyageur.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S) DURING
NAME, ADDRESS, AND AGE POSITION PAST FIVE YEARS AND OTHER AFFILIATIONS
- ---------------------- -------- --------------------------------------
<S> <C> <C>
Clarence G. Frame, 78 Director Of counsel, Briggs & Morgan law firm. Mr. Frame currently
First National Bank Building, serves on the board of directors of Tosco Corporation (an
W-875 oil refining and marketing company), Milwaukee Land Company,
332 Minnesota Street and Independence One Mutual Funds.
St. Paul, Minnesota 55101
Richard F. McNamara, 63 Director Chief Executive Officer of Activar, Inc., a
7808 Creekridge Circle #200 Minneapolis-based holding company consisting of seventeen
Minneapolis, Minnesota 55439 companies in industrial plastics, sheet metal, automotive
aftermarket, construction supply, electronics and financial
services, since 1966. Mr. McNamara currently serves on the
board of directors of Rimage (electronics manufacturing) and
Interbank.
Thomas F. Madison, 60 Director President and CEO of MLM Partners, Inc. since January 1993;
200 South Fifth Street previously, Vice Chairman--Office of the CEO, The Minnesota
Suite 2100 Mutual Life Insurance Company from February to September
Minneapolis, Minnesota 55402 1994; President of U.S. WEST Communications--Markets from
1988 to 1993. Mr. Madison currently serves on the board of
directors of Valmont Industries, Inc. (metal manufacturing),
Eltrax Systems, Inc. (data communications integration),
Minnegasco, Lutheran Health Systems, Communications
Holdings, Inc., Alexander and Alexander (insurance and risk
management), Span Link Communications (telecommunications),
Medical Benefits Administrators, D&D Farms, AetherWorks
(software applications), Digital River (digital data
provider) and various civic and educational organizations.
James W. Nelson, 54 Director Chairman and Chief Executive Officer of Eberhardt Holding
81 South Ninth Street Company and its subsidiaries.
Suite 400
Minneapolis, Minnesota 55440
Robert J. Odegard, 75 Director Special Assistant to the President of the University of
University of Minnesota Minnesota.
Foundation
1300 South Second Street
Minneapolis, Minnesota 55454
John G. Taft, 42 President President (since 1991) and Director (since 1993) of the
90 South Seventh Street Adviser; Director (since 1993) and Executive Vice President
Suite 4400 (since 1995) of the Underwriter; President of the
Minneapolis, Minnesota 55402 Underwriter from 1991 to 1995; Management committee member
of the Adviser from 1991 to 1993.
Jane M. Wyatt, 41 Executive Chief Investment Officer (since 1993) and Portfolio Manager
90 South Seventh Street Vice (since 1989) of the Adviser; Director of the Adviser and the
Suite 4400 President Underwriter since 1993; Executive Vice President and
Minneapolis, Minnesota 55402 Portfolio Manager of the Adviser from 1992 to 1993; Vice
President and Portfolio Manager from 1989 to 1992.
Andrew M. McCullagh, Jr., 47 Executive Senior Tax-Exempt Portfolio Manager of the Adviser;
717 Seventeenth Street Vice previously, Director of the Adviser and the Underwriter
Denver, Colorado 80202 President from 1993 to 1995.
Elizabeth H. Howell, 34 Vice Senior Tax Exempt Portfolio Manager of the Adviser.
90 South Seventh Street President
Suite 4400
Minneapolis, Minnesota 55402
James C. King, 55 Vice Senior Equity Portfolio Manager of the Adviser since 1993;
90 South Seventh Street President previously, Director of the Adviser and the Underwriter from
Suite 4400 1993 to 1995.
Minneapolis, Minnesota 55402
Steven P. Eldredge, 40 Vice Senior Tax Exempt Portfolio Manager of the Adviser since
90 South Seventh Street President 1995; previously, portfolio manager for ABT Funds, Palm
Suite 4400 Mutual Beach, Florida, from 1989 to Minneapolis,
Minnesota 55402 1995.
Kenneth R. Larsen, 33 Treasurer Treasurer of the Adviser and the Underwriter; previously,
90 South Seventh Street Director, Secretary and Treasurer of the Adviser and the
Suite 4400 Underwriter from 1993 to 1995.
Minneapolis, Minnesota 55402
Thomas J. Abood, 32 Secretary Senior Vice President and General Counsel of Dougherty
90 South Seventh Street Financial Group, Inc. since 1995, the indirect parent of the
Suite 4400 Adivser; Senior Vice President (since 1995) of the Adviser,
Minneapolis, Minnesota 55402 the Underwriter and Voyageur Companies, Inc.; previously,
Vice President of the Adviser and Voyageur Companies, Inc.
from 1994 to 1995; associated with the law firm of Skadden,
Arps, Slate, Meagher & Flom, Chicago, Illinois from 1988 to
1994.
</TABLE>
The Fund does not compensate its officers. Each director (who is not an
employee of Voyageur or any of its affiliates) receives a total annual fee of
$26,000 for serving as a director or trustee for each of the open-end and
closed-end investment companies (the "Fund Complex") for which Voyageur acts as
investment adviser, plus a $500 fee for each special in-person meeting attended
by such director. These fees are allocated among each series or fund in the Fund
Complex based on the relative average net asset value of each series or fund.
Currently the Fund Complex consists of ten open-end investment companies
comprising 33 series or funds and six closed-end investment companies. In
addition, each director or trustee who is not an employee of Voyageur or any of
its affiliates is reimbursed for expenses incurred in connection with attending
meetings. The following table sets forth the aggregate compensation received by
each director from the Fund 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.
AGGREGATE
COMPENSATION TOTAL COMPENSATION
DIRECTOR FROM THE FUND FROM FUND COMPLEX
- -------- ------------- -----------------
Clarence G. Frame $1,163 $24,500
Richard F. McNamara $1,163 $24,500
Thomas F. Madison $1,163 $24,500
James W. Nelson $1,163 $24,500
Robert J. Odegard $1,163 $24,500
THE INVESTMENT ADVISER AND UNDERWRITER
Voyageur Fund Managers, Inc., a Minnesota corporation ("Voyageur"), has
been retained under an investment advisory agreement (the "Advisory Agreement")
to act as the Fund's investment adviser, subject to the authority of the Board
of Directors. Voyageur and the Underwriter are each indirect wholly-owned
subsidiaries of Dougherty Financial Group Inc. ("DFG"), which is owned
approximately 49% by Michael E. Dougherty, 49% by Pohlad Companies and less than
1% by certain retirement plans for the benefit of DFG employees. Mr. Dougherty
co-founded the predecessor of DFG in 1977 and has served as DFG's Chairman of
the Board and Chief Executive Officer since inception. Pohlad Companies is a
holding company owned in equal parts by each of James O. Pohlad, Robert C.
Pohlad and William M. Pohlad. Certain key employees of DFG and its subsidiaries
and an employee benefit plan benefitting the employees of such companies have
been offered the opportunity to purchase voting common shares of DFG through
stock options granted with respect thereto, with the shareholdings of Pohlad
Companies and Mr. Dougherty each to be diluted proportionately by any such
purchases. Following any such purchases, Mr. Dougherty and Pohlad Companies
would each continue to own greater than 25% of the outstanding voting common
shares of DFG, and no other person or entity would own greater than 25% of such
shares. The principal executive offices of Voyageur are located at 90 South
Seventh Street, Suite 4400, Minneapolis, Minnesota, 55402.
Voyageur Fund Distributors, Inc. (the "Underwriter") is the principal
distributor of the Fund's shares. With regard to the Underwriter, Mr. Frank
Tonnemaker is the President and a director and Mr. Taft and Ms. Wyatt are each
Executive Vice Presidents and directors. Mr. Abood is Senior Vice President and
general counsel and Mr. Larsen is Treasurer of the Underwriter.
INVESTMENT ADVISORY AGREEMENT
The Fund does not maintain its own research department. The Company has
contracted with Voyageur, on behalf of the Fund, for investment advice and
management. Pursuant to the Company's Investment Advisory Agreement, Voyageur
has the sole and exclusive responsibility for the management of the Fund's
portfolio and the making and execution of all investment decisions for the Fund
subject to the objectives and investment policies and restrictions of the Fund
and subject to the supervision of the Company's Board of Directors. Voyageur
also furnishes, at its own expense, office facilities, equipment and personnel
for servicing the investments of the Fund. Voyageur has agreed to arrange for
officers and employees of Voyageur to serve without compensation from the
Company as directors, officers or employees of the Company if duly elected to
such positions by the shareholders or directors of the Company.
As compensation for Voyageur's services, the Fund pays a monthly investment
advisory and management fee equivalent on an annual basis to .50 of 1% of the
average daily net assets of the Fund. As of June 30, 1996, 1995, and 1994, the
Fund had net assets of $112,133,540, $130,689,931 and $134,582,276,
respectively. For the fiscal years ended June 30, 1996, 1995 and 1994, the Fund
paid $609,965, $647,382 and $715,217, respectively, in investment advisory fees
(before expense reimbursements or waivers, as described below).
The Company's Investment Advisory Agreement continues from year to year
only if approved annually (a) by the Company's Board of Directors or by vote of
a majority of the outstanding voting securities of the Fund and (b) by vote of a
majority of directors of the Company who are not parties to the 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 of the Company
called for the purpose of voting on such approval. The Investment Advisory
Agreement may be terminated by the Company or the parties to such agreement on
60 days' notice and terminates automatically in the event of its assignment.
ADMINISTRATIVE SERVICES AGREEMENT
Voyageur also acts as the Fund's dividend disbursing, transfer,
administrative and accounting services agent pursuant to an Administrative
Services Agreement between Voyageur and the Company. Pursuant to the
Administrative Services Agreement, Voyageur provides the Fund all dividend
disbursing, transfer agency, administrative and accounting services required by
the Fund including, without limitation, the following: (i) the calculation of
net asset value per share at such times and in such manner as is specified in
the Fund's current Prospectus and Statement of Additional Information, (ii) upon
the receipt of funds for the purchase of the Fund's shares or the receipt of
redemption requests with respect to the Fund's shares outstanding, the
calculation of the number of shares to be purchased or redeemed, respectively,
(iii) upon the Fund's distribution of dividends, the calculation of the amount
of such dividends to be received per share, the calculation of the number of
additional shares of the Fund to be received by each Fund shareholder (other
than any shareholder who has elected to receive such dividends in cash) and the
mailing of payments with respect to such dividends to shareholders who have
elected to receive such dividends in cash, (iv) the provision of transfer agency
services, (v) the creation and maintenance of such records relating to the
business of the Fund as the Fund may from time to time reasonably request, (vi)
the preparation of tax forms, reports, notices, proxy statements, proxies and
other shareholder communications, and the mailing thereof to shareholders of the
Fund, and (vii) the provision of such other dividend disbursing, administrative
and accounting services as the Fund and Voyageur may from time to time agree
upon. Pursuant to the Administrative Services Agreement, the Adviser also
provides such regulatory reporting and compliance related services and tasks for
the Fund as the Fund may reasonably request.
As compensation for these services, the Fund pays Voyageur a monthly fee
based upon the Fund's average daily net assets and the number of shareholder
accounts then existing. This fee is equal to 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, 0.06% per annum of the next $20 million of the Fund's
average daily net assets, 0.035% per annum of the next $60 million of the Fund's
average daily net assets, 0.03% per annum of the next $400 million of the Fund's
average daily net assets, and 0.02% per annum of the Fund's average daily net
assets in excess of $500 million. For purposes of calculating average daily net
assets, as such term is used in the Administrative Services Agreement, the
Fund's net assets equal its total assets minus its total liabilities. The Fund
also reimburses Voyageur for its out-of-pocket expenses in connection with
Voyageur's provision of services under the Administrative Services Agreement.
The Company or Voyageur can terminate the Administrative Services Agreement on
60 days' notice to the other party. For the fiscal years ended June 30, 1996,
1995 and 1994, the Fund paid $166,715, $144,961 and $168,373, respectively, in
dividend disbursing, administrative and accounting services fees (before expense
reimbursements or waivers as described below).
EXPENSES OF THE FUND
Voyageur is contractually obligated to reimburse each class of Fund shares
up to the amount of the investment advisory and administrative services fees, to
the extent that operating expenses, including the investment advisory,
administrative services and Rule 12b-1 fees (but excluding interest expense,
taxes, brokerage fees and commissions) exceed on an annual basis 1.25% of the
Fund's average daily net assets attributable to each of Class A and
Institutional Class shares and 2.00% of the Fund's average daily net assets
attributable to each of Class B and Class C shares. In addition, Voyageur and
the Underwriter reserve the right to voluntarily waive their fees in whole or
part and to voluntarily absorb certain other of the Fund's expenses. For the
fiscal year ended June 30, 1994, Voyageur did not waive or absorb any expenses
for any class of shares. For the fiscal year ended June 30, 1995, Voyageur
waived, absorbed or reduced $1,582 of expenses for Class A shares, $65 for Class
B shares, $6 for Class C shares and $1,066 for Institutional Class shares,
including voluntary waivers of $0 for Class A shares, $65 for Class B shares, $6
for Class C shares and $0 for Institutional Class shares. For the fiscal year
ended June 30, 1996, Voyageur waived, absorbed or reduced $6,317 of expenses for
Class A shares, $1,683 for Class B shares, $23 for Class C shares and $4,132 for
Institutional Class shares, including voluntary waivers of $1,606 for Class B
shares.
All costs and expenses (other than those specifically referred to as being
borne by Voyageur or the Underwriter) incurred in the operation of the Fund are
borne by the Fund. These expenses include, among others, interest, taxes,
brokerage fees and commissions, fees of the directors who are not employees of
Voyageur or any of its affiliates, expenses of directors' and shareholders'
meetings, including the cost of printing and mailing proxies, expenses of
insurance premiums for fidelity and other coverage, expenses of redemption of
shares, expenses of issue and sale of shares (to the extent not borne by the
Underwriter or Voyageur under their agreements 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,
audit 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 and reports to shareholders.
RULE 12B-1 PLAN OF DISTRIBUTION; DISTRIBUTION AGREEMENT
The Fund has adopted a Plan of Distribution (the "Plan") relating to the
payment of certain expenses pursuant to Rule 12b-1 under the 1940 Act. Rule
12b-1(b) provides that any payments made by the Fund in connection with the
distribution of its shares may only be made pursuant to a written plan
describing all material aspects of the proposed financing of distribution and
also requires that all agreements with any person relating to implementation of
the plan must be in writing. In addition, Rule 12b-1(b)(1) requires that such
plan be approved by a vote of at least a majority of the Fund's outstanding
shares, and Rule 12b-1(b)(2) requires that such plan, together with any related
agreements, be approved by a vote of the Board of Directors and of the directors
who are not interested persons of the Fund and have no direct or indirect
financial interest in the operation of the plan or in any agreements related to
the plan, cast in person at a meeting called for the purpose of voting on such
plan or agreements. Rule 12b-1(b)(3) requires that the plan or agreement
provide, in substance: (1) that it shall continue in effect for a period of more
than one year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner described
in paragraph (b)(2) of Rule 12b- 1; (2) that any person authorized to direct the
disposition of monies paid or payable by the Fund pursuant to its plan or any
related agreement shall provide to the Board of Directors, and the directors
shall review, at least quarterly, a written report of the amount so expended and
the purposes for which such expenditures were made; and (3) in the case of a
plan, that it may be terminated at any time by vote of a majority of the members
of the Board of Directors who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the plan or in any
agreements related to the plan or by vote of a majority of the outstanding
voting securities of the Fund.
Rule 12b-1(b)(4) requires that such plans may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and that all material amendments of the plan must be approved in the manner
described in paragraph (b)(2) of Rule 12b-1. Rule 12b-1(c) provides that the
Fund may rely upon Rule 12b-1(1) only if selection and nomination of the Fund's
disinterested directors are committed to the discretion of such disinterested
directors. Rule 12b-1(e) provides that the Fund may implement or continue a plan
pursuant to Rule 12b-1(b) only if the directors who vote to approve such
implementation or continuation conclude, in the exercise of reasonable business
judgment and in light of their fiduciary duties under state law, and under
Section 36(a) and (b) of the 1940 Act, that there is a reasonable likelihood
that the plan will benefit the Fund and its shareholders.
The Company has entered into a Distribution Agreement (on behalf of the
Fund) with the Underwriter, pursuant to which the Underwriter acts as the
principal underwriter of the Fund's shares. The Distribution Agreement and Plan
provide that the Underwriter agrees to provide, and shall pay costs which it
incurs in connection with providing, ongoing servicing and/or maintenance of
Fund shareholder accounts (such costs are referred to as "Shareholder Servicing
Expenses") and that the Underwriter shall also pay all costs of distributing the
shares of the Fund ("Distribution Expenses"). Shareholder Servicing Expenses
include all expenses of the Underwriter incurred in connection with providing
ongoing servicing and/or maintenance of Fund shareholder accounts including, but
not limited to, an allocation of the Underwriter's overhead and payments made to
persons, including employees of the Underwriter, who respond to inquiries of
shareholders regarding their ownership of Fund shares, or who provide other
administrative or accounting services not otherwise required to be provided by
the Fund's investment adviser or transfer agent. Distribution Expenses include,
but are not limited to, initial and ongoing sales compensation (in addition to
sales loads) paid to investment executives of the Underwriter and to other
broker-dealers and participating financial institutions; expenses incurred in
the printing of prospectuses, statements of additional information and reports
used for sales purposes; expenses of preparation and distribution of sales
literature; expenses of advertising of any type; an allocation of the
Underwriter's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution-related expenses.
Pursuant to the provisions of the Distribution Agreement, the Underwriter
is entitled to receive a total fee each quarter at an annual rate of .25% of the
average daily net assets attributable to the Fund's Class A and Institutional
Class shares and 1.00% of the average daily net assets attributable to the
Fund's Class B and Class C shares. As determined from time to time by the Board
of Directors, a portion of such fees shall be designated as a "shareholder
servicing fee" and a portion shall be designated as a "distribution fee." The
Board of Directors has determined that all of the fee payable with respect to
Class A shares and Institutional Class shares shall be designated a shareholder
servicing fee. For fees payable with respect to Class B and Class C shares, that
portion of the fee equal to .25% of average daily net assets attributable to the
Fund's Class B shares or Class C shares, as the case may be, is designated a
shareholder servicing fee and that portion of the fee equal to .75% of average
daily net assets attributable to the Fund's Class B shares or Class C shares, as
the case may be, is designated a distribution fee. Amounts payable to the
Underwriter under the Distribution Agreement may exceed or be less than the
Underwriter's actual distribution expenses and shareholder servicing expenses.
In the event such distribution expenses and shareholder servicing expenses
exceed amounts payable to the Underwriter under the Plan, the Underwriter shall
not be entitled to reimbursement by the Fund.
The Company's Distribution Agreement is renewable from year to year if the
directors approve the Agreement and the Plan. The Company or the Underwriter can
terminate the Distribution Agreement on 60 days' notice to the other party, and
such Agreement terminates automatically upon its assignment. In the Distribution
Agreement, the Underwriter agrees to indemnify the Fund against all costs of
litigation and other legal proceedings and against any liability incurred by or
imposed on the Fund in any way arising out of or in connection with the sale or
distribution of the Fund's shares, except to the extent that such liability is
the result of information which was obtainable by the Underwriter only from
persons affiliated with the Fund but not the Underwriter.
Pursuant to the Distribution Agreement, the Underwriter has agreed to act
as the principal underwriter for the Fund in the sale and distribution to the
public of shares of the Fund, either through dealers or otherwise. The
Underwriter has agreed 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. For
its services, in addition to being paid the shareholder servicing fee and the
distribution fee, pursuant to the Rule 12b-1 Plan discussed above, the
Underwriter receives the sales charge on sales of Fund shares set forth in the
Prospectus.
For the fiscal year ended June 30, 1994, the Fund paid Rule 12b-1 fees of
$349,605 for Class A shares, $16 for Class B shares and $7,992 for Institutional
Class shares. There were no Class C shares outstanding during fiscal 1994. For
the fiscal year ended June 30, 1995, the Fund paid Rule 12b-1 fees of $192,688
for Class A shares, $455 for Class B shares, $228 for Class C shares and
$130,835 for Institutional Class shares. Voyageur voluntarily waived $65 of such
fees for Class B shares that were otherwise payable within the 1.25% expense
limitation. For the fiscal year ended June 30, 1996, the Fund paid Rule 12b-1
fees of $182,881 for Class A shares, $9,201 for Class B shares, $2,690 for Class
C shares and $119,138 for Institutional Class shares. Voyageur voluntarily
waived $1,606 of such fees for Class B shares that were otherwise payable within
the 1.25% expense limitation.
Distribution fees for the fiscal year ended June 30, 1996, were used by the
Underwriter as follows:
Advertising and promotions $44,494
Printing and mailing of prospectuses
to other than current shareholders 11,224
Compensation to underwriters
(trail fees to investment executives) 34,060
Compensation to dealers 213,483
Compensation to sales personnel 10,649
----------
Total $313,910
The aggregate dollar amount of underwriting commissions paid by Class A
shareholders of the Fund for the fiscal years ended June 30, 1996, 1995 and 1994
were $137,755, $75,170 and $1,088,194, respectively. The amount of such
commissions retained by the Underwriter was $17,499, $10,778 and $153,930,
respectively. Contingent deferred sales charges paid by Class B shareholders
were $1,047 and $896 during the years ended June 30, 1996 and 1995,
respectively. Contingent deferred sales charges paid by Class C shareholders
were $2 during the year ended June 30, 1996.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
As the Fund's portfolio is composed exclusively of debt, rather than equity
securities, most of the Fund's 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 portfolio transactions on
behalf of the Fund, Voyageur seeks the most favorable net price consistent with
the best execution. However, Voyageur frequently 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 Voyageur to accept a particular price for a security because the price
offered by the dealer meets its guidelines for profit, yield or both.
Decisions with respect to placement of the Fund's portfolio transactions
are made by Voyageur. The primary consideration in making these decisions is
efficiency in the execution of orders and obtaining the most favorable net
prices for the Fund. When consistent with these objectives, business may be
placed with broker-dealers who furnish investment research services to Voyageur.
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 Voyageur to supplement its own investment research
activities and enables Voyageur to obtain the views and information of
individuals and research staffs of many different securities firms prior to
making investment decisions for the Fund. To the extent portfolio transactions
are effected with broker-dealers who furnish research services to Voyageur,
Voyageur receives a benefit, not capable of evaluation in dollar amounts,
without providing any direct monetary benefit to the Fund from these
transactions.
Voyageur has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of the Fund's portfolio transactions in exchange
for research services provided Voyageur. However, Voyageur does maintain
informal lists of broker-dealers, which are used from time to time as a general
guide in the placement of the Fund's business, in order to encourage certain
broker-dealers to provide Voyageur with research services which Voyageur
anticipates will be useful to it. Because the lists are merely a general guide,
which are to be used only after the primary criterion for the selection of
broker-dealers (discussed above) has been met, substantial deviations from the
lists are permissible and may be expected to occur. Voyageur will authorize the
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 Voyageur 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 Voyageur's overall responsibilities with respect to the accounts
as to which they exercise investment discretion.
The Fund will not effect any brokerage transactions in its portfolio
securities with any broker-dealer affiliated directly or indirectly with
Voyageur unless such transactions, including the frequency thereof, the receipt
of commissions payable in connection therewith and the selection of the
affiliated broker-dealer effecting such transactions are not unfair or
unreasonable to the shareholders of the Fund. In the event any transactions are
executed on an agency basis, Voyageur will authorize the 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 Voyageur 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 Voyageur's overall
responsibilities with respect to the Funds as to which they exercise investment
discretion. If the Fund executes any transactions on an agency basis, it will
generally pay higher than the lowest commission rates available.
In determining the commissions to be paid to a broker-dealer affiliated
with Voyageur, it is the policy of the Fund that such commissions will, in the
judgment of Voyageur, 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 the 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.
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,
Voyageur may consider sales of shares of the Fund as a factor in the selection
of broker-dealers to execute the Fund's securities transactions.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Fund did not
pay any brokerage commissions, direct any portfolio transactions to
broker-dealers because of research services provided to Voyageur or execute any
brokerage transactions with an affiliated broker-dealer.
Pursuant to conditions set forth in rules of the Securities and Exchange
Commission, the Fund may purchase securities from an underwriting syndicate of
which an affiliated broker-dealer is a member but not directly from such
affiliated broker-dealers 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 Company, particularly those directors who are not interested
persons of the Company.
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 plus the applicable sales charge, if
any, is summarized in the Prospectus. The net asset value of the 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.
The portfolio securities in which the Fund invests fluctuate in value and
hence the net asset value per share of the Fund also fluctuates. On June 30,
1996, the net asset value per share and the maximum public offering price per
share for Class A shares, Class B shares, Class C shares and Institutional Class
shares of the Fund were calculated as follows:
<TABLE>
<CAPTION>
CLASS A SHARES
<S> <C>
NET ASSETS ($68,441,534) = Net Asset Value Per Share ($10.16)
------------------------
Shares outstanding (6,737,203)
Maximum Public Offering Price/share = $10.16 + 4.75% of Public Offering Price
Maximum Public Offering Price = $10.16 = $10.67/share
----------------
100% - 4.75%
CLASS B SHARES
NET ASSETS ($1,780,037) = Net Asset Value Per Share ($10.17)
---------------------------
Shares outstanding (175,030)
CLASS C SHARES
NET ASSETS ($223,880) = Net Asset Value Per Share ($10.15)
---------------------
Shares outstanding (22,054)
INSTITUTIONAL CLASS SHARES
NET ASSETS ($41,688,089) = Net Asset Value Per Share ($10.16)
------------------------
Shares outstanding (4,101,857)
</TABLE>
TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"), the 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, the Fund
generally must declare dividends by the end of a calendar year representing 98%
of the Fund's ordinary income for the calendar year and 98% of its capital gain
net income (both long- and short-term capital gains) for the 12-month period
ending on October 31 of such year. For purposes of the excise tax, any income on
which the Fund has paid corporate-level tax is considered to have been
distributed. The Fund intends to make sufficient distributions each year to
avoid the payment of the excise tax.
If shares of the 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 pertaining to regulated investment companies states that, if the 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.
An exchange of shares in one Voyageur Fund for shares in another Voyageur
Fund pursuant to exercise of the Exchange Privilege is considered to be a sale
of the shares for federal tax purposes that may result in a taxable gain or
loss. If a shareholder incurs a sales charge in acquiring shares and then, after
holding those shares not more than 90 days, exchanges them pursuant to the
Exchange Privilege for shares of another Voyageur Fund, the shareholder may not
take into account the initial sales charge (to the extent that the otherwise
applicable sales charge on the later-acquired shares is reduced) for purposes of
determining the shareholder's gain or loss on the exchange of the first held
shares. Similarly, if a shareholder redeems shares in the Fund within 90 days of
purchasing them and then repurchases shares in the Fund pursuant to the
reinstatement privilege (see "Reinstatement Privilege" in the Prospectus), the
shareholder may not take the sales charge paid on the initial purchase of Fund
shares into account in determining gain or loss on the sale of the
first-acquired shares. However, in both cases the amount of the disallowed sales
charge may be taken into account in determining gain or loss on the eventual
sale or exchange of the later-acquired shares.
Shareholders will be notified annually as to the amount, nature and federal
income tax status of dividends and distributions. The Fund is also required to
report all distributions and redemption payments to the Internal Revenue
Service. The Fund is required to withhold 31% of taxable interest, dividends and
certain other payments, including redemption payments, for shareholders who fail
to furnish their correct taxpayer identification number (for most individuals,
the Social Security number) or as a result of certain other events specified in
Section 3406 of the Code. Payees that are exempt from this "backup withholding"
are generally not individuals but are corporations or governmental entities. In
order to avoid withholding, a shareholder of the Fund must provide a taxpayer
identification number to the Fund and must certify that he or she is not subject
to backup withholding.
The foregoing is a general and abbreviated summary of the Code and Treasury
Regulations in effect as of the date of the Fund's Prospectus and this Statement
of Additional Information. No attempt has been made to discuss any state and
local income tax consequences of an investment in the Fund. State and local
income tax treatment may differ from the federal income tax treatment discussed
above. Potential investors in the Fund are encouraged to consult a competent tax
adviser regarding the income tax consequences of acquiring shares in the Fund.
BANK SALES
Banks, acting as agents for their customers and not for the Funds or the
Underwriter, from time to time may purchase Fund shares for the accounts of such
customers. Generally, the Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Should the
activities of any bank, acting as agent for its customers in connection with the
purchase of the Fund's shares, be deemed to violate the Glass-Steagall Act,
management will take whatever action, if any, is appropriate in order to provide
efficient services for the Fund. Management does not believe that a termination
in the relationship with a bank would result in any material adverse
consequences to the Fund. In addition, state securities laws on this issue may
differ and banks and financial institutions may be required to register as
dealers pursuant to state law. Fund shares are not deposits or obligations of,
or guaranteed or endorsed by, any bank and are not insured or guaranteed by the
U.S. Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other federal agency.
SPECIAL PURCHASE PLANS
AUTOMATIC INVESTMENT PLAN. As a convenience to investors, shares may be
purchased through a preauthorized automatic investment plan. Such preauthorized
investments (at least $100) may be used to purchase shares of the Fund at the
public offering price next determined after the Fund receives the investment
(normally the 20th of each month, or the next business day thereafter). Further
information is available from the Underwriter.
COMBINED PURCHASE PRIVILEGE. The following persons (or groups of persons)
may qualify for reductions from the front end sales charge ("FESC") schedule for
Class A shares set forth in the Prospectus by combining purchases of any class
of shares of any one or more of the Voyageur Funds which bears a FESC (and, in
certain circumstances, purchases of FESC shares of certain other open-end
investment companies) if the combined purchase of all such funds totals at least
$50,000:
(i) an individual or a "company" as defined in Section 2(a)(8) of the
1940 Act;
(ii) an individual, his or her spouse and their children under age 21,
purchasing for his, her or their own account;
(iii) a trustee or other fiduciary purchasing for a single trust
estate or single fiduciary account (including a pension, profit-sharing or
other employee benefit trust) created pursuant to a plan qualified under
Section 401 of the Code;
(iv) tax-exempt organizations enumerated in Section 501(c)(3) of the
Code;
(v) employee benefit plans of a single employer or of affiliated
employers;
(vi) any organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company, and provided that
the purchase is made through a central administration, or through a single
dealer, or by other means which result in economy of sales effort or
expense. An organized group does not include a group of individuals whose
sole organizational connection is participation as credit cardholders of a
company, policyholders of an insurance company, customers of either a bank
or broker-dealer, or clients of an investment adviser.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A purchase of Class A
shares may qualify for a Cumulative Quantity Discount. The applicable FESC will
then be based on the total of:
(i) the amount of the current purchase; and
(ii) the amount previously invested (valued at the time of investment)
in shares of any class of one or more Voyageur Funds which has a FESC owned
by the investor; and
(iii) the amount previously invested (valued at the time of
investment) in shares of any class of one or more Voyageur Funds which has
a FESC owned by another shareholder eligible to participate with the
investor in a "Combined Purchase Privilege" (see above).
For example, if an investor owned shares worth $35,000 at the then current
net asset value and purchased an additional $15,000 of shares, the sales charge
for the $15,000 purchase would be at the rate applicable to a single $50,000
purchase.
To qualify for the Combined Purchase Privilege or to obtain the Cumulative
Quantity Discount on a purchase through an investment dealer, when each purchase
is made the investor or dealer must provide the Fund whose shares are being
purchased with sufficient information to verify that the purchase qualifies for
the privilege or discount.
LETTER OF INTENTION. Investors may also obtain the reduced front-end sales
charges shown in the Prospectus by means of a written Letter of Intention, which
expresses the investor's intention to invest not less than $50,000 (including
certain "credits," as described below) within a period of 13 months in any one
or more of the Voyageur Funds which has a FESC. Each purchase of shares under a
Letter of Intention will be made at the public offering price applicable at the
time of such purchase to a single transaction of the dollar amount indicated in
the Letter. A Letter of Intention may include purchases of shares made not more
than 90 days prior to the date that an investor signs a Letter; however, the
13-month period during which the Letter is in effect will begin on the date of
the earliest purchase to be included. Investors qualifying for the Combined
Purchase Privilege described above may purchase shares under a single Letter of
Intention.
For example, on the date an investor signs a Letter of Intention to invest
at least $50,000 as set forth above and the investor and the investor's spouse
and children under age 21 have previously invested $35,000 in shares which are
still held by such persons, it will only be necessary to invest a total of
$15,000 during the 13 months following the first date of purchase of such shares
in order to qualify for the sales charges applicable to investments of $50,000.
The Letter of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intention is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased. When the full amount indicated has been purchased, the escrow will be
released. To the extent that an investor purchases more than the dollar amount
indicated on the Letter of Intention and qualifies for further reduced sales
charges, the sales charges will be adjusted for the entire amount purchased at
the end of the 13-month period. The difference in sales charges will be used to
purchase additional shares at the then current offering price applicable to the
actual amount of the aggregate purchases.
Investors electing to take advantage of a Letter of Intention should
carefully review the appropriate provisions on the authorization form attached
to the Prospectus.
Shares of other open-end investment companies bearing a FESC will be
included with Voyageur Fund shares bearing a FESC in a Combined Purchase
Privilege, Cumulative Quantity Discount or Letter of Intention only if such
shares are owned by customers of dealers that Voyageur or the Underwriter has
engaged to provide administration or accounting services to Fund omnibus
accounts in connection with the offering of the Fund as part of such other
investment companies' family of funds. Additionally, the maximum reduction of
the Fund's FESC that may result from the inclusion of shares of such other
investment companies in a Combined Purchase Privilege, Cumulative Quantity
Discount or Letter of Intention shall be a reduction to the front-end sales
charge applicable to purchases of $500,000 but less than $1,000,000 (as set
forth in the sales charge table in the Prospectus).
OTHER INFORMATION
CONVERSION OF CLASS B SHARES. In addition to information regarding
conversion set forth in the prospectus, the conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service or an opinion of counsel that payment of different
dividends by each of the classes of shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under the Code
and that such conversions do not constitute taxable events for Federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B shares to Class A shares will not occur
if such ruling or opinion will not be available. In such event, Class B shares
would continue to be subject to higher expenses than Class A shares for an
indefinite period.
SIGNATURE GUARANTY. In addition to information regarding redemption of
shares and signature guaranty set forth in the Prospectus, a signature guaranty
will be required when redemption proceeds: (1) exceed $50,000 (unless proceeds
are being wired to a pre-authorized bank account, in which case a guarantee is
not required), (2) are to be paid to someone other than the registered
shareholder or (3) are to be mailed to an address other than the address of
record or wired to an account other than the pre-authorized bank or brokerage
account. On joint account redemptions of the type previously listed, each
signature must be guaranteed. A signature guarantee may not be provided by a
notary public. Please contact your investment executive for instructions as to
what institutions constitute eligible signature guarantors.
VALUATION OF PORTFOLIO SECURITIES. Generally, trading in certain securities
such as tax exempt securities, corporate bonds, U.S. Government Securities and
money market instruments is substantially completed each day at various times
prior to the primary close of trading on the Exchange. The values of such
securities used in determining the net asset value of Fund shares are computed
as of such times. Occasionally events affecting the value of such securities may
occur between such times and the primary close of trading on the Exchange which
are not reflected in the computation of net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities are valued at their fair market value as determined in good faith by
Voyageur in accordance with procedures adopted by the Board.
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to the
Fund's "yield," "average annual total return," "cumulative total return" and
"current distribution rate." Such performance information is calculated as
follows.
Voyageur has waived or paid certain expenses of the Fund, thereby
increasing total return and yield. These expenses may or may not be waived or
paid in the future in Voyageur's discretion.
YIELD
Yield is computed by dividing the net investment income per share deemed
earned during the computation period by the maximum offering price per share on
the last day of the period, according to the following formula:
YIELD = [(a-b )6 ]
[(--- +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.
The 30 day yields as of June 30, 1996 were:
ABSENT VOLUNTARY
ACTUAL FEE WAIVERS
------ -----------
Class A 6.63% N/A
Class B 5.96 5.86%
Class C 5.95 N/A
Institutional Class 6.68 N/A
CURRENT DISTRIBUTION RATE
The current distribution rate is calculated by determining the amount of
distributions that would have been paid over a twelve-month period 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). Under certain
circumstances that may affect distributions made by the Fund, such as a change
in investment policies or Fund expenses, it may be appropriate, for purposes of
calculating the distribution rate, to annualize the distributions paid during
the period such amended policies or expenses were in effect rather than using
distributions made during the past twelve months. Current distribution rates,
unlike standardized yield quotations, may include distributions to shareholders
from sources other than dividends and interest, such as short-term capital
gains, and may be computed over different time periods. Additionally, current
distribution rates do not reflect certain elements of return, such as unrealized
appreciation or depreciation in the value of portfolio investments.
The distribution rate as of June 30, 1996 was 5.87% for Class A shares,
5.42% for Class B shares, 5.43% for Class C shares and 6.16% for Institutional
Class shares.
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.
The following table sets forth the average annual total returns for the
Fund and average annual total returns absent voluntary and contractual expense
reimbursements and waivers, for one year, five years and since inception for the
period ending June 30, 1996:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
ABSENT VOLUNTARY
FEE WAIVERS AND
EXPENSE REIMBURSEMENTS
----------------------
SINCE SINCE
1 YEAR 5 YEARS INCEPTION 1 YEAR 5 YEARS INCEPTION
------ ------- --------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Class A(1) (1.05%) 7.16% 8.21% N/A 6.98% 7.89%
Class B(2) (0.68) N/A 4.95 (1.16)% N/A 4.52
Class C(3) 2.11 N/A 10.74 N/A N/A 10.54
Institutional Class(2) 3.88 N/A 6.92 N/A N/A N/A
- ------------------------
1 Inception date: November 2, 1987
2 Inception date: June 7, 1994
3 Inception date: January 10, 1995
</TABLE>
CUMULATIVE TOTAL RETURN
Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CRT = (ERV-P)
(-----) 100
( P )
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period; and
P = initial payment of $1,000.
This calculation deducts the maximum sales charge from the initial
hypothetical $1,000 investment, assumes all dividends and capital gains
distributions are reinvested at net asset value on the appropriate reinvestment
dates as described in the Prospectus, and includes all recurring fees, such as
investment advisory and management fees, charged as expenses to all shareholder
accounts.
The following table sets forth the cumulative total returns for the Fund
from inception to June 30, 1996:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN CUMULATIVE TOTAL RETURN
(AFTER VOLUNTARY AND CONTRACTUAL (ABSENT VOLUNTARY EXPENSE
EXPENSE REIMBURSEMENTS) REIMBURSEMENTS)
----------------------- ---------------
<S> <C> <C>
Class A 98.14% 93.15%
Class B 10.51 9.65
Class C 16.23 16.22
Institutional Class 14.85 N/A
</TABLE>
MONTHLY CASH WITHDRAWAL PLAN
Any investor who owns or buys shares of the Fund valued at $10,000 or more
at the current offering price may open a Withdrawal Plan and have a designated
sum of money paid monthly to the investor or another person. Shares are
deposited in a Withdrawal Plan account and all distributions are reinvested in
additional shares of the Fund at net asset value. Shares in a Withdrawal Plan
account are then redeemed at net asset value to make each withdrawal payment.
Deferred sales charges may apply to monthly redemptions of Class B and Class C
shares. Redemptions for the purpose of withdrawal are made on the 25th of the
month (or on the preceding business day if the 25th falls on a weekend or is a
holiday) at that day's closing net asset value and checks are mailed on the next
business day. Payments will be made to the registered shareholder or to another
party if preauthorized by the registered shareholder. As withdrawal payments may
include a return on principal, they cannot be considered a guaranteed annuity or
actual yield of income to the investor. The redemption of shares in connection
with a Withdrawal Plan may result in a gain or loss for tax purposes. Continued
withdrawals in excess of income will reduce and possibly exhaust invested
principal, especially in the event of a market decline. The maintenance of a
Withdrawal Plan concurrently with purchases of additional shares of a class of
Fund shares which imposes an FESC would normally be disadvantageous to the
investor because of the FESC payable on such purchases. For this reason, an
investor may not maintain a Plan for the accumulation of shares of a class of
Fund shares which imposes an FESC (other than through reinvestment of
distributions) and a Withdrawal Plan at the same time. The cost of administering
Withdrawal Plans is borne by the Fund as an expense of all shareholders. The
Fund or the Underwriter may terminate or change the terms of the Withdrawal Plan
at any time. The Withdrawal Plan is fully voluntary and may be terminated by the
shareholder at any time without the imposition of any penalty.
Since the Withdrawal Plan may involve invasion of capital, investors should
consider carefully with their own financial advisers whether the Withdrawal Plan
and the specified amounts to be withdrawn are appropriate in their
circumstances. The Fund makes no recommendations or representations in this
regard.
ADDITIONAL INFORMATION
The following persons owned of record or beneficially more than 5% of the
Class A of the Fund as of October 22, 1996: Merrill Lynch Pierce Fenner & Smith
for the sole benefit of its customers, 4800 Deer Lake Dr. , Jacksonville, FL
32246, 438,016 shares (6.74%). The following persons owned of record or
beneficially more than 5% of the Class B shares of the Fund as of October 22,
1996: Merrill Lynch Pierce Fenner & Smith for the sole benefit of its customers,
4800 Deer Lake Dr. , Jacksonville, FL 32246, 59,910 shares (29.13%); A. G.
Edwards & Sons Inc. C/F, Carl T. Brown, Jr., Tulsa, Oklahoma, 12,176 shares
(5.92%); Jeanne K. Kinkade, c/o Allen Mitchem POA, 1375 High Street, Apt 1003,
Denver, CO 80218, 14,955 shares (7.27%). The following persons owned of record
or beneficially more than 5% of the Class C shares of the Fund as of October 22,
1996: Norval O. and Roselyn A. Jesme, Jt Ten, Tod Paulette Wiesen, et al, RR 2
Box 48, Canby, MN 56220, 2,068 shares (9.15%); Gerald J. and Charlotte B.
Thompson, Jt Ten, 110 East Fifth St, Canby, MN 56220, 1,661 shares (7.35%);
Lloyd H. Swenson, Wanda J. Swenson Jt Ten, RR3 Box 52, Canby, MN 56220, 1637
shares (7.24%); PaineWebber, for the benefit of PainWebber CDN FBO, Daniel W.
Drake, P.,O. Box 3321, Weehawken, NJ, 7,937 shares, (35.12%); Elk River Eagles
AERIE #3264, 824 Railroad Drive, Elk River, MN 55330, 4,885 shares (21.62%);
Roger E. Sorenson, TTEE, Edna E. Sorenson, Rev Living Trust, 517 Turnpike Road,
Golden Valley, MN 55416, 1,756 shares (7.77%). The following persons owned of
record or beneficially more than 5% of the Institutional Class shares of the
Fund as of October 22, 1996: Bankers Trust Company as TTEE for Public Service
Electric & Gas Company, Master Employee Benefit Plan, 34 Exchange Place, New
Jersey, NJ 07303, 1,330,203 shares, (29.29%); Great-West Life & Annuity Company,
8515 E. Orchard Road, Englewood, CO 80111, 904,287 shares (19.91%); City of
Rapid City, 300 Sixth St., Rapid City, South Dakota, 789,990 shares (17.40%).
CUSTODIAN; COUNSEL; INDEPENDENT AUDITORS
Norwest Bank Minnesota, N.A., Sixth Street & Marquette Avenue, Minneapolis,
Minnesota 55479, acts as custodian of the Fund's assets and portfolio
securities.
Dorsey & Whitney L.L.P., 220 South Sixth Street, Minneapolis, Minnesota
55402, serves as counsel for the Company.
KPMG Peat Marwick LLP, 4200 Norwest Center, Minneapolis, Minnesota 55402,
serves as independent auditors for the Company.
LIMITATION OF DIRECTOR LIABILITY
Under Minnesota law, each director of the Company owes certain fiduciary
duties to the Company 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).
In February 1987, Minnesota enacted legislation which authorizes corporations 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 laws, or (iv) for any transaction from which
the directors derived an improper personal benefit. The Company's Articles of
Incorporation limit the liability of Company 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, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their role as directors).
Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Minnesota law, further, does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers (including the liability of directors who serve as officers
for breach of their duties as officers). Minnesota law does not permit
elimination or limitation of the availability of equitable relief, such as
injunctive or rescissionary relief. These remedies, however, may be ineffective
in situations where shareholders become aware of such a breach after a
transaction has been consummated and rescission has become impractical. Further,
Minnesota law does not permit elimination or limitation of a director's
liability under the Securities Act of 1933 or the Securities Exchange Act of
1934, and it is uncertain whether and to what extent the elimination of monetary
liability would extend to violations of duties imposed on directors by the 1940
Act and the rules and regulations adopted thereunder.
SHAREHOLDER MEETINGS
The Company is not required under Minnesota law to hold annual or
periodically scheduled regular meetings of shareholders. Regular and special
shareholder meetings are held only at such times and with such frequency as
required by law. Minnesota corporation law provides for the Board of Directors
to convene shareholder meetings when it deems appropriate. In addition, if a
regular meeting of shareholders has not been held during the immediately
preceding fifteen months, a shareholder or shareholders holding three percent or
more of the voting shares of the Fund may demand a regular meeting of
shareholders of the Fund by written notice of demand given to the chief
executive officer or the chief financial officer of the Fund. Within ninety days
after receipt of the demand, a regular meeting of shareholders must be held at
the expense of the Fund. Additionally, the 1940 Act requires shareholder votes
for all amendments to fundamental investment policies and restrictions and for
all investment advisory contracts and amendments thereto.
FINANCIAL STATEMENTS
The audited statement of assets and liabilities, including the schedule of
investments in securities, of the Fund as of June 30, 1996, the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period ended June 30, 1996, and
the financial highlights for each of the years in the five-year period ended
June 30, 1996, have been incorporated by reference into this Statement of
Additional Information from the Fund's annual report to shareholders in reliance
on the report of KPMG Peat Marwick LLP, independent auditors of the Fund, given
on the authority of such firm as experts in accounting and auditing.
PART C
VOYAGEUR FUNDS, INC.
(VOYAGEUR U. S. GOVERNMENT SECURITIES FUND)
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements as filed with the Securities and Exchange
Commission on August 28, 1996 are hereby incorporated by reference.
(b) EXHIBITS:
1.1 Amended and Restated Articles of Incorporation, dated November 22,
1993, 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 Certificate of Designation, Class A, Class B and Class Y Common Shares
of Series A, dated May 17, 1994, 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.
1.3 Certificate of Designation, Class C of Series A, dated August 30,
1994, 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.
1.4 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.
1.5 Certificate of Designation of Series B, C, and D Common Shares, dated
March 8, 1996, filed as an Exhibit to Post-Effective Amendment No. 19
to Form N-1A on March 15, 1996, 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. Voting Trust Agreement. 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 between Voyageur Funds, Inc. and
Voyageur Fund Managers, Inc., dated November 1, 1993, 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.
5.2 Investment Advisory Agreement between Voyageur Funds, Inc. and
Marquette Trust Company, dated March 20, 1996, filed as an Exhibit to
Post-Effective Amendment No. 19, to Form N-1A on March 15, 1996, File
Nos 33-16270 and 811-5267, and incorporated herein by reference.
5.3 Investment Advisory Agreement between Voyageur Funds, Inc. and Cadre
Consulting Services, Inc., dated March 20, 1996, filed as an Exhibit
to Post-Effective Amendment No. 20, to Form N-1A on March 19, 1996,
File Nos 33-16270 and 811-5267, and incorporated herein by reference.
5.4 Investment Sub-Advisory Agreement between Voyageur Funds, Inc. and
Voyageur Fund Managers, Inc., filed as an Exhibit to Post-Effective
Amendment No. 19, to Form N-1A on March 15, 1996, File Nos 33-16270
and 811-5267, and incorporated herein by reference.
6.1. Distribution Agreement between Voyageur Funds, Inc. and Voyageur U.S.
Government Securities Fund, a series of the Fund, dated September 1,
1994, 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.
6.2 Distribution Agreement between Voyageur Funds, Inc. and VFI Short
Duration Portfolio, VFI Intermediate Duration Portfolio and VFI Core
Portfolio, three separate series of the Fund, dated March 20, 1996,
filed as an Exhibit to Post-Effective Amendment No. 19, to Form N-1A
on March 15, 1996, File Nos 33-16270 and 811-5267, and incorporated
herein by reference.
6.3 Form of Dealer Sales Agreement, 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.
6.4 Form of Bank Agreement 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.
7. Bonus, Profit Sharing, or Pension Plans. None
8.1 Custodian Agreement between the Fund and Norwest Bank Minnesota N.A.,
dated April 20, 1992, 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.
8.2 Custodian Agreement between the Fund and Marquette Trust Company,
dated March 20, 1996, filed as an Exhibit to Post-Effective Amendment
No. 19, to Form N-1A on March 15, 1996, File Nos 33-16270 and
811-5267, and incorporated herein by reference.
9.1 Administrative Services Agreement dated October 24, 1994, filed as an
Exhibit to Post- Effective Amendment No. 19, to Form N-1A on March 15,
1996, File Nos 33-16270 and 811-5267, and incorporated herein by
reference.
9.2 Service Plan between the Fund and VFI Short Duration Portfolio, VFI
Intermediate Duration Portfolio, and VFI Institutions Core Portfolio,
three separate series of the Fund, dated March 20, 1996, filed as an
Exhibit to Post-Effective Amendment No. 19, to Form N-1A on March 15,
1996, File Nos 33-16270 and 811-5267, and incorporated herein by
reference.
10.1 Opinion and Consent of Dorsey & Whitney, dated October 14, 1987, filed
as an Exhibit hereto.
10.2 Opinion and Consent of Dorsey & Whitney with respect to Class A., B,
C, and Institutional Class Shares of Series A, 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.
10.3 Opinion and Consent of Dorsey & Whitney LLP with respect to Series B,
C and D, filed as an Exhibit to Post-Effective Amendment No. 19, to
Form N-1A on March 15, 1996, File Nos 33-16270 and 811-5267, and
incorporated herein by reference.
11. Consent of KPMG Peat Marwick L.L.P., dated October 23, 1996, filed as
an Exhibit hereto.
12. Not Applicable.
13. Letter of Investment Intent, dated October 2, 1987, filed as an
Exhibit to Post-Effective Amendment No. 19, to Form N-1A on March 15,
1996, File Nos 33-16270 and 811-5267, and incorporated herein by
reference.
14. Copy of prototype defined contribution plan. Not Applicable.
15. Plan pursuant to 12b-1 adopted under the Investment Company Act of
1940, 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.
16.1 Schedule for Computation of Performance Data, Voyageur U.S. Government
Securities Fund, a separate series of the Fund, - Class A, B, C, and
Institutional Shares, filed as an Exhibit hereto.
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, filed as an Exhibit hereto.
18. Plan Pursuant to Rule 18f-3 under the Investment Company Act of 1940,
dated December 29, 1995, filed as an Exhibit hereto.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Voyageur serves as investment manager to the following closed-end and
open-end management investment companies:
CLOSED-END INVESTMENT COMPANIES
Voyageur Arizona Municipal Income Fund, Inc.
Voyageur Colorado Insured Municipal Income Fund, Inc.
Voyageur Florida Insured Municipal Income Fund
Voyageur Minnesota Municipal Income Fund, Inc.
Voyageur Minnesota Municipal Income Fund II, Inc.
Voyageur Minnesota Municipal Income Fund III, Inc.
OPEN-END INVESTMENT COMPANIES AND SERIES THEREOF
VOYAGEUR FUNDS, INC.
Voyageur U.S. Government Securities Fund
Voyageur Financial Institutions Short Duration Portfolio
Voyageur Financial Institutions Intermediate Duration Portfolio
Voyageur Financial Institutions Core Portfolio
VOYAGEUR INSURED FUNDS, INC.
Voyageur Minnesota Insured Fund
Voyageur Arizona Insured Tax Free Fund
Voyageur National Insured Tax Free Fund
Voyageur Colorado Insured Tax Free Fund
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
Voyageur Minnesota Limited Term Tax Free Fund
Voyageur National Limited Term Tax Free Fund
Voyageur Arizona Limited Term Tax Free Fund
Voyageur Colorado Limited Term Tax Free Fund
Voyageur California Limited Term Tax Free Fund
VOYAGEUR INVESTMENT TRUST
Voyageur California Insured Tax Free Fund
Voyageur Florida Insured Tax Free Fund
Voyageur Kansas Tax Free Fund
Voyageur Missouri Insured Tax Free Fund
Voyageur New Mexico Tax Free Fund
Voyageur Oregon Insured Tax Free Fund
Voyageur Utah Tax Free Fund
Voyageur Washington Insured Tax Free Fund
Voyageur Florida Tax Free Fund
VOYAGEUR INVESTMENT TRUST II
Voyageur Florida Limited Term Tax Free Fund
Voyageur Tax Free Funds, Inc.
Voyageur Minnesota Tax Free Fund
Voyageur North Dakota Tax Free Fund
VOYAGEUR MUTUAL FUNDS, INC.
Voyageur Iowa Tax Free Fund
Voyageur Wisconsin Tax Free Fund
Voyageur Idaho Tax Free Fund
Voyageur Arizona Tax Free Fund
Voyageur California Tax Free Fund
Voyageur National Tax Free Fund
Voyageur Minnesota High Yield Municipal Bond Fund
Voyageur Mutual Funds II, Inc.
Voyageur Colorado Tax Free Fund
VOYAGEUR MUTUAL FUNDS III , INC.
Voyageur Growth Stock Fund
Voyageur International Equity Fund
Voyageur Aggressive Growth Fund
Voyageur Growth and Income Fund
VAM INSTITUTIONAL FUNDS, INC.
VAM Global Fixed Income Fund
VAM Short Duration Government Agency Fund
VAM Intermediate Duration Government Agency Fund
VAM Government Mortgage Fund
VAM Short Duration Total Return Fund
VAM Intermediate Duration Total Return Fund
VAM Intermediate Duration Municipal Fund
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following table sets forth the number of holders of shares of the
Registrant as of September 30, 1996.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
COMMON SHARES, SERIES A,
PAR VALUE $.01 PER SHARE:
Class A 2,534
Class B 81
Class C 10
Institutional Class 164
ITEM 27. INDEMNIFICATION
The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify such persons, for such expenses and liabilities, in
such manner, under such circumstances, and to such extent as permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereinafter amended, and any rules, regulations or releases promulgated
thereunder.
The Registrant may indemnify its officers and directors and other "persons"
acting in an "official capacity" (as such terms are defined in Section 302A.521)
pursuant to a determination by the board of directors or shareholders of the
Registrant as set forth in Section 302A.521, by special legal counsel selected
by the board or a committee thereof for the purpose of making such a
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of the Registrant, then such director generally
may not be counted for the purpose of determining either the presence of a
quorum or such director's eligibility to be indemnified.
In any case, indemnification is proper only if the eligibility determining
body decides that the person seeking indemnification has: (a) not received
indemnification for the same conduct from any other party or organization;
(b)acted in good faith; (c) received no improper personal benefit; (d) in the
case of criminal proceedings, had no reasonable cause to believe the conduct was
unlawful; (e) reasonably believed that the conduct was in the best interest of
the Registrant, or in certain contexts, was not opposed to the best interest of
the Registrant; and (f) had not otherwise engaged in conduct which precludes
indemnification under either Minnesota or federal law (including, but not
limited to, conduct constituting willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties as set forth in Section 17(h) and
(i) of the Investment Company Act of 1940).
If a person is made or threatened to be made a party to a proceeding, the
person is entitled, upon written request to the Registrant, to payment or
reimbursement by the Registrant of reasonable expenses, including attorneys'
fees and disbursements, incurred by the person in advance of the final
disposition of the proceeding, (a) upon receipt by the Registrant of a written
affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant, if it is ultimately determined that the criteria for indemnification
have not been satisfied, and (b) after a determination that the facts then known
to those making the determination would not preclude indemnification under
Section 302A.521. The written undertaking required by clause (a) is an unlimited
general obligation of the person making it, but need not be secured and shall be
accepted without reference to financial ability to make the repayment.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless, in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant undertakes to comply with the indemnification requirements
of Investment Company Release 7221 (June 9, 1972) and Investment Company Release
11330 (September 2, 1980).
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The name and principal occupations(s) during the past two fiscal years of
each director and executive officer of the Adviser are set forth below. The
business address of each is 90 South Seventh Street, Suite 4400, Minneapolis,
Minnesota 55402.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH ADVISER PRINCIPAL OCCUPATION(S)
- ---------------- --------------------- -----------------------
<S> <C> <C>
Michael E. Dougherty Chairman Chairman of the Board, President and Chief Executive Officer
of Dougherty Financial Group, Inc. ("DFG") and Chairman of
Voyageur, the Underwriter and Dougherty Dawkins, Inc.
John G. Taft President and Director See biographical information in Part B of Registration
Statement.
Jane M. Wyatt Director and Chief See biographical information in Part B of Registration
Investment Officer Statement.
Edward J. Kohler Director and Executive Director and Executive Vice President of the Adviser and Director
Vice President of the Underwriter since 1995; previously, President and Director
of Piper Capital Management Incorporated from 1985 to 1995.
Frank C. Tonnemaker Director and Executive Director of Voyageur and the Underwriter since 1993; Executive
Vice President Vice President of Voyageur since 1994; Vice President of Voyageur
from 1990 to 1994.
Thomas J. Abood Senior Vice President See biographical information in Part B of Registration
and General Counsel Statement.
Kenneth R. Larsen Treasurer See biographical information in Part B of 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 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
John G. Taft Executive Vice President President
and Director
Edward J. Kohler Executive Vice President None
and Director
Jane M. Wyatt Executive Vice President Executive Vice President
and Director
Steven B. Johansen Secretary and Chief Financial None
Officer
Kenneth R. Larsen Treasurer Treasurer
Thomas J. Abood Senior Vice President and Secretary
General Counsel
</TABLE>
The address of each of the executive officers is 90 South Seventh Street, Suite
4400, Minneapolis, Minnesota 55402.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The custodian for Registrant is Norwest Bank Minnesota, N.A., Sixth Street&
Marquette Avenue, Minneapolis, Minnesota 55402. 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) Not applicable.
(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
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the City of Minneapolis, State of
Minnesota, on the 25th day of October 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.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/John G. Taft President (Principal October 25, 1996
- -------------------- Executive Officer)
John G. Taft
/s/Kenneth R. Larsen Treasurer (Principal Financial October 25, 1996
- -------------------- and Accounting Officer)
Kenneth R. Larsen
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 October 25, 1996
- --------------------
Thomas J. Abood
(Pursuant to a Power of Attorney dated January 24, 1995)
DORSEY & WHITNEY
A partnership Including Professional Corporations
2200 FIRST BANK PLACE EAST
MINNEAPOLIS, MINNESOTA 55402
(612)340-2600
TELEX 29-0605
TELECOPIER (612) 340-2868
Voyageur U.S. Government Securities Fund, Inc.
100 South Fifth Street; Suite 2300
Minneapolis, Minnesota 55402
Dear Sir/Madam:
Reference is made to the Registration Statement on Form N-1A (File No.
33-16270) which you have filed with the Securities and Exchange commission
pursuant to the Securities Act of 1933 for the purpose of registering for sale
by the Voyageur U.S. Government Securities Fund, Inc. (the "Fund") of an
indefinite number of shares of the Fund's Common Stock, par value $.01 per
share.
We are familiar with the proceedings to date with respect to the proposed
sale by the Fund, and have examined such records, documents and matters of law
and have satisfied ourselves as to such matters of fact as we consider relevant
for the purposes of this opinion.
We are of the opinion that:
(a) The Fund is a legally organized corporation under Minnesota law.
(b) The shares of common Stock to be sold by the Fund will be legally
issued, fully paid and nonassessable when issued and sold upon the
terms an din the manner set forth in said Registration Statement of
the Fund.
We consent to the reference to this firm under the caption "Custodian;
Dividend Disbursing, Administrative and Accounting Services Agent; Counsel;
Accountants" in the Statement of Additional Information and to the use of this
opinion as an exhibit to the Registration Statement.
Dated: October 14, 1987
Very truly yours,
/s/Dorsey & Whitney
--------------------------------
DORSEY & WHITNEY
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Voyageur Funds, Inc.:
We consent to the use of our report included herein and the references to our
Firm under the headings "FINANCIAL HIGHLIGHTS" in Part A and "ADDITIONAL
INFORMATION - Custodian; Counsel; Independent Auditors" and "FINANCIAL
STATEMENTS" in Part B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 23, 1996
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
VOYAGEUR FUNDS, INC.
Average annual total return figures for the current one year period, five year
period, and life of fund ending June 30, 1996, are calculated as follows:
1/n
Formula: P(1+T) = ERV or T = ERV/P -1
Where: P = hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
U.S. GOVERNMENT
SECURITIES
FUND
----
Class A
(includes 4.75% sales charge):
One year period
ERV = 989.47
n = 1
T = (1.05)
P = 1,000
Five year period
ERV = 1,413.36
n = 5
T = 7.16
P = 1,000
Life of Class A (since November 2, 1987):
ERV = 1,981.35
n = 8.67
T = 8.21
P = 1,000
Class B
One year period
ERV = 1,033.18
n = 1
T = 3.32
P = 1,000
Five year period:
ERV = N/A
n = N/A
T = N/A
P = N/A
Life of Class B (since June 7, 1994):
ERV = 1,135.11
n = 2.07
T = 6.32
P = 1,000
Class C
One year period
ERV = 1,031.08
n = 1
T = 3.11
P = 1,000
Five year period
ERV = N/A
n = N/A
T = N/A
P = N/A
Life of Class C (since January 10, 1995):
ERV = 1,162.33
n = 1.47
T = 10.74
P = 1,000
Institutional Class
One year period
ERV = 1,038.79
n = 1
T = 3.88
P = 1,000
Five year period
ERV = N/A
n = N/A
T = N/A
P = N/A
Life of Institutional Class (since June 7, 1994):
ERV = 1,148.54
n = 2.07
T = 6.92
P = 1,000
COMPUTATION OF PERFORMANCE QUOTATIONS
VOYAGEUR FUNDS, INC.
Cumulative total return figures for the periods ending June 30, 1996 are
calculated as follows:
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
the period
P = initial payment of $1,000
U.S. GOVERNMENT
SECURITIES
FUND
----
Class A (since November 2, 1987)
P = 1,000
ERV = 1,981.35
CTR = 98.14
Class B (since June 7, 1994)
P = 1,000
ERV = 1,135.11
CTR = 13.51
Class C (since January 10, 1995)
P = 1,000
ERV = 1,162.33
CTR = 16.23
Institutional Class (since June 7, 1994)
P= 1,000
ERV= 1,148.54
CTR= 14.85
COMPUTATION OF PERFORMANCE QUOTATIONS
VOYAGEUR FUNDS, INC.
The 30 day SEC yield for the period ending June 30, 1996 is calculated as
follows:
6
Formula: 2(((a-b)+1) -1)
---
cd
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
d = the maximum offering price per share on the last day of the
period
U.S. GOVERNMENT
SECURITIES FUND
---------------
Class A
a = 408,854.19
b = 30,694.68
c = 6,779,528.3799
d = 10.67
SEC Yield = 6.36
Class B
a = 9,859.87
b = 1,725.66
c = 163,020.1401
d = 10.17
SEC Yield = 5.96
Class C
a = 1,837.84
b = 322.56
c = 30,496.3595
d = 10.15
SEC Yield = 5.95
Institutional Class
a= 248,846.59
b= 18,698.43
c= 4,123,948.1948
d= 10.16
SEC Yield= 6.68
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VAM INSTITUTIONAL FUNDS, INC.
Multiple Class Plan Pursuant to Rule 18f-3
Adopted as of December 1, 1995
I. PREAMBLE.
Each of the funds listed below (each a "Fund", and collectively the
"Funds"), is a separate series of one of the above-captioned registrants (each,
a "Company"). Each Fund has elected to rely on Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "1940 Act") in offering multiple classes of
shares in such Fund:
<TABLE>
<CAPTION>
<S> <C>
Voyageur Minnesota Tax Free Fund Voyageur Washington Insured Tax Free Fund
Voyageur North Dakota Tax Free Fund Voyageur Florida Tax Free Fund
Voyageur Minnesota Limited Term Tax Free Fund Voyageur Florida Limited Term Tax Free Fund
Voyageur National Limited Term Tax Free Fund Voyageur Iowa Tax Free Fund
Voyageur Arizona Limited Term Tax Free Fund Voyageur Wisconsin Tax Free Fund
Voyageur Colorado Limited Term Tax Free Fund Voyageur Idaho Tax Free Fund
Voyageur California Limited Term Tax Free Fund Voyageur Arizona Tax Free Fund
Voyageur Minnesota Insured Fund Voyageur California Tax Free Fund
Voyageur Arizona Insured Tax Free Fund Voyageur National Tax Free Fund
Voyageur National Insured Tax Free Fund Voyageur Colorado Tax Free Fund
Voyageur Colorado Insured Tax Free Fund Voyageur Growth Stock Fund
Voyageur U.S. Government Securities Fund Voyageur International Equity Fund
Voyageur Florida Insured Tax Free Fund Voyageur Aggressive Growth Fund
Voyageur California Insured Tax Free Fund Voyageur Growth and Income Fund
Voyageur Kansas Tax Free Fund VAM Global Fixed Income Fund
Voyageur Missouri Insured Tax Free Fund VAM Short Duration Government Agency Fund
Voyageur New Mexico Tax Free Fund VAM Intermediate Duration Government Agency Fund
Voyageur Oregon Insured Tax Free Fund VAM Government Mortgage Fund
Voyageur Utah Tax Free Fund VAM Short Duration Total Return Fund
VAM Intermediate Duration Total Return Fund VAM Intermediate Duration Municipal Fund
</TABLE>
This Plan sets forth the differences among classes of shares of the Funds,
including distribution arrangements, shareholder services, expense allocations,
conversion and exchange options, and voting rights.
II. ATTRIBUTES OF SHARE CLASSES.
The attributes of each existing class of the existing Funds with respect to
distribution arrangements, shareholder services, and conversion and exchange
options shall be as set forth in the following materials:
A. Prospectus and Statement of Additional Information of each respective
Fund dated March 1, 1995 (with respect to the
Funds which invest primarily in municipal bonds).
B. Prospectus and Statement of Additional Information of the VAM
Institutional Funds dated August 1, 1995.
C. Prospectus and Statement of Additional Information of each respective
Fund dated September 1, 1995 with respect to the Funds which invest primarily in
equity securities.
D. Prospectus and Statement of Additional Information of U.S. Government
Securities Fund dated November 1, 1995.
E. Plan of Distribution for each Company and Fund in the form reapproved by
the Board of Directors on April 21, 1995. Expenses of such existing classes of
the Funds shall continue to be allocated in the manner set forth in III below.
Each such existing class shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement for shareholder
services and the distribution of shares and shall have separate voting rights on
any matter submitted to shareholders in which the interests of one class differ
from the interest of any other class, and shall have in all other respects the
same rights and obligations as each other class.
III. EXPENSE ALLOCATIONS.
Expenses of the existing classes of the existing Funds shall be allocated
as follows:
A. Distribution fees and service fees relating to the respective classes of
shares, as set forth in the materials referred to in II above, shall be borne
exclusively by the classes of shares to which they relate.
B. Except as set forth in A above, expenses of the Funds shall be borne at
the Fund level and shall not be allocated on a class basis.
Unless and until this Plan is amended to provide otherwise, the methodology
and procedures for calculating the net asset value of the respective classes of
shares of the Funds and the allocation of income and expenses among the
respective classes shall be as set forth in the "Multi-Class Accounting
Methodology" and "Report" dated October 4, 1993 rendered by KPMG Peat Marwick.
The foregoing allocations shall in all cases be made in a manner consistent
with each Company's private letter ruling from the Internal Revenue Service with
respect to multiple classes of shares.
IV. AMENDMENT OF PLAN; PERIODIC REVIEW.
A. NEW FUNDS AND NEW CLASSES. With respect to any new portfolio of a
Company created after the date of this Plan and any new class of shares of the
existing Funds created after the date of this Plan, the Board of
Directors/Trustees of such Company shall approve amendments to this Plan setting
forth the attributes of the classes of shares of such new portfolio or of such
new class of shares.
B. MATERIAL AMENDMENTS AND PERIODIC REVIEWS. The Board of
Directors/Trustees of each Company, including a majority of the independent
directors/trustees, shall periodically review this Plan for its continued
appropriateness and shall approve any material amendment of this Plan as it
relates to any class of any Fund covered by this Plan.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the statement
of assets and liabilities, statement of operations, statement of changes in net
assets and the financial highlights and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000819799
<NAME> Voyageur Funds, Inc.
<SERIES>
<NUMBER> 1
<NAME> Voyageur U.S. Government Securities Fund
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<INVESTMENTS-AT-COST> 110,508,629
<INVESTMENTS-AT-VALUE> 111,393,565
<RECEIVABLES> 1,005,909
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 13,322
<TOTAL-ASSETS> 112,412,796
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 279,256
<TOTAL-LIABILITIES> 279,256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 118,507,604
<SHARES-COMMON-STOCK> 11,036,144
<SHARES-COMMON-PRIOR> 12,599,179
<ACCUMULATED-NII-CURRENT> 219,689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,478,689)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 884,936
<NET-ASSETS> 112,133,540
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,556,433
<OTHER-INCOME> 0
<EXPENSES-NET> 1,181,757
<NET-INVESTMENT-INCOME> 7,374,676
<REALIZED-GAINS-CURRENT> 2,285,055
<APPREC-INCREASE-CURRENT> (4,503,029)
<NET-CHANGE-FROM-OPS> 5,156,702
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,133,454
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,355,262
<NUMBER-OF-SHARES-REDEEMED> 4,369,077
<SHARES-REINVESTED> 450,780
<NET-CHANGE-IN-ASSETS> (18,556,391)
<ACCUMULATED-NII-PRIOR> (21,533)
<ACCUMULATED-GAINS-PRIOR> (9,763,744)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 609,965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,193,912
<AVERAGE-NET-ASSETS> 121,764,430
<PER-SHARE-NAV-BEGIN> 10.37
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> (0.23)
<PER-SHARE-DIVIDEND> 0.61
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 0.010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
