SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Voyageur Funds, Inc.
-------------------------------
(Name of Registrant as Specified in its Charter)
Voyageur Funds, Inc.
--------------------------------
Name of Person(s) Filing Proxy Statement if other than the Registrant
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4 and 0-11.
(1) Title of each class of securities to which transaction applies:
__________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
__________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
__________________________________________________________________________
(4) Proposed maximum aggregate value of transaction :
__________________________________________________________________________
(5) Total fee paid:
__________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
__________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________________________________
(3) Filing Party:
__________________________________________________________________________
(4) Date Filed:
__________________________________________________________________________
VOYAGEUR FINANCIAL INSTITUTIONS ("VFI") INTERMEDIATE DURATION PORTFOLIO
VFI CORE PORTFOLIO
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
90 South Seventh Street
Minneapolis, Minnesota 55402
NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 11, 1997
A special joint meeting of shareholders of the above mutual funds
(individually a "Fund" and collectively the "Funds") will be held at 9:00 a.m.
on Friday, April 11, 1997 at 90 South Seventh Street, Suite 4400, Minneapolis,
Minnesota 55402. Each Fund is a series of Voyageur Funds, Inc. (the "Company").
The meeting will be held for the following purposes:
1. For shareholders of the VFI Intermediate Duration Portfolio
and VFI Core Portfolio (collectively, the "VFI Funds"), to
approve an Agreement and Plan of Reorganization (the "Plan")
pursuant to which all of the assets each of the VFI Funds
would be acquired by a newly formed series of VAM
Institutional Funds, Inc. corresponding to and having the same
name as such VFI Fund (collectively, the "New VFI Funds") and
whereby shareholders of the VFI Funds would become
shareholders of the New VFI Funds. A vote in favor of the Plan
will be considered a vote in favor of an amendment to the
articles of incorporation of the Company required to effect
the Plan.
2. For shareholders of the Voyageur U.S. Government Securities
Fund, to approve a new Investment Advisory Agreement.
3. For shareholders of the Voyageur U.S. Government Securities
Fund, to approve a Sub-Advisory Agreement.
4. To elect a Board of Directors of the Company.
5. To transact such other business as may properly come before
the meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF
EACH ITEM LISTED ON THIS NOTICE OF SPECIAL MEETING OF SHAREHOLDERS.
Shareholders of record on February 10, 1997 are the only persons
entitled to notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. We hope you
can attend. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE UPCOMING MEETING,
PLEASE FILL IN, SIGN, DATE AND MAIL THE ENCLOSED PROXY OR PROXIES AS PROMPTLY AS
POSSIBLE IN ORDER TO SAVE FURTHER SOLICITATION EXPENSE. WE RESPECTFULLY ASK FOR
YOUR COOPERATION IN RETURNING YOUR PROXY PROMPTLY. A stamped return envelope is
included for your convenience. If you are present at the meeting, you may then
revoke your proxy and vote in person, as explained in the Proxy Statement in the
section entitled "SPECIAL JOINT MEETING OF SHAREHOLDERS--APRIL 11, 1997."
Dated: March 5, 1997 Thomas J. Abood
Secretary
PROXY STATEMENT
VOYAGEUR FINANCIAL INSTITUTIONS ("VFI") INTERMEDIATE DURATION PORTFOLIO
VFI CORE PORTFOLIO
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402
SPECIAL JOINT MEETING OF SHAREHOLDERS--APRIL 11, 1997
The enclosed proxy is solicited by the Board of Directors (the "Board
of Directors") of Voyageur Funds, Inc., an open-end investment company (the
"Company") in connection with a special meeting of shareholders of the Company
to be held on April 11, 1997, and any adjournments thereof (the "Meeting"). The
three series of the Company (individually, a "Fund", and collectively, the
"Funds") are Voyageur U.S. Government Securities Fund ("Government Securities
Fund") and VFI Intermediate Duration Portfolio and VFI Core Portfolio
(collectively, the "VFI Funds").
Marquette Trust Company ("Marquette"), 13100 Wayzata Boulevard, Suite
100, Minneapolis, Minnesota 55480, serves as investment adviser to each VFI
Fund. Marquette has retained Voyageur Fund Managers, Inc. ("VFM") to act as
sub-adviser to such Funds. VFM serves as investment adviser to the Government
Securities Fund. The address of VFM is that of the Company stated above.
Representatives of Marquette and/or VFM may, without cost to the Funds,
solicit proxies on behalf of management of the Funds by means of mail, telephone
or personal calls. VFM has engaged Shareholder Communications Corporation
("SCC") to assist in the solicitation. Representatives of SCC may telephone
shareholders who have not voted, encouraging them to vote. The estimated cost of
engaging SCC, all of which will be paid by Lincoln National Corporation and not
by your Fund, is $10,000. The costs of solicitation, including the cost of
preparing and mailing the Notice of Meeting of Shareholders and this Proxy
Statement, will be borne by Lincoln National Corporation ("LNC") and will not be
an expense of the Funds, and the mailing will take place on approximately March
5, 1997.
A proxy may be revoked before the Meeting by giving written notice of
revocation to the Secretary of the Company, or at the Meeting prior to voting.
Unless revoked, properly executed proxies in which choices are not specified by
the shareholders will be voted "for" each item for which no choice is specified,
in accordance with the recommendation of the Company's Board of Directors. In
instances where choices are specified by the shareholders in the proxy, those
proxies will be voted or the vote will be withheld in accordance with the
shareholder's choice. With regard to the election of directors, votes may be
cast in favor or withheld. Abstentions may be specified on all proposals other
than the election of directors. Abstentions and votes withheld with respect to
the election of directors will be counted as present for purposes of determining
whether a quorum of shares is present at the Meeting with respect to the item on
which the abstention or withheld vote is noted, and will have the same result as
a vote "against" such item. Under the Rules of the New York Stock Exchange, if a
proposal is considered "non-discretionary," then brokers who hold Fund shares in
street name for customers are not authorized to vote on such proposal on behalf
of their customers who have not furnished the broker specific voting
instructions. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on a proposal, then the shares covered by such non-vote shall
not be counted as present for purposes of calculating the vote with respect to
such proposal. So far as the Board of Directors is aware, no matter other than
those described in this Proxy Statement will be acted upon at the Meeting.
Should any other matters properly come before the Meeting calling for a vote of
shareholders, it is the intention of the persons named as proxies in the
enclosed proxy to act upon such matters according to their best judgment.
Only shareholders of record of each Fund on February 10, 1997 may vote
at the Meeting or any adjournment thereof. As of that date, there were issued
and outstanding common shares of each Fund of the Company as follows:
<TABLE>
<CAPTION>
Common Shares
-----------------------------------------------
Institutional
Class A* Class B Class C Class
-------- ------- ------- -------------
<S> <C> <C> <C> <C>
VFI Intermediate Duration Portfolio 3,066,445 N/A N/A N/A
VFI Core Portfolio 4,595,816 N/A N/A N/A
Government Securities Fund 6,421,990 227,101 23,266 5,071,273
</TABLE>
- --------------------
* The VFI Funds do not issue multiple classes of shares.
Each shareholder is entitled to one vote for each share held on each of
the Proposals applicable to the Fund(s) in which the shareholder held shares on
the record date. None of the matters to be presented at the Meeting will entitle
any shareholder to cumulative voting or appraisal rights. A list of those
persons who, to the knowledge of Fund management, beneficially owned more than
5% of the voting shares of any class of the Funds as of February 10, 1997, is
set forth in Schedule 1 to this Proxy Statement.
In the event that sufficient votes are not received for the adoption of
any proposal, an adjournment or adjournments of the Meeting may be sought. Any
adjournment would require a vote in favor of the adjournment by the holders of a
majority of the shares present at the Meeting (or any adjournment thereof) in
person or by proxy. In such circumstances, the persons named as proxies will
vote in favor of any proposed adjournment.
COPIES OF EACH FUND'S MOST RECENT ANNUAL REPORT IS AVAILABLE TO
SHAREHOLDERS UPON REQUEST. IF YOU WOULD LIKE TO RECEIVE A COPY, PLEASE CONTACT
THE FUNDS AT 90 SOUTH SEVENTH STREET, MINNEAPOLIS, MINNESOTA 55402 OR CALL (800)
553-2143 AND ONE WILL BE SENT, WITHOUT CHARGE, BY FIRST-CLASS MAIL WITHIN THREE
BUSINESS DAYS OF YOUR REQUEST.
The following table illustrates which Proposals are to be voted upon by
shareholders of a Fund:
<TABLE>
<CAPTION>
Proposal Number
-----------------------------------------------------------
1 2 3 4
----- ----- ----- ------
Approve Approve Elect
Approve Advisory Sub-Advisory Board of
Reorganization Agreement Agreement Directors
-------------- --------- --------- ---------
<S> <C> <C> <C> <C>
VFI Intermediate Duration Portfolio X X
VFI Core Portfolio X X
Government Securities Fund X X X
</TABLE>
BACKGROUND
INTRODUCTION
VFM currently serves as the investment adviser to the Government
Securities Fund and as the sub-adviser to each VFI Fund. VFM also provides each
of the Funds with administrative, accounting, transfer agency and dividend
disbursing services pursuant to an Administrative Services Agreement between VFM
and the Company. Voyageur Fund Distributors, Inc. ("VFD"), a wholly-owned
subsidiary of VFM, acts as the distributor of each Fund's shares.
The Meeting has been called as a result of a proposed Merger, as
defined and discussed in greater detail below under "The Proposed Merger." The
proposed Merger involves the parent company of VFM and a newly formed subsidiary
of Lincoln National Corporation ("LNC") and is expected to occur on or about
April 30, 1997. The Merger would result in LNC having ultimate ownership and
control of VFM (and its subsidiary, VFD). In negotiating the terms of the
Merger, the current owners of VFM determined that they would prefer to maintain
any rights their companies have to provide investment advisory or distribution
services to the VFI Funds. Therefore, such owners plan to create new limited
liability companies through which they will continue to provide investment
management services (in the form of sub-advisory services) and administrative,
accounting, transfer agency, dividend disbursing and distribution services to
the VFI Funds. However, in order to do this, the VFI Funds must be separated
from the Government Securities Fund. To accomplish this separation, certain
reorganizations are being proposed (under Proposal One, below) whereby the VFI
Funds would become series of a different corporate entity prior to the Merger
(the "VFI Fund Reorganizations").
The Merger will also impact the Government Securities Fund. If the
Merger is consummated, due to the change in ownership and control discussed
above, it will result in an automatic termination of the investment advisory
agreement between the Government Securities Fund and VFM. Thus, shareholders of
the Government Securities Fund are being asked to approve a new investment
advisory agreement. Shareholders are also being asked to approve a sub-advisory
agreement with Voyageur Asset Management LLC ("VAM LLC"), a new limited
liability company owned by the current owners of VFM, whereby VAM LLC would
become the sub-adviser to the Government Securities Fund and would utilize Jane
M. Wyatt, the Fund's current portfolio manager, to provide day-to-day portfolio
management services.
In addition, all shareholders of the Company (i.e., those of all Funds)
are being asked to elect eight members to the Company's Board of Directors (the
"Board"), including one director from the current Board who has been nominated
for reelection. The remaining members of the current Board are expected to
resign immediately prior to the closing of the Merger. Shareholders of the VFI
Funds are being asked to elect directors because they were record holders of the
Company's shares on the record date for the Meeting and are therefore required
to be included among shareholders entitled to vote. Such shareholders will not
ultimately be governed by this election of directors, however, if the
reorganization of their respective Fund is approved.
Certain proposals on which shareholders are being asked to vote are
contingent upon consummation of the Merger, specifically, the new investment
advisory and sub-advisory agreements for the Government Securities Fund
(Proposals Two and Three) and the election of Directors (Proposal Four). Thus,
if the Merger is not consummated, the current investment advisory agreement will
remain in effect for the Government Securities Fund and the current members of
the Board would remain in office. The VFI Fund Reorganizations are not
contingent upon consummation of the Merger.
THE PROPOSED MERGER
VFM is an indirect wholly-owned subsidiary of Dougherty Financial
Group, Inc. ("DFG"), which is owned 49.83% by Michael E. Dougherty and 49.83%
equally by James O. Pohlad, Robert C. Pohlad and William M. Pohlad (the
"Pohlads").
On January 15, 1997, DFG, Mr. Dougherty and the Pohlads entered into an
Agreement and Plan of Merger with LNC (the "Merger Agreement"). The Merger
Agreement provides that a wholly-owned subsidiary of LNC will be merged with and
into DFG, causing DFG to become a wholly-owned subsidiary of LNC. This
transaction is referred to herein as the "Merger." Prior to the closing date of
the Merger (the "Closing Date") a reorganization will be completed whereby
certain assets of DFG and its subsidiaries, including all of the assets of VFM
used solely or primarily in the private accounts investment advisory business of
VFM, and certain assets related to its institutional investment management
business (including those related to the provision of investment management,
administration, accounting, transfer agency and dividend disbursing services to
the VFI Funds), will be sold by DFG to certain newly organized limited liability
companies owned by Mr. Dougherty and the Pohlads (the "Dougherty
Reorganization").
LNC, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management. Delaware Management Company, Inc.
("DMC"), an indirect wholly-owned subsidiary of LNC, and its affiliate, Delaware
International Advisers Ltd., serve as the investment advisers to the investment
companies in the Delaware Group of Investment Companies (the "Delaware Group"),
which currently includes 16 open-end funds and two closed-end funds (comprising
48 separate investment portfolios). Delaware Distributors, L.P. ("Delaware
Distributors"), also an indirect wholly-owned subsidiary of LNC, serves as the
national distributor for each open-end fund in the Delaware Group. DMC, through
its Delaware Investment Advisers division, Delaware International Advisers Ltd.
and certain other subsidiaries of Delaware Management Holdings, Inc. ("DMH"),
also provides investment advice with respect to separately managed accounts of
institutional and other clients. DMH, through its subsidiaries, is responsible
for the management of approximately $32 billion.
Under the Merger Agreement, holders of DFG common stock will receive
LNC common stock with a value of approximately $69 million. This amount is
subject to certain adjustments, including a downward adjustment in the event
that the aggregate net assets of the Funds and certain other investment
companies managed by VFM (collectively, the "Voyageur Funds") as of the Closing
Date are less than 90% but equal to or greater than 80% of the aggregate net
assets of the Voyageur Funds as of January 14, 1997. In connection with the
Dougherty Reorganization, all issued and outstanding shares of DFG common stock
other than those owned by Mr. Dougherty and the Pohlads will be redeemed and all
outstanding options (other than those held by certain optionholders receiving
compensation under the Merger Agreement) will be canceled. As a result,
immediately prior to consummation of the Merger, the issued and outstanding
shares of DFG will be owned 50% by Michael E. Dougherty, 16 2/3% by James O.
Pohlad, 16 2/3% by Robert C. Pohlad and 16 2/3% by William Pohlad.
The closing of the Merger (the "Closing") is subject to a number of
conditions, including a condition that those Voyageur Funds which collectively
represent at least 90% of the aggregate net assets of the Voyageur Funds as of
the Closing Date will, by shareholder vote, have approved new investment
advisory agreements and, with respect to the open-end Voyageur Funds, the Boards
of Directors or Trustees of such Funds shall have approved new distribution
agreements. In addition, the aggregate net assets of the Voyageur Funds as of
the Closing Date shall not be less than 80% of the aggregate net assets of the
Voyageur Funds as of January 14, 1997, and the net assets of each of certain
Voyageur Funds (namely, Minnesota Insured Fund, Minnesota Tax Free Fund, Florida
Insured Tax Free Fund, Colorado Tax Free Fund and Arizona Insured Tax Free Fund)
as of the Closing Date shall not be less than 80% of their net assets as of
January 14, 1997.
CONSUMMATION OF THE MERGER
If the Merger is consummated, LNC will own indirectly all of the
outstanding voting securities of VFM, which in turn will own all of the
outstanding voting securities of VFD. Such new ownership will constitute a
change in control of VFM and VFD and will cause the current investment advisory
and distribution agreements for the Government Securities Fund to terminate
automatically in accordance with their terms, as required by the Investment
Company Act of 1940, as amended (the "1940 Act"). Such terminations will
necessitate adoption of new agreements for the provision of investment advisory
and distribution services to the Government Securities Fund. Shareholder
approval of a new investment advisory agreement for Government Securities Fund
is proposed and is described below under Proposal Two.
Shareholder approval of a new distribution agreement for Government
Securities Fund is not required. However, new distribution agreements have been
approved for the Government Securities Fund by the Board of the Company,
effective upon the Closing of the Merger. The Company, on behalf of the
Government Securities Fund, will enter into new distribution agreements with
both VFD and Delaware Distributors that will be identical in all material
respects to the Company's current distribution agreement with VFD relating to
Government Securities Fund. VFD and Delaware Distributors will act as
co-principal distributors of the Government Securities Fund's shares. Delaware
Distributors, an indirect wholly-owned subsidiary of LNC, is the national
distributor for all of the mutual funds in the Delaware Group. Under such
distribution agreements, VFD and Delaware Distributors may receive payments
pursuant to the Government Securities Fund's Rule 12b-1 Plan of Distribution.
The Plan of Distribution, including the Rule 12b-1 fees payable thereunder, will
not change as a result of the Merger.
Following the Merger, it is possible that the businesses of VFM and DMC
will be combined to consolidate all investment management activities of the
Delaware Group and the Voyageur Funds into one company, and that the businesses
of VFD and Delaware Distributors will be combined to consolidate distribution
activities for the two groups into one company. In the event such combinations
take place, no change in ultimate control or management of VFM or VFD would
occur.
The Company is currently a party to an administrative services
agreement with VFM which, pursuant to its terms, will terminate automatically
upon consummation of the Merger. Under the administrative services agreement,
VFM acts as the Funds' dividend disbursing, transfer, administrative and
accounting services agent to perform dividend-paying functions, to calculate
each Fund's daily share price, to maintain shareholder records and to perform
certain regulatory and compliance related services for the Funds. Following
consummation of the Merger, the Company, on behalf of the Government Securities
Fund, will enter into a shareholder services agreement with Delaware Service
Company, Inc. ("Delaware Service"), pursuant to which Delaware Service will
serve as the shareholder servicing, dividend disbursing and transfer agent for
such Fund, and a fund accounting agreement with Delaware Service pursuant to
which Delaware Service will act as the accounting agent for such Fund. Delaware
Service is an indirect, wholly-owned subsidiary of LNC.
In order to provide continuity in the provision of these services to
the Government Securities Fund, the Merger Agreement requires Dougherty
Financial Group LLC ("DFG LLC"), one of the limited liability companies to be
formed in the Dougherty Reorganization discussed above, to provide certain
transition services to LNC or one of its subsidiaries after Closing.
Accordingly, upon Closing, DFG LLC will enter into a Transition Services
Agreement with DMH, an indirect parent company of Delaware Service and a
wholly-owned subsidiary of LNC, pursuant to which, for a period of up to two
years following the Closing Date, DFG LLC shall provide to DMH certain specified
services which may include the following: (a) human resources, supervision,
general administrative, accounting and employee benefits; (b) fund accounting;
(c) transfer agency; (d) legal, tax and compliance; (e) support services for
brokers, wholesalers, marketing, customer support, fulfillment, securities
trading, investment management, the unit investment trust business and the
closed-end funds businesses; (f) hardware and software systems and maintenance;
and (g) third-party vendor relationships. Payments under the Transition Services
Agreement will be the responsibility of DMH and not of the Fund.
PROPOSAL ONE
PROPOSAL FOR THE VFI FUNDS TO APPROVE AN
AGREEMENT AND PLAN OF REORGANIZATION
THIS PROPOSAL IS APPLICABLE TO BOTH VFI FUNDS, AND NOT TO THE GOVERNMENT
SECURITIES FUND.
INTRODUCTION
Shareholders of each VFI Fund are being asked to consider and vote upon
an Agreement and Plan of Reorganization (the "Plan"), by and between the
Company, on behalf of each of the VFI Funds, and VAM Institutional Funds, Inc.
("VAM"), on behalf of two newly formed series of VAM which are being created to
correspond to each of the VFI Funds and which will have the same names as the
respective VFI Funds (the "New VFI Funds"). Pursuant to the Plan, all of the
assets of each of the VFI Funds would be acquired by the corresponding fund of
the New VFI Funds (which, prior to such time, would have no assets) and
shareholders of each VFI Fund would become shareholders of the corresponding New
VFI Fund and would receive shares in such New VFI Fund equal to the value of
their holdings in the relevant VFI Fund on the date of such transaction (the
transactions described above will constitute a "VFI Fund Reorganization" for
each VFI Fund). The shares to be issued by each New VFI Fund pursuant to its VFI
Fund Reorganization ("New VFI Fund Shares") will be issued at net asset value
without a sales charge. A vote in favor of the Plan will be considered a vote in
favor of an amendment to the articles of incorporation of the Company required
to effect the VFI Fund Reorganization as contemplated by the Plan. The VFI Fund
Reorganizations will not be contingent upon consummation of the Merger.
BACKGROUND
The VFI Funds currently constitute two series of the Company. However,
the Government Securities Fund is also a series of the Company. As described
above under "Background," in connection with the Merger, shareholders of the
Government Securities Fund will be asked to approve a new investment advisory
agreement with DMC. In addition, all shareholders of the Company (including
those of the VFI Funds) are being asked to elect new members of the Board of
Directors of the Company that will consist principally of individuals who
currently serve on the Board of Directors of the investment companies in the
Delaware Group.
The shareholder base, and related marketing and distribution efforts,
pertaining to the Government Securities Fund are somewhat separate from and
unrelated to those of the VFI Funds, which are sold primarily to financial
institutions. In negotiating the terms of the Merger, the owners of VFM and DFG
determined that they would prefer to maintain any current rights their companies
have to provide investment advisory or distribution services to the VFI Funds,
and that any right to provide such services to the VFI Funds should therefore
not remain with VFM or VFD at the time of the Merger. However, in order to do
this, the VFI Funds must be separated out of the corporate entity of which the
Government Securities Fund is a series. In order to accomplish this separation,
the VFI Fund Reorganizations are being recommended to shareholders of both VFI
Funds.
If the Plan is approved, it will in essence cause the VFI Funds to
become, as the New VFI Funds, series of a different corporate entity, VAM.
However, this corporate entity will, like the Company, be a Minnesota
corporation, and will have the same Board of Directors as the Company currently
has. The provisions of the articles of incorporation of VAM, and the rights of
shareholders determined thereunder, are substantially the same as those of the
Company and its shareholders. The Plan will not result in any other material
changes to shareholders. Management of each VFI Fund will remain essentially
unchanged because Marquette will continue to act as each Fund's investment
adviser and VAM LLC (the successor to this portion of VFM's operations) will act
as each Fund's sub-adviser. See "Comparison of VFI Funds and New VFI Funds"
below.
THE PLAN
The terms and conditions under which the VFI Fund Reorganizations would
be consummated are set forth in the Plan and are summarized below. This summary
is qualified in its entirety by reference to the Plan, a copy of which is
attached as Exhibit A to this Proxy Statement.
The Plan provides that (a) each VFI Fund will transfer all of its
assets, including portfolio securities, cash, cash equivalents, securities,
commodities, futures and interest receivables, to its corresponding New VFI Fund
at the Closing Time in exchange for the assumption by such New VFI Fund of all
of the VFI Fund's liabilities, including all expenses, costs, charges and
reserves, as reflected on an unaudited statement of assets and liabilities of
the VFI Fund prepared by the Treasurer of the Company as of the Valuation Date
(as defined below) in accordance with generally accepted accounting principles
consistently applied from the prior audited period, and the delivery of New VFI
Fund Shares; and (b) such New VFI Fund Shares will be distributed to the
shareholders of the VFI Fund at the Closing Time or as soon as practicable
thereafter and outstanding VFI Fund shares will be canceled and retired. The
distribution of New VFI Fund Shares and the cancellation and retirement of
outstanding VFI Fund shares is to be accomplished under the Plan by amending the
articles of incorporation of the Company in the manner provided in the amendment
set forth in Exhibit 1 to the Plan.
For technical reasons, certain existing investment limitations of one
or both VFI Funds may be deemed to preclude a VFI Fund from consummating a VFI
Fund Reorganization to the extent that the VFI Fund Reorganization would involve
the VFI Fund holding all of its assets as shares of the New VFI Fund until such
shares are distributed to the VFI Fund's shareholders. By approving the Plan, a
VFI Fund's shareholders will be deemed to have agreed to waive each of these
limitations.
The number of New VFI Fund Shares to be delivered to a VFI Fund will
have an aggregate net asset value equal to the value of the VFI Fund assets
acquired by such New VFI Fund (net of the liabilities assumed by the New VFI
Fund); these values will be calculated as of the close of business of the New
York Stock Exchange on a business day not later than the fifth business day
following the receipt of the requisite approval of the Plan by the shareholders
of such VFI Fund or at such other time as the VFI Fund and New VFI Fund may
agree (the "Valuation Date"). These New VFI Fund Shares will be distributed to
the former VFI Fund shareholders, with each such shareholder receiving New VFI
Fund Shares with a value equal to the value of their holdings in the relevant
VFI Fund.
For each New VFI Fund, VAM will cause its transfer agent to credit and
confirm an appropriate number of New VFI Fund Shares to each shareholder of the
respective VFI Fund. Neither the Company nor VAM issues stock certificates.
The Closing Time for each VFI Fund Reorganization will be 5:00 p.m.,
Eastern Time, on the Valuation Date, or at such other time as the relevant VFI
Fund and New VFI Fund may agree. The consummation of each Reorganization is
contingent upon the approval of the Plan by the shareholders of the relevant VFI
Fund and the receipt of certain opinions and certificates as described in
Sections 6, 7 and 8 of the Plan and the occurrence of the events described in
those Sections, certain of which may be waived by the relevant VFI Fund or New
VFI Fund. The Plan may be amended in any mutually agreeable manner, except that
no amendment may be made subsequent to the Meeting which would detrimentally
affect the value of the New VFI Fund Shares to be distributed. LNC will bear all
direct costs associated with preparation, printing, filing and proxy
solicitation incurred in connection with obtaining requisite shareholder
approval of each VFI Fund Reorganization. In addition, VFM will pay any
unamortized organizational expenses on the books of each VFI Fund immediately
prior to its Reorganization.
The Plan may be terminated with respect to either VFI Fund and such
Fund's VFI Fund Reorganization abandoned at any time, before or after approval
by such VFI Fund's shareholders, by mutual consent of the Fund and its
corresponding New VFI Fund. In addition, either party may terminate the Plan
upon the occurrence of a material breach of the Plan by the other party or if,
by July 1, 1997, any condition set forth in the Plan has not been fulfilled or
waived by the party entitled to its benefits.
Shareholders of a VFI Fund will continue to be able to redeem their
shares at net asset value next determined after receipt of the redemption
request until the close of business on the business day next preceding the
Valuation Date. Redemption requests received by a VFI Fund thereafter will be
treated as requests for redemption of shares of the corresponding New VFI Fund.
TAX ASPECTS OF THE VFI FUND REORGANIZATIONS
It is intended that each VFI Fund Reorganization will qualify for
federal income tax purposes as a tax-free reorganization under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code"), and
that, for federal income tax purposes, no income, gain or loss will be
recognized by such VFI Fund's shareholders in connection therewith (except that
the dividend or dividends discussed in the first paragraph of this section will
be taxable to Fund shareholders subject to taxation). The VFI Funds have not
asked, and do not plan to ask, the Internal Revenue Service to rule on the tax
consequences of the VFI Fund Reorganizations.
As a condition to the closing of each VFI Fund Reorganization, the VFI
Fund and the New VFI Fund will receive an opinion from Dorsey & Whitney LLP,
counsel to such funds, based in part on certain representations to be furnished
by each fund, substantially to the effect that the federal income tax
consequences of the VFI Fund Reorganization will be as follows:
(i) the VFI Fund Reorganization will constitute a
reorganization within the meaning of Section 368(a)(1)(F) of the Code,
and the relevant VFI Fund and corresponding New VFI Fund each will
qualify as a party to the VFI Fund Reorganization under Section 368(b)
of the Code;
(ii) VFI Fund shareholders will recognize no income, gain or
loss upon receipt, pursuant to the VFI Fund Reorganization, of New VFI
Fund Shares. VFI Fund shareholders subject to taxation will recognize
income upon receipt of any net investment income or net capital gains
of their VFI Fund which are distributed by the Fund prior to its VFI
Fund Reorganization;
(iii) the tax basis of New VFI Fund Shares received by a VFI
Fund shareholder pursuant to a VFI Fund Reorganization will be equal to
the tax basis of the VFI Fund Shares exchanged therefor;
(iv) the holding period of New VFI Fund shares received by
each VFI Fund shareholder pursuant to a VFI Fund Reorganization will
include the period during which the shareholder held the VFI Fund
shares exchanged therefor, provided that the VFI Fund Shares were held
as a capital asset on the date of the relevant VFI Fund Reorganization;
(v) the VFI Fund will recognize no income, gain or loss by
reason of the VFI Fund Reorganization;
(vi) the corresponding New VFI Fund will recognize no income,
gain or loss by reason of the VFI Fund Reorganization;
(vii) the tax basis of the assets received by a New VFI Fund
pursuant to the VFI Fund Reorganization will be the same as the basis
of those assets in the hands of the corresponding VFI Fund immediately
prior to its VFI Fund Reorganization;
(viii) the holding period of the assets received by a New VFI
Fund pursuant to a VFI Fund Reorganization will include the period
during which such assets were held by the corresponding VFI Fund; and
(ix) the New VFI Fund will succeed to and take into account
the earnings and profits, or deficit in earnings and profits, of the
corresponding VFI Fund immediately prior to its VFI Fund
Reorganization.
The foregoing advice is based in part upon certain representations
furnished by each VFI Fund, VFM and certain 5% shareholders of each VFI Fund, of
which two principal representations (for each VFI Fund) are: (a) immediately
following consummation of the VFI Fund Reorganization, the shareholders of the
VFI Fund will own all of the outstanding stock of the New VFI Fund and will own
such stock solely by reason of their ownership of stock of the VFI Fund
immediately prior to the VFI Fund Reorganization; and (b) there is no plan or
intention on the part of shareholders of the VFI Fund who own 5% or more of the
shares of the VFI Fund and, to the best knowledge of management of the VFI Fund,
there is no plan or intention on the part of the remaining shareholders of the
VFI Fund to sell, exchange or otherwise dispose of any of the New VFI Fund
Shares to be received in the VFI Fund Reorganization.
SHAREHOLDERS OF EACH VFI FUND SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE EFFECT, IF ANY, OF THEIR PROPOSED VFI FUND REORGANIZATION IN LIGHT
OF THEIR INDIVIDUAL CIRCUMSTANCES. SINCE THE FOREGOING DISCUSSION RELATES ONLY
TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE VFI FUND REORGANIZATIONS,
SHAREHOLDERS OF EACH VFI FUND SHOULD CONSULT THEIR TAX ADVISORS AS TO STATE AND
LOCAL TAX CONSEQUENCES, IF ANY, OF THEIR VFI FUND REORGANIZATION.
DISSENTERS' RIGHTS
Pursuant to Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (the "MBCA Sections"), record holders of VFI Fund shares are
entitled to assert dissenters' rights in connection with the Fund Reorganization
and obtain payment of the "fair value" of their shares, provided such
shareholders comply with the requirements of the MBCA Sections. NOTWITHSTANDING
THE PROVISIONS OF THE MBCA SECTIONS, THE DIVISION OF INVESTMENT MANAGEMENT (THE
"DIVISION") OF THE COMMISSION HAS TAKEN THE POSITION THAT ADHERENCE TO STATE
APPRAISAL PROCEDURES BY A REGISTERED INVESTMENT COMPANY ISSUING REDEEMABLE
SECURITIES WOULD CONSTITUTE A VIOLATION OF RULE 22C-1 UNDER THE 1940 ACT. THIS
RULE PROVIDES THAT NO OPEN-END INVESTMENT COMPANY MAY REDEEM ITS SHARES OTHER
THAN AT NET ASSET VALUE NEXT COMPUTED AFTER RECEIPT OF A TENDER OF SUCH SECURITY
FOR REDEMPTION. IT IS THE VIEW OF THE DIVISION THAT RULE 22C-1 PREEMPTS
APPRAISAL PROVISIONS IN STATE STATUTES.
It should be emphasized that, as usual, VFI Fund shareholders may
redeem their shares at net asset value at any time prior to the closing of their
VFI Fund Reorganization in accordance with the redemption procedures set forth
in the VFI Funds' Prospectus.
DESCRIPTION OF SHARES
Shares of each New VFI Fund to be issued pursuant to the Plan will,
when issued, be fully paid and nonassessable by the relevant New VFI Fund and
transferable without restrictions and will have no preemptive or conversion
rights.
COMPARISON OF THE VFI FUNDS AND NEW VFI FUNDS
INVESTMENT ADVISER AND SUB-ADVISER. VAM, on behalf of each New VFI
Fund, will enter into an investment advisory agreement with Marquette with terms
substantially identical to those of the VFI Funds' current investment advisory
agreement. Marquette will in turn enter into a new sub-advisory agreement with
VAM LLC with terms substantially identical to those contained in the current
sub-advisory agreement with VFM. As described above, prior to the consummation
of the Merger, DFG will complete the Dougherty Reorganization whereby certain
assets of DFG and its subsidiaries, including certain assets of VFM, will be
sold by DFG to certain newly organized limited liability companies, including
VAM LLC. These limited liability companies will not merge with a subsidiary of
LNC or otherwise be acquired by LNC in the Merger. The ultimate ownership and
control of VAM LLC is anticipated to remain with the same individuals who
currently own and control VFM, namely, Michael E. Dougherty, James O. Pohlad,
Robert C. Pohlad and William M. Pohlad. It is expected that the individuals who
currently serve as the principal executive officer and the directors of VFM
will, with the exception of Frank C. Tonnemaker, serve in similar capacities
with VAM LLC after the Merger. See "Supplemental Information about Voyageur Fund
Managers, Inc." VAM LLC will make investment decisions for the New VFI Funds
through a committee expected to consist of the same individuals who make
investment decisions for the VFI Funds. A vote in favor of a VFI Fund
Reorganization by shareholders of a VFI Fund will be deemed to be a vote to
authorize such VFI Fund (as sole shareholder of the New VFI Fund Shares of its
corresponding New VFI Fund on the date of such reorganization) to vote in favor
of a new advisory agreement between VAM, on behalf of such New VFI Fund, and
Marquette, and a new sub-advisory agreement between Marquette and VAM LLC (VFM
in the event the Merger is not consummated).
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The investment
objectives, policies and restrictions of each New VFI Fund will be identical to
those of its corresponding current VFI Fund.
DIRECTORS AND EXECUTIVE OFFICERS. As mentioned above, the directors of
VAM are the same as the current directors of the Company. The officers of VAM
are the same individuals as listed below under "Executive Officers of Voyageur
Funds." However, Mr. McCullagh and Ms. Howell will resign as officers of VAM
immediately prior to the Merger.
PRINCIPAL UNDERWRITER. VFD acts as the principal underwriter of the
Funds' shares pursuant to a Distribution Agreement. Under this Distribution
Agreement, VFD receives a monthly service fee from each VFI Fund which is
intended to compensate VFD for expenses incurred in connection with the
servicing of VFI Fund shareholder accounts. Dougherty Dawkins LLC, one of the
limited liability companies to be formed in the Dougherty Reorganization, will
act as the principal underwriter of each New VFI Fund's shares pursuant to a
Distribution Agreement substantially identical to the current Distribution
Agreement.
DIVIDEND DISBURSING, TRANSFER, ADMINISTRATIVE AND ACCOUNT SERVICES
AGENT. VFM currently acts as each VFI Fund's dividend disbursing, transfer,
administrative and account services agent pursuant to an administrative services
agreement. VAM LLC will act in such capacities for each of the New VFI Funds
pursuant to an administrative services agreement that will have substantially
identical terms to the current agreement between VFM and the Fund. VAM LLC may
contract with third parties to provide some of these services.
THE BOARD'S CONSIDERATIONS
At a meeting of the Board held on February 7, 1997, VFM reviewed the
proposed Plan with the Board. In reviewing the Plan, the Board considered the
various factors discussed above, including the following:
(a) each VFI Fund is currently a series of the Company - a
corporate entity that will become a part of the Delaware Group, whereas
the VFI Funds will not be advised by DMC or its affiliates;
(b) the Plan will result in no material changes to
shareholders of the VFI Funds other than a change in the corporate
entity of which their fund is a series, and will allow their fund to be
a series of a corporate entity that will be advised by VAM LLC;
(c) the Board of Directors of VAM will not change as a result
of the VFI Fund Reorganizations or the Merger and will continue to
consist of the same individuals who currently serve on the Board of the
Company;
(d) it is anticipated that each VFI Fund Reorganization will
constitute a tax-free reorganization for federal income tax purposes,
and no gain or loss will be recognized by any VFI Fund or its
shareholders for federal income tax purposes as a result of its
reorganization.
Based on the foregoing, at a meeting held on February 14, 1997, the
Board, including a majority of the Board's directors who are not "interested
persons" of the Company as defined by the 1940 Act, determined that the VFI Fund
Reorganizations are in the best interests of the shareholders of the VFI Funds
and that the interests of VFI Fund shareholders will not be diluted as a result
thereof, and therefore approved the Plan.
VOTE REQUIRED
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS OF
EACH VFI FUND VOTE IN FAVOR OF APPROVAL OF THE PLAN. For each VFI Fund, the
affirmative vote of a majority of the shares entitled to vote is required to
approve the Plan for such Fund.
PROPOSAL TWO
PROPOSAL TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT FOR
THE GOVERNMENT SECURITIES FUND
THIS PROPOSAL IS APPLICABLE ONLY TO SHAREHOLDERS OF THE GOVERNMENT SECURITIES
FUND.
INTRODUCTION
As discussed above under "Background," the Merger will cause the
current investment advisory agreement of the Government Securities Fund (for
purposes of this Proposal Two, the "Current Agreement") to terminate
automatically, as required by the 1940 Act. The Government Securities Fund
(sometimes referred to in this Proposal as the "Fund") must therefore adopt a
new investment advisory agreement for the provision of such services (for
purposes of this Proposal Two, the "New Agreement"). Under the 1940 Act, the New
Agreement must be approved by the Government Securities Fund's shareholders.
The investment adviser under the New Agreement would be DMC. DMC is an
indirect wholly-owned subsidiary of LNC. In addition, as described below in
Proposal Three, subject to shareholder approval, DMC would enter into a
sub-advisory agreement with VAM LLC whereby VAM LLC would utilize Jane M. Wyatt,
the Fund's current portfolio manager, to provide day-to-day portfolio management
services.
BOARD OF DIRECTORS' RECOMMENDATION
The Board, including a majority of the Board's directors who are not
"interested persons" of the Company, as defined by the 1940 Act, voted to
approve the New Agreement for the Government Securities Fund. For information
about the Board's deliberations and the reasons for its recommendation, please
see "Evaluation of the Merger by the Board of Directors" below in this Proposal
Two.
The Board recommends that shareholders of the Government Securities
Fund vote in favor of the approval of the New Agreement.
COMPARISON OF THE NEW AGREEMENT AND CURRENT AGREEMENT
The material differences between the New Agreement and the Current
Agreement are discussed below. A form of the New Agreement is attached to this
Proxy Statement as Exhibit B. The following discussion is qualified in its
entirety by reference to the text of New Agreement. If approved by shareholders,
the New Agreement will take effect upon consummation of the Merger.
ADVISORY SERVICES. Pursuant to both the Current Agreement and the New
Agreement (sometimes referred to hereafter in this Proposal Two collectively as
the "Agreements"), VFM (in the case of the Current Agreement) and DMC (in the
case of the New Agreement) (each of which may sometimes be referred to hereafter
in this Proposal Two as an "Adviser"), 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 investment objective and
investment policies and restrictions of the Fund and the supervision of the
Board; provided that under the New Agreement the Adviser may retain one or more
sub-advisers. See "Ability to Retain a Sub-Adviser" below. Under both
Agreements, the Adviser is required to furnish, at its own expense, office
facilities, equipment and personnel for servicing the investments of the Fund.
In addition, the Adviser is required, if the Company so requests, to arrange for
its officers and employees to serve without compensation from the Fund as
directors, officers or employees of the Company if duly elected to such
positions by the shareholders or directors of the Company or the directors of
the Company.
COMPENSATION. The rate at which investment advisory fees are payable by
the Fund under the Current Agreement is identical to the rate at which fees will
be payable under the New Agreement except that, as described in the following
paragraph, under the Current Agreement VFM is contractually obligated to pay
certain operating expenses of the Fund if such expenses exceed a certain level.
Under both Agreements, as compensation for the Adviser's services, the Fund is
obligated to pay to the Adviser a monthly investment advisory fee at an annual
rate of 0.50% of the Fund's average daily net assets. The fee is based on the
average daily value of the Fund's net assets at the close of each business day.
FEE AND EXPENSE LIMITATIONS. Under the Fund's Current Agreement, VFM 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.
The New Agreement will not include any contractual expense limitation
provisions. However, DMC has committed, for a period of two years following the
date of Closing, to voluntarily waive fees and/or pay Fund expenses to the same
extent, if any, as would have been necessary to comply with such contractual
provisions. See "Fees and Expenses" below.
Under both Agreements, all costs and expenses incurred in the operation
of the Fund, to the extent not specifically assumed by the Adviser or the Fund's
distributor, are the responsibility of the Fund.
ABILITY TO RETAIN A SUB-ADVISER. The Current Agreement provides that
VFM shall have the sole and exclusive responsibility for the management of the
Fund's investment portfolio and for making and executing all investment
decisions for the Fund. The New Agreement authorizes DMC, at its expense, to
retain a sub-adviser or sub-advisers to perform some or all of the services for
which DMC is responsible under the New Agreement. Any retention of a sub-adviser
is subject to approval by the Board and the shareholders of the Fund.
Shareholders of the Fund are being asked to approve a sub-advisory agreement
between DMC and VAM LLC. (See Proposal Three.)
STANDARD OF CARE. The Current Agreement does not contain an explicit
standard of care. The New Agreement provides that, unless there is willful
misfeasance, bad faith, gross negligence or a reckless disregard by DMC of its
duties, DMC shall not be liable to the Fund or its shareholders for any action
or omission in the course of, or connected with, rendering services under the
New Agreement or for any losses that may be sustained in the purchase, holding
or sale of any security, or otherwise.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE. The New Agreement
provides that, subject to the primary objective of obtaining the best available
prices and execution, DMC may place orders with brokers or dealers who provide
brokerage and research services to DMC or its advisory clients. The New
Agreement also provides that, to the extent consistent with the rules of the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc., these orders may be placed with brokers who sell shares of the
Fund and other funds to which DMC provides advisory services. The services which
may be provided to DMC include advice, either directly or through publications
or writings, 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; furnishing of analyses and reports
concerning issuers, securities or industries; providing information on economic
factors and trends; assisting in determining portfolio strategy; providing
computer software and hardware used in security analyses; and providing
portfolio performance evaluation and technical market analyses. Such services
will be used by DMC in connection with its investment decision-making process
with respect to one or more funds and accounts that it manages, and need not be
used, or used exclusively, with respect to the Fund. The New Agreement also
provides that higher commissions are permitted to be paid to broker-dealers who
provide brokerage and research services than to broker-dealers who do not
provide such services if such higher commissions are deemed reasonable in
relation to the value of the brokerage and research services provided. There are
no provisions in the Current Agreement addressing these issues. Disclosure in
the Fund's current Prospectus and Statement of Additional Information provides,
however, that the Adviser may engage in such practices.
TERM. If approved by shareholders, the New Agreement will become
effective upon consummation of the Merger and will have an initial term of two
years. Thereafter, as is also the case with the Current Agreement, the New
Agreement will continue from year to year only if approved annually (a) by the
Board or by the vote of a majority of the outstanding voting securities of the
Fund and (b) by the vote of a majority of the Independent Directors, cast in
person at a meeting of the Board called for the purpose of voting on such
approval. In the case of both Agreements, the Agreement may be terminated by the
Fund or by its Adviser on 60 days' notice to the other party, and terminates
automatically upon its assignment.
OTHER INFORMATION RELATED TO THE AGREEMENTS
The Current Agreement, dated November 1, 1993, was last submitted to
shareholders on October 31, 1993, for the purpose of approving a new agreement
with VFM as a result of a change in control of VFM. For the four-month fiscal
period ended October 31, 1996, the Fund paid $187,687 in advisory fees to VFM.
VFM did not waive any advisory fees during such period. The table below sets
forth for the four-month fiscal period ended October 31, 1996, the
administrative services fees paid to VFM under the Fund's Administrative
Services Agreement, commissions retained by VFD under the Fund's Distribution
Agreement, and Rule 12b-1 fees paid to VFD under the Fund's Plan of
Distribution.
Commissions
Retained by
Administrative VFD under Rule 12b-1
Fees Paid Administrative Distribution Fees Paid Rule 12b-1
to VFM Fees Waived Agreement to VFD Fees Waived
------ ----------- --------- ------ -----------
$44,565 $0 $1,628 $5,797 $0
FEES AND EXPENSES
As discussed above, the Current Agreement contains contractual expense
limitations. The New Agreement will not contain any such limitations. However,
DMC has committed for a period of two years following the date of the Closing of
the Merger to waive fees and/or pay Fund expenses to the same extent, if any, as
would have been necessary had such contractual expense limitations ("Contractual
Limitations") remained in place.
Senior management of VFM and VFD has reviewed with senior management of
DMC, Delaware Distributors and Delaware Service the expected total expense ratio
for the Fund for 1997, after taking into account the Contractual Limitations. In
addition to adhering to the Contractual Limitations for the two-year period
after Closing, DMC has committed through December 31, 1997, to cause the total
expense ratio for Class A and Institutional Class shares of the Fund to equal
the expense ratios that senior management of VFM and VFD projected to maintain
for such classes during 1997. Expense ratios for Class B and Class C of the Fund
are expected to vary from the expense ratios for Class A and Institutional Class
by the amount of the difference in the Rule 12b-1 plan fees payable for each
class. In view of anticipated expense ratios for 1997, DMC does not expect that
expense waivers and/or reimbursements in addition to the Contractual Limitations
will be required.
Fees paid to DMC for investment management services after the Closing
will not exceed those set forth in the New Agreement being considered for
approval at the Meeting unless shareholder approval is obtained. In addition,
Rule 12b-1 Plan payments for each class of the Fund will not exceed the levels
set forth in the Fund's existing Rule 12b-1 Plan without shareholder approval.
EVALUATION OF THE MERGER BY THE BOARD OF DIRECTORS
On January 15, 1997, the Board was informed by VFM that DFG had entered
into the Merger Agreement. After such notification, the Board was advised by
counsel to the Fund regarding the directors' fiduciary obligations and the
nature and extent of the information that they should consider requesting in
order to evaluate the New Agreement and the potential impact of the Merger on
the Fund and its shareholders. A special meeting of the Board was held on
January 28, 1997, at which meeting the Board met with various executive officers
of LNC, DMC, Delaware Distributors and Delaware Service (collectively, "DMH
representatives"). These individuals presented to Board members background
information on LNC, information on DMC, including its experience in municipal
bond fund and fixed income fund management, and the structure of and rationale
behind the proposed Merger. They also discussed the capabilities of Delaware
Distributors and Delaware Service and described the Transition Services
Agreement referred to above that was designed to help provide continuity with
respect to shareholder servicing, fund accounting and dividend disbursing and
transfer agency services. DMC representatives summarized the other benefits that
the Merger, in their opinion, could bring to Fund shareholders, including
benefits in the areas of customer service and fund accounting, improved
distribution as a result of the strength of Delaware Distributors, and access
through a net asset value exchange privilege to all open-end mutual funds in the
Delaware Group.
At the meeting, the Board appointed a special committee made up of
disinterested directors (the "Special Committee") to further consider and make
recommendations to the Board as to the appropriateness of the proposed
transactions. Those directors who are members of the Special Committee are James
W. Nelson and Thomas F. Madison. On February 5, 1997, the Special Committee
traveled to DMH's headquarters and met with senior management representatives of
DMC, Delaware Distributors and Delaware Service to review various aspects of the
proposed Merger, the background of DMC and its affiliates, DMC's operational
capabilities and compliance functions and future plans for the Funds. The
Special Committee also met with outside counsel to the funds in the Delaware
Group, a representative of Ernst & Young LLP ("Ernst & Young"), the independent
public accountants to the funds in the Delaware Group, and with certain nominees
to the Board.
At a meeting on February 7, 1997, the Board met to review with the
Special Committee the findings of such committee. The Board also met with senior
management representatives of DMC, Delaware Distributors and Delaware Service
and reviewed substantial additional information regarding the following points:
(a) the structure of the Merger; (b) the performance and abilities of DMC,
including performance information for funds in the Delaware Group; (c) benefits
of the Merger to Fund shareholders; (d) Fund expenses following the transaction;
(e) proposed staffing and personnel relative to the Fund; (f) organizational
style; (g) the financial condition of LNC and its affiliates; (h) the fact that
a consolidation of the Fund with another fund in the Delaware Group is currently
not being considered; (i) anticipated changes in Fund officers and counsel; (j)
the compliance philosophy and record of DMC and its affiliates; (k)
distribution, shareholder servicing and fund accounting; and (l) pro forma
profitability information (in connection with providing advisory, distribution
and other services to the Fund) for DMC, Delaware Distributors and Delaware
Service, assuming consummation of the Merger. The Boards were also informed at
such meeting that DMC anticipates that it will recommend, at some point after
consummation of the Merger, that Ernst & Young be appointed as the Fund's
independent public accountants.
A final meeting of the Board was held on February 14, 1997 for the
purpose of approving the New Agreement. At such meeting, the Board recommended
that the shareholders of the Fund approve the New Agreement, to become effective
as of the closing of the Merger. During its deliberations the Board noted, in
particular, the following:
* The New Agreement contains substantially the same terms and
conditions as are contained in the Current Agreement except
that, as discussed above, the New Agreement does not contain a
contractual expense limitation provision, it allows the
Adviser to retain one or more sub-advisers and it contains an
explicit standard of care.
* DMC has committed, for a period of two years following the
date of Closing, to voluntarily waive fees and/or pay Fund
expenses to the same extent, if any, as would have been
necessary to comply with the contractual expense limitations
in the Current Agreement.
* The Fund will not bear any costs or expenses in connection
with the Merger, including the costs of this proxy
solicitation.
* No change in the Fund's investment objective or fundamental
policies is currently contemplated in connection with the
Merger.
* The Merger is expected to result in a number of benefits to
shareholders, including access through a net asset value
exchange privilege to all of the open-end mutual funds in the
Delaware Group.
* As a result of the proposed sub-advisory agreement between DMC
and VAM LLC (see Proposal Three, below), the Merger is not
expected to cause any change in the investment personnel
managing the Fund.
The Board also considered Section 15(f) of the 1940 Act during its
deliberations. Section 15(f) provides a "safe harbor" from the 1971 case of
ROSENFELD V. BLACK, in which the U.S. Court of Appeals for the Second Circuit
held that an investment adviser is prohibited from benefitting financially in
connection with the sale or assignment of its advisory office to another
investment adviser. Under the ROSENFELD analysis, any compensation received by
an investment adviser or an affiliate thereof in connection with the transfer or
assignment of an investment advisory agreement arguably would be prohibited if
all or any portion of such compensation constitutes consideration for the
assistance by such investment adviser or affiliate thereof in facilitating the
transfer of the investment advisory office to the successor adviser. The Section
15(f) safe harbor is available if two conditions are met. First, for a period of
three years after the transaction at least 75% of the board members of the
investment company must not be "interested persons" (within the meaning of the
1940 Act) of the new or predecessor investment adviser. The Board of Directors
which shareholders are being asked to elect in Proposal Five, below, consists of
eight directors, two of whom, Jeffrey J. Nick and Wayne A. Stork, are interested
persons of LNC, and none of whom are interested persons of VFM. Accordingly, the
composition of the proposed Board of Directors would be in compliance with this
provision of Section 15(f). Second, an "unfair burden" must not be imposed upon
the investment company as a result of such transaction or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair burden"
is defined in Section 15(f) to include any arrangement during a two-year period
after the transaction whereby the investment adviser, or any interested person
of any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its shareholders (other
than fees for bona fide investment advisory or other services) or from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). In
connection therewith, LNC represented to the Board that it will use its best
efforts to ensure that the Funds do not execute any portfolio transactions
through an affiliate of LNC for a period of at least two years following
consummation of the Merger.
LNC has represented in the Merger Agreement that neither LNC nor any of
its affiliates has any express or implied understanding or arrangement which
would impose an unfair burden on the Fund or would in any way violate Section
15(f) of the 1940 Act as a result of the transactions contemplated by the Merger
Agreement.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE GOVERNMENT
SECURITIES FUND VOTE IN FAVOR OF THE APPROVAL OF THE NEW AGREEMENT. Approval of
the proposal requires the favorable vote of a "majority of the outstanding
voting securities" of such Fund, as defined in the 1940 Act, which means the
lesser of the vote of (a) 67% of the shares of the Fund present at a meeting
where more than 50% of the outstanding shares are present in person or by proxy,
or (b) more than 50% of the outstanding shares of the Fund. Unless otherwise
instructed, the proxies will vote to approve the New Agreement.
PROPOSAL THREE
PROPOSAL TO APPROVE A SUB-ADVISORY AGREEMENT PURSUANT TO WHICH
VOYAGEUR ASSET MANAGEMENT LLC WOULD MANAGE
THE ASSETS OF THE GOVERNMENT SECURITIES FUND
THIS PROPOSAL IS APPLICABLE ONLY TO SHAREHOLDERS OF THE GOVERNMENT SECURITIES
FUND, AND WILL BE CONSIDERED AT THE MEETING IF PROPOSAL THREE IS APPROVED.
THE PROPOSED SUB-ADVISORY AGREEMENT
As set forth in Proposal Two, shareholders of the Government Securities
Fund are being asked to approve a new investment advisory agreement with DMC.
DMC proposed that the Board approve a sub-advisory agreement (the "Sub-Advisory
Agreement") between DMC and VAM LLC. It is expected that VAM LLC will be a
wholly-owned subsidiary of DFG LLC, formed in connection with the Dougherty
Reorganization described above in the "Background" section of this Proxy
Statement. After the Merger, VAM LLC is expected to conduct the private account
investment advisory business which is currently conducted by VFM. The current
portfolio manager for the Government Securities Fund, Jane M. Wyatt, will be an
employee of VAM LLC following the Merger and, if the proposed Sub-Advisory
Agreement is approved, will continue to act as the Government Securities Fund's
portfolio manager after the Merger. Ms. Wyatt has been Chief Investment Officer
of VFM and a Director of VFM and VFD since 1993. Previously, she had been an
Executive Vice President of VFM since 1992 and a Vice President of VFM from 1989
to 1992. Ms. Wyatt has approximately 20 years of risk management experience. The
Board has approved, and recommends that Government Securities Fund shareholders
approve, the Sub-Advisory Agreement. If approved by shareholders, the
Sub-Advisory Agreement would be effective upon closing of the Merger.
DMC believes it has the capacity among its existing investment
personnel to manage the Government Securities Fund without the assistance of a
sub-adviser but has at this point determined to utilize a sub-adviser to enhance
the continuity in the provision of investment management services for existing
Government Securities Fund shareholders. In fact, DMC under the proposed
investment management agreement intends to be actively involved in the
management of the Government Securities Fund. At such time as DMC determines
that it would be prudent to manage the Government Securities Fund without the
assistance of a sub-adviser, it may, consistent with the terms of the
Sub-Advisory Agreement, terminate such agreement.
The form of Sub-Advisory Agreement is attached as Exhibit C to this
Proxy Statement. The following discussion is qualified in its entirety by
reference to the text of the Sub-Advisory Agreement.
Under the terms of the Sub-Advisory Agreement, and subject to the
supervision of DMC, VAM LLC will direct the investment of the Government
Securities Fund's assets and will be responsible for the formulation and
implementation of a continuing program for the management of the Fund's assets
and resources. VAM LLC will make determinations with respect to the investment
of the assets of the Government Securities Fund and will take such steps as may
be necessary to implement the determinations, including the placement of
purchase and sale orders on behalf of the Fund.
The Sub-Advisory Agreement provides that DMC shall pay VAM LLC a
monthly management fee at an annual rate of 0.25% of the Government Securities
Fund's average daily net assets during each month (provided that, to the extent
DMC undertakes in Government Securities Fund's Registration Statement or
elsewhere to waive its investment advisory fee and/or pay Fund expenses, VAM LLC
has agreed to proportionately waive its sub-advisory fee). VAM LLC's
sub-advisory fee will be paid by DMC, not by the Fund.
As is the case with the proposed investment advisory agreement for
Government Securities Fund, the Sub-Advisory Agreement provides that, subject to
the primary objective of obtaining the best available prices and execution, VAM
LLC may place orders with brokers or dealers who provide brokerage and research
services to VAM LLC or its advisory clients. See "Proposal Two--Comparison of
New Agreement and Current Agreement--Portfolio Transactions and Allocation of
Brokerage."
The Sub-Advisory Agreement would terminate automatically in the event
of its assignment, as defined under the 1940 Act. In addition, the Sub-Advisory
Agreement would be terminable at any time, without penalty, by the Board, by a
vote of a majority of the Fund's outstanding voting securities (as defined under
the 1940 Act) on 60 days' written notice to DMC and VAM LLC, by DMC on 60 days'
written notice to VAM LLC, or by VAM LLC on 60 days' written notice to the DMC.
The Sub-Advisory Agreement shall have an initial term of two years and
thereafter shall continue in effect only so long as such continuance is
specifically approved at least annually by either the Board, or by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund, provided that, in either event, such continuance is also approved by a
vote of a majority of the directors who are not parties to such Agreement, or
interested persons of such parties, cast in person at a meeting called for the
purpose of voting on such approval.
THE BOARD'S CONSIDERATIONS
The Sub-Advisory Agreement was approved by the Board, subject to
shareholder approval, at a meeting called for the purpose of voting on the
Sub-Advisory Agreement held February 14, 1997. Prior to approving the
Sub-Advisory Agreement, the Board considered a variety of factors, including:
(a) the historical performance of the Government Securities Fund under current
management; (b) the nature, quality and extent of the services proposed to be
provided by VAM LLC pursuant to the Sub-Advisory Agreement; (c) DMC's role in
supervising VAM LLC in its capacity as sub-adviser to DMC; and (d) the
reasonableness of the proposed fee allocation between DMC and VAM LLC in light
of the reduced investment role but continued overall responsibility of DMC.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND
VOTE TO APPROVE THE PROPOSED SUB-ADVISORY AGREEMENT. Adoption of the proposal
requires the favorable vote of a "majority of the outstanding voting securities"
of the Fund, as defined in the 1940 Act, which means the lesser of the vote of
(a) 67% of the shares of the Fund present at a meeting where more than 50% of
the outstanding shares are present in person or by proxy, or (b) more than 50%
of the outstanding shares of the Fund. Unless otherwise instructed, the proxies
will vote for the approval of the proposed Sub-Advisory Agreement.
PROPOSAL FOUR
ELECTION OF DIRECTORS
THIS PROPOSAL IS APPLICABLE TO SHAREHOLDERS OF ALL FUNDS.
SHAREHOLDERS OF THE VFI FUNDS ARE BEING ASKED TO VOTE ON THIS PROPOSAL
BECAUSE THEY ARE RECORD HOLDERS OF THE COMPANY'S SHARES ON THE RECORD DATE FOR
THE MEETING AND ARE THEREFORE REQUIRED TO BE INCLUDED AMONG SHAREHOLDERS
ENTITLED TO VOTE. HOWEVER, UNDER PROPOSAL ONE, SUCH SHAREHOLDERS ARE BEING ASKED
TO VOTE IN FAVOR OF THE VFI FUND REORGANIZATIONS, WHEREBY EACH VFI FUND WOULD BE
REORGANIZED INTO VAM, A SEPARATE CORPORATE ENTITY WHICH WOULD HAVE THE SAME
BOARD OF DIRECTORS AS THE CURRENT BOARD OF THE COMPANY. THEREFORE, THIS PROPOSAL
WOULD AFFECT SHAREHOLDERS OF A VFI FUND ONLY IF THE RELEVANT VFI FUND
REORGANIZATION IS NOT APPROVED, AND THE MERGER IS CONSUMMATED.
Listed below are the nominees for director to be elected by the
shareholders. Current members of the Company's Board of Directors are Clarence
G. Frame, Thomas F. Madison, Richard F. McNamara, James W. Nelson and Robert J.
Odegard. Upon closing of the Merger, all of such individuals other than Mr.
Madison will resign, and the nominees set forth below will take office. Such
individuals have been nominated for election by the current disinterested
directors of the Company. The election of such nominees is contingent upon
consummation of the Merger. It is intended that the enclosed proxy will be voted
for the shares represented thereby for the election of the persons named below
as directors of the Company unless such authority has been withheld in the
proxy. The term of office of each person elected will be until the next regular
meeting of shareholders or until his or her successor is duly elected and shall
qualify. Mr. Madison has been a director of the Company since May 1, 1994.
Messrs. Babich, Knerr, Longstreth, Peck and Stork and Ms. Leven are currently
directors of each investment company in the Delaware Group. Pertinent
information regarding each nominee for at least the past five years is set forth
following his or her name below.
Name and Age Principal Occupation and Business Experience
During Past 5 Years
Walter P. Babich (69) Director and/or Trustee of the 18 investment
companies in the Delaware Group; Board Chairman,
Citadel Constructors, Inc., 1988 to present;
Partner, I&L Investors, 1988 to 1991; Partner,
Irwin & Leighton (building construction), 1986
to 1988.
Anthony D. Knerr (58) Director and/or Trustee of the 18 investment
companies in the Delaware Group; founder and
Managing Director, Anthony Knerr & Associates
(consulting company to non-profit institutions
and organizations), 1991 to present; founder and
Chairman of The Publishing Group, Inc., 1988 to
1990; Executive Vice President/ Finance and
Treasurer, Columbia University, 1982 to 1988;
lecturer in English, Columbia University, 1987
to 1989.
Ann R. Leven (56) Director and/or Trustee of the 18 investment
companies in the Delaware Group; Director of
four investment companies sponsored by Aquila
Management Corporation, 1985 to present;
Treasurer, National Gallery of Art, 1994 to
present; Deputy Treasurer, National Gallery of
Art, 1990 to 1994; Treasurer and Chief Fiscal
Officer, Smithsonian Institution, 1984 to 1990;
Adjunct Professor, Columbia Business School,
1975 to 1992.
W. Thacher Longstreth (age 76) Director and/or Trustee of the 18 investment
companies in the Delaware Group; Philadelphia
City Councilman, 1984 to present; Consultant,
Packard Press, 1988 to present; President, MLW
Associates (business consulting), 1983 to
present; Director, Healthcare Services Group,
1983 to present; Director Emeritus, Tasty Baking
Company, 1991 to present; Director, MicroLeague
Micromedia, Inc. (computer game publisher), 1996
to present; Director, Tasty Baking Company, 1968
to 1991; Vice Chairman, The Winchell Company
(financial printing), 1983 to 1988.
Thomas F. Madison (age 60) Director and/or Trustee of the 16 Voyageur
investment companies since 1994; President and
CEO of MLM Partners, Inc. since 1993; Chairman
of the Board, Communications Holdings, Inc.,
since 1996; previously, Vice Chairman--Office of
the CEO, The Minnesota Mutual Life Insurance
Company from February to September 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. (irrigation systems and steel
manufacturing), Eltrax Systems, Inc. (data
communications integration), Minnegasco, Span
Link Communications (software) and ACI
Telecentrics (outbound telemarketing and
telecommunications).
*Jeffrey J. Nick (age 43) President, Chief Executive Officer and Director
of Lincoln National Investment Companies, Inc.;
Managing Director, Lincoln National UK plc, 1992
to present; responsible for corporate planning
and development, Lincoln National Corporation,
1989 to 1992; previously, Arthur D. Little, Inc.
(management consultancy); Chase Investment Bank
(merchant banking).
Charles E. Peck (age 71) Director and/or Trustee of the 18 investment
companies in the Delaware Group;
Secretary/Treasurer, Enterprise Homes, Inc.,
1992 to present; Chairman and Chief Executive
Officer, The Ryland Group, Inc. (home building),
1981 to 1990.
*Wayne A. Stork (age 59) Chairman, President, Chief Executive Officer,
Director and/or Trustee of 17 investment
companies in the Delaware Group (which excludes
Delaware Pooled Trust, Inc.), Delaware
Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders
Holdings, Inc.; Chairman and Director of
Delaware Pooled Trust, Inc., Delaware
Distributors, Inc. and Delaware Capital
Management, Inc.; Chairman, President, Chief
Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.;
Chairman, Chief Executive Officer and Director
of Delaware International Advisers Ltd.;
Director of Delaware Service Company, Inc. and
Delaware Investment & Retirement Services, Inc.;
during the past five years, Mr. Stork has served
in various executive capacities at different
times within the Delaware organization.
- --------------------
* Denotes directors who will be considered to be "interested persons" (as
defined by the 1940 Act) of the Company upon closing of the Merger.
As of January 31, 1997, the current officers and directors of each Fund
as a group beneficially owned less than 1% of each class of outstanding shares
of each Fund.
The Board has established an Audit Committee which consists of each of
the current directors. If the nominees named above are elected and the Merger is
consummated, it is expected that the Audit Committee will be reconstituted at
the first meeting of the Board following the Closing. The Audit Committee met
two times during the most recently ended fiscal period of the Company. The
Company does not have nominating or compensation committees.
The functions to be performed by the Audit Committee are to recommend
annually to the Board a firm of independent certified public accountants to
audit the books and records of the Company for the ensuing year; to monitor that
firm's performance; to review with the firm the scope and results of each audit
and determine the need, if any, to extend audit procedures; to confer with the
firm and representatives of the Company on matters concerning the Funds'
financial statements and reports including the appropriateness of its accounting
practices and of its financial controls and procedures; to evaluate the
independence of the firm; to review procedures to safeguard portfolio
securities; to review the purchase by the Company from the firm of non-audit
services; to review all fees paid to the firm; and to facilitate communications
between the firm and each Company's officers and directors.
For the most recently ended fiscal period of the Company, there were
two meetings of the Board. The only nominee for director at this Meeting, Mr.
Madison, attended all of the meetings of the Board and of committees of which he
was a member that were held while he was serving on the Board or on such
committee.
No compensation is paid by the Company (or any Fund) to its officers or
directors, except that each director who is not an employee of VFM or any of its
affiliates currently receives an annual fee of $26,000 for serving as a director
of all of the open-end and closed-end investment companies for which VFM acts as
investment adviser, plus a $500 fee for each special in-person meeting attended
by such director. For the most recently ended fiscal period, each current
director received compensation in the amount of $1,434 from the Company. The
aggregate compensation received by each such director from all open-end and
closed-end investment companies managed by VFM (the "Voyageur Fund Complex")
during the calendar year ended December 31, 1996 was $25,500. Director
compensation paid by the Voyageur Fund Complex during the first quarter of 1996
was based on an annual fee of $24,000, which was subsequently increased to
$26,000.
VOTE REQUIRED
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE IN FAVOR
OF THE FOREGOING NOMINEES TO SERVE AS NEW DIRECTORS OF THE COMPANY. The vote of
a majority of shares of the Company represented at the meeting and entitled to
vote, provided at least a quorum is represented in person or by proxy, is
sufficient for the election of the above nominees. Unless otherwise instructed,
the proxies will vote for the above nominees. In the event any of the above
nominees are not candidates for election at the meeting, the proxies will vote
for such other persons as the Board may designate. Nothing currently indicates
that such a situation will arise.
SUPPLEMENTAL INFORMATION ABOUT
VOYAGEUR FUND MANAGERS, INC.
VFM, a Minnesota corporation, is an indirect wholly-owned subsidiary of
DFG, which is owned 49.83% by Michael E. Dougherty and 49.83% equally by James
O. Pohlad, Robert C. Pohlad and William M. Pohlad. 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. As of January 31, 1997, VFM and its
affiliates served as the investment manager to six closed-end and ten open-end
investment companies (comprising 33 separate investment portfolios),
administered numerous private accounts and managed approximately $11 billion in
assets.
The names and principal occupations of the principal executive officer
and each director of VFM are set forth below. The address of all individuals is
that of the VFM and the Funds.
Name Principal Occupation
Michael E. Dougherty Chairman of VFM; Chairman of VFD and Dougherty
Dawkins, Inc.; Director, Chairman of the Board,
President and E. Chief Executive Officer of DFG.
John G. Taft Director and President of VFM; Director and
Executive Vice President of VFD.
Jane M. Wyatt Director and Chief Investment Officer of VFM;
Director and Executive Vice President of VFD.
Edward J. Kohler Director and Executive Vice President of VFM;
Director of VFD.
Frank C. Tonnemaker Director and Executive Vice President of VFM; and
Director and President of VFD.
All of such individuals will resign their positions immediately prior
to Closing. It is expected that, after consummation of the Merger, the
individuals who currently serve as the principal executive officer and directors
of DMC will also serve as the principal executive officer and directors of VFM.
See "Supplemental Information about Delaware Management Company, Inc." below.
Set forth below is information regarding sub-advisory agreements
between VFM and certain other open-end funds which have investment objectives
similar to those of the Government Securities Fund:
<TABLE>
<CAPTION>
Sub-Advisory
Rate of Fees Waived for Net Assets of
Fund VFM's Compensation* Last Fiscal Year Fund at 12/31/96
- ---- ------------------- ---------------- ----------------
<S> <C> <C> <C>
VFI Intermediate Duration Portfolio 0.10% of average daily net assets $ 0 $ 30,655,171
VFI Core Portfolio 0.10% of average daily net assets $ 0 $ 45,921,261
</TABLE>
- -----------------------
* VFM receives 50% of the advisory fee, which is equal to 0.20% of average
daily net assets, subject to a performance adjustment of up to +-.15% of
average daily net assets based on the respective Fund's performance versus
that of its comparison index.
SUPPLEMENTAL INFORMATION ABOUT
DELAWARE MANAGEMENT COMPANY, INC.
DMC is an indirect, wholly-owned subsidiary of DMH. In turn, DMH is an
indirect wholly-owned subsidiary, and subject to the ultimate control, of LNC.
LNC, an Indiana corporation with headquarters in Fort Wayne, Indiana, is a
diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management. DMC and its
predecessors have been managing the funds in the Delaware Group since 1938. On
December 31, 1996, DMC and its affiliates within the Delaware Investment
Advisers division and Delaware International Advisers Ltd. and certain other
subsidiaries of DMH, were supervising in the aggregate approximately $32 billion
in assets in various institutional or separately managed and investment company
accounts. DMC is located at One Commerce Square, Philadelphia, Pennsylvania
19103.
The names and principal occupations of the principal executive officer
and each director of DMC are set forth below. The address of all individuals is
that of DMC.
Name Principal Occupation
Wayne A. Stork Chairman, President, Chief Executive Officer,
Chief Investment Officer and Director of
Delaware Management Company, Inc.; Chairman,
President, Chief Executive Officer, Director
and/or Trustee of 17 investment companies in the
Delaware Group (which excludes Delaware Pooled
Trust, Inc.), Delaware Management Holdings,
Inc., DMH Corp., Delaware International Holdings
Ltd. and Founders Holdings, Inc.; Chairman and
Director of Delaware Pooled Trust, Inc.,
Delaware Distributors, Inc. and Delaware Capital
Management, Inc.; Chairman, Chief Executive
Officer and Director of Delaware International
Advisers Ltd.; Director of Delaware Service
Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Winthrop S. Jessup Executive Vice President and Director of
Delaware Management Company, Inc.; Executive
Vice President of 17 investment companies in the
Delaware Group (which excludes Delaware Pooled
Trust, Inc.) and Delaware Management Holdings,
Inc.; President and Chief Executive Officer of
Delaware Pooled Trust, Inc.; President and
Director of Delaware Capital Management, Inc.;
Executive Vice President and Director of DMH
Corp., Delaware International Holdings Ltd. and
Founders Holdings, Inc.; Vice Chairman and
Director of Delaware Distributors, Inc.; Vice
Chairman of Delaware Distributors, L.P.;
Director of Delaware Service Company, Inc.,
Delaware International Advisers Ltd., Delaware
Management Trust Company and Delaware Investment
& Retirement Services, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of
Delaware Management Company, Inc.; Executive
Vice President of the 18 investment companies in
the Delaware Group; Senior Vice President of
Delaware Management Holdings, Inc.; Director of
Delaware International Advisers Ltd.
David K. Downes Executive Vice President/Chief Operating
Officer/Chief Financial Officer and Director of
Delaware Management Company, Inc.; Senior Vice
President/Chief Administrative Officer/Chief
Financial Officer of the 18 investment companies
in the Delaware Group; Chairman and Director of
Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.;
President/Chief Executive Officer/Chief
Financial Officer and Director of Delaware
Service Company, Inc.; Executive Vice
President/Chief Operating Officer/Chief
Financial Officer and Director of DMH Corp.,
Delaware Distributors, Inc., Founders Holdings,
Inc. and Delaware International Holdings Ltd.;
Executive Vice President/Chief Operating
Officer/Chief Financial Officer of Delaware
Management Holdings, Inc. and Delaware Capital
Management, Inc.; Senior Vice President/Chief
Administrative Officer/Chief Financial Officer
of Delaware Distributors, L.P., Director of
Delaware International Advisers Ltd.
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of
Delaware Management Company, Inc.; Senior Vice
President and Secretary of the 18 investment
companies in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware
Distributors, L.P.; Executive Vice President,
Secretary and Director of Delaware Management
Trust Company; Senior Vice President, Secretary
and Director of DMH Corp., Delaware
Distributors, Inc., Delaware Service Company,
Inc., Delaware Investment & Retirement Services,
Inc., Founders Holdings, Inc. and Delaware
Capital Management, Inc.; Secretary and Director
of Delaware International Holdings Ltd.,
Director of Delaware International Advisers
Ltd., Attorney.
DMC currently serves as investment adviser for the following funds that
have investment objectives similar to those of the Government Securities Fund:
<TABLE>
<CAPTION>
Rate of Advisory Fees
Compensation (Based Waived For Assets as
Fund on Average Net Assets) Last Fiscal Year of 12/31/96
- ---- ---------------------- ---------------- -----------
<S> <C> <C> <C>
Delaware Group Government Fund, Inc. 0.60% per annum* $ 0 $ 174,249,070
Delaware Group Adviser Funds, Inc.
Federal Bond Fund 0.30% per annum $ 34,787 $ 12,150,117
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund 0.50% per annum $ 0 $ 510,406,022
Delaware Group Premium Fund, Inc.
Capital Reserves Series 0.60% per anum* $ 0 $ 27,732,215
</TABLE>
- ------------------------
* All fees are reduced by fees paid to directors or trustees of the fund.
EXECUTIVE OFFICERS OF THE FUNDS
Certain information about the executive officers of the Funds and the
Company is set forth below. Unless otherwise indicated, all positions have been
held more than five years.
Name (Age) Position and Term of Office with the Funds and
Business Experience During the Past Five Years
John G. Taft (42) President of the Funds; President of VFM;
Director of VFM and of VFD since 1993; Executive
Vice President of VFD (since 1995); Management
Committee member of VFM from 1991 to 1993.
Andrew M. McCullagh, Jr. (48) Executive Vice President of the Funds; Senior
Tax Exempt Portfolio Manager of VFM; previously,
Director of VFM and VFD, from 1993 to 1995.
Jane M. Wyatt (42) Executive Vice President of the Funds; Director
and Chief Investment Officer of VFM since 1993;
Director and Executive Vice President of VFD
since 1993; previously, Executive Vice President
and Portfolio Manager of VFM from 1992 to 1993.
Steve P. Eldredge (40) Vice President of the Funds since 1995; Senior
Tax Exempt Portfolio Manager of VFM since 1995;
previously, portfolio manager for ABT Mutual
Funds, Palm Beach, Florida, from 1989 to 1995.
Elizabeth H. Howell (35) Vice President of the Funds; Senior Tax Exempt
Portfolio Manager of VFM.
James C. King (56) Vice President of the Funds; Senior Equity
Portfolio Manager of VFM since 1993; previously,
Director of VFM and VFD from 1993 to 1995.
Kenneth R. Larsen (33) Treasurer of the Funds; Treasurer of VFM and
VFD; previously, Director, Secretary and
Treasurer of VFM and VFD from 1993 to 1995.
Thomas J. Abood (33) Secretary of the Funds since 1995; Senior Vice
President and General Counsel since 1994 of DFG;
Senior Vice President of VFM, VFD and Voyageur
Companies, Inc. since 1995; previously, Vice
President of VFM and Voyageur Companies, Inc.
from 1994 to 1995; previously, associated with
the law firm of Skadden, Arps, Slate, Meagher &
Flom, Chicago, Illinois from 1988 to 1994.
All of such individuals except Ms. Howell and Mr. McCullagh will resign
their positions with the Company immediately prior to Closing. It is expected
that, after consummation of the Merger, the newly elected members of the Board
will elect the following individuals, in addition to Ms. Howell and Mr.
McCullagh, to serve as officers of the Company:
Name (Age) Expected Position with Funds and Business
Experience During the Past Five Years
Wayne A. Stork (59) Chairman, President, Chief Executive Officer,
Director and/or Trustee of the Funds. See
"Supplemental Information About Delaware
Management Company, Inc." for a description of
Mr. Stork's business experience.
Winthrop S. Jessup (51) Executive Vice President of the Funds. See
"Supplemental Information About Delaware
Management Company, Inc." for a description of
Mr. Jessup's business experience.
Richard G. Unruh, Jr. (57) Executive Vice President of the Funds. See
"Supplemental Information About Delaware
Management Company, Inc." for a description of
Mr. Unruh's business experience.
Paul E. Suckow (49) Executive Vice President/Chief Investment
Officer, Fixed Income of the Funds and of the 18
investment companies in the Delaware Group and
Delaware Management Company, Inc.; Executive
Vice President and Director of Founders
Holdings, Inc.; Senior Vice President/Chief
Investment Officer, Fixed Income of Delaware
Management Holdings, Inc.; Senior Vice President
of Delaware Capital Management, Inc.; Director
of Founders CBO Corporation; Director of HYPPCO
Finance Company Ltd.; before returning to the
Delaware Group in 1993, Mr. Suckow was Executive
Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York,
New York from 1985 to 1992; prior to 1985, he
was a fixed-income portfolio manager for the
Delaware Group.
David K. Downes (57) Senior Vice President/Chief Administrative
Officer/ Chief Financial Officer of the Funds.
See "Supplemental Information About Delaware
Management Company, Inc." for a description of
Mr. Downes' business experience.
George M. Chamberlain, Jr. (50) Senior Vice President and Secretary of the
Funds. See "Supplemental Information About
Delaware Management Company, Inc." for a
description of Mr. Chamberlain's business
experience.
Mitchell L. Conery (38) Vice President/Senior Portfolio Manager of the
tax-free Funds and of the tax-free and
fixed-income investment companies in the
Delaware Group and Delaware Management Company,
Inc.; from 1995 to 1996, Mr. Conery was an
investment officer with Travelers Insurance and
from 1992 to 1995, he was a research analyst
with CS First Boston. Mr. Conery joined the
Delaware Group in 1997.
Patrick P. Coyne (33) Vice President/Senior Portfolio Manager of the
tax-free Funds and of the tax-free and
fixed-income investment companies in the
Delaware Group, Delaware Management Company,
Inc. and Delaware Capital Management, Inc.;
during the past five years, Mr. Coyne has served
in various capacities within the Delaware
organization.
Edward N. Antoian (41) Vice President/Senior Portfolio Manager of the
equity Funds and of the equity investment
companies in the Delaware Group, Delaware
Management Company, Inc. and Delaware Capital
Management, Inc.; during the past five years,
Mr. Antoian has served in various capacities
within the Delaware organization.
Gerald S. Frey (50) Vice President/Senior Portfolio Manager of the
equity Funds and of the equity investment
companies in the Delaware Group and Delaware
Management Company, Inc.; before joining the
Delaware Group in 1996, Mr. Frey was a Senior
Director with Morgan Grenfell Capital
Management, New York, New York from 1986 to
1995.
Michael P. Bishof (34) Vice President/Treasurer of the Funds and of the
18 investment companies in the Delaware Group,
Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., and Founders
Holdings, Inc.; Vice President/Manager of
Investment Accounting of Delaware International
Holdings Ltd.; Assistant Treasurer of Founders
CBO Corporation; before joining the Delaware
Group in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, New York from 1994
to 1995, a Vice President for CS First Boston
Investment Management, New York, New York from
1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New
York, New York from 1987 to 1993.
SHAREHOLDER PROPOSALS
As series of a Minnesota corporation, the Funds are not required to
hold annual shareholder meetings. Since the Funds do not hold regular meetings
of shareholders, the anticipated date of the next shareholder meeting cannot be
provided. Any shareholder proposal which may properly be included in the proxy
solicitation material for a special shareholder meeting must be received by the
Fund no later than four months prior to the date proxy materials are mailed to
shareholders.
Dated: March 5, 1997 Thomas J. Abood, Secretary
SCHEDULE 1
5% BENEFICIAL OWNERS OF THE FUNDS AS OF FEBRUARY 10, 1997
ACCOUNT NAME AND ADDRESS %/# SHARES
Intermediate Duration Portfolio:
- --------------------------------
Marquette Bank Rochester 7.86%/240,940
P.O. Box 4800
Rochester, MN 55903
Core Portfolio:
- ---------------
Marquette Bank Rochester 5.24%/240,940
P.O. Box 4800
Rochester, MN 55903
Marquette Bank NA 16.10%/739,963
1640 W. 82nd Street
Bloomington, MN 55431
First Bank of Texas 5.66%/260,000
P.O. Box 100
Denton, TX 76202
National City Bank Trustee, 7.21%/331,553
FBO North Country Health Services
P.O. Box 1919
Minneapolis, MN 55480
IBM Mid America Employees 26.27%/1,207,133
Federal Credit Union
4001 West River Parkway
Rochester, MN 55901
Government Securities Fund--Class A:
- ------------------------------------
Alcoba Company 5.16%/331,489
P.O. Box 1000
Minneapolis, MN 55480
Government Securities Fund--Class B:
- ------------------------------------
A.G. Edwards & Sons Inc. C/F 5.36%/12,176
Carl T. Brown, Jr. IRA
Tulsa, OK 74145
Jeanne K. Kinkade 6.59%/14,955
c/o Allen Mitchem POA
1375 High Street, Apt. 1003
Denver, CO 80218
John Lindemann 10.96%/24,891
P.O. Box 55
Golden Valley, ND 58541
Government Securities Fund--Class C:
- ------------------------------------
Norval O. and Roselyn A. Jesme Jt. Ten. 8.89%/2,068
R.R. 2, Box 48
Canby, MN 56220
Gerald J. and Charlotte B. 7.27%/1,691
Thompson Jt. Ten.
110 E. Fifth Street
Canby, MN 56220
Lloyd H. and Wanda J. Swenson Jt. Ten. 7.16%/1,666
R.R. 3, Box 52
Canby, MN 56220
PaineWebber, FBO PaineWebber 34.12%/7,937
CDN
FBO Daniel W. Drake
P.O. Box 3321
Weehawken, NJ 07087
Elk River Eagles AERIE #3264 21.38%/4,974
824 Railroad Drive
Elk River, MN 55330
Roger E. Sorenson, Trustee 7.30%/1,699
Edna E. Sorenson, Rev Living Trust
517 Turnpike Road
Golden Valley, MN 55416
Government Securities Fund--Institutional Class:
- ------------------------------------------------
Bankers Trust Company 29.12%/1,984,049
as Trustee for Public Service
Electric & Gas Company,
Master Employee Benefit Plan
34 Exchange Place
New Jersey, NJ 07303
Great-West Life & Annuity Company 18.26%/926,178
8515 E. Orchard Road
Englewood, CO 80111
City of Rapid City 15.58%/789,990
300 Sixth Street
Rapid City, SD 57701
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of
the __ day of ______, 1997, by and between Voyageur Funds, Inc. ("Voyageur
Funds"), on behalf of its two Voyageur Financial Institution Fund series,
designated as Intermediate Duration Portfolio and Core Portfolio (each, a "VFI
Fund," and collectively, the "VFI Funds") and VAM Institutional Funds, Inc.
("VAM Funds"), on behalf of its two newly formed series which have been created
to correspond to the VFI Funds, and which are designated as the Intermediate
Duration Portfolio and Core Portfolio, respectively (each, a "New VFI Fund," and
collectively, the "New VFI Funds"). Voyageur Funds and VAM Funds are Minnesota
corporations. As used in this Agreement, the terms "VFI Fund" and "New VFI Fund"
shall be construed to mean, respectively, "VAM Funds on behalf of a New VFI
Fund" and "Voyageur Funds on behalf of a VFI Fund," to the extent necessary to
reflect the fact that a corporate series is generally considered the beneficiary
of corporate level actions taken with respect to the series and is not itself
recognized as a person under law.
This Agreement is intended to be and is adopted as a "plan of
reorganization," within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization of each VFI Fund under Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended (the "Code"). The reorganization of each VFI
Fund (each, a "Reorganization") will consist of the transfer to its
corresponding New VFI Fund of all of the assets of such VFI Fund in exchange for
the assumption by its corresponding New VFI Fund of all liabilities of such VFI
Fund and the issuance by its corresponding New VFI Fund of shares of common
stock, par value $0.01 per share ("New VFI Fund Shares"), to be distributed,
after the Closing Time hereinafter determined, to the shareholders of such VFI
Fund in liquidation of such VFI Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement. The distribution of New VFI
Fund Shares to a VFI Fund's shareholders and the retirement and cancellation of
VFI Fund shares will be effected pursuant to an amendment to the Articles of
Incorporation of Voyageur Funds in the form attached hereto as Exhibit 1 (the
"Amendment"), to be adopted by Voyageur Funds in accordance with the Minnesota
Business Corporation Act.
Thus, the provisions of this Agreement set forth below shall be
construed as setting forth terms which in effect constitute a separate Agreement
and Plan of Reorganization for the Reorganization of each of the two VFI Funds
and its corresponding New VFI Fund. The failure of either VFI Fund and its
corresponding New VFI Fund to consummate a Reorganization shall not affect the
consummation or validity of the Reorganization provided for hereunder involving
the other VFI Fund and its corresponding New VFI Fund. It is expressly agreed
that the respective rights and obligations of each VFI Fund and its
corresponding New VFI Fund, as provided for hereunder, are separate from the
rights and obligations of the other VFI Fund and its corresponding New VFI Fund,
and that neither the rights and obligations of a VFI Fund nor of its
corresponding New VFI Fund shall be construed to be joint rights or obligations
of the other VFI Fund or its corresponding New VFI Fund, respectively,
notwithstanding the fact that such other funds may also be subject to the terms
set forth in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. REORGANIZATION AND LIQUIDATION OF VFI FUND
1.1. Subject to the terms and conditions set forth herein and in the
Amendment and on the basis of the representations and warranties contained
herein, VFI Fund agrees to assign, deliver and otherwise transfer the VFI Fund
Assets (as defined in paragraph 1.2) to its corresponding New VFI Fund and New
VFI Fund agrees in exchange therefor to assume all liabilities of the VFI Fund
at the Closing Time (as defined in paragraph 3.1) as set forth in paragraph 1.3
and to deliver to VFI Fund Shareholders (as defined in paragraph 1.5) the number
of New VFI Fund Shares, including fractional New VFI Fund Shares, determined in
accordance with paragraph 2.2. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing").
1.2. The "VFI Fund Assets" shall consist of all property, including,
without limitation, all cash, cash equivalents, securities, futures and interest
receivables owned by VFI Fund, and any deferred or prepaid expenses shown as an
asset on VFI Fund's books, on the Valuation Date (as defined in paragraph 2.1).
1.3. New VFI Fund will assume all liabilities of VFI Fund, which
include, without limitation, all expenses, costs, charges and reserves reflected
on an unaudited Statement of Assets and Liabilities of VFI Fund prepared by the
Treasurer of VFI Fund as of the Valuation Date in accordance with generally
accepted accounting principles consistently applied from the prior audited
period ("Valuation Date Statement").
1.4. At the Closing Time or as soon as practicable thereafter, pursuant
to paragraph 1.1 hereof and the Amendment, VFI Fund will distribute New VFI Fund
Shares received by VFI Fund pro rata to its shareholders of record determined as
of the close of business on the Valuation Date ("VFI Fund Shareholders").
Thereafter, no additional shares representing interests in VFI Fund shall be
issued. Such distribution will be accomplished by an instruction, signed by VFI
Fund's Secretary, to transfer New VFI Fund Shares then credited to VFI Fund's
account on the books of New VFI Fund to open accounts on the books of VAM Funds
in the names of the VFI Fund Shareholders and representing the respective pro
rata number of New VFI Fund Shares due each such VFI Fund Shareholder. All
issued and outstanding shares of VFI Fund simultaneously will be canceled on VFI
Fund's books.
1.5. Ownership of New VFI Fund Shares will be shown on the books of VAM
Funds' transfer agent. New VFI Fund Shares will be issued in the manner
described in New VFI Fund's then-current Prospectus and Statement of Additional
Information.
1.6. Any transfer taxes payable upon issuance of New VFI Fund Shares in
a name other than the registered holder of VFI Fund Shares on VFI Fund's books
as of the close of business on the Valuation Date shall, as a condition of such
issuance and transfer, be paid by the person to whom New VFI Fund Shares are to
be issued and transferred.
1.7. Any reporting responsibility of VFI Fund is and shall remain the
responsibility of VFI Fund.
1.8. All books and records maintained on behalf of VFI Fund will be
delivered to New VFI Fund and, after the Closing, will be maintained by New VFI
Fund or its designee in compliance with applicable record retention requirements
under the Investment Company Act of 1940, as amended (the "1940 Act").
2. VALUATION
2.1. The "Valuation Date" shall be a business day not later than the
5th business day following the receipt of the requisite approval of this
Agreement by shareholders of VFI Fund or such other date after such shareholder
approval as may be mutually agreed upon. The value of the VFI Fund Assets shall
be the value of such assets computed as of 4:00 p.m., Eastern time, on the
Valuation Date, using the valuation procedures set forth in VFI Fund's then
current Prospectus and Statement of Additional Information.
2.2. The New VFI Fund Shares to be issued hereunder will have an
aggregate net asset value equal to the value of the VFI Fund Assets, net of the
liabilities of VFI Fund, determined in accordance with paragraph 2.1.
2.3. All computations of value shall be made by Voyageur Fund Managers,
Inc. ("VFM") in accordance with its regular practice in pricing VFI Fund. New
VFI Fund shall cause VFM to deliver a copy of its valuation report at the
Closing.
3. CLOSING AND CLOSING TIME
3.1. The Closing shall take place on the Valuation Date as of 5:00
p.m., Eastern time, or at such other day or time as the parties may agree (the
"Closing Time"). The Closing shall be held in a location mutually agreeable to
the parties hereto. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Closing Time unless otherwise provided.
3.2. Portfolio securities held by VFI Fund (together with any cash or
other assets) shall be delivered by VFI Fund to Marquette Trust Company (the
"Custodian"), as custodian for New VFI Fund, for the account of New VFI Fund at
or before the Closing Time in conformity with applicable custody provisions
under the 1940 Act and duly endorsed in proper form for transfer in such
condition as to constitute good delivery thereof in accordance with the custom
of brokers. The portfolio securities shall be accompanied by all necessary
federal and state stock transfer stamps or a check for the appropriate purchase
price of such stamps. Portfolio securities and instruments deposited with a
securities depository (as defined in Rule 17f-4 under the 1940 Act) shall be
delivered on or before the Closing Time by book-entry in accordance with
customary practices of such depository and the Custodian. The cash delivered
shall be in the form of a Federal Funds wire, payable to the order of "Marquette
Trust Company, Custodian for [Name of New VFI Fund], a series of VAM
Institutional Funds, Inc."
3.3. In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of both VFI Fund and New VFI Fund, accurate
appraisal of the value of the VFI Fund Assets is impracticable, the Valuation
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed without restriction or disruption and reporting
shall have been restored.
3.4. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. COVENANTS OF NEW VFI FUND AND VFI FUND
4.1. Except as otherwise expressly provided herein, VFI Fund will
operate its business in the ordinary course between the date hereof and the
Closing Time, it being understood that such ordinary course will include
customary dividends and other distributions.
4.2. VAM Funds will prepare and file with the Securities and Exchange
Commission (the "Commission") a post-effective amendment to its existing
registration statement on Form N-1A under the Securities Act of 1933, as amended
(the "1933 Act"), relating to New VFI Fund Shares (the "Registration
Statement").
4.3. VFI Fund will call a meeting of its shareholders to consider and
act upon this Agreement and the Amendment and to take all other action necessary
to obtain approval of the transactions contemplated herein, including, if
necessary, the waiver of any existing investment limitations that might
otherwise preclude VFI Fund from holding all of its assets as New VFI Fund
Shares until such shares are distributed to VFI Fund shareholders. Voyageur
Funds will prepare the notice of meeting, form of proxy and proxy statement
(collectively, "Proxy Materials") to be used in connection with such meeting.
VAM Funds will furnish Voyageur Funds with such information relating to New VFI
Fund as is reasonably necessary for the preparation of the Proxy Materials.
4.4. Subject to the provisions of this Agreement, New VFI Fund and VFI
Fund will each take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
4.5. As soon after the Closing Time as is reasonably practicable,
Voyageur Funds (a) shall prepare and file all federal and other tax returns and
reports of VFI Fund required by law to be filed with respect to all periods
ending on or before the Closing Time but not theretofore filed, and (b) shall
pay all federal and other taxes shown as due thereon and/or all federal and
other taxes that were unpaid as of the Closing Time, including without
limitation, all taxes for which the provision for payment was made as of the
Closing Time (as represented in paragraph 5.2(l)).
4.6. New VFI Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act and the 1940 Act as it may
deem appropriate in order to continue its operations after the Closing Time.
5. REPRESENTATIONS AND WARRANTIES
5.1. VAM Funds represents and warrants to Voyageur Funds as follows:
(a) New VFI Fund is a series of VAM Funds. VAM Funds is a
corporation validly existing and in good standing under the laws of
Minnesota with corporate power to carry on its business as presently
conducted.
(b) VAM Funds is a duly registered management investment
company, and its registration with the Commission as an investment
company under the 1940 Act is in full force and effect.
(c) The Prospectus and Statement of Additional Information of
New VFI Fund will, at the Closing Time, conform in all materials
respects to the applicable requirements of the 1933 Act and the 1940
Act and the regulations thereunder and will not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(d) New VFI Fund is not in, and the execution, delivery and
performance of this Agreement will not result in, a material violation
of any provision of VAM Funds's Articles of Incorporation or Bylaws or
of any agreement, indenture, instrument, contract, lease or other
undertaking to which New VFI Fund is a party or by which it is bound.
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against VAM Funds or New VFI
Fund or any of its properties or assets which, if adversely determined,
would materially and adversely affect its financial condition or the
conduct of its business; and New VFI Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is
reasonably likely to materially and adversely affect, its business or
its ability to consummate the transactions herein contemplated.
(f) The execution, delivery and performance of this Agreement
have been duly authorized by all necessary action on the part of VAM
Funds, and this Agreement constitutes a valid and binding obligation of
New VFI Fund enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws relating to or affecting creditors
rights and to general equity principles.
(g) New VFI Fund Shares to be issued and delivered to VFI
Fund, for the account of the VFI Fund Shareholders, pursuant to the
terms of this Agreement will at the Closing Time have been duly
authorized and, when so issued and delivered, will be duly and validly
issued New VFI Fund Shares, and will be fully paid and nonassessable
with no personal liability attaching to the ownership thereof.
(h) The information furnished or to be furnished by New VFI
Fund for use in registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material
respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(i) The Proxy Materials, insofar as they relate to New VFI
Fund, will, at the time of the meeting of VFI Fund's shareholders and
at the Closing Time, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not materially misleading.
5.2 Voyageur Funds represents and warrants to VAM Funds as follows:
(a) VFI Fund is a series of Voyageur Funds. Voyageur Funds is
a corporation validly existing and in good standing under the laws of
Minnesota.
(b) Voyageur Funds is a duly registered management investment
company, and its registration with the Commission as an investment
company under the 1940 Act and the registration of its shares under the
1933 Act are in full force and effect.
(c) All of the issued and outstanding shares of common stock
of VFI Fund have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act and
state securities laws. Shares of VFI Fund are registered in all
jurisdictions in which they are required to be registered under state
securities laws and other laws, and Voyageur Funds is not subject to
any stop order and is fully qualified to sell VFI Fund shares in each
state in which such shares have been registered.
(d) The current Prospectus and Statement of Additional
Information of VFI Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) VFI Fund is not in, and the execution, delivery and
performance of this Agreement will not result in, a material violation
of any provision of Voyageur Funds' Articles of Incorporation or Bylaws
or of any agreement, indenture, instrument, contract, lease or other
undertaking to which VFI Fund is a party or by which it is bound.
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against VFI Fund or any of its
properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business; and VFI Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is
reasonably likely to materially and adversely affect, its business or
its ability to consummate the transactions herein contemplated.
(g) The Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights
of VFI Fund as of October 31, 1996 and for the period then ended,
certified by KPMG Peat Marwick LLP, fairly present, in all material
respects, VFI Fund's financial condition as of such date, and its
results of operations, changes in its net assets and financial
highlights for such period in accordance with generally accepted
accounting principles, and as of such date there were no known
liabilities of VFI Fund (contingent or otherwise) not disclosed therein
that would be required in accordance with generally accepted accounting
principles to be disclosed therein.
(h) Since the date of the most recent unaudited financial
statements, there has not been any material adverse change in VFI
Fund's financial condition, assets, liabilities or business, other than
changes occurring in the ordinary course of business, or any incurrence
by VFI Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed in
writing to and acknowledged by New VFI Fund prior to the date of this
Agreement and prior to the Closing Time. All liabilities of VFI Fund
(contingent and otherwise) are reflected in the Valuation Date
Statement. For the purpose of this subparagraph (h), neither a decline
in VFI Fund's net asset value per share nor a decrease in VFI Fund's
size due to redemptions by VFI Fund shareholders shall constitute a
material adverse change.
(i) VFI Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability to
it prior to the Closing Time.
(j) All issued and outstanding shares of VFI Fund are, and at
the Closing Time will be, duly and validly issued and outstanding,
fully paid and nonassessable with no personal liability attaching to
the ownership thereof. VFI Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of its
shares, nor is there outstanding any security convertible into any of
its shares. All such shares will, at the time of Closing, be held by
the persons and in the amounts recorded by VFI Fund's transfer agent.
(k) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Time by all
necessary action on the part of Voyageur Funds and, subject to the
approval of VFI Fund's shareholders, this Agreement constitutes a valid
and binding obligation of VFI Fund enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws
relating to or affecting creditors' rights and to general equity
principles.
(l) All material federal and other tax returns and reports of
VFI Fund required by law to be filed at or before the Closing Time
shall have been filed and are correct and all federal and other taxes
shown as due or required to be shown as due on said returns and reports
have been paid or provision has been made for the payment thereof and,
to the best of VFI Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to any such
return and there are no facts that might form the basis for such
proceedings.
(m) For each taxable year since its inception, VFI Fund has
met all the requirements of Subchapter M of the Code for qualification
and treatment as a "regulated investment company" and neither the
execution or delivery of, nor the performance of its obligations under,
this Agreement will adversely affect, and no other events, to the best
of VFI Fund's knowledge, are reasonably likely to occur which will
adversely affect the ability of VFI Fund to continue to meet the
requirements of Subchapter M of the Code.
(n) At the Closing Time, VFI Fund will have good and valid
title to the VFI Fund Assets, subject to no liens (other than the
obligation, if any, to pay the purchase price of portfolio securities
purchased by VFI Fund which have not settled prior to the Closing
Time), security interests or other encumbrances, and full right, power
and authority to assign, deliver and otherwise transfer such assets
hereunder, and upon delivery and payment for such assets, New VFI Fund
will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including any restrictions
as might arise under the 1933 Act.
(o) At the time of the meeting of VFI Fund's shareholders and
at the Closing Time, the Proxy Materials will (i) comply in all
material respects with the provisions of the 1934 Act and the 1940 Act
and the regulations thereunder and (ii) not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Neither VFI Fund nor Voyageur Funds shall be construed to
have made the foregoing representation with respect to portions of the
Proxy Materials furnished by VAM Funds or New VFI Fund. Any other
information furnished by VFI Fund for use in any other manner that may
be necessary in connection with the transactions contemplated hereby
shall be accurate and complete and shall comply in all material
respects with the applicable federal securities and other laws and
regulations thereunder.
(p) VFI Fund has maintained or has caused to be maintained on
its behalf all books and accounts as required of a registered
investment company in compliance with the requirements of Section 31 of
the 1940 Act and the rules thereunder.
(q) VFI Fund is not acquiring New VFI Fund Shares to be issued
hereunder for the purpose of making any distribution thereof other than
in accordance with the terms of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF VFI FUND
The obligations of VFI Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by New VFI Fund of
all the obligations to be performed by it hereunder at or before the Closing
Time and, in addition thereto, the following conditions:
6.1. All representations and warranties of New VFI Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Time with the same force and effect as if made
at and as of the Closing Time.
6.2. New VFI Fund shall have delivered to VFI Fund a certificate of its
President and Treasurer, in a form reasonably satisfactory to VFI Fund and dated
as of the date of the Closing, to the effect that the representations and
warranties of VAM Funds made in this Agreement are true and correct at and as of
the Closing Time, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as Voyageur Funds
shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF NEW VFI FUND
The obligations of New VFI Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by VFI Fund of
all the obligations to be performed by it hereunder at or before the Closing
Time and, in addition thereto, the following conditions:
7.1. All representations and warranties of Voyageur Funds contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Time with the same force and effect as if made
at and as of the Closing Time.
7.2. VFI Fund shall have delivered to New VFI Fund at the Closing a
certificate of its President and its Treasurer, in form and substance
satisfactory to New VFI Fund and dated as of the date of the Closing, to the
effect that the representations and warranties of VFI Fund made in this
Agreement are true and correct at and as of the Closing Time, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as New VFI Fund shall reasonably request.
7.3. VFI Fund shall have delivered to New VFI Fund a statement,
certified by the Treasurer of Voyageur Funds, of the VFI Fund Assets and its
liabilities, together with a list of VFI Fund's portfolio securities and other
assets showing the respective adjusted bases and holding periods thereof for
income tax purposes, such statement to be prepared as of the Closing Time and in
accordance with generally accepted accounting principles consistently applied.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF NEW VFI FUND AND VFI
FUND.
The obligations of VFI Fund and New VFI Fund hereunder are each subject
to the further conditions that at or before the Closing Time:
8.1. This Agreement and the Amendment and the transactions contemplated
herein and therein shall have been approved by the requisite vote of the holders
of the outstanding shares of VFI Fund in accordance with the provisions of
Voyageur Funds' Articles of Incorporation, and certified copies of the
resolutions evidencing such approval shall have been delivered to New VFI Fund.
8.2. At the Closing Time, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by New VFI Fund or VFI Fund to permit
consummation, in all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve risk of a material adverse effect on the assets or
properties of New VFI Fund or VFI Fund.
8.4. On or prior to the Valuation Date, VFI Fund shall have declared
and paid a dividend or dividends and/or other distribution or distributions
that, together with all previous such dividends or distributions, shall have the
effect of distributing to its shareholders all of VFI Fund's investment company
taxable income (computed without regard to any deduction for dividends paid) and
all of its net capital gain (after reduction for any capital loss carry-forward
and computed without regard to any deduction for dividends paid) for the taxable
year during which the Reorganization occurs.
8.5. The parties shall have received an opinion of the law firm of
Dorsey & Whitney LLP (based on such representations as such law firm shall
reasonably request), addressed to VAM Funds and Voyageur Funds, which opinion
may be relied upon by the shareholders of VFI Fund, substantially to the effect
that the federal income tax consequences of the Reorganization will be as
follows:
(i) the Reorganization will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Code, and New VFI Fund
and VFI Fund each will qualify as a party to the
Reorganization under Section 368(b) of the Code;
(ii) VFI Fund shareholders will recognize no income, gain or loss
upon receipt, pursuant to the Reorganization, of New VFI Fund
Shares. VFI Fund shareholders subject to taxation will
recognize income upon receipt of any net investment income or
net capital gains of VFI Fund which are distributed by VFI
Fund prior to the Reorganization;
(iii) the tax basis of New VFI Fund Shares received by each VFI Fund
shareholder pursuant to the Reorganization will be equal to
the tax basis of the VFI Fund Shares exchanged therefor;
(iv) the holding period of New VFI Fund Shares received by each VFI
Fund shareholder pursuant to the Reorganization will include
the period during which the VFI Fund shareholder held the VFI
Fund shares exchanged therefor, provided that the VFI Fund
shares were held as a capital asset on the date of the
Reorganization;
(v) VFI Fund will recognize no income, gain or loss by reason of
the Reorganization;
(vi) New VFI Fund will recognize no income, gain or loss by reason
of the Reorganization;
(vii) the tax basis of the assets received by New VFI Fund pursuant
to the Reorganization will be the same as the basis of those
assets in the hands of VFI Fund immediately prior to the
Reorganization;
(viii) the holding period of the assets received by New VFI Fund
pursuant to the Reorganization will include the period during
which such assets were held by VFI Fund; and
(ix) New VFI Fund will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of
VFI Fund immediately prior to the Reorganization.
Notwithstanding anything herein to the contrary, neither New VFI Fund
nor VFI Fund may waive the condition set forth in this paragraph 8.5.
8.6. The Amendment shall have been filed in accordance with applicable
provisions of Minnesota law.
9. FEES AND EXPENSES
9.1. (a) Lincoln National Corporation shall bear all direct
expenses incurred in connection with entering into and carrying out the
provisions of this Agreement, including expenses incurred in connection
with the preparation, printing, filing and solicitation of proxies to
obtain requisite shareholder approvals.
(b) VFM shall pay any unamortized organizational expenses on
the books of VFI Fund immediately prior to the Reorganization.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the
parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein.
11. TERMINATION
11.1. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Voyageur Funds and VAM
Funds;
(b) by either VAM Funds or Voyageur Funds by notice to the
other, without liability to the terminating party on account of such
termination (providing the terminating party is not otherwise in
material default or breach of this Agreement) if the Closing shall not
have occurred on or before July 1, 1997; or
(c) by either New VFI Fund or VFI Fund, in writing without
liability to the terminating party on account of such termination
(provided the terminating party is not otherwise in material default or
breach of this Agreement), if (i) the other party shall fail to perform
in any material respect its agreements contained herein required to be
performed at or prior to the Closing Time, (ii) the other party
materially breaches any of its representations, warranties or covenants
contained herein, (iii) the VFI Fund shareholders fail to approve this
Agreement at any meeting called for such purpose at which a quorum was
present, or (iv) any other condition herein expressed to be precedent
to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
11.2. (a) Termination of this Agreement pursuant to paragraphs 11.1
(a) or (b) shall terminate all obligations of the parties hereunder and
there shall be no liability for damages on the part of New VFI Fund or
VFI Fund or the directors or officers of New VFI Fund or VFI Fund, to
any other party or its directors or officers.
(b) Termination of this Agreement pursuant to paragraph
11.1(c) shall terminate all obligations of the parties hereunder and
there shall be no liability for damages on the part of New VFI Fund or
VFI Fund or the directors or officers of New VFI Fund or VFI Fund,
except that any party in breach of this Agreement shall, upon demand,
reimburse the non-breaching party for all reasonable out-of-pocket fees
and expenses incurred in connection with the transactions contemplated
by this Agreement, including legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the parties; PROVIDED, HOWEVER,
that following the meeting of VFI Fund's shareholders to be called by VFI Fund
pursuant to paragraph 4.3, no such amendment may have the effect of changing the
provisions for determining the number of New VFI Fund Shares to be issued to the
VFI Fund shareholders under this Agreement to the detriment of such VFI Fund
shareholders without their further approval.
13 MISCELLANEOUS
13.1. The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
13.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Minnesota.
13.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
13.5. The obligations and liabilities of VAM Funds hereunder are solely
those of New VFI Fund. It is expressly agreed that no shareholder, nominee,
director, officer, agent or employee of VAM Funds on behalf of New VFI Fund
shall be personally liable hereunder. The execution and delivery of this
Agreement have been authorized by the directors of VAM Funds and signed by
authorized officers of VAM Funds acting as such, and neither such authorization
by such directors nor such execution and delivery by such officers shall be
deemed to have been made by any of them individually or to impose any liability
on any of them personally.
13.6. The obligations and liabilities of Voyageur Funds hereunder are
solely those of VFI Fund. It is expressly agreed that no shareholder, nominee,
director, officer, agent or employee of VFI Fund shall be personally liable
hereunder. The execution and delivery of this Agreement have been authorized by
the directors of Voyageur Funds and signed by authorized officers of Voyageur
Funds acting as such, and neither such authorization by such directors nor such
execution and delivery by such officers shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer.
VOYAGEUR FUNDS, INC., on behalf of each VFI
Fund
By _______________________________________
Its ______________________________________
VAM INSTITUTIONAL FUNDS, INC., on behalf of
each New VFI Fund
By ______________________________________
Its _____________________________________
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
VOYAGEUR FUNDS, INC.
The undersigned officer of Voyageur Funds, Inc. (the "Corporation"), a
corporation subject to the provisions of Chapter 302A of the Minnesota Statutes,
hereby certifies that the Corporation's Board of Directors and shareholders, at
meetings held February 14, 1997 and April 11, 1997, respectively, adopted the
resolutions hereinafter set forth; and such officer further certifies that the
amendments to the Corporation's Amended and Restated Articles of Incorporation
set forth in such resolutions were adopted pursuant to said Chapter 302A.
WHEREAS, the Corporation is registered as an open-end management
investment company (i.e., a mutual fund) under the Investment Company
Act of 1940 and offers its shares to the public in several series, each
of which represents a separate and distinct portfolio of assets; and
WHEREAS, it is desirable and in the best interests of the holders of
each of the Series C shares of the Corporation (also known as the
"Intermediate Duration Portfolio") that the assets belonging to such
series be sold to Series I (also known as the "Intermediate Duration
Portfolio") of VAM Funds, Inc. ("VAM Funds"), a Minnesota corporation
and an open-end management investment company registered under the
Investment Company Act of 1940, in exchange for shares of Series I of
VAM Funds; and
WHEREAS, it is desirable and in the best interests of the holders of
each of the Series D shares of the Corporation (also known as the "Core
Portfolio") that the assets belonging to such series be sold to Series
J (also known as the "Core Portfolio") of VAM Funds, Inc. ("VAM
Funds"), a Minnesota corporation and an open-end management investment
company registered under the Investment Company Act of 1940, in
exchange for shares of Series J of VAM Funds; and
WHEREAS, the Corporation wishes to provide for the pro rata
distribution of the shares of Series I and Series J of VAM Funds
received by it to holders of shares of the Corporation's Intermediate
Duration Portfolio and Core Portfolio, respectively, and the
simultaneous cancellation and retirement of the outstanding shares of
the Corporation's Intermediate Duration Portfolio and Core Portfolio;
and
WHEREAS, the Corporation and VAM Funds have entered into an Agreement
and Plan of Reorganization providing for the foregoing transactions;
and
WHEREAS, the Agreement and Plan of Reorganization requires that, in
order to bind all holders of shares of the Corporation's Intermediate
Duration Portfolio and Core Portfolio to the foregoing transactions,
and in particular to bind such holders to the cancellation and
retirement of the outstanding shares of the Corporation's Intermediate
Duration Portfolio and Core Portfolio, it is necessary to adopt an
amendment to the Corporation's Amended and Restated Articles of
Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation's Amended and
Restated Articles of Incorporation be, and the same hereby are, amended
to add the following Article 5A immediately following Article 5
thereof:
5A. (a) For purposes of this Article 5A, the following terms
shall have the following meanings:
"Corporation" means this corporation.
"VAM Funds" means VAM Institutional Funds, Inc., a Minnesota
corporation.
"Intermediate Duration Portfolio" means the Series C shares of
the Corporation.
"Core Portfolio" means the Series D shares of the Corporation.
"Acquired Fund" or "Acquired Funds" means one or both of
Intermediate Duration Portfolio and Core Portfolio.
"VAM Intermediate Duration Portfolio" means the Series I
shares of VAM Funds.
"VAM Core Portfolio" means the Series J shares of VAM Funds.
"Acquiring Fund" or "Acquiring Funds" means one or both of VAM
Intermediate Duration Portfolio and VAM Core Portfolio.
"Valuation Date" means the day established in the Agreement
and Plan of Reorganization as the day upon which the value of
the assets of each of Intermediate Duration Portfolio and Core
Portfolio is determined for purposes of the reorganization.
"Valuation Time" means 4:00 p.m., Eastern time, on the
Valuation Date.
"Closing Time" means 5:00 p.m., Eastern time, on the Valuation
Date, or such other date and time upon which the parties to
the reorganization may agree.
(b) At the Closing Time, the assets belonging to each of
Intermediate Duration Portfolio and Core Portfolio, the Special
Liabilities associated with such assets, and the General Assets and
General Liabilities allocated to Intermediate Duration Portfolio and
Core Portfolio, shall be sold to and assumed by VAM Intermediate
Duration Portfolio and VAM Core Portfolio, respectively, in return for
common shares of VAM Intermediate Duration Portfolio and VAM Core
Portfolio, respectively, all pursuant to the Agreement and Plan of
Reorganization between the Corporation and VAM Funds relating thereto.
For purposes of the foregoing, the terms "assets belonging to,"
"Special Liabilities," "General Assets" and "General Liabilities" have
the meanings assigned to them in Article 7(b), (c) and (d) of the
Corporation's Amended and Restated Articles of Incorporation.
(c) The numbers of common shares of an Acquiring Fund to be
received by the respective Acquired Fund and distributed by it to the
respective Acquired Fund shareholders shall be determined as follows:
(i) The net asset value per share of the Acquired
Fund Shares shall be computed as of the Valuation Time, using
the valuation procedures set forth in the Acquired Fund's
then-current Prospectus and Statement of Additional
Information, and as may be required by the Investment Company
Act of 1940, as amended.
(ii) The total number of Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for
the assets and liabilities of the Acquired Fund shall have an
aggregate net asset value equal to the aggregate net asset
value of the Acquired Fund Shares immediately prior to the
Effective Time, as determined pursuant to (i) above.
(iii) At the Closing Time, the Acquired Fund shall
distribute to the Acquired Fund shareholders in liquidation of
the Acquired Fund pro rata (based upon the ratio that the
number of Acquired Fund Shares owned by each Acquired Fund
shareholder immediately prior to the Closing Time bears to the
total number of issued and outstanding Acquired Fund Shares
immediately prior to the Closing Time) the full and fractional
Acquiring Fund Shares received by the Acquired Fund pursuant
to (i) and (ii) above. Accordingly, each Acquired Fund
shareholder shall receive, immediately after the Closing Time,
Acquiring Fund Shares with an aggregate net asset value equal
to the aggregate net asset value of the Acquired Fund Shares
owned by such Acquired Fund shareholder immediately prior to
the Closing Time.
(d) The distribution of each Acquiring Fund's common shares to
shareholders of the respective Acquired Fund, as provided for in
paragraph (c) above, shall be accomplished by the issuance of such
Acquiring Fund common shares to open accounts on the share records of
the Acquiring Fund in the names of the Acquired Fund shareholders
representing the numbers of Acquiring Fund common shares due each such
shareholder pursuant to the foregoing provisions. With respect to each
Acquired Fund, all issued and outstanding Acquired Fund common shares
shall simultaneously be canceled on the books of the Acquired Fund and
retired. From and after the Closing Time, share certificates formerly
representing Acquired Fund common shares, if any, shall represent the
numbers of common shares of the respective Acquiring Fund determined in
accordance with the foregoing provisions.
(e) From and after the Closing Time, the common shares of the
Acquired Funds canceled and retired pursuant to paragraph (d) above
shall have the status of authorized and unissued shares of the
corporation, without designation as to series.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has
executed these Articles of Amendment on behalf of the Corporation on
_____________________, 1997.
VOYAGEUR FUNDS, INC.
By______________________________________
Its_____________________________________
EXHIBIT B
INVESTMENT ADVISORY AGREEMENT
This Agreement, made this ___ day of ________, 1997, by and
between Voyageur Funds, Inc., a Minnesota corporation (the "Company"), on behalf
of each Fund represented by a series of shares of common stock of the Fund that
adopts this Agreement (each a "Fund" and, collectively (if more than one), the
"Funds") (the Funds, together with the date each Fund adopts this Agreement, are
set forth in Exhibit A hereto, which shall be updated from time to time to
reflect additions, deletions or other changes thereto), and Delaware Management
Company, Inc., a Delaware corporation ("Adviser"),
WITNESSETH:
1. INVESTMENT ADVISORY SERVICES.
(a) The Company hereby engages Adviser on behalf of the Funds,
and Adviser hereby agrees to act, as investment adviser for, and to manage the
investment of the assets of, the Funds.
(b) The investment of the assets of each Fund shall at all
times be subject to the applicable provisions of the Articles of Incorporation,
the Bylaws, the Registration Statement, and the current Prospectus and the
Statement of Additional Information, if any, of the Company and each Fund and
shall conform to the policies and purposes of each Fund as set forth in such
documents and as interpreted from time to time by the Board of Directors of the
Company. Within the framework of the investment policies of each Fund, and
subject to such other limitations and directions as the Board of Directors may
from time to time prescribe, Adviser shall have the sole and exclusive
responsibility for the management of each Fund's assets and the making and
execution of all investment decisions for each Fund, except as set forth in the
following paragraph. Adviser shall report to the Board of Directors regularly at
such times and in such detail as the Board may from time to time determine
appropriate, in order to permit the Board to determine the adherence of Adviser
to the investment policies of the Funds.
(c) Adviser may, at its expense, select and contract with one
or more registered investment advisers ("Sub-Adviser") for any of the Funds to
perform some or all of the services for such Funds. Such Sub-Adviser shall be
responsible for executing orders for the purchase and sale of portfolio
securities. Adviser will compensate any Sub-Adviser for its services to the
Funds. Adviser may terminate the services of any Sub-Adviser at any time in its
sole discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected.
(d) Adviser shall, at its own expense, furnish all office
facilities, equipment and personnel necessary to discharge its responsibilities
and duties hereunder. Adviser shall arrange, if requested by the Company, for
officers or employees of Adviser to serve without compensation from any Fund as
directors, officers, or employees of the Company if duly elected to such
positions by the shareholders or directors of the Company (as required by law).
(e) Adviser hereby acknowledges that all records pertaining to
each Fund's investments are the property of the Company, and in the event that a
transfer of investment advisory services to someone other than Adviser should
ever occur, Adviser will promptly, and at its own cost, take all steps necessary
to segregate such records and deliver them to the Company.
(f) Subject to the primary objective of obtaining the best
available prices and execution, Adviser will place orders for the purchase and
sale of portfolio securities with such broker/dealers who provide statistical,
factual and financial information and services to the Funds, Adviser or to any
other fund for which Adviser provides investment advisory services and/or with
broker/dealers who sell shares of the Funds or who sell shares of any other fund
for which Adviser provides investment advisory services. Broker/dealers who sell
shares of the funds of which Adviser is investment manager, shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the Rules of the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
(g) Notwithstanding the provisions of subparagraph (f) above,
and subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Company, Adviser may ask the Funds and the Funds
may agree to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it and Adviser have
determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
member, broker or dealer, viewed in terms of either that particular transaction
or Adviser's overall responsibilities with respect to the Funds and to other
funds and other advisory accounts for which Adviser exercises investment
discretion.
2. COMPENSATION FOR SERVICES.
In payment for the investment advisory and management services
to be rendered by Adviser hereunder, each Fund shall pay to Adviser a monthly
fee, which fee shall be paid to Adviser not later than the fifth business day of
the month following the month in which said services were rendered. The monthly
fee payable by each Fund shall be as set forth in Exhibit A hereto, which may be
updated from time to time to reflect amendments, if any, to Exhibit A. The
monthly fee payable by each Fund shall be based on the average of the net asset
values of all of the issued and outstanding shares of the Fund as determined as
of the close of each business day of the month pursuant to the Articles of
Incorporation, Bylaws, and currently effective Prospectus and Statement of
Additional Information of the Company and the Fund. For purposes of calculating
each Fund's average daily net assets, as such term is used in this Agreement,
each Fund's net assets shall equal its total assets minus (a) its total
liabilities and (b) its net orders receivable from dealers.
3. ALLOCATION OF EXPENSES.
(a) In addition to the fee described in Section 2 hereof, each
Fund shall pay all its costs and expenses which are not assumed by Adviser.
These Fund expenses include, by way of example, but not by way of limitation,
all expenses incurred in the operation of the Fund and any public offering of
its shares, including, among others, Rule 12b-1 plan of distribution fees (if
any), interest, taxes, brokerage fees and commissions, fees of the directors who
are not employees of Adviser or the principal underwriter of the Fund's shares
(the "Underwriter"), or any of their affiliates, expenses of directors' and
shareholders' meetings, including the cost of printing and mailing proxies,
expenses of insurance premiums for fidelity and other coverage, expenses of
redemption of shares, expenses of issue and sale of shares (to the extent not
borne by the Underwriter under its agreement with the Fund), expenses of
printing and mailing stock certificates representing shares of the Fund,
association membership dues, charges of custodians, transfer agents, dividend
disbursing agents, accounting services agents, investor servicing agents, and
bookkeeping, auditing, and legal expenses. Each Fund will also pay the fees and
bear the expense of registering and maintaining the registration of the Fund and
its shares with the Securities and Exchange Commission and registering or
qualifying its shares under state or other securities laws and the expense of
preparing and mailing prospectuses and reports to shareholders.
(b) The Underwriter shall bear all advertising and promotional
expenses in connection with the distribution of each Fund's shares, including
paying for prospectuses for new shareholders, except as provided in the
following sentence. No Fund shall use any of its assets to finance costs
incurred in connection with the distribution of its shares except pursuant to a
Plan of Distribution, if any, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (as amended, the "1940 Act").
4. FREEDOM TO DEAL WITH THIRD PARTIES.
Adviser shall be free to render services to others similar to
those rendered under this Agreement or of a different nature except as such
services may conflict with the services to be rendered or the duties to be
assumed hereunder.
5. REPORTS TO DIRECTORS OF THE FUND.
Appropriate officers of Adviser shall provide the directors of
the Company with such information as is required by any plan of distribution
adopted by the Company on behalf of any Fund pursuant to Rule 12b-1 under the
1940 Act.
6. STANDARD OF CARE.
In the absence of willful misfeasance, bad faith, gross
negligence or a reckless disregard of the performance of duties of the Adviser
to the Funds, the Adviser shall not be subject to liabilities of the Funds or to
any shareholders of the Funds for any action or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security, or otherwise.
7. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
(a) The effective date of this Agreement with respect to each
Fund shall be the date set forth on Exhibit A hereto.
(b) Unless sooner terminated as hereinafter provided, this
Agreement shall continue in effect with respect to each Fund for a period of two
years from the date of its execution, and thereafter shall continue in effect
only so long as such continuance is specifically approved at least annually by
(i) the Board of Directors of the Company or by the vote of a majority of the
outstanding voting securities of the applicable Fund, and (ii) by the vote of a
majority of the directors of the Company who are not parties to this Agreement
or "interested persons", as defined in the 1940 Act, of Adviser or of the
Company cast in person at a meeting called for the purpose of voting on such
approval.
(c) This Agreement may be terminated with respect to any Fund
at any time, without the payment of any penalty, by the Board of Directors of
the Company or by the vote of a majority of the outstanding voting securities of
such Fund, or by Adviser, upon 60 days' written notice to the other party.
(d) This agreement shall terminate automatically in the event
of its "assignment" (as defined in the 1940 Act).
(e) No amendment to this Agreement shall be effective with
respect to any Fund until approved by the vote of: (i) a majority of the
directors of the Company who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of Adviser or of the Company cast in
person at a meeting called for the purpose of voting on such approval; and (ii)
a majority of the outstanding voting securities of the applicable Fund.
(f) Wherever referred to in this Agreement, the vote or
approval of the holders of a majority of the outstanding voting securities or
shares of a Fund shall mean the lesser of (i) the vote of 67% or more of the
voting securities of such Fund present at a regular or special meeting of
shareholders duly called, if more than 50% of the Fund's outstanding voting
securities are present or represented by proxy, or (ii) the vote of more than
50% of the outstanding voting securities of such Fund.
8. NOTICES.
Any notice under this Agreement shall be in writing,
addressed, delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and Adviser have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
VOYAGEUR FUNDS, INC.
By _____________________________________
Its _______________________________
DELAWARE MANAGEMENT
COMPANY, INC.
By _____________________________________
Its _______________________________
Exhibit A
to
Investment Advisory Agreement
between
Delaware Management Company, Inc.
and
Voyageur Funds, Inc.
MONTHLY
ADVISORY FEE
(as % of average
FUND EFFECTIVE DATE daily net assets)
---- -------------- -----------------
Government Securities Fund 0.50%
EXHIBIT C
SUB-ADVISORY AGREEMENT
Agreement, dated __________, 1997, by and between Delaware Management
Company, Inc. (the "Adviser"), a Delaware corporation, and Voyageur Asset
Management LLC, a Minnesota limited liability company ("Sub-Adviser").
WHEREAS, Voyageur Funds, Inc., a Minnesota corporation (the"Company"),
on behalf of its Government Securities Fund, a separately managed series of the
Company (the "Fund"), has appointed Adviser as the Fund's investment adviser
pursuant to an Investment Advisory Agreement dated ________, 1997 (the "Advisory
Agreement"); and
WHEREAS, pursuant to the terms of the Advisory Agreement, Adviser
desires to appoint Sub-Adviser as its sub-adviser for the Fund, and Sub-Adviser
is willing to act in such capacity upon the terms set forth herein; and
WHEREAS, pursuant to the terms of the Advisory Agreement, the Company
has approved the appointment of Sub-Adviser as Sub-Adviser for the Fund.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
Adviser and Sub-Adviser agree as follows:
1. Adviser hereby employs Sub-Adviser to serve as sub-adviser for, and
to manage the investment of the assets of, the Fund as set forth herein.
Sub-Adviser hereby accepts such employment and agrees, for the compensation
herein provided, to assume all obligations herein set forth and to bear all
expenses of its performance of such obligations (but no other expenses).
Sub-Adviser shall not be required to pay expenses of the Fund, including, but
not limited to (a) brokerage and commission expenses; (b) federal, state, local
and foreign taxes, including issue and transfer taxes incurred by or levied on
the Fund; (c) interest charges on borrowings; (d) the Fund's organizational and
offering expenses, whether or not advanced by Adviser; (e) the cost of other
personnel providing services to the Fund; (f) fees and expenses of registering
or otherwise qualifying the shares of the Fund under applicable state securities
laws; (g) expenses of printing and distributing reports to shareholders; (h)
costs of shareholders' meetings and proxy solicitation; (i) charges and expenses
of the Fund's custodian and registrar, transfer agent and dividend disbursing
agent; (j) compensation of the Company's officers, directors and employees that
are not Affiliated Persons or Interested Persons (as defined in Section 2(a)(19)
of the Investment Company Act of 1940, as amended (the "1940 Act") and the
rules, regulations and releases relating thereto) of Adviser; (k) legal and
auditing expenses; (l) costs of certificates representing common shares of the
Fund; (m) costs of stationery and supplies; (n) insurance expenses; (o)
association membership dues; (p) the fees and expenses of registering the Fund
and its shares with the Securities and Exchange Commission; (q) travel expenses
of officers and employees of Sub-Adviser to the extent such expenses relate to
the attendance of such persons at meetings at the request of the Board of
Directors of the Company; and (r) all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein. Sub-Adviser shall for all
purposes herein be deemed to be an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise) have no authority
to act for or on behalf of the Fund in any way or otherwise be deemed an agent
of the Fund.
2. Sub-Adviser shall direct the Fund's investments in accordance with
applicable law and the investment objective, policies and restrictions set forth
in the Fund's then-effective Registration Statement under the Securities Act of
1933, as amended, including the Prospectus and Statement of Additional
Information of the Fund contained therein, subject to the supervision of the
Company, its officers and directors, and Adviser and in accordance with the
investment objectives, policies and restrictions from time to time prescribed by
the Board of Directors of the Company and communicated by Adviser to Sub-Adviser
and subject to such further limitations as Adviser may from time to time impose
by written notice to Sub-Adviser.
3. Sub-Adviser shall formulate and implement a continuing program for
managing the investment of the Fund's assets, and shall amend and update such
program from time to time as financial and other economic conditions warrant.
Sub-Adviser shall make all determinations with respect to managing the
investment of the Fund's assets and shall take such steps as may be necessary to
implement the same, including the placement of purchase and sale orders on
behalf of the Fund.
4. Sub-Adviser shall furnish such reports to Adviser as Adviser may
reasonably request for Adviser's use in discharging its obligations under the
Advisory Agreement, which reports may be distributed by Adviser to the Company's
Board of Directors at periodic meetings of the Board of Directors and at such
other times as may be reasonably requested by the Board of Directors. Copies of
all such reports shall be furnished to Adviser for examination and review within
a reasonable time prior to the presentation of such reports to Company's Board
of Directors.
5. Sub-Adviser shall select the brokers and dealers that will execute
the purchases and sales of securities for the Fund and markets on or in which
such transactions will be executed and shall place, in the name of the Fund or
its nominee, all such orders.
(a) Subject to the primary objective of obtaining the best
available prices and execution, Sub-Adviser will place orders for the
purchase and sale of portfolio securities with such broker/dealers who
provide statistical, factual and financial information and services to
the Fund, Sub-Adviser or to any other fund for which Sub-Adviser
provides investment advisory services and/or with broker/dealers who
sell shares of the Fund or who sell shares of any other fund for which
Sub-Adviser provides investment advisory services. Broker/dealers who
sell shares of the funds for which Sub-Adviser provides investment
advisory services shall only receive orders for the purchase or sale of
portfolio securities to the extent that the placing of such orders is
in compliance with the Rules of the Securities and Exchange Commission
and the National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above,
and subject to such policies and procedures as may be adopted by the
Board of Directors and officers of the Company, Sub-Adviser may ask the
Fund and the Fund may agree to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange,
broker or dealer would have charged for effecting that transaction, in
such instances where Sub-Adviser has determined in good faith that such
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker or
dealer, viewed in terms of either that particular transaction or
Sub-Adviser's overall responsibilities with respect to the Fund and to
other funds and other advisory accounts for which Sub-Adviser exercises
investment discretion.
(c) It is understood that certain other clients of Sub-Adviser
may have investment objectives and policies similar to those of the
Fund, and that Sub-Adviser may, from time to time, make recommendations
that result in the purchase or sale of a particular security by its
other clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the demand for
securities being purchased or the supply of securities being sold,
there may be an adverse effect on price or quantity. In such event,
Sub-Adviser shall allocate advisory recommendations and the placing of
orders in a manner that is deemed equitable by Sub-Adviser to the
accounts involved, including the Fund. When two or more of the clients
of Sub-Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker or dealer, such
transactions may be averaged as to price.
(d) Sub-Adviser agrees that it will not purchase or sell
securities for the Fund in any transaction in which it, Adviser or any
"affiliated person" of the Company, Adviser or Sub-Adviser or any
affiliated person of such "affiliated person" is acting as principal;
provided, however, that Sub-Adviser may effect transactions pursuant to
Rule 17a-7 under the 1940 Act in compliance with the Fund's
then-effective policies concerning such transactions.
(e) Sub-Adviser agrees that it will not execute any portfolio
transactions for the Fund with a broker or dealer or futures
commission-merchant which is an "affiliated person" of the Company,
Adviser or Sub-Adviser or an "affiliated person" of such an "affiliated
person" without the prior written consent of Adviser. In effecting any
such transactions with the prior written consent of Adviser,
Sub-Adviser shall comply with Section 17(e)(1) of the 1940 Act, other
applicable provisions of the 1940 Act, if any, the then-effective
Registration Statement of the Fund under the Securities Act of 1933, as
amended and the Fund's then-effective policies concerning such
transactions.
(f) Sub-Adviser shall promptly communicate to Adviser and, if
requested by Adviser, to the Company's Board of Directors, such
information relating to portfolio transactions as Adviser may
reasonably request. The parties understand that the Fund shall bear all
brokerage commissions in connection with the purchases and sales of
portfolio securities for the Fund and all ordinary and reasonable
transaction costs in connection with purchases of such securities in
private placements and subsequent sales thereof.
6. Sub-Adviser may (at its cost except as contemplated by paragraph 5
of this Agreement) employ, retain or otherwise avail itself of the services and
facilities of persons and entities within its own organization or any other
organization for the purpose of providing Sub-Adviser, Adviser or the Fund with
such information, advice or assistance, including but not limited to advice
regarding economic factors and trends and advice as to transactions in specific
securities, as Sub-Adviser may deem necessary, appropriate or convenient for the
discharge of its obligations hereunder or otherwise helpful to Adviser or the
Fund, or in the discharge of Sub-Adviser's overall responsibilities with respect
to the other accounts for which it serves as investment manager or investment
adviser.
7. Sub-Adviser shall cooperate with and make available to Adviser, the
Fund and any agents engaged by the Fund, Sub-Adviser's expertise relating to
matters affecting the Fund.
8. For the services to be rendered under this Agreement, and the
facilities to be furnished for each fiscal year of the Fund, Adviser shall pay
to Sub-Adviser a monthly management fee at the annual rate of 0.25% of the
Fund's average daily net assets. This fee will be computed based on net assets
at the beginning of each day and will be paid to Sub-Adviser monthly on or
before the fifteenth day of the month next succeeding the month for which the
fee is paid. The fee shall be prorated for any fraction of a fiscal year at the
commencement and termination of this Agreement.
Pursuant to the Advisory Agreement, Adviser receives monthly from the
Fund compensation at the annual rate of 0.50% of the Fund's average daily net
assets. If Adviser has undertaken in the Fund's Registration Statement as filed
under the 1940 Act or elsewhere to waive all or part of its fee under the
Advisory Agreement or to reduce such fee upon order of the Board of Directors or
the vote of a majority of the outstanding voting securities of the Fund,
Sub-Adviser's fee payable under this Agreement will be proportionately waived.
9. Sub-Adviser represents, warrants and agrees that:
(a) Sub-Adviser is registered as an "investment adviser" under
the Investment Advisers Act of 1940 ("Advisers Act") and is currently
in compliance and shall at all times continue to comply with the
requirements imposed upon it by Advisers Act and other applicable laws
and regulations. Sub-Adviser agrees to (i) supply Adviser with such
documents as Adviser may reasonably request to document compliance with
such laws and regulations and (ii) immediately notify Adviser of the
occurrence of any event which would disqualify Sub-Adviser from serving
as an investment adviser of an investment company pursuant to any
applicable law or regulation.
(b) Sub-Adviser will maintain, keep current and preserve on
behalf of the Company all records required or permitted by the 1940 Act
in the manner provided by such Act. Sub-Adviser agrees that such
records are the property of the Company, and will be surrendered to the
Company promptly upon request.
(c) Sub-Adviser will complete such reports concerning
purchases or sales of securities on behalf of Sub-Adviser as Adviser
may from time to time require to document compliance with the 1940 Act,
Advisers Act, the Internal Revenue Code, applicable state securities
laws and other applicable laws and regulations or regulatory and taxing
authorities in countries other than the United States.
(d) After filing with the Securities and Exchange Commission
any amendment to its Form ADV, Sub-Adviser will promptly furnish a copy
of such amendment to Adviser.
(e) Sub-Adviser will immediately notify Adviser of the
occurrence of any event which would disqualify Sub-Adviser from serving
as an investment adviser of an investment company pursuant to Section 9
of the 1940 Act or any other applicable statute or regulation.
10. Adviser represents, warrants and agrees that:
(a) It has been duly authorized by the Board of Directors of
the Company to delegate to Sub-Adviser the provision of the services
contemplated hereby.
(b) Adviser and the Company are currently in compliance and
shall at all times continue to comply with the requirements imposed
upon Adviser and the Company by applicable law and regulations.
11. Sub-Adviser will not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund or its shareholders in connection
with the performance of its duties under this Agreement, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its duties under
this Agreement.
12. This Agreement shall become effective as of the date first set
forth above. Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities or shares of the Fund
shall mean the vote of 67% or more of such shares if the holders of more than
50% of such shares are present in person or by proxy or the vote of more than
50% of such shares, whichever is less.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect for a period of two years from the date of its execution, and
thereafter shall continue in effect only so long as such continuance is
specifically approved at least annually (a) by the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of the
Fund, and (b) by the vote of a majority of the directors who are not parties to
this Agreement or Interested Persons of Adviser, Sub-Adviser or the Company,
cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time without the payment of any
penalty (a) by the vote of the Board of Directors of the Company or by the vote
of the holders of a majority of the outstanding voting securities of the Fund,
upon 60 days' written notice to Adviser and the Sub-Adviser, or (b) by Adviser,
upon 60 days' written notice to the Sub-Adviser; or (c) by the Sub-Adviser, upon
60 days' written notice to Adviser. This Agreement shall automatically terminate
in the event of its assignment as defined in the 1940 Act and the rules
thereunder, provided, however, the such automatic termination shall be prevented
in a particular case by an order of exemption from the Securities and Exchange
Commission or a no-action letter of the staff of the Commission to the effect
that such assignment does not require termination as a statutory or regulatory
matter. This Agreement shall automatically terminate upon completion of the
dissolution, liquidation or winding up of the Fund.
13. No amendment to or modification of this Agreement shall be
effective unless and until approved by the vote of a majority of the outstanding
shares of the Fund.
14. This Agreement shall be binding upon, and inure to the benefit of,
Adviser and Sub-Adviser, and their respective successors.
15. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
16. To the extent that state law is not preempted by the provisions of
any law of the United States heretofore or hereafter enacted, as the same may be
amended from time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers thereunto duly authorized in multiple
counterparts, each of which shall be an original but all of which shall
constitute one of the same instrument.
DELAWARE MANAGEMENT
COMPANY, INC.
By ___________________________________
Name:
Title:
VOYAGEUR ASSET MANAGEMENT LLC
By ___________________________________
Name:
Title:
FOR VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The undersigned appoints Thomas J. Abood and John G. Taft, and each of
them, with power to act without the other and with the right of substitution in
each, the proxies of the undersigned to vote all shares of Voyageur U.S.
Government Securities Fund (the "Fund"), held by the undersigned at a special
meeting of shareholders of the Fund to be held on April 11, 1997, and at any
adjournments thereof, with all the powers the undersigned would possess if
present in person. All previous proxies given with respect to the meeting are
revoked.
THE PROXIES ARE INSTRUCTED:
2. To vote: FOR ________ AGAINST ________ approval of a new Investment
Advisory Agreement.
3. To vote: FOR ________ AGAINST ________ approval of a Sub-Advisory
Agreement.
4. To vote:
______FOR all nominees listed below (except as marked to the
contrary below)
______WITHHOLD AUTHORITY to vote for all nominees listed below
NOMINEES: Walter P. Babich, Anthony D. Knerr, Ann R. Leven, W. Thacher
Longstreth, Thomas F. Madison, Jeffrey J. Nick, Charles E. Peck and Wayne A.
Stork.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournments or
postponements thereof.
THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE ABOVE MATTERS. IT IS
UNDERSTOOD THAT, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ALL
ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST
INTERESTS OF THE FUND. RECEIPT OF NOTICE OF MEETING AND PROXY STATEMENT IS
ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY. SIGN, DATE, AND RETURN IN THE
ADDRESSED ENVELOPE--NO POSTAGE REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE FUND
FURTHER SOLICITATION EXPENSE.
Dated:_______________________________, 1997
___________________________________________
___________________________________________
IMPORTANT: Please date and sign this Proxy.
If the stock is held jointly, signature
should include both names. Executors,
administrators, trustees, guardians, and
others signing in a representative capacity
should give their full title as such.
FOR VFI CORE PORTFOLIO AND VFI INTERMEDIATE DURATION PORTFOLIO
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The undersigned appoints Thomas J. Abood and John G. Taft, and each of
them, with power to act without the other and with the right of substitution in
each, the proxies of the undersigned to vote all shares of VFI [name of VFI
Fund] Fund (the "Fund"), held by the undersigned at a special meeting of
shareholders of the Fund to be held on April 11, 1997, and at any adjournments
thereof, with all the powers the undersigned would possess if present in person.
All previous proxies given with respect to the meeting are revoked.
THE PROXIES ARE INSTRUCTED:
1. To vote: FOR _________ AGAINST _________ approval of an Agrement and
Plan of Reorganization.
4. To vote:
______FOR all nominees listed below (except as marked to the
contrary below)
______WITHHOLD AUTHORITY to vote for all nominees listed below
NOMINEES: Walter P. Babich, Anthony D. Knerr, Ann R. Leven, W. Thacher
Longstreth, Thomas F. Madison, Jeffrey J. Nick, Charles E. Peck and Wayne A.
Stork.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournments or
postponements thereof.
THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE ABOVE MATTERS. IT IS
UNDERSTOOD THAT, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ALL
ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST
INTERESTS OF THE FUND. RECEIPT OF NOTICE OF MEETING AND PROXY STATEMENT IS
ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY. SIGN, DATE, AND RETURN IN THE
ADDRESSED ENVELOPE--NO POSTAGE REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE FUND
FURTHER SOLICITATION EXPENSE.
Dated:_______________________________, 1997
___________________________________________
___________________________________________
IMPORTANT: Please date and sign this Proxy.
If the stock is held jointly, signature
should include both names. Executors,
administrators, trustees, guardians, and
others signing in a representative capacity
should give their full title as such.
Dear Shareholder:
In January, Lincoln National Corporation (NYSE: LNC) announced that it had
entered into an agreement to acquire the business of Voyageur Fund Managers,
Inc.("Voyageur Fund Managers"). If the agreement is consummated, Lincoln
National Corporation will control Voyageur Fund Managers. LNC also controls
Delaware Management Company, Inc. ("Delaware"), which with its affiliates acts
as investment advisor to the Delaware Group of Funds.
Because this acquisition affects Voyageur U.S. Government Securities Fund's
investment manager, shareholders of this Fund are being asked to approve a new
investment management agreement with Delaware. Shareholders of the U.S.
Government Securities Fund are also being asked to approve a new sub-advisory
agreement with Voyageur Asset Management LLC whereby Jane M. Wyatt, current
portfolio manager of the Fund, will continue to manage the Fund. Voyageur Asset
Management LLC will be owned by the current owners of Voyageur Fund Managers,
and will not be affiliated with Delaware. Shareholders of the Voyageur Financial
Institutions Intermediate Duration Portfolio and Voyageur Financial Institutions
Core Portfolio ("VFI Funds") are being asked to approve the reorganization of
their Funds. The VFI Funds are not a part of the LNC acquisition and the
reorganization is required to separate these Funds from Voyageur U.S. Government
Securities Fund, which is part of the acquisition. The VFI Funds and Voyageur
U.S. Government Securities Fund are currently part of the same corporate entity.
With the enclosed proxy statement, we have included a question and answer
section, intended to address some of the more commonly asked questions about the
proposed acquisition and the future management of your Voyageur Funds. If you
have additional questions, we encourage you to contact Shareholder
Communications Corporation, a professional proxy solicitation firm retained by
Voyageur Fund Managers, Inc. and Lincoln National Corporation to assist in
answering shareholders questions about the proxy vote. You may call Shareholder
Communications Corporation at 800.733.8481 extension 438 on Monday through
Friday from 9 a.m. to 11 p.m (Eastern Standard Time).
We believe shareholders in the Voyageur U.S. Government Securities Fund will
benefit from this transaction. When Voyageur's mutual funds are added to
Delaware's existing line of mutual funds (16 open end funds consisting of 48
separate portfolios and two closed end funds), Voyageur U.S. Government
Securities Fund shareholders will have access to a wider variety of investment
options. Delaware Management Company has a conservative, long-term investment
philosophy that is consistent with and similar to that of Voyageur Fund
Managers. No change is expected to the day to day management of the VFI Funds,
which are not part of the LNC transaction. Your Fund Board has unanimously
approved the proposals and recommends that shareholders vote in favor of all of
the items on the enclosed proxy card(s).
Your vote is important. Please review the proxy statement then take a moment to
complete, sign and mail your proxy card(s). A postage-paid envelope is enclosed
for your convenience. If the date of the meeting approaches and we have not
received your vote, you may receive a telephone call from a representative of
Shareholder Communications Corporation reminding you to vote your shares.
We appreciate your prompt attention to this very important matter.
Sincerely,
/s/ John G. Taft
John G. Taft
President
Q&A ABOUT THE VOYAGEUR FUND MANAGERS ACQUISITION
ON JANUARY 15, LINCOLN NATIONAL CORPORATION, ANNOUNCED IT WOULD ACQUIRE VOYAGEUR
FUND MANAGERS. IN RESPONSE TO THIS ACQUISITION, WE CREATED THIS QUESTION AND
ANSWER SECTION TO ADDRESS ANY CONCERNS YOU MAY HAVE. IF YOU REQUIRE ADDITIONAL
INFORMATION ABOUT THE PROXY OR TRANSACTION, PLEASE CONTACT SHAREHOLDER
COMMUNICATIONS AT 800.733.8481 EXTENSION 438. A REPRESENTATIVE WILL BE AVAILABLE
TO ANSWER YOUR QUESTIONS FROM MONDAY THROUGH FRIDAY FROM 9 A.M. TO 11 P.M.
(EASTERN STANDARD TIME).
- --------------------------------------------------------------------------------
Q. How will the acquisition of Voyageur Fund Managers impact my investments?
A. We believe this acquisition will be very positive for our fund shareholders.
Delaware Management Company -- an indirect subsidiary of Lincoln National
Corporation -- currently offers a broad variety of retail open-end mutual
funds and two closed-end funds with assets under management of approximately
$10.3 billion. Shareholders of the U.S. Government Securities Fund should
benefit from this extended product line, which will allow choices (through
exchanges at net asset value) from a wider variety of mutual funds. Also by
combining the assets of these two fund families, it is anticipated that
certain efficiencies may be gained through the coordination of
administrative, marketing and trading functions.
Q. Will the investment advisory fees paid by the U.S. Government Securities Fund
stay the same?
A. Yes, under the terms of the proposed investment advisory agreement, the
investment management fees paid by your Fund will remain the same. However,
certain expense limitation provisions contained in your current advisory
agreement have not been included in the proposed agreement. Delaware
Management Company has nevertheless agreed to comply with these limitations
for two years.
Q. Will the management of my Voyageur Fund investments change dramatically?
A. No. Through the sub-advisory agreement with Voyageur Asset Management LLC,
the portfolio manager of the U.S. Government Fund will remain the same.
Shareholders of the Voyageur Financial Institutions Intermediate Duration and
Core portfolios ("VFI Funds"), which are not part of the Lincoln National
Corporation transaction, will continue to receive conservative portfolio
management services from Voyageur Asset Management LLC.
Some of the changes to the management of Voyageur's Funds are summarized as
follows:
* For the Voyageur U.S. Government Securities Fund, Delaware Management will
retain the services of Jane M. Wyatt, the Fund's current portfolio manager,
through a sub-advisory arrangement.
* It is proposed that shareholders of VFI Funds approve a plan of
reorganization which would in essence cause them to become a series of a
different corporate entity. The VFI Funds are not participating in the
acquisition, and the reorganization is required to separate the VFI Funds
from the U.S. Government Securities Fund which is a series of the same
corporation and is participating in the acquisition. The reorganization
will not result in any other material changes that affect the VFI Funds
shareholders; management of the Fund through Voyageur Asset Management LLC
will remain essentially unchanged.
Q. Why is a shareholder vote necessary?
A. The Investment Company Act of 1940, as amended, generally requires that
shareholders approve a new investment advisory agreement whenever there is a
change in control of the investment adviser. The proposed acquisition of the
holding company of Voyageur Fund Managers by Lincoln National Corporation
will result in a change in control of Voyageur Fund Managers and, therefore,
requires a shareholder vote on a new investment advisory agreement for the
U.S. Government Securities Fund.
Q. Is the board changing for the U.S. Government Securities Fund?
A. Yes. The current Voyageur Fund board of directors has nominated a slate of
directors which includes one current Voyageur Fund board member, Thomas F.
Madison, the six members of the current board of the Delaware Group of Funds
and one additional individual from Lincoln National Corporation. The Delaware
Fund board currently contains five independent directors.
Q. What about the board of directors for the VFI Funds?
A. VFI Fund shareholders are being asked to vote for the new directors because,
as of the record date for the meeting, they were shareholders of the same
corporate entity as the U.S. Government Securities Fund. However, if the
reorganization is approved, they will become shareholders of a corporate
entity governed by the current Voyageur Fund board of directors.
Q. Who will pay for the cost associated with the acquisition, the shareholder
meeting and this proxy solicitation?
A. Lincoln National Corporation -- not the Funds -- will bear the costs
associated with consideration of the proposals being presented to
shareholders, including the costs of the joint meetings of shareholders and
the proxy solicitation.
Q. How do the Fund Board members suggest I vote?
A. After careful consideration, the board members of the Voyageur Funds
unanimously recommend that you vote "FOR" all the items on the enclosed proxy
card.
Q. Who should I contact about this proxy vote?
A. Shareholder Communications Corporation at 800.733.8481 extension 438. They
are a professional proxy solicitation firm retained by Voyageur Fund Managers
and Delaware Management Holdings to assist in answering shareholders
questions about the proxy vote and soliciting shareholder votes.
Q. Who will answer questions about my Voyageur Fund investments?
A. During this transition period, it will be business as usual; shareholders
should call Voyageur Client Services at 800.545.3863 to obtain information
about their Voyageur Fund investments.
Q. Are all of the Voyageur Funds covered by the enclosed proxy statement?
A. No. All of the Voyageur Funds are affected by the proposed acquisition.
However, because different Funds are affected differently, there are three
separate proxy statements. As a result, depending on which Voyageur Funds you
own, you may receive more than one proxy statement.
