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U.S. GOVERNMENT SECURITIES FUND PROSPECTUS
VOYAGEUR U.S. GOVERNMENT SECURITIES FUND May 1, 1997
-------------------------------
Voyageur U.S. Government Securities Fund (the "Fund"), a series of
Voyageur Funds, Inc. (the "Company"), is an open-end, diversified management
investment company, commonly known as a mutual fund. The Fund currently offers
its shares in four classes (Class A, Class B, Class C and Institutional Class),
each sold pursuant to different sales arrangements and expenses.
The Fund's investment objective is to provide its shareholders with a
high level of current income consistent with prudent investment risk. The Fund
will seek to achieve its investment objective by investing in U.S. Treasury
bills, notes, bonds and other obligations issued or unconditionally guaranteed
by the U.S. Government, or otherwise backed by the full faith and credit of the
U.S. Government, and repurchase agreements fully secured by such obligations.
The Fund invests a significant portion of its assets in mortgage participation
certificates guaranteed by the Government National Mortgage Association.
The Fund's investment adviser is Delaware Management Company, Inc. (the
"Adviser") located at One Commerce Square, 2005 Market Street, Philadelphia, PA
19103. The Adviser employs Voyageur Asset Management LLC, 90 South Seventh
Street, Suite 4400, Minneapolis, MN 55402 (the "Sub-Adviser") as the Fund's
Sub-Adviser.
Investors should read and retain this Prospectus for future reference.
An investment in the Fund involves certain risks and requires consideration of
such risks. See "Risk Factors and Special Considerations." An investment in the
Fund is not a deposit or obligation of, or guaranteed or endorsed by, any bank
and is not insured or guaranteed by the U.S. Government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other federal agency. An
investment in the Fund involves investment risk including the possible loss of
principal due to fluctuations in the Fund's net asset value.
This Prospectus sets forth certain information about the Fund that a
prospective investor should know before investing. A Statement of Additional
Information (dated February 28, 1997) has been filed with the Securities and
Exchange Commission. The Statement of Additional Information is available free
of charge from the Fund by telephone and at the mailing address below, and is
incorporated in its entirety by reference into this Prospectus in accordance
with the Commission's rules.
Voyageur U.S. Government Securities Fund
1818 Market Street
Philadelphia, Pennsylvania 19103
800-523-1918
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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PURCHASE INFORMATION
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FUND EXPENSES
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FINANCIAL HIGHLIGHTS
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INVESTMENT OBJECTIVE AND POLICIES
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HOW TO PURCHASE SHARES
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RETIREMENT PLANS
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HOW TO SELL SHARES
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REINSTATEMENT PRIVILEGE
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EXCHANGE PRIVILEGE
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MANAGEMENT
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DETERMINATION OF NET ASSET VALUE
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DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
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INVESTMENT PERFORMANCE
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GENERAL INFORMATION
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(VGOV)
PURCHASE INFORMATION
The Fund offers investors the choice among four classes of shares which
offer different sales charges and bear different expenses. These alternatives
permit an investor to choose the method of purchasing shares that is most
beneficial given the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances.
Class A Shares
An investor who purchases Class A shares pays a sales charge at the
time of purchase. As a result Class A shares are not subject to any charges when
they are redeemed (except for sales at net asset value in excess of $1 million
which are subject to a contingent deferred sales charge). The initial sales
charge may be reduced or waived for certain purchases. Class A shares are
subject to a Rule 12b-1 fee payable at an annual rate of .25% of the Fund's
average daily net assets attributable to Class A shares. See "How to Purchase
Shares--Class A Shares."
Class B Shares
Class B shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge of up to 4% if redeemed within six
years of purchase. Class B shares are also subject to a higher Rule 12b-1 fee
than Class A shares. The Rule 12b-1 fee for Class B shares will be paid at an
annual rate of 1% of the Fund's average daily net assets attributable to Class B
shares. Class B shares will automatically convert to Class A shares at net asset
value approximately eight years after purchase. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made, but until conversion will have a higher expense
ratio and pay lower dividends than Class A shares due to the higher Rule 12b-1
fee. See "How to Purchase Shares--Class B Shares."
Class C Shares
Class C shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge of 1% if redeemed within one year
of purchase. Class C shares are also subject to a higher Rule 12b-1 fee than
Class A shares. The Rule 12b-1 fee for Class C shares will be paid at an annual
rate of 1% of the Fund's average daily net assets attributable to Class C
shares. Class C shares provide an investor the benefit of putting all of the
investor's dollars to work from the time the investment is made, but will have a
higher expense ratio and pay lower dividends than Class A shares due to the
higher Rule 12b-1 fee. See "How to Purchase Shares--Class C Shares."
Institutional Class Shares
Institutional Class shares are available to a limited group of
investors with no sales charge at the time of purchase and no contingent
deferred sales charge upon redemption. Institutional Class shares are subject to
a Rule 12b-1 fee payable at an annual rate of .25% of the Fund's average daily
net assets attributable to Institutional Class shares. See "How to Purchase
Shares--Institutional Class Shares."
Investors making investments that qualify for reduced sales charges
might consider Class A shares. Other investors might consider Class B or Class C
shares because all of the purchase price is invested immediately. Orders for
Class B shares for $250,000 or more will be treated as orders for Class A shares
or such orders will be declined. Sales personnel may receive different
compensation depending on which class of shares they sell.
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FUND EXPENSES
<TABLE>
<CAPTION>
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Shareholder Transaction
Expenses
------------------------- Annual Fund Operating Expenses Example of Expenses I:
Maximum (as a Percentage of Average Net Assets) An investor would pay the
Deferred --------------------------------------- following dollar amount of
Sales Charge expenses on a $1,000
as a % of investment assuming a 5%
Maximum Sales Original annual return and
Charge Imposed Purchase Price redemption at the end of
on Purchases or Redemption Total Fund each period.
as a % of Proceeds, as Management Rule Other Operating ---------------------------------
Offering Price Applicable Fee 12b-1 Fees Expenses Expenses 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Securities Fund
Class A 4.75% 1.00%(2) 0.50% 0.25% 0.23% 0.98% $57 $77 $99 $162
Class B N/A(1) 4.00 0.50 1.00 0.23 1.73 58 84 114 184
Class C N/A(1) 1 0.50 1.00 0.23 1.73 28 54 94 204
Institutional Class N/A N/A 0.50 0.25 0.24 0.99 10 32 55 121
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Example of Expenses II:
An investor would pay the following
dollar amount of expenses on
the same investment (as above) in
Class B and Class C shares, assuming
no redemption at the end of each period.
----------------------------------------
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Securities Fund
Class B $18 $54 $94 $184
Class C 18 54 94 204
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</TABLE>
1 Class B and Class C shares are sold without a front end sales charge,
but their Rule 12b-1 fees may cause long-term shareholders to pay more
than the economic equivalent of the maximum permitted front end sales
charges.
2 A contingent deferred sales charge of 1% is imposed on certain
redemptions of Class A shares that were purchased without an initial
sales charge as part of an investment of $1 million or more. See "How
to Purchase Shares--Class A Shares."
The examples contained in the table should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown. The purpose of the above Fund Expenses table is to assist
the investor in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. The information set forth in the
table reflects actual expenses incurred during the four month period ended
October 31, 1996 for all classes of shares. Future expenses may be greater or
less than those shown. In connection with a merger transaction, pursuant to
which Voyageur became a subsidiary of Delaware Management Holdings, Inc., the
Adviser and its new parent companies have agreed, until April 30, 1999, to pay
certain operating expenses of the Fund (including the investment advisory,
administrative and Rule 12b-1 fees) which exceed on an annual basis 1.25% of the
Fund's average daily net assets attributable to Class A and Institutional Class
shares and 2.00% of the Fund's average daily net assets attributable to Class B
and Class C shares, up to the combined amount of the investment advisory and
administrative services fees received from the Fund.
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FINANCIAL HIGHLIGHTS
The following table shows certain per share data and selected information for a
share of capital stock outstanding during the indicated periods for the Fund.
This information has been audited by KPMG Peat Marwick LLP, independent
auditors, and should be read in conjunction with the financial statements of the
Fund contained in its annual report. An annual report of the Fund can be
obtained without charge by contacting the Fund at 800-523-4640. In addition to
financial statements, the annual report contains further information about
performance of the Fund.
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<TABLE>
<CAPTION>
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Income (Loss) from
Investment Operations Less Distributions
--------------------- ------------------
Net Dividends
Net Realized from Distrib-
Asset and Net utions Net Total
Value Net Unrealized Invest- from Asset Value Invest-
Beginning Investment Gains on ment Capital End of ment
Voyageur Fund of Period Income Securities Income Gains Period Return(3)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Securities Fund
Class A
10/31/96(5) $10.16 $0.21 $0.21 ($0.21) -- $10.37
6/30/96 10.37 0.63 (0.23) (0.61) -- 10.16 3.88
6/30/95 9.76 0.62 0.63 (0.62) (0.02) 10.37 13.45
6/30/94 10.99 0.55 (0.94) (0.55) (0.29) 9.76 (3.95)
6/30/93 10.46 0.61 0.83 (0.61) (0.30) 10.99 14.25
6/30/92 9.99 0.67 0.76 (0.67) (0.29) 10.46 14.68
6/30/91 9.77 0.78 0.32 (0.78) (0.10) 9.99 11.67
6/30/90 10.05 0.82 (0.07) (0.82) (0.21) 9.77 7.89
6/30/89 9.98 0.88 0.07 (0.88) -- 10.05 10.05
11/2/87(2) - 6/30/88 10.00 0.58 (0.02) (0.58) -- 9.98 5.76
Class B
10/31/96(5) 10.17 0.18 0.21 (0.18) -- 10.38 3.91
6/30/96 10.38 0.57 (0.23) (0.55) -- 10.17 3.32
6/30/95 9.75 0.56 0.65 (0.56) (0.02) 10.38 12.90
6/7/94(2) - 6/30/94 10.05 0.01 (0.28) (0.01) (0.02) 9.75 (2.68)
Class C
10/31/96(5) 10.15 0.18 0.21 (0.18) -- 10.36 3.92
6/30/96 10.36 0.55 (0.23) (0.53) -- 10.15 3.11
1/10/95(2) - 6/30/95 9.48 0.27 0.88 (0.27) -- 10.36 12.73
Institutional Class
10/31/96(5) 10.16 0.21 0.21 (0.21) -- 10.37 4.17
6/30/96 10.37 0.63 (0.23) (0.61) -- 10.16 3.88
6/30/95 9.75 0.62 0.64 (0.62) (0.02) 10.37 13.57
6/7/94(2) - 6/30/94 10.05 0.01 (0.28) (0.01) (0.02) 9.75 (2.64)
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------
Ratio of Expenses
to Average Daily
Net Assets
Ratio Assuming
Net Ratio of of Net No Voluntary
Assets Expenses Investment Waivers,
End of to Income Portfolio Reimbursements
Period Average to Average Tunrover and Expense
Voyageur Fund (000s) Net Assets Net Assets Rate Reductions
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Government Securities Fund
Class A
10/31/96(5) $65,516 2.03 66.29% 0.98
6/30/96 68,442 0.97 6.07 145.35 0.97
6/30/95 75,886 0.95 6.38 144.39 0.95
6/30/94 84,660 0.96 5.10 124.38 0.96
6/30/93 112,604 1.10 5.61 175.02 1.14
6/30/92 53,332 1.00 6.60 198.54 1.25
6/30/91 22,176 0.95 7.95 186.15 1.25
6/30/90 8,326 1.25 8.35 130.97 1.25
6/30/89 20,137 0.82 8.97 186.97 1.25
11/2/87(2) - 6/30/88 10,048 0.25(4) 8.64(4) 119.01 1.25(4)
Class B
10/31/96(5) 2,139 1.73(4) 5.24(4) 66.29 1.73(4)
6/30/96 1,780 1.46 5.55 145.35 1.63
6/30/95 139 1.54 5.56 144.39 1.69
6/7/94(2) - 6/30/94 24 0.30(1) 0.11(1) 124.38 0.30(1)
Class C
10/31/96(5) 234 1.73(4) 5.26(4) 66.29 1.73(4)
6/30/96 224 1.70 5.33 145.35 1.70
1/10/95(2) - 6/30/95 221 1.62(4) 5.10(4) 144.39 1.65(4)
Institutional Class
10/31/96(5) 50,066 0.99(4) 6.00(4) 66.29 0.99(4)
6/30/96 41,688 0.97 6.07 145.35 0.97
6/30/95 54,445 0.94 6.39 144.39 0.94
6/7/94(2) - 6/30/94 49,898 0.25(1) 0.16(1) 124.38 0.25(1)
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</TABLE>
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1 Ratios presented for the period from June 7, 1994 to June 30, 1994 are not
annualized as they are not indicative of anticipated annual results.
2 Commencement of investment operations.
3 Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
4 Annualized.
5 Effective October 31, 1996, the Fund changed its fiscal year end from June
30 to October 31.
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide its shareholders with a
high level of current income consistent with prudent investment risk. The Fund
will seek to achieve its investment objective by investing in U.S. Treasury
bills, notes, bonds and other obligations issued or unconditionally guaranteed
by the U.S. Government, or otherwise backed by the full faith and credit of the
U.S. Government ("U.S. Government Securities"), and repurchase agreements fully
secured by such obligations. The Fund invests a significant portion of its
assets in mortgage participation certificates guaranteed by the Government
National Mortgage Association ("GNMA Certificates"). The Fund's investment
objective is fundamental and may not be changed without shareholder approval.
There can, of course, be no assurance that the Fund will achieve its objective.
The Board of Directors may change any of the investment policies below that are
not designated fundamental.
Securities guaranteed by the full faith and credit of the U.S.
Government include a variety of securities, which differ in their interest
rates, maturities and dates of issuance. For example, Treasury bills have
maturities of one year or less, Treasury notes have maturities of one to ten
years and Treasury bonds generally have maturities of greater than ten years at
the date of issuance. GNMA Certificates are also backed by the full faith and
credit of the U.S. Treasury. Certain other obligations issued by federal
agencies or instrumentalities may also be supported by the full faith and credit
of the U.S. Treasury, depending on the circumstances of the issue.
The Fund may purchase U.S. Government Securities on a when-issued or
delayed delivery basis. The settlement dates for these types of transactions are
determined by mutual agreement of the parties and may occur a month or more
after the parties have agreed to the transaction, except that in no case will
the period from the trade date to the settlement date exceed 120 days.
Securities purchased on a when-issued or delayed delivery basis are subject to
market fluctuation and may decrease in value prior to their maturity, and no
interest accrues to the purchaser during the period prior to settlement. See
"Investment Policies and Restrictions" in the Statement of Additional
Information.
Although the securities in the Fund's portfolio are guaranteed as to
principal and interest by the U.S. Government or otherwise backed by the full
faith and credit of the U.S. Government, the market value of these securities
upon which the Fund's daily net asset value is based will fluctuate and will
tend to vary inversely with changes in prevailing interest rates. As a result,
the price per share a shareholder receives on redemption may be more or less
than the price originally paid for the shares. The dividends per share paid by
the Fund may also vary. In general, shorter term bonds are less sensitive to
interest rate changes, but longer term bonds generally offer higher yields.
GNMA Certificates
GNMA Certificates are mortgage backed securities representing part
ownership of a pool of mortgage loans. GNMA Certificates differ from bonds in
that principal is scheduled to be paid back by the borrower over the length of
the loan rather than returned in a lump sum at maturity. The Fund purchases
"modified pass-through" type GNMA Certificates for which the payment of
principal and interest on a timely basis is guaranteed, rather than the
"straight pass-through" certificates for which such guarantee is not available.
The Fund may also purchase "variable rate" GNMA Certificates and may purchase
other types which may be issued with GNMA's guarantee.
GNMA Certificates are created by an "issuer," which is a Federal
Housing Administration ("FHA") approved lender, such as a mortgage banker,
commercial banker or a savings and loan association, and which meets criteria
imposed by GNMA. The issuer assembles a specific pool of mortgages insured by
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either the FHA or the Farmers Home Administration or guaranteed by the Veterans
Administration. Upon application by the issuer, and after approval by GNMA of
the pool, GNMA provides its commitment to guarantee timely payment of principal
and interest on the GNMA Certificates secured by the mortgages included in the
pool. The GNMA Certificates, endorsed by GNMA, are then sold by the issuer
through securities dealers.
The yield and payment characteristics of GNMA Certificates differ from
traditional debt securities. When mortgages in the pool underlying a GNMA
Certificate are prepaid by mortgagors or foreclosed, such principal payments are
passed through to the Certificate holders (such as the Fund). Accordingly, the
life of the GNMA Certificate is likely to be substantially shorter than the
stated maturity of the mortgages in the underlying pool. Because of such
variation in prepayment rates, it is not possible to predict the life of a
particular GNMA Certificate.
Payments to holders of GNMA Certificates consist of the monthly
distributions of interest and principal less the GNMA and issuer's fees. The
portion of the monthly payment which represents a return of principal may be
reinvested by the Fund in then-available GNMA obligations which may bear
interest at a rate higher or lower than the obligation from which the payment
was received. The actual yield to be earned by the holder of a GNMA Certificate
is calculated by dividing such payments by the purchase price paid for the GNMA
Certificate (which may be at a premium or a discount from the face value of the
Certificate). Unpredictable prepayments of principal, however, can greatly
change realized yields and in a period of declining interest rates it is more
likely that mortgages contained in GNMA pools will be prepaid thus reducing the
effective yield. Moreover, any premium paid on the purchase of a GNMA
Certificate will be lost if the obligation is prepaid. In periods of falling
interest rates this potential for pre-payment may reduce the general upward
price increase of GNMAs which might otherwise occur. As with other debt
instruments, the price of GNMAs is likely to decrease in times of rising
interest rates. Price changes of the GNMAs held by the Fund have a direct impact
on the net asset value per share of the Fund.
The GNMA guarantee of timely payment of principal and interest on GNMA
Certificates is backed by the full faith and credit of the U.S. Government. GNMA
may borrow U.S. Treasury funds to the extent needed to make payments under its
guarantee.
Zero-Coupon Securities
The Fund may invest in "zero-coupon" Treasury securities, which are
U.S. Treasury bills, notes and bonds that have been stripped of their unmatured
interest coupons. Zero-coupon securities do not entitle the holder to any
periodic payments of interest prior to maturity. Rather, such securities usually
trade at a deep discount from their face value, and pay their entire face value
at maturity. The difference between the face value of the security (at maturity)
and the amount at which the security was purchased (i.e., the "discount")
represents interest income to the holder. Current federal tax law requires that
a holder of a zero-coupon security accrue a portion of such discount as interest
income each year the security is held even though the holder receives no
interest payment in cash on the security during the year. As a registered
investment company, the Fund will be required to distribute this income to
shareholders. See "Distributions to Shareholders and Taxes." These distributions
will be made from the Fund's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. Zero-coupon securities generally are subject to
greater fluctuations of market value in response to changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest.
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Short-Term Trading
The Fund intends to use short-term trading of its securities as a means
of managing its portfolio to achieve its investment objective. The Fund will
engage in short-term trading if it believes the transactions, net of costs
(including commission, if any), will result in improving the income or,
secondarily, appreciation potential of its portfolio. The successful use of
short-term trading will depend upon the ability of the Fund to evaluate
particular securities and anticipate relevant market factors, including interest
rate trends and variations from such trends. Short-term trading such as that
contemplated by the Fund places a premium upon the ability of the Fund to obtain
relevant information, evaluate it promptly and take advantage of its evaluations
by completing transactions on a favorable basis. As used herein, "short-term
trading" means selling securities held for a relatively brief period of time,
usually less than three months.
The Fund's short-term trading may lead to frequent changes in
investments, particularly in periods of rapidly fluctuating interest rates. A
change in securities held by the Fund is known as "portfolio turnover" and may
involve the payment by the Fund of dealer mark-ups or underwriting commissions
and of transaction costs on the sale of securities as well as on reinvestment of
the proceeds in other securities. In addition, frequent changes in the Fund's
portfolio securities may result in greater tax liability to the Fund's
shareholders by reason of more short-term capital gains. See "Distributions to
Shareholders and Taxes" in this Prospectus and "The Investment Adviser and
Underwriter--Portfolio Transactions and Allocation of Brokerage" in the
Statement of Additional Information.
Repurchase Agreements
The Fund will also seek to achieve its investment objective through
investing in repurchase agreements. A repurchase agreement is an instrument
under which the purchaser acquires ownership of an obligation, but the seller
agrees, at the time of sale, to repurchase such obligation at a mutually agreed
upon time and price. Investments in repurchase agreements present the risk that
the seller may fail to repurchase the obligation according to the terms of the
agreement. Should the seller of a repurchase agreement fail to repurchase the
underlying obligation or should the seller become insolvent or involved in a
bankruptcy proceeding, the Fund might incur disposition costs and a loss if the
proceeds of the sale of such obligation to a third party are less than the
repurchase price. In order to minimize these risks, the Adviser or Sub-Adviser
will review the creditworthiness of prospective parties to repurchase agreements
under established guidelines and repurchase agreements will be fully
collateralized by U.S. Government Securities of the same type as those in which
the Fund may invest directly. Such collateral will be maintained on a daily
basis at the repurchase price or better.
HOW TO PURCHASE SHARES
Alternative Purchase Arrangements
The Fund offers investors the choice among four classes of shares which
offer different sales charges and bear different expenses. These alternatives
permit an investor to choose the method of purchasing shares that is most
beneficial given the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. Page 2 of this Prospectus
contains a summary of these alternative purchase arrangements.
A broker-dealer may receive different levels of compensation depending
on which class of shares is sold. In addition, Delaware Distributors, L.P.,
the Fund's principal underwriter (the "Underwriter"), from time to time pays
certain additional cash incentives of up to $100 and/or non-cash incentives
such as vacations or merchandise to its investment executives and other
broker-dealers and financial institutions in consideration of their sales of
Fund shares. In some instances, the Underwriter pays amounts not to exceed
1.25% of the Fund's net assets (such as payments related to retention of
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shares sold by a particular broker-dealer or financial institution for a
specified period of time) to broker-dealers and financial institutions who meet
certain objective standards developed by the Underwriter.
General Purchase Information
The minimum initial investment is $1,000, and the minimum additional
investment is $100. The Fund's shares may be purchased at the public offering
price from the Underwriter, from other broker-dealers who are members of the
National Association of Securities Dealers, Inc. and who have selling agreements
with the Underwriter, and from certain financial institutions that have selling
agreements with the Underwriter.
When orders are placed for shares of the Fund, the public offering
price used for the purchase will be the net asset value per share next
determined, plus the applicable sales charge, if any (determined daily). If an
order is placed with the Underwriter or other broker-dealer, the broker-dealer
is responsible for promptly transmitting the order to the Fund. The Fund
reserves the right, in its absolute discretion, to reject any order for the
purchase of shares.
Shares of the Fund may be purchased by opening an account either by
mail, by phone or by wire.
An investor who may be interested in having shares redeemed shortly
after purchase should consider making unconditional payment by certified check
or other means approved in advance by the Underwriter. Payment of redemption
proceeds will be delayed as long as necessary to verify by expeditious means
that the purchase payment has been or will be collected. Such period of time
typically will not exceed 15 days.
Automatic Investment Plan
Investors may make systematic investments in fixed amounts
automatically on a monthly basis through the Fund's Automatic Investment Plan.
Additional information is available from the Underwriter by calling 800-
523-1918.
Purchases by Mail
To open an account by mail, an investment application must be
completed, signed and sent with a check payable to the specific Fund and class
selected, to:
Through May 11, 1997: Beginning May 12, 1997:
--------------------- -----------------------
NW 9369 Delaware Group
P.O. Box 1450 1818 Market Street
Minneapolis, MN 55485-9369 Philadelphia, PA 19103
Purchases by Telephone
To open an account by telephone, call 1-800-523-4640 to obtain an
account number and instructions. Information concerning the account will be
taken over the phone. The investor must then request a commercial bank with
which he or she has an account and which is a member of the Federal Reserve
System to transmit Federal Funds by wire to the Fund as follows:
Through May 11, 1997:
---------------------
Norwest Bank Minnesota, N.A., ABA #091000019
For Credit of: Voyageur U.S. Government Securities Fund
Checking Account No.: 872-458
Account Number: (assigned by telephone).
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Beginning May 12, 1997:
-----------------------
CoreStates Bank, N.A.
For Credit of: Voyageur U.S. Government Securities Fund
ABA #031000011
Account Number: 1412893401
Information on how to transmit Federal Funds by wire is available at
any national bank or any state bank that is a member of the Federal Reserve
System. The bank may charge the shareholder for the wire transfer. If the
telephone order and Federal Funds are received before the primary close of
trading on the Exchange, the order will be deemed to become effective at that
time. Otherwise, the order will be deemed to become effective as of the primary
close of trading on the Exchange on the next day the Exchange is open for
trading. The investor will be required to complete the investment application
and mail it to the Fund after making the initial telephone purchase.
Class A Shares--Front End Sales Charge Alternative
The public offering price of Class A shares of the Fund is the net
asset value of the Fund's shares plus the applicable front end sales charge
("FESC"), which will vary with the size of the purchase. The Fund receives the
net asset value. The FESC varies depending on the size of the purchase and is
allocated between the Underwriter and other broker-dealers. The current sales
charges are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Dealer's
Sales Charge as % of Discount
Amount of Purchase Net Asset Offering as % of
Value Price Offering Price*
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but under $100,000 4.71 4.50 4.00
$100,000 but under $250,000 3.90 3.75 3.25
$250,000 but under $500,000 2.83 2.75 2.50
$500,000 but under $1,000,000 2.30 2.25 2.00
$1,000,000 or more NAV*** NAV*** 1.00**
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Brokers and dealers who receive 90% or more of the sales charge may be
considered to be underwriters under the Securities Act of 1933, as
amended.
** The Underwriter intends to pay its investment executives and other
broker-dealers and banks that sell Fund shares, out of its own assets, a
fee of 1% of the offering price of sales of $1,000,000 or more, other
than on sales not subject to a contingent deferred sales charge.
*** Purchases of $1,000,000 or more, may be subject to a contingent deferred
sales charge at the time of redemption. See "-- Contingent Deferred
Sales Charge" below.
- --------------------------------------------------------------------------------
In connection with the distribution of the Fund's Class A shares, the
Underwriter is deemed to receive all applicable sales charges. The Underwriter,
in turn, pays its investment executives and other broker-dealers selling such
shares a "dealer discount," as set forth above. In the event that shares are
purchased by a financial
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(VGOV)
institution acting as agent for its customers, the Underwriter or the
broker-dealer with whom such order was placed may pay all or part of its dealer
discount to such financial institution in accordance with agreements between
such parties.
Special Purchase Plans--Reduced Sales Charges
Certain investors (or groups of investors) may qualify for reductions in
the sales charges shown above. Investors should contact their broker-dealer or
the Fund for details about the Combined Purchase Privilege, Cumulative Quantity
Discount and Letter of Intention plans. Descriptions are also included with the
general authorization form and in the Statement of Additional Information. These
special purchase plans may be amended or eliminated at any time by the
Underwriter without notice to existing Fund shareholders.
Rule 12b-1 Fees
Class A shares are subject to a Rule 12b-1 fee payable at an annual rate
of .25% of the average daily net assets of the Fund attributable to Class A
shares. All or a portion of such fees are paid quarterly to financial
institutions and service providers with respect to the average daily net assets
of the Fund attributable to shares sold or serviced by such institutions and
service providers. For additional information about this fee, see
"Management--Plan of Distribution" below.
Contingent Deferred Sales Charge
Although there is no initial sales charge on purchases of Class A shares
of $1,000,000 or more, the Underwriter pays investment dealers, out of its own
assets, a fee of 1% of the offering price of such shares. If these shares are
redeemed within two years after purchase, the redemption proceeds will be
reduced by a contingent deferred sales charge ("CDSC") of 1%. For additional
information, see "How to Sell Shares--Contingent Deferred Sales Charge."
Waiver of Sales Charges
Purchases of Class A shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Adviser or Sub-Adviser, any of their affiliates, any of the Voyageur or
other Delaware Group funds, certain of their agents and registered
representatives and employees of authorized investment dealers and by employee
benefit plans for such entities. Individual purchases, including those in
retirement accounts, must be for accounts in the name of the individual or a
qualifying family member.
Purchases of Class A shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of the Voyageur
or other Delaware Group funds. In addition, purchases of Class A shares may be
made by financial institutions investing for the account of their trust
customers when they are not eligible to purchase shares of the Fund's
institutional class. Officers, directors and key employees of institutional
clients of the Adviser or Sub-Adviser or any of their affiliates may purchase
Class A shares at net asset value. Moreover, purchases may be effected at net
asset value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Underwriter
providing specifically for the purchase of Class A shares in connection with
special investment projects, such as wrap accounts or similar fee based
programs.
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(VGOV)
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
A Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Class B Shares--Contingent Deferred Sales Charge Alternative
The public offering price of Class B shares of the Fund is the net asset
value of such shares. Class B shares are sold without an initial sales charge so
that the Fund receives the full amount of the investor's purchase. However, a
CDSC of up to 4% will be imposed if shares are redeemed within six years of
purchase. For additional information, see "How to Sell Shares--Contingent
Deferred Sales Charge." In addition, Class B shares are subject to higher
Rule 12b-1 fees as described below. The CDSC will depend on the number of
years since the purchase was made, according to the following table:
CDSC as a % of
CDSC Period Amount Redeemed(1)
------------------
1st year after purchase 4%
2nd year after purchase 4
3rd year after purchase 3
4th year after purchase 3
5th year after purchase 2
6th year after purchase 1
Thereafter 0
1 The CDSC will be calculated on an amount equal to the lesser of the net
asset value of the shares at the time of purchase or the net asset value
at the time of redemption.
Proceeds from the CDSC are paid to the Underwriter and are used to
defray expenses of the Underwriter related to providing distribution-related
services to the Fund in connection with the sale of Class B shares, such as the
payment of compensation to selected broker-dealers and for selling Class B
shares. The combination of the CDSC and the Rule 12b-1 fee enables the Fund to
sell the Class B shares without deduction of a sales charge at the time of
purchase. Although Class B shares are sold without an initial sales charge, the
Underwriter pays to brokers who sell Class B shares a sales commission equal to
3% of the amount invested and an ongoing annual servicing fee of .15% (paid
quarterly) calculated on the net assets attributable to sales made by such
broker-dealers.
Rule 12b-1 Fees
Class B shares are subject to a Rule 12b-1 fee payable at an annual rate
of 1% of the average daily net assets of the Fund attributable to Class B
shares. The higher Rule 12b-1 fee will cause Class B shares to have a higher
expense ratio and to pay lower dividends than Class A shares. For additional
information about this fee, see "Fund Expenses" and "Management--Plan of
Distribution."
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(VGOV)
Conversion Feature
On the first business day of the month eight years after the purchase
date, Class B shares will automatically convert to Class A shares and will no
longer be subject to a higher Rule 12b-1 fee. Such conversion will be on the
basis of the relative net asset values of the two classes. Class A shares issued
upon such conversion will not be subject to any FESC or CDSC. Class B shares
acquired by exchange from Class B shares of another Voyageur Fund (or effective
May 12, 1997, from another Fund in the Delaware Group) will convert into Class A
shares based on the time of the initial purchase. Similarly, Class B shares
acquired by exercise of the Reinstatement Privilege will convert into Class A
shares based on the time of the original purchase of Class B shares. See
"Reinstatement Privilege." Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date of issuance of
such shares.
Class C Shares--Level Load Alternative
The public offering price of Class C shares of the Fund is the net asset
value of such shares. Class C shares are sold without an initial sales charge so
that the Fund receives the full amount of the investor's purchase. However, a
CDSC of 1% will be imposed if shares are redeemed within one year of purchase.
For additional information, see "How to Sell Shares--Contingent Deferred Sales
Charge." In addition, Class C shares are subject to higher annual Rule 12b-1
fees as described below.
Rule 12b-1 Fees
Class C shares are subject to a Rule 12b-1 fee payable at an annual rate
of 1% of the average daily net assets of the Fund attributable to Class C
shares. The higher Rule 12b-1 fee will cause Class C shares to have a higher
expense ratio and to pay lower dividends than Class A shares. For additional
information about this fee, see "Fund Expenses" and "Management--Plan of
Distribution."
Proceeds from the CDSC are paid to the Underwriter and are used to
defray expenses of the Underwriter related to providing distribution-related
services to the Fund in connection with the sale of Class C shares, such as the
payment of compensation to selected broker-dealers and for selling Class C
shares. The combination of the CDSC and the Rule 12b-1 fee enables the Fund to
sell the Class C shares without deduction of a sales charge at the time of
purchase. Although Class C shares are sold without an initial sales charge, the
Underwriter pays to brokers who sell Class C shares a sales commission equal to
1% of the amount invested and an ongoing annual servicing fee of .75% (paid
quarterly commencing in the thirteenth month after the sale of such shares)
calculated on the net assets attributable to sales made by such broker-dealers.
Institutional Class Shares
Institutional Class shares are available to a limited group of investors
with no sales charge at the time of purchase and no contingent deferred sales
charge upon redemption. Institutional Class shares are subject to a Rule 12b-1
fee payable at an annual rate of .25% of the Fund's average daily net assets
attributable to Institutional Class shares.
The investors who may purchase Institutional Class shares include: (a)
officers and directors of the Fund; (b) officers, directors and full-time
employees of the Adviser or Sub-Adviser, and officers, directors and full-time
employees of parents and subsidiaries of the foregoing companies; (c) officers,
directors and full-time employees of investment advisers of other mutual funds
subject to a sales charge and included in any other family of mutual funds that
includes any Voyageur Fund or Delaware Group Fund as a member ("Other Load
Funds"), and officers, directors and full-time employees of parents,
subsidiaries and corporate affiliates of such investment advisers; (d) spouses
and lineal ancestors and descendants of the officers, directors/trustees and
employees referenced in clauses (a), (b) and (c), and lineal ancestors and
descendants of their spouses; (e)
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<PAGE>
(VGOV)
investment executives and other employees of banks and dealers that have selling
agreements with the Underwriter and parents, spouses and children under the age
of 21 of such investment executives and other employees; (f) trust companies and
bank trust departments for funds held in a fiduciary, agency, advisory,
custodial or similar capacity; (g) any state or any political subdivision
thereof or any instrumentality, department, authority or agency of any state or
political subdivision thereof; (h) partners and full-time employees of the
Fund's counsel; (i) managed account clients of the Adviser or Sub-Adviser,
clients of investment advisers affiliated with the Adviser or Sub-Adviser and
other registered investment advisers and their clients (the Fund may be
available through a broker-dealer which charges a transaction fee for purchases
and sales); (j) "wrap accounts" for the benefit of clients of financial planners
adhering to certain standards established by the Adviser; (k) tax-qualified
employee benefit plans for employees of the Adviser or Sub-Adviser and their
subsidiaries and (l) employee benefit plans qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code") (which does not
include Individual Retirement Accounts) and custodial accounts under Section
403(b)(7) of the Code (also known as tax-sheltered annuities).
RETIREMENT PLANS
Shares of the Fund may be an appropriate investment medium for
retirement plans, including: (a) Keogh (HR-10) plans (for self-employed
individuals); (b) qualified corporate pension and profit sharing plans (for
employees); (c) Individual Retirement Accounts (IRAs) (for employees and their
spouses); and (d) tax-deferred investment plans (for employees of public school
systems and certain types of charitable organizations). Certain retirement plans
may qualify to purchase Institutional Class shares at net asset value with no
sales charge at the time of purchase.
Persons desiring information about such plans, including their
availability, should contact the Fund. All retirement plans summarized above
involve a long-term commitment of assets and are subject to various legal
requirements and restrictions. The legal and tax implications may vary according
to the circumstances of the individual investor. Therefore, the investor is
urged to consult with an attorney or tax adviser prior to the establishment of
such a plan.
HOW TO SELL SHARES
The Fund will redeem its shares in cash at the net asset value next
determined after receipt of a shareholder's written request for redemption in
good order (see below). If shares for which payment has been collected are
redeemed, payment must be made within seven days. The Fund may suspend this
right of redemption and may postpone payment only when the Exchange is closed
for other than customary weekends or holidays, or if permitted by the rules of
the Securities and Exchange Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Fund to dispose of its securities or to determine fairly the value of its
net assets or during any other period permitted by order of the Commission for
the protection of investors.
The Fund reserves the right and currently plans to redeem Fund shares
and mail the proceeds to the shareholder if at any time the value of Fund shares
in the account falls below a specified value, currently set at $250.
Shareholders will be notified and will have 60 days to bring the account up to
the required value before any redemption action will be taken by the Fund.
-15-
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(VGOV)
Contingent Deferred Sales Charge
The CDSC will be calculated on an amount equal to the lesser of the net
asset value of the shares at the time of purchase or their net asset value at
the time of redemption. No charge will be imposed on increases in net asset
value above the initial purchase price. In addition, no charge will be assessed
on shares derived from reinvestment of dividends or capital gains distributions.
In determining whether a CDSC is payable with respect to any redemption,
the calculation will be determined in the manner that results in the lowest rate
being charged. Therefore, it will be assumed that shares that are not subject to
the CDSC are redeemed first, shares subject to the lowest level of CDSC are
redeemed next, and so forth.
The CDSC does not apply to: (a) redemptions of Class B shares in
connection with the automatic conversion to Class A shares; (b) redemptions of
shares when the Fund exercises its right to liquidate accounts which are less
than the minimum account size; and (c) redemptions in the event of the death or
disability of the shareholder within the meaning of Section 72(m)(7) of the
Internal Revenue Code.
If a shareholder exchanges Class A, Class B or Class C shares subject to
a CDSC for Class A, Class B or Class C shares, respectively, of a different
Voyageur Fund, the transaction will not be subject to a CDSC. However, when
shares acquired through the exchange are redeemed, the shareholder will be
treated as if no exchange took place for the purpose of determining the CDSC.
Beginning May 12, 1997, Class A, Class B and Class C shares of funds in the
Delaware Group and the corresponding classes of the Fund may be exchanged for
each other. The same rules concerning treatment of CDSCs will apply to
permissible exchanges. Fund shares are exchangeable for shares of any Voyageur
money market funds. No CDSC will be imposed at the time of any such exchange;
however, the shares acquired in any such exchange will remain subject to the
CDSC and the period during which such shares represent shares of the money
market fund will not be included in determining how long the shares have been
held. Effective July 1, 1997, Class B and Class C shares of the Funds may not be
exchanged into shares of the Voyageur money market funds. Any CDSC due upon a
redemption of Fund shares will be reduced by the amount of any Rule 12b-1
payments made by such money market fund with respect to such shares.
Expedited Redemptions
The Fund offers several expedited redemption procedures, described
below, which allow a shareholder to redeem Fund shares at net asset value
determined on the same day that the shareholder places the request for
redemption of those shares. Pursuant to these expedited redemption procedures,
the Fund will redeem its shares at their net asset value next determined
following the Fund's receipt of the redemption request. The Fund reserves the
right at any time to suspend or terminate the expedited redemption procedures or
to impose a fee for this service. There is currently no additional charge to the
shareholder for use of the Fund's expedited redemption procedures.
Expedited Telephone Redemption
Shareholders redeeming at least $1,000 (for which certificates have not
been issued) may redeem by telephoning the Fund directly at 1-800-523-1918. The
applicable section of the Investment Application must have been completed by the
shareholder and filed with the Fund before the telephone request is received.
The proceeds of the redemption will be paid by check mailed to the shareholder's
address of record or, if requested at the time of redemption, by wire to the
bank designated on the Investment Application. Shareholders should notify the
Fund in writing if they do not wish to have such services available to their
accounts.
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(VGOV)
Neither the Fund nor its shareholder services and transfer agent is
responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption of Fund shares which are reasonably
believed to be genuine. With respect to such telephone transactions, the Fund
will follow reasonable procedures to confirm that instructions communicated by
telephone are genuine (including verification of a form of personal
identification) as, if it does not, the Fund or the shareholder services and
transfer agent may be liable for any losses due to unauthorized or fraudulent
transactions. Instructions received by telephone are generally tape recorded,
and a written confirmation will be provided for all purchase and redemption
transactions initiated by telephone. These procedures also apply to written and
telephone exchange requests. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which your shares
are being exchanged.
Expedited Redemptions Through Certain Broker-Dealers
Certain broker-dealers who have sales agreements with the Underwriter
may allow their customers to effect a redemption of shares of the Fund purchased
through such a broker-dealer by notifying the broker-dealer of the amount of
shares to be redeemed. The broker-dealer is then responsible for promptly
placing the redemption request with the Fund on the customer's behalf. Payment
will be made to the shareholder by check or wire sent to the broker-dealer.
Broker-dealers offering this service may impose a fee or additional requirements
for such redemptions.
Good Order
"Good order" means that stock certificates, if issued, must accompany
the request for redemption and must be duly endorsed for transfer, or must be
accompanied by a duly executed stock power. If no stock certificates have been
issued, a written request to redeem must be made. Stock certificates will not be
issued for Class B, Class C or Institutional Class shares. In any case, the
shareholder must execute the redemption request exactly as the shares are
registered. If the redemption proceeds are to be paid to the registered
holder(s), a signature guarantee is not normally required. A signature guarantee
is required in certain other circumstances, for example, to redeem more than
$50,000 or to have a check mailed other than to the shareholder's address of
record. See "Other Information" in the Statement of Additional Information. The
Fund's transfer agent may waive certain of these redemption requirements at its
own risk, but also reserves the right to require signature guarantees on all
redemptions, in contexts perceived by the transfer agent to subject the Fund to
an unusual degree of risk.
Monthly Cash Withdrawal Plan
An investor who owns or buys shares of the Fund valued at $5,000 or more
at the current offering price may open a Withdrawal Plan and have monthly
withdrawals of $25 or more paid to the investor or another person. Deferred
sales charges may apply to monthly redemptions of Class B or Class C shares. For
additional information see "Monthly Cash Withdrawal Plan" in the Statement of
Additional Information.
REINSTATEMENT PRIVILEGE
An investor in the Fund whose shares have been redeemed and who has not
previously exercised the Reinstatement Privilege as to the Fund may reinvest the
proceeds of such redemption in Class A shares of the same class of any Voyageur
Fund or any Delaware Group Fund eligible for sale in the shareholder's state of
residence (provided that the proceeds of a redemption of Institutional Class
shares may be reinvested in Class A shares of any Voyageur or Delaware Group
Fund). Reinvestment will be at the net asset value of Fund shares next
determined after the Underwriter receives a check along with a letter requesting
reinstatement. The
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(VGOV)
Underwriter must receive the letter requesting reinstatement within 365 days
following the redemption. Investors who desire to exercise the Privilege should
contact their broker-dealer or the Fund.
Exercise of the Reinstatement Privilege does not alter the income tax
treatment of any capital gains realized on a sale of Fund shares, but to the
extent that any shares are sold at a loss and the proceeds are reinvested within
30 days in shares of the Fund, some or all of the loss may not be allowed as a
deduction, depending upon the number of shares reacquired.
EXCHANGE PRIVILEGE
Except as described below, shareholders may exchange some or all of
their Fund shares for shares of another Voyageur Fund provided that the shares
to be acquired in the exchange are eligible for sale in the shareholder's state
of residence. Class A and Institutional Class shareholders may exchange their
shares for Class A shares of other Voyageur Funds. Class B shareholders may
exchange their shares for the Class B shares of other Voyageur Funds and Class C
shareholders may exchange their shares for the Class C shares of other Voyageur
Funds. Shares of each class may also be exchanged for shares of the Voyageur
money market funds.
Beginning May 12, 1997, Class A, Class B and Class C shares of the Fund
may be exchanged into the corresponding classes of shares of the retail funds in
the Delaware Group that have such classes. In addition, each of the three money
market funds in the Delaware Group has class A shares and a consultant class.
The consultant class of each of these funds is subject to a Rule 12b-1 Plan;
however, only the consultant class of Delaware Cash Reserve currently assesses a
fee under its 12b-1 Plan. The Class A shares of the Fund may be exchanged into
either class A shares or the consultant class of these three funds.
The minimum amount which may be exchanged is $1,000. The exchange will
be made on the basis of the relative net asset values next determined after
receipt of the exchange request. For a discussion of issues relating to the
contingent deferred sales charge upon such exchanges, see "How to Sell
Shares--Contingent Deferred Sales Charge." There is no specific limit on
exchange frequency; however, the Fund is intended for long term investment and
not as a trading vehicle. The Fund reserves the right to prohibit excessive
exchanges (more than four per quarter). The Fund also reserves the right, upon
60 days prior notice, to restrict the frequency of, or otherwise modify,
condition, terminate or impose charges upon, exchanges. An exchange is
considered to be a sale of shares on which the investor may realize a capital
gain or loss for income tax purposes. Exchange requests may be placed directly
with the fund in which the investor owns shares, through the Fund's transfer
agent or through other broker-dealers. An investor considering an exchange
should obtain a prospectus of the fund to be acquired and should read such
prospectus carefully. Contact the Fund, the Fund's transfer agent or any of such
other broker-dealers for further information about the exchange privilege.
MANAGEMENT
Directors and Executive Officers of the Fund
The Board of Directors of the Company is responsible for managing the
business and affairs of the Company. The names, addresses, principal occupations
and other affiliations of Directors and executive officers of the Company are
set forth in the Statement of Additional Information.
Investment Adviser
Prior to May 1, 1997, Voyageur Fund Managers, Inc. ("Voyageur") had been
retained under an investment advisory contract to act as the Fund's investment
adviser, subject to the authority of the Board of
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Directors. Voyageur is an indirect, wholly-owned subsidiary of Dougherty
Financial Group, Inc. ("DFG"). After the close of business on April 30, 1997,
Voyageur became an indirect, wholly-owned subsidiary of Lincoln National
Corporation ("LNC") as a result of LNC's acquisition of Voyageur's parent
company, DFG. LNC, headquartered in Fort Wayne, Indiana, owns and operates
insurance and investment management businesses, including Delaware Management
Holdings, Inc. ("DMH"). Affiliates of DMH serve as adviser, distributor and
transfer agent for the Delaware Group of Mutual Funds which currently includes
16 open-end funds and 2 closed-end funds (comprising 48 separate investment
portfolios). DMH, through its subsidiaries, is responsible for the management of
approximately $32 billion.
Because LNC's acquisition of DFG resulted in a change of control of
Voyageur, the Fund's previous investment advisory agreement with Voyageur was
"assigned," as that term is defined by the Investment Company Act of 1940, and
the previous agreement therefore terminated upon the completion of the
acquisition. The Board of Directors of the Fund unanimously approved a new
investment advisory agreement with the Adviser at a meeting held in person on
February 14, 1997, and called for a shareholders meeting to approve the new
agreements. At a meeting held on April 11, 1997, the shareholders of the Fund
approved an investment advisory agreement with the Adviser to become effective
after the close of business on April 30, 1997, the date the acquisition was
completed.
Beginning May 1, 1997, Delaware Management Company, Inc., an indirect,
wholly-owned subsidiary of LNC, was retained as the Fund's investment adviser.
The Fund pays the Adviser a monthly investment advisory and management
fee equivalent on an annual basis to .50% of its average daily net assets.
Sub-Adviser; Portfolio Management
Voyageur Asset Management LLC (the "Sub-Adviser") serves as the
Sub-Adviser to the Fund. The Sub-Adviser is a wholly-owned subsidiary of DFG.
Jane M. Wyatt, an employee of the Sub-Adviser, has had day-to-day
portfolio management responsibility for the Fund since 1990. Ms. Wyatt is an
Executive Vice President of the Company and has been Chief Investment Officer of
Voyageur and a Director of Voyageur and the Distributor since 1993. Previously,
she had been an Executive Vice President of Voyageur since 1992 and a Vice
President of Voyageur from 1989 to 1992. Ms. Wyatt has approximately twenty
years of risk management experience.
Plan of Distribution
The Fund has adopted a Plan of Distribution under the 1940 Act (the
"Plan") and has entered into a Distribution Agreement with Delaware
Distributors, L.P. (the "Underwriter"). Pursuant to the Plan, the Fund pays the
Underwriter a Rule 12b-1 fee at an annual rate of .25% of the Fund's
average daily net assets attributable to Class A shares and Institutional Class
shares and 1% of the Fund's average daily net assets attributable to Class B and
Class C shares for servicing of shareholder accounts and distribution-related
services. Payments made under the Plan are not tied exclusively to expenses
actually incurred by the Underwriter and may exceed such expenses.
All of the Rule 12b-1 fee attributable to Class A shares and
Institutional Class shares, and a portion of the fee equal to .25% of the
average daily net assets of the Fund attributable to each of the Class B shares
and Class C shares constitutes a shareholder servicing fee designed to
compensate the Underwriter for the provision of certain services to
shareholders. The services provided may include personal services provided to
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shareholders, such as answering shareholder inquiries and providing reports and
other information, and services related to the maintenance of shareholder
accounts. The Underwriter may use the Rule 12b-1 fee or a portion thereof to
make payments to qualifying broker-dealers and financial institutions that
provide such services.
That portion of the Rule 12b-1 fee equal to .75% of the average daily
net assets of the Fund attributable to Class B shares and Class C shares,
respectively, constitutes a distribution fee designed to compensate the
Underwriter for advertising, marketing and distributing the Class B and Class C
shares. In connection therewith, the Underwriter may provide initial and ongoing
sales compensation to its investment executives and other broker-dealers for
sales of Class B and Class C shares and may pay for other advertising and
promotional expenses in connection with the distribution of Class B and Class C
shares. The distribution fee attributable to Class B and Class C shares is
designed to permit an investor to purchase such shares through investment
executives of the Underwriter and other broker-dealers without the assessment of
an initial sales charge and at the same time to permit the Underwriter to
compensate its investment executives and other broker-dealers in connection with
the sale of such shares.
Custodian; Dividend Disbursing, Transfer, Administrative and Account Services
Agent
Norwest Bank Minnesota, N.A. serves as the custodian of the Fund's
portfolio securities and cash.
Delaware Service Company, Inc. ("DSC") acts as the Fund's dividend
disbursing, transfer, administrative and fund accounting agent to perform
dividend-paying functions, to calculate the Fund's daily share price, to
maintain shareholder records and to perform certain regulatory and compliance
related services for the Fund.
Certain institutions may act as sub-transfer agents for the Fund
pursuant to contracts with DSC, whereby the institutions will provide
shareholder services to their customers. DSC will pay the sub-administrators'
fees out of its own assets. The fee paid by DSC to any sub-administrator will be
a matter of negotiation between the institution and DSC based on the extent and
quality of the services provided.
Expenses of the Fund
In connection with the merger transaction described above, Voyageur and
its parent companies have agreed to pay certain operating expenses of the Fund
(including the investment advisory, administrative services and Rule 12b-1 fees
but excluding interest expense, taxes, brokerage fees and commissions) which
exceed on an annual basis 1.25% of the Fund's average daily net assets
attributable to Class A and Institutional Class shares and 2.00% of the Fund's
average daily net assets attributable to Class B and Class C shares up to the
combined amount of the investment advisory and administrative services fees
received from the Fund. In addition, the Adviser and the Underwriter reserve the
right to voluntarily waive their fees in whole or part and to voluntarily absorb
certain other Fund expenses.
The Fund's expenses include, among others, fees of directors, expenses
of directors' and shareholders' meetings, insurance premiums, expenses of
redemption of shares, expenses of the issue and sale of shares (to the extent
not otherwise borne by the Underwriter), expenses of printing and mailing stock
certificates and shareholder statements, association membership dues, charges of
the Fund's custodian, bookkeeping, auditing and legal expenses, fees and
expenses of registering the Fund and its shares with the Securities and Exchange
Commission and registering or qualifying its shares under state securities laws
and expenses of preparing and mailing prospectuses and reports to existing
shareholders.
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Portfolio Transactions
The Fund's portfolio transactions will generally be with the issuer or
with dealers acting on a principal basis. However, portfolio transactions for
the Fund which are executed on an agency basis may be effected through the
Underwriter or another broker-dealer affiliated directly or indirectly with the
Fund's investment adviser, provided the commissions, fees or other remuneration
received by such affiliated broker-dealer are reasonable and fair compared to
the commissions, fees or other remuneration paid to other broker-dealers in
connection with comparable transactions involving similar securities being
purchased or sold during a comparable period of time. It is not anticipated that
the Fund will effect any brokerage transactions with any affiliated
broker-dealer, including the Underwriter, unless it would be to the Fund's
advantage. The Fund's investment adviser may consider sales of shares of the
funds in the Delaware Group as a factor in the selection of broker-dealers to
execute the Fund's securities transactions.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund's shares is determined once daily,
Monday through Friday, as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4:00 p.m. Eastern time), on each business day on which the
Exchange is open for trading.
Net asset value per share of each class of Fund shares is determined by
dividing the value of the securities, cash and other assets of the Fund
attributable to such class less all liabilities attributable to such class by
the total number of shares of such class outstanding. For purposes of
determining the net assets of the Fund, U.S. Government Securities are stated at
an institutionally determined valuation based generally upon the average of last
reported bid and asked prices. Short-term debt securities having remaining
maturities of 60 days or less are stated at amortized cost which approximates
market. All other securities and other assets are valued in good faith at fair
value by the Adviser or Sub-Adviser in accordance with procedures adopted by the
Board of Directors.
DISTRIBUTIONS TO SHAREHOLDERS AND TAXES
The Fund declares a distribution from net investment income on each day
that the Fund is open for business. Net investment income consists of interest
accrued on portfolio investments of the Fund, less accrued expenses.
Distributions of net investment income and realized short-term capital gains, if
any, are paid monthly. The distribution of short-term capital gains on a monthly
basis could potentially affect the future timing of investment purchases and
sales. Net realized long-term capital gains, if any, are distributed annually.
Distributions paid by the Fund, if any, with respect to Class A, Class B, Class
C and Institutional Class shares will be calculated in the same manner, at the
same time, on the same day and will be in the same amount, except that the
higher Rule 12b-1 fees applicable to Class B and Class C shares will be borne
exclusively by such shares. The per share distributions on Class B and Class C
shares will be lower than the per share distributions on Class A shares and
Institutional Class shares as a result of the higher Rule 12b-1 fees applicable
to Class B and Class C shares.
Shareholders receive distributions from net investment income and
capital gains in additional shares of the class owned by such shareholders at
net asset value, without any sales charge, unless they elect otherwise. If cash
payment is requested, a check will be mailed within three business days after
the payment date. The Fund sends its shareholders no less than quarterly
statements with details of any reinvested dividends.
The Fund qualified during its last taxable year and intends to qualify
during its current taxable year as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). So long as it
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does so, the Fund will not be liable for federal income taxes to the extent it
distributes its taxable income to its shareholders.
Distributions by the Fund are generally taxable to shareholders, whether
received in cash or in additional shares of the Fund. Distributions from the
Fund's net investment income and net short-term capital gains are taxable to
shareholders as ordinary income. Distributions from the Fund designated as
long-term capital gain distributions will be reportable by the shareholder as
long-term capital gains irrespective of how long the shareholder has held the
shares. Shareholders not subject to federal income taxation will not be taxed on
distributions by the Fund. Shareholders will be notified annually as to the
amount, nature and federal income tax status of dividends and distributions.
The foregoing discussion of federal income tax consequences is based
upon tax laws and regulations in effect on the date of this Prospectus and is
subject to change by legislative or administrative action. For additional
information, see "Taxes" in the Statement of Additional Information. Prospective
investors are advised to consult with their tax advisers concerning the
application of state and local tax laws to investments in and distributions by
the Fund.
INVESTMENT PERFORMANCE
Advertisements and other sales literature for the Fund may refer to
"yield," "average annual total return," "cumulative total return" and "current
distribution rate" and may compare such performance quotations with published
indices and comparable quotations of other funds. Performance quotations are
computed separately for Class A, Class B, Class C and Institutional Class
shares. All such figures are based on historical earnings and performance and
are not intended to be indicative of future performance. Additionally,
performance information may not provide a basis for comparison with other
investments or other mutual funds using a different method of calculating
performance. The investment return on and principal value of an investment in
the Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
Average annual total return is the average annual compounded rate of
return on a hypothetical $1,000 investment made at the beginning of the
advertised period. Cumulative total return is calculated by subtracting a
hypothetical $1,000 payment to the Fund from the redeemable value of such
payment at the end of the advertised period, dividing such difference by $1,000
and multiplying the quotient by 100. In calculating average annual and
cumulative total return, the maximum sales charges is deducted from the
hypothetical investment and all dividends and distributions are assumed to be
reinvested. Such total return quotations may be accompanied by quotations which
do not reflect the reduction in value of the initial investment due to the sales
charge, and which thus will be higher.
In addition to advertising total return and yield, comparative
performance information may be used from time to time in advertising the Fund's
shares, including data from Lipper Analytical Services, Inc. and Morningstar.
For Fund performance information and daily net asset value quotations,
investors may call 1-800- 523-4640 For additional information regarding the
calculation of the Fund's yield, average annual total return, cumulative total
return and current distribution rate, see "Calculation of Performance Data" in
the Statement of Additional Information.
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GENERAL INFORMATION
The Fund sends to its shareholders six-month unaudited and annual
audited financial statements.
The shares of the Fund constitute a separate series of Voyageur Funds,
Inc., a Minnesota corporation which issues shares of common stock with a $.01
par value per share. The Fund is represented by the Series A common shares of
the Company, incorporated on April 15, 1987. All shares of the Company are
non-assessable and fully transferable when issued and paid for in accordance
with the terms thereof and possess no cumulative voting, preemptive or
conversion rights. The Board of Directors is empowered to issue other series of
common stock without shareholder approval.
The Fund currently offers its shares in four classes, each with
different sales arrangements and bearing different expenses. Class A, Class B,
Class C and Institutional Class shares each represent interests in the assets of
the Fund and have identical voting, dividend, liquidation and other rights on
the same terms and conditions except that expenses related to the distribution
of each class are borne solely by such class and each class of shares has
exclusive voting rights with respect to provisions of the Fund's Rule 12b-1
distribution plan which pertain to that particular class and other matters for
which separate class voting is appropriate under applicable law.
Fund shares are freely transferable, are entitled to dividends as
declared by the Board, and, in liquidation, are entitled to receive the net
assets, if any, of the Fund. The Fund does not generally hold annual meetings of
shareholders and will do so only when required by law.
Each share of a series has one vote irrespective of the relative net
asset value of the shares. On some issues, such as the election of Board
members, the shares of all series and classes vote together as one. On an issue
affecting only a particular series or class, the shares of the affected series
or class vote as a separate series or class. An example of such an issue would
be a fundamental investment restriction pertaining to only one series.
The assets received by the Company for the issue or sale of shares of
each series or class thereof, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are allocated to such series,
and in the case of a class, allocated to such class, and constitute the
underlying assets of such series or class. The underlying assets of each series,
or class thereof, are required to be segregated on the books of account, and are
to be charged with the expenses in respect to such series or class thereof, and
with a share of the general expenses of the Company. Any general expenses of the
Company not readily identifiable as belonging to a particular series or class
are allocated among the series or classes thereof, based upon the relative net
assets of the series or class at the time such expenses were accrued. For a
further discussion of the above matters, see "Additional Information" in the
Statement of Additional Information.
No dealer, sales representative or other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus (and/or in the Statement of Additional Information referred
to on the cover page of this Prospectus), and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or Delaware Distributors, L.P. This Prospectus does not constitute
an offer or solicitation by anyone in the state in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
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