SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Voyageur Funds, Inc.
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(Name of Registrant as Specified in its Charter)
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[PRELIMINARY COPY]
VOYAGEUR FINANCIAL INSTITUTIONS ("VFI") SHORT DURATION PORTFOLIO
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 MARCH 31, 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 Monday, March 31, 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 Short Duration Portfolio, VFI
Intermediate Duration Portfolio and VFI Core Portfolio
(collectively, the "VFI Funds"), to approve an Agreement and
Plan of Reorganization 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 and, with respect to the VFI Intermediate
Duration Portfolio and VFI Core Portfolio, a vote in favor of
a new Investment Advisory Agreement and Sub-Advisory Agreement
on substantially the same terms as those currently in effect.
2. For shareholders of the VFI Short Duration Portfolio, to
approve a new Investment Advisory Agreement.
3. For shareholders of the U.S. Government Securities Fund, to
approve a new Investment Advisory Agreement.
4. For shareholders of the U.S. Government Securities Fund, to
approve a new Sub-Advisory Agreement.
5. To elect a Board of Directors of the Company.
6. 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--MARCH 31, 1997."
Dated: February 28, 1997 Thomas J. Abood
Secretary
[PRELIMINARY COPY]
PROXY STATEMENT
VOYAGEUR FINANCIAL INSTITUTIONS ("VFI") SHORT DURATION PORTFOLIO
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--MARCH 31, 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 March 31, 1997, and any adjournments thereof (the "Meeting"). The
four series of the Company (individually, a "Fund", and collectively, the
"Funds") are the Voyageur U.S. Government Securities Fund ("Government
Securities Fund") and the following Voyageur Financial Institution Funds
(collectively, the "VFI Funds"): Short Duration Portfolio, Intermediate Duration
Portfolio, and Core Portfolio.
Marquette Trust Company ("Marquette"), 13100 Wayzata Boulevard, Suite
100, Minneapolis, Minnesota 55480, serves as investment adviser to VFI
Intermediate Duration Portfolio and VFI Core Portfolio. Marquette has retained
Voyageur Fund Managers, Inc. ("VFM") to act as sub-adviser to such Funds. CF
Financial Services, Inc., formerly known as Cadre Consulting Services, Inc. ("CF
Services"), 905 Marconi Avenue, Ronkonkoma, New York 11779, serves as investment
adviser to VFI Short Duration Portfolio. VFM serves as investment adviser to the
Government Securities Fund. The address of VFM is that of the Company stated
above.
Representatives of Marquette, VFM and/or CF Services 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 $_____. 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 CF SERVICES] and will not be an expense of the Funds,
and the mailing will take place on approximately February 28, 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; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all
proposals other than the election of directors. Abstentions 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 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:
Common Shares
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VFI Short Duration Portfolio
VFI Intermediate Duration Portfolio
VFI Core Portfolio
Voyageur Government Securities Fund
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 of the Funds as of ________, 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 AND SEMI-ANNUAL REPORTS ARE
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:
Proposal Number
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1 2 3 4 5
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VFI Short Duration Portfolio X X X
VFI Intermediate Duration Portfolio X X
VFI Core Portfolio X X
Government Securities Fund X X X
BACKGROUND
INTRODUCTION
VFM currently serves as the investment adviser to the Government
Securities Fund and as the sub-adviser to the VFI Intermediate Duration
Portfolio and VFI Core Portfolio. 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.
VFD, a wholly-owned subsidiary of VFM, acts as the distributor of each Fund's
shares.
The Meeting has been called primarily 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 result of the Merger would be that the ultimate
ownership and control of VFM (and its subsidiary, VFD) would change, resulting
in ownership and control by LNC. In negotiating the terms of the Merger, the
current owners of VFM determined that they would prefer to maintain, in one of
their own companies, any 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 be an asset of VFM
or VFD at the time of the Merger. Rather, 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) to the Intermediate
Duration and Core Portfolios, and administrative, accounting, transfer agency,
dividend disbursing and distribution services to all of the VFI Funds. However,
in order to do this, the VFI Funds must be separated from the Government
Securities Fund. In order 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, an automatic termination of the investment advisory agreement between
the Government Securities Fund and VFM would occur, necessitating shareholder
approval of a new agreement. The investment adviser under the new advisory
agreement being proposed (under Proposal Three) for the Government Securities
Fund is a subsidiary of LNC. However, as described below in Proposal Four,
subject to shareholder approval, that subsidiary would enter into a sub-advisory
agreement with a new limited liability company owned by the current owners of
VFM, whereby the new limited liability company will continue to utilize Jane M.
Wyatt, the Fund's current portfolio manager, to provide day-to-day portfolio
management services.
The Meeting has also been called with respect to the VFI Short Duration
Portfolio in order to approve a new investment advisory agreement with the
successor to most of the assets of CF Services. As described below under
Proposal Two, CF Services was recently involved in an acquisition transaction
unrelated to the Merger. Due to this unrelated transaction involving CF
Services, the investment adviser to the VFI Short Duration Portfolio, a new
advisory agreement is being proposed (under Proposal Two) for that Fund with the
acquiror of CF Services' assets.
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.
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 Three and Four) and the election of Directors (Proposal Five). 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 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 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 Voyageur Fund Distributors, Inc. ("VFD"). Such
new ownership will constitute a change in control of VFM and VFD and will cause
the current investment advisory agreement and distribution agreement 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"). (The sub-advisory agreements for the VFI Intermediate Duration Portfolio
and the VFI Core Portfolio, and the distribution agreement for each of the VFI
Funds, would not terminate only because those assets would, subject to
shareholder approval, be reorganized as part of the Dougherty Reorganization
prior to the Merger and would not constitute assets of VFM subject to the
Merger.) Such terminations will necessitate adoption of new agreements for the
provision of investment advisory and distribution services. 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 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 will 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.
The Company has entered into 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 Funds.
PROPOSAL ONE
PROPOSAL FOR THE VFI FUNDS TO APPROVE AN
AGREEMENT AND PLAN OF REORGANIZATION
THIS PROPOSAL IS APPLICABLE TO EACH OF THE 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, dated as of February 14, 1997 (the
"Plan"), by and between the Company, on behalf of each of the VFI Funds, and VAM
Institutional Funds, Inc. ("VAM"), on behalf of three 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 of the VFI Funds 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 three 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 be an asset of 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 each VFI
Fund.
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. 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
on the Closing Date 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 on the Closing Date 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 more 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 VFI Fund
shareholder. Neither the Company nor VAM issues stock certificates.
The Closing Date 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 and each VFI Fund Reorganization abandoned
at any time, before or after approval by the 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 December 31, 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
Closing 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 the 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 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 THE 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 THE 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 OF INVESTMENT MANAGEMENT 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 Date 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, would enter into an investment advisory agreement with terms substantially
identical to those of the corresponding VFI Fund's current investment advisory
agreement. Thus, for the Intermediate Duration and Core Portfolios, VAM on
behalf of the corresponding New VFI Funds would enter into investment advisory
agreements with Marquette with terms substantially identical to those of the
current investment advisory agreements with Marquette. For each of Intermediate
Duration Portfolio and Core Portfolio, Marquette would in turn enter into a new
sub-advisory agreement with VAM LLC with terms substantially identical to those
contained in the current sub-advisory agreements 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." Thus, a vote in
favor of a VFI Fund Reorganization by shareholders of the Intermediate Duration
Portfolio and Core Portfolio will be deemed to be a vote to authorize such VFI
Funds (as sole shareholders of the New VFI Fund Shares of their corresponding
New VFI Funds on the date of such reorganizations) to vote in favor of a new
advisory agreement between VAM, on behalf of such New VFI Funds, and Marquette,
and a new sub-advisory agreement between Marquette and VAM LLC.
Similarly, for the Short Duration Portfolio, the corresponding New VFI
Fund would enter into an investment advisory agreement with terms substantially
identical to those of the current investment advisory agreement with CF
Services. However, if shareholders of Short Duration Portfolio approve Proposal
Two, such new investment advisory agreement will be with Cadre Financial
Services, Inc., rather than CF Services. If shareholders do not approve Proposal
Two, such new investment advisory agreement will be with CF Services. Thus, a
vote in favor of the VFI Fund Reorganization by shareholders of the Short
Duration Portfolio will be deemed to authorize the approval of an advisory
agreement between VAM, on behalf of the Short Duration Portfolio of the New VFI
Funds, and, subject to any vote of shareholders rendered in accordance with
Proposal Two below, either CF Services or Cadre Financial Services, Inc.
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.
PLAN OF DISTRIBUTION; PRINCIPAL UNDERWRITER. The Plan of Distribution
for each New VFI Fund is identical to the corresponding current VFI Fund's
current Plan of Distribution. VFD acts as the principal underwriter of the
Fund's shares. 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.
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 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 VFI SHORT DURATION PORTFOLIO
THIS PROPOSAL IS APPLICABLE ONLY TO THE VFI SHORT DURATION PORTFOLIO.
BACKGROUND
CF Services, Inc. ("CF Services"), formerly Cadre Financial Services,
Inc., currently serves as the investment adviser for the VFI Short Duration
Portfolio (for purposes of this Proposal Two, the "Fund"). Subject to the
direction of the Board, CF Services is responsible for the overall management of
the Fund's business and investment affairs under the terms of an Investment
Advisory and Management Agreement (for purposes of this Proposal Two, the
"Existing Advisory Agreement"). Through the 1996 year-end, the principal
business of CF Services was to serve as the adviser and administrator of
collective, short-term investment programs for local governmental and municipal
entities and other organizations. Except for the Fund, only one of those
programs had been registered under the 1940 Act. As of December 31, 1996, CF
Services and its affiliates managed or administered approximately $5.8 billion
in assets for more than 2,600 institutional investors. CF Services maintains its
principal office at 905 Marconi Avenue, Ronkonkoma, New York 11779.
Pursuant to an Asset Purchase Agreement dated as of August 19, 1996
(the "Purchase Agreement"), AMBAC Investment Management, Inc. ("AIMI"), an
indirect wholly-owned subsidiary of AMBAC, Inc. ("AMBAC") acquired substantially
all of the assets of CF Services, effective December 31, 1996 (the
"Acquisition"). On or about January 6, 1997, AIMI changed its name to Cadre
Financial Services, Inc. ("New Cadre Financial").
Shareholders of the Fund are being asked to approve a new investment
advisory and management agreement (for purposes of this Proposal Two, the "New
Advisory Agreement") between the Fund and New Cadre Financial, to take effect
immediately upon the receipt of such approval. Under the New Advisory Agreement,
New Cadre Financial would serve as investment adviser to the Fund. Except for
the investment adviser and different effective and termination dates, the terms
of the New Advisory Agreement are substantially identical to the terms of the
Existing Advisory Agreement. If shareholders of the Fund approve this Proposal
and also approve the VFI Fund Reorganization for the Fund (as described above in
Proposal One), upon the closing of such VFI Fund Reorganization, an advisory
agreement with identical terms to those of the New Advisory Agreement will be
entered into between VAM and New Cadre Financial governing the Short Duration
Portfolio of the New VFI Funds.
SUMMARY OF THE AIMI/CADRE TRANSACTION
THE COMPANY AND THE FUND ARE NOT PARTIES TO THE PURCHASE AGREEMENT.
NONE OF THE COMPANY, THE FUND OR THE DIRECTORS (INDIVIDUALLY OR COLLECTIVELY)
MAKE ANY REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED IN THIS SECTION ENTITLED "SUMMARY OF THE AIMI/CADRE
TRANSACTION" OR ANY OTHER INFORMATION PROVIDED IN THIS PROXY STATEMENT WITH
RESPECT TO THE TERMS AND CONDITIONS OF THE PURCHASE AGREEMENT OR THE
ACQUISITION, OR THE DESCRIPTION OF NEW CADRE FINANCIAL AND ITS AFFILIATES.
Pursuant to the Purchase Agreement, AMBAC purchased from CF Services
and transferred to New Cadre Financial all of CF Services' right, title and
interest in substantially all of the assets, businesses, goodwill, franchises,
rights, privileges, interests, claims and properties (tangible or intangible) of
every kind and description owned by CF Services or any person (whether directly,
immediately or ultimately) controlling, controlled by or under common control
with CF Services and used, useful or necessary in connection with, or arising
out of, or pertaining in any manner to, the conduct or operations of CF
Services' business, other than "Excluded Assets," as defined below. In addition,
certain key employees of CF Services entered into employment agreements with New
Cadre Financial.
In exchange for the transfer of the assets of CF Services, New Cadre
Financial transferred a specified number of shares of AMBAC stock to CF Services
and assumed certain liabilities of CF Services. At the option of CF Services,
and subject to certain limitations designed to assure that the Acquisition would
be treated as a tax-free reorganization of CF Services, AMBAC was required to
pay a portion of the purchase price in cash. Certain additional consideration
may be payable in the future, based upon the financial performance of the
business attributable to CF Services during the four year period following the
closing of the Acquisition.
Certain assets of CF Services, including assets relating to the
management of the Fund, were not purchased by AMBAC in the Acquisition (the
"Excluded Assets"). In addition, individuals involved in the management of the
Fund, including the Fund's portfolio manager, continue to be employed by CF
Services. The Purchase Agreement provided, however, that CF Services would use
its best efforts to obtain the approval of the Company's Board and the
shareholders of the Fund of the New Advisory Agreement between the Fund and New
Cadre Financial. The Purchase Agreement also requires that CF Services resign as
the Fund's investment adviser if such approval is not obtained within 90 days
from the closing of the Acquisition. If shareholder approval of the New Advisory
Agreement is obtained, CF Services will transfer to New Cadre Financial, for no
additional consideration, its assets related to the Fund. In addition,
individuals involved in the management of the Fund have accepted employment
agreements with New Cadre Financial. Investment decisions for the Fund are made
by a committee, and no individual or individuals are primarily responsible for
making recommendations to that committee.
AMBAC, which has its principal office at One State Street Plaza, New
York, New York 10004, is a publicly held company, shares of which are listed on
the New York Stock Exchange. Through various subsidiaries, AMBAC is a leading
insurer of municipal and structured finance obligations and a provider of
investment contracts and interest rate swaps to states, municipalities,
municipal authorities and other entities in connection with their financing. New
Cadre Financial is a wholly-owned subsidiary of AMBAC Capital Corporation
("AMBAC Capital"), which in turn is a wholly-owned subsidiary of AMBAC. New
Cadre Financial is registered as an investment adviser under the Investment
Advisers Act of 1940, and has served as the investment adviser to two other
registered investment companies: since 1995, AMBAC Treasurers Trust, a
registered investment company with three investment portfolios (including two
money market funds) and total assets of approximately $100 million as of
December 31, 1996; and, since December 31, 1996, Hospital and Health Facilities
Trust, a registered investment company with one investment portfolio and total
assets of approximately $45.7 million as of December 31, 1996. AMBAC, through
various subsidiaries, also manages its own investment portfolios with total
assets of approximately $5 billion. Information regarding the advisory fees of
the AMBAC Treasurers Trust money market funds and Hospital and Health Facilities
Trust money market fund and the currently effective fee waivers and expense
reimbursement arrangements respecting those funds is contained in the attached
Schedule 2. The principal offices of New Cadre Financial and AMBAC Capital are
located at 300 Nyala Farms Road, Westport, Connecticut 06880.
DIRECTORS AND OFFICERS
The chief executive officer and directors of CF Services and their
principal occupations are as follows:
<TABLE>
<CAPTION>
Name Title Principal Occupation
- ---- ----- --------------------
<S> <C> <C>
William T. Sullivan, Jr. CEO/Chairman CEO of CF Services, Inc. and Cadre Securities,
Inc.
Francis X. Sullivan Vice Chairman/Director COO of CF Services, Inc. and Cadre Securities,
Inc.
Joan M. Restivo Director Executive Vice President of CF Services, Inc.
and Cadre Securities, Inc.
Beth A. Smith Director Senior Vice President of CF Services, Inc. and
Cadre Securities, Inc.
Richard I. Bauer Director President of Cadre Securities, Inc.
Lynford Moyer Director Retired
John Elberfeld Director Retired
Raymond Peets Director Associated person, Advest, Inc.
</TABLE>
As of the Record Date, the following persons each beneficially owned
more than 10% of the outstanding shares of CF Services:
Name and Address Name and Address
- ---------------- ----------------
Joan A. Restivo Kevin T. Sullivan
16 Maple Run Drive 8 Rosanne Court
Jericho, New York 11753 Nesconset, New York 17767
Beth A. Smith Timothy P. Sullivan
6 Cynthia Court 38 Laura Lee Drive
Setauket, New York 11733 Center Moriches, New York 11734
Adelade Sullivan William M. Sullivan
8 Rosanne Court 993 South Snedecor Avenue
Nesconset, New York 11767 Bayport, New York 11705
Francis X. Sullivan
19 Marzella Street
Brookhaven, New York 11719
The directors of New Cadre Financial and their principal occupations
are as follows:
<TABLE>
<CAPTION>
Name Title Principal Occupation
- ---- ----- --------------------
<S> <C> <C>
William T. Sullivan, Jr. CEO/Chairman CEO of Cadre Financial Services, Inc.
and Cadre Securities, Inc.
Francis X. Sullivan Vice Chairman/ COO/Director COO of Cadre Financial Services, Inc.
and Cadre Securities, Inc.
Stephen A. Attanasio Managing Director/ Director Managing Director of Cadre Financial
Services, Inc.
Frank J. Bivona Director Senior Vice President, Chief Financial
Officer and Treasurer of AMBAC Inc. and
AMBAC Indemnity Corporation
Michael W. Kelly Director Managing Director AMBAC Financial
Services, Limited Partnership
</TABLE>
EFFECT OF THE ACQUISITION ON THE FUND
The Existing Advisory Agreement between the Company, on behalf of the
Fund, and CF Services provides that it is terminable by either party upon 60
days' written notice. As discussed above, the Purchase Agreement requires that
CF Services resign as the Fund's investment adviser and terminate the Existing
Advisory Agreement if the New Advisory Agreement is not approved by the Board
and shareholders of the Fund within 90 days of the closing of the Acquisition.
The Board has considered and evaluated the desirability of entering
into the New Advisory Agreement with New Cadre Financial (sometimes referred to
hereafter in this Proposal Two as the "New Adviser"). In this regard, the Board
was advised by AMBAC that no material changes in investment philosophy,
policies, or strategies are presently contemplated by the New Adviser. The New
Adviser will conduct its operations relating to the Fund from the same offices
now used by CF Services. The New Adviser nevertheless expects to conduct a
review of its operations due to the Acquisition and, based upon such review,
certain changes could be implemented. However, AMBAC has represented that one of
the purposes of any such changes will be to enhance the quality and scope of
services provided to the Fund and other clients.
If approved by the Fund's shareholders, the New Advisory Agreement will
become effective immediately on the date on which such shareholder approval is
obtained. The terms of the New Advisory Agreement provide that it shall remain
in effect for an initial term of two years from the date of its execution, and
that it may be continued in effect from year to year thereafter if approved
annually by either the Board or by a majority of the Fund's shareholders and, in
each case, by a majority of the Board's directors who are not "interested
persons" of the Company as defined by the 1940 Act (the "Independent
Directors").
THE ADVISORY AGREEMENTS
The Existing Advisory Agreement was executed on____ 199_, and was
approved by the Fund's initial shareholder on ____, 199_.
Except for the description of the New Adviser and different effective
and termination dates, the terms of the New Advisory Agreement are substantially
identical to the terms of the Existing Advisory Agreement.
The New Advisory Agreement provides that the New Adviser will act as
the investment adviser of the Fund and, subject to the control and direction of
the Board, will manage the investments of the Fund in accordance with the
investment objectives, policies and limitations of the Fund. The Fund will
remain responsible to pay all expenses not assumed by the New Adviser, including
interest and taxes, expenses of the Independent Directors, legal and audit
expenses, custodial fees, insurance, and the expenses of preparing and filing
amendments to the Fund's registration statement, reports, notices and meeting
material to shareholders, and the costs of printing and mailing prospectuses,
reports and other materials sent to shareholders.
For the services of CF Services under the Existing Advisory Agreement,
the Fund pays CF Services a monthly investment advisory and management fee
computed at an annual rate of .10% of the average daily net assets of the Fund.
This fee will remain unchanged under the New Advisory Agreement. For the period
from March 27, 1996 (inception) through the fiscal year end of October 31, 1996,
the Fund paid advisory fees of $17,532 to CF Services.
Section 15(f) of the 1940 Act provides that an investment adviser to a
mutual fund and its affiliated persons may receive any amount or benefit in
connection with the sale of such adviser which results in an "assignment" of an
advisory agreement if two conditions are met. Under these two conditions: (1)
for a period of three years after the sale, at least 75% of the board of
directors of the fund must be persons who are not "interested persons" of the
fund's new adviser or predecessor adviser; and (2) there must not be imposed an
"unfair burden" as a result of the sale or any express or implied terms,
conditions or understandings related thereto. An "unfair burden" is defined to
include any arrangement, during the two year period after the sale, whereby the
new adviser or predecessor adviser receives or is entitled to receive any
compensation directly or indirectly: (1) from any person in connection with the
purchase or sale of securities or other property to, from, or on behalf of, the
fund, other than bona fide ordinary compensation as principal underwriter; or
(2) from the fund or its shareholders for other than bona fide investment
advisory or other services. Although there has not been an assignment of the
Existing Advisory Agreement, because the Purchase Agreement provided for a delay
in the transfer of assets related thereto so that shareholders could be asked to
approve the New Advisory Agreement, AMBAC has agreed that neither it nor any of
its affiliates will take any actions which would cause the "safe harbor"
provisions of Section 15(f) not to be met.
Portfolio securities ordinarily are purchased directly from the issuer
or from an underwriter or a market maker for the securities. Usually no
brokerage commissions are paid by the Fund for such purchases. Purchases from
underwriters of portfolio securities typically include a commission paid by the
issuer to the underwriter and the purchase price paid to market makers for the
securities generally includes a "spread" which represents compensation to the
market maker.
Currently, transactions are allocated to various dealers by CF Services
in its best judgment. The primary considerations are prompt and effective
execution and orders at the most favorable price. Subject to those primary
considerations, business may be placed with broker-dealers who furnish
investment research services to CF Services. Such research services are used by
CF Services in carrying out its investment management responsibilities with
respect to its client accounts generally, but not necessarily in connection with
the Fund.
Under the New Advisory Agreement, the New Adviser will be responsible
for placing orders for the purchase and sale of portfolio securities for the
Fund and will do so in a manner deemed fair and reasonable to shareholders of
the Fund and consistent with the practices of CF Services described above.
During the fiscal year ended December 31, 1996, the Fund did not pay
any brokerage commissions.
EVALUATION BY THE BOARD OF THE NEW ADVISORY AGREEMENT
On February 14,1997, the Board met to evaluate the New Advisory
Agreement. In evaluating the New Advisory Agreement, the Board reviewed various
materials that were furnished by AMBAC in advance of the meeting, including
information regarding AMBAC and its affiliates and their personnel, operations
and financial condition. In its deliberations, the Board considered the fact
that certain key personnel formerly with CF Services were now employed by the
New Adviser, and the anticipated continued employment of certain current
personnel of CF Services involved in management of the Fund by the New Adviser.
The Board believed these factors to be important to assure the continued quality
of services provided to the Fund. The Board also considered comparative
information pertaining to other investment companies with investment objectives
similar to the Fund. In addition, it reviewed and discussed the terms and
provisions of the New Advisory Agreement and compared fees payable by the Fund
under the New Advisory Agreement with those paid by other investment companies.
The Board identified several potential benefits that the Fund can be
expected to obtain under the New Advisory Agreement. In this regard, the Board
determined that the expanded research and credit review capabilities that would
be available from the New Adviser would benefit the Fund and its shareholders.
The Board also concluded that AMBAC's commitment to devote additional resources
and personnel to expand compliance and control systems should enhance the
quality of services received by the Fund. At the same time, the rate at which
advisory fees are paid by the Fund would remain unchanged under the New Advisory
Agreement. These factors, coupled with the fact that former senior officers of
CF Services now serve as senior officers of the New Adviser, would help to
insure a smooth transition. These various considerations led the Board to
conclude that the approval of the New Advisory Agreement would be in the best
interests of the Fund and its shareholders.
In considering these matters, the Board was advised by the Fund's
independent counsel and considered all information that it believed was relevant
to its deliberations.
Based upon the foregoing, the Board, including the Independent
Directors, unanimously approved the New Advisory Agreement and approved the
taking of various actions necessary to obtain its approval by shareholders.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE VFI SHORT
DURATION PORTFOLIO VOTE IN FAVOR OF THE NEW ADVISORY 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 Advisory Agreement.
PROPOSAL THREE
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 Three, the "Current Agreement") to terminate
automatically in accordance with its terms, as required by the 1940 Act. Such
termination will necessitate adoption by the Government Securities Fund
(sometimes referred to in this Proposal simply as the "Fund") of a new
investment advisory agreement for the provision of such services (for purposes
of this Proposal Three, 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. However, as described below in Proposal
Four, subject to shareholder approval, DMC would enter into a sub-advisory
agreement with VAM LLC whereby VAM LLC will 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
Three.
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
Except as described below, the Government Securities Fund's New
Agreement will contain the same terms and conditions as are contained in such
Fund's Current Agreement, including the investment advisory fees payable by the
Fund. 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 Three 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 Three 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. 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 are identical to the rate at which fees
which 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 .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 the Adviser 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 Four.)
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 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 first table below sets forth for the Fund the date of the Current
Agreement, the date on which it was last submitted to a vote of the
shareholders, the purpose of such submission, the rate of compensation payable
under such Agreement, advisory fees paid to and waived by VFM for the Fund's
last fiscal period (a four-month period ended October 31, 1996) and the Fund's
net assets at December 31, 1996. The second table sets forth for the Fund's most
recently completed fiscal period the administrative services fees paid to VFM
under the Fund's Administrative Services Agreement, commissions paid to VFD
under the Fund's Distribution Agreement, and Rule 12b-1 fees paid to VFD under
the Fund's Plan of Distribution.
<TABLE>
<CAPTION>
Date Last Net Assets
Date of Submitted to Purpose of Rate of Advisory Advisory of Fund
Agmt Shareholders Submission Compensation* Fees Paid Fees Waived at 12/31/96
---- ------------ ---------- ------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
0.50% $187,687 $0 $117,475,851
</TABLE>
<TABLE>
<CAPTION>
Commissions
Paid to VFD
Administrative under Rule 12b-1
Feed Paid Administrative Distribution Fees Paid Rule 12b-1
to VFM Fees Waived Agreement to VFD Fees Waived
------ ----------- --------- ------ -----------
<S> <C> <C> <C> <C> <C>
$44,565 $0 $1628 $5797 $0
</TABLE>
- --------------------
* As a percentage of average daily net assets.
** For the four-month fiscal period ended 10/31/96.
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 remained in
place.
In addition to such contractual expense limitations described above,
VFM and VFD have, on a voluntary basis, waived additional fees and reimbursed
additional Fund expenses. The amount of such voluntary fee waivers and expense
reimbursements has varied from year to year depending on VFM's and VFD's
assessment of market conditions. Senior management of VFM and VFD have reviewed
with senior management of DMC, Delaware Distributors and Delaware Service the
amount of fees and expenses that VFM and VFD expected to waive or reimburse
during 1997 and the expected total expense ratios for the Fund for 1997, and the
expected total expense ratios for the Fund for 1997, after taking into account
such fee waivers and expense reimbursements. DMC currently expects to
voluntarily waive fees and/or pay Fund expenses following the Closing and
through December 31, 1997 to the extent necessary to cause the total expense
ratio for the Fund to be the same as the total expense ratio that senior
management of VFM and VFD projected for the Fund during 1997. In accordance with
DMC's standard process, it is expected that, commencing in 1998, the voluntary
fee waivers and expense limitations described in this paragraph will be reviewed
on a semi-annual basis and may be adjusted or eliminated from time to time based
on factors determined by DMC, Delaware Distributors and Delaware Service to be
relevant. Notwithstanding any possible adjustment or elimination of voluntary
fee waivers or expense limitations, fees paid to VFM or DMC for investment
management services after the Closing will not exceed those set forth in the New
Agreement unless shareholder approval is obtained. Nor will Rule 12b-1 Plan
payments 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 Services (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
travelled to DMC's headquarters and met with senior management representatives
of DMC 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 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 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.
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 and it allows the
Adviser to retain one or more sub-advisers.
* 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 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.
* The Merger is not expected to cause any change in the
investment personnel managing the majority of the Funds.
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 FOUR
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 Three, shareholders of the Government
Securities Fund are being asked to approve a new investment advisory agreement
with DMC. DMC believes that the Government Securities Fund is an appropriate
addition to the Delaware Group, since it is not duplicative of any of the
Delaware Group's current funds. However, DMC does not believe that it currently
has adequate resources to manage this type of fund. Therefore, 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. The form of Sub-Advisory
Agreement is attached as Exhibit D 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 all 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 .25% of the Government Securities
Fund's average daily net assets during each month. VAM LLC's sub-advisory fee
will be paid by DMC, not by the Fund.
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 FIVE
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 the past 5 years is set forth following
his or her name below.
Principal Occupation and Business Address During
Name and Age Past 5 Years
- ------------ -----------------------------------------------
Walter P. Babich (age 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, 1986 to 1988.
Anthony D. Knerr (age 58) Director and/or Trustee of the 18 investment
companies in the Delaware Group; founder and
Managing Director, Anthony Knerr & Associates,
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 (age 56) Director and/or Trustee of the 18 investment
companies in the Delaware Group; Director of
_____ 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, 1983 to present; Director,
Healthcare Services Group, 1983 to present;
Director Emeritus, Tasty Baking Company, 1991 to
present; Director, Tasty Baking Company, 1968 to
1991; Vice Chairman, The Winchell Company, 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., 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 year 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 year of the Company, there were five
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. Set forth below is the compensation received by each current
director from the Company for its most recently ended fiscal year and the
aggregate compensation received by each such director from all open-end and
closed-end investment companies managed by VFM during the calendar year ended
December 31, 1996.
<TABLE>
<CAPTION>
DIRECTOR
-------------------------------------------------------------------------
MR. FRAME MR. McNAMARA MR. MADISON MR. NELSON MR. ODEGARD
--------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
COMPENSATION
FROM COMPANY $1,434 $1,434 $1,434 $1,434 $1,434
TOTAL COMPENSATION
FROM "FUND COMPLEX"
OF VOYAGEUR FUNDS $25,500 $25,500 $25,500 $25,500 $25,500
</TABLE>
After the Merger, each director who is not an employee of DMC or any of
its affiliates will receive an annual fee of $____________.
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 (10% of the outstanding shares) 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 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 advisory agreements between
VFM and certain other open-end funds which have investment objectives similar to
those of the Government Securities Fund:
Rate of Advisory Net Assets of
Fund VFM's Compensation Fees Waived Fund at 12/31/96
- ---- ------------------ ----------- ----------------
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 Adviser 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:
[NAME OF FUND, RATE OF COMPENSATION, FEES WAIVED PURSUANT TO ADVISORY AGREEMENT,
NET ASSETS OF FUND AS OF DECEMBER 31, 1996.]
EXECUTIVE OFFICERS OF VOYAGEUR FUNDS
Certain information about the executive officers of the Company and the
Funds is set forth below. Unless otherwise indicated, all positions have been
held more than five years.
Position and Term of Office with the Funds and
Name (Age) Business Experience During the Past Five Years
- ---------- ----------------------------------------------
John G. Taft (42) President of the Funds (Executive Vice President
of Colorado Tax Free Fund); 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 (President
of Colorado Tax Free Fund); 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 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 Government Securities Fund 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 to serve as
officers of the Government Securities Fund:
Expected Position with Funds and Business
Name (Age) 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.
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.
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.
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: February 28, 1997 Thomas J. Abood, Secretary
SCHEDULE 1
5% Beneficial Owners of the Funds as of ____, 1997
SCHEDULE 2
INFORMATION REGARDING OTHER FUNDS OF WHICH AIMI IS THE ADVISER
New Cadre Financial is the investment adviser of two investment
companies: AMBAC Treasurers Trust ("ATT") and Hospital and Health Facilities
Trust ("HHFT"). ATT is a registered investment company which consists of three
investment portfolios. Two of the investment portfolios of ATT are money market
funds with investment objectives similar to those of Short Duration Portfolio.
HHFT is a registered investment company which consists of one
investment portfolio. The investment portfolio of HHFT is a money market fund
with investment objectives similar to those of Short Duration Portfolio.
Provided below is certain information regarding these portfolios:
Net Assets of the Fund at
Name of Portfolio 9/30/96 (unaudited) Investment Advisory Fee
----------------- ------- -----------------------
AMBAC U.S. Market Fund $69.2 M 15% of the fund's average
Government Money daily net
assets. New Cadre Financial
has voluntarily agreed to
waive its fees or to absorb
the fund's expenses to the
extent necessary to assure
that the ordinary operating
expenses of the fund do not
exceed .20% of the fund's
average daily net assets.
AMBAC U.S. Treasury
Money Market Fund $26.2 M 15% of the fund's average
daily net Fund assets. New
Cadre Financial has
voluntarily agreed to waive
its fees or to absorb the
fund's expenses to the
extent necessary to assure
that the ordinary operating
expenses of the fund do not
exceed .28% of the fund's
average daily assets.
Hospital and Health $44 M .40% of the fund's average
Facilities Liquid Asset Fund
daily net assets up to
$250,000,000. .3675% of the
fund's average daily net
assets greater than
$250,000,000 but less than
$500,000,000. .335% of the
fund's average daily net
assets greater than
$500,00,000
The services provided by New Cadre Financial to ATT do not include
administrative or transfer agent services. These services are provided by a
company that is not affiliated with AMBAC, and additional fees are paid by the
portfolios of ATT in consideration of these services.
The services provided by New Cadre Financial to HHFT include
administrative and transfer agent services to HHFT.
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 three Voyageur Financial Institution Fund series,
designated as Short Duration Portfolio, 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 three newly formed
series which have been created to correspond to the VFI Funds, and which are
designated as the Short Duration Portfolio, 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 Fund of all liabilities of such VFI Fund
and the issuance by its corresponding New Fund of shares of common stock, par
value $0.01 per share ("New VFI Fund Shares"), to be distributed, after the
Closing Date 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 three VFI Funds
and its corresponding New VFI Fund. The failure of any VFI Fund and any
corresponding New VFI Fund to consummate a Reorganization shall not affect the
consummation or validity of the Reorganization provided for hereunder involving
any 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 each of the other VFI Funds and other series fund(s)
of Voyageur Funds, and that neither the rights and obligations of any VFI Fund
nor of any New VFI Fund shall be construed to be joint rights or obligations of
any other VFI Fund or 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
on the Closing Date (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. On the Closing Date 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, except no front-end sales charges will be incurred by VFI Fund
Shareholders in connection with New VFI Fund Shares received in the
Reorganization.
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 DATE
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 Date"). 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 5:00 p.m., Eastern time, on the Closing Date 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 Norwest Bank Minnesota, N.A.
(the "Custodian"), as custodian for New VFI Fund, for the account of New VFI
Fund on or before the Closing Date 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 Date 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 "Norwest
Bank Minnesota, N.A., 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 Date, 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 registration statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), or post-effective amendment
to its existing registration statement, 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 Date 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 Date 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 Date, including without
limitation, all taxes for which the provision for payment was made as of the
Closing Date (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 Date.
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, on the Closing Date, 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 Date 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
on the Closing Date, 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 April 30, 1996 and for the year then ended, certified
by KPMG Peat Marwick LLP, and the unaudited Statement of Assets and
Liabilities, Statement of Operations, Statement of Changes in Net
Assets and Financial Highlights of VFI Fund as of October 30, 1996 and
for the six months then ended, 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 Date. 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 Date.
(j) All issued and outstanding shares of VFI Fund are, and at
the Closing Date 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 Date 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 on or before the Closing Date
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 Date, 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
Date), 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
on the Closing Date, 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 on or before the Closing
Date 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 Date with the same force and effect as if made
on and as of the Closing Date.
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 Closing Date, 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
Date, 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 on or before the Closing
Date 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 Date with the same force and effect as if made
on and as of the Closing Date.
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 Closing Date, 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 Date, 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 Date 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 on or before the Closing Date:
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. On the Closing Date, 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 December 31, 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 on or prior to the Closing Date, (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 B shares of the Corporation (also known as the
"Short Duration Portfolio") that the assets belonging to such series be
sold to Series I (also known as the "Short 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 C shares of the Corporation (also known as the
"Intermediate Duration Portfolio") that the assets belonging to such
series be sold to Series J (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 J 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
K (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 K of VAM Funds; and
WHEREAS, the Corporation wishes to provide for the pro rata
distribution of the shares of Series I, Series J and Series K of VAM
Funds received by it to holders of shares of the Corporation's Short
Duration Portfolio, Intermediate Duration Portfolio and Core Portfolio,
respectively, and the simultaneous cancellation and retirement of the
outstanding shares of the Corporation's Short Duration Portfolio,
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 Short Duration
Portfolio, 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 Short Duration Portfolio, 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.
"Short Duration Portfolio" means the Series B shares of the
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 more of Short Duration
Portfolio, Intermediate Duration Portfolio and Core Portfolio.
"VAM Short Duration Portfolio" means the Series I shares of VAM Funds.
"VAM Intermediate Duration Portfolio" means the Series J shares of VAM
Funds.
"VAM Core Portfolio" means the Series K shares of VAM Funds.
"Acquiring Fund" or "Acquiring Funds" means one or more of VAM Short
Duration Portfolio, 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
Short Duration Portfolio, Intermediate Duration Portfolio and Core
Portfolio is determined for purposes of the reorganization.
"Closing Date" 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 Date, the assets belonging to each of Short Duration
Portfolio, Intermediate Duration Portfolio and Core Portfolio, the Special
Liabilities associated with such assets, and the General Assets and General
Liabilities allocated to Short Duration Portfolio, Intermediate Duration
Portfolio and Core Portfolio, shall be sold to and assumed by VAM Short Duration
Portfolio, VAM Intermediate Duration Portfolio and VAM Core Portfolio,
respectively, in return for common shares of VAM Short Duration Portfolio, 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 4:00 p.m., Eastern time, on the Valuation Date,
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) On the Closing Date, 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
Effective Time bears to the total number of issued and outstanding
Acquired Fund Shares immediately prior to the Effective 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 Effective 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 Effective 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 Date, 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 Date, 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
CHANGES FROM THE CURRENT AGREEMENT ARE INDICATED IN ITALICS
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 _________ 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 INVESTMENT MANAGER 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 [INSERT]
EXHIBIT C
SUB-ADVISORY AGREEMENT
Agreement, dated __________, 1997, by and between Delaware Management
Company, Inc. (the "Adviser"), a ___________________ 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 International 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 of which Sub-Adviser or 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.
(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 or 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 it and Sub-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 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 .___ of 1% 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 .___% 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:
