<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-16270
File No. 811-5267
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [X]
Post-Effective Amendment No. 23
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 23
VOYAGEUR FUNDS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: February 27, 1998
-----------------
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
__X__ on February 27, 1998 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendement
Title of Securities Being Registered
------------------------------------
Class A Shares, Class B Shares
Class C Shares and Institutional Class Shares
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 23 to Registration File No. 33-16270
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheets
4. Part A - Prospectus
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Item No. Description Location in Prospectus
-------- ----------- ----------------------
<S> <C> <C>
1 Cover Page.................................................... Cover
2 Synopsis...................................................... Synopsis; Summary
of Expenses
3 Condensed Financial Information............................... Financial Highlights
4 General Description of Registrant............................. Investment Objective
and Policies; Classes
of Shares
5 Management of the Fund........................................ Management of the Fund
6 Capital Stock and Other Securities ........................... The Delaware Difference;
Classes of Shares
7 Purchase of Securities Being Offered.......................... Cover; How to Buy Shares;
Calculation of Offering Price
and Net Asset Value Per
Share; Management of the Fund
8 Redemption or Repurchase...................................... How to Buy Shares;
Redemption and Exchange
9 Legal Proceedings............................................. None
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement of
Item No. Description Additional Information
-------- ----------- ----------------------
<S> <C> <C>
10 Cover Page.................................................... Cover
11 Table of Contents............................................. Table of Contents
12 General Information and History............................... Not Applicable
13 Investment Objectives and Policy.............................. Investment Policies
and Restrictions
14 Management of the Registrant.................................. Officers and Directors
15 Control Persons and Principal
Holders of Securities......................................... Officers and Directors
16 Investment Advisory and Other Services........................ Officers and Directors; Investment
Management Agreement; General
Information; Financial Statements
17 Brokerage Allocation.......................................... Trading Practices
18 Capital Stock and Other Securities............................ Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of Securities
Being Offered................................................. Purchasing Shares; Offering
Price; Redemption;
Exchange Privilege
20 Tax Status.................................................... Taxes
21 Underwriters ................................................. Purchasing Shares
22 Calculation of Performance Data............................... Performance Information
23 Financial Statements.......................................... Financial Statements
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Item No. Description Location in Part C
-------- ----------- ------------------
<S> <C> <C>
24 Financial Statements and Exhibits............................. Item 24
25 Persons Controlled by or under Common Control
with Registrant............................................... Item 25
26 Number of Holders of Securities............................... Item 26
27 Indemnification............................................... Item 27
28 Business and Other Connections of Investment
Adviser....................................................... Item 28
29 Principal Underwriters........................................ Item 29
30 Location of Accounts and Records.............................. Item 30
31 Management Services........................................... Item 31
32 Undertakings.................................................. Item 32
</TABLE>
<PAGE>
Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end funds
give investors the ability to create a portfolio that fits their personal
financial goals. For more information, contact your financial adviser or call
Delaware Investments at 800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
SUB-ADVISER
Voyageur Asset Management LLC
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
Dividend Disbursing,
Accounting Services
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55402
<PAGE>
- ----------------------------------------------
US GOVERNMENT SECURITIES FUND
- ----------------------------------------------
A CLASS
- ----------------------------------------------
B CLASS
- ----------------------------------------------
C CLASS
- ----------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------
PROSPECTUS
- ----------------------------------------------
FEBRUARY 27, 1998
<PAGE>
US GOVERNMENT SECURITIES FUND PROSPECTUS
A CLASS SHARES FEBRUARY 27, 1998
B CLASS SHARES
C CLASS SHARES
INSTITUTIONAL CLASS
-----------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes shares of Delaware-Voyageur US Government
Securities Fund series (the "Fund") of Voyageur Funds, Inc., a professionally
managed mutual fund of the series type. The Fund's investment objective is to
provide its shareholders with a high level of current income consistent with
prudent investment risk. The Fund will seek to achieve its investment objective
by investing in U.S. Treasury bills, notes, bonds and other obligations issued
or unconditionally guaranteed by the U.S. government, or otherwise backed by
the full faith and credit of the U.S. government, and repurchase agreements
fully secured by such obligations. The Fund invests a significant portion of
its assets in mortgage participation certificates guaranteed by the Government
National Mortgage Association. See Investment Objective
and Policies.
The Fund offers three retail classes of shares: "Class A Shares," "Class B
Shares" and "Class C Shares." The Fund also offers an Institutional Class,
which is available for purchase only by certain investors. Each class is
referred to as, individually, a "Class" and, collectively,
the "Classes."
This Prospectus sets forth information that you should read and consider
before you invest. Please retain it for future reference. The Fund's Statement
of Additional Information ("Part B" of Voyageur Funds, Inc.'s registration
statement), dated February 27, 1998, as it may be amended from time to time,
contains additional information about the Fund and has been filed with the
Securities and Exchange Commission (the "SEC"). Part B is incorporated by
reference into this Prospectus and is available, without charge, by writing to
Delaware Distributors, L.P. at the above address or by calling the above
numbers. The Fund's financial statements appear in the Annual Report of
Voyageur Funds, Inc. for the fiscal year ended October 31, 1997, which will
accompany any response to requests for Part B. The SEC also maintains a Web
site (http://www.sec.gov) that contains Part B, material incorporated by
reference into Voyageur Funds, Inc.'s registration statement, and other
information regarding registrants that electronically file with the SEC.
<PAGE>
TABLE OF CONTENTS
Cover Page Rlasses of Shares
Synopsis How to Buy Shares
Summary of Expenses Redemption and Exchange
Financial Highlights Dividends and Distributions
Investment Objective and Policies Taxes
Suitability Calculation of Offering Price and
Investment Strategy Net Ssset Value Per Share
The Delaware Difference Management of the Fund
Plans and Services Other Investment Policies and
Risk Considerations
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Objective
The investment objective of the Fund is to provide its shareholders with a
high level of current income consistent with prudent investment risk. The Fund
will seek to achieve its investment objective by investing in U.S. Treasury
bills, notes, bonds and other obligations issued or unconditionally guaranteed
by the U.S. government, or otherwise backed by the full faith and credit of the
U.S. government, and repurchase agreements fully secured by such obligations.
The Fund invests a significant portion of its assets in mortgage participation
certificates guaranteed by the Government National Mortgage Association ("GNMA
Certificates"). For further details, see Investment Objective and Policies and
Other Investment Policies and Risk Considerations.
Risk Factors and Special Considerations
Although the securities in the Fund's portfolio are guaranteed as to
principal and interest by the U.S. government or otherwise backed by the full
faith and credit of the U.S. government, the market value of these securities
upon which the Fund's daily net asset value is based will fluctuate and will
tend to vary inversely with changes in prevailing interest rates. As a result,
the price per share a shareholder receives on redemption may be more or less
than the price originally paid for the shares. The dividends per share paid by
the Fund may also vary. In general, shorter term bonds are less sensitive to
interest rate changes, but longer term bonds generally offer
higher yields.
The yield and payment characteristics of GNMA Certificates differ from
traditional debt securities. When mortgages in the pool underlying a GNMA
Certificate are prepaid by mortgagors or foreclosed, such principal payments
are passed through to the Certificate holders (such as the Fund). Accordingly,
the life of the GNMA Certificate is likely to be substantially shorter than the
stated maturity of the mortgages in the underlying pool. Because of such
variation in prepayment rates, it is not possible to predict the life of a
particular GNMA Certificate.
Investment Manager, Sub-Adviser, Distributor and Transfer Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Voyageur Funds, Inc.'s Board of Directors. The Manager also provides investment
management services to certain other funds available from Delaware Investments.
The Manager employs Voyageur Asset Management LLC (the "Sub-Adviser") as the
Fund's Sub-Adviser. Delaware Distributors, L.P. (the "Distributor") is the
national distributor for the Fund and for all of the other mutual funds
available from Delaware Investments. Delaware Service Company, Inc. (the
"Transfer Agent") is the shareholder servicing, dividend disbursing, accounting
services and transfer agent for the Fund and for all of the other mutual funds
available from Delaware Investments. See Summary of Expenses and Management of
the Fund for further information regarding the Manager and the Sub-Adviser and
the fees payable under the Fund's Investment Management Agreement and the
Sub-Advisory Agreement.
Sales Charges
The price of Class A Shares includes a maximum front-end sales charge of
4.75% of the offering price. The front-end sales charge is reduced on certain
transactions of at least $100,000 but under $1,000,000. For purchases of
$1,000,000 or more, the front-end sales charge is eliminated (subject to a
contingent deferred sales charge ("Limited CDSC") of 1% if shares are redeemed
within 12 months
-3-
<PAGE>
of purchase and a dealer commission was paid in connection with such purchase).
Class A Shares are subject to annual 12b-1 Plan expenses for the life of the
investment.
The price of each of the Class B Shares is equal to the net asset value
per share. Class B Shares are subject to a CDSC of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are redeemed during
the third or fourth year following purchase; (iii) 2% if shares are redeemed
during the fifth year following purchase; and (iv) 1% if shares are redeemed
during the sixth year following purchase. Class B Shares are subject to annual
12b-1 Plan expenses for approximately eight years after purchase.
The price of the Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses
for the life of the investment.
Institutional Class Shares are available to a limited group of investors
with no sales charge at the time of purchase and no contingent deferred sales
charge upon redemption. Institutional Class Shares are subject to annual 12b-1
Plan expenses for the life of the investment. However, the Distributor has
elected voluntarily to waive its right to receive 12b-1 Plan fees with respect
to Institutional Class Shares acquired on or after March 1, 1998.
See Classes of Shares and Distribution (12b-1) and Service under Management
of the Fund.
Purchase Amounts
Generally, the minimum initial investment in Class A Shares, Class B
Shares and Class C Shares is $1,000. Subsequent investments for Class A Shares,
Class B Shares and Class C Shares generally must be at least $100. There are no
minimum investment amount requirements for Institutional Class Shares.
Each purchase of Class B Shares is subject to a maximum purchase limitation
of $250,000. For Class C Shares, each purchase must be in an amount that is less
than $1,000,000. An investor may exceed these maximum purchase limitations for
Class B Shares and Class C Shares by making cumulative purchases over a period
of time. An investor should keep in mind, however, that reduced front-end sales
charges apply to investments of $100,000 or more in Class A Shares, and that
Class A Shares are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a Limited CDSC. The
minimum and maximum purchase amounts for retirement plans may vary. See How to
Buy Shares.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Fund nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of Class A Shares purchased at
net asset value, which may be subject to a Limited CDSC if a dealer's
commission was paid in connection with such purchases. See Front-End Sales
Charge Alternative -- Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any
-4-
<PAGE>
applicable CDSC. Neither the Fund nor the Distributor assesses any charges other
than the CDSC for redemptions or exchanges of Class B Shares or Class C Shares.
Institutional Class Shares of the Fund may be redeemed at the net asset
value calculated after receipt of the redemption request. Neither the Fund nor
the Distributor assesses a charge for redemptions of Institutional Class
Shares.
There are certain limitations on an investor's ability to exchange shares
between the various classes of shares that are offered. See Redemption and
Exchange.
Open-End Investment Company
Voyageur Funds, Inc. is an open-end, registered management investment
company. The Fund's portfolio of assets is diversified as defined by the
Investment Company Act of 1940 (the "1940 Act"). Voyageur Funds, Inc. was
organized as a Minnesota corporation on April 15, 1987. See Shares under
Management of the Fund.
-5-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A Shares, Class B Shares, Class C Shares and Institutional
Class Shares of the Fund follows.
<TABLE>
<CAPTION>
Class A Class B Class C Institutional
Shareholder Transaction Expenses Shares Shares Shares Class Shares
- -------------------------------- ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price). ................................ 4.75% None None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) ................................. None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds,
as applicable) ...................................................... 1.00%(1) 4.00%(2) 1.00%(3) None
Redemption Fees ....................................................... None(4) None(4) None(4) None
Annual Operating Expenses (as a Class A Class B Class C Institutional
percentage of average daily net assets) Shares Shares Shares Class Shares
- ----------------------------------------- ----------- ------------ ------------ --------------
Management Fees(7)..................................................... 0.50% 0.50% 0.50% 0.50%
12b-1 Plan Expenses ................................................... 0.25%(5) 1.00%(5) 1.00%(5) 0.25%(5,6)
Other Operating Expenses .............................................. 0.27% 0.27% 0.27% 0.27%
------- ------- ------- -----
Total Fund Operating Expenses(7)....................................... 1.02% 1.77 % 1.77% 1.02%
======= ======= ======= =====
</TABLE>
(1) Class A purchases of $1,000,000 or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a
Limited CDSC of 1% will be imposed on certain redemptions within 12 months
of purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange. Additional Class A purchase options involving the imposition of a
CDSC may be permitted as described in the Prospectus from time to time.
(2) Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the
third or fourth year following purchase; (iii) 2% if shares are redeemed
during the fifth year following purchase; (iv) 1% if shares are redeemed
during the sixth year following purchase; and (v) 0% thereafter. See
Deferred Sales Charge Alternative -- Class B Shares, and Contingent
Deferred Sales Charge -- Class B Shares and Class C Shares under Classes of
Shares.
-6-
<PAGE>
(3) Class C Shares are subject to a CDSC of 1% if the shares are redeemed
within 12 months of purchase. See Level Sales Charge Alternative -- Class C
Shares and Contingent Deferred Sales Charge -- Class B Shares and Class C
Shares under Classes of Shares.
(4) CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
(5) Class A Shares, Class B Shares, Class C Shares and Institutional Class
Shares are subject to separate 12b-1 Plans. Long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by rules of the National Association of Securities Dealers, Inc.
(the "NASD"). See Distribution (12b-1) and Service under Management of the
Fund.
(6) The Distributor has elected voluntarily to waive its right to receive 12b-1
Plan fees with respect to Institutional Class Shares acquired by
shareholders on or after March 1, 1998. As the portion of assets
attributable to Institutional Class Shares acquired on or after March 1,
1998 increases, and so long as the Distributor's voluntary waiver is in
effect with respect to those shares, this figure will decrease. See
Distribution (12b-1) and Service under Management of the Fund.
(7) The Annual Operating Expenses for the Fund have been restated using the
current fees and operating expenses that would have been applicable had
they been in effect during the last fiscal year. The Manager may waive any
or all of its fee and may pay certain expenses of the Fund from time to
time. For the period from January 1, 1998 through April 30, 1999, the
Manager has elected voluntarily to waive that portion, if any, of the
annual management fees payable by the Fund and to pay the Fund's expenses
to the extent necessary to ensure that the Fund's total operating expenses
(exclusive of 12b-1 Plan Expenses, taxes, interest expense, brokerage fees
and commissions) do not exceed, on an annualized basis, 1.00% of the
average daily net assets of each Class of the Fund. See Expenses under
Management of the Fund for a discussion of the waivers.
Investors utilizing the Asset Planner asset allocation service also
typically incur an annual maintenance fee of $35 per Strategy. However,
effective November 1, 1996, the annual maintenance fee is waived until further
notice. Investors who utilize the Asset Planner for an Individual Retirement
Plan ("IRA") will pay an annual IRA fee of $15 per Social Security number. See
Asset Planner in Part B.
-7-
<PAGE>
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods, assuming (1) a 5% annual rate
of return, (2) redemption and no redemption at the end of each time period and
(3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.
<TABLE>
<CAPTION>
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares ...................... $ 57(1) $78 $101 $ 166 $57 $78 $101 $ 166
Class B Shares ...................... $ 58 $86 $116 $ 189(2) $18 $56 $ 96 $ 189(2)
Class C Shares ...................... $ 28 $56 $ 96 $ 208 $18 $56 $ 96 $ 208
Institutional Class Shares(3)........ $ 10 $32 $ 56 $ 125 $10 $32 $ 56 $ 125
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC or other CDSC,
which has not been reflected in this calculation, may be imposed in the
event of certain redemptions. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares of
the Fund will be automatically converted into Class A Shares. The example
above assumes conversion of Class B Shares at the end of the eighth year.
However, the conversion may occur as late as three months after the eighth
anniversary of purchase, during which time the higher 12b-1 Plan fees
payable by Class B Shares will continue to be assessed. The ten year
expense numbers for Class B Shares reflects the expenses of Class B Shares
for years one through eight and the expenses of Class A Shares for years
nine and ten. See Automatic Conversion of Class B Shares under Classes of
Shares for a description of the automatic conversion feature.
(3) The example does not assume the Distributor's voluntary waiver to receive
12b-1 Plan fees with respect to Institutional Class Shares acquired by
shareholders on or after March 1, 1998. As the portion of assets
attributable to Institutional Class Shares acquired on or after March 1,
1998 increases, and so long as the Distributor's voluntary waiver is in
effect with respect to those shares, the expenses that an investor would
pay will decrease. See Distribution (12b-1) and Service under Management of
the Fund.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in understanding
the various costs and expenses that an investor in each Class will bear
directly or indirectly.
-8-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Voyageur Funds, Inc. and have been audited by Ernst & Young LLP, independent
auditors for the year ended October 31, 1997 and by the Fund's previous
independent auditors for the prior fiscal periods. The data for the most recent
fiscal year should be read in conjunction with the financial statements,
related notes, and the report of Ernst & Young LLP, all of which are
incorporated by reference into Part B. Further information about the Fund's
performance is contained in its Annual Report to shareholders. A copy of the
Fund's Annual Report (including the report of Ernst & Young LLP) may be
obtained from Voyageur Funds, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
-8-
<PAGE>
<TABLE>
<CAPTION>
US Government Securities Fund
Class A Shares
----------------------------------------------------------------------
Period
Year 7/1/96
Ended through
10/31/97(1) 10/31/96(2) 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 10.37 $ 10.16 $ 10.37 $ 9.76 $ 10.99
Income from Investment Operations:
Net Investment Income .................. 0.59 0.21 0.63 0.62 0.55
Net Gains (Losses) on Security
Transactions (both realized and
unrealized) ........................... 0.24 0.21 ( 0.23) 0.63 ( 0.94)
------- ------- ------- ------- -------
Total from Investment Operations........ 0.83 0.42 0.40 1.25 ( 0.39)
------- ------- ------- ------- -------
Less Dividends and Distributions:
Dividends (from net investment
income) ............................... ( 0.60) ( 0.21) ( 0.61) ( 0.62) ( 0.55)
Distributions (from net realized
gains) ................................ none none none ( 0.02) ( 0.29)
-------- ---------- --------- -------- -------
Total Dividends and Distributions....... ( 0.60) ( 0.21) ( 0.61) ( 0.64) ( 0.84)
-------- ---------- --------- -------- -------
Net Asset Value, End of Period .......... $ 10.60 $ 10.37 $ 10.16 $ 10.37 $ 9.76
======== ========== ========= ======== =======
Total Return(40.......................... 8.37% 4.18% 3.88% 13.45% ( 3.95%)
Ratios/Supplemental Data
Net Assets, End of Period
(000's omitted) ........................ $ 52,213 $ 65,516 $ 68,442 $75,886 $84,660
Ratio of Expenses to Average Daily
Net Assets ............................. 0.93% 0.98%(5,6) 0.97%(5) 0.95% 0.96%
Ratio of Expenses to Average Daily
Net Assets Prior to Expense
Limitation(7)........................... 1.01% 8 8 8 8
Ratio of Net Investment Income to
Average Daily Net Assets ............... 5.76% 6.03%(6) 6.07% 6.38% 5.10%
Ratio of Net Investment Income to
Average Daily Net Assets Prior to
Expense Limitation(7)................... 5.68% 8 8 8 8
Portfolio Turnover Rate ................. 202.47% 66.29% 145.35% 144.39% 124.38%
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
US Government Securities Fund
Class A Shares
-----------------------------------------------------------------------------
Period
11/2/87(3)
Year Ended June 30 through
1993 1992 1991 1990 1989 6/30/88
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 10.46 $ 9.99 $ 9.77 $ 10.05 $ 9.98 $ 10.00
Income from Investment Operations:
Net Investment Income .................. 0.61 0.67 0.78 0.82 0.88 0.58
Net Gains (Losses) on Security
Transactions (both realized and
unrealized) ........................... 0.83 0.76 0.32 ( 0.07) 0.07 ( 0.02)
------- ------- ------- --------- ------- --------
Total from Investment Operations........ 1.44 1.43 1.10 0.75 0.95 0.56
------- ------- ------- --------- ------- --------
Less Dividends and Distributions:
Dividends (from net investment
income) ............................... ( 0.61) ( 0.67) ( 0.78) ( 0.82) ( 0.88) ( 0.58)
Distributions (from net realized
gains) ................................ ( 0.30) ( 0.29) ( 0.10) ( 0.21) none none
-------- -------- -------- --------- -------- --------
Total Dividends and Distributions....... ( 0.91) ( 0.96) ( 0.88) ( 1.03) ( 0.88) ( 0.58)
-------- -------- -------- --------- -------- --------
Net Asset Value, End of Period .......... $ 10.99 $ 10.46 $ 9.99 $ 9.77 $ 10.05 $ 9.98
======== ======== ======== ========= ======== ========
Total Return(4).......................... 14.25% 14.68% 11.67% 7.89% 10.05% 5.76%
Ratios/Supplemental Data
Net Assets, End of Period
(000's omitted) ........................ $112,604 $ 53,332 $ 22,176 $ 8,326 $ 20,137 $10,048
Ratio of Expenses to Average Daily
Net Assets ............................. 1.10% 1.00% 0.95% 1.25% 0.82% 0.25%(6)
Ratio of Expenses to Average Daily
Net Assets Prior to Expense
Limitation(7)........................... 1.14% 1.25% 1.25% 8 1.25% 1.25%(6)
Ratio of Net Investment Income to
Average Daily Net Assets ............... 5.61% 6.60% 7.95% 8.35% 8.97% 8.64%(6)
Ratio of Net Investment Income to
Average Daily Net Assets Prior to
Expense Limitation(7)................... 5.57% 6.35% 7.65% 8 8.54% 7.64%(6)
Portfolio Turnover Rate ................. 175.02% 198.54% 186.15% 130.97% 186.97% 119.01%
</TABLE>
- -----------
(1) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(2) Effective October 31, 1996, the Fund changed its fiscal year end from June
30 to October 31.
(3) Date of initial public offering of Class A Shares.
(4) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge. Total return
for periods less than 12 months have not been annualized.
(5) For the period and year shown, the expense ratio reflects the effect of
gross expense attributable to earnings credits on uninvested cash balances
received by the Fund.
(6) Annualized.
(7) During the period, certain fees/expenses were voluntarily waived,
reimbursed or paid. If such voluntary waivers, reimbursements or payments
had not occurred, the ratios would have been as indicated.
(8) There were no waivers, reimbursements or payments during the period.
-10-
<PAGE>
<TABLE>
<CAPTION>
US Government Securities Fund
Class B Shares
------------------------------
Period Period
Year 7/1/96 6/7/94(3)
Ended through Year Ended through
10/31/97(1) 10/31/96(2) 6/30/96 6/30/95 6/30/94
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period ..................... $ 10.38 $ 10.17 $ 10.38 $ 9.75 $ 10.05
Income from Investment Operations
Net Investment Income ................................... 0.52 0.18 0.57 0.56 0.01
Net Gains (Losses) on Security Transactions (both
realized and unrealized) ............................... 0.24 0.21 ( 0.23) 0.65 ( 0.28)
-------- ------- --------- -------- --------
Total from Investment Operations ........................ 0.76 0.39 0.34 1.21 ( 0.27)
-------- ------- --------- -------- --------
Less Dividends and Distributions
Dividends (from net investment income) .................. ( 0.53) ( 0.18) ( 0.55) ( 0.56) ( 0.01)
Distributions (from net realized gains) ................. none none none ( 0.02) ( 0.02)
--------- ---------- --------- --------- --------
Total Dividends and Distributions ...................... ( 0.53) ( 0.18) ( 0.55) ( 0.58) ( 0.03)
--------- ---------- --------- --------- --------
Net Asset Value, End of Period ........................... $ 10.61 $ 10.38 $ 10.17 $ 10.38 $ 9.75
========= ========== ========= ========= ========
Total Return(4)........................................... 7.59% 3.91% 3.32% 12.90% ( 2.68%)
Ratios/Supplemental Data
Net Assets at End of Period (000's
omitted) ................................................ $ 2,257 $ 2,139 $ 1,780 $ 139 $ 24
Ratio of Expenses to Average Daily Net Assets ............ 1.67% 1.73%(5,6) 1.46%(5) 1.54% 0.30%(7)
Ratio of Expenses to Average Daily Net Assets Prior to
Expense Limitation(8).................................... 1.75% (6,9) 1.63% 1.69% (9)
Ratio of Net Investment Income to
Average Daily Net Assets ................................ 5.02% 5.24%(6) 5.55% 5.56% 0.11%(7)
Ratio of Net Investment Income to
Average Daily Net Assets Prior to Expense
Limitation(8)............................................ 4.94% (6,9) 5.38% 5.41% (9)
Portfolio Turnover Rate .................................. 202.47% 66.29% 145.35% 144.39% 124.38%
</TABLE>
- -----------
(1) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(2) Effective October 31, 1996, the Fund changed its fiscal year end from June
30 to October 31.
(3) Date of initial public offering of Class B Shares.
(4) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge. Total return
for periods less than 12 months have not been annualized.
(5) For the period and year shown, the expense ratio reflects the effect of
gross expense attributable to earnings credits on uninvested cash balances
received by the Fund.
(6) Annualized.
(7) Ratios presented for the period from June 7, 1994 to June 30, 1994 are not
annualized as they are not indicative of anticipated annual results.
(8) During the period, certain fees/expenses were voluntarily waived,
reimbursed or paid. If such voluntary waivers, reimbursements or payments
had not occurred, the ratios would have been as indicated.
(9) There were no waivers, reimbursements or payments during the period.
-11-
<PAGE>
<TABLE>
<CAPTION>
US Government Securities Fund
Class C Shares
----------------------------------------------------------
Period Period
Year 7/1/96 Year 1/10/95(3)
Ended through Ended through
10/31/97(1) 10/31/96(2) 6/30/96 6/30/95
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................................ $ 10.36 $ 10.15 $ 10.36 $ 9.48
Income from Investment Operations
Net Investment Income .............................................. 0.52 0.18 0.55 0.27
Net Gains (Losses) on Security Transactions (both realized and
unrealized) ....................................................... 0.24 0.21 ( 0.23) 0.88
-------- ------- --------- --------
Total from Investment Operations ................................... 0.76 0.39 0.32 1.15
-------- ------- --------- --------
Less Dividends and Distributions
Dividends (from net investment income) ............................. ( 0.53) ( 0.18) ( 0.53) ( 0.27)
Distributions (from net realized gains) ............................ none none none none
--------- ---------- --------- -------
Total Dividends and Distributions .................................. ( 0.53) ( 0.18) ( 0.53) ( 0.27)
--------- ---------- --------- --------
Net Asset Value, End of Period ...................................... $ 10.59 $ 10.36 $ 10.15 $ 10.36
========= ========== ========= ========
Total Return4 ....................................................... 7.60% 3.92% 3.11% 12.73%
Ratios/Supplemental Data
Net Assets at End of Period (000's omitted) ......................... $ 138 $ 234 $ 224 $ 221
Ratio of Expenses to Average Daily Net Assets ....................... 1.68% 1.73%(5,6) 1.70%(5) 1.62%(6)
Ratio of Expenses to Average Daily Net Assets Prior to Expense
Limitation7 ........................................................ 1.76% (8) (8) 1.65%(6)
Ratio of Net Investment Income to Average Daily Net Assets .......... 5.02% 5.26%(6) 5.33% 5.10%(6)
Ratio of Net Investment Income to Average Daily Net Assets Prior to
Expense Limitation7 ................................................ 4.94% (8) (8) 5.07%(6)
Portfolio Turnover Rate ............................................. 202.47% 66.29% 145.35% 144.39%
</TABLE>
- -----------
(1) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(2) Effective October 31, 1996, the Fund changed its fiscal year end from June
30 to October 31.
(3) Date of initial public offering of Class C Shares.
(4) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge. Total return
for periods less than 12 months have not been annualized.
(5) For the period and year shown, the expense ratio reflects the effect of
gross expense attributable to earnings credits on uninvested cash balances
received by the Fund.
(6) Annualized.
(7) During the period, certain fees/expenses were voluntarily waived,
reimbursed or paid. If such voluntary waivers, reimbursements or payments
had not occurred, the ratios would have been as indicated.
(8) There were no waivers, reimbursements or payments during the period.
-12-
<PAGE>
<TABLE>
<CAPTION>
US Government Securities Fund
Institutional Class Shares
---------------------------------------------------------------------
Period Period
Year 7/1/96 6/7/943
Ended through Year Ended through
10/31/971 10/31/962 6/30/96 6/30/95 6/30/94
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $ 10.37 $ 10.16 $ 10.37 $ 9.75 $ 10.05
Income from Investment Operations
Net Investment Income ................................... 0.60 0.21 0.63 0.62 0.01
Net Gains (Losses) on Security Transactions
(both realized and unrealized) ......................... 0.24 0.21 ( 0.23) 0.64 ( 0.28)
------- ------- --------- ------- --------
Total from Investment Operations ........................ 0.84 0.42 0.40 1.26 ( 0.27)
------- ------- --------- ------- --------
Less Dividends and Distributions
Dividends (from net investment income) .................. ( 0.61) ( 0.21) ( 0.61) ( 0.62) ( 0.01)
Distributions (from net realized gains) ................. none none none ( 0.02) ( 0.02)
-------- ------- --------- -------- --------
Total Dividends and Distributions ....................... ( 0.61) ( 0.21) ( 0.61) ( 0.64) ( 0.03)
-------- ------ --------- -------- --------
Net Asset Value, End of Period ........................... $ 10.60 $ 10.37 $ 10.16 $ 10.37 $ 9.75
======== ======= ========= ======== ========
Total Return4 ............................................ 8.39% 4.17% 3.88% 13.57% ( 2.64%)
Ratios/Supplemental Data
Net Assets at End of Period (000's omitted) .............. $ 45,589 50,066 $ 41,688 $ 54,445 $49,898
Ratio of Expenses to Average Daily Net Assets ............ 0.93% 0.99%5,6 0.97%5 0.94% 0.25%7
Ratio of Expenses to Average Daily Net Assets Prior to
Expense Limitation8 ..................................... 1.01% 9 9 9 9
Ratio of Net Investment Income to Average Daily Net
Assets .................................................. 5.76% 6.00%5 6.07% 6.39% 0.16%7
Ratio of Net Investment Income to Average Daily Net
Assets Prior to Expense
Limitation8 ............................................. 5.68% 9 9 9 9
Portfolio Turnover Rate .................................. 202.47% 66.29% 145.35% 144.39% 124.38%
</TABLE>
- -----------
1 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
2 Effective October 31, 1996, the Fund changed its fiscal year end from June
30 to October 31.
3 Date of initial public offering of Institutional Class Shares.
4 Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value. Total return for periods less than 12 months have not been
annualized.
5 For the period and year shown, the expense ratio reflects the effect of
gross expense attributable to earnings credits on uninvested cash balances
received by the Fund.
6 Annualized.
7 Ratios presented for the period from June 7, 1994 to June 30, 1994 are not
annualized as they are not indicative of anticipated annual results.
8 During the period, certain fees/expenses were voluntarily waived, reimbursed
or paid. If such voluntary waivers, reimbursements or payments had not
occurred, the ratios would have been as indicated.
9 There were no waivers, reimbursements or payments during the period.
-13-
<PAGE>
Investment Objective and Policies
The Fund's investment objective is to provide its shareholders with a high
level of current income consistent with prudent investment risk. The Fund's
investment objective is fundamental and may not be changed without shareholder
approval. There can, of course, be no assurance that the Fund will achieve its
objective.
SUITABILITY
The Fund may be suitable for individuals who seek a stable and high income
flow potential, the security associated with investments focused principally on
U.S. government-backed instruments and the convenience and liquidity of mutual
funds. However, investors should consider asset value fluctuation as well as
income potential in making an investment decision.
Because the Fund invests in longer term securities, the value of shares
will fluctuate. When interest rates rise, the share value will tend to fall,
and when interest rates fall, the share value will tend to rise.
* * *
Ownership of shares of the Fund can reduce the bookkeeping and
administrative inconvenience that is typically connected with direct purchases
of the type of securities in which the Fund invests.
An investor should not consider a purchase of shares of the Fund as
equivalent to a complete investment program. Delaware Investments offers a
family of funds, generally available through registered investment dealers,
which may be used together to create a more complete investment program.
INVESTMENT STRATEGY
The Fund will seek to achieve its investment objective by investing in
U.S. Treasury bills, notes, bonds and other obligations issued or
unconditionally guaranteed by the U.S. government, or otherwise backed by the
full faith and credit of the U.S. government ("U.S. Government Securities"),
and repurchase agreements fully secured by such obligations. The Fund invests a
significant portion of its assets in mortgage participation certificates
guaranteed by the Government National Mortgage Association ("GNMA
Certificates"). The Board of Directors
may change any investment policy not designated
as fundamental.
Securities guaranteed by the full faith and credit of the U.S. government
include a variety of securities, which differ in their interest rates,
maturities and dates of issuance. For example, Treasury bills have maturities
of one year or less, Treasury notes have maturities of one to ten years and
Treasury bonds generally have maturities of greater than ten years at the date
of issuance. GNMA Certificates are also backed by the full faith and credit of
the U.S. Treasury. Certain other obligations issued by federal agencies or
instrumentalities may also be supported by the full faith and credit of the
U.S. Treasury, depending on the circumstances of the issue. The Fund may invest
in Treasury Inflation Indexed Securities ("TIPS"). TIPS, introduced for the
first time in January 1997, are inflation-protected securities whose rates of
return are proportional to the rise and fall of the Consumer Price Index.
-14-
<PAGE>
The Fund may purchase U.S. Government Securities on a when-issued or
delayed delivery basis. The settlement dates for these types of transactions
are determined by mutual agreement of the parties and may occur a month or more
after the parties have agreed to the transaction, except that in no case will
the period from the trade date to the settlement date exceed 120 days.
Securities purchased on a when-issued or delayed delivery basis are subject to
market fluctuation and may decrease in value prior to their maturity, and no
interest accrues to the purchaser during the period prior to settlement. See
Investment Restrictions and Policies in Part B.
Although the securities in the Fund's portfolio are guaranteed as to
principal and interest by the U.S. government or otherwise backed by the full
faith and credit of the U.S. government, the market value of these securities
upon which the Fund's daily net asset value is based will fluctuate and will
tend to vary inversely with changes in prevailing interest rates. As a result,
the price per share a shareholder receives on redemption may be more or less
than the price originally paid for the shares. The dividends per share paid by
the Fund may also vary. In general, shorter term bonds are less sensitive to
interest rate changes, but longer term bonds generally offer
higher yields.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of securities, see
Other Investment Policies and Risk Considerations in this Prospectus. Part B
provides more information concerning the Fund's investment policies,
restrictions and risk factors.
-15-
<PAGE>
The Delaware Difference
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Investments
family of funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature; Price; Yield and Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment
Accounts and Retirement Plan Accounts; Wire Investments; Wire
Liquidations; Telephone Liquidations and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center at any time for current yield
information. Current yield and total return information may also be included in
advertisements and information given to shareholders. Yields are computed on an
annualized basis over a 30-day period.
Shareholder Services
During business hours, you can call Delaware Investments' Shareholder
Service Center. Our representatives can answer any questions about your
account, the Fund, various service features and other funds available from
Delaware Investments.
Delaphone Service
Delaphone is an account inquiry service for investors with Touch-Tone(R)
phone service. It enables you to get information on your account faster than
the mailed statements and confirmations. Delaphone also provides current
performance information on the Fund, as well as other funds available from
Delaware Investments. Delaphone is available seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your investment
application, we will send a duplicate confirmation to him or her. This makes it
easier for your adviser to help you manage your investments.
-16-
<PAGE>
Tax Information
Each year, Voyageur Funds, Inc. will mail to you information on the tax
status of your dividends and distributions.
Dividend Payments
Dividends, capital gains and other distributions, if any, are automatically
reinvested in your account. Holders of Class A Shares, Class B Shares and Class
C Shares may elect to receive such distributions in cash. Holders of Class A
Shares, Class B Shares and Class C Shares may also elect to have the dividends
earned in one fund automatically invested in another Delaware Investments fund
with a different investment objective, subject to certain exceptions and
limitations.
For more information, see Additional Methods of Adding to Your Investment
- -- Dividend Reinvestment Plan under How to Buy Shares or call the Shareholder
Service Center.
MoneyLineSM Services
Delaware Investments offers the following services for fast and convenient
transfer of funds between your personal bank account and your Fund account:
1. MoneyLineSM Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may
choose the MoneyLineSM Direct Deposit Service and have such payments
transferred from your Fund account to your predesignated bank account. See
Dividends and Distributions. In addition, you may elect to have your Systematic
Withdrawal Plan payments transferred from your Fund account to your
predesignated bank account through this service. See Systematic Withdrawal
Plans under Redemption and Exchange. This service is not available for certain
retirement plans.
2. MoneyLineSM On Demand
You or your investment dealer may request purchases and redemptions of
Fund shares by phone using MoneyLineSM On Demand. When you authorize the Fund
to accept such requests from you or your investment dealer, funds will be
withdrawn from (for share purchases) or deposited to (for share redemptions)
your predesignated bank account. Your request will be processed the same day if
you call prior to 4 p.m., Eastern time. There is a $25 minimum and $50,000
maximum limit for MoneyLineSM
On Demand transactions. This service is not available for retirement plans,
except for purchases of shares by IRAs.
For each MoneyLineSM Service, it may take up to four business days for the
transactions to be completed. You can initiate either service by completing an
Account Services form. If your name and address are not identical to the name
and address on your Fund account, you must have your signature guaranteed. The
Fund does not charge a fee for MoneyLineSM services; however, your bank may
charge a fee. Please call the Shareholder Service Center for additional
information about these services. These services are not available for
Institutional Class Shares.
-17-
<PAGE>
Retirement Planning
An investment in Class A Shares, Class B Shares or Class C Shares may be a
suitable investment option for tax-deferred retirement plans. Delaware
Investments offers a full spectrum of qualified and non-qualified retirement
plans, including the popular 401(k) Deferred Compensation Plan, IRA, and the
new Roth IRA. Just call Delaware Investments at 800-523-1918 for more
information.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows
you to combine the value of your current holdings of Class A Shares, Class B
Shares and Class C Shares of the Fund with the dollar amount of new purchases
of Class A Shares of a Fund to qualify for a reduced front-end sales charge on
such purchases of Class A Shares. Under the Combined Purchases Privilege, you
may also include certain shares that you own in other funds in the Delaware
Investments family. See Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced front-end
sales charge on purchases of Class A Shares by aggregating certain of your
purchases of fund shares available from Delaware Investments over a 13-month
period. See Classes of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds from
a redemption of Class A Shares, within one year of the date of the redemption,
without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part of your Class A
Shares, Class B Shares or Class C Shares into shares of other mutual funds
available from Delaware Investments, subject to certain exceptions and
limitations. For additional information on exchanges, see Investing by Exchange
under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Class A Shares, Class B Shares and Class C
Shares of the Fund through regular liquidations of shares in your accounts in
other funds available from Delaware Investments. Investments under this feature
are exchanges and are therefore subject to the same conditions and limitations
as other exchanges of shares. See Additional Methods of Adding to Your
Investment -- Wealth Builder Option and Investing by Exchange under How to Buy
Shares and Redemption and Exchange.
Financial Information about the Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Voyageur Funds, Inc.'s fiscal year ends
on October 31.
-18-
<PAGE>
Classes of Shares
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 0.25% of average daily net assets of such shares. Certain purchases
of Class A Shares qualify for reduced front-end sales charges. See Front-End
Sales Charge Alternative -- Class A Shares, below. See also Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange, and Distribution (12b-1) and Service under
Management of the Fund.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales
charge when they are purchased, but are subject to a contingent deferred sales
charge if they are redeemed within six years of purchase. Class B Shares are
subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which
are service fees to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average daily net
assets of such shares for approximately eight years after purchase. Class B
Shares permit all of the investor's dollars to work from the time the
investment is made. The higher 12b-1 Plan expenses paid by Class B Shares will
cause such shares to have a higher expense ratio and to pay lower dividends
than Class A Shares. At the end of approximately eight years after purchase,
Class B Shares automatically will be converted into Class A Shares and,
thereafter, for the remainder of the life of the investment, the annual 12b-1
Plan fee of up to 0.25% for Class A Shares will apply. See Automatic Conversion
of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares, which do not incur a front-end sales charge when they
are purchased, but are subject to a contingent deferred sales charge if they
are redeemed within 12 months of purchase. Class C Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service fees
to be paid to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of such
shares for the life of the investment. The higher 12b-1 Plan expenses paid by
Class C Shares will cause such shares to have a higher expense ratio and to pay
lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares do
not convert to another class.
Institutional Class Shares. Institutional Class Shares are available to a
limited group of investors with no sales charge at the time of purchase and no
contingent deferred sales charge upon redemption. Institutional Class Shares
are subject to a Rule 12b-1 fee payable at an annual rate of 0.25% of the
Fund's average daily net assets of such shares. However, the Distributor has
elected voluntarily to waive its right to receive 12b-1 Plan fees with respect
to Institutional Class Shares acquired by shareholders on or after March 1,
1998. See Distribution (12b-1) and Service under Management of the Fund.
-19-
<PAGE>
The investors who may purchase Institutional Class Shares include: (a)
officers and directors of the Fund; (b) officers, directors and full-time
employees of the Adviser or Sub-Adviser, and officers, directors and full-time
employees of parents and subsidiaries of the foregoing companies; (c) officers,
directors and full-time employees of investment advisers of other mutual funds
subject to a sales charge and included in any other family of mutual funds that
includes any Voyageur Fund or Delaware Investments Fund as a member ("Other Load
Funds"), and officers, directors and full-time employees of parents,
subsidiaries and corporate affiliates of such investment advisers; (d) spouses
and lineal ancestors and descendants of the officers, directors/trustees and
employees referenced in clauses (a), (b) and (c), and lineal ancestors and
descendants of their spouses; (e) investment executives and other employees of
banks and dealers that have selling agreements with the Underwriter and parents,
spouses and children under the age of 21 of such investment executives and other
employees; (f) trust companies and bank trust departments for funds held in a
fiduciary, agency, advisory, custodial or similar capacity; (g) any state or any
political subdivision thereof or any instrumentality, department, authority or
agency of any state or political subdivision thereof; (h) partners and full-time
employees of the Fund's counsel; (i) managed account clients of the Adviser or
Sub-Adviser, clients of investment advisers affiliated with the Adviser or
Sub-Adviser and other registered investment advisers and their clients (the Fund
may be available through a broker-dealer which charges a transaction fee for
purchases and sales); (j) tax-qualified employee benefit plans for employees of
the Adviser or Sub-Adviser and their subsidiaries and (k) employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") (which does not include Individual Retirement Accounts) and
custodial accounts under Section 403(b)(7) of the Code (also known as
tax-sheltered annuities).
The alternative purchase arrangements described above permit investors to
choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and
other relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares
and incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being
subject to a CDSC if they redeem shares within six years of purchase, purchase
Class C Shares and have the entire initial purchase amount invested in the Fund
with their investment being subject to a CDSC if they redeem shares within 12
months of purchase, or whether they qualify to purchase Institutional Class
Shares. In addition, investors should consider the level of annual 12b-1 Plan
expenses applicable to each Class. The higher 12b-1 Plan expenses on Class B
Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested upon the purchase of such shares.
However, there can be no assurance as to the return, if any, that will be
realized on such additional money. In addition, the effect of any return earned
on such additional money will diminish over time. In comparing Class B Shares
to Class C Shares, investors should consider the duration of the annual 12b-1
Plan expenses to which each of the Classes is subject and the desirability of
an automatic conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption and, in the case of Institutional Class Shares, from the proceeds of
the 12b-1 Plan fees. Financial advisers may receive different compensation for
selling Class A Shares, Class B Shares, Class C Shares and Institutional Class
Shares. Investors should understand that the purpose and function of the
Classes' 12b-1 Plan and the CDSCs applicable to Class B Shares and Class C
Shares are the same as those of the 12b-1 Plan and the front-end sales charge
applicable to Class A Shares and the 12b-1 Plan applicable to Institutional
Class Shares in that such fees and charges are used to finance the distribution
of the respective Classes. See Distribution (12b-1) and Service under
Management of the Fund.
-20-
<PAGE>
Dividends, if any, paid on Class A Shares, Class B Shares, Class C Shares
and Institutional Class Shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except that the additional amount of 12b-1 Plan expenses
relating to Class B Shares and Class C Shares will be borne exclusively by such
shares. See Calculation of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Voyageur Funds, Inc. and the Distributor intend to operate in
compliance with these rules.
Front-End Sales Charge Alternative -- Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
US Government Securities Fund A Class
- ------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge Commission***
as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested** Price
- ----------------------- ---------- ------------- --------------
Less than $100,000 4.75% 5.00% 4.00%
$100,000 but under $ 250,000 3.75 3.87 3.00
$250,000 but under $ 500,000 2.50 2.55 2.00
$500,000 but under $1,000,000* 2.00 2.08 1.60
* There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based on the net asset value per share of the Class A Shares as of the end
of Voyageur Funds, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
-21-
<PAGE>
The Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of the
front-end sales charge shown above. In addition, certain dealers who enter
into an agreement to provide extra training and information on Delaware
Investments products and services and who increase sales of Delaware
Investments funds may receive an additional commission of up to 0.15% of
the offering price. Dealers who receive 90% or more of the sales charge may
be deemed to be underwriters under the Securities Act of 1933 (the "1933
Act").
- --------------------------------------------------------------------------------
For initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through whom
such purchases are made in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
- ---------------------------------- --------------------
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies may be aggregated with those of Class
A Shares of the Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. Financial
advisers should contact the Distributor concerning the applicability and
calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The
schedule and program for payment of the dealer's commission are subject to
change or termination at any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
-22-
<PAGE>
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of Class B
Shares and/or Class C Shares of the Fund and shares of other funds available
from Delaware Investments, except as noted below, you can reduce the front-end
sales charges on any additional purchases of Class A Shares. Shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with ownership of
variable insurance products may be combined with other Delaware Investments
fund holdings. In addition, assets held by investment advisory clients of the
Manager or its affiliates in a stable value account may be combined with other
Delaware Investments fund holdings. Shares of other funds that do not carry a
front-end sales charge or CDSC may not be included unless they were acquired
through an exchange from a Delaware Investments fund that does carry a
front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention.
A Letter of Intention allows you to make purchases over a 13-month period and
qualify the entire purchase for a reduction in front-end sales charges on Class
A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made
at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative -- Class A Shares, above.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between Delaware Distributors, L.P. and another
institution through which mutual funds are marketed and which allow investments
in Class A Shares of designated Delaware Investments funds ("eligible Delaware
Investments fund shares"), as well as shares of designated classes of
non-Delaware Investments funds ("eligible non-Delaware Investments fund
shares"). Class B Shares, Class C Shares and Institutional Class Shares are not
eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible
fund shares, both Delaware Investments and non-Delaware Investments, which were
not subject to a front-end sales charge, will be subject to the applicable
sales charge if exchanged for eligible Delaware Investments fund shares to
which a sales charge applies. No sales charge will apply if the eligible fund
shares were previously acquired through the exchange of eligible shares on
which a sales charge was already paid or through the reinvestment of dividends.
See Investing by Exchange.
-23-
<PAGE>
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with
Allied Plans, all participant holdings in the Allied Plan will
be aggregated.
The Limited CDSC is applicable to redemptions of net asset value purchases
from an Allied Plan on which a dealer's commission has been paid. Waivers of
the Limited CDSC, as described under Waiver of Limited Contingent Deferred
Sales Charge -- Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased at net asset value under the Delaware
Investments Dividend Reinvestment Plan and, under certain circumstances, the
Exchange Privilege or the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their families) of the
Manager or the Sub-Adviser, any affiliate, any of the funds in Delaware
Investments, certain of their agents and registered representatives and
employees of authorized investment dealers and by employee benefit plans for
such entities. Individual purchases, including those in retirement accounts,
must be for accounts in the name of the individual or a qualifying family
member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the Manager or Sub-Adviser or any of its affiliates
may purchase Class A Shares at net asset value. Moreover, purchases may be
effected at net asset value for the benefit of the clients of brokers, dealers
and registered investment advisers affiliated with a broker or dealer, if such
broker, dealer or investment adviser has entered into an agreement with the
Distributor providing specifically for the purchase of Class A Shares in
connection with special investment products, such as wrap accounts or similar
fee based programs. Investors may be charged a fee when effecting transactions
in Class A Shares through a broker or agent that offers these special
investment products.
-24-
<PAGE>
Purchases of Class A Shares at net asset value may also be made by the
following: institutions investing for the account of their trust customers if
they are not eligible to purchase shares of the Institutional Class of the
Fund; and any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of Delaware Investments funds and any stable
value account available to investment advisory clients of the Manager or its
affiliates, or (ii) is sponsored by an employer that has at any point after May
1, 1997 had more than 100 employees while such plan has held Class A Shares of
a Delaware Investments fund and such employer has properly represented to DIRSI
in writing that it has the requisite number of employees and has received
written confirmation back from DIRSI. See Group Investment Plans for
information regarding the applicability of the Limited CDSC.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Investments account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at net
asset value.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest monthly
dividend checks and/or repayment of invested capital into Class A Shares of any
of the funds available from Delaware Investments at net asset value.
The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE 401(k),
Profit Sharing, Money Purchase Pension Plans, 401(k) Defined Contribution
Plans, and 403(b)(7) and 457 Deferred Compensation Plans) may benefit from the
reduced front-end sales charges available on Class A Shares based on total plan
assets. If a company has more than one plan investing in the Delaware
Investments family of funds, then the total amount invested in all plans will
be aggregated to determine the applicable front-end sales charge reduction on
each purchase, both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund in which it is investing that it
qualifies for the reduction. Employees participating in such Group Investment
Plans may also combine the investments held in their plan account to determine
the front-end sales charge applicable to purchases in non-retirement investment
accounts of Delaware Investments if, at the time of each such purchase, they
notify the Fund that they are eligible to combine purchase amounts held in
their plan account.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid if such redemption is made pursuant to a withdrawal of
the entire plan from Delaware Investments funds. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
Deferred Sales Charge Alternative -- Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the
dollar amount purchased. In addition, from time to time, upon written notice to
all of its dealers, the Distributor may hold special promotions for specified
periods during which the Distributor may pay additional compensation to dealers
or brokers for selling Class B Shares at the time of purchase. As discussed
below, however, Class B Shares are subject to annual 12b-1 Plan expenses and,
if redeemed within six years of purchase, a CDSC.
-25-
<PAGE>
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class
B Shares. Payments to the Distributor and others under the Class B 12b-1 Plan
may be in an amount equal to no more than 1% annually. The combination of the
CDSC and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to
sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may
be higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption
and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business
day of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B
Shares falls on a Conversion Date, an investor's Class B Shares will be
converted on that date. If the eighth anniversary occurs between Conversion
Dates, an investor's Class B Shares will be converted on the next Conversion
Date after such anniversary. Consequently, if a shareholder's eighth
anniversary falls on the day after a Conversion Date, that shareholder will
have to hold Class B Shares for as long as three additional months after the
eighth anniversary of purchase before the shares will automatically convert
into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative -- Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the
dollar amount purchased. As discussed below, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a
CDSC.
-26-
<PAGE>
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class
C Shares. Payments to the Distributor and others under the Class C 12b-1 Plan
may be in an amount equal to no more than 1% annually. Payments to the
Distributor and others under the Class C 12b-1 Plan may be in an amount equal
to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge -- Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage
of the dollar amount subject to the CDSC. The charge will be assessed on an
amount equal to the lesser of the net asset value at the time of purchase of
the shares being redeemed or the net asset value of those shares at the time of
redemption. No CDSC will be imposed on increases in net asset value above the
initial purchase price, nor will a CDSC be assessed on redemptions of shares
acquired through reinvestments of dividends or capital gains distributions. For
purposes of this formula, the "net asset value at the time of purchase" will be
the net asset value at purchase of Class B Shares or Class C Shares of the
Fund, even if those shares are later exchanged for shares of another Delaware
Investments fund. In the event of an exchange of the shares, the "net asset
value of such shares at the time of redemption" will be the net asset value of
the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for Class B Shares of
the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Year After Dollar Amount
Purchase Made Subject to Charge)
--------------------------- --------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that the Class A Shares into which Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.25% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B Shares,
it will be assumed that shares held for more than six years are redeemed first,
followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
-27-
<PAGE>
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge -- Class B Shares and
Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A Shares, Class B Shares and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain,
have sold or may sell certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules, in connection
with the promotion of Delaware Investments fund shares, the Distributor may,
from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Conduct Rules will be amended such that the
ability of the Distributor to pay non-cash compensation as described above will
be restricted in some fashion. The Distributor intends to comply with the
NASD's Conduct Rules as they may be amended.
-28-
<PAGE>
How to Buy Shares
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of Class A
Shares, Class B Shares and Class C Shares generally must be $100 or more. There
is no minimum initial or subsequent purchase amount for Institutional Class
Shares. For purchases under the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act or through an Automatic Investing Plan, there is a
minimum initial purchase of $250 and a minimum subsequent purchase of $25.
Minimum purchase requirements do not apply to retirement plans other than IRAs,
for which there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Funds through most investment
dealers who, as part of the service they provide, must transmit orders
promptly. They may charge for this service. If you want a dealer but do not
have one, Delaware Investments can refer you to one.
Investing by Mail
1. Initial Purchases -- An Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, must be
completed, signed and sent with a check, payable to the Fund and Class
selected, to Delaware Investments at 1818 Market Street, Philadelphia, PA
19103.
2. Subsequent Purchases -- Additional purchases may be made at any time by
mailing a check payable to the specific Fund and Class selected. Your check
should be identified with your name(s) and account number. An investment slip
(similar to a deposit slip) is provided at the bottom of transaction
confirmations and dividend statements that you will receive from Voyageur
Funds, Inc. Use of this investment slip can help expedite processing of your
check when making additional purchases. Your investment may be delayed if you
send additional purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 1412893401 (include
your name(s) and your account number for the Class in which you are investing).
1. Initial Purchases -- Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, to the specific Fund and Class selected, to Delaware
Investments at 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
2. Subsequent Purchases -- You may make additional investments anytime by
wiring funds to CoreStates Bank, N.A., as described above. You should advise
the Shareholder Service Center by telephone of each wire
you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in Delaware Investments,
you may write and authorize an exchange of part or all of your investment into
Class A Shares, Class B Shares and Class C Shares of the Fund. If you wish to
open an account by exchange, call the Shareholder Service Center for more
information. All exchanges are subject to the eligibility and minimum purchase
requirements set forth in each fund's prospectus. See Redemption and Exchange
for more complete information concerning your exchange privileges.
Holders of Class A Shares of the Fund may exchange all or part of their
shares for certain of the shares of other funds available from Delaware
Investments, including other Class A Shares, but may not exchange their Class A
Shares for Institutional Class Shares of the Fund, or for Class B Shares or
Class C Shares of the Fund or of any other fund available from Delaware
Investments. Holders of Class B Shares of the Fund are permitted to exchange
all or part of their Class B Shares only into Class B Shares of other Delaware
Investments funds. Similarly, holders of Class C Shares of the Fund are
permitted to exchange all or part of their Class C Shares only into Class C
Shares of other Delaware Investments funds. Class B Shares of the Fund and
Class C Shares of the Fund acquired by exchange will continue to carry the CDSC
and, in the case of Class B Shares, the automatic conversion schedule of the
fund from which the exchange is made. The holding period of Class B Shares of
the Fund acquired by exchange will be added to that of the shares that were
exchanged for purposes of determining the time of the automatic conversion into
Class A Shares of the Fund. Holders of Institutional Class Shares of the Fund
may not exchange their shares for any Class of the Fund or for any other fund
available from Delaware Investments.
Permissible exchanges into Class A Shares of the Fund will be made without
a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were
acquired through the reinvestment of dividends). Permissible exchanges into
Class B Shares or Class C Shares of the Fund will be made without the
imposition of a CDSC by the fund from which the exchange is being made at the
time of the exchange.
See Allied Plans under Classes of Shares for information on exchanges by
participants in an Allied Plan.
Additional Methods of Adding to Your Investment
Holders of Class A Shares, Class B Shares and Class C Shares may call the
Shareholder Service Center for more information if they wish to use the
following services:
-30-
<PAGE>
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Voyageur
Funds, Inc. to transfer a designated amount monthly from your checking account
to your Fund account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of
time for initial purchases and changes to these plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad
Retirement benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Voyageur Funds, Inc. has the
right to liquidate your shares to reimburse the government or transmitting
bank. If there are insufficient funds in your account, you are obligated to
reimburse the Fund.
3. MoneyLineSM On Demand
Through the MoneyLineSM On Demand service, you or your investment dealer
may call the Fund to request a transfer of funds from your predesignated bank
account to your Fund account. See MoneyLineSM Services under
The Delaware Difference for additional information
about this service.
4. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in Delaware
Investments. You may also elect to invest in other mutual funds available from
Delaware Investments through the Wealth Builder
Option through regular liquidations of shares in your
Fund account.
Under this automatic exchange program, you can authorize regular monthly
amounts (minimum of $100 per fund) to be liquidated from your account in one or
more funds available from Delaware Investments and invested automatically into
any other account in a Delaware Investments mutual fund that you may specify.
If in connection with the election of the Wealth Builder Option, you wish to
open a new account to receive the automatic investment, such new account must
meet the minimum initial purchase requirements described in the prospectus of
the fund that you select. All investments under this option are exchanges and
are therefore subject to the same conditions and limitations as other exchanges
noted above. You can terminate your participation in Wealth Builder at any time
by giving written notice to the fund from which the exchanges are made. See
Redemption and Exchange.
-31-
<PAGE>
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
5. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Or, you may invest
your distributions in certain other funds available from Delaware Investments,
subject to the exceptions noted below as well as the eligibility and minimum
purchase requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of other
Delaware Investments funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Investments funds or into Class C Shares of the Fund or of other
Delaware Investments funds are also made without any sales charge and will not
be subject to a CDSC if later redeemed. See Automatic Conversion of Class B
Shares under Classes of Shares for information concerning the automatic
conversion of Class B Shares acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their distributions
into Institutional Class Shares of the Fund or into Class B Shares or Class C
Shares of any fund available from Delaware Investments, including the Fund.
Holders of Class B Shares of the Fund may reinvest their distributions only
into Class B Shares of the funds available from Delaware Investments which
offer that class of shares. Similarly, holders of Class C Shares of the Fund
may reinvest their distributions only into Class C Shares of the funds
available from Delaware Investments which offer that class of shares. Holders
of Institutional Class Shares of the Fund may only reinvest their distributions
into Institutional Class Shares of the Fund. For more information about
reinvestments, call the Shareholder Service Center.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Purchase Price and Effective Date
The offering price and net asset value of each Class are determined as of
the close of regular trading on the New York Stock Exchange (ordinarily, 4
p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund, its agent or designee. The effective
date of a direct purchase is the day your wire, electronic transfer or check is
received, unless it is received after the time the offering price or net asset
value of shares is determined, as noted above. Purchase orders received after
such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase is
canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in Delaware Investments. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on
a foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
-32-
<PAGE>
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts of Class A Shares, Class B
Shares and Class C Shares that, as a result of redemption, have remained below
the minimum stated account balance for a period of three or more consecutive
months. Holders of such accounts may be notified of their insufficient account
balance and advised that they have until the end of the current calendar
quarter to raise their balance to the stated minimum. If the account has not
reached the minimum balance requirement by that time, the Fund will charge a $9
fee for that quarter and each subsequent calendar quarter until the account is
brought up to the minimum balance. The service fee will be deducted from the
account during the first week of each calendar quarter for the previous
quarter, and will be used to help defray the cost of maintaining low-balance
accounts. No fees will be charged without proper notice, and no CDSC or Limited
CDSC will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts of each Class that remain under the minimum
initial purchase amount as a result of redemptions. An investor making the
minimum initial investment may be subject to involuntary redemption without the
imposition of a CDSC or Limited CDSC if he or she redeems any portion of his or
her account.
-33-
<PAGE>
Redemption and Exchange
You can redeem or, in the case of Class A Shares, Class B Shares and Class
C Shares, exchange your shares in a number of different ways. The exchange
service is useful if your investment requirements change and you want an easy
way to invest in other bond funds, tax-advantaged funds, equity funds or money
market funds. This service is also useful if you are anticipating a major
expenditure and want to move a portion of your investment into a fund that has
the checkwriting feature. Exchanges are subject to the requirements of each
fund and all exchanges of shares constitute taxable events. See Taxes. Further,
in order for an exchange to be processed, shares of the fund being acquired
must be registered in the state where the acquiring shareholder resides. You
may want to consult your financial adviser or investment dealer to discuss
which funds in Delaware Investments will best meet your changing objectives,
and the consequences of any exchange transaction. You may also call Delaware
Investments directly for fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See Purchase Price and Effective Date under
How to Buy Shares. A shareholder submitting a redemption request may indicate
that he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, and in the case of certain redemptions
from retirement plan accounts, the Fund will redeem the number of shares
necessary to deduct the applicable CDSC in the case of Class B Shares and Class
C Shares, and, if applicable, the Limited CDSC in the case of Class A Shares
and tender to the shareholder the requested amount, assuming the shareholder
holds enough shares in his or her account for the redemption to be processed in
this manner. Otherwise, the amount tendered to the shareholder upon redemption
will be reduced by the amount of the applicable CDSC or Limited CDSC.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order," you
must provide your account number, account registration, and the total number of
shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918.
Certificates that have been issued for shares you wish to redeem or exchange
must accompany your request. The Fund may suspend, terminate, or amend the
terms of the exchange privilege upon 60 days' written notice to shareholders.
-34-
<PAGE>
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the purchase check has cleared, which may take
up to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. The Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds available from Delaware
Investments (in each case, "New Shares") in a permitted exchange, will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the
Original Shares as described in this Prospectus and any CDSC assessed upon
redemption will be charged by the fund from which the Original Shares were
exchanged. In an exchange of Class B Shares from the Fund, the Fund's CDSC
schedule may be higher than the CDSC schedule relating to the New Shares
acquired as a result of the exchange. For purposes of computing the CDSC that
may be payable upon a disposition of the New Shares, the period of time that an
investor held the Original Shares is added to the period of time that an
investor held the New Shares. With respect to Class B Shares, the automatic
conversion schedule of the Original Shares may be longer than that of the New
Shares. Consequently, an investment in New Shares by exchange may subject an
investor to the higher 12b-1 fees applicable to Class B Shares of the Fund for
a longer period of time than if the investment in New Shares were made
directly.
Various redemption and exchange methods are outlined below. Except for the
CDSC applicable to certain redemptions of Class B Shares and Class C Shares and
the Limited CDSC applicable to certain redemptions of Class A Shares purchased
at net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares
redeemed or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your shares. The request must be signed by all owners of
the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
-35-
<PAGE>
Payment is normally mailed the next business day after receipt of your
redemption request. If your shares are in certificate form, the certificate(s)
must accompany your request and also be in good order. Certificates are issued
for Class A Shares and Institutional Class Shares only if a shareholder submits
a specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your Class A Shares, Class B
Shares or Class C Shares into another mutual fund available from Delaware
Investments, subject to the same conditions and limitations as other exchanges
noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares or Institutional Class Shares in
certificate form, you may redeem or, in the case of Class A Shares, exchange
only by written request and you must return your certificate(s).
The Telephone Redemption -- Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an
unusually large volume of telephone requests. The Telephone Exchange service is
not available to Institutional Class Shares.
Neither the Fund nor its Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption
or exchange of Fund shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
-36-
<PAGE>
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50 for Class A Shares, Class B Shares
and Class C Shares) will be deducted from your redemption proceeds. If you ask
for a check, it will normally be mailed the next business day after receipt of
your redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
MoneyLineSM On Demand
Through the MoneyLineSM On Demand service, you or your investment dealer
may call the Fund to request a transfer of funds from your Fund account to your
predesignated bank account. See MoneyLineSM Services under The Delaware
Difference for additional information about this service. This service is not
available to Institutional Class Shares.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds available from Delaware Investments under the same
registration, subject to the same conditions and limitations as other exchanges
noted above. As with the written exchange service, telephone exchanges are
subject to the requirements of each fund, as described above. Telephone
exchanges may be subject to limitations as to amounts or frequency. The service
is not available to Institutional Class Shares.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it can provide them with a stable supplemental amount. With accounts of
at least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or
more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLineSM Direct
Deposit Service. Your funds will normally be credited to your bank account up
to four business days after the payment date. There are no separate fees for
this redemption method. See MoneyLineSM Services under The Delaware Difference
for more information about this service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to receive
benefits in periodic payments, the Systematic Withdrawal Plan provides you with
maximum flexibility. A number of formulas are available for calculating your
withdrawals depending upon whether the distributions are required or optional.
Withdrawals must be for $25 or more; however, no minimum account balance is
required. The MoneyLineSM Direct Deposit Service is not available for certain
retirement plans.
* * *
Shareholders should not purchase additional shares while participating in
a Systematic Withdrawal Plan.
-37-
<PAGE>
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission was paid
on that purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or
were acquired through the reinvestment of distributions. The 12% annual limit
will be reset on the date that any Systematic Withdrawal Plan is modified (for
example, a change in the amount selected to be withdrawn or the frequency or
date of withdrawals), based on the balance in the account on that date. See
Waiver of Contingent Deferred Sales Charge -- Class B Shares and Class C
Shares, below.
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center. Systematic Withdrawal Plans are not available to Institutional
Class Shares.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
made within 12 months
of purchase, if such purchases were made at net asset
value and triggered the payment by the Distributor of a
dealer's commission.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of Class A Shares
even if those shares are later exchanged for shares of another Delaware
Investments fund and, in the event of an exchange of Class A Shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares acquired in the exchange.
Redemptions of Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the
Limited CDSC at the time of such exchange. The period a shareholder owns shares
into which Class A Shares are exchanged will count towards satisfying the
12-month holding period. The Limited CDSC is assessed if such 12-month period
is not satisfied irrespective of whether the redemption triggering its payment
is of Class A Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are redeemed first followed by other
shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the
investment occurred, will age one month on the last day of that month and each
subsequent month.
-38-
<PAGE>
Waiver of Limited Contingent Deferred Sales Charge -- Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that
result from a Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is less than the
then-effective minimum account size;
(ii) distributions to participants from a retirement plan qualified under
section 401(a) or 401(k) of the Code,
or due to death of a participant in such a plan;
(iii) redemptions pursuant to the direction of a participant or beneficiary of
a retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA,
SIMPLE IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death,
disability, or attainment of age 59 1/2, and IRA distributions qualifying under
Section 72(t) of the Code;
(v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and
(vi) above pursuant to a systematic withdrawal plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying Class A Shares at Net
Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge --
Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in connection
with the following redemptions:
(i) redemptions that result from the Fund's right to liquidate a shareholder's
account if the aggregate net asset value of the shares held in the account is
less than the then-effective minimum account size; (ii) returns of excess
contributions to an IRA, SIMPLE IRA, SEP/IRA or 403(b)(7) or 457 Deferred
Compensation Plan; (iii) periodic distributions from an IRA, SIMPLE IRA,
SAR/SEP, SEP/IRA or 403(b)(7) or 457 Deferred Compensation Plan due to death,
disability, or attainment of age 59 1/2, and IRA distributions qualifying under
Section 72(t) of the Code; and (iv) distributions from an account if the
redemption results from the death of all registered owners of the account (in
the case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death
of all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase
of the shares
being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in
the account is less than the then-effective minimum account size; (ii) returns
of excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution Plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Pension Plan, 401(k) Defined Contribution Plans upon attainment
of age 70 1/2, and IRA distributions qualifying under Section 72(t) of the
Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation Plan,
Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA
or SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions
from an account if the redemption results from the death of all registered
owners of the account (in the case of accounts established under the Uniform
Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts, the
waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
-39-
<PAGE>
In addition, the CDSC will be waived on Class B Shares and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
-40-
<PAGE>
Dividends and Distributions
Voyageur Funds, Inc. declares a distribution from net investment income,
if any, on each day that the Fund is open for business. Net investment income
consists of interest accrued on portfolio investments of the Fund, less accrued
expenses. Distributions of net investment income, if any, are paid monthly. Net
realized short-term and long-term capital gains, if any, are declared and
distributed at least annually.
Each Class of the Fund will share proportionately in the investment income
and expenses of the Fund, except that the per share dividends from net
investment income on Class A Shares, Class B Shares, Class C Shares and
Institutional Class Shares will vary due to the expenses under the 12b-1 Plan
applicable to each Class. Generally, the dividends per share on Class B Shares
and Class C Shares can be expected to be lower than the dividends per share on
Class A Shares and Institutional Class Shares because the expenses under the
12b-1 Plans relating to Class B Shares and Class C Shares will be higher than
the expenses under the 12b-1 Plan relating to Class A Shares and Institutional
Class Shares. See Distribution (12b-1) and Service under Management of the
Fund.
Purchases by wire of the shares begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if the Fund is given prior notice of Federal Funds wire
and an acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start earning
dividends on the date the wire is received. Purchases by check earn dividends
upon conversion to Federal Funds, normally one business day after receipt.
Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value. Holders of Class A Shares, Class B Shares and
Class C Shares may elect to receive dividends and distributions in cash. If
cash payment is requested, a check will be mailed within three business days
after the payment date. Any check in payment of dividends or other
distributions which cannot be delivered by the United States Post Office or
which remains uncashed for a period of more than one year may be reinvested in
your account at the then-current net asset value and the dividend option may be
changed from cash to reinvest. If you elect to take your dividends and
distributions in cash and such dividends and distributions are in an amount of
$25 or more, you may choose the MoneyLineSM Direct Deposit Service and have
such payments transferred from your Fund account to your predesignated bank
account. This service is not available for certain retirement plans. See
MoneyLineSM Services under The Delaware Difference for more information about
this service.
-41-
<PAGE>
Taxes
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the Code.
Because many of these changes are complex, and only indirectly affect the Fund
and its distributions to you, they are discussed in Part B. Changes in the
treatment of capital gains, however, are discussed in this section.
The Fund has qualified as a regulated investment company under Subchapter
M of the Code. As such, the Fund will not be subject to federal income tax, or
to any excise tax, to the extent its earnings are distributed as provided in
the Code and it satisfies certain other requirements relating to the sources of
its income and diversification of its assets.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, whether received in cash or in additional
shares. No portion of the Fund's distributions will be eligible for the
dividends-received deduction for corporations.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who
are subject to income taxes as long-term capital gains, regardless of the
length of time an investor has owned shares in the Fund. The Fund does not seek
to realize any particular amount of capital gains during a year; rather,
realized gains are a by-product of Fund management activities. Consequently,
capital gains distributions may be expected to vary considerably from year to
year. Also, for those investors subject to tax, if purchases of shares in the
Fund are made shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a
taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for individuals
that will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a maximum rate
of 20%. For investors who are in the 15% federal income tax bracket, these
gains will be taxed at a maximum rate of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when the Fund's
securities were sold and how long they were held by the Fund before they were
sold. Investors who want more information on holding periods and other
qualifying rules relating to these new rates should review the expanded
discussion in Part B, or should contact their own tax advisers.
Voyageur Funds, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
-42-
<PAGE>
Dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but which,
for operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Fund and received
by the shareholder on December 31 of the calendar year in which they are
declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between the Fund and any other fund available from Delaware Investments. Any
loss incurred on a sale or exchange of Fund shares that had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gains dividends received with respect to such shares. All or a portion
of the sales charge incurred in acquiring Fund shares will be excluded from the
federal tax basis of any of such shares sold or exchanged within 90 days of
their purchase (for purposes of determining gain or loss upon the sale of such
shares) if the sale proceeds are reinvested in the Fund or in another fund
available from Delaware Investments and a sales charge that would otherwise
apply to the reinvestment is reduced or eliminated. Any portion of such sales
charge excluded from the tax basis of the shares sold will be added to the tax
basis of the shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the end
of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes
of Shares.
In addition to the federal taxes described above, shareholders may or may
not be subject to various state and local taxes. For example, distributions of
interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisors.
Each year, Voyageur Funds, Inc. will mail to you information on the tax
status of the dividends and distributions paid by the Fund. Shareholders will
also receive each year information as to the portion of dividend income that is
derived from U.S. government securities that are exempt from state income tax.
Of course, shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by
the Fund.
Voyageur Funds, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your
proper Taxpayer Identification Number and by certifying that you are not
subject to backup withholding.
See Accounting and Tax Issues and Distributions and Taxes in Part B for
additional information on tax matters relating to the Fund and its
shareholders.
-43-
<PAGE>
Calculation of Offering Price and Net Asset Value Per Share
The net asset value ("NAV") per share is computed by adding the value of
all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Debt securities are priced on the basis of valuations provided by
an independent pricing service using methods approved by Voyageur Funds, Inc.'s
Board of Directors. Equity securities for which marked quotations are available
are priced at market value. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market value. All
other securities are valued at their fair value as determined in good faith and
in a method approved by Voyageur Funds, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while Class
B Shares, Class C Shares and Institutional Class Shares are purchased at the
NAV per share. The offering price per share of Class A Shares consists of the
NAV per share next computed after
the order is received, plus any applicable front-end
sales charges.
The offering price and NAV are computed as of the close of regular trading
on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when
the Exchange is open.
The net asset values of all outstanding shares of each Class of the Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that Class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that Class A Shares, Class B Shares, Class C Shares and Institutional
Class Shares alone will bear the 12b-1 Plan expense payable under their
respective Plans.
-44-
<PAGE>
Management of the Fund
Directors
The business and affairs of Voyageur Funds, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Voyageur Funds, Inc.'s directors and officers.
Investment Manager and Sub-Adviser
The Manager furnishes investment management services to the Fund, and the
Sub-Adviser is responsible for the day-to-day investment management of the
Fund. The Manager has offices located at One Commerce Square, Philadelphia, PA
19103. The Sub-Adviser has offices located at 90 South Seventh Street, Suite
4400, Minneapolis, MN 55402.
The Manager and its predecessors have been managing the funds in Delaware
Investments since 1938. On October 31, 1997, the Manager and its affiliates,
including Delaware International Advisers Ltd., were managing in the aggregate
more than $38 billion in assets in various institutional or separately managed
(approximately $16,012,252,000) and investment company (approximately
$22,496,609,000) accounts.
Prior to May 1, 1997, Voyageur Fund Managers, Inc. ("Voyageur") had been
retained under an investment advisory contract to act as the Fund's investment
adviser, subject to the authority of the Board of Directors. Voyageur was an
indirect, wholly-owned subsidiary of Dougherty Financial Group, Inc. ("DFG").
After the close of business on April 30, 1997, Voyageur became an indirect,
wholly owned subsidiary of Lincoln National Corporation ("LNC") as a result of
LNC's acquisition of DFG. LNC, headquartered in Fort Wayne, Indiana, owns and
operates insurance and investment management businesses, including Delaware
Management Holdings, Inc. ("DMH"). Affiliates of DMH serve as adviser,
distributor and transfer agent for the Delaware Investments
mutual funds.
Because LNC's acquisition of DFG resulted in a change of control of
Voyageur, the Fund's previous investment advisory agreements with Voyageur were
"assigned," as that term is defined by the 1940 Act, and the previous
agreements therefore terminated upon the completion of the acquisition. The
Board of Directors of the Fund unanimously approved new investment advisory
agreements with the Manager at a meeting held in person on February 14, 1997,
and called for a shareholders meeting to approve the new agreements. At a
meeting held on April 11, 1997, the shareholders of the Fund approved its
investment advisory agreement with the Manager to become effective after the
close of business on April 30, 1997, the date the acquisition was completed. At
that meeting, shareholders of the Fund also approved a Sub-Advisory Agreement
between the Manager and the Sub-Adviser to take effect at the same time as the
Investment Management Agreement.
Beginning May 1, 1997, the Manager, an indirect, wholly owned subsidiary
of LNC, became the Fund's investment manager. The Manager administers the
affairs of and is ultimately responsible for the investment management of the
Fund under a separate Investment Management Agreement. The Manager also
administers Voyageur Funds, Inc.'s affairs and pays the salaries of all the
directors, officers and employees of Voyageur Funds, Inc. who are affiliated
with the Manager. For these services, under the Investment Management
Agreement, the Fund pays the Manager a monthly investment advisory fee
equivalent on an annual basis to 0.50% of its average daily net assets, less
directors' fees paid to the unaffiliated directors by Voyageur Funds, Inc. The
directors of Voyageur Funds, Inc. annually review fees paid to the Manager.
Investment management fees incurred by the Fund for the fiscal year ended
October 31, 1997 were 0.50% of average daily net assets and 0.44% was paid
as a result of the voluntary waiver of fees by the Manager and Voyageur.
-45-
<PAGE>
Effective October 6, 1997, Mark Simenstad assumed day-to-day responsibility
for managing the Fund's portfolio. He has been a Senior Vice President with the
Sub-Adviser since August 1996. Mr. Simenstad holds a bachelor's degree from St.
Olaf College and an MBA from the University of Minnesota. Prior to August 1996,
Mr. Simenstad was a Vice President/Portfolio Manager of Investment Advisors,
Inc. and prior to August 1993, he was an Assistant Vice President/Portfolio
Manager of Lutheran Brotherhood. Mr. Simenstad is a CFA charterholder and has 14
years of investment management experience.
Pursuant to the terms of a Sub-Advisory Agreement with the Manager, the
Sub-Adviser participates in the management of the Fund's assets, is responsible
for day-to-day investment management of the Fund, makes investment decisions
for the Fund in accordance with the Fund's investment objectives and stated
policies and places orders on behalf of the Fund to effect the investment
decisions made with Voyageur Funds, Inc.'s Trading Department. The Manager
continues to have ultimate responsibility for all investment advisory services
in connection with the management of the Fund pursuant to the Investment
Management Agreement and supervises the Sub-Adviser's performance of such
services. For the services provided to the Manager, the Manager pays the
Sub-Adviser a fee equal to one-half of the actual fee paid to the Manager under
the terms of the Investment Management Agreement.
Portfolio Trading Practices
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or a mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Fund's portfolio
transactions. The Fund may sell securities without regard to the length of time
they have been held. The degree of portfolio activity will affect brokerage
costs of the Fund and may affect taxes payable by the Fund's shareholders.
The Manager and Sub-Adviser use their best efforts to obtain the best
available price and most favorable execution for portfolio transactions. Orders
may be placed with brokers or dealers who provide brokerage and research
services to the Manager or to their advisory clients. These services may be
used by the Manager in servicing any of its accounts. Subject to best price and
execution, the Fund may consider a broker/dealer's sales of shares of funds in
the Delaware Investments family of funds in placing portfolio orders and may
place orders with broker/dealers that have agreed to defray certain expenses of
such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote yield or total return performance of
its Classes in advertising and other types of literature.
The current yield for each of the Classes will be calculated by dividing
the annualized net investment income earned by that Class during a recent
30-day period by the maximum offering price per share on the last day of the
period. The yield formula provides for semi-annual compounding, which assumes
that net investment income is earned and reinvested at a constant rate and
annualized at the end of a six-month period.
-46-
<PAGE>
Total return will be based on a hypothetical $1,000 investment, reflecting
the reinvestment of all distributions at net asset value and: (i) in the case
of Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares and
Class C Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for
one-, five- and ten-year, or life-of-fund periods, as applicable. The Fund may
also advertise aggregate and average total return information concerning a
Class over additional periods of time. In addition, the Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC. In this case, such total return
information would be more favorable than total return information that includes
the deductions of the maximum front-end sales charge or any applicable CDSC.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time. Past performance is not considered a guarantee of
future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for the Fund's shares under a separate Distribution Agreement with
Voyageur Funds, Inc. dated March 1, 1997.
Voyageur Funds, Inc. has adopted a distribution plan under Rule 12b-1 for
each of the Classes (the "Plan"). The Plan permits the Fund to pay the
Distributor from the assets of the respective Classes a monthly fee for the
Distributor's services and expenses in distributing and promoting sales of
shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special
promotions for specified periods of time and paying distribution and
maintenance fees to brokers, dealers and others. In connection with the
promotion of shares of the Classes, the Distributor may, from time to time, pay
to participate in dealer-sponsored seminars and conferences, and reimburse
dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales contests and/or
to dealers who provide extra training and information concerning a Class and
increase sales of the Class. In addition, the Fund may make payments from the
12b-1 Plan fees of its respective Classes directly to others, such as banks,
who aid in the distribution of Class shares or provide services in respect of
such Classes, pursuant to service agreements with Voyageur Funds, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and Class C
Shares of the Fund are also used to pay the Distributor for advancing the
commission costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Fund from the assets of the respective
Classes to the Distributor and others under the Plan may not exceed: (i) 0.25%
of Class A Shares' average daily net assets in any year; (ii) 1% (0.25% of
which are service fees to be paid by the Fund to the Distributor, dealers and
others, for providing personal service and/or maintaining shareholder accounts)
of the Fund's Class B Shares' and Class C Shares' average daily net assets in
any year; and (iii) 0.25% of Institutional Class Shares' average daily net
assets in any year. The Fund's Class A Shares, Class B Shares, Class C Shares
and Institutional Class Shares will not incur any distribution expenses beyond
these limits, which may not be increased without shareholder approval.
-47-
<PAGE>
The Distributor has elected voluntarily to waive its right to receive
12b-1 Plan fees with respect to Institutional Class Shares acquired by
shareholders on or after March 1, 1998. Thus, so long as the Distributor's
voluntary waiver is in effect, the formula for determining the annual fee
payable on a monthly basis under the Plan with respect to Institutional Class
Shares will be the amount obtained by multiplying 0.25% by the average daily
net assets represented by shares of the Class that were acquired before March
1, 1998. While this is the method for calculating the 12b-1 Plan fee payable by
the Institutional Class, the 12b-1 Plan fee is an Institutional Class expense.
As a result, all Institutional Class shareholders, regardless of when they
purchase their shares, will bear 12b-1 Plan expenses at the same share rate. As
the portion of assets attributable to Institutional Class Shares acquired by
shareholders on or after March 1, 1998 increases, and so long as the
Distributor's voluntary waiver is in effect, this figure will decrease.
While payments pursuant to the Plan may not exceed 0.25% annually with
respect to Class A Shares and Institutional Class Shares, and 1% annually with
respect to each of the Class B Shares and Class C Shares, the Plan does not
limit fees to amounts actually expended by the Distributor. It is therefore
possible that the Distributor may realize a profit in any particular year.
However, the Distributor currently expects that its distribution expenses will
likely equal or exceed payments to it under the Plan. The Distributor may,
however, incur such additional expenses and make additional payments to dealers
from its own resources to promote the distribution of shares of the Classes.
The monthly fees paid to the Distributor under the Plan are subject to the
review and approval of Voyageur Funds, Inc.'s unaffiliated directors, who may
reduce the fees or terminate the Plan at any time.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
under a Shareholders Services Agreement dated as of May 1, 1997. The
Transfer Agent also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting Agreement.
The directors of Voyageur Funds, Inc. annually review fees paid to the
Distributor and the Transfer Agent. The Distributor and the Transfer Agent are
also indirect, wholly owned subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Distribution Agreement.
In connection with the merger transaction described above, the Manager has
agreed for the period from May 1, 1997 through April 30, 1999, to voluntarily
waive that portion, if any, of the annual management fees payable by the Fund
and to pay the Fund's expenses to the extent necessary to ensure that the
Fund's total operating expenses (excluding 12b-1 Plan fees, interest expense,
taxes, brokerage fees and commissions) do not exceed, on an annual basis, 1.00%
of the average daily net assets of each Class of the Fund. This agreement
replaces a similar provision in the Funds' investment advisory contracts with
the Funds' predecessor investment adviser. The Manager and the Distributor
reserve the right to voluntarily waive their fees in whole or part and to
voluntarily pay or reimburse certain other of the Fund's expenses.
-48-
<PAGE>
For the fiscal year ended October 31, 1997, the ratios of operating
expenses to average daily net asset for Class A Shares, Class B Shares, Class C
Shares and Institutional Class Shares were 0.93%, 1.67%, 1.68% and 0.93%,
respectively. The expense ratio of each Class reflects the impact of its 12b-1
Plan and the fee waivers and payments by the Manager and Voyageur. Without
these waivers and payments the ratios of operating expenses to average daily
net assets would have been 1.01% for Class A Shares, 1.75% for Class B Shares,
1.76% for Class C Shares and 1.01% for Institutional Class Shares.
Shares
Voyageur Funds, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Voyageur Funds, Inc. was organized as a Minnesota
corporation on April 15, 1987.
Fund shares have a par value of $.01, equal voting rights, except as noted
below, and are equal in all other respects. All shares have noncumulative
voting rights which means that the holders of more than 50% of Voyageur Funds,
Inc.'s shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Under Minnesota law, Voyageur Funds, Inc. is
not required, and does not intend, to hold annual meetings of shareholders
unless, under certain circumstances, it is required to do so under the 1940
Act.
Shares of each Class represent proportionate interests in the assets of
the Fund and have the same voting and other rights and preferences as the other
Classes of the Fund, except that as a general matter, the shareholders of Class
A Shares, Class B Shares, Class C Shares and Institutional Class Shares may
vote only on matters affecting the 12b-1 Plan that relates to the Class of
shares that they hold. However, Class B Shares of the Fund may vote on any
proposal to increase materially the fees to be paid by the Fund under the 12b-1
Plan relating to
Class A Shares.
-49-
<PAGE>
Other Investment Policies and Risk Considerations
GNMA Certificates
The Fund may invest in certificates of the Government National Mortgage
Association ("GNMA"). GNMA Certificates are mortgage-backed securities. Each
Certificate evidences an interest in a specific pool of mortgages insured by
the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. GNMA Certificates differ from bonds
in that principal is scheduled to be paid back by the borrower over the length
of the loan rather than returned in a lump sum at maturity. Scheduled payments
of principal and interest are made to the registered holders of GNMA
Certificates. Interest on GNMA Certificates is paid monthly rather than
semi-annually as for most traditional bonds. The GNMA Certificates in which the
Fund will generally invest are of the modified pass-through type. The Fund may
also purchase "variable rate" GNMA Certificates and may purchase other types of
certificates which may be issued with GNMA's guarantee. U.S. Government GNMA
guarantees the timely payment of monthly installments of principal and interest
on modified pass-through Certificates at the time such payments are due,
whether or not such amounts are collected by the issuer on the underlying
mortgages. The National Housing Act provides that the full faith and credit of
the United States is pledged to the timely payment of principal and interest by
GNMA of amounts due on these GNMA Certificates. GNMA may borrow U.S. Treasury
funds to the extent needed to make payments under its guarantee.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as the result of prepayments of
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest, and have the effect of reducing future payments. Due to the GNMA
guarantee, foreclosures impose no risk to principal investments.
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
As prepayment rates vary widely, it is not possible to accurately predict the
average life of a particular pool. However, statistics indicate that the
average life of the type of mortgages backing the majority of GNMA Certificates
is approximately 12 years. For this reason, it is standard practice to treat
GNMA Certificates as 30-year mortgage-backed securities which prepay fully in
the twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than 12 years, but typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates, but only by the amount of the fees paid to GNMA and the issuer.
Such fees in the aggregate usually amount to approximately 1/2 of 1%.
-50-
<PAGE>
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average
life of a pool of mortgage-related securities. Conversely, in periods of rising
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Prepayments generally occur when interest rates have
fallen. Reinvestments of prepayments will be at lower rates. Historically,
actual average life has been consistent with the 12-year assumption referred to
above. The actual yield of each GNMA Certificate is influenced by the
prepayment experience of the mortgage pool underlying the Certificates and may
differ from the yield based on the assumed average life. Moreover, any premium
paid on the purchase of a GNMA Certificate will be lost if the obligation is
prepaid. In periods of falling interest rates, this potential for prepayment
may reduce the general upward price increase of GNMAs which might otherwise
occur. Price changes of the GNMAs held by the Fund have a direct impact on the
net asset value per share of the Fund.
Zero-Coupon Securities
The Fund may invest in "zero-coupon" Treasury securities, which are U.S.
Treasury bills, notes and bonds that have been stripped of their unmatured
interest coupons. Zero-coupon securities do not entitle the holder to any
periodic payment of interest prior to maturity. Rather, such securities usually
trade at a deep discount from their face value and pay their entire face value
at maturity. The difference between the face value of the security (at
maturity) and the amount at which the security was purchased (i.e., the
"discount") represents interest income to the holder. STRIPs are a type of
zero-coupon security in which the Fund may invest. STRIPs are securities where
the principal and interest components are traded independently under the
Separate Trading of Registered Interest and Principal Securities Program
("STRIPs"). Under STRIPs, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently. The market prices of zero-coupon securities are generally more
volatile than the market prices of securities that pay interest periodically
and are likely to respond to changes in interest rates to a greater degree than
do non-zero-coupon securities having similar maturities and credit quality.
Current federal income tax law requires that a holder of a taxable zero-coupon
security report as income each year the portion of the original issue discount
of such security that accrues that year, even though the holder receives no
cash payments of interest during the year. The Fund intends to qualify as a
regulated investment company under the Code. Accordingly, during periods when
the Fund receives no interest payments on its zero-coupon securities, it will
be required, in order to maintain its desired tax treatment, to distribute cash
approximating the income attributable to such securities. Such distribution may
require the sale of portfolio securities to meet the distribution requirements
and such sales may be subject to the risk factor discussed above.
Short-Term Trading
The Fund intends to use short-term trading of its securities as a means of
managing its portfolio to achieve its investment objective. The Fund will
engage in short-term trading if it believes the transactions, net of costs
(including commission, if any), will result in improving the income or,
secondarily, appreciation potential of its portfolio. The successful use of
short-term trading will depend upon the ability of the Fund to evaluate
particular securities and anticipate relevant market factors, including
interest rate trends and variations from such trends. Short-term trading such
as that contemplated by the Fund places a premium upon the ability of the Fund
to obtain relevant information, evaluate it promptly and take advantage of its
evaluations by completing transactions on a favorable basis. As used herein,
"short-term trading" means selling securities held for a relatively brief
period of time, usually less than three months.
-51-
<PAGE>
The Fund's short-term trading may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve
the payment by the Fund of dealer mark-ups or underwriting commissions and of
transaction costs on the sale of securities as well as on reinvestment of the
proceeds in other securities. In addition, frequent changes in the Fund's
portfolio securities may result in greater tax liability to the Fund's
shareholders by reason of more short-term capital gains. See Dividends and
Distributions and Part B.
Repurchase Agreements
The Fund will also seek to achieve its investment objective through
investing in repurchase agreements with banks or broker/dealers deemed to be
creditworthy by the Manager, under guidelines approved by the Board of
Directors. A repurchase agreement is a short-term investment in which the
purchaser (i.e. the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the purchaser's holding period. Generally,
repurchase agreements are of short duration, often less than one week but on
occasion for longer periods. Not more than 10% of the Fund's assets may be
invested in illiquid securities, including repurchase agreements of over
seven-days' maturity. Should an issuer of a repurchase agreement fail to
repurchase the underlying security, the loss to the Fund, if any, would be the
difference between the repurchase price and the market value of the security.
The Fund will limit its investments in repurchase agreements to those which the
Manager under guidelines of the Board of Directors determines to present
minimal credit risks and which are of high quality. In addition, the Fund must
have collateral of at least 102% of the repurchase price, including the portion
representing the Fund's yield under such agreements, which is monitored on a
daily basis. Repurchase agreements may be considered loans under the 1940 Act,
but the Fund considers repurchase agreements contracts for the purchase and
sale of securities, and it seeks to perfect a security interest in the
collateral securities so that it has the right to keep and dispose of the
underlying collateral in the event of default.
The funds in Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
Delaware Investments funds jointly to invest cash balances. The Fund may invest
cash balances in a joint repurchase agreement in accordance with the terms of
the Order and subject generally to the conditions described above.
* * *
Part B describes certain of these investment policies and risk
considerations. Part B also sets forth other investment policies, risk
considerations and more specific investment restrictions.
-52-
<PAGE>
Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end funds
give investors the ability to create a portfolio that fits their personal
financial goals. For more information, shareholders should contact their
financial adviser or call Delaware Investments at 800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
SUB-ADVISER
Voyageur Asset Management LLC
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55402
<PAGE>
- --------------------------------------------------------------------------------
DELAWARE-VOYAGEUR US GOVERNMENT
SECURITIES FUND
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
CLASSES OF VOYAGEUR FUNDS, INC.
- --------------------------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
FEBRUARY 27, 1998
- ------------
DELAWARE
INVESTMENTS
- ------------
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 27, 1998
- --------------------------------------------------------------------------------
VOYAGEUR FUNDS, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For Prospectus and Performance of Class A Shares, Class B Shares, Class C Shares
and Institutional Class Shares:
Nationwide 800-523-4640
Information on Existing Accounts of Class A Shares, Class B Shares, Class C
Shares and Institutional Class Shares:
(SHAREHOLDERS ONLY) Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
- --------------------------------------------------------------------------------
Investment Restrictions and Policies
- --------------------------------------------------------------------------------
Accounting and Tax Issues
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
- --------------------------------------------------------------------------------
Purchasing Shares
- --------------------------------------------------------------------------------
Investment Plans
- --------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- --------------------------------------------------------------------------------
Redemption and Repurchase
- --------------------------------------------------------------------------------
Distributions and Taxes
- --------------------------------------------------------------------------------
Investment Management Agreement and Sub-Advisory Agreement
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Appendix A -- Ratings
- --------------------------------------------------------------------------------
Appendix B -- General Characteristics and Risks of Options and Futures
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
-1-
<PAGE>
Voyageur Funds, Inc. is a professionally-managed mutual fund of the
series type which currently offers shares of Delaware-Voyageur US Government
Securities Fund series (the "Fund"). This Statement of Additional Information
("Part B" of Voyageur Funds, Inc.'s registration statement) describes the Fund's
four classes (individually, a "Class" and collectively the "Classes") of shares
- - Class A Shares, Class B Shares, Class C Shares and Institutional Class Shares.
Class B Shares, Class C Shares and Institutional Class Shares of the
Fund may be purchased at a price equal to the next determined net asset value
per share. Class A Shares may be purchased at the public offering price, which
is equal to the next determined net asset value per share, plus a front-end
sales charge. Class A Shares are subject to a maximum front-end sales charge of
4.75% and annual 12b-1 Plan expenses of up to 0.25%. Class B Shares are subject
to a contingent deferred sales charge ("CDSC") which may be imposed on
redemptions made within six years of purchase and annual Rule 12b-1 Plan ("12b-1
Plan") expenses of up to 1% which are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares in the Fund's Prospectus. Class C Shares are
subject to a CDSC which may be imposed on redemptions made within 12 months of
purchase and annual 12b-1 Plan expenses of up to 1% which are assessed against
Class C Shares for the life of the investment. Institutional Class shares are
subject to annual 12b-1 Plan expenses of up to 0.25% for the life of the
investment. All references to "shares" in this Part B refer to all Classes of
shares of the Fund, except where noted.
This Part B supplements the information contained in the current
Prospectus for the Fund dated February 27, 1998 as it may be amended from time
to time. It should be read in conjunction with the Prospectus. Part B is not
itself a prospectus but is, in its entirety, incorporated by reference into the
Prospectus. A prospectus may be obtained by writing or calling your investment
dealer or by contacting the Fund's national distributor, Delaware Distributors,
L.P., 1818 Market Street, Philadelphia, PA 19103.
-2-
<PAGE>
INVESTMENT RESTRICTIONS AND POLICIES
Investment Restrictions
The Fund has adopted certain investment restrictions set forth below
which, together with the investment objectives of the Fund and other policies
which are specifically identified as fundamental in the Prospectus or herein
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. As defined in the Investment Company Act of 1940 (the
"1940 Act"), this means the lesser of the vote of (1) 67% of the shares of the
Fund at a meeting where more than 50% of the outstanding shares of the Fund are
present in person or by proxy or (2) more than 50% of the outstanding shares of
the Fund. The following investment restrictions apply to the Fund. The Fund will
not:
1. Borrow money, except from banks for temporary or emergency purposes
in an amount not exceeding 5% of the value of the Fund's total assets. The Fund
will not borrow for leverage purposes, and securities will not be purchased
while borrowings are outstanding. Interest paid on any money borrowed will
reduce the Fund's net income.
2. Pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 5% of its total assets (taken at the lower of cost or current value)
and then only to secure borrowings permitted by restriction (1) above.
3. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities.
4. Make short sales of securities or maintain a short position for the
account of the Fund unless at all times when a short position is open it owns an
equal amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short.
5. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under federal securities laws.
6. Purchase or sell real estate, although it may purchase securities
which are secured by or represent interests in real estate.
7. Purchase or sell commodities or commodity contracts.
8. Make loans, except by purchase of debt obligations in which the Fund
may invest consistent with its investment policies and through repurchase
agreements.
9. Invest in securities of any issuer if, to the knowledge of the Fund,
officers and directors of the Fund or officers and directors of the Fund's
investment adviser who beneficially own more than 1/2 of 1% of the securities of
that issuer together own more than 5%.
10. Purchase securities restricted as to resale.
-3-
<PAGE>
11. Invest more than 25% of its assets in the securities of issuers in
any single industry; provided that there shall be no limitation on the purchase
of securities issued by banks and obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
12. Invest in (a) securities which in the opinion of the Fund's
investment adviser at the time of such investment are not readily marketable,
and (b) securities the disposition of which is restricted under federal
securities laws (as described in fundamental restriction (10) above).
13. Invest in securities of other investment companies, except as part
of a merger, consolidation or acquisition of assets.
14. Purchase options or puts, calls, straddles, spreads or combinations
thereof; in connection with the purchase of fixed-income securities, however,
the Fund may acquire attached warrants or other rights to subscribe for
securities of companies issuing such fixed-income securities or securities of
parents or subsidiaries of such companies. (The Fund's investment policies do
not currently permit it to exercise warrants or rights with respect to equity
securities.)
15. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
Any investment restriction or limitation which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after an acquisition of
securities or a utilization of assets and such excess results therefrom.
When Issued and Delayed Delivery Securities
When issued and delayed delivery transactions permit the Fund to
lock-in a price or yield on a security it intends to purchase, regardless of
future changes in interest rates. At the time the Fund commits to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction and thereafter reflect the value, each day, of such security in
determining its net asset value. At the time of delivery of the securities, the
value may be more or less than the purchase price. The Fund will also establish
a segregated account with its custodian in which it will maintain cash or cash
equivalents or other portfolio securities equal in value to its commitments for
such when-issued or delayed delivery securities. The Fund generally will enter
into agreements to purchase securities on a when-issued or delayed delivery
basis only with the intention of actually acquiring the securities. The purchase
of securities on a when-issued or delayed delivery basis exposes the Fund to
risk because the securities may decrease in value prior to their delivery.
Purchasing securities on a when-issued or delayed delivery basis involves the
additional risk that the return available in the market when the delivery takes
place will be higher than that obtained in the transaction itself. Although the
Fund dos not presently intend to do so, these risks could result in increased
volatility of the Fund's net asset value to the extent that the Fund purchases
securities on a when-issued or delayed delivery basis while remaining
substantially fully invested.
Repurchase Agreements
The Fund will also follow the collateral custody, protection and
perfection guidelines recommended by the Comptroller of the Currency for the use
of national banks in their direct repurchase agreement activities. As an
additional safety measure, the Fund will enter into repurchase agreements only
with primary dealers that report to the Federal Reserve Bank of New York or with
the 100 largest U. S. commercial banks, as measured by domestic deposits.
-4-
<PAGE>
ACCOUNTING AND TAX ISSUES
When the Fund writes a call option, an amount equal to the premium
received by it is included in the section of the Fund's assets and liabilities
as an asset and as an equivalent liability. The amount of the liability is
subsequently "marked to market" to reflect the current market value of the
option written. The current market value of a written option is the last sale
price on the principal Exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and asked prices. If an option
which the Fund has written expires on its stipulated expiration date, the Fund
reports a realized gain. If the Fund enters into a closing purchase transaction
with respect to an option which the Fund has written, the Fund realizes a gain
(or loss if the cost of the closing transaction exceeds the premium received
when the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
Any such gain or loss is a short-term capital gain or loss for federal income
tax purposes. If a call option which the Fund has written is exercised, the Fund
realizes a capital gain or loss (long-term or short-term, depending on the
holding period of the underlying security) from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received.
Other Tax Requirements -- The Fund has qualified and intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). As such, the Fund will
not be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and it satisfies other
requirements relating to the sources of its income and diversification of its
assets.
In order to qualify as a regulated investment company for federal
income tax purposes, the Fund must meet certain specific requirements,
including:
(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. Government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short- short income").
The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30% short-short
income test for tax years of regulated investment companies beginning after
August 5, 1997; however, this rule may have continuing effect in some states for
purposes of classifying the Fund as a regulated investment company.
-5-
<PAGE>
The Code requires the Funds to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Fund intends as a matter of policy to declare and pay sufficient dividends in
December or January (which are treated by you as received in December) but does
not guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
-6-
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Fund may state each of its Classes' total return
in advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year, or life-of-fund periods, as applicable. The
Fund may also advertise aggregate and average total return information for its
Classes over additional periods of time. In addition, the Fund may include
illustrations showing the power of compounding in advertisements and other types
of literature.
In presenting performance information for Class A Shares, the Limited
CDSC applicable to only certain redemptions of those shares will not be deducted
from any computation of total return. See the Prospectus for a description of
the Limited CDSC, or other CDSC, and the limited instances in which it applies.
All references to a CDSC in this Performance Information section will apply to
Class B Shares or Class C Shares of the Fund.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of
$1,000 from which, in the case of only
Class A Shares, the maximum front-end sales
charge is deducted;
T = average annual total return;
n = number of years; and
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period
after the deduction of the applicable CDSC,
if any, with respect to Class B Shares and
Class C Shares.
Total return performance for each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculation.
Because securities prices fluctuate, past performance should not be considered
as a representation of the results which may be realized from an investment in
the Fund in the future.
Aggregate or cumulative total return is calculated in a similar
manner, except that the results are not annualized. Each calculation assumes the
maximum front-end sales charge, if any, is deducted from the initial $1,000
investment at the time it is made with respect to Class A Shares and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, the Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
-7-
<PAGE>
The Fund may also state total return performance for its Classes in
the form of an average annual return. This average annual return figure will be
computed by taking the sum of a Class' annual returns, then dividing that figure
by the number of years in the overall period indicated. The computation will
reflect the impact of the maximum front-end sales charge or CDSC, if any, paid
on the illustrated investment amount against the first year's return.
The performance of Class A Shares and Institutional Class shares, as
shown below, is the average annual total return quotations through October 31,
1997, computed as described above. The average annual total return for Class A
Shares at offer reflects the maximum front-end sales charges paid on the
purchase of shares. The average annual total return for Class A Shares at net
asset value (NAV) does not reflect the payment of the maximum front-end sales
charge of 4.75%.
Securities prices fluctuated during the periods covered, and past
results should not be considered as representative of future performance.
Average Annual Total Return(2)
<TABLE>
<CAPTION>
Class A Class A
Shares Shares Institutional
(At Offer) (At NAV) Class Shares
---------- -------- ------------
<S> <C> <C> <C> <C>
1 year ended 1 year ended
10/31/97 3.22% 8.37% 10/31/97 8.39%
3 years ended 3 years ended
10/31/97 8.29% 10.08% 10/31/97 10.07%
5 years ended Period 6/7/94(1)
10/31/97 6.03% 7.08% through 10/31/97 7.97%
Period 11/2/87(1)
through 10/31/97 8.40% 8.93%
</TABLE>
(1) Date of initial public offering.
(2) Reflects fee waivers and payment of expenses in effect during the
periods. Performance would have been lower without the fee waivers and
expense payments. See Plan under Rule 12b-1 under Purchasing Shares and
Investment Management Agreement and Sub-Advisory Agreement for
information about voluntary fee waivers and expense payments in effect
through April 30, 1999.
The performance of Class B Shares, as shown below, is the average
annual total return quotation through October 31, 1997. The average annual total
return for Class B Shares including deferred sales charge reflects the deduction
of the applicable CDSC that would be paid if the shares were redeemed at October
31, 1997. The average annual total return for Class B Shares excluding deferred
sales charge assumes the shares were not redeemed at October 31, 1997 and
therefore does not reflect the deduction of a CDSC.
-8-
<PAGE>
Average Annual Total Return(2)
Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
------------- -------------
1 year ended
10/31/97 3.59% 7.59%
3 years ended
10/31/97 8.54% 9.38%
Period 6/7/94(1)
through 10/31/97 6.53% 7.28%
(1) Date of initial public offering of Class B Shares.
(2) Reflects fee waivers and payment of expenses in effect during the
periods. Performance would have been lower without the fee waivers and
expense payments. See Plan under Rule 12b-1 under Purchasing Shares and
Investment Management Agreement and Sub-Advisory Agreement for
information about voluntary fee waivers and expense payments in effect
through April 30, 1999.
The performance of Class C Shares, as shown below, is the average
annual total return quotation through October 31, 1997. The average annual total
return for Class C Shares including deferred sales charge reflects the deduction
of the applicable CDSC that would be paid if the shares were redeemed at October
31, 1997. The average annual total return for Class C Shares excluding deferred
sales charge assumes the shares were not redeemed at October 31, 1997 and
therefore does not reflect the deduction of a CDSC.
Average Annual Total Return(2)
Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)
------------- -------------
1 year ended
10/31/97 6.60% 7.60%
Period 1/10/95(1)
through 10/31/97 9.82% 9.82%
(1) Date of initial public offering of Class C Shares.
(2) Reflects fee waivers and payment of expenses in effect during the
periods. Performance would have been lower without the fee waivers and
expense payments. See Plan under Rule 12b-1 under Purchasing Shares and
Investment Management Agreement and Sub-Advisory Agreement for
information about voluntary fee waivers and expense payments in effect
through April 30, 1999.
-9-
<PAGE>
As stated in the Prospectus, the Fund may also quote the current yield
for each Class in advertisements and investor communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula:
a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on the
last day of the period.
The above formula will be used in calculating quotations of yield of
each Class, based on specified 30- day periods identified in advertising by the
Fund. Using this formula, the yields for Class A Shares, Class B Shares, Class C
Shares and Institutional Class Shares for the 30-day period ended October 31,
1997 were 5.32%, 4.83%, 4.85% and 5.59%, respectively. Yield calculations assume
the maximum front-end sales charge, if any, and do not reflect the deduction of
any CDSC or Limited CDSC and also reflect voluntary waivers in effect during the
period. Actual yield may be affected by variations in front-end sales charges on
investments. Past performance, such as is reflected in quoted yields, should not
be considered as a representation of the results which may be realized from an
investment in any class of the Fund in the future.
The average weighted portfolio maturity at October 31, 1997 for the
Fund was 20 years.
Investors should note that the income earned and dividends paid by the
Fund will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of the fund may change. Unlike money market
funds, the Fund invests in longer-term securities that fluctuate in value and do
so in a manner inversely correlated with changing interest rates. The Fund's net
asset value will tend to rise when interest rates fall. Conversely, the Fund's
net asset value will tend to fall as interest rates rise. Normally, fluctuations
in interest rates have a greater effect on the prices of longer-term bonds. The
value of the securities held in the Fund will vary from day to day and investors
should consider the volatility of the Fund's net asset value as well as its
yield before making a decision to invest.
From time to time, the Fund may quote actual total return and/or yield
performance for its Classes in advertising and other types of literature. This
information may be compared to that of other mutual funds with similar
investment objectives and to stock, bond an other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the
-10-
<PAGE>
performance of mutual funds. For example, the performance of the Fund (or Class)
may be compared to data prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc. or the performance of unmanaged indices compiled or maintained
by statistical research firms such as Lehman Brothers or Salomon Brothers, Inc.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The total
return performance reported for these indices will reflect the reinvestment of
all distributions on a quarterly basis and market price fluctuations. The
indices do not take into account any sales charge or other fees. A direct
investment in an unmanaged index is not possible.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well as
unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative purposes. Generally, the indices
selected will be representative of the types of securities in which the Fund may
invest and the assumptions that were used in calculating the blended performance
will be described.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Fund may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Fund. The Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the future.
The Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of the Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic and political conditions, the
relationship between sectors of the economy and the economy as a whole, the
effects of
-11-
<PAGE>
inflation and historical performance of various asset classes, including but not
limited to, stocks, bonds and Treasury bills. From time to time advertisements,
sales literature, communications to shareholders or other materials may
summarize the substance of information contained in shareholder reports
(including the investment composition of the Fund), as well as the views as to
current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. In addition, selected indices may be
used to illustrate historic performance of selected asset classes. The Fund may
also include in advertisements, sales literature, communications to shareholders
or other materials, charts, graphs or drawings which illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, domestic stocks, and/or bonds, treasury bills and shares of the
Fund. In addition, advertisements, sales literature, communications to
shareholders or other materials may include a discussion of certain attributes
or benefits to be derived by an investment in the Fund and/or other mutual
funds, shareholder profiles and hypothetical investor scenarios, timely
information on financial management, tax and retirement planning (such as
information on Roth IRAs and Education IRAs) and investment alternatives to
certificates of deposit and other financial instruments. Such sales literature,
communications to shareholders or other materials may include symbols, headlines
or other material which highlight or summarize the information discussed in more
detail therein.
Materials may refer to the CUSIP numbers of the Fund and may illustrate
how to find the listings of the Fund in newspapers and periodicals. Materials
may also include discussions of other funds, products, and services.
The Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Fund may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. The Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to the Fund may include information
regarding the background and experience of its portfolio managers.
Total return performance for each Class of the Fund will reflect the
appreciation or depreciation of principal, reinvestment of income and any
capital gains distributions paid during any indicated period, and, in the case
of Class A Shares, the impact of the maximum front-end sales charge, if any,
paid on the illustrated investment amount, annualized. Performance of Class A
Shares may also be shown without reflecting the impact of any front-end sales
charge. The results will not reflect any income taxes, if applicable, payable by
shareholders on the reinvested distributions included in the calculations. The
performance of Class B Shares and Class C Shares will be calculated both with
the applicable CDSC included and excluded. The net asset values of the Fund
fluctuate so shares, when redeemed, may be worth more or less than the original
investment, and the Fund's results should not be considered a guarantee of
future performance.
The following tables present examples, for purposes of illustration
only, of cumulative total return performance for each Class of the Fund through
October 31, 1997. For these purposes, the calculations reflect maximum sales
charges, if any, and assume the reinvestment of any realized securities profits
distributions and income dividends paid during the indicated periods. The
performance does not reflect any income taxes payable by shareholders on the
reinvested distributions included in the
-12-
<PAGE>
calculations. The performance of Class A Shares reflects the maximum front-end
sales charge paid on the purchase of shares but may also be shown without
reflecting the impact of any front-end sales charge. The performance of Class B
Shares and Class C Shares is calculated both with the applicable CDSC included
and excluded.
Cumulative Total Return(3)
A Class Consumer Price
(at Offer) Index(4)
---------- --------
3 months ended
10/31/97 (2.49%) 0.69%
6 months ended
10/31/97 2.21%(2) 0.87%
9 months ended
10/31/97 2.38% 1.57%
1 year ended
10/31/97 3.22% 2.08%
3 years ended
10/31/97 26.98% 8.09%
5 years ended
10/31/97 34.04% 13.96%
Period 11/2/87(1)
through 10/31/97 123.94% 40.20%
(1) Date of initial public offering of Class A Shares.
(2) For the six-month period ended October 31, 1997, cumulative total
return for Class A Shares at net asset value was 7.34%.
(3) Reflects fee waivers and payment of expenses in effect during the
periods. Performance would have been lower without the fee waivers and
expense payments. See Plan under Rule 12b-1 under Purchasing Shares and
Investment Management Agreement and Sub-Advisory Agreement for
information about voluntary fee waivers and expense payments in effect
through April 30, 1999.
(4) Source -- Lipper Analytical.
-13-
<PAGE>
Cumulative Total Return(2)
Institutional Consumer Price
Class Index(3)
------------- --------------
3 months ended
10/31/97 2.24% 0.69%
6 months ended
10/31/97 7.24% 0.87%
9 months ended
10/31/97 7.35% 1.57%
1 year ended
10/31/97 8.39% 2.08%
3 years ended
10/31/97 33.37% 8.09%
Period 6/7/94(1)
through 10/31/97 29.83% 9.56%
(1) Date of initial public offering of Institutional Class Shares.
(2) Reflects fee waivers and payment of expenses in effect during the
periods. Performance would have been lower without the fee waivers and
expense payments. See Plan under Rule 12b-1 under Purchasing Shares and
Investment Management Agreement and Sub-Advisory Agreement for
information about voluntary fee waivers and expense payments in effect
through April 30, 1999.
(3) Source -- Lipper Analytical.
-14-
<PAGE>
Cumulative Total Return(2)
<TABLE>
<CAPTION>
B Class B Class Consumer Price
(including CDSC) (excluding CDSC) Index (3)
---------------- ---------------- ---------
<S> <C> <C> <C>
3 months ended
10/31/97 (1.85%) 2.15% 0.69%
6 months ended
10/31/97 2.92% 6.92% 0.87%
9 months ended
10/31/97 2.85% 6.85% 1.57%
1 year ended
10/31/97 3.59% 7.59% 2.08%
3 years ended
10/31/97 27.87% 30.87% 8.09%
Period 6/7/94(1)
through 10/31/97 24.01% 27.01% 9.56%
</TABLE>
(1) Date of initial public offering of Class B Shares.
(2) Reflects fee waivers and payment of expenses in effect during the
periods. Performance would have been lower without the fee waivers and
expense payments. See Plan under Rule 12b-1 under Purchasing Shares and
Investment Management Agreement and Sub-Advisory Agreement for
information about voluntary fee waivers and expense payments in effect
through April 30, 1999.
(3) Source -- Lipper Analytical.
Cumulative Total Return(2)
<TABLE>
<CAPTION>
C Class C Class Consumer Price
(including CDSC) (excluding CDSC) Index (3)
---------------- ---------------- ---------
<S> <C> <C> <C>
3 months ended
10/31/97 1.06% 2.06% 0.69%
6 months ended
10/31/97 5.83% 6.83% 0.87%
9 months ended
10/31/97 5.86% 6.86% 1.57%
1 year ended
10/31/97 6.60% 7.60% 2.08%
Period 1/10/95(1)
through 10/31/97 30.08% 30.08% 7.95%
</TABLE>
(1) Date of initial public offering of Class C Shares.
(2) Reflects fee waivers and payment of expenses in effect during the
periods. Performance would have been lower without the fee waivers and
expense payments. See Plan under Rule 12b-1 under Purchasing Shares and
Investment Management Agreement and Sub-Advisory Agreement for
information about voluntary fee waivers and expense payments in effect
through April 30, 1999.
(3) Source -- Lipper Analytical.
-15-
<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds available from
Delaware Investments, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the Manager's and
Sub-Adviser's overriding investment philosophy and how that philosophy impacts
the Fund's, and other Delaware Investments funds', investment disciplines
employed in seeking their objectives. The Distributor may also from time to time
cite general or specific information about the institutional clients of Delaware
or the Manager, including the number of such clients serviced by Delaware or the
Manager.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Plan, Direct Deposit
Purchase Plan and the Wealth Builder Option -- that can help to keep your
regular investment program on track. See Investing by Electronic Fund Transfer -
Direct Deposit Purchase Plan and Automatic Investing Plan under Investment Plans
and Wealth Builder Option under Investment Plans for a complete description of
these services, including restrictions or limitations.
-16-
<PAGE>
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
------ ------ ---------
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
----- ------ ------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund available from the
Delaware Investments family of funds.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. The Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
-17-
<PAGE>
TRADING PRACTICES AND BROKERAGE
Brokers, dealers and banks are selected to execute transactions for the
purchase or sale of portfolio securities on the basis of the Manager's and
Sub-Adviser's (collectively referred to in this section as the "Manager")
judgment of their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. Trades are generally made on a net basis where
securities are either bought or sold directly from or to a broker, dealer or
bank. In these instances, there is no direct commission charged, but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.
During the fiscal years ended October 31, 1995, 1996 and 1997, no
brokerage commissions were paid by the Fund.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
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 are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
During the fiscal year ended October 31, 1997, there were no portfolio
transactions of the Fund resulting in brokerage commissions directed to brokers
for brokerage and research services.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") and
the Fund's Investment Management Agreement and Sub-Advisory Agreement, 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. Although transactions are directed to
broker/dealers who provide such brokerage and research services, Voyageur Funds,
Inc. believes that the commissions paid to such broker/dealers are not, in
general, higher than commissions that would be paid to broker/dealers not
providing such services and that such commissions are reasonable in relation to
the value of the brokerage and research services provided. In some instances,
services may be provided to the Manager which constitute in some part brokerage
and research services used by the Manager in connection with its investment
decision-making process and constitute in some part services used by the Manager
in connection with administrative or other functions not related to its
investment decision-making process.
-18-
<PAGE>
In such cases, the Manager will make a good faith allocation of brokerage and
research services and will pay out of its own resources for services used by the
Manager in connection with administrative or other functions not related to its
investment decision-making process. In addition, so long as no fund is
disadvantaged, portfolio transactions which generate commissions or their
equivalent are allocated to broker/dealers who provide daily portfolio pricing
services to the Fund and to other funds available from Delaware Investments.
Subject to best price and execution, commissions allocated to brokers providing
such pricing services may or may not be generated by the funds receiving the
pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Voyageur Funds,
Inc.'s Board of Directors that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain expenses of the funds in the Delaware Investments family of
funds, such as custodian fees, and may, at the request of the Distributor, give
consideration to sales of shares of such funds as a factor in the selection of
brokers and dealers to execute portfolio transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general level of
interest rates. The Fund is free to dispose of portfolio securities at any time,
subject to complying with the Code and the 1940 Act, when changes in
circumstances or conditions make such a move desirable in light of the
investment objective. The Fund will not attempt to achieve or be limited to a
predetermined rate of portfolio turnover, such a turnover always being
incidental to transactions undertaken with a view to achieving the Fund's
investment objective. The degree of portfolio activity may affect brokerage
costs of the Fund and taxes payable by the Fund's shareholders to the extent of
any net realized capital gains. The Fund's portfolio turnover rate may exceed
100%. A turnover rate of 100% would occur, for example, if all the investments
in the Fund's portfolio at the beginning of the year were replaced by the end of
the year. The Fund's portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less.
The Fund may hold securities for any period of time. The Fund's
portfolio turnover will be increased if the Fund writes a large number of call
options which are subsequently exercised. The portfolio turnover rate also may
be affected by cash requirements from redemptions and repurchases of Fund
shares. Total brokerage costs generally increase with higher portfolio turnover
rates.
-19-
<PAGE>
The portfolio turnover rate of the Fund was 145% for the fiscal year
ended June 30, 1996, 66% for the period July 1, 1996 through October 31, 1996
and 202% for the fiscal year ended October 31, 1997.
-20-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's
shares and has agreed to use its best efforts to sell shares of the Fund. See
the Prospectus for additional information on how to invest. Shares of the Fund
are offered on a continuous basis, and may be purchased through authorized
investment dealers or directly by contacting Voyageur Funds, Inc. or the
Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. There is no minimum initial or subsequent
purchase amount for Institutional Class Shares. The initial and subsequent
minimum investments for Class A Shares will be waived for purchases by officers,
directors and employees of any Delaware Investments fund, the Manager or any of
the its affiliates if the purchases are made pursuant to a payroll deduction
program. Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Asset Planner service are
subject to a minimum initial investment of $2,000 per Asset Planner Strategy
selected.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Voyageur Funds, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, and that Class A Shares are subject to lower annual 12b-1 Plan expenses
than Class B Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Voyageur Funds, Inc. reserves the right to reject any order for the purchase of
shares of the Fund if in the opinion of management such rejection is in the
Fund's best interests.
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Voyageur Funds, Inc. and the
Distributor intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. Class A Shares are also subject to annual 12b-1 Plan
expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against Class B Shares for
approximately eight years after purchase. Class B Shares will automatically
convert to Class A Shares at the end of approximately eight years after purchase
and, thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of
0.25% of average daily net
-21-
<PAGE>
assets of such shares. See Automatic Conversion of Class B Shares under Classes
of Shares in the Prospectus.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject. Unlike
Class B Shares, Class C Shares do not convert to another class.
Institutional Class Shares are purchased at net asset value without the
imposition of a front-end or contingent deferred sales charge. Institutional
Class Shares are subject to annual 12b-1 Plan expenses for the life of the
investment. However, the Distributor has voluntarily elected to waive its right
to receive 12b-1 fees with respect to Institutional Class Shares acquired by
shareholders on or after March 1, 1998. See Plan Under Rule 12b-1 under
Purchasing Shares, and Determining Offering Price and Net Asset Value in this
Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
Shares represent a proportionate interest in the Fund's assets and will receive
a proportionate interest in the Fund's income, before application, as to Class A
Shares, Class B Shares, Class C Shares and Institutional Class Shares, of any
expenses under the Fund's 12b-1 Plan.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares or in the case of any retirement
plan accounts including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Voyageur Funds, Inc. for any certificate issued. A shareholder may be subject
to fees for replacement of a lost or stolen certificate under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact the Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares of the Fund permit investors to choose the method of
purchasing shares that is most suitable for their needs given the amount of
their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares of
the Fund and incur a front-end sales charge and annual 12b-1 Plan expenses of up
to a maximum of 0.25% of the average daily net assets of Class A Shares or to
purchase either Class B Shares or Class C Shares of the Fund and have the entire
initial purchase amount invested in the Fund with the investment thereafter
subject to a CDSC and annual 12b-1 Plan expenses.
-22-
<PAGE>
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges and may include a series of purchases over
a 13-month period under a Letter of Intention signed by the purchaser. See
Front-End Sales Charge - Class A Shares in the Prospectus for a table
illustrating reduced front-end sales charges. See also Special Purchase Features
- -- Class A Shares, below, for more information on ways in which investors can
avail themselves of reduced front-end sales charges and other purchase features.
Dealer's Commission
As described more fully in the Prospectus, for initial purchases of
Class A Shares of $1,000,000 or more, a dealer's commission may be paid by the
Distributor to financial advisers through whom such purchases are effected. See
Front-End Sales Charge Alternative - Class A Shares in the Prospectus for the
applicable schedule and further details.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. See Waiver of Contingent Deferred Sales Charge - Class B Shares
and Class C Shares under Redemption and Exchange in the Prospectus for a list of
the instances in which the CDSC is waived. During the seventh year after
purchase and, thereafter, until converted automatically into Class A Shares,
Class B Shares will still be subject to the annual 12b-1 Plan expenses of up to
1% of average daily net assets of those shares. At the end of approximately
eight years after purchase, the investor's Class B Shares will be automatically
converted into Class A Shares of the Fund. See Automatic Conversion of Class B
Shares under Classes of Shares in the Prospectus. Such conversion will
constitute a tax-free exchange for federal income tax purposes. See Taxes in the
Prospectus.
Plan Under Rule 12b-1
Pursuant to Rule 12b-1 under the 1940 Act, Voyageur Funds, Inc. has
adopted a plan for each Class (the "Plan"). The Plan permits the Fund to pay for
certain distribution, promotional and related expenses involved in the marketing
of the respective Class of shares.
The Plan permits the Fund, pursuant to its Distribution Agreement, to
pay out of the assets of Class A Shares, Class B Shares, Class C Shares and
Institutional Class Shares monthly fees to the Distributor for its services and
expenses in distributing and promoting sales of shares of such classes. These
expenses include, among other things, preparing and distributing advertisements,
sales literature and prospectuses and reports used for sales purposes,
compensating sales and marketing personnel, and paying distribution and
maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. The Plan expenses relating to Class B Shares and Class C
Shares are also used to
-23-
<PAGE>
pay the Distributor for advancing the commission costs to dealers with respect
to the initial sale of such shares.
In addition, the Fund may make payments out of the assets of Class A
Shares, Class B Shares, Class C Shares and Institutional Class Shares directly
to other unaffiliated parties, such as banks, who either aid in the distribution
of shares of, or provide services to, such classes.
The maximum aggregate fee payable by the Fund under its Plan, and the
Fund's Distribution Agreement, is on an annual basis, up to 0.25% of each of the
Class A Shares' and Institutional Class Shares' average daily net assets for the
year, and up to 1% (0.25% of which are service fees to be paid to the
Distributor, dealers and others for providing personal service and/or
maintaining shareholder accounts) of each of the Class B Shares' and Class C
Shares' average daily net assets for the year. Voyageur Funds, Inc.'s Board of
Directors may reduce these amounts at any time.
The Distributor has elected voluntarily to waive its right to receive
12b-1 Plan fees with respect to Institutional Class Shares acquired by
shareholders on or after March 1, 1998. Thus, so long as the Distributor's
voluntary waiver is in effect, the formula for determining the annual fee
payable on a monthly basis under the Plan with respect to Institutional Class
Shares will be the amount obtained by multiplying 0.25% by the average daily net
assets represented by shares of the Class that were acquired before March 1,
1998. While this is the method for calculating the 12b-1 Plan fee payable by the
Institutional Class, the 12b-1 Plan fee is an Institutional Class expense. As a
result, all Institutional Class shareholders, regardless of when they purchase
their shares, will bear 12b-1 Plan expenses at the same share rate. As the
portion of assets attributable to Institutional Class Shares acquired by
shareholders on or after March 1, 1998 increases, and so long as the
Distributor's voluntary waiver is in effect, this figure will decrease.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A Shares, Class B Shares, Class C Shares and Institutional Class Shares would be
borne by such persons without any reimbursement from the Classes. Subject to
seeking best price and execution, the Fund may, from time to time, buy or sell
portfolio securities from or to firms which receive payments under the Plan.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan and the Distribution Agreement, as amended, have been approved
by the Board of Directors of Voyageur Funds, Inc., including a majority of the
directors who are not "interested persons" (as defined in the 1940 Act) of
Voyageur Funds, Inc. and who have no direct or indirect financial interest in
the Plan, by vote cast in person at a meeting duly called for the purpose of
voting on the Plan and such Agreements. Continuation of the Plan and the
Distribution Agreements, as amended, must be approved annually by the Board of
Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plan is in the best interest of shareholders of the Classes of the Fund and that
there is a reasonable likelihood of the Plan providing a benefit to the Classes.
The Plan and the Distribution Agreement, as amended, may be terminated at any
time without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
Classes. Any amendment materially increasing the
-24-
<PAGE>
percentage payable under the Plan must likewise be approved by a majority vote
of the outstanding voting securities of the Classes, as well as by a majority
vote of those directors who are not "interested persons." Also, any material
amendment to the Plan must be approved by a majority vote of the directors
including a majority of the noninterested directors of Voyageur Funds, Inc.
having no interest in the Plan. In addition, in order for the Plan to remain
effective, the selection and nomination of directors who are not "interested
persons" of Voyageur Funds, Inc. must be effected by the directors who
themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plan. Persons authorized to make payments under the
Plan must provide written reports at least quarterly to the Board of Directors
for their review.
For the fiscal year ended October 31, 1997, payments from Class A
Shares, Class B Shares, Class C Shares and Institutional Class Shares of the
Fund amounted to $157,056, $22,868, $1,983 and $122,782, respectively.
For the period May 1, 1997 through October 31, 1997, 12b-1 Plan
payments were used for the following purposes:
<TABLE>
<CAPTION>
A Class B Class C Class Institutional Class
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Advertising $ --- $ --- $--- $ ---
Annual/Semi-Annual Reports $ --- $ --- $--- $ ---
Broker Trails $100,733 $2,804 $786 $59,397
Broker Sales Charges $ --- $5,424 $497 $ ---
Dealer Service Expenses $ --- $ --- $ 8 $ ---
Interest on Broker Sales Charges $ --- $2,425 $134 $ ---
Commissions to Wholesalers $ --- $ --- $--- $ ---
Promotional-Broker Meetings $ --- $ 33 $ 5 $ ---
Promotional-Other $ --- $ --- $--- $ ---
Prospectus Printing $ --- $ --- $--- $ ---
Telephone $ --- $ 12 $--- $ ---
Wholesaler Expenses $ --- $ 522 $ 17 $ ---
Other $ --- $ --- $--- $ ---
</TABLE>
Other Payments to Dealers
From time to time, at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an additional
payment of up to 0.25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the funds in Delaware Investments. In some instances, these incentives
or payments may be offered only to certain dealers who maintain, have sold or
may sell certain amounts of shares. The Distributor may also pay a portion of
the expense of preapproved dealer advertisements promoting the sale of Delaware
Investments fund shares.
-25-
<PAGE>
Special Purchase Features--Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Voyageur Funds,
Inc., any other fund available from Delaware Investments, the Manager, or any of
the Manager's current affiliates and those that may in the future be created,
legal counsel to the funds, and registered representatives and employees of
broker/dealers who have entered into Dealer's Agreements with the Distributor
may purchase Class A Shares of the Fund and any such class of shares of any of
the other funds available from Delaware Investments, including any fund that may
be created, at the net asset value per share. Family members (regardless of age)
of such persons at their direction, and any employee benefit plan established by
any of the foregoing funds, corporations, counsel or broker/dealers may also
purchase Class A Shares at net asset value. Class A Shares may also be purchased
at net asset value by current and former officers, directors and employees (and
members of their families) of the Dougherty Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware
Investments funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment adviser
has entered into an agreement with the Distributor providing specifically for
the purchase of Class A Shares in connection with special investment products,
such as wrap accounts or similar fee based programs. Such purchasers are
required to sign a letter stating that the purchase is for investment only and
that the securities may not be resold except to the issuer. Such purchasers may
also be required to sign or deliver such other documents as Voyageur Funds, Inc.
may reasonably require to establish eligibility for purchase at net asset value.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their customers
when they are not eligible to purchase shares of the Institutional Class of the
Fund; and any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of Delaware Investments funds and any stable
value product available through Delaware Investments, or (ii) is sponsored by an
employer that has at any point after May 1, 1997 had more than 100 employees
while such plan has held Class A Shares of a Delaware Investments fund and such
employer has properly represented to DIRSI in writing that it has the requisite
number of employees and has received written confirmation back from DIRSI.
-26-
<PAGE>
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds available from Delaware Investments at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Investments account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
Voyageur Funds, Inc. must be notified in advance that an investment
qualifies for purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Voyageur Funds, Inc., which provides for the holding in escrow by the
Transfer Agent of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Fund and of any class of
any of the other mutual funds available from Delaware Investments (except shares
of any Delaware Investments fund which do not carry a front-end sales charge,
CDSC or Limited CDSC, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from a Delaware
Investments fund which carried a front-end sales charge, CDSC or Limited CDSC)
previously purchased and still held as of the date of their Letter of Intention
toward the completion of such Letter. For purposes of satisfying an investor's
obligation under a Letter of Intention, Class B Shares and Class C Shares of a
Fund and the corresponding classes of shares of other Delaware Investments funds
which offer such shares may be aggregated with Class A Shares of the Fund and
the corresponding class of shares of the other Delaware Investments funds.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments in Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of
-27-
<PAGE>
Intention is not fulfilled within the 13-month period, the plan level will be
adjusted (without completing another Letter of Intention) and the employer will
be billed for the difference in front-end sales charges due, based on the plan's
assets under management at that time. Employers may also include the value (at
offering price at the level designated in their Letter of Intention) of all
their shares intended for purchase that are offered with a front-end sales
charge, CDSC or Limited CDSC of any class. Class B Shares and Class C Shares of
the Fund and other Delaware Investments funds which offer corresponding classes
of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Fund, as well as shares of any other class of any of the other
Delaware Investments funds (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or shares of any other
of the classes described in the previous sentence with a value of $40,000 and
subsequently purchases $60,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $60,000 purchase would currently be 3.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of the Fund who redeem such shares have one
year from the date of redemption to reinvest all or part of their redemption
proceeds in Class A Shares of the Fund or in Class A Shares of any of the other
funds available from Delaware Investments, subject to applicable eligibility and
minimum purchase requirements, in states where shares of such other funds may be
sold, at net asset value without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares
-28-
<PAGE>
where the redemption of the shares triggered the payment of a Limited CDSC.
Persons investing redemption proceeds from direct investments in mutual funds
available from Delaware Investments offered without a front-end sales charge
will be required to pay the applicable sales charge when purchasing Class A
Shares. The reinvestment privilege does not extend to a redemption of Class B
Shares, Class C Shares or Institutional Class Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Fund's shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectus) in connection with the features
described above.
-29-
<PAGE>
Group Investment Plans
Group Investment Plans may also benefit from the reduced front-end
sales charges for investments in Class A Shares set forth in the Prospectus,
based on total plan assets. If a company has more than one plan investing in the
Delaware Investments family of funds, then the total amount invested in all
plans would be used in determining the applicable front-end sales charge
reduction upon each purchase, both initial and subsequent, upon notification to
the Fund in which the investment is being made at the time of each such
purchase. Employees participating in such Group Investment Plans may also
combine the investments made in their plan account when determining the
applicable front-end sales charge on purchases to non-retirement investment
accounts in Delaware Investments if they so notify the Fund in connection with
each purchase. See Retirement Plans for the Fund Classes under Investment Plans
for information about Retirement Plans.
Institutional Class
Institutional Class Shares are available to a limited group of
investors with no sales charge at the time of purchase and no contingent
deferred sales charge upon redemption. Institutional Class Shares are subject to
a Rule 12b-1 fee payable at an annual rate of 0.25% of the Fund's average daily
net assets attributable to Institutional Class Shares. See Distribution (12b-1)
and Service under Purchasing Shares for a discussion of the Distributor's
voluntary waiver of the fee with respect to Institutional Class Shares acquired
on or after March 1, 1998.
The investors who may purchase Institutional Class Shares include: (a)
officers and directors of the Fund; (b) officers, directors and full-time
employees of the Adviser or Sub-Adviser, and officers, directors and full-time
employees of parents and subsidiaries of the foregoing companies; (c) officers,
directors and full-time employees of investment advisers of other mutual funds
subject to a sales charge and included in any other family of mutual funds that
includes any Voyageur Fund or Delaware Investments Fund as a member ("Other Load
Funds"), and officers, directors and full-time employees of parents,
subsidiaries and corporate affiliates of such investment advisers; (d) spouses
and lineal ancestors and descendants of the officers, directors/trustees and
employees referenced in clauses (a), (b) and (c), and lineal ancestors and
descendants of their spouses; (e) investment executives and other employees of
banks and dealers that have selling agreements with the Underwriter and parents,
spouses and children under the age of 21 of such investment executives and other
employees; (f) trust companies and bank trust departments for funds held in a
fiduciary, agency, advisory, custodial or similar capacity; (g) any state or any
political subdivision thereof or any instrumentality, department, authority or
agency of any state or political subdivision thereof; (h) partners and full-time
employees of the Fund's counsel; (i) managed account clients of the Adviser or
Sub-Adviser, clients of investment advisers affiliated with the Adviser or
Sub-Adviser and other registered investment advisers and their clients (the Fund
may be available through a broker-dealer which charges a transaction fee for
purchases and sales); (j) tax-qualified employee benefit plans for employees of
the Adviser or Sub-Adviser and their subsidiaries and (k) employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") (which does not include Individual Retirement Accounts) and
custodial accounts under Section 403(b)(7) of the Code (also known as
tax-sheltered annuities).
-30-
<PAGE>
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Class A Shares, Class B Shares or Class C Shares in which an investor has an
account (based on the net asset value in effect on the reinvestment date) and
will be credited to the shareholder's account on that date. All dividends and
distributions of the Institutional Class will be reinvested in the accounts of
the holders of such shares (based on the net asset value in effect on the
reinvestment date). A confirmation of each distribution from realized securities
profits, if any, will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase
and add full and fractional shares to their plan accounts at any time either
through their investment dealers or by sending a check or money order to the
specific Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectus
and this Part B, are made, for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and Institutional Class Shares at the net
asset value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect against
depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Investments Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds available from Delaware Investments,
including the Fund, in states where their shares may be sold. Such investments
will be at net asset value at the close of business on the reinvestment date
without any front-end sales charge or service fee. The shareholder must notify
the Transfer Agent in writing and must have established an account in the fund
into which the dividends and/or distributions are to be invested. Any
reinvestment directed to a fund in which the investor does not then have an
account will be treated like all other initial purchases of a fund's shares.
Consequently, an investor should obtain and read carefully the prospectus for
the fund in which the investment is intended to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses. See also Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares in the
Prospectus.
Subject to the following limitations, dividends and/or distributions
from other funds available from Delaware Investments may be invested in shares
of the Class A Shares, Class B Shares or Class C Shares of the Fund, provided an
account has been established. Dividends from Class A Shares may not be directed
to Class B Shares or Class C Shares or Institutional Class Shares of the Fund.
Dividends from Class B Shares may be directed only to other Class B Shares and
dividends from Class C Shares may be directed only to other Class C Shares.
Dividends from Institutional Class Shares may be directed only to Institutional
Class shares of the Fund.
Capital gains and/or dividend distributions to participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
-31-
<PAGE>
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan -- Investors may arrange for the Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
Automatic Investing Plan -- Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit into
their Fund account. This type of investment will be handled in either of the
following ways. (1) If the shareholder's bank is a member of the National
Automated Clearing House Association ("NACHA"), the amount of the investment
will be electronically deducted from his or her account by Electronic Fund
Transfer ("EFT"). The shareholder's checking account will reflect a debit each
month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
the Fund may liquidate sufficient shares from a shareholder's account to
reimburse the government or the private source. In the event there are
insufficient shares in the shareholder's account, the shareholder is expected to
reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Voyageur Funds, Inc. for
proper instructions.
-32-
<PAGE>
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Class
A Shares, Class B Shares or Class C Shares of the Fund through regular
liquidations of shares in their accounts in other mutual funds available from
Delaware Investments. Shareholders of Class A Shares, Class B Shares or Class C
Shares may elect to invest in one or more of the other mutual funds available
from Delaware Investments through the Wealth Builder Option. See Wealth Builder
Option and Redemption and Exchange in the Prospectus.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds available from
Delaware Investments, subject to the conditions and limitations set forth in the
Prospectus. The investment will be made on the 20th day of each month (or, if
the fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete a Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange in the
Prospectus. Also see Buying Class A Shares at Net Asset Value under Classes of
Shares. The minimum initial investment per Strategy is $2,000; subsequent
investments must be at least $100. Individual fund minimums do not apply to
investments made using the Asset Planner service. Class A, Class B and Class C
Shares are
-33-
<PAGE>
available through the Asset Planner service. Generally, only shares within the
same class may be used within the same Strategy. However, Class A Shares of the
Fund and of other funds available from Delaware Investments may be used in the
same Strategy with consultant class shares that are offered by certain other
Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans
An investment in Class A Shares, Class B Shares and Class C Shares may
be suitable for tax-deferred retirement plans. Delaware Investments offers a
full spectrum of qualified and non-qualified retirement plans, including the
401(k) deferred compensation plan, Individual Retirement Account ("IRA"), and
the new Roth IRA. Among the retirement plans the Delaware Investments offers,
Class B Shares are available for investment only by Individual Retirement
Accounts, SIMPLE IRAs, Roth IRAs, Education IRAs, Simplified Employee Pension
Plans, Salary Reduction Simplified Employee Pension Plans, 457 Deferred
Compensation Plans and 403(b)(7) Deferred Compensation Plans.
The CDSC may be waived on certain redemptions of Class B Shares and
Class C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares
and Class C Shares under Redemption and Exchange in the Prospectuses for the
Fund Classes for a list of the instances in which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans, other than Individual Retirement Accounts for
which there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25, regardless of which class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such plans.
-34-
<PAGE>
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. For
additional information on any of the plans and Delaware's retirement services,
call the Shareholder Service Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans may be subject to
withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section 401(k),
profit sharing or money purchase pension plans.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an
IRA and make contributions which may be tax-deductible, even if the individual
is already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or, for years prior to
1997, elects to be treated as having no compensation for the year.
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income and whether the taxpayer or his or her spouse is an active
participant in an employer-sponsored retirement plan. Even if a taxpayer (or his
or her spouse) is an active participant in an employer-sponsored retirement
plan, the full $2,000 deduction is still available if the taxpayer's adjusted
gross income is below $25,000 ($40,000 for taxpayers filing joint returns). A
partial deduction is allowed for married couples with incomes between $40,000
and $50,000, and for single individuals with incomes between $25,000 and
$35,000. No deductions are available for contributions to IRAs by taxpayers
whose adjusted gross income before IRA deductions exceeds $50,000 ($35,000 for
singles) and who are active participants in an employer-sponsored retirement
plan. Taxpayers who are not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
-35-
<PAGE>
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares for
information on reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge - Class B
Shares and Class C Shares under Classes of Shares, and Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares under Redemption and Exchange
in the Prospectus concerning the applicability of a CDSC upon redemption.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may be maintained by employers having 25 or fewer
employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are available to
enable employers to establish a plan. An employer may also elect to make profit
sharing contributions and/or matching contributions with investments in shares
of the Fund or certain other funds available from Delaware Investments.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the
Prospectus.
-36-
<PAGE>
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and
certain non-profit organizations to use mutual fund shares held in a custodial
account to fund deferred compensation arrangements for their employees. A
custodial account agreement is available for those employers who wish to
purchase shares of the Fund in conjunction with such an arrangement. Applicable
front-end sales charges with respect to Class A Shares for such purchases are
set forth in the Prospectus.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Applicable front-end sales charges for
such purchases of Class A Shares are set forth in the Prospectus.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors
are limited to 100 employees and, in exchange for mandatory plan sponsor
contributions, discrimination testing is no longer required.
-37-
<PAGE>
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund, its agent, designee, or certain other
authorized persons. See Distribution and Service under Investment Management
Agreement. Orders for purchases of Class B Shares, Class C Shares and
Institutional Class Shares are effected at the net asset value per share next
calculated by the fund in which shares are being purchased after receipt of the
order by the Fund, its agent, designee, or other authorized persons. Selling
dealers are responsible for transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable front-end sales charges. Offering price and net
asset value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open. The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for the days when the following holidays are
observed: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the Fund will generally
be closed, pricing calculations will not be made and purchase and redemption
orders will not be processed.
An example showing how to calculate the net asset value per share, and
in the case of Class A Shares, the offering price per share, is included in the
Fund's financial statements which are incorporated by reference into Part B.
The Fund's net asset value per share is computed by adding the value
of all the Fund's securities and other assets, deducting any liabilities of the
Fund, and dividing by the number of Fund shares outstanding. Expenses and fees
are accrued daily. Portfolio securities, except for bonds, which are primarily
traded on a national or foreign securities exchange are valued at the last sale
price on that exchange. Options are valued at the last reported sales price or,
if no sales are reported, at the mean between bid and asked prices. Securities
not traded on a particular day, over-the-counter securities and government and
agency securities are valued at the mean value between bid and asked prices.
Money market instruments having a maturity of less than 60 days are valued at
amortized cost. Debt securities (other than short-term obligations) are valued
on the basis of valuations provided by a pricing service when such prices are
believed to reflect the fair value of such securities. Use of a pricing service
has been approved by the Board of Directors. Prices provided by a pricing
service take into account appropriate factors such as institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. If no quotations are
available, all other securities and assets are valued at fair value as
determined in good faith and in a method approved by the Board of Directors.
Each Class of the Fund will bear, pro-rata, all of the common expenses
of the Fund. The net asset values of all outstanding shares of each Class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that Class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes. Due
to the specific distribution expenses and other costs that may be
-38-
<PAGE>
allocable to each Class, the dividends paid to each Class may vary. The net
asset value per share of each Class is expected to be equivalent.
-39-
<PAGE>
REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class Shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. The Fund reserves the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Fund may request further documentation from
corporations, retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Fund, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the Fund, its agent, or
certain other authorized persons, subject to any applicable CDSC or Limited
CDSC. See Distribution and Service under Investment Management Agreement. This
is computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value. The Fund and the
Distributor end their business days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectus. Class B Shares are subject to a CDSC
of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class C Shares are
subject to a CDSC of 1% if shares are redeemed within 12 months following
purchase. See Contingent Deferred Sales Charge Class B Shares and Class C Shares
under Classes of Shares in the Prospectus. Except for the applicable CDSC or
Limited CDSC and, with respect to the expedited payment by wire described below
for which, in the case of Class A Share, Class B Shares and Class C Shares,
there is currently a $7.50 bank wiring cost, neither the Fund nor the Fund's
-40-
<PAGE>
Distributor charges a fee for redemptions or repurchases, but such fees could be
charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next
business day, but in no case later than seven days, after receipt of a
redemption request in good order; provided, however, that each commitment to
mail or wire redemption proceeds by a certain time, as described below, is
modified by the qualifications described in the next paragraph.
The Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the check has cleared. This potential delay can
be avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Fund fairly to value its
assets, or in the event that the SEC has provided for such suspension for the
protection of shareholders, the Fund may postpone payment or suspend the right
of redemption or repurchase. In such case, the shareholder may withdraw the
request for redemption or leave it standing as a request for redemption at the
net asset value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Voyageur
Funds, Inc. has elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the Fund during any 90-day period
for any one shareholder.
The value of the Fund's investments is subject to changing market
prices. Thus, a shareholder reselling shares to the Fund may sustain either a
gain or loss, depending upon the price paid and the price received for such
shares.
Small Accounts
Before the Fund involuntarily redeems shares from an account that,
under the circumstances noted in the Prospectus, has remained below the minimum
amounts required by the Prospectus and sends the proceeds to the shareholder,
the shareholder will be notified in writing that the value of the shares in the
account is less than the minimum required and will be allowed 60 days from the
date of notice to make an additional investment to meet the required minimum.
See The Conditions of Your Purchase under How to Buy Shares in the Prospectus.
Any redemption in an inactive account established with a
-41-
<PAGE>
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
* * *
The Fund has made available certain redemption privileges, as
described below. The Fund reserves the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders or their investment dealers of record wishing to redeem
any amount of shares of $50,000 or less for which certificates have not been
issued may call the Shareholder Service Center at 800-523-1918 prior to the time
the offering price and net asset value are determined, as noted above, and have
the proceeds mailed to them at the address of record. Checks payable to the
shareholder(s) of record will normally be mailed the next business day, but no
later than seven days, after the receipt of the redemption request. This option
is only available to individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the Fund before the request is received. Payment will
be made by wire or check to the bank account designated on the authorization
form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption of Class A Shares, Class B Shares or Class C Shares. If
the proceeds are wired to the shareholder's account at a bank which is not a
member of the Federal Reserve System, there could be a delay in the crediting of
the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the Fund
and a signature guarantee may be required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
-42-
<PAGE>
If expedited payment under these procedures could adversely affect the
Fund, the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Fund's Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders are generally tape recorded. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone.
Systematic Withdrawal Plans
Shareholders who own or purchase $5,000 or more of shares at the
offering price, or net asset value, as applicable, for which certificates have
not been issued may establish a Systematic Withdrawal Plan for monthly
withdrawals of $25 or more, or quarterly withdrawals of $75 or more, although
the Fund does not recommend any specific amount of withdrawal. Shares purchased
with the initial investment and through reinvestment of cash dividends and
realized securities profits distributions will be credited to the shareholder's
account and sufficient full and fractional shares will be redeemed at the net
asset value calculated on the third business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may, in time, be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of the
Delaware Investments' retirement plans or is investing in Delaware Investments
funds which do not carry a sales charge. Redemptions of Class A Shares pursuant
to a Systematic Withdrawal Plan may be subject to a Limited CDSC if the purchase
was made at net asset value and a dealer's commission has been paid on that
purchase. Redemptions of Class B Shares or Class C Shares pursuant to a
Systematic Withdrawal Plan may be subject to a CDSC, unless the annual amount
selected to be withdrawn is less than 12% of the account balance on the date
that the Systematic Withdrawal Plan was established. See Waiver of Contingent
Deferred Sales Charge - Class B Shares and Class C Shares and Waiver of Limited
-43-
<PAGE>
Contingent Deferred Sales Charge - Class A Shares under Redemption and Exchange
in the Prospectus. Shareholders should consult their financial advisers to
determine whether a Systematic Withdrawal Plan would be suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must
complete an authorization form. If the recipient of Systematic Withdrawal Plan
payments is other than the registered shareholder, the shareholder's signature
on this authorization must be guaranteed. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
Class Shares.
DISTRIBUTIONS AND TAXES
The Fund declares a dividend to shareholders of each Class from net
investment income on a daily basis. Dividends are declared each day the Fund is
open and paid monthly. Net investment income earned on days when the Fund is not
open will be declared as a dividend on the next business day. Purchases of
shares of the Fund by wire begin earning dividends when converted into Federal
Funds and are available for investment, normally the next business day after
receipt. However, if the Fund is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor satisfying the
Fund's credit policies, the purchase will start earning dividends on the date
the wire is received. Investors desiring to guarantee wire payments must have an
acceptable financial condition and credit history in the sole discretion of the
Fund. Voyageur Funds, Inc. reserves the right to terminate this option at any
time. Purchases by check earn dividends upon conversion to Federal Funds,
normally one business day after receipt.
Each Class of shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that Class A Shares, Class B
Shares, Class C Shares and Institutional Class Shares will each bear
distribution fees payable under their respective 12b-1 Plans.
Dividends are automatically reinvested in additional shares of the
same Class of the Fund at net asset value, unless, in the case of Class A
Shares, Class B Shares and Class C Shares, an election to receive dividends in
cash has been made. Payment by check of cash dividends will ordinarily be mailed
within three business days after the payable date. Dividend payments of $1.00 or
less will be automatically reinvested, notwithstanding a shareholder's election
to receive dividends in cash. If such a shareholder's dividends increase to
greater than $1.00, the shareholder would have to file a new election in order
to begin receiving dividends in cash again. If a shareholder redeems an entire
account, all dividends accrued to the time of the withdrawal will be paid by
separate check at the end of that particular monthly dividend period, consistent
with the payment and mailing schedule described above. Any check in payment of
dividends or other distributions which cannot be delivered by the United States
Post Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. The Fund may deduct
from a shareholder's account the costs of the Fund's effort to locate a
shareholder if a shareholder's mail is returned by the United States Post Office
or the Fund is otherwise unable to locate the shareholder or verify the
shareholder's mailing address. These costs may
-44-
<PAGE>
include a percentage of the account when a search company charges a percentage
fee in exchange for their location services.
Any distributions from net realized securities profits will be made
twice a year. Payment would be made during the first quarter of the next fiscal
year. Such distributions will be reinvested in shares, unless the shareholders
elect to receive them in cash. The Fund will mail a quarterly statement showing
the dividends paid and all the transactions made during the period.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), the Fund is
required to track its sales of portfolio securities and to report its capital
gain distributions to you according to the following categories of holding
periods:
"Pre-Act long-term capital gains": securities sold by the Fund before
May 7, 1997, that were held for more than 12 months. These gains will
be taxable to individual investors at a maximum rate of 28%.
"Mid-term capital gains" or "28 percent rate gain": securities sold by
the Fund after July 28, 1997 that were held more than one year but not
more than 18 months. These gains will be taxable to individual
investors at a maximum rate of 28%.
"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold by the Fund between May 7, 1997 and July 28, 1997 that
were held for more than 12 months, and securities sold by the Fund
after July 28, 1997 that were held for more than 18 months. These
gains will be taxable to individual investors at a maximum rate of 20%
for investors in the 28% or higher federal income tax brackets, and at
a maximum rate of 10% for investors in the 15% federal income tax
bracket.
"Qualified 5-year gains": For individuals in the 15% bracket,
qualified 5-year gains are net gains on securities held for more than
5 years which are sold after December 31, 2000. For individual who are
subject to tax at higher rate brackets, qualified 5-year gains are net
gains on securities which are purchased after December 31, 2000 and
are held for more than 5 years. Taxpayers subject to tax at a higher
rate brackets may also make an election for shares held on January 1,
2001 to recognize gain on their shares in order to qualify such shares
as qualified 5- year property. These gains will be taxable to
individual investors at a maximum rate of 18% for investors in the 28%
or higher federal income tax brackets, and at a maximum rate of 8% for
investors in the 15% federal income tax bracket..
See also Accounting and Tax Issues in this Part B.
-45-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the supervision
and direction of Voyageur Funds, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in
Delaware Investments since 1938. On October 31, 1997, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $38 billion in assets in
the various institutional or separately managed (approximately $16,012,252,000)
and investment company (approximately $22,496,609,000) accounts.
Prior to May 1, 1997, Voyageur Fund Managers, Inc. ("Voyageur") had
been retained under an investment advisory contract to act as the Fund's
investment adviser, subject to the authority of the board of directors. Voyageur
was an indirect, wholly-owned subsidiary of Dougherty Financial Group, Inc.
("DFG"). After the close of business on April 30, 1997, Voyageur became an
indirect, wholly owned subsidiary of Lincoln National as a result of Lincoln
National's acquisition of DFG.
Because Lincoln National's acquisition of DFG resulted in a change of
control of Voyageur, the Fund's previous investment advisory agreement with
Voyageur was "assigned", as that term is defined by the 1940 Act, and the
previous agreement therefore terminated upon the completion of the acquisition.
The board of directors of Voyageur Funds, Inc. unanimously approved new advisory
agreements at a meeting held in person on February 14, 1997, and called for a
shareholders meeting to approve the new agreements. At a meeting held on April
11, 1997, the shareholders of the Fund approved its Investment Management
Agreement with Voyageur, an indirect wholly-owned subsidiary of Lincoln
National, to become effective after the close of business on April 30, 1997, the
date the acquisition was completed. On May 30, 1997, Voyageur was merged into
the Manager and the Manager became the investment manager for the Fund.
Beginning May 1, 1997, Delaware Management Company, Inc. became the
Fund's Investment Manager and Voyageur Asset Management LLC became the
sub-adviser. The Investment Management Agreement into which the Fund's Manager
has entered has an initial term of two years and may be renewed each year only
so long as such renewal and continuance are specifically approved at least
annually by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Fund, and only if the terms and the renewal thereof
have been approved by the vote of a majority of the directors of Voyageur Funds,
Inc. who are not parties thereto or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval. The
Agreement is terminable without penalty on 60 days' notice by the directors of
Voyageur Funds, Inc. or by the Manager. The Agreement will terminate
automatically in the event of its assignment.
Under its Investment Management Agreement, the Manager is entitled to
receive an annual fee equal to 0.50% of the Fund's average daily net assets.
Pursuant to the terms of a Sub-Advisory Agreement with the Manager,
the Sub-Adviser participates in the management of the Fund's assets, is
responsible for day-to-day investment management of the Fund, makes investment
decisions for the Fund in accordance with the Fund's investment objectives and
stated policies and places orders on behalf of the Fund to effect the investment
-46-
<PAGE>
decisions made with Voyageur Funds, Inc.'s Trading Department. The Manager
continues to have ultimate responsibility for all investment advisory services
in connection with the management of the Fund pursuant to the Investment
Management Agreement and supervises the Sub-Adviser's performance of such
services. For the services provided to the Manager, the Manager pays the
Sub-Adviser a fee equal to one-half of the actual fee paid to the Manager under
the terms of the Investment Management Agreement.
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement.
In connection with the merger transaction described above, the Manager
has agreed for the period from May 1, 1997 through April 30, 1999, to
voluntarily waive that portion, if any, of the annual management fees payable by
the Fund and to pay the Fund's expenses to the extent necessary to ensure that
the Fund's total operating expenses (excluding 12b-1 Plan fees, interest
expense, taxes, brokerage fees and commissions) do not exceed, on an annual
basis, 1.00% of the average daily net assets of each Class of the Fund. This
agreement replaces a similar provision in the Funds' investment advisory
contracts with the Funds' predecessor investment adviser. The Manager and the
Distributor reserve the right to voluntarily waive their fees in whole or part
and to voluntarily pay or reimburse certain other of the Fund's expenses. This
agreement replaces a similar provision in the Fund's investment advisory
contracts with the Fund's predecessor investment adviser.
On October 31, 1997, the total net assets of Voyageur Funds, Inc. were
$100,196,465.
Investment management fees incurred by the Fund for the last 3 fiscal
years follow:
Period Incurred Paid Waived
------ -------- ---- ------
Year Ended
October 31, 1997 $568,682 $476,490 $92,192
Period Ended
October 31, 1996 $187,687 $187,687 -0-
Year Ended
June 30, 1996 $609,965 $608,359 $ 1,606
Year Ended
June 30, 1995 $647,382 $644,663 $ 2,719
For the period May 1, 1997 through October 31, 1997, the Manager paid
the Sub-Adviser $273,401.
Under the general supervision of the Board of Directors, the Manager
makes and executes all investment decisions for the Fund. The Manager pays the
salaries of all directors, officers and employees of Voyageur Funds, Inc. who
are affiliated with the Manager. The Fund pays all of its other expenses.
-47-
<PAGE>
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 1818 Market
Street, Philadelphia, PA 19103, serves as the national distributor of the Fund's
shares under a Distribution Agreement dated March 1, 1997. The Distributor is an
affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by the Fund on behalf of Class A Shares, Class
B Shares and Class C Shares under the 12b-1 Plan. See Distribution (12b-1) and
Service under Purchasing Shares for a discussion of the Distributor's waiver
with respect to Institutional Class Shares. The Distributor is an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to an Amended and Restated Shareholders Services Agreement dated as of
April 30, 1997. The Transfer Agent also provides accounting services to the Fund
pursuant to the terms of a separate Fund Accounting Agreement. The Transfer
Agent is also an indirect, wholly owned subsidiary of Delaware Management
Holdings, Inc.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order.
-48-
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Voyageur Funds, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Voyageur Funds, Inc. hold identical
positions in each of the other funds in Delaware Investments. On January 31,
1998, Voyageur Funds, Inc.'s officers and directors owned less than 1% of the
outstanding shares of Class B, Class C and Institutional Class of the Fund and
approximately 2% of the outstanding shares of Class A of the Fund.
As of January 31, 1998, management believes the following shareholders
held 5% or more of the outstanding shares of a Class:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
US Government Securities MN State Armory Bldg. Commission 313,075 6.58%
Fund A Class Attn: Terry Palmer
Veterans Service Building
20 West 12th Street
St. Paul, MN 55155
City of Kentwood 286,296 6.02%
Attn: Tom Chase
4900 Breton Avenue SE
P.O. Box 8848
Kentwood, MI 49508
Delta County Memorial Hospital 241,802 5.08%
100 Stafford Lane
P.O. Box 10100
Delta, CO 81416
US Government Securities Merrill Lynch, Pierce, Fenner & Smith 32,158 14.09%
Fund B Class For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive, East - 3rd Floor
Jacksonville, FL 32246
BNC Partnership 26,169 11.46%
Attn: Mike Schmitz
c/o BNC National Bank Trust Dept.
322 East Main Street
Bismarck, ND 58501
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
US Government Securities Jeanne K. Kinkade 14,955 6.55%
Fund B Class In Care of Allen Mitchem POA
1375 High Street, Unit 1003
Denver, CO 80218
A.G. Edwards & Sons, Inc. C/F 12,176 5.33%
Carl Troy Brown, Jr.
Rollover IRA Account
3509 South 88th East Avenue
Tulsa, OK 74145
US Government Securities Paine Webber 7,937 66.02%
Fund C Class For the Benefit of Paine Webber CDN FBO
Daniel W. Drake
P.O. Box 3321
Weehawken, NJ 07087
Roselyn A. Jesme 2,068 17.20%
Tod Paulette Wiesen et al.
202 8th Street West
Canby, MN 56220
Gerald J. Thompson 1,778 14.78%
Charlotte B. Thompson JTTEN
110 East Fifth Street
Canby, MN 56220
US Government Securities Bankers Trust Co. as Trustee for 2,537,641 62.94%
Fund Institutional Class Public Service Electric & Gas Co.
Master Employee Benefit Plan
34 Exchange Place
Attn: Donna Dekowski
New Jersey, NJ 07303
City of Rapid City, SD 789,990 19.59%
Attn: James Preston/Colleen Schmidt
300 Sixth Street
Rapid City, SD 57701
</TABLE>
-50-
<PAGE>
DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Delaware International Holdings Ltd.,
Founders Holdings, Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. DMH and the
Manager are now indirect, wholly owned subsidiaries, and subject to the ultimate
control, of Lincoln National. Lincoln National, 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.
Directors and principal officers of Voyageur Funds, Inc. are noted
below along with their ages and their business experience for the past five
years. Unless otherwise noted, the address of each officer and director is One
Commerce Square, Philadelphia, PA 19103.
*Wayne A. Stork (60)
Chairman and Director and/or Trustee of Voyageur Funds, Inc. and each
of the other 33 investment companies in Delaware Investments,
Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, 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. and Delaware International
Holdings Ltd.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Chief Executive Officer of Delvoy, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
*Jeffrey J. Nick (44)
President, Chief Executive Officer, Director and/or Trustee of Voyageur
Funds, Inc. and each of the 33 other investment companies in
Delaware Investments.
President, Chief Executive Officer and Director of Delaware Management
Holdings, Inc. and Lincoln National Investment Companies, Inc.
President of Lincoln Funds Corporation.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln
National UK plc and from 1989 to 1992, he was Senior Vice
President responsible for corporate planning and development
for Lincoln National Corporation.
- ----------
*Director affiliated with the Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
-51-
<PAGE>
Richard G. Unruh, Jr. (58)
Executive Vice President of Voyageur Funds, Inc. and each of the other
33 investment companies in Delaware Investments, Delaware
Management Holdings, Inc. and Delaware Capital Management,
Inc.
Executive Vice President and Director of Delaware Management Company,
Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of
Voyageur Funds, Inc., each of the other 33 investment
companies in Delaware Investments, Delaware Management
Company, Inc. and Delaware Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation and HYPPCO Finance Company Ltd.
Before returning to Delaware Investments in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income portfolio
manager for Delaware Investments.
Walter P. Babich (70)
Director and/or Trustee of Voyageur Funds, Inc. and each of the other
33 investment companies in Delaware Investments.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (59)
Director and/or Trustee of Voyageur Funds, Inc. and each of the other
33 investment companies in Delaware Investments.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (57)
Director and/or Trustee of Voyageur Funds, Inc. and each of the other
33 investment companies in Delaware Investments.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975
to 1992, she was Adjunct Professor of Columbia Business
School.
-52-
<PAGE>
W. Thacher Longstreth (77)
Director and/or Trustee of Voyageur Funds, Inc. and each of the other
33 investment companies in Delaware Investments.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Thomas F. Madison (61)
Director and/or Trustee of Voyageur Funds, Inc. and 33 other investment
companies in Delaware Investments.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996. From February to September 1994,
Mr. Madison served as Vice Chairman--Office of the CEO of The
Minnesota Mutual Life Insurance Company and from 1988 to 1993,
he was President of U.S. WEST Communications--Markets.
Charles E. Peck (72)
Director and/or Trustee of Voyageur Funds, Inc. and each of the other
33 investment companies in Delaware Investments.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive
Officer of The Ryland Group, Inc., Columbia, MD.
David K. Downes (58)
Executive Vice President/Chief Operating Officer/Chief Financial
Officer of Voyageur Funds, Inc., each of the other 33
investment companies in Delaware Investments, Delaware
Management Holdings, Inc, Founders CBO Corporation, Delaware
Capital Management, Inc.
and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc., DMH
Corp., Delaware Distributors, Inc., Founders Holdings, Inc.
and Delvoy, Inc.
President/Chief Executive Officer/Chief Financial Officer and Director
of Delaware Service Company, Inc.
President/Chief Operating Officer/Chief Financial Officer and Director
of Delaware International Holdings, Inc.
Vice President of Lincoln Funds Corporation.
Chairman, Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Chairman and Director of Delaware Management Trust Company.
Director of Delaware International Advisers Ltd.
Before joining Delaware Investments in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer
of Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President
from December 1985 through March 1992, and Vice Chairman from
March 1992 through August 1992.
-53-
<PAGE>
George M. Chamberlain, Jr. (50)
Senior Vice President, Secretary and General Counsel of Voyageur
Funds, Inc., each of the other 33 investment companies in
Delaware Investments, Delaware Distributors, L.P. and Delaware
Management Holdings, Inc.
Senior Vice President, Secretary, General Counsel and Director of DMH
Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc., Delaware Investment & Retirement Services,
Inc., Delaware Capital Management, Inc. and Delvoy, Inc.
Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company.
Senior Vice President and Director of Delaware International Holdings
Ltd.
Director of Delaware International Advisers Ltd.
Secretary of Lincoln Funds Corporation.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware
organization.
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of the Voyageur Funds,
Inc., each of the other 33 investment companies in Delaware
Investments and Founders Holdings, Inc.
Senior Vice President/Corporate Controller/Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc. and Delaware International Holdings
Ltd.
Senior Vice President/Controller and Treasurer of Delvoy, Inc.
Chief Financial Officer/Treasurer of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Senior Vice President/Assistant Treasurer of Founders CBO Corporation.
Treasurer of Lincoln Funds Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining Delaware Investments in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P.,
New York, NY from 1989 to 1992. Prior to that, Mr. Hastings
served as Controller and Treasurer for Fine Homes
International, L.P., Stamford, CT from 1987 to 1989.
-54-
<PAGE>
Michael P. Bishof (35)
Senior Vice President/Treasurer of Voyageur Funds, Inc., each of the
other 33 investment companies in Delaware Investments,
Delaware Distributors, Inc. and Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc. and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager, Investment Accounting of
Delaware Distributors, L.P.
Senior Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
-55-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation expected to be
received from Voyageur Funds, Inc. during the actual fiscal year, the total
compensation received from all investment companies in Delaware Investments for
the fiscal year ended October 31, 1997, and an estimate of annual benefits to be
received upon retirement under the Delaware Investments Retirement Plan for
Directors/Trustees as of December 31, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Estimated Compensation
Aggregate Accrued Annual from all 34
Compensation as Part of Benefits Investment Companies
from Voyageur Voyageur Funds, Upon in Delaware
Name Funds, Inc.(1) Inc. Expenses Retirement(2) Investments
---- -------------- ------------- ------------- -----------
<S> <C> <C> <C>
W. Thacher Longstreth $496 None $38,500 $58,618
Ann R. Leven $512 None $38,500 $63,743
Walter P. Babich $508 None $38,500 $62,743
Anthony D. Knerr $508 None $38,500 $62,743
Charles E. Peck $400 None $38,500 $55,432
Thomas F. Madison(3) $495 None $38,500 $30,913
</TABLE>
(1) The current Board of Directors was elected by shareholders of Voyageur
Funds, Inc. on April 11, 1997 and began serving on May 1, 1997. With
the exception of Thomas F. Madison, none of the current directors had
served on the prior Board. Compensation figures are estimates of
payments for Voyageur Funds, Inc.'s current fiscal year.
(2) Under the terms of Delaware Investments Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his
or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each fund in the Delaware Investments family of funds for
a period equal to the lesser of the number of years that such person
served as a director or the remainder of such person's life. The amount
of such payments will be equal, on an annual basis, to the amount of
the annual retainer that is paid to directors of each fund at the time
of such person's retirement. If an eligible director retired as of
December 31, 1997, he or she would be entitled to annual payments
totaling $38,500, in the aggregate, from all of the funds in the
Delaware Investments family of funds, based on the number of funds in
Delaware Investments as of that date.
(3) Thomas F. Madison also received $24,500 for his service on the previous
Board of Directors during the last fiscal year.
-56-
<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Class A
Shares, Class B Shares and Class C Shares and for shareholders of classes of
other funds available from Delaware Investments are set forth in the relevant
prospectuses for such classes. The following supplements that information. The
Fund may modify, terminate or suspend the exchange privilege upon 60 days'
notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds available from
Delaware Investments. Exchange instructions must be signed by the record
owner(s) exactly as the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds available from Delaware Investments on behalf of their clients by
telephone or other expedited means. This service may be discontinued or revised
at any time by the Transfer Agent. Such exchange requests may be rejected if it
is determined that a particular request or the total requests at any time could
have an adverse effect on any of the funds. Requests for expedited exchanges may
be submitted with a properly completed exchange authorization form, as described
above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds available from Delaware Investments. This service
is automatically provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 to effect an exchange. The
shareholder's current Fund account number must be identified, as well as the
registration of the account, the share or dollar amount to be exchanged and the
fund into which the exchange is to be made. Requests received on any day after
the time the offering price and net asset value are determined will be processed
the following day. See Determining Offering Price and Net Asset Value. Any new
account established through the exchange will automatically carry the same
registration, shareholder information and dividend option as the account from
which the shares were exchanged. The exchange requirements of the fund into
which the exchange is being made, such as sales charges, eligibility and
investment minimums, must be met. (See the prospectus of the fund desired or
inquire by calling the Transfer Agent or, as relevant, your Client Services
Representative.) Certain funds are not available for retirement plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds available from Delaware Investments. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
-57-
<PAGE>
As described in the Fund's Prospectus, neither the Fund nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. The Fund reserves the right to temporarily
or permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Decatur Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4)
Limited-Term Government Fund, (5) USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. The Fund reserves the right
to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a timing pattern (as described above).
The Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other
Delaware Investments funds:
Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common
-58-
<PAGE>
stocks, with a focus on common stocks the Manager believes have the potential
for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
Small Cap Value Fund seeks capital appreciation by investing primarily
in common stocks whose market values appear low relative to their underlying
value or future potential.
DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Blue Chip Fund seeks to achieve long-term capital appreciation. Current income
is a secondary objective. It seeks to achieve these objectives by investing
primarily in equity securities and any securities that are convertible into
equity securities. Social Awareness Fund seeks to achieve long-term capital
appreciation. It seeks to achieve this objective by investing primarily in
equity securities of medium- to large-sized companies expected to grow over time
that meet the Fund's "Social Criteria" strategy.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
-59-
<PAGE>
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
Tax-Free New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Tax-Free Ohio Fund seeks a high level of current
interest income exempt from federal income tax and Ohio state and local taxes,
consistent with preservation of capital. Tax-Free Pennsylvania Fund seeks a high
level of current interest income exempt from federal income tax and Pennsylvania
state and local taxes, consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth. Emerging Markets Fund
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located or operating in emerging countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing in
companies of all sizes which have low dividend yields, strong balance sheets and
high expected earnings growth rates relative to their industry. Overseas Equity
Fund seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. New Pacific Fund seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.
Delaware Group Premium Fund, Inc. offers 15 funds available exclusively
as funding vehicles for certain insurance company separate accounts. Decatur
Total Return Series (formerly known as Equity/Income Series) seeks the highest
possible total rate of return by selecting issues that exhibit the potential for
capital appreciation while providing higher than average dividend income.
Delchester Series (formerly know as High Yield Series) seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series (formerly known as Money Market Series) seeks the highest
level of income consistent with preservation of capital
-60-
<PAGE>
and liquidity through investments in short-term money market instruments. DelCap
Series (formerly known as Growth Series) seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Series (formerly known as Multiple
Strategy Series) seeks a balance of capital appreciation, income and
preservation of capital. It uses a dividend-oriented valuation strategy to
select securities issued by established companies that are believed to
demonstrate potential for income and capital growth. International Equity Series
seeks long-term growth without undue risk to principal by investing primarily in
equity securities of foreign issuers that provide the potential for capital
appreciation and income. Value Series seeks capital appreciation by investing in
small- to mid-cap common stocks whose market value appears low relative to their
underlying value or future earnings and growth potential. Emphasis will also be
placed on securities of companies that may be temporarily out of favor or whose
value is not yet recognized by the market. Trend Series (formerly known as
Emerging Growth Series) seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Quantum Series seeks to achieve long-term capital appreciation by
investing primarily in equity securities of medium to large-sized companies
expected to grow over time that meet the Series' "Social Criteria" strategy.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide
a high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of
-61-
<PAGE>
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Kansas Fund seeks to provide a high level of current
income exempt from federal income tax, the Kansas personal income tax and the
Kansas Intangible personal property tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the Missouri
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free New Mexico Fund seeks to provide a high level of
current income exempt from federal income tax and the New Mexico personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
Oregon Insured Fund seeks to provide a high level of current income exempt from
federal income tax and the Oregon personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Utah Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Washington Insured Fund
seeks to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital. The Fund will seek to select investments that will
enable its shares to be exempt from the Florida intangible personal property
tax. The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund seeks to provide a
high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital. Delaware-
Voyageur Tax-Free Idaho Fund seeks to provide a high level of current income
exempt from federal income tax and the Idaho personal income tax, consistent
with the preservation of capital. Delaware-Voyageur Minnesota High Yield
Municipal Bond Fund seeks to provide a high level of current income exempt from
federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level
of current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth.
-62-
<PAGE>
Although the Fund, in seeking its objective, may receive current income from
dividends and interest, income is only an incidental consideration in the
selection of the Fund's investments. Growth Stock Fund has an objective of
long-term capital appreciation. The Fund seeks to achieve its objective from
equity securities diversified among individual companies and industries.
Tax-Efficient Equity Fund seeks to obtain for taxable investors a high total
return on an after-tax basis. The Fund will attempt to achieve this objective by
seeking to provide a high long-term after-tax total return through managing its
portfolio in a manner that will defer the realization of accrued capital gains
and minimize dividend income.
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free North Dakota Fund seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
For more complete information about any of the Delaware Investments
funds, including charges and expenses, you can obtain a prospectus from the
Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
-63-
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager also
provides investment management services to certain of the other funds available
from Delaware Investments. The Manager, through a separate division, also
manages private investment accounts. While investment decisions of the Fund are
made independently from those of the other funds and accounts, investment
decisions for such other funds and accounts may be made at the same time as
investment decisions for the Fund.
The Manager, or its affiliate Delaware International Advisers Ltd.,
also manages the investment options for Delaware Medallion (SM) III Variable
Annuity. Medallion is issued by Allmerica Financial Life Insurance and Annuity
Company (First Allmerica Financial Life Insurance Company in New York and
Hawaii). Delaware Medallion offers 15 different investment series ranging from
domestic equity funds, international equity and bond funds and domestic fixed
income funds. Each investment series available through Medallion utilizes an
investment strategy and discipline the same as or similar to one of the Delaware
Investments mutual funds as available outside the annuity. See Delaware Group
Premium Fund, Inc., above.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds available from Delaware Investments. Prior to May 31, 1997,
Voyageur Fund Distributors, Inc. ("VFD") served as the national distributor for
the Fund. The Distributor ("DDLP"), for all periods after May 31, 1997, and,
VFD, prior to May 31, 1997, received net commissions from on behalf of the
Fund's Class A Shares, after reallowances to dealers, as follows:
-64-
<PAGE>
US Government Securities Fund A Class
<TABLE>
<CAPTION>
Total Amount of Amounts
Underwriting Reallowed Net Commission
Fiscal Year Ended Commission to Dealers to VFD/DDLP
----------------- ---------- ---------- -----------
<S> <C> <C> <C>
10/31/97 $34,104 $5,079 $29,025
</TABLE>
DDLP, after May 31, 1997, and VFD, for periods prior to May 31, 1997,
received in the aggregate Limited CDSC payments with respect to the Fund's A
Class as follows:
Period Limited CDSC Payments
------ ---------------------
Year Ended
10/31/97 None
Four Months
10/31/96 None
Year Ended
6/30/96 None
Year Ended
6/30/95 None
DDLP, after May 31, 1997, and VFD, for periods prior to May 31, 1997,
received in the aggregate CDSC payments with respect to the Fund's B Class as
follows:
Period CDSC Payments
------ -------------
Year Ended
10/31/97 $5,058
Four Months
10/31/96 1,460
Year Ended
6/30/96 1,047
Year Ended
6/30/95 896
DDLP, after May 31, 1997, and VFD, for periods prior to May 31, 1997,
received CDSC payments with respect to the Fund's C Class as follows:
Period CDSC Payments
------ -------------
Year Ended
10/31/97 $6
Four Months
10/31/96 4
Year Ended
6/30/96 2
Year Ended
6/30/95 None
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for the
other mutual funds available from Delaware Investments. The Transfer Agent is
paid a fee by the Fund for providing these services consisting of an annual per
account charge of $11.00 plus transaction charges for particular services
according to a schedule. Compensation is fixed each year and approved by the
Board of Directors, including a majority of the unaffiliated directors. The
Transfer Agent also provides accounting services to the Fund. Those services
include performing all functions related to calculating the Fund's net asset
value and providing all financial reporting services, regulatory compliance
testing and other related accounting services. For its services, the Transfer
Agent is paid a fee based on total assets of all funds in Delaware Investments
for which it provides such accounting services. Such fee is equal to 0.25%
multiplied by the total amount of assets in the complex for which the Transfer
Agent furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate
-65-
<PAGE>
complex assets exceed $10 billion. The fees are charged to each fund, including
the Fund, on an aggregate pro-rata basis. The asset-based fee payable to the
Transfer Agent is subject to a minimum fee calculated by determining the total
number of investment portfolios and associated classes.
Norwest Bank Minnesota, N.A. ("Norwest"), Sixth Street & Marquette
Avenue, Minneapolis, Minnesota 55402 is custodian of the Fund's securities and
cash. As custodian for the Fund, Norwest maintains a separate account or
accounts for the Fund; receives, holds and releases portfolio securities on
account of the Fund; receives and disburses money on behalf of the Fund; and
collects and receives income and other payments and distributions on account of
the Fund's portfolio securities.
Capitalization
Voyageur Funds, Inc. has a present authorized capitalization of 10
trillion shares of capital stock with a $.01 par value per share.
The Board of Directors has allocated the following number of shares to
the Fund and its respective classes:
US Government Securities Fund 100 billion
Class A Shares 10 billion
Class B Shares 10 billion
Class C Shares 10 billion
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
Each Class of the Fund represents a proportionate interest in the
assets of the Fund and has the same voting and other rights and preferences as
the other classes of the Fund. Shareholders of Class A Shares, Class B Shares,
Class C Shares and Institutional Class Shares of the Fund may vote only on
matters affecting the 12b- 1 Plan that relates to the Class of shares that they
hold. However, Class B Shares may vote on any proposal to increase materially
the fees to be paid by the Fund under the 12b-1 Plan relating to its Class A
Shares. General expenses of the Fund will be allocated on a pro-rata basis to
the classes according to asset size, except that expenses of the 12b-1 Plan of
the Fund's Class A Shares, Class B Shares and Class C Shares will be allocated
solely to those classes.
Beginning June 9, 1997, the name of Voyageur U.S. Government
Securities Fund changed to Delaware-Voyageur US Government Securities Fund.
-66-
<PAGE>
Noncumulative Voting
Voyageur Funds, Inc.'s shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of Voyageur Funds, Inc.
voting for the election of directors can elect all the directors if they choose
to do so, and, in such event, the holders of the remaining shares will not be
able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
-67-
<PAGE>
APPENDIX A -- RATINGS
Earnings and Dividend Rankings for Common Stocks
Standard & Poor's Corporation. The investment process involves
assessment of various factors -- such as product and industry position,
corporate resources and financial policy -- with results that make some common
stocks more highly esteemed than others. In this assessment, Standard & Poor's
believes that earnings and dividend performance is the end result of the
interplay of these factors and that, over the long run, the record of this
performance has a considerable bearing on relative quality. The rankings,
however, do not pretend to reflect all of the factors, tangible or intangible,
that bear on stock quality.
Relative quality of bonds or other debt, that is, degrees of
protection for principal and interest, called creditworthiness, cannot be
applied to common stocks, and therefore rankings are not to be confused with
bond quality ratings which are arrived at by a necessarily different approach.
Growth and stability of earnings and dividends are deemed key elements
in establishing Standard & Poor's earnings and dividend rankings for common
stocks, which are designed to capsulize the nature of this record in a single
symbol. It should be noted, however, that the process also takes into
consideration certain adjustments and modifications deemed desirable in
establishing such rankings.
The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the most
recent ten years -- a period deemed long enough to measure significant time
segments of secular growth, to capture indications of basic change in trend as
they develop, and to encompass the full peak-to-peak range of the business
cycle. Basic scores are computed for earnings and dividends, then adjusted as
indicated by a set of predetermined modifiers for growth, stability within
long-term trend, and cyclicality. Adjusted scores for earnings and dividends are
then combined to yield a final score.
Further, the ranking system makes allowance for the fact that, in
general, corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate sales volume)
are set for the various rankings, but the system provides for making exceptions
where the score reflects an outstanding earnings-dividend record.
-68-
<PAGE>
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample of
stocks. The range of scores in the array of this sample has been aligned with
the following ladder of rankings:
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower
NR signifies no ranking because of insufficient data or because the
stock is not amenable to the ranking process.
The positions as determined above may be modified in some instances by
special considerations, such as natural disasters, massive strikes, and
non-recurring accounting adjustments.
A ranking is not a forecast of future market price performance, but is
basically an appraisal of past performance of earnings and dividends, and
relative current standing. These rankings must not be used as market
recommendations; a high-score stock may at times be so overpriced as to justify
its sale, while a low-score stock may be attractively priced for purchase.
Rankings based upon earnings and dividend records are no substitute for complete
analysis. They cannot take into account potential effects of management changes,
internal company policies not yet fully reflected in the earnings and dividend
record, public relations standing, recent competitive shifts, and a host of
other factors that may be relevant to investment status and decision.
Commercial Paper Ratings
Standard & Poor's Corporation. Commercial paper ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues assigned the A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with designation 1, 2, and 3 to indicate the relative degree of safety.
The "A-1" designation indicates that the degree of safety regarding timely
payment is very strong.
Moody's Investors Service, Inc. Moody's commercial paper ratings are
opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation that such obligations are exempt from registration under
the 1933 Act, nor does it represent that any specific note is a valid obligation
of a rated issuer or issued in conformity with any applicable law. Moody's
employs the following three designations, all judged to be investment grade, to
indicate the relative repayment capacity of rated issuers:
Prime-1 Superior capacity for repayment of short-term promissory
obligations.
Prime-2 Strong capacity for repayment of short-term promissory
obligations.
Prime-3 Acceptable capacity for repayment of short-term promissory
obligations.
-69-
<PAGE>
Corporate Bond Ratings
Standard & Poor's Corporation. Its ratings for corporate bonds have
the following definitions:
Investment grade:
Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Speculative Grade:
Debt rated "BB", "B" "CCC" and "CC" and "C" is regarded, as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
generally are regarded as eligible for bank investment. Also, the laws of
various states governing legal investments impose certain rating or other
standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
Moody's Investors Service, Inc. Its ratings for corporate bonds include
the following:
Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.
-70-
<PAGE>
Bonds which are rated "A" possess many favorable attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Bonds which are rated "Caa" are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
Bonds which are rated "C" are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Preferred Stock Rating
Standard& Poor's Corporation. Its ratings for preferred stock have the
following definitions:
An issue rated "AAA" has the highest rating that may be assigned by
Standard& Poor's ("S&P") to a preferred stock issue and indicates an extremely
strong capacity to pay the preferred stock obligations.
A preferred stock issue rated "AA" also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA."
An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
-71-
<PAGE>
Preferred stock rate "BB," "B," and "CCC" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. "BB" indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
A preferred stock rated "C" is a non-paying issue.
A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
"NR" indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Moody's Investors Service, Inc. Its ratings for preferred stock
include the following:
An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
An issue which is rate "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
An issue which is rated "baa" is considered to be medium-grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual payment.
-72-
<PAGE>
An issue rated "c" is the lowest rated class of preferred or
preference stock. Issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
-73-
<PAGE>
APPENDIX B -- GENERAL CHARACTERISTICS AND RISKS OF OPTIONS AND FUTURES
General. As described in the Prospectus under "Investment Objectives
and Policies -- Options and Futures," the Fund may purchase and sell options on
the securities in which it may invest and the Fund may purchase and sell options
on futures contracts (as defined below) and may purchase and sell futures
contracts. The Fund intend to engage in such transactions if it appears
advantageous to Voyageur to do so in order to pursue the Fund's investment
objectives, to seek to hedge against the effects of market conditions and to
seek to stabilize the value of its assets. The Fund will engage in hedging and
risk management transactions from time to time in Voyageur's discretion, and may
not necessarily be engaging in such transactions when movements in interest
rates that could affect the value of the assets of the Fund occur.
Conditions in the securities, futures and options markets will
determine whether and in what circumstances the Fund will employ any of the
techniques or strategies described below. The Fund's ability to pursue certain
of these strategies may be limited by applicable regulations of the Commodity
Futures Trading Commission (the "CFTC") and the federal tax requirements
applicable to regulated investment companies. Transactions in options and
futures contracts may give rise to income that is subject to regular federal
income tax and, accordingly, in normal circumstances the Fund does not intend to
engage in such practices to a significant extent.
The use of futures and options, and the possible benefits and
attendant risks, are discussed below.
Futures Contracts and Related Options. The Fund may enter into
contracts for the purchase or sale for future delivery (a "futures contract") of
fixed-income securities or contracts based on financial indices including any
index of securities in which the Fund may invest. A "sale" of a futures contract
means the undertaking of a contractual obligation to deliver the securities, or
the cash value of an index, called for by the contract at a specified price
during a specified delivery period. A "purchase" of a futures contract means the
undertaking of a contractual obligation to acquire the securities, or cash value
of an index, at a specified price during a specified delivery period. The Fund
may also purchase and sell (write) call and put options on financial futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during, or at the termination of, the
period specified in the terms of the option. Upon exercise, the writer of the
option delivers the futures contract to the holder at the exercise price. The
Fund would be required to deposit with its custodian initial margin and
maintenance margin with respect to put and call options on futures contracts
written by it.
Although some financial futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the contractual
commitment is closed out before delivery without having to make or take delivery
of the security. The offsetting of a contractual obligation is accomplished by
purchasing (or selling, as the case may be) on a commodities exchange an
identical futures contract calling for delivery in the same period. The Fund's
ability to establish and close out positions in futures contracts and options on
futures contracts will be subject to the liquidity of the market. Although the
Fund generally will purchase or sell only those futures contracts and options
thereon for which there appears to be a liquid market, there is no assurance
that a liquid market on an exchange will exist for any particular futures
contract or option thereon at any particular time. Where it is not possible to
effect a closing transaction in a contract or to do so at a satisfactory price,
the Fund would have to make or take delivery under the futures contract, or, in
the case of a purchased option, exercise the option. The Fund
-74-
<PAGE>
would be required to maintain initial margin deposits with respect to the
futures contract and to make variation margin payments until the contract is
closed. The Fund will incur brokerage fees when they purchase or sell futures
contracts.
At the time a futures contract is purchased or sold, the Fund must
deposit in a custodial account cash or securities as a good faith deposit
payment (known as "initial margin"). It is expected that the initial margin on
futures contracts the Fund may purchase or sell may range from approximately 1
1/2% to approximately 5% of the value of the securities (or the securities
index) underlying the contract. In certain circumstances, however, such as
during periods of high volatility, the Fund may be required by an exchange to
increase the level of its initial margin payment. Initial margin requirements
may be increased generally in the future by regulatory action. An outstanding
futures contract is valued daily in a process known as "marking to market." If
the market value of the futures contract has changed, the Fund will be required
to make or will be entitled to receive a payment in cash or specified high
quality debt securities in an amount equal to any decline or increase in the
value of the futures contract. These additional deposits or credits are
calculated and required on a daily basis and are known as "variation margin."
There may be an imperfect correlation between movements in prices of
the futures contract the Fund purchases or sells and the portfolio securities
being hedged. In addition, the ordinary market price relationships between
securities and related futures contracts may be subject to periodic distortions.
Specifically, temporary price distortions could result if, among other things,
participants in the futures market elect to close out their contracts through
offsetting transactions rather than meet variation margin requirements,
investors in futures contracts decide to make or take delivery of underlying
securities rather than engage in closing transactions or if, because of the
comparatively lower margin requirements in the futures market than in the
securities market, speculators increase their participation in the futures
market. Because price distortions may occur in the futures market and because
movements in the prices of securities may not correlate precisely with movements
in the prices of futures contracts purchased or sold by the Fund in a hedging
transaction, even if Voyageur correctly forecasts market trends the Fund's
hedging strategy may not be successful. If this should occur, the Fund could
lose money on the futures contracts and also on the value of its portfolio
securities.
Although the Fund believes that the use of futures contracts and
options thereon will benefit it, if Voyageur's judgment about the general
direction of securities prices or interest rates is incorrect, the Fund's
overall performance may be poorer than if it had not entered into futures
contracts or purchased or sold options thereon. For example, if the Fund seeks
to hedge against the possibility of an increase in interest rates, which
generally would adversely affect the price of fixed-income securities held in
its portfolio, and interest rates decrease instead, the Fund will lose part or
all of the benefit of the increased value of its assets which it has hedged due
to the decrease in interest rates because it will have offsetting losses in its
futures positions. In addition, particularly in such situations, the Fund may
have to sell assets from its portfolio to meet daily margin requirements at a
time when it may be disadvantageous to do so.
Options on Securities. The Fund may purchase and sell (write) options
on securities, which options may be either exchange-listed or over-the-counter
options. The Fund may write call options only if the call option is "covered." A
call option written by the Fund is covered if the Fund owns the securities
underlying the option or has a contractual right to acquire them or owns
securities which are acceptable for escrow purposes. The Fund may write put
options only if the put option is "secured." A put option
-75-
<PAGE>
written by the Fund is secured if the Fund, which is obligated as a writer of a
put option, invests an amount, not less than the exercise price of a put option,
in eligible securities.
The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or purchased, in the case
of a put option; the writer may be assigned an exercise notice at any time prior
to the termination of the obligation. Whether or not an option expires
unexercised, the writer retains the amount of the premium. This amount, of
course, may, in the case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period. If a call
option is exercised, the writer experiences a profit or loss from the sale of
the underlying security. If a put option is exercised, the writer must fulfill
the obligation to purchase the underlying security at the exercise price which
will usually exceed the then market value of the underlying security.
The writer of an option that wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option. Likewise, an investor who is
the holder of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
Effecting a closing transaction in the case of a written call option
will permit the Fund to write another call option on the underlying security
with either a different exercise price or expiration date or both, or in the
case of a written put option will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other Fund investments. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option, it
will effect a closing transaction prior to or concurrent with the sale of the
security.
The Fund will realize a profit from a closing transaction if the price
of the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
An option position may be closed out only where there exists a
secondary market for an option of the same series. If a secondary market does
not exist, it might not be possible to effect closing transactions in particular
options with the result that the Fund would have to exercise the options in
order to realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market include the
following: (i) there may be insufficient trading interest in certain options,
(ii) restrictions may be imposed by a national securities exchange ("Exchange")
on opening transactions or closing transactions or both, (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
-76-
<PAGE>
classes or series of options or underlying securities, (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange, (v) the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume, or (vi) one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.
The Fund may purchase put options to hedge against a decline in the
value of its portfolio. By using put options in this way, the Fund will reduce
any profit it might otherwise have realized in the underlying security by the
amount of the premium paid for the put option and by transaction costs.
The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund anticipates purchasing in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
worthless to the Fund.
The Fund may purchase and sell options that are exchange-traded or
that are traded over-the counter ("OTC options"). Exchange-traded options in the
United States are issued by a clearing organization affiliated with the exchange
on which the option is listed which, in effect, guarantees every exchange-traded
option transaction. In contrast, OTC options are contracts between the Fund and
its counterparty with no clearing organization guarantee. Thus, when the Fund
purchases OTC options, it must rely on the dealer from which it purchased the
OTC option to make or take delivery of the securities underlying the option.
Failure by the dealer to do so would result in the loss of the premium paid by
the Fund as well as the loss of the expected benefit of the transaction.
Although the Fund will enter into OTC options only with dealers that
agree to enter into, and which are expected to be capable of entering into,
closing transactions with the Fund, there can be no assurance that the Fund will
be able to liquidate an OTC option at a favorable price at any time prior to
expiration. Until the Fund is able to effect a closing purchase transaction in a
covered OTC call option the Fund has written, it will not be able to liquidate
securities used as cover until the option expires or is exercised or different
cover is substituted. This may impair the Fund's ability to sell a portfolio
security at a time when such a sale might be advantageous. In the event of
insolvency of the counterparty, the Fund may be unable to liquidate an OTC
option. In the case of options written by the Fund, the inability to enter into
a closing purchase transaction may result in material losses to the Fund.
Regulatory Restrictions. To the extent required to comply with
applicable SEC releases and staff po sitions, when entering into futures
contracts or certain option transactions, such as writing a put option, the Fund
will maintain, in a segregated account, cash or liquid high-grade securities
equal to the value of such contracts. Compliance with such segregation
requirements may restrict the Fund's ability to invest in intermediate- and
long-term Tax Exempt Obligations.
The Fund intend to comply with CFTC regulations and avoid "commodity
pool operator" status. These regulations require that futures and options
positions be used (a) for "bona fide hedging purposes" (as defined in the
regulations) or (b) for other purposes so long as aggregate initial margins and
premiums required in connection with non-hedging positions do not exceed 5% of
the liquidation value of
-77-
<PAGE>
the Fund's portfolio. The Fund currently does not intend to engage in
transactions in futures contracts or options thereon for speculation.
Accounting Considerations. When the Fund writes an option, an amount
equal to the premium received by it is included in the Fund's Statement of
Assets and Liabilities as a liability. The amount of the liability subsequently
is marked to market to reflect the current market value of the option written.
When the Fund purchases an option, the premium paid by the Fund is recorded as
an asset and subsequently is adjusted to the current market value of the option.
In the case of a regulated futures contract purchased or sold by the
Fund, an amount equal to the initial margin deposit is recorded as an asset. The
amount of the asset subsequently is adjusted to reflected changes in the amount
of the deposit as well as changes in the value of the contract.
-78-
<PAGE>
FINANCIAL STATEMENTS
Beginning May 1, 1997, Ernst & Young LLP began serving as the
independent auditors for Voyageur Funds, Inc. and, in its capacity as such,
audits the annual financial statements of the Fund. KPMG Peat Marwick LLP
previously served as the independent auditors for the Fund and, in its capacity
as such, audited the annual financial statements of the Fund. The Fund's
Statement of Net Assets, Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights and Notes
to Financial Statements, as well as the report of Ernst & Young LLP, independent
auditors, for the fiscal year ended October 31, 1997 are included in Voyageur
Funds, Inc.'s Annual Report to shareholders. The financial statements and
financial highlights, the notes relating thereto and the report of Ernst & Young
LLP listed above are incorporated by reference from the Annual Report into this
Part B. The Statements of Changes in Net Assets for the periods ended June 30,
1996 through October 31, 1996, and the Financial Highlights for the periods
ended June 30, 1994, through October 31, 1996, were audited by KPMG Peat Marwick
LLP whose report, dated December 6, 1996, expressed an unqualified opinion on
those statements and financial highlights.
-79-
<PAGE>
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statement of Net Assets
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed above
relating to US Government Securities Fund are incorporated into
this filing by reference into the Fund's Part B from the
Registrant's Annual Report for the fiscal year ended October 31,
1997.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Amended and Restated Articles of
Incorporation (November 22, 1993)
incorporated into this filing by reference
to Post-Effective Amendment No. 17 filed
October 31, 1995.
(b) Certification of Designation (May 17, 1994)
incorporated into this filing by reference
to Post-Effective Amendment No. 17 filed
October 31, 1995.
(c) Certification of Designation (August 30,
1994) incorporated into this filing by
reference to Post-Effective Amendment No.
17 filed October 31, 1995.
(d) Articles of Correction to Amended and
Restated Articles of Incorporation (July
27, 1994) incorporated into this filing by
reference to Post-Effective Amendment No.
17 filed October 31, 1995.
(e) Certification of Designation (March 8,
1996) incorporated into this filing by
reference to Post-Effective Amendment No.
19 filed March 15, 1996.
(2) By-Laws. By-Laws, as amended (October 24, 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 18 filed January 3,
1996.
<PAGE>
PART C - Other Information
(Continued)
(3) Voting Trust Agreement. Inapplicable.
(4) Copies of All Instruments Defining the Rights of
Holders.
(a) Articles of Incorporation and Articles
Supplementary.
(i) Amended and Restated Articles of
Incorporation (November 22, 1993)
incorporated into this filing by
reference to Post-Effective
Amendment No. 17 filed October 31,
1995.
(ii) Certification of Designation (May
17, 1994) incorporated into this
filing by reference to
Post-Effective Amendment No. 17
filed October 31, 1995.
(iii) Certification of Designation
(August 30, 1994) incorporated into
this filing by reference to
Post-Effective Amendment No. 17
filed October 31, 1995.
(iv) Articles of Correction to Amended
and Restated Articles of
Incorporation (July 27, 1994)
incorporated into this filing by
reference to Post-Effective
Amendment No. 17 filed October 31,
1995.
(v) Certification of Designation (March
8, 1996) incorporated into this
filing by reference to
Post-Effective Amendment No. 19
filed March 15, 1996.
(b) By-Laws. By-Laws, as amended (October 24,
1995) incorporated into this filing by
reference to Post-Effective Amendment No.
18 filed January 3, 1996.
(5) Investment Management Agreement.
(a) Executed Investment Management Agreement
(April 30, 1997) between Delaware
Management Company, Inc. and the Registrant
on behalf of US Government Securities Fund
attached as Exhibit.
(b) Executed Investment Sub-Advisory Agreement
(April 30, 1997) between Delaware
Management Company, Inc. and Voyageur Asset
Management LLC on behalf of US Government
Securities Fund attached as Exhibit.
<PAGE>
PART C - Other Information
(Continued)
(6) (a) Distribution Agreements.
(i) Executed Distribution Agreement
(March 1, 1997) between Delaware
Distributors, L.P. and the
Registrant on behalf of US
Government Securities Fund attached
as Exhibit.
(b) Administration and Service Agreement Form
of Administration and Service Agreement (as
amended November 1995) included as Module.
(c) Dealer's Agreement. Dealer's Agreement (as
amended November 1995) included as Module.
(d) Mutual Fund Agreement for the Delaware
Group of Funds (as amended December 1995)
included as Module.
(7) Bonus, Profit Sharing, Pension Contracts.
Inapplicable.
(8) Custodian Agreement.
(a) Custodian Contract with Norwest Bank
Minnesota N.A. (April 20, 1992)
incorporated into this filing by reference
to Post-Effective Amendment No. 17 filed
October 31, 1995.
(9) Other Material Contracts.
(a) Executed Shareholders Services Agreement
(May 1, 1997) between Delaware Service
Company, Inc. and the Registrant on behalf
of US Government Securities Fund attached
as Exhibit.
(b) Executed Fund Accounting Agreement (August
16, 1996) between Delaware Service Company,
Inc. and the Registrant on behalf of US
Government Securities Fund attached as
Exhibit.
(i) Executed Amendment No. 5 (May 1,
1997) to Delaware Group of Funds
Fund Accounting Agreement attached
as Exhibit.
(ii) Executed Amendment No. 6 (July 21,
1997) to Delaware Group of Funds
Fund Accounting Agreement attached
as Exhibit.
(iii) Executed Amendment No. 7 (October
14, 1997) to Delaware Group of
Funds Fund Accounting Agreement
attached as Exhibit.
<PAGE>
PART C - Other Information
(Continued)
(iv) Executed Amendment No. 8 (December
18, 1997) to Delaware Group of
Funds Fund Accounting Agreement
attached as Exhibit.
(10) Opinion of Counsel. Inapplicable.
(11) Consents of Auditors. Attached as Exhibit.
(12) Inapplicable.
(13) Letter of Investment Intent dated October 2, 1987
incorporated into this filing by reference to
Post-Effective Amendment No. 19 filed March 15,
1996.
(14) Inapplicable.
(15) Plan under Rule 12b-1.
(a) Plan under Rule 12b-1 incorporated into
this filing by reference to Post-Effective
Amendment No. 17 filed November 1, 1995.
(16) Schedules of Computation for each Performance
Quotation.
(a) Schedule of Computation of Fund Performance
for US Government Securities Fund
incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed
October 28, 1996.
(b) Schedules of Computation for periods
previously not filed attached as Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
(18) Plan under Rule 18f-3.
(a) Plan under Rule 18f-3 (June 19, 1997)
attached as Exhibit.
(19) Other: Directors' Power of Attorney. Attached as
Exhibit.
Item 25. Persons Controlled by or under Common Control with
Registrant. None.
<PAGE>
PART C - Other Information
(Continued)
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
Class A Shares:
Common Stock Par Value 1,845 Accounts
$.01 Per Share as of January 31, 1998
Class B Shares:
Common Stock Par Value 76 Accounts
$.01 Per Share as of January 31, 1998
Class C Shares:
Common Stock Par Value 8 Accounts
$.01 Per Share as of Januaryr 31, 1998
Institutional Class Shares:
Common Stock Par Value 37 Accounts
$.01 Per Share as of January 31, 1998
Item 27. Indemnification. Incorporated into this filing by reference to
Post-Effective Amendment No. 22 filed February 28, 1997.
<PAGE>
PART C - Other Information
(Continued)
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. ("DMC") serves as investment
manager to the Registrant and as investment manager or sub-adviser to certain of
the other funds in the Delaware Group (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III, Inc.,
Delaware Group Equity Funds IV, Inc., Delaware Group Equity Funds V, Inc.,
Delaware Group Government Fund, Inc., Delaware Group Income Funds, Inc.,
Delaware Group Limited-Term Government Funds, Inc., Delaware Group Cash Reserve,
Inc., Delaware Group Tax-Free Fund, Inc., Delaware Group State Tax-Free Income
Trust, Delaware Group Tax-Free Money Fund, Inc., Delaware Group Premium Fund,
Inc., Delaware Group Global & International Funds, Inc., Delaware Pooled Trust,
Inc., Delaware Group Adviser Funds, Inc., Delaware Group Dividend and Income
Fund, Inc., Delaware Group Global Dividend and Income Fund, Inc., Delaware Group
Foundation Funds, Voyageur Tax-Free Funds, Inc., Voyageur Intermediate Tax-Free
Funds, Inc., Voyageur Insured Funds, Inc., Voyageur Investment Trust, Voyageur
Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II,
Inc., Voyageur Mutual Funds III, Inc., Voyageur Arizona Municipal Income Fund,
Inc., Voyageur Colorado Insured Municipal Income Fund, Inc., Voyageur Florida
Insured Municipal Income Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur
Minnesota Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund III,
Inc.) and provides investment advisory services to institutional accounts,
primarily retirement plans and endowment funds. In addition, certain directors
of the Manager also serve as directors/trustees of the other Delaware Group
funds, and certain officers are also officers of these other funds. A company
owned by the Manager's parent company acts as principal underwriter to the
mutual funds in the Delaware Group (see Item 29 below) and another such company
acts as the shareholder services, dividend disbursing, accounting servicing and
transfer agent for all of the mutual funds in the Delaware Group.
<PAGE>
PART C - Other Information
(Continued)
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.; Chairman of the
Board, President, Chief Executive Officer and
Director of DMH Corp., Delaware Distributors, Inc.
and Founders Holdings, Inc.; Chairman, Chief
Executive Officer and Director of Delaware
International Holdings Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board
and Director of the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc., and Delaware Capital Management,
Inc.; Chairman of Delaware Distributors, L.P.;
President and Chief Executive Officer of Delvoy,
Inc.; and Director of Delaware Service Company,
Inc. 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 Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc.
and Delaware Capital Management, Inc.; and
Director of Delaware International Advisers Ltd.
Board of Directors, Chairman of Finance Committee,
Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors,
Chairman of Finance Committee, AAA Mid Atlantic,
Inc. since 1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Metron, Inc. since 1995,
11911 Freedom Drive, Reston, VA
Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the
Delaware Group and Delaware Management Holdings,
Inc.; Executive Vice President and Director of
Founders Holdings, Inc.; Executive Vice President
of Delaware Capital Management, Inc.; and Director
of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
David K. Downes Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp., Delaware
Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Executive Vice President, Chief
Operating Officer and Chief Financial Officer of
the Registrant and each of the other funds in the
Delaware Group, Delaware Management Holdings,
Inc., Founders CBO Corporation, Delaware Capital
Management, Inc. and Delaware Distributors, L.P.;
President, Chief Executive Officer, Chief
Financial Officer and Director of Delaware Service
Company, Inc.; President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman, Chief
Executive Officer and Director of Delaware
Investment & Retirement Services, Inc.; Chairman
and Director of Delaware Management Trust Company;
Director of Delaware International Advisers Ltd.;
and Vice President of Lincoln Funds Corporation
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square,
PA
George M. Senior Vice President, General Counsel, Secretary
Chamberlain, Jr. and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc.,
Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Delvoy,
Inc.; Senior Vice President, Secretary and General
Counsel of the Registrant, each of the other funds
in the Delaware Group, Delaware Distributors, L.P.
and Delaware Management Holdings, Inc.; Senior
Vice President and Director of Delaware
International Holdings Ltd.; Executive Vice
President, Secretary, General Counsel and Director
of Delaware Management Trust Company; Director of
Delaware International Advisers Ltd.; Secretary of
Lincoln Funds Corporation
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard J. Flannery Senior Vice President/Corporate & International
Affairs of the Registrant, each of the other funds
in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Management
Trust Company, Delaware Capital Management, Inc.,
Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.; Executive
Vice President/Corporate & International Affairs
and Director of Delaware International Holdings
Ltd.; Senior Vice President/Corporate &
International Affairs and Director of Founders
Holdings, Inc. and Delvoy, Inc.; Senior Vice
President of Founders CBO Corporation; and
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bulltown Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall Links,
Inc. since 1991, Bulltown Rd., Elverton, PA
Michael P. Bishof Senior Vice President and Treasurer of the
Registrant, each of the other funds in the
Delaware Group and Founders Holdings, Inc.; Senior
Vice President/Investment Accounting of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.; Senior Vice President and
Treasurer/Manager, Investment Accounting of
Delaware Distributors, L.P.; Assistant Treasurer
of Founders CBO Corporation; and Senior Vice
President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Joseph H. Hastings Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital
Management, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., Delaware
International Holdings Ltd. and Delvoy, Inc.;
Senior Vice President/Corporate Controller of the
Registrant, each of the other funds in the
Delaware Group and Founders Holdings, Inc.;
Executive Vice President, Chief Financial Officer
and Treasurer of Delaware Management Trust
Company; Chief Financial Officer and Treasurer of
Delaware Investment & Retirement Services, Inc.;
Senior Vice President/Assistant Treasurer of
Founders CBO Corporation; and Treasurer of Lincoln
Funds Corporation.
Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Investment and
Retirement Services, Inc. and Delaware Service
Company, Inc.; Senior Vice President/ Operations
and Director of Delaware Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of
Delaware Management Company, Inc., Delaware
Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant and each of the
other funds in the Delaware Group, Delaware
Management Company, Inc., Delaware Management
Holdings, Inc., DMH Corp., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Management Trust
Company, Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment &
Retirement Services, Inc.; and Vice President and
Assistant Secretary of Delvoy, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., DMH Corp., Delaware
Management Trust Company, Delaware Capital
Management, Inc., Delaware Investment & Retirement
Services, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Vice President and Secretary of
Delaware International Holdings Ltd.; and
Secretary of Founders CBO Corporation
Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA
Richard Salus(1) Vice President/Assistant Controller of Delaware
Management Company, Inc. and Delaware Management
Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.; Vice
President/Director of Internal Audit of Delvoy,
Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Christopher Adams Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Susan L. Hanson Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Dennis J. Mara(2) Vice President/Acquisitions of Delaware Management
Company, Inc.
Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Capital
Management, Inc. and Delaware Investment &
Retirement Services, Inc.; Vice President of
Delvoy, Inc.
Rosemary E. Milner Vice President/Legal Registrations of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Distributors, Inc.
Mary Ellen Carrozza Vice President/Client Services of Delaware
Management Company, Inc. and Delaware Pooled
Trust, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and
Treasurer, Assistant Secretary and Director of
Founders CBO Corporation
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds, the fixed income funds and the
closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and
President and Director of Founders CBO Corporation
George H. Burwell Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the
equity funds in the Delaware Group
Gary A. Reed Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds and the fixed income funds in the
Delaware Group and Delaware Capital Management,
Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
tax-exempt funds and the fixed income funds in the
Delaware Group and Delaware Capital Management,
Inc.
Roger A. Early Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the
tax-exempt funds and the fixed income funds in the
Delaware Group
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the
tax-exempt and fixed income funds in the Delaware
Group
John B. Fields Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the
equity funds in the Delaware Group and Delaware
Capital Management, Inc.
Gerald S. Frey(4) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the
equity funds in the Delaware Group
Christopher Beck(5) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the
equity funds in the Delaware Group
Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and the
Delaware-Voyageur Tax-Free Minnesota Intermediate,
Delaware-Voyageur Minnesota Insured,
Delaware-Voyageur Tax-Free Minnesota,
Delaware-Voyageur Tax-Free Idaho, Delaware-
Voyageur Tax-Free Kansas, Delaware-Voyageur
Tax-Free Missouri, Delaware-Voyageur Tax-Free
Oregon, Delaware-Voyageur Tax-Free Washington,
Delaware-Voyageur Tax-Free Iowa and
Delaware-Voyageur Tax-Free Wisconsin Funds
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Andrew M. Vice President/Senior Portfolio Manager of
Company, McCullagh, Delaware Management Inc. and the Delaware-Voyageur
Jr.(7) Tax-Free Arizona Insured, Delaware- Voyageur
Tax-Free Arizona, Delaware-Voyageur Tax-Free
California Insured, Delaware-Voyageur Tax-Free
Colorado, Delaware-Voyageur Tax-Free New Mexico,
Delaware-Voyageur Tax-Free North Dakota and
Delaware-Voyageur Tax-Free Utah Funds.
Babak Zenouzi Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the
equity funds and the closed-end funds in the
Delaware Group
Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the
tax-exempt and fixed income funds in the Delaware
Group
Marshall T. Bassett Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity
funds in the Delaware Group.
John Heffern Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity
funds in the Delaware Group.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR, FINANCIAL
PLANNING, Decision One prior to March 1996.
3 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
4 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
5 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
6 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
7 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
<PAGE>
(b) Voyageur Asset Management LLC serves as sub-adviser (the
"Sub-Adviser") for the Registrant. The Sub-Adviser is an indirect wholly-owned
subsidiary of Dougherty Financial Group LLC ("DFG"), which is owned 50% by
Michael E. Dougherty and 50% equally by James A. Pohlad, Robert C. Pohlad and
William M. Pohlad (the "Pohlads"). 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. The Sub-Adviser serves as adviser or sub-adviser to
other investment companies and administers numerous private accounts. The
Sub-Adviser's principal business address is 90 South Seventh Street, Suite 4400,
Minneapolis, Minnesota 55402.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
John G. Taft Chairman of the Board, Director and Chief Executive Officer of Voyageur
Asset Management LLC
Edward J. Kohler Director and President of Voyageur Asset Management LLC
Steven B. Johansen Director, Treasurer and Chief Financial Officer of Voyageur Asset Management
LLC
Thomas J. Abood Secretary of Voyageur Asset Management LLC
</TABLE>
*Business address of each is 90 South Seventh Street, Suite 4400, Minneapolis,
Minnesota 55402.
<PAGE>
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal
underwriter for all the mutual funds in the Delaware
Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice
Chief Operating Officer President/Chief
and Chief Financial Officer Operating Officer/
Chief Financial Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary/ Senior Vice President/
General Counsel Secretary/General Counsel
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/
& International Affairs Corporate &
International Affairs
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Holly W. Reimel Vice President/Manager, National None
Accounts
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
William F. Hostler Senior Vice President/ None
Marketing Services
J. Chris Meyer Senior Vice President/ None
Director Product Management
Stephen H. Slack Senior Vice President/Wholesaler None
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Eric E. Miller Vice President/Assistant Secretary/ Vice President/
Deputy General Counsel Assistant Secretary/
Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance
Rosemary E. Milner Vice President/Legal Registrations Vice President/Legal
Registrations
Daniel H. Carlson Vice President/Strategic Marketing None
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Joanne A. Mettenheimer Vice President/New Business None
Development
Scott Metzger Vice President/Business Development Vice President/Business
Development
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/National Accounts None
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Vice President/Product None
Development
Andrew W. Whitaker Vice President/Financial Institutions None
Jesse Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Susan T. Friestedt Vice President/Client Service None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
Richard Allen Vice President/Wholesaler None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Thomas P. Kennett Vice President/Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing Technology None
Scott Whitehouse Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at
1818 Market Street, Philadelphia, PA 19103 or One Commerce
Square, Philadelphia, PA 19103 or 90 South Seventh Street,
Suite 4400, Minneapolis, Minnesota 55402.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a copy
of the Registrant's latest annual report to
shareholders, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a
meeting of shareholders for the purpose of voting upon
the question of removal of any director when requested
in writing to do so by the record holders of not less
than 10% of the outstanding shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 25th day of February, 1998.
VOYAGEUR FUNDS, INC.
By /s/Wayne A. Stork
-------------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ Wayne A. Stork Chairman of the Board and Director February 25, 1998
- ----------------------------------------- Executive Vice President/Chief Operating
Wayne A. Stork Officer/Chief Financial Officer
(Principal Financial Officer and
/s/David K. Downes Principal Accounting Officer) February 25, 1998
- ---------------------------------------
David K. Downes
/s/ Walter A. Babich * Director February 25, 1998
- ---------------------------------------
Walter A. Babich
/s/ Anthony D. Knerr * Director February 25, 1998
- ---------------------------------------
Anthony D. Knerr
/s/ Ann R. Leven * Director February 25, 1998
- ---------------------------------------
Ann R. Leven
/s/ W. Thacher Longstreth * Director February 25, 1998
- ---------------------------------------
W. Thacher Longstreth
/s/ Thomas F. Madison * Director February 25, 1998
- ---------------------------------------
Thomas F. Madison
/s/ Jeffrey J. Nick * Director February 25, 1998
- ----------------------------------------
Jeffrey J. Nick
/s/ Charles E. Peck * Director February 25, 1998
- ----------------------------------------
Charles E. Peck
*By /s/ Wayne A. Stork
----------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit No. Exhibit
- ----------- -------
EX-99.B5A Executed Investment Management Agreement (April 30, 1997) between Delaware
Management Company, Inc. and Registrant on behalf of US Government Securities
Fund
EX-99.B5B Executed Investment Sub-Advisory Agreement (April 30, 1997) between Delaware
Management Company, Inc. and Voyageur Asset Management LLC on behalf of
US Government Securities Fund
EX-99.B6AI Executed Distribution Agreement (March 1, 1997) between Delaware Distributors,
L.P. and the Registrant on behalf of US Government Securities Fund
EX-99.B6B Form of Administration and Service Agreement (as amended November 1995)
(Module Name
ADMIN_SER_AGREE)
EX-99.B6C Dealer's Agreement (November 1995)
(Module Name
DEALERS_AGREE)
EX-99.B6D Mutual Fund Agreement for the Delaware Group of Funds (December 1995)
(Module Name
MFAGMT95)
EX-99.B9A Executed Shareholders Services Agreement (May 1, 1997) between Delaware Service
Company, Inc. and US Government Securities Fund
EX-99.B9B Executed Fund Accounting Agreement (August 16, 1996) between Delaware
Service Company, Inc. and Registrant on behalf of US Government Securities Fund
EX-99.B9BI Executed Amendment No. 5 (May 1, 1997) to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B9BII Executed Amendment No. 6 (July 21, 1997) to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B9BIII Executed Amendment No. 7 (October 14, 1997) to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B9BIV Executed Amendment No. 8 (December 18, 1997) to Delaware Group of Funds Fund
Accounting Agreement
EX-99.B11 Consents of Auditors
EX-99.B16 Schedules of Computation for periods previously not filed
EX-27 Financial Data Schedules
</TABLE>
<PAGE>
INDEX TO EXHIBITS
(Continued)
Exhibit No. Exhibit
EX-99.B18A Plan under Rule 18f-3
EX-99.B19 Directors' Power of Attorney
<PAGE>
EX-99.B5A
INVESTMENT ADVISORY AGREEMENT
This Agreement, made as of this 30th day of April, 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, the "Funds")
(the Funds, together with the date each Fund adopts this Agreement, are set
forth in Exhibit A hereto, which shall be updated from time to time to reflect
additions, deletions or other changes thereto), and Delaware Management Company,
Inc., a Delaware corporation ("Adviser").
WITNESSETH
WHEREAS, the Company has been organized and operates as an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, Adviser is an investment adviser registered under the
Investment Advisers Act of 1940, as amended, and engages in the business of
providing investment management services;
WHEREAS, a subsidiary of Adviser's indirect parent company completed as
of the date of this Agreement a merger transaction (the "Merger") with the
indirect parent company of the investment adviser to the Company, Voyageur Fund
Managers, Inc. ("VFM"), which resulted in a change of control of VFM and the
assignment (as defined under the 1940 Act) and automatic termination of the
investment advisory agreement that was in effect between VFM and the Company at
the time of the Merger; and
WHEREAS, the Board of Directors of the Company and the shareholders of
the Company have determined that the Company should enter into an investment
advisory agreement with Adviser to be effective upon consummation of the Merger;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
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
<PAGE>
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
-2-
<PAGE>
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, fees (if any) associated with a
plan of distribution adopted pursuant to Rule 12b-1 under the 1940 Act ("Plan of
Distribution"), 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
-3-
<PAGE>
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.
4. FREEDOM TO DEAL WITH THIRD PARTIES.
Adviser shall be free to render services to others
similar to those rendered under this Agreement or of a different nature except
as such services may conflict with the services to be rendered or the duties to
be assumed hereunder.
5. REPORTS TO DIRECTORS OF THE FUND.
Appropriate officers of Adviser shall provide the
directors of the Company with such information as is required by any Plan of
Distribution adopted by the Company on behalf of any Fund pursuant to Rule 12b-1
under the 1940 Act.
6. STANDARD OF CARE.
In the absence of willful misfeasance, bad faith,
gross negligence or a reckless disregard of the performance of duties of the
Adviser to the Funds, the Adviser shall not be subject to liabilities to 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.
-4-
<PAGE>
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: /s/ George M. Chamberlain, Jr.
------------------------------------------
Its: Senior Vice President
DELAWARE MANAGEMENT COMPANY, INC.
By: /s/Wayne A. Stork
------------------------------------------
Its: Chairman, President, Chief Executive Officer
-5-
<PAGE>
Exhibit A
to
Investment Advisory Agreement
between
Delaware Management Company, Inc.
and
Voyageur Funds, Inc.
<TABLE>
<CAPTION>
EQUIVALENT
MONTHLY ANNUAL
ADVISORY FEE ADVISORY FEE
(as % of average (as % of average
FUND EFFECTIVE DATE daily net assets) daily net assets)
---- -------------- ----------------- -----------------
<S> <C> <C> <C>
Series A - Voyageur
U.S. Government May 1, 1997 0.50%/12 0.50%
Securities Fund
</TABLE>
-6-
<PAGE>
EX-99.B5B
SUB-ADVISORY AGREEMENT
Agreement, dated as of April 30, 1997, by and between
Delaware Management Company, Inc. ("Adviser"), a Delaware corporation, and
Voyageur Asset Management LLC, a Delaware limited liability company
("Sub-Adviser").
WHEREAS, Voyageur Funds, Inc., a Minnesota
corporation (the "Company"), on behalf of the Voyageur U.S. 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 as of April 30, 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 Board of Directors and shareholders of the Company have approved
the appointment of Sub-Adviser as a 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 Fund borrowings; (d)
the Fund's organizational and offering expenses, whether or not advanced by
Adviser; (e) the cost of other personnel providing services to the Fund; (f)
fees and expenses of registering or otherwise qualifying the shares of the Fund
under applicable state securities laws; (g) expenses of printing and
distributing reports to shareholders; (h) costs of shareholders' meetings and
proxy solicitation; (i) charges and expenses of the Fund's custodian and
registrar, transfer agent and dividend disbursing agent; (j) compensation of the
Company's officers, directors and employees that are not Affiliated Persons or
Interested Persons (as defined in Section 2(a)(19) of the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules, regulations and releases
relating thereto) of Adviser; (k) legal and auditing expenses of the Fund; (1)
costs of certificates representing common shares of the Fund; (m) costs of Fund
stationery and supplies; (n) insurance expenses of the Fund; (o) association
membership dues of the Fund; (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
<PAGE>
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, applicable provisions of the Articles of
Incorporation and Bylaws (which shall be provided to the Sub-Adviser on the date
hereof and any changes thereto shall be promptly provided to the Sub-Adviser
thereafter), 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, to Adviser, to Sub-Adviser or
to any other fund for which Adviser or Sub Adviser
provides investment advisory services and/or with
-2-
<PAGE>
broker/dealers who sell shares of the Fund or who
sell shares of any other fund for which Adviser or
Sub-Adviser provides investment advisory services.
Broker/dealers who sell shares of the funds for which
Adviser or Sub-Adviser provides investment advisory
services shall only receive orders for the purchase
or sale of portfolio securities to the extent that
the placing of such orders is in compliance with the
Rules of the Securities and Exchange Commission and
the National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph
(a) above, and subject to such policies and
procedures as may be adopted by the Board of
Directors and officers of the Company, Sub-Adviser
may ask the Fund and the Fund may agree to pay a
member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in
excess of the amount of commission another member of
an exchange, broker or dealer would have charged for
effecting that transaction, in such instances where
the Fund 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 Adviser or 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
-3-
<PAGE>
person of such "affiliated person" is acting as
principal; provided, however, that Sub-Adviser may
effect transactions pursuant to Rule 17a-7 under the
1940 Act in compliance with the Fund's then-effective
policies concerning such transactions.
(e) Sub-Adviser agrees that it will not execute any
portfolio transactions for the Fund with a broker or
dealer or futures commission-merchant which is an
"affiliated person" of the Company, Adviser or
Sub-Adviser or an "affiliated person" of such an
"affiliated person" without the prior written consent
of Adviser. In effecting any such transactions with
the prior written consent of Adviser, Sub-Adviser
shall comply with Section 17(e)(1) of the 1940 Act,
other applicable provisions of the 1940 Act, if any,
the then-effective Registration Statement of the Fund
under the Securities Act of 1933, as amended, and the
Fund's then-effective policies concerning such
transactions.
(f) Sub-Adviser shall promptly communicate to Adviser
and, if requested by Adviser, to the Company's Board
of Directors, such information relating to portfolio
transactions as Adviser may reasonably request. The
parties understand that the Fund shall bear all
brokerage commissions in connection with the
purchases and sales of portfolio securities for the
Fund and all ordinary and reasonable transaction
costs in connection with purchases of such securities
in private placements and subsequent sales thereof.
6. Sub-Adviser may (at its cost except as
contemplated by paragraph 5 of this Agreement) employ, retain or otherwise avail
itself of the services and facilities of persons and entities within its own
organization or any other organization for the purpose of providing Sub-Adviser,
Adviser or the Fund with such information, advice or assistance, including but
not limited to advice regarding economic factors and trends and advice as to
transactions in specific securities, as Sub-Adviser may deem necessary,
appropriate or convenient for the discharge of its obligations hereunder or
otherwise helpful to Adviser or the Fund, or in the discharge of Sub-Adviser's
overall responsibilities with respect to the other accounts for which it serves
as investment manager or investment adviser.
7. Sub-Adviser shall cooperate with and make
available to Adviser, the Fund and any agents engaged by the Fund, Sub-Adviser's
expertise relating to matters affecting the Fund.
8. For the services to be rendered under this
Agreement, and the facilities to be furnished for each fiscal year of the Fund,
Adviser shall pay to Sub-Adviser a monthly management fee at the annual rate of
0.25% of the Fund's average daily net assets. This fee will be computed based on
the average of the net assets of the Fund as of the close of
-4-
<PAGE>
each business day, calculated as set forth in the Advisory Agreement, and will
be paid to Sub-Adviser monthly on or before the fifteenth day of the month next
succeeding the month for which the fee is paid. The fee shall be prorated for
any fraction of a fiscal year at the commencement and termination of this
Agreement.
Pursuant to the Advisory Agreement, Adviser receives
monthly from the Fund compensation at the annual rate of 0.50% of the Fund's
average daily net assets. If Adviser or any affiliate of 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 any other agreement
with the Fund and/or to pay certain Fund expenses, or to reduce any 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 or reduced, such that Sub-Adviser's fee
would be in an amount equal to one-half of the compensation actually received by
Adviser, after taking into account all such waivers or payments of Fund expenses
by Adviser or any of its affiliates.
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.
-5-
<PAGE>
(d) Sub-Adviser has furnished Adviser with a copy of
Sub-Adviser's currently effective Form ADV. 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 on May 1,
1997. 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 (a) the vote of 67% or more of the voting securities of such Fund
present at such meeting if the holders of more than 50% of the outstanding
voting securities of the Fund are present in person or by proxy, or (b) the vote
of more than 50% of the outstanding voting securities of the Fund, 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 of
the Company 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.
-6-
<PAGE>
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, that such
automatic termination shall be prevented in a particular case by an order of
exemption from the Securities and Exchange Commission or a no-action letter of
the staff of the Commission to the effect that such assignment does not require
termination as a statutory or regulatory matter. This Agreement shall
automatically terminate upon completion of the dissolution, liquidation or
winding up of the Fund. This Agreement shall automatically terminate upon the
termination of the Advisory Agreement.
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
-7-
<PAGE>
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 /s/ George M. Chamberlain, Jr.
----------------------------------
Name: George M. Chamberlain, Jr.
Title: Senior Vice President
VOYAGEUR ASSET MANAGEMENT LLC
By /s/ Thomas J. Abood
----------------------------------
Name: Thomas J. Abood
Title: Secretary
-8-
<PAGE>
EX-99.B6AI
VOYAGEUR FUNDS, INC.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day March, 1997,
by and between Voyageur Funds, Inc., a Minnesota corporation (the "Company"),
for and on behalf of its sole series, Voyageur U.S. Government Securities Fund
(the "Fund"), and Delaware Distributors, L.P., a Delaware limited partnership
("DDLP"). This Agreement shall apply to the Class A, B, C and Y shares of the
Fund.
WITNESSETH:
WHEREAS, Voyageur Fund Distributors, Inc. ("VFD") currently serves as
the principal underwriter of the shares of the sole series of the Company and of
the shares of the other registered open-end investment companies within the
Voyageur mutual fund complex (the "Voyageur Funds"); and
WHEREAS, on January 15, 1997, the indirect owners of VFD entered into
an Agreement and Plan of Merger with Lincoln National Corporation ("LNC") which,
when consummated (the consummation of such agreement is referred to herein as
the "Merger"), will result in LNC's indirect ownership of, among others, VFD and
its parent company, Voyageur Fund Managers, Inc., the investment adviser and
administrator for the Voyageur Funds; and
WHEREAS, to facilitate additional sales of shares of the Fund in
anticipation of the Merger, the Board of Directors of the Company has determined
that the Company should enter into a distribution agreement with DDLP under
which DDLP will serve as co-underwriter of such shares along with VFD, which
currently serves as the sole principal underwriter of such shares (VFD and DDLP
may hereinafter be referred to as the "Co-Underwriters").
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. UNDERWRITING SERVICES
The Company, on behalf of the Fund, hereby engages DDLP, and DDLP
hereby agrees to act, as co-underwriter for the Fund in the sale and
distribution of the shares of each class of the Fund to the public, either
through dealers or otherwise. DDLP agrees to offer such shares for sale at all
times when such shares are available for sale and may lawfully be offered for
sale and sold.
2. SALE OF SHARES
The shares of the Fund are to be sold only on the following
<PAGE>
terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance
or rejection by the Company. Any offer for or sale of shares shall be
conclusively presumed to have been accepted by the Company if the Company shall
fail to notify DDLP of the rejection of such offer or sale prior to the
computation of the net asset value of such shares next following receipt by the
Company of notice of such offer or sale.
(b) No share of the Fund shall be sold by DDLP (i) for any
consideration other than cash or, pursuant to any exchange privilege provided
for by the applicable currently effective Prospectus or Statement of Additional
Information (hereinafter referred to collectively as the "Prospectus"), shares
of any other Voyageur Fund, or (ii)uexcept in instances otherwise provided for
by the applicable currently effective Prospectus, for any amount less than the
public offering price per share, which shall be determined in accordance with
the applicable currently effective Prospectus.
(c) In connection with certain sales of shares, a contingent deferred
sales charge will be imposed in the event of a redemption transaction occurring
within a certain period of time following such a purchase, as described in the
applicable currently effective Prospectus.
(d) The front-end sales charge, if any, for any class of shares of the
Fund may, at the discretion of the Company and the Co-Underwriters, be reduced
or eliminated as permitted by the Investment Company Act of 1940, and the rules
and regulations thereunder, as they may be amended from time to time (the "1940
Act"), provided that such reduction or elimination shall be set forth in the
Prospectus for such class, and provided that the Company shall in no event
receive for any shares sold an amount less than the net asset value thereof. In
addition, any contingent deferred sales charge for any class of shares of the
Fund may, at the discretion of the Company and the Co-Underwriters, be reduced
or eliminated in accordance with the terms of an exemptive order received from,
or any applicable rule or rules promulgated by, the Securities and Exchange
Commission, provided that such reduction or elimination shall be set forth in
the Prospectus for such class of shares.
(e) DDLP shall require any securities dealer entering into a selected
dealer agreement with DDLP to disclose to prospective investors the existence of
all available classes of shares of the Fund and to determine the suitability of
each available class as an investment for each such prospective investor.
3. QUALIFICATION OF SHARES
The Company agrees to make prompt and reasonable efforts to effect and
keep in effect, at its expense, the qualification of
<PAGE>
the Fund's shares for sale in such jurisdictions as the Company may designate.
4. INFORMATION TO BE FURNISHED TO DDLP
The Company agrees that it will furnish DDLP with such information with
respect to the affairs and accounts of the Company (and each class of the Fund)
as DDLP may from time to time reasonably require, and further agrees that DDLP,
at all reasonable times, shall be permitted to inspect the books and records of
the Company.
5. ALLOCATION OF EXPENSES
During the period of this Agreement, the Company shall pay or cause to
be paid all expenses, costs and fees incurred by the Company which are not
assumed by DDLP and/or VFD. VFD has agreed to provide, and pay costs which it
incurs in connection with providing, administrative or accounting services to
shareholders of the Fund (such costs are referred to as "Shareholder Servicing
Costs"). DDLP may provide such services and pay Shareholder Servicing Costs
associated therewith to the extent agreed to from time to time by DDLP and VFD.
Shareholder Servicing Costs include all expenses of DDLP or VFD, as the case may
be, incurred in connection with providing administrative or accounting services
to shareholders of the Fund, including, but not limited to, an allocation of
overhead of DDLP or VFD and payments made to persons, including employees of
DDLP or VFD, who respond to inquiries of shareholders regarding their ownership
of Fund shares, or who provide other administrative or accounting services not
otherwise required to be provided by the Fund's investment adviser or transfer
agent. VFD has also agreed to pay all costs of distributing the shares of the
Fund ("Distribution Expenses"). DDLP may pay all or a portion of the
Distribution Expenses as agreed to from time to time by DDLP and VFD.
Distribution Expenses include, but are not limited to, initial and ongoing sales
compensation (in addition to sales loads) paid to investment executives of DDLP
or VFD, as the case may be, and to other broker-dealers and participating
financial institutions; expenses incurred in the printing of prospectuses,
statements of additional information and reports used for sales purposes;
expenses of preparation and distribution of sales literature; expenses of
advertising of any type; an allocation of the overhead of DDLP or VFD, as the
case may be; payments to and expenses of persons who provide support services in
connection with the distribution of Fund shares; and other distribution-related
expenses.
6. COMPENSATION TO DDLP
As compensation for all of its services provided and its costs assumed
under this Agreement, DDLP shall receive the following forms and amounts of
compensation:
<PAGE>
(a) DDLP shall, as agreed to from time to time with VFD and as
permitted by applicable law or regulation, be entitled to receive or retain any
front-end sales charge imposed in connection with sales of shares of the Fund,
as set forth in the applicable current Prospectus. Up to the entire amount of
such front-end sales charge may be reallowed by DDLP to broker-dealers and
participating financial institutions in connection with their sale of Fund
shares. The amount of the front-end sales charge (if any) may be retained or
deducted by DDLP from any sums received by it in payment for shares so sold. If
such amount is not deducted by DDLP from such payments, such amount shall be
paid to DDLP by the Company not later than five business days after the close of
any calendar quarter during which any such sales were made by DDLP and payment
received by the Company.
(b) DDLP shall, as agreed to from time to time with VFD and as
permitted by applicable law or regulation, be entitled to receive or retain any
contingent deferred sales charge imposed in connection with any redemption of
shares of the Fund, as set forth in the applicable current Prospectus.
(c) Pursuant to the Company's Plan of Distribution adopted in
accordance with Rule 12b-1 under the 1940 Act (the "Plan"):
(i) Class A and Class Y of the Fund are each obligated to pay
DDLP and/or VFD, as agreed to from time to time by such parties and as
permitted by applicable law or regulation, a total fee in connection
with the servicing of shareholder accounts of such class and in
connection with distribution-related services provided in respect of
such class, calculated and payable quarterly, at the annual rate of
.25% of the value of the average daily net assets of such class. All or
any portion of such total fee may be payable as a Shareholder Servicing
Fee, and all or any portion of such total fee may be payable as a
Distribution Fee, as determined from time to time by the Company's
Board of Directors. Until further action by the Board of Directors, all
of such fee shall be designated and payable as a Shareholder Servicing
Fee.
(ii) Class B and Class C of the Fund are each obligated to pay
DDLP and/or VFD, as agreed to from time to time by such parties and as
permitted by applicable law or regulation, a total fee in connection
with the servicing of shareholder accounts of such class and in
connection with distribution-related services provided in respect of
such class, calculated and payable quarterly, at the annual rate of
1.00% of the value of the average daily net assets of such class. All
or any portion of such total fee may be payable as a Shareholder
Servicing Fee, and all or any portion of such total fee may be payable
as a Distribution Fee, as determined from time to time by the Company's
Board of Directors. With respect to each such class, until
<PAGE>
further action by the Board of Directors, a portion of such total fee
equal to .25% per annum of the average daily net assets of such class
shall be designated and payable as a Shareholder Servicing Fee and the
remainder of such fee shall be designated as a Distribution Fee.
Average daily net assets shall be computed in accordance with the
applicable currently effective Prospectus. Amounts payable under the Plan may
exceed or be less than actual Distribution Expenses and Shareholder Servicing
Costs. In the event such Distribution Expenses and Shareholder Servicing Costs
exceed amounts payable under the Plan, DDLP shall not be entitled to
reimbursement by the Company.
(d) In each year during which this Agreement remains in effect, DDLP,
as agreed to from time to time with VFD, will prepare and furnish to the Board
of Directors of the Company, and the Board will review, on a quarterly basis,
written reports complying with the requirements of Rule 12b-1 under the 1940 Act
that set forth the amounts expended under this Agreement and the Plan, on a
class by class basis as applicable, and the purposes for which those
expenditures were made.
7. LIMITATION OF DDLP'S AUTHORITY
DDLP shall be deemed to be an independent contractor and, except as
specifically provided or authorized herein, shall have no authority to act for
or represent the Fund or the Company.
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELLED ORDERS
DDLP shall subscribe for the shares of the Fund only for the purpose of
covering purchase orders already received by it or for the purpose of investment
for its own account. In the event that an order for the purchase of shares of
the Fund is placed with DDLP by a customer or dealer and subsequently cancelled,
DDLP shall forthwith cancel the subscription for such shares entered on the
books of the Fund, and, if DDLP has paid the Fund for such shares, shall be
entitled to receive from the Fund in refund of such payment the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation by
DDLP.
9. INDEMNIFICATION OF THE COMPANY
DDLP agrees to indemnify the Fund and the Company against any and all
litigation and other legal proceedings of any kind or nature and against any
liability, judgment, cost, or penalty imposed as a result of such litigation or
proceedings in any way arising out of or in connection with the sale or
distribution of
<PAGE>
the shares of the Fund by DDLP. In the event of the threat or institution of any
such litigation or legal proceedings against the Fund, DDLP shall defend such
action on behalf of the Fund or the Company at DDLP's own expense, and shall pay
any such liability, judgment, cost, or penalty resulting therefrom, whether
imposed by legal authority or agreed upon by way of compromise and settlement;
provided, however, DDLP shall not be required to pay or reimburse the Fund for
any liability, judgment, cost, or penalty incurred as a result of information
supplied by, or as the result of the omission to supply information by, the
Company to DDLP, or to DDLP by a director, officer, or employee of the Company
who is not an "interested person," as defined in the provisions of the 1940 Act,
of DDLP, unless the information so supplied or omitted was available to DDLP
without recourse to the Fund or the Company or any such person referred to
above.
10. FREEDOM TO DEAL WITH THIRD PARTIES
DDLP shall be free to render to others services of a nature either
similar to or different from those rendered under this contract, except such as
may impair its performance of the services and duties to be rendered by it
hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
(a) The effective date of this Agreement is set forth in the first
paragraph of this Agreement. Unless sooner terminated as hereinafter provided,
this Agreement shall continue in effect for a period of one year after the date
of its execution, and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by a vote of the Board of
Directors of the Company, and of the directors who are not "interested persons"
(as defined in the provisions of the 1940 Act) of the Company and have no direct
or indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (including, without limitation, this Agreement), cast in
person at a meeting called for the purpose of voting on this Agreement.
Notwithstanding the preceding sentence, this Agreement shall terminate at 11:59
p.m., Philadelphia time, on June 30, 1997, if the Merger has not been
consummated by such date, unless otherwise agreed by the parties.
(b) This Agreement may be terminated at any time with respect to the
Fund or any class thereof, without the payment of any penalty, by the vote of a
majority of the members of the Board of Directors of the Company who are not
"interested persons" (as defined in the provisions of the 1940 Act) of the
Company and have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan (including, without limitation,
this Agreement), or by the vote of a majority of the outstanding voting
securities of the Fund (or such class), or by DDLP, upon 60 days' written notice
to the other party.
<PAGE>
(c) This Agreement shall automatically terminate in the event of its
"assignment" (as defined by the provisions of the 1940 Act).
(d) Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of the Fund (or a
class) shall mean the lesser of (i) the vote of 67% or more of the voting
securities of the Fund (or such class) present at a regular or special meeting
of shareholders duly called, if more than 50% of the Fund's (or class's, as
applicable) outstanding voting securities are present or represented by proxy,
or (ii) the vote of more than 50% of the outstanding voting securities of the
Fund (or such class).
12. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until
approved by DDLP and by vote of a majority of the Board of Directors of the
Company who are not interested persons of the Company or DDLP.
13. NOTICES
Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and DDLP have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
VOYAGEUR FUNDS, INC.
By /s/Thomas J. Abood
------------------------
Thomas J. Abood
Its Secretary
DELAWARE DISTRIBUTORS, L.P.
By Winthrop S. Jessup
------------------------
Winthrop S. Jessup
Its Vice Chairman
<PAGE>
<PAGE>
DELAWARE GROUP
Administration and Service Agreement
Gentlemen:
We are the national distributor of the shares of all of the classes
(now existing or hereafter added) of all of the Funds in the Delaware Group of
Funds. The term "Fund" as used in this Agreement refers to each fund in the
Delaware Group which retains the Distributor to promote and sell its shares, and
any fund which may hereafter be added to the Delaware Group and retain us as
national distributor. You have indicated that you wish to provide certain
services to your customers relating to their ownership of Fund shares, in
accordance with the terms of this Agreement.
TERMS
1. With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), which 12b-1 Plans
provide for the payment of service fees, we expect you to provide administrative
and other services, including, but not limited to, furnishing personal and other
services and assistance to your customers who own Fund shares, answering routine
inquiries regarding a Fund, assisting in changing dividend options, account
designations and addresses, maintaining such accounts, or such other services as
a Fund may require, to the extent permitted by applicable statutes, rules, or
regulations. For such services, we shall pay you a fee, as established by us
from time to time, based on the value of the shares of each class of each Fund
which are attributable to customers of your firm. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time.
2. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to this Agreement.
3. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under
<PAGE>
the Plan by us with respect to the relevant Fund and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon any act of
insolvency by you. Notwithstanding the termination of this Agreement, you shall
remain liable for any amounts otherwise owing to the Distributor or the Funds
and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Distributor or the Fund, or upon any one or
more of the Distributor's dealers, based upon a claim that you and such dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
5. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
6. The 12b-1 Plans in effect on the date of this Agreement are
described in the Funds' Prospectuses. Each Fund reserves the right to terminate
or suspend its 12b-1 Plan(s) at any time as specified in such Plan(s) and we
reserve the right, at any time, without notice, to modify, suspend or terminate
payments hereunder in connection with such 12b-1 Plan(s).
7. This Agreement shall take effect on the date set forth below.
8. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of Pennsylvania, without reference to that
state's choice of law doctrine.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
11. Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
<PAGE>
to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
13. Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
By:
--------------------------------
Agreed and Accepted:
- ------------------------------
(Name)
By:
---------------------------
(Authorized Officer)
Date:
-------------------------
<PAGE>
<PAGE>
DEALER'S AGREEMENT
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the classes (now existing or hereafter
added) of all of the Funds in the Delaware Group of Investment Companies which
retain us, Delaware Distributors, L.P., to act as exclusive national
distributor. The term "Fund" as used in this Agreement, refers to each Fund in
the Delaware Group which retains us to promote and sell its shares, and any Fund
which may hereafter be added to the Delaware Group and retain us as national
distributor. Such additional Funds will be included in this Agreement upon our
providing you with written notice of such inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by a
Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's Prospectus.
The manner of computing the net asset value of shares, the public offering price
and the effective time of orders received from you are described in the
Prospectus for each Fund. We reserve the right, at any time and without notice,
to suspend the sale of Fund shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession as
set forth in the then current Prospectus of a Fund from the purchase price of
certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to modify,
suspend or eliminate such concessions by amendment, sticker or supplement to the
Prospectus for the Fund. If any shares confirmed to you under the terms of this
Agreement are redeemed or repurchased by the Fund or by us as agent for the
Fund, or are tendered for redemption or repurchase, within seven business days
after the date of our confirmation of the original purchase order, you shall
promptly refund to us the concession allowed to you on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special plans
and accounts (e.g., volume purchases, letters of intent, rights of accumulation,
combined purchases privilege, exchange and reinvestment privileges and
<PAGE>
retirement plan accounts) as set forth from time to time in the Prospectus. We
must be notified when an order is placed if it qualifies for a reduced sales
charge under any of these plans. We reserve the right, at any time, without
prior notice, to modify, suspend or eliminate any such plans or accounts by
amendment, sticker or supplement to the Prospectus for the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no transaction
shall you have any authority to act as agent for the Fund, for any other
selected dealer or for us. No person is authorized to make any representations
concerning the shares to the Fund except those contained in the Prospectus and
in written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund shares, you shall rely only on such
representations.
All sales must be made subject to confirmation and orders are subject
to acceptance or rejection by the Fund in its sole discretion. Your orders must
be wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received and
that you will not, as principal, sell Fund shares unless purchased by you from
the Fund under the terms hereof. You also agree that you will not withhold
placing with us orders received from your customers so as to profit yourself
from such withholding. Each of your orders shall be confirmed by you in writing
on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within
three business days after our acceptance of your order. If not so paid, we
reserve the right to cancel the sale and to hold you responsible for any loss
sustained by us or the Fund (including lost profit) in consequence. Certificates
representing the Fund's shares will not be issued unless (i) the Fund's
Prospectus indicates that certificates may be issued for the class of shares
being purchased, and (ii) a specific request is received from the purchaser.
Certificates, if requested, will be issued in the names indicated by
registration instructions accompanying your payment.
-2-
<PAGE>
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will redeem shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their shares other than the statements contained in the Prospectus
and the underlying organizational documents of the Fund, to which it refers, and
that you will quote as the redemption price only the price determined by the
Fund. You shall not repurchase any shares from your customers at a price below
that next quoted by the Fund for redemption. You may charge a reasonable fee for
services in connection with the repurchase by you from your customers of shares.
You may hold such repurchased shares only for investment purposes or submit such
shares to the Fund for redemption.
12b-1 PLAN: With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), we expect you to
provide distribution and marketing services in the promotion of the Fund's
shares. In connection with the receipt of distribution fees and/or the receipt
of service fees as set forth under the 12b-1 Plan(s) applicable to the class or
classes of Fund shares purchased by your customers, we expect you to provide
administrative and other services to your customers who own Fund shares,
including, but not limited to, furnishing personal and other services and
assistance, answering routine inquiries regarding a Fund, assisting in changing
dividend options, account designations and addresses, maintaining such accounts,
or such other services as the Fund may require, to the extent permitted by
applicable statutes, rules, or regulations. For such services we will pay you a
fee, as established by us from time to time, based on a portion of the net asset
value of the accounts of your clients in the Fund. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time. The 12b-1 Plans in effect on the
date of this Agreement are described in the Funds' Prospectuses. Each Fund
reserves the right to terminate or suspend its 12b-1 Plan at any time as
specified in the Plan and we reserve the right, at any time, without notice, to
modify, suspend or terminate payments hereunder in connection with such 12b-1
Plan. You will furnish the Fund and us with such information as may be
-3-
<PAGE>
reasonably requested by the Fund or its directors or trustees or by us with
respect to such fees paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws in
each jurisdiction in which you are required to be qualified to act as a
broker/dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); or (b) a foreign
broker/dealer not eligible for membership in the NASD and otherwise in
compliance with applicable U.S. federal and state securities laws. You agree to
notify us promptly in writing and immediately suspend sales of Fund shares if
this representation ceases to be true. You also agree that, whether you are a
member of the NASD or a foreign broker/dealer not eligible for such membership,
you will comply with the rules of the NASD including, in particular, Sections 2
and 26 of Article III thereof, and that you will maintain adequate records with
respect to your transactions with the Funds.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we may furnish you with information identifying the states and jurisdictions
under the securities laws of which it is believed a Fund's shares may be sold.
You will not transact orders for Fund shares in states or jurisdictions in which
we indicate Fund shares may not be sold. You agree to offer and sell Fund shares
outside the United States only in compliance with all applicable laws, rules and
regulations of any foreign government having jurisdiction over such transactions
in addition to any applicable laws, rules and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicity available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall file
Fund sales literature and promotional material with the NASD and SEC as
required.
-4-
<PAGE>
You may not publish or use any sales literature or promotional materials with
respect to the Funds without our prior review and written approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance with
the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection Act,
or any other act of insolvency by you. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Funds and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, or us, or upon any one or more of the
selected dealers based upon the claim that the selected dealers or any of them
constitute a partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will be
deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach and we may offset any
such damages, losses, costs and expenses against any amounts due to you
hereunder. Nothing contained herein shall constitute you, us and any dealers an
association or partnership. All references in this Agreement to the "Prospectus"
refer to the then current version of the Prospectus and include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto. This Agreement supercedes and replaces any prior agreement
-5-
<PAGE>
between us and you with respect to your purchase and sale of Fund shares and is
to be construed in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement
below and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
By:/s/Keith E. Mitchell
----------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
-6-
<PAGE>
DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges
that any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms and
conditions stated in the Agreement. The undersigned hereby acknowledges receipt
of Prospectuses relating to the Fund shares and confirms that, in executing the
Dealer's Agreement, it has relied on such Prospectuses and not on any other
statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
By: DATE
------------------------------- ----------------------------
Name:
-----------------------------
Title:
----------------------------
- ----------------------------------
FIRM
- ----------------------------------
FIRM'S TAX IDENTIFICATION NUMBER
- ----------------------------------
STREET ADDRESS
- ----------------------------------
CITY/STATE/ZIP
<PAGE>
<PAGE>
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co., Inc., will be at the public
offering price applicable to each order as set forth in the Prospectus. The
manner of computing the net asset value, the public offering price and the
effective time of orders received from you are described in the Prospectus for
each Fund. We reserve the right at any time, without notice, to suspend the sale
of Fund shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
<PAGE>
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
full by check payable to the Fund at its office within three business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1Plan") of the Investment Company Act of 1940 (the "1940 Act"), we
expect you will provide shareholder and administrative services to your
customers who own Fund shares, such as: answering inquiries regarding the Fund;
assisting in changing dividend options, account designations and addresses;
establishing and maintaining shareholder accounts and records; arranging for
bank wires; or such other services as the Fund may require to the extent
permitted by applicable statutes, rules or regulations. You will promptly answer
all written complaints received by you relating to Fund accounts or promptly
forward such complaints to us and assist us in answering such complaints. For
such services we will pay you a fee as set by us from time to time, based on a
portion of the net asset value of the accounts of your clients in the Fund. We
are permitted to make this payment under the terms of the 12b-1 Plan adopted by
2
<PAGE>
certain of the Funds, as such 12b-1 Plans may be in effect from time to time.
Each Fund reserves the right, at any time, to suspend payments under its 12b-1
Plan. You will furnish the Fund and us with such information as may be
reasonably requested by the Fund or its directors or trustees or by us with
respect to fees paid to you pursuant to this Agreement. In accordance with
interpretations and rulings to the Staff of the Commission, you will not charge
your customers any fees for services for which you are being compensated under a
12b-1 Plan of a Fund.
SALES OF NO-LOAD - NON 12b-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness you will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities and Exchange Act of 1934
(or other financial institution) and not otherwise required to register as a
broker or dealer under such Act. You agree to notify us promptly in writing if
this representation ceases to be true. You also agree that you will comply with
the rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, you
will be responsible in that relationship for insuring compliance with all laws
and regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states which we indicate Fund shares may
not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
3
<PAGE>
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional material with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The name of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
4
<PAGE>
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date: DELAWARE DISTRIBUTORS, L.P.
----------------------------
BY: DELAWARE DISTRIBUTORS, INC.
General Partner
BY:
--------------------------------
Accepted and Agreed to:
- ---------------------------------
(Name of Firm)
BY:
------------------------------
Name:
Title:
5
<PAGE>
EX-99.B9A
VOYAGEUR FUNDS, INC.
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 1st day of May, 1997 by and between
VOYAGEUR FUNDS, INC (the "Fund") on behalf of the Voyageur U.S. Government
Securities Fund (the "Series"), and DELAWARE SERVICE COMPANY, INC. ("DSC"), a
Delaware Corporation, each having its principal office and place of business at
1818 Market Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Fund and
Delaware Management Company, Inc. and/or Voyageur Fund Managers, Inc. provide
that the Fund shall conduct its own business and affairs and shall bear the
expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfers of stock,
including issuance and redemption of shares; reports and notices to
stockholders; calling and holding of stockholder meetings; miscellaneous office
expenses; brokerage commissions; legal and accounting fees; taxes; and federal
and state registration fees; and
WHEREAS, the Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
<PAGE>
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto.
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Series or altering or abolishing each such class or series;
(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
2
<PAGE>
(e) The forms of share certificates of the Series in the forms
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans;
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
(j) A certified copy of any resolution of the Board of
Directors of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend, capital gains
3
<PAGE>
distribution, distribution of capital, stock dividend, stock split or other
similar action affecting the authorization or issuance of shares of the Series
or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting
such change;
(b) Written instructions from an authorized officer
implementing such change; and
(c) An opinion of counsel to the Fund as to the validity of
such action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series' shares
which it issues will be properly registered and lawfully issued under applicable
federal and state laws.
(b) The provisions of this contract do not violate the terms
of any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of 1934 and is duly authorized to serve, and
may lawfully serve as such.
4
<PAGE>
(b) The provisions of this contract do not violate the terms of any
instrument by which DSC is bound; nor do they violate any law or regulation of
any body having jurisdiction over DSC or its property.
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
5
<PAGE>
(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by
debiting transferor-stockholder accounts and crediting such shares to accounts
created and/or maintained for transferee-stockholders; if applicable, issue
and/or cancel stock certificates.
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash
due and paid, shares issued and to be issued, cash remitted and to be remitted
and shares debited and credited to accounts; provide such notices, instructions
or authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem Series'
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Fund, DSC shall disburse and
cause to be disbursed to stockholders of each Series dividends, capital gains
distributions or any payments from other sources as directed by the Fund. In
connection therewith, but not in the limitation thereof, DSC shall:
6
<PAGE>
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of
each Series, as aforesaid, for which Series' shares are to be issued and
authorized and instruct the issuance of Series' shares therefor in accordance
with Section IV hereof.
(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Fund, DSC shall provide
those services ancillary to, but in implementation of, the services provided
under Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
(a) Except where instructed in writing by the Fund not to do
so, and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process
7
<PAGE>
investments and applications; remit to the Fund or its custodian payments for
shares acquired and to be issued; and direct the issuance of shares in
accordance with Section IV hereof.
(b) Receive, record and respond to communications of
stockholders and their agents.
(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
(e) Administer investment plans offered by the Fund to
investors and stockholders of each Series, including retirement plans, including
activities not otherwise provided in Sections I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action
8
<PAGE>
taken or omitted by it in good faith in accordance with such instructions or
opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguards and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), advantages and benefits to the Fund in
9
<PAGE>
the employment of DSC hereunder can be available which may not generally be
available to it from others providing similar services.
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested persons of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Series and their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other
10
<PAGE>
proceeding, and acknowledges that any risk of loss or damage arising from the
conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
10.2 This Agreement may not be assigned without the approval of the
Fund.
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the 1st day of
May, 1997.
DELAWARE SERVICE COMPANY, INC.
ATTEST: /s/Michael D. Mabry By: /s/ David K. Downes
--------------------- ------------------------
Michael D. Mabry David K. Downes
Assistant Vice President/ President, Chief Executive Officer,
Assistant Secretary and Chief Financial Officer
VOYAGEUR FUNDS, INC on behalf of the
Voyageur U.S. Government Securities Fund
ATTEST: /s/ David P. O'Connor By: /s/ Wayne A. Stork
David P. O'Connor Wayne A. Stork
Assistant Vice President/ Chairman, President and
Assistant Secretary Chief Executive Officer
12
<PAGE>
EX-99.B9B
DELAWARE GROUP OF FUNDS
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1996 by and between
the registered investment companies in the Delaware Group listed on Schedule A,
which Schedule may be amended from time to time as provided in Section 8 hereof
(each corporation or common law or business trust, hereinafter referred to as a
"Company," and all such entities collectively hereinafter referred to as, the
"Companies"), on behalf of the portfolio(s) of securities of such Companies
listed on Schedule A, which Schedule may be amended from time to time (when used
in this Agreement in the context of a Company that offers only a single
portfolio/series of shares, the term "Portfolio" shall be a reference to such
Company, and when used in the context of a Company that offers multiple
portfolios/series of shares, shall be a reference to each portfolio/series of
such Company) and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware
corporation, having its principal office and place of business at 1818 Market
Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Companies
with respect to each Portfolio and either Delaware Management Company, Inc. or
its U.K. affiliate, Delaware International Advisers Ltd., provide, in part, that
each
<PAGE>
Portfolio shall conduct its business and affairs and shall bear the expenses
necessary and incidental thereto including, but not in limitation of the
foregoing, the costs incurred with respect to accounting services; and
WHEREAS, the services to be provided under this agreement
previously were provided by employees of the Companies; and
WHEREAS, the Companies and DSC desire to have a written agreement
concerning the performance of accounting services for each Portfolio and
providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 1.1 The Companies hereby appoint DSC the accounting agent
("Accounting Agent") for all of the classes of each Portfolio, to provide such
accounting services as are set forth herein and DSC hereby accepts such
appointment and agrees to provide the Companies, as their agent, the services
described herein.
Section 1.2 The Companies shall pay DSC and DSC shall accept, for the
services provided hereunder, the compensation provided for in Section VI hereof.
The Companies also shall reimburse DSC for expenses incurred or advanced by it
for the Companies in connection with its services hereunder.
-2-
<PAGE>
II. DOCUMENTATION
Section 2.1 Each Company represents that it has provided or made
available to DSC (or has given DSC an opportunity to examine) copies of, and,
DSC represents that it has received from the Companies (or is otherwise familiar
with), the following documents:
A. The Articles of Incorporation or Agreement and Declaration
of Trust or other document, as relevant, evidencing each Company's form of
organization and any current amendments thereto;
B. The By-Laws or Procedural Guidelines of each Company;
C. Any resolution or other action of each Company or the Board
of Directors or Trustees of each Company establishing or affecting the rights,
privileges or other status of any class of shares of a Portfolio, or altering or
abolishing any such class;
D. A certified copy of a resolution of the Board of Directors
or Trustees of each Company appointing DSC as Accounting Agent for each
Portfolio and authorizing the execution of this Agreement or an amendment to
Schedule A of this Agreement;
E. A copy of each Company's currently effective prospectus[es]
and Statement[s] of Additional Information under the Securities Act of 1933, if
effective;
-3-
<PAGE>
F. A certified copy of any resolution of the Board of
Directors or Trustees of each Company authorizing any person to give
instructions to DSC under this Agreement (with a specimen signature of such
person if not already provided), setting forth the scope of such authority; and
G. Any amendment, revocation or other document altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.
Section 2.2 Each Company and DSC may consult as to forms or documents
that may be required in performing services hereunder.
Section 2.3 Each Company warrants the following:
A. The Company is, or will be, a properly registered
investment company under the Investment Company Act of 1940 (the "1940 Act") and
any and all shares of a Portfolio which it issues will be properly registered
and lawfully issued under applicable federal and state laws.
B. The provisions of this contract do not violate the terms of
any instrument by which the Company or the Company on behalf of a Portfolio is
bound; nor do they violate any law or regulation of any body having jurisdiction
over the Company or its property.
Section 2.4 DSC warrants the following:
A. The provisions of this contract do not violate the terms of
any instrument by which DSC is bound; nor do they violate any law or regulation
of any body having jurisdiction over DSC or its property.
-4-
<PAGE>
III. SERVICES TO BE PROVIDED BY DSC
Section 3.1 Daily Net Asset Value ("NAV") Calculation. As Accounting
Agent for each Portfolio of the Companies, DSC will perform all functions
necessary to provide daily Portfolio NAV calculations, including:
A. Maintaining each Portfolio's securities portfolio history
by:
1. recording portfolio purchases and sales;
2. recording corporate actions and capital changes
relating to portfolio securities;
3. accruing interest, dividends and expenses; and
4. maintaining the income history for securities
purchased by a Portfolio.
B. Determining distributions to Portfolio shareholders;
C. Recording and reconciling shareholder activity including:
1. recording subscription, liquidations and dividend
reinvestments;
2. recording settlements of shareholder activity; and
-5-
<PAGE>
3. reconciling Portfolio shares outstanding to the
records maintained by DSC, as transfer agent of the Portfolio.
Valuing a Portfolio's securities portfolio which
includes determining the NAVs for all classes of the Portfolio;
D. Disseminating Portfolio NAVs and dividends to interested
parties (including the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the Investment Company Institute ("ICI"),
Morningstar, and Lipper Analytical Services, Inc. ("Lipper")); and
E. Resolving pricing and/or custody discrepancies.
Section 3.2 Financial Reporting. As Accounting Agent, DSC shall perform
financial reporting services for each Portfolio, which shall include:
A. The preparation of semi-annual and annual reports
for shareholders which involves the performance of the following functions:
1. preparing all statements of net assets,
statements of operations and statements of changes in net assets for the
Portfolio;
2. preparing footnotes to financial
statements for the Portfolio;
3. preparing workpapers for each Company's
annual audit by its independent public accountants; and
4. coordinating the annual audit by each
Company's independent public accountants.
-6-
<PAGE>
B. Reporting to the ICI in response to requests for
monthly and other periodic information;
C. Performing statistical reporting, which includes
daily, monthly, quarterly and annual reports for Lipper, Weisenberger and other
third party reporting agencies; and
D. Furnishing financial information for any
additional required SEC reporting, such as the preparation of financial
information for each Company's reporting on Form N-SAR, the furnishing of
financial information for each Company's prospectus[es] and statement[s] of
additional information, and the financial information required for each
Company's annual Rule 24f-2 notice filing;
Section 3.3 Compliance Testing. DSC will monitor, test and prepare and
maintain supporting schedules which evidence compliance with the definitional
and distribution requirements under the Internal Revenue Code of 1986, as
amended ("IRC"), including the following:
A. The requirement to be registered at all times during the
taxable year under the 1940 Act (IRC Section 851(a));
B. The annual ninety percent gross income test (IRC Section
851(b)(2));
C. The short/short (thirty percent) gross income test (IRC
Section 851(b)(3));
D. The quarterly IRC industry diversification tests (IRC
Sections 851(b)(4) and 817(h)); and
-7-
<PAGE>
E. The 90% distribution requirements (IRC Section 852(a)).
Section 3.4 Other Services. In addition to the above, DSC, in
its capacity as Accounting Agent for the Company, will perform the following
services:
A. The calculation of required Portfolio monthly yields and
total return calculations in accordance with the prescribed rules of the U.S.
Securities and Exchange Commission;
B. Providing the financial information necessary for the
preparation of all federal and state tax returns and ancillary schedules,
including:
1. year-end excise tax distributions; and
2. compliance with Subchapter M and Section 4982 of
the IRC;
C. Performing special tax reporting to shareholders, including
the preparation of reports which reflect income earned by each Portfolio by
state, exempt income and distributions that qualify for the corporate dividends
received deduction;
D. The preparation of expense and budget figures for each
Portfolio, including the maintenance of detailed records pertaining to expense
accruals and payments and adjusting reports to reflect accrual adjustments;
E. The preparation of reports for Board of Directors' or
Trustees' meetings;
F. Coordination of the custody relationships;
G. Facilitating security settlements;
-8-
<PAGE>
H. Performance of required foreign security accounting
functions;
I. Performance of daily cash reconciliations for each
Portfolio;
J. Providing identified reports to portfolio managers
including:
1. providing portfolio holdings and security
valuation reports;
2. preparing cash forecasts and reconciliations
as mutually agreed upon; and
3. preparing income projections.
IV. PERFORMANCE OF DUTIES
Section 4.1 DSC may request or receive instructions from a Company and
may, at a Portfolio's expense, consult with counsel for the Company or its own
counsel, with respect to any matter arising in connection with the performance
of its duties hereunder, and shall not be liable for any action taken or omitted
by it in good faith in accordance with such instructions or opinions of counsel.
Section 4.2 DSC shall maintain reasonable insurance coverage for errors
and omissions and reasonable bond coverage for fraud.
Section 4.3 Upon notice thereof to a Company, DSC may employ others to
provide services to DSC in its performance of this Agreement.
-9-
<PAGE>
Section 4.4 Personnel and facilities of DSC used to perform services
hereunder may be used to perform similar services to all Companies of the
Delaware Group and their Portfolios and to others, and may be used to perform
other services for all of the Companies of the Delaware Group and others.
Section 4.5 The Companies and DSC may, from time to time, set forth in
writing at the Companies' expense certain guidelines to be applicable to the
services hereunder.
V. ACCOUNTS AND RECORDS
Section 5.1 The parties hereto agree and acknowledge that the accounts
and records maintained by DSC with respect to a Portfolio shall be the property
of such Portfolio, and shall be made available to the relevant Company promptly
upon request and shall be maintained for the periods prescribed in Rule 31a-2
under the Investment Company Act of 1940 or such longer period as shall be
agreed to by the parties hereto, at such Portfolio's expense.
VI. COMPENSATION
Section 6.1 The Companies and DSC acknowledge that the compensation to
be paid hereunder to DSC is intended to induce DSC to provide services under
this Agreement of a nature and quality which the Boards of Directors or Trustees
of the Companies, including a majority who are not parties to this
-10-
<PAGE>
Agreement or interested person of the parties hereto, have determined after due
consideration to be necessary for the conduct of the business of a Portfolio in
the best interests of a Portfolio and its shareholders.
Section 6.2 Compensation by a Portfolio hereunder shall be determined
in accordance with Schedule B hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
Section 6.3 Compensation as provided in Schedule B shall be reviewed
and approved for each Portfolio in the manner set forth in Section 8.1 hereof by
the Boards of Directors or Trustees of the Companies at least annually and may
be reviewed and approved more frequently at the request of either party. The
Boards may request and DSC shall provide such information as the Boards may
reasonably require to evaluate the basis of and approve the compensation.
VII. STANDARD OF CARE
Section 7.1 The Companies on behalf of each Portfolio acknowledge that
DSC shall not be liable for, and in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of the performance of its duties
under this contract, agree to indemnify DSC against, any claim or deficiency
arising from the performance of DSC's duties hereunder, including DSC's costs,
counsel fees and expenses incurred in investigating or defending any such claim
or any administrative or other
-11-
<PAGE>
proceeding, and acknowledge that any risk of loss or damage arising from the
conduct of a Portfolio's affairs in accordance herewith or in accordance with
guidelines or instructions given hereunder, shall be borne by the Portfolio. The
indemnification provided for in this Section 7.1 shall be made Portfolio by
Portfolio so that DSC is only entitled to indemnification from a Company on
behalf of a Portfolio for actions arising from the performance of DSC's duties
as to that Portfolio.
VIII. CONTRACTUAL STATUS
Section 8.1 This Agreement shall be executed and become effective as to
a Company with regard to a Portfolio listed on Schedule A as of the date first
written above if approved by a vote of such Company's Board of Directors or
Trustees, including an affirmative vote of a majority of the non-interested
members of the Board of such Company, cast in person at a meeting called for the
purpose of voting on such approval. It shall continue in effect for an
indeterminate period, and is subject to termination as to a Company on behalf of
a Portfolio or DSC, as the case may be, on sixty (60) days notice by either that
Company or DSC, unless earlier terminated or amended by agreement among the
parties. A Company shall be permitted to terminate this Agreement as to a
Portfolio on sixty (60) days notice to DSC. Compensation under this Agreement by
a Portfolio shall require approval by a majority vote of the Board of Directors
or Trustees of such Portfolio's Company, including an affirmative vote of the
-12-
<PAGE>
majority of the non-interested members of such Board cast in person at a meeting
called for the purpose of voting such approval.
Section 8.2 This Agreement shall become effective as to any Company or
Portfolio not included on Schedule A as of the date first written above, but
desiring to participate in this Agreement, on such date as an amended Schedule A
adding such new Company or Portfolio to such Schedule is executed by DSC and
such new Company or a Company on behalf of a new Portfolio following approval by
the Company or by the Company on behalf of a new Portfolio desiring to be
included in this Agreement in accordance with the method specified in Section
8.1. Any such amended Schedule A shall not affect the validity of this Agreement
as between DSC and the other Companies which have executed this Agreement or any
subsequent amendment to Schedule A of this Agreement.
Section 8.3 This Agreement may not be assigned by DSC without the
approval of all of the Companies.
Section 8.4 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
----------------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
-13-
<PAGE>
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP DELCHESTER HIGH-YIELD
BOND FUND, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/Wayne A. Stork
------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
-------------------------------------
Wayne A. Stork, Chairman
-14-
<PAGE>
SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Delchester High-Yield Bond Fund, Inc.
- --------
* Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
-15-
<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
-16-
<PAGE>
Delaware Group Government Fund, Inc.
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: August 19, 1996
-17-
<PAGE>
SCHEDULE B
COMPENSATION
Fee Schedule for The Delaware Group of Funds
Part 1 -- Fees for Existing Portfolios
Existing Portfolios are those so designated on Schedule A to the Fund Accounting
Agreement between Delaware Service Company, Inc. and the Delaware Group of Funds
dated as of August 19, 1996 ("Agreement").
Annual Asset Based Fees
First $10 Billion of Aggregate
Complex Net Assets 2.5 Basis Points
Aggregate Complex Net Assets
over $10 Billion 2.0 Basis Points
Annual asset based fees will be charged at a rate of 2.5 basis points for the
first $10 Billion of Aggregate Complex Net Assets. Aggregate Complex Net Assets
over $10 Billion will be charged at a rate of 2.0 basis points. These fees will
be charged to a Portfolio on an aggregated pro rated basis.
Annual Minimum Fees
Domestic Equity Portfolio $35,000
Domestic Fixed Income Portfolio $45,000
International Series Portfolio $70,000
Per Class of Share Fee $ 4,000
There is an annual minimum fee that will be charged only if the annual asset
based fee is less than the calculation for the minimum fee. This fee is based on
the type and the number of classes per Portfolio. For an equity Portfolio
$35,000 will be charged; for a fixed income Portfolio $45,000 will be charged,
and for an international Portfolio $70,000 will be charged. For each class of
shares, $4,000 will be charged, such amount to be prorated over a period of less
than a year for any classes added after April 30, 1996. A total of all minimum
fees will be compared to the total asset based fee to determine which fee is
higher and, subsequently, will be used to bill the Companies.
-18-
<PAGE>
Part 2 -- Fees for New Portfolios
For each Portfolio designated as a New Portfolio on Schedule A to the Agreement,
there will be a fee of 2.0 basis points, providing that the Delaware complex net
assets are above $10 Billion (the rate would be 2.5 basis points if under $10
Billion and then 2.0 basis points once the net assets cross $10 Billion), or an
annual minimum fee calculated in the manner described above, whichever is
higher. This new fee would be added to the total of Existing Portfolio fees and
then pro rated. Fees shall not be charged for New Portfolios included on
Schedule A until such Portfolios shall have commenced operations.
Dated as of: August 19, 1996
-19-
<PAGE>
EX-99.B9I
AMENDMENT NO. 5
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
2
<PAGE>
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust-Pennsylvania (doing business as Tax-Free Pennsylvania
Fund)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of May 1, 1997
4
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
----------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
-------------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
EX-99.B9II
AMENDMENT NO. 6
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
2
<PAGE>
Trend Series
Value Series
Delaware Group State Tax-Free Income Trust
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Tax-Free Pennsylvania Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of July 21, 1997
4
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
---------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
---------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
EX-99.B9III
AMENDMENT NO.7
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of October 14, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
---------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
---------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9IV
AMENDMENT NO. 8
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of December 18, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
----------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
---------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B11
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statements of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 23 to the Registration Statement (Form N-1A) (No.
33-16270) of Voyageur Funds, Inc. of our report dated December 4, 1997, included
in the 1997 Annual Report to shareholders.
/s/ Ernst & Young LLP
- ------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
February 25, 1998
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware - Voyageur U.S. Government Securities Fund
We have audited the accompanying statement of net assets and statement of assets
and liabilities of Delaware - Voyageur U.S. Government Securities Fund as of
October 31, 1997, and the related statement of operations, statement of changes
in net assets, and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the periods ended June 30, 1996 through October 31, 1996, and
the financial highlights for the periods ended June 30, 1994, through October
31, 1996, were audited by other auditors whose report dated December 6, 1996,
expressed an unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of October 31, 1997, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1997 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Delaware - Voyageur U.S. Government Securities Fund at October 31, 1997, the
results of its operations, the changes in its net assets, and its financial
highlights for the year then ended, in conformity with generally accepted
accounting principles.
/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP
December 4, 1997
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Funds, Inc.:
We consent to the use of our report dated December 6, 1996 included herein and
to the reference to our Firm under the heading "FINANCIAL STATEMENTS" in the
Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
---------------------------
KPMG Peat Marwick LLP
Minneapolis Minnesota
February 26, 1998
Member firm of
Klywald Peat Marwick
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Voyageur Funds
We have audited the accompanying statements of changes in net assets of Voyageur
U.S. Government Securities Fund (formerly a portfolio within Voyageur Funds,
Inc.) for the four- months ended October 31, 1996 and the year ended June 30,
1996, and the financial highlights for the four-months ended October 31, 1996
and each of the years in the four-year period ended June 30, 1996. The
statements of changes in net assets and the financial highlights are the
responsibility of Fund management. Our responsibility is to express an opinion
on the statements of changes in net assets and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the changes in net assets of
Voyageur U.S. Government Securities Fund for the four-months ended October 31,
1996 and the year ended June 30, 1996, and the financial highlights for the
periods stated in the first paragraph above, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
---------------------------
KPMG Peat Marwick LLP
Minneapolis Minnesota
December 6, 1996
Member firm of
Klywald Peat Marwick
<PAGE>
EX-99.B16
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
-------
1
$1000(1 - T) = $1,075.88
T = 7.59%
LIFE OF
FUND
------
2.80821918
$1000(1 - T) = $1,300.82
T = 9.82%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
------
1
$1000(1 - T) = $1,065.88
T = 6.59%
LIFE OF
FUND
--------
2.80821918
$1000(1 - T) = $1,300.82
T= 9.82%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 95.238 $0.124 1.129 96.367
- --------------------------------------------------------------------------------
Ending Shares 96.367
Ending NAV x $10.59
----------
$1,020.53
Less CDSC ($10.00)
----------
Investment Return $1,010.53
Total Return Performance
- ------------------------
Investment Return $1,010.53
Less Initial Investment $1,000.00
----------
$10.53 / $1,000.00 x 100
Total Return: 1.05%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 95.238 $0.124 0.000 96.367
- --------------------------------------------------------------------------------
Ending Shares 96.367
Ending NAV x $10.59
---------
Investment Return $1,020.53
Total Return Performance
- ------------------------
Investment Return $1,020.53
Less Initial Investment $1,000.00
---------
$20.53 / $1,000.00 x 100
Total Return: 2.05%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.18
Initial Shares 98.232
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.232 $0.257 2.650 100.882
- --------------------------------------------------------------------------------
Ending Shares 100.882
Ending NAV x $10.59
---------
$1,068.34
Less CDSC ($10.00)
---------
Investment Return $1,058.34
Total Return Performance
- ------------------------
Investment Return $1,058.34
Less Initial Investment $1,000.00
---------
$58.34 / $1,000.00 x 100
Total Return: 5.83%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.18
Initial Shares 98.232
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.232 $0.257 2.650 100.882
- --------------------------------------------------------------------------------
Ending Shares 100.882
Ending NAV x $10.59
------------
Investment Return $1,068.34
Total Return Performance
- ------------------------
Investment Return $1,068.34
Less Initial Investment $1,000.00
------------
$68.84 / $1,000.00 x 100
Total Return: 6.83%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.16
Initial Shares 98.425
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.425 $0.389 2.482 100.907
- --------------------------------------------------------------------------------
Ending Shares 100.907
Ending NAV x $10.59
----------
Investment Return $1,068.61
Total Return Performance
------------------------
Investment Return $1,068.61
Less Initial Investment $1,000.00
----------
$68.61 / $1,000.00 x 100
Total Return: 6.86%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.16
Initial Shares 98.425
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.425 $0.389 2.482 100.907
- --------------------------------------------------------------------------------
Ending Shars 100.907
Ending NAV x $10.59
----------
$1,068.61
Less CDSC ($10.00)
----------
Investment Return $1,058.61
Total Return Performance
------------------------
Investment Return $1,058.61
Less Initial Investment $1,000.00
----------
$58.61 / $1,000.00 x 100
Total Return: 5.86%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.36
Initial Shares 96.525
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.525 $0.539 5.069 101.594
- --------------------------------------------------------------------------------
Ending Shares 101.594
Ending NAV x $10.59
----------
$1,075.88
Less CDSC ($10.00)
----------
Investment Return $1,065.88
Total Return Performance
- ------------------------
Investment Return $1,065.88
Less Initial Investment $1,000.00
----------
$65.88 / $1,000.00 x 100
Total Return: 6.59%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.36
Initial Shares 96.525
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.525 $0.539 5.069 101.594
- --------------------------------------------------------------------------------
Ending Shares 101.594
Ending NAV x $10.59
---------
Investment Return $1,075.88
Total Return Performance
- ------------------------
Investment Return $1,075.88
Less Initial Investment $1,000.00
---------
$75.88 / $1,000.00 x 100
Total Return: 7.59%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.45
Initial Shares 105.820
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 105.820 $0.278 2.991 108.811
- --------------------------------------------------------------------------------
1996 108.811 $0.714 7.782 116.593
- --------------------------------------------------------------------------------
1997 116.593 $0.539 6.242 122.835
- --------------------------------------------------------------------------------
Ending Shares 122.835
Ending NAV x $10.59
---------
$1,300.82
Less CDSC $0.00
---------
Investment Return $1,300.82
Total Return Performance
- ------------------------
Investment Return $1,300.82
Less Initial Investment $1,000.00
---------
$300.82 / $1,000.00 x 100
Total Return: 30.08%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES C
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.45
Initial Shares 105.820
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 105.820 $0.278 2.991 108.811
- --------------------------------------------------------------------------------
1996 108.811 $0.714 7.782 116.593
- --------------------------------------------------------------------------------
1997 116.593 $0.539 6.242 122.835
- --------------------------------------------------------------------------------
Ending Shares 122.835
Ending NAV x $10.59
----------
Investment Return $1,300.82
Total Return Performance
- ------------------------
Investment Return $1,300.82
Less Initial Investment $1,000.00
----------
$300.82 / $1,000.00 x 100
Total Return: 30.08%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
------
1
$1000(1 - T) = $1,075.72
T = 7.57%
THREE
YEARS
------
3
$1000(1 - T) = $1,308.67
T = 9.38%
LIFE OF
FUND
----------
3.40273973
$1000(1 - T) = $1,270.10
T = 7.28%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
------
1
$1000(1 - T) = $1,035.72
T = 3.57%
THREE
YEARS
-------
3
$1000(1 - T) = $1,278.67
T = 8.54%
LIFE OF
FUND
--------
3.40273973
$1000(1 - T) = $1,240.10
T = 6.53%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.51
Initial Shares 95.147
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 95.147 $0.123 1.132 96.279
- --------------------------------------------------------------------------------
Ending Shares 96.279
Ending NAV x $10.61
----------
$1,021.52
Less CDSC ($40.00)
----------
Investment Return $981.52
Total Return Performance
- ------------------------
Investment Return $981.52
Less Initial Investment $1,000.00
----------
($18.48) / $1,000.00 x 100
Total Return: -1.85%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.51
Initial Shares 95.147
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 95.147 $0.123 1.132 96.279
- --------------------------------------------------------------------------------
Ending Shares 96.279
Ending NAV x $10.61
---------
Investment Return $1,021.52
Total Return Performance
- ------------------------
Investment Return $1,021.52
Less Initial Investment $1,000.00
---------
$21.52 / $1,000.00 x 100
Total Return: 2.15%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.17
Initial Shares 98.328
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.328 $0.253 2.444 100.772
- --------------------------------------------------------------------------------
Ending Shares 100.772
Ending NAV x $10.61
---------
$1,069.19
Less CDSC ($40.00)
---------
Investment Return $1,029.19
Total Return Performance
- ------------------------
Investment Return $1,029.19
Less Initial Investment $1,000.00
---------
$29.19 / $1,000.00 x 100
Total Return: 2.92%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.17
Initial Shares 98.328
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.328 $0.253 2.444 100.772
- --------------------------------------------------------------------------------
Ending Shares 100.772
Ending NAV x $10.61
---------
Investment Return $1,069.19
Total Return Performance
- ------------------------
Investment Return $1,069.19
Less Initial Investment $1,000.00
---------
$69.19 / $1,000.00 x 100
Total Return: 6.92%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.31
Initial Shares 96.993
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.993 $0.388 3.715 100.708
- --------------------------------------------------------------------------------
Ending Shares 100.708
Ending NAV x $10.61
---------
Investment Return $1,068.51
Total Return Performance
------------------------
Investment Return $1,068.51
Less Initial Investment $1,000.00
---------
$68.51 / $1,000.00 x 100
Total Return: 6.85%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.31
Initial Shares 96.993
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.993 $0.388 3.715 100.708
- --------------------------------------------------------------------------------
Ending Shares 100.708
Ending NAV x $10.61
----------
$1,028.51
Less CDSC ($40.00)
---------
Investment Return $1,028.51
Total Return Performance
------------------------
Investment Return $1,028.51
Less Initial Investment $1,000.00
----------
$28.51 / $1,000.00 x 100
Total Return: 2.85%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.38
Initial Shares 96.339
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.339 $0.527 5.048 101.387
- --------------------------------------------------------------------------------
Ending Shares 101.387
Ending NAV x $10.61
----------
$1,075.72
Less CDSC ($40.00)
----------
Investment Return $1,035.72
Total Return Performance
- ------------------------
Investment Return $1,035.72
Less Initial Investment $1,000.00
----------
$35.72 / $1,000.00 x 100
Total Return: 3.57%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.38
Initial Shares 96.339
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.339 $0.527 5.048 101.387
- --------------------------------------------------------------------------------
Ending Shares 101.387
Ending NAV x $10.61
---------
Investment Return $1,075.72
Total Return Performance
- ------------------------
Investment Return $1,075.72
Less Initial Investment $1,000.00
---------
$75.72 / $1,000.00 x 100
Total Return: 7.57%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
THREE YEARS (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.53
Initial Shares 104.932
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 104.932 $0.386 4.123 109.055
- --------------------------------------------------------------------------------
1996 109.055 $0.736 8.031 117.086
- --------------------------------------------------------------------------------
1997 117.086 $0.527 6.257 123.343
- --------------------------------------------------------------------------------
Ending Shares 123.343
Ending NAV x $10.61
---------
$1,308.67
Less CDCS (30.00)
---------
Investment Return $1,278.67
Total Return Performance
- ------------------------
Investment Return $1,278.67
Less Initial Investment $1,000.00
---------
$278.67 / $1,000.00 x 100
Total Return: 27.87%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
THREE YEARS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.53
Initial Shares 104.932
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 104.932 $0.386 4.123 109.055
- --------------------------------------------------------------------------------
1996 109.055 $0.736 8.031 117.086
- --------------------------------------------------------------------------------
1997 117.086 $0.527 6.257 123.343
- --------------------------------------------------------------------------------
Ending Shares 123.343
Ending NAV x $10.61
---------
Investment Return $1,308.67
Total Return Performance
- ------------------------
Investment Return $1,308.67
Less Initial Investment $1,000.00
---------
$308.67 / $1,000.00 x 100
Total Return: 30.87%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.05
Initial Shares 99.502
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 99.502 $0.576 6.341 105.843
- --------------------------------------------------------------------------------
1996 105.843 $0.736 7.793 113.636
- --------------------------------------------------------------------------------
1997 113.636 $0.539 6.072 119.708
- --------------------------------------------------------------------------------
Ending Shares 119.708
Ending NAV x $10.61
---------
$1,270.10
Less CDCS (30.00)
---------
Investment Return $1,240.10
Total Return Performance
- ------------------------
Investment Return $1,240.10
Less Initial Investment $1,000.00
---------
$240.10 / $1,000.00 x 100
Total Return: 24.01%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.05
Initial Shares 99.502
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 99.502 $0.576 6.341 105.843
- --------------------------------------------------------------------------------
1996 0.000 $0.736 113.636 113.636
- --------------------------------------------------------------------------------
1997 0.000 $0.539 119.708 119.708
- --------------------------------------------------------------------------------
Ending Shares 119.708
Ending NAV x $10.61
---------
Investment Return $1,270.10
Total Return Performance
- ------------------------
Investment Return $1,270.10
Less Initial Investment $1,000.00
---------
$270.10 / $1,000.00 x 100
Total Return: 27.01%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES INSTIT.
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
------
1
$1000(1 - T) = $1,083.95
T = 8.40%
THREE
YEARS
-------
3
$1000(1 - T) = $1,333.71
T = 10.07%
LIFE OF
FUND
-------
3.40273973
$1000(1 - T) = $1,298.33
T = 7.97%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES INSTIT.
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.51
Initial Shares 95.147
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 95.147 $0.143 1.308 96.455
- --------------------------------------------------------------------------------
Ending Shares 96.455
Ending NAV x $10.60
----------
Investment Return $1,022.42
Total Return Performance
- ------------------------
Investment Return $1,022.42
Less Initial Investment $1,000.00
----------
$22.42 / $1,000.00 x 100
Total Return: 2.24%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES INSTIT.
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.17
Initial Shares 98.328
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.328 $0.297 2.837 101.165
- --------------------------------------------------------------------------------
Ending Shares 101.165
Ending NAV x $10.60
----------
Investment Return $1,072.35
Total Return Performance
- ------------------------
Investment Return $1,072.35
Less Initial Investment $1,000.00
----------
$72.35 / $1,000.00 x 100
Total Return: 7.24%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES INSTIT.
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.31
Initial Shares 96.993
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.993 $0.447 4.286 101.279
- --------------------------------------------------------------------------------
Ending Shares 101.279
Ending NAV x $10.60
----------
Investment Return $1,073.56
Total Return Performance
- ------------------------
Investment Return $1,073.56
Less Initial Investment $1,000.00
----------
$73.56 / $1,000.00 x 100
Total Return: 7.35%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES INSTIT.
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.37
Initial Shares 96.432
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.432 $0.605 5.827 102.259
- --------------------------------------------------------------------------------
Ending Shares 102.259
Ending NAV x $10.60
-----------
Investment Return $1,083.95
Total Return Performance
- ------------------------
Investment Return $1,083.95
Less Initial Investment $1,000.00
-----------
$83.95 / $1,000.00 x 100
Total Return: 8.40%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES INSTIT.
TOTAL RETURN PERFORMANCE
THREE YEARS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.53
Initial Shares 104.932
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 104.932 $0.644 4.595 109.527
- --------------------------------------------------------------------------------
1996 109.527 $0.818 8.998 118.525
- --------------------------------------------------------------------------------
1997 118.525 $0.605 7.297 125.822
- --------------------------------------------------------------------------------
Ending Shares 125.822
Ending NAV x $10.60
----------
Investment Return $1,333.71
Total Return Performance
------------------------
Investment Return $1,333.71
Less Initial Investment $1,000.00
----------
$333.71 / $1,000.00 x 100
Total Return: 33.37%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES INSTIT.
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.03
Initial Shares 99.701
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1994 99.701 $0.035 0.151 99.852
- --------------------------------------------------------------------------------
1995 99.852 $0.644 6.768 106.620
- --------------------------------------------------------------------------------
1996 106.620 $0.818 8.760 115.380
- --------------------------------------------------------------------------------
1997 115.380 $0.605 7.104 122.484
- --------------------------------------------------------------------------------
Ending Shares 122.484
Ending NAV x $10.60
----------
Investment Return $1,298.33
Total Return Performance
- ------------------------
Investment Return $1,298.33
Less Initial Investment $1,000.00
----------
$298.33 / $1,000.00 x 100
Total Return: 29.83%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
------
1
$1000(1 - T) = $1,083.95
T = 8.39%
THREE
YEARS
------
3
$1000(1 - T) = $1,333.71
T = 10.08%
FIVE
YEARS
------
5
$1000(1 - T) = $1,407.52
T = 7.08%
LIFE OF
FUND
-------
9.99771689
$1000(1 - T) = $2,351.31
T = 8.93%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 90.744
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 90.744 $0.143 5.803 96.547
- --------------------------------------------------------------------------------
Ending Shares 96.547
Ending NAV x $10.60
----------
Investment Return $1,023.40
Total Return Performance
- ------------------------
Investment Return $1,023.40
Less Initial Investment $1,000.00
----------
$23.40 / $1,000.00 x 100
Total Return: 2.34%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.16
Initial Shares 98.425
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 98.425 $0.296 2.838 101.263
- --------------------------------------------------------------------------------
Ending Shares 101.263
Ending NAV x $10.60
----------
Investment Return $1,073.39
Total Return Performance
- ------------------------
Investment Return $1,073.39
Less Initial Investment $1,000.00
----------
$73.39 / $1,000.00 x 100
Total Return: 7.34%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.30
Initial Shares 97.087
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 97.087 $0.447 4.289 101.376
- --------------------------------------------------------------------------------
Ending Shares 101.376
Ending NAV x $10.60
---------
Investment Return $1,074.59
Total Return Performance
- ------------------------
Investment Return $1,074.59
Less Initial Investment $1,000.00
---------
$74.59 / $1,000.00 x 100
Total Return: 7.46%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.37
Initial Shares 96.432
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 96.432 $0.605 5.827 102.259
- --------------------------------------------------------------------------------
Ending Shares 102.259
Ending NAV x $10.60
----------
Investment Return $1,083.95
Total Return Performance
- ------------------------
Investment Return $1,083.95
Less Initial Investment $1,000.00
----------
$83.95 / $1,000.00 x 100
Total Return: 8.39%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
THREE YEARS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.53
Initial Shares 104.932
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 104.932 $0.644 4.595 109.527
- -------------------------------------------------------------------------------
1996 109.527 $0.818 8.998 118.525
- -------------------------------------------------------------------------------
1997 118.525 $0.605 7.297 125.822
- -------------------------------------------------------------------------------
Ending Shares 125.822
Ending NAV x $10.60
----------
Investment Return $1,333.71
Total Return Performance
- ------------------------
Investment Return $1,333.71
Less Initial Investment $1,000.00
----------
$333.71 / $1,000.00 x 100
Total Return: 33.37%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
FIVE YEARS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.58
Initial Shares 94.518
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1993 94.518 $0.910 5.578 100.096
- --------------------------------------------------------------------------------
1994 100.096 $0.836 8.153 108.249
- --------------------------------------------------------------------------------
1995 108.249 $0.644 7.337 115.586
- --------------------------------------------------------------------------------
1996 115.586 $0.818 9.498 125.084
- --------------------------------------------------------------------------------
1997 125.084 $0.605 7.701 132.785
- --------------------------------------------------------------------------------
Ending Shares 132.785
Ending NAV x $10.60
-----------
Investment Return $1,407.52
Total Return Performance
- ------------------------
Investment Return $1,407.52
Less Initial Investment $1,000.00
-----------
$407.52 / $1,000.00 x 100
Total Return: 40.75%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
LIFE FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.58
Initial Shares 94.518
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1988 94.518 $0.584 11.452 105.970
- --------------------------------------------------------------------------------
1989 105.970 $0.879 9.835 115.805
- --------------------------------------------------------------------------------
1990 115.805 $1.031 12.705 128.510
- --------------------------------------------------------------------------------
1991 128.510 $0.878 11.797 140.307
- --------------------------------------------------------------------------------
1992 140.307 $0.956 13.467 153.774
- --------------------------------------------------------------------------------
1993 153.774 $0.910 13.441 167.215
- --------------------------------------------------------------------------------
1994 167.215 $0.836 13.621 180.836
- --------------------------------------------------------------------------------
1995 180.836 $0.644 12.254 193.090
- --------------------------------------------------------------------------------
1996 193.090 $0.818 15.869 208.959
- --------------------------------------------------------------------------------
1997 208.959 $0.605 12.863 221.822
- --------------------------------------------------------------------------------
Ending Shares 221.822
Ending NAV x $10.60
---------
Investment Return $2,351.31
Total Return Performance
- ------------------------
Investment Return $2,351.31
Less Initial Investment $1,000.00
---------
$1,351.31 / $1,000.00 x 100
Total Return: 135.13%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
- --------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
------
1
$1000(1 - T) = $1,032.15
T = 3.22%
THREE
YEARS
------
3
$1000(1 - T) = $1,269.82
T = 8.29%
FIVE
YEARS
- -----
5
$1000(1 - T) = $1,340.37
T = 6.03%
LIFE OF
FUND
- -------
9.99771689
$1000(1 - T) = $2,239.37
T = 8.40%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $11.02
Initial Shares 90.744
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 90.744 $0.143 1.248 91.992
- --------------------------------------------------------------------------------
Ending Shares 91.992
Ending NAV x $10.60
---------
Investment Return $975.12
Total Return Performance
- ------------------------
Investment Return $975.12
Less Initial Investment $1,000.00
---------
($24.88) / $1,000.00 x 100
Total Return: -2.49%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.67
Initial Shares 93.721
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 93.721 $0.296 2.702 96.423
- --------------------------------------------------------------------------------
Ending Shares 96.423
Ending NAV x $10.60
---------
Investment Return $1,022.08
Total Return Performance
- ------------------------
Investment Return $1,022.08
Less Initial Investment $1,000.00
---------
$22.08 / $1,000.00 x 100
Total Return: 2.21%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.81
Initial Shares 92.507
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 92.507 $0.447 4.086 96.593
- --------------------------------------------------------------------------------
Ending Shares 96.593
Ending NAV x $10.60
---------
Investment Return $1,023.89
Total Return Performance
- ------------------------
Investment Return $1,023.89
Less Initial Investment $1,000.00
---------
$23.89 / $1,000.00 x 100
Total Return: 2.38%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
ONE YEAR
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.89
Initial Shares 91.827
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1997 91.827 $0.605 5.546 97.373
- --------------------------------------------------------------------------------
Ending Shares 97.373
Ending NAV x $10.60
----------
Investment Return $1,032.15
Total Return Performance
- ------------------------
Investment Return $1,032.15
Less Initial Investment $1,000.00
----------
$32.15 / $1,000.00 x 100
Total Return: 3.22%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
THREE YEARS
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.01
Initial Shares 99.900
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 99.900 $0.644 4.375 104.275
- --------------------------------------------------------------------------------
1996 104.275 $0.818 8.571 112.846
- --------------------------------------------------------------------------------
1997 112.846 $0.605 6.948 119.794
- --------------------------------------------------------------------------------
Ending Shares 119.794
Ending NAV x $10.60
---------
Investment Return $1,269.82
Total Return Performance
- ------------------------
Investment Return $1,269.82
Less Initial Investment $1,000.00
---------
$269.82 / $1,000.00 x 100
Total Return: 26.98%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
FIVE YEARS
Initial Investment $1,000.00
Beginning OFFER $11.11
Initial Shares 90.009
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1993 90.009 $0.910 5.311 95.320
- --------------------------------------------------------------------------------
1994 95.32 $0.836 7.764 103.084
- --------------------------------------------------------------------------------
1995 103.084 $0.644 6.441 109.525
- --------------------------------------------------------------------------------
1996 109.525 $0.818 9.592 119.117
- --------------------------------------------------------------------------------
1997 119.117 $0.605 7.333 126.450
- --------------------------------------------------------------------------------
Ending Shares $126.45
Ending NAV x $ 10.60
----------
Investment Return $1,340.37
Total Return Performance
- ------------------------
Investment Return $1,340.37
Less Initial Investment $1,000.00
----------
$340.37 / $1,000.00 x 100
Total Return: 34.04%
<PAGE>
DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES A
TOTAL RETURN PERFORMANCE
LIFE FUND
Initial Investment $1,000.00
Beginning OFFER $10.50
Initial Shares 95.238
- --------------------------------------------------------------------------------
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1988 95.238 $0.584 5.686 100.924
- --------------------------------------------------------------------------------
1989 100.924 $0.879 8.511 109.435
- --------------------------------------------------------------------------------
1990 109.435 $1.031 12.957 122.392
- --------------------------------------------------------------------------------
1991 122.392 $0.878 10.250 132.642
- --------------------------------------------------------------------------------
1992 132.642 $0.956 13.814 146.456
- --------------------------------------------------------------------------------
1993 146.456 $0.910 12.799 159.255
- --------------------------------------------------------------------------------
1994 159.255 $0.836 12.969 172.224
- --------------------------------------------------------------------------------
1995 172.224 $0.644 11.672 183.896
- --------------------------------------------------------------------------------
1996 183.896 $0.818 15.113 199.009
- --------------------------------------------------------------------------------
1997 199.009 $0.605 12.252 211.261
- --------------------------------------------------------------------------------
Ending Shares 211.261
Ending NAV x $10.60
---------
Investment Return $2,239.37
Total Return Performance
- ------------------------
Investment Return $2,239.37
Less Initial Investment $1,000.00
---------
$1,239.37 / $1,000.00 x 100
Total Return: 123.94%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000819799
<NAME> VOYAGEUR FUNDS, INC.
<SERIES>
<NUMBER> 001
<NAME> DELAWARE-VOYAGEUR U.S. GOV'T SECURITIES FUND A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 100,044,909
<INVESTMENTS-AT-VALUE> 101,678,810
<RECEIVABLES> 22,294,517
<ASSETS-OTHER> 275,597
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,248,924
<PAYABLE-FOR-SECURITIES> 21,008,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,043,707
<TOTAL-LIABILITIES> 24,052,459
<SENIOR-EQUITY> 94,513
<PAID-IN-CAPITAL-COMMON> 101,913,079
<SHARES-COMMON-STOCK> 4,926,222
<SHARES-COMMON-PRIOR> 6,319,211
<ACCUMULATED-NII-CURRENT> 82,004
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,527,032)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,633,901
<NET-ASSETS> 52,212,844
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,662,729
<OTHER-INCOME> 0
<EXPENSES-NET> 1,080,679
<NET-INVESTMENT-INCOME> 6,582,050
<REALIZED-GAINS-CURRENT> 3,015,506
<APPREC-INCREASE-CURRENT> (621,669)
<NET-CHANGE-FROM-OPS> 8,975,887
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,691,516
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 726,443
<NUMBER-OF-SHARES-REDEEMED> 2,371,057
<SHARES-REINVESTED> 251,626
<NET-CHANGE-IN-ASSETS> (17,759,744)
<ACCUMULATED-NII-PRIOR> 217,429
<ACCUMULATED-GAINS-PRIOR> (6,542,538)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 568,682
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,172,871
<AVERAGE-NET-ASSETS> 62,730,140
<PER-SHARE-NAV-BEGIN> 10.370
<PER-SHARE-NII> 0.590
<PER-SHARE-GAIN-APPREC> 0.240
<PER-SHARE-DIVIDEND> 0.600
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.600
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000819799
<NAME> VOYAGEUR FUNDS, INC.
<SERIES>
<NUMBER> 002
<NAME> DELAWARE-VOYAGEUR U.S. GOV'T SECURITIES FUND B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 100,044,909
<INVESTMENTS-AT-VALUE> 101,678,810
<RECEIVABLES> 22,294,517
<ASSETS-OTHER> 275,597
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,248,924
<PAYABLE-FOR-SECURITIES> 21,008,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,043,707
<TOTAL-LIABILITIES> 24,052,459
<SENIOR-EQUITY> 94,513
<PAID-IN-CAPITAL-COMMON> 101,913,079
<SHARES-COMMON-STOCK> 212,656
<SHARES-COMMON-PRIOR> 206,126
<ACCUMULATED-NII-CURRENT> 82,004
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,527,032)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,633,901
<NET-ASSETS> 2,256,609
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,662,729
<OTHER-INCOME> 0
<EXPENSES-NET> 1,080,679
<NET-INVESTMENT-INCOME> 6,582,050
<REALIZED-GAINS-CURRENT> 3,015,506
<APPREC-INCREASE-CURRENT> (621,669)
<NET-CHANGE-FROM-OPS> 8,975,887
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 117,294
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 56,888
<NUMBER-OF-SHARES-REDEEMED> 55,886
<SHARES-REINVESTED> 5,528
<NET-CHANGE-IN-ASSETS> (17,759,744)
<ACCUMULATED-NII-PRIOR> 217,429
<ACCUMULATED-GAINS-PRIOR> (6,542,538)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 568,682
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,172,871
<AVERAGE-NET-ASSETS> 2,295,805
<PER-SHARE-NAV-BEGIN> 10.380
<PER-SHARE-NII> 0.520
<PER-SHARE-GAIN-APPREC> 0.240
<PER-SHARE-DIVIDEND> 0.530
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.610
<EXPENSE-RATIO> 1.670
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000819799
<NAME> VOYAGEUR FUNDS, INC.
<SERIES>
<NUMBER> 003
<NAME> DELAWARE-VOYAGEUR U.S. GOV'T SECURITIES FUND C CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 100,044,909
<INVESTMENTS-AT-VALUE> 101,678,810
<RECEIVABLES> 22,294,517
<ASSETS-OTHER> 275,597
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,248,924
<PAYABLE-FOR-SECURITIES> 21,008,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,043,707
<TOTAL-LIABILITIES> 24,052,459
<SENIOR-EQUITY> 94,513
<PAID-IN-CAPITAL-COMMON> 101,913,079
<SHARES-COMMON-STOCK> 13,022
<SHARES-COMMON-PRIOR> 22,631
<ACCUMULATED-NII-CURRENT> 82,004
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,527,032)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,633,901
<NET-ASSETS> 137,918
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,662,729
<OTHER-INCOME> 0
<EXPENSES-NET> 1,080,679
<NET-INVESTMENT-INCOME> 6,582,050
<REALIZED-GAINS-CURRENT> 3,015,506
<APPREC-INCREASE-CURRENT> (621,669)
<NET-CHANGE-FROM-OPS> 8,975,887
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,330
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 527
<NUMBER-OF-SHARES-REDEEMED> 10,563
<SHARES-REINVESTED> 427
<NET-CHANGE-IN-ASSETS> (17,759,744)
<ACCUMULATED-NII-PRIOR> 217,429
<ACCUMULATED-GAINS-PRIOR> (6,542,538)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 568,682
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,172,871
<AVERAGE-NET-ASSETS> 199,012
<PER-SHARE-NAV-BEGIN> 10.360
<PER-SHARE-NII> 0.520
<PER-SHARE-GAIN-APPREC> 0.240
<PER-SHARE-DIVIDEND> 0.530
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.590
<EXPENSE-RATIO> 1.680
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000819799
<NAME> VOYAGEUR FUNDS, INC.
<SERIES>
<NUMBER> 004
<NAME> DELAWARE-VOYAGEUR U.S. GOV'T SECURITIES INSTL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 100,044,909
<INVESTMENTS-AT-VALUE> 101,678,810
<RECEIVABLES> 22,294,517
<ASSETS-OTHER> 275,597
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,248,924
<PAYABLE-FOR-SECURITIES> 21,008,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,043,707
<TOTAL-LIABILITIES> 24,052,459
<SENIOR-EQUITY> 94,513
<PAID-IN-CAPITAL-COMMON> 101,913,079
<SHARES-COMMON-STOCK> 4,299,490
<SHARES-COMMON-PRIOR> 4,826,688
<ACCUMULATED-NII-CURRENT> 82,004
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,527,032)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,633,901
<NET-ASSETS> 45,589,094
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,662,729
<OTHER-INCOME> 0
<EXPENSES-NET> 1,080,679
<NET-INVESTMENT-INCOME> 6,582,050
<REALIZED-GAINS-CURRENT> 3,015,506
<APPREC-INCREASE-CURRENT> (621,669)
<NET-CHANGE-FROM-OPS> 8,975,887
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,898,335
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,286,857
<NUMBER-OF-SHARES-REDEEMED> 2,030,915
<SHARES-REINVESTED> 216,860
<NET-CHANGE-IN-ASSETS> (17,759,744)
<ACCUMULATED-NII-PRIOR> 217,429
<ACCUMULATED-GAINS-PRIOR> (6,542,538)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 568,682
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,172,871
<AVERAGE-NET-ASSETS> 49,276,276
<PER-SHARE-NAV-BEGIN> 10.370
<PER-SHARE-NII> 0.600
<PER-SHARE-GAIN-APPREC> 0.240
<PER-SHARE-DIVIDEND> 0.610
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.600
<EXPENSE-RATIO> 0.930
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EX-99.B18A
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VAM INSTITUTIONAL FUNDS, INC.
Multiple Class Plan Pursuant to Rule 18f-3
As Approved as of June 19, 1997
I. Preamble
Each of the funds listed below (each a "Fund", and collectively the
"Funds"), is a separate series of one of the above-captioned registrants (each,
a "Company"). Each Fund has elected to rely on Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "1940 Act") in offering multiple classes of
shares in such Fund:
<TABLE>
<CAPTION>
<S> <C>
Delaware-Voyageur US Government Securities Fund Delaware-Voyageur Tax-Free Washington Insured Fund
Delaware-Voyageur Tax-Free Arizona Insured Fund Delaware-Voyageur Tax-Free Florida Intermediate Fund
Delaware-Voyageur Tax-Free Colorado Insured Fund Delaware-Voyageur Tax-Free Arizona Fund
Delaware-Voyageur Minnesota Insured Fund Delaware-Voyageur Tax-Free California Fund
Delaware-Voyageur Tax-Free Arizona Intermediate Fund Delaware-Voyageur Tax-Free Iowa Fund
Delaware-Voyageur Tax-Free California Intermediate Fund Delaware-Voyageur Tax-Free Idaho Fund
Delaware-Voyageur Tax-Free Colorado Intermediate Fund Delaware-Voyageur Minnesota High Yield Municipal Bond Fund
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund National High Yield Municipal Bond Fund
Delaware-Voyageur Tax-Free California Insured Fund Delaware-Voyageur Tax-Free New York Fund
Delaware-Voyageur Tax-Free Florida Insured Fund Delaware-Voyageur Tax-Free Wisconsin Fund
Delaware-Voyageur Tax-Free Florida Fund Delaware-Voyageur Tax-Free Colorado Fund
Delaware-Voyageur Tax-Free Kansas Fund Aggressive Growth Fund
Delaware-Voyageur Tax-Free Missouri Insured Fund Growth Stock Fund
Delaware-Voyageur Tax-Free New Mexico Fund Tax Efficient Equity Fund
Delaware-Voyageur Tax-Free Oregon Insured Fund Delaware-Voyageur Tax-Free Minnesota Fund
Delaware-Voyageur Tax-Free Utah Fund Delaware-Voyageur Tax-Free North Dakota Fund
</TABLE>
<PAGE>
This plan pursuant to rule 18f-3 (the "Plan"), which shall become effective for
the Funds on the Effective Date (as defined in section VI of this Plan), sets
forth the differences among classes of shares of the Funds, including
distribution arrangements, shareholder services, income gains and expense
allocations, conversion and exchange options, and voting rights.
II. Attributes of Share Classes.
The attributes of each existing class of the existing Funds with
respect to distribution arrangements, shareholder services, and conversion and
exchange options shall be as set forth in the following materials:
A. Prospectus and Statement of Additional Information of each
respective Fund as in effect (including supplements) as of the Effective Date
(as defined in section VI hereof).
B. Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act
("Rule 12b-1 Plan") for each Company and Fund as in effect on the Effective Date
(as defined in section VI hereof).
Expenses, income and gains of such existing classes of the Funds shall be
allocated in the manner set forth in III and IV below. Each such existing class
shall have exclusive voting rights on any matter submitted to shareholders that
relates solely to its arrangement for shareholder services and the distribution
of shares and shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interest of any
other class, and shall have in all other respects the same rights and
obligations as each other class.
III. Expense Allocation.
A. Class-specific expenses. Each Company shall allocate to each class
of shares of a Fund any fees and expenses incurred by the Company in connection
with the distribution or servicing of such class of shares under a Rule 12b-1
Plan, if any, adopted for such class. In addition, the Company reserves the
right, subject to approval by the Company's Board of Directors/Trustees, to
allocate fees and expenses of the following nature to a particular class of
shares of a Fund (to the extent that such fees and expenses actually vary among
each class of shares or vary by types of services provided to each class of
shares of the Fund):
(i) transfer agency and other recordkeeping costs;
(ii) Securities and Exchange Commission and blue sky registration or
qualification fees;
(iii) printing and postage expenses related to printing and
distributing class specific materials, such as shareholder
reports, prospectuses and proxies to current shareholders of a
particular class or to regulatory authorities with respect to
such class of shares;
(iv) audit or accounting fees or expenses relating solely to such
class;
-2-
<PAGE>
(v) the expenses of administrative personnel and services as required
to support the shareholders of such class;
(vi) litigation or other legal expenses relating solely to such class
of shares;
(vii) Directors'/Trustees' fees and expenses incurred as a result of
issues relating solely to such class of shares; and
(viii) other expenses subsequently identified and determined to be
properly allocated to such class of shares.
B. Common Expenses.
(i) For Funds which declare a dividend to shareholders on a daily
basis ("Daily Dividend Funds"), except for any expenses that are
allocated to a particular class as described in paragraph A
above, all expenses incurred by a Fund will be allocated to each
class of shares of such Fund on the basis of "settled shares"
(net assets valued in accordance with generally accepted
accounting principles but excluding the value of subscriptions
receivable) of each class in relation to the net assets of the
Fund.
(ii) For Funds which do not declare a dividend to shareholders on a
daily basis ("Non-Daily Dividend Funds"), except for any expenses
that are allocated to a particular class as described in
paragraph A above, all expenses incurred by a Fund will be
allocated to each class of shares of such Fund on the basis of
the net asset value of each such class in relation to the net
asset value of the Fund.
IV. Allocation of Income and Gains.
A. Daily Dividend Funds.
(i) Income of a Daily Dividend Fund will be allocated to each class
of shares of such Fund on the basis of settled shares of each
class in relation to the net assets of the Fund.
(ii) Realized and unrealized capital gains and losses of a Fund will
be allocated to each class of shares of such Fund on the basis of
the net asset value of each such class in relation to the net
asset value of the Fund.
B. Non-Daily Dividend Funds.
(i) Income of a Non-Daily Dividend Fund will be allocated to each
class of shares of such Fund on the basis of the net asset value
of each such class in relation to the net asset value of the
Fund.
-3-
<PAGE>
(ii) Realized and unrealized gains and losses of a Non-Daily Dividend
Fund will be allocated to each class of shares of such Fund on
the basis of the net asset value of each such class in relation
to the net asset value of the Fund.
V. Amendment of Plan; Periodic Review.
A. New Funds and New Classes. With respect to any new portfolio of a
Company created after the date of this Plan and any new class of shares of the
existing Funds created after the date of this Plan, the Board of
Directors/Trustees of such Company shall approve amendments to this Plan setting
forth the attributes of the classes of shares of such new portfolio or of such
new class of shares.
B. Material Amendments and Periodic Reviews. The Board of
Directors/Trustees of each Company, including a majority of the independent
directors/trustees, shall periodically review this Plan for its continued
appropriateness and shall approve any material amendment of this Plan as it
relates to any class of any Fund covered by this Plan.
VI. Effective Date of Plan.
This Plan shall become effective for a Fund upon conversion of the
accounting system for such Fund (the "Effective Date"). Upon the Effective Date,
this Plan shall supersede any other plan pursuant to Rule 18f-3 which previously
has been adopted for a Fund.
-4-
<PAGE>
EX-99.B19
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Group Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on Exhibit
A, Wayne A. Stork, Jeffrey J. Nick and Walter P. Babich and any one of them
acting singly, his true and lawful attorneys-in-fact, in his name, place, and
stead, to execute and cause to be filed with the Securities and Exchange
Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as either of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 18th day of December, 1997.
/s/Walter P. Babich /s/Thomas F. Madison
- ---------------------------- -----------------------------
Walter P. Babich Thomas F. Madison
/s/Anthony D. Knerr /s/Jeffrey J. Nick
- ---------------------------- -----------------------------
Anthony D. Knerr Jeffrey J. Nick
/s/Ann R. Leven /s/Charles E. Peck
- ---------------------------- -----------------------------
Ann R. Leven Charles E. Peck
/s/W. Thacher Longstreth /s/Wayne A. Stork
- ---------------------------- -----------------------------
W. Thacher Longstreth Wayne A. Stork
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
