STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
VOYAGEUR FUNDS, INC.
DELAWARE-VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
1818 Market Street
Philadelphia, PA 19103
For Prospectus, Performance and Information on Existing Accounts:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Voyageur Funds, Inc. is a professionally-managed mutual fund of the
series type which currently offers one series of shares: Delaware-Voyageur
U.S. Government Securities Fund (the "Fund"). The Fund offers four classes:
Class A Shares, Class B Shares, Class C Shares and Institutional Class
Shares.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus
for the Fund dated March 1, 1999 as it may be amended from time to time.
Part B should be read in conjunction with the Prospectus. Part B is not
itself a prospectus but is, in its entirety, incorporated by reference
into Prospectus. The Prospectus may be obtained by writing or calling
your investment dealer or by contacting the Fund's national distributor,
Delaware Distributors, L.P. (the "Distributor"), at the above address or
by calling the above phone numbers. The Fund's financial statements, the
notes relating thereto, the financial highlights and the report of
independent auditors are incorporated by reference from the Annual Report
into this Part B. The Annual Report will accompany any request for Part
B. The Annual Report can be obtained, without charge, by calling
800-523-1918.
TABLE OF CONTENTS
Cover Page
Investment Restrictions and Policies
Accounting and Tax Issues
Investment Restrictions and Policies
Performance Information
Trading Practices and Brokerage
Purchasing Shares
Investment Plans
Determining Offering Price and Net Asset Value
Redemption and Exchange
Distributions and Taxes
Investment Management Agreement and Sub-Advisory Agreement
Officers and Directors
General Information
Appendix A--Description of Ratings
Appendix B--General Characteristics and Risks of Options and Futures
Appendix C--Investment Objectives of the Other Funds in the Delaware
Investments Family
Financial Statements
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 Funds net income.
2. Pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 5% of its total assets (taken at the lower of cost or current
value) and then only to secure borrowings permitted by restriction (1)
above.
3. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities.
4. Make short sales of securities or maintain a short position for the
account of the Fund unless at all times when a short position is open it
owns an equal amount of such securities or owns securities which, without
payment of any further consideration, are convertible into or exchangeable
for securities of the same issue as, and equal in amount to, the
securities sold short.
5. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter under federal securities laws.
6. Purchase or sell real estate, although it may purchase securities
which are secured by or represent interests in real estate.
7. Purchase or sell commodities or commodity contracts.
8. Make loans, except by purchase of debt obligations in which the Fund
may invest consistent with its investment policies and through repurchase
agreements.
9. Invest in securities of any issuer if, to the knowledge of the Fund,
officers and directors of the Fund or officers and directors of the Fund's
investment adviser who beneficially own more than 1/2 of 1% of the
securities of that issuer together own more than 5%.
10. Purchase securities restricted as to resale.
11. Invest more than 25% of its assets in the securities of issuers
in any single industry; provided that there shall be no limitation on the
purchase of securities issued by banks and obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
12. Invest in (a) securities which in the opinion of the Fund's
investment adviser at the time of such investment are not readily
marketable, and (b) securities the disposition of which is restricted under
federal securities laws (as described in fundamental restriction (10) above).
13. Invest in securities of other investment companies, except as part
of a merger, consolidation or acquisition of assets.
14. Purchase options or puts, calls, straddles, spreads or combinations
thereof; in connection with the purchase of fixed-income securities,
however, the Fund may acquire attached warrants or other rights to
subscribe for securities of companies issuing such fixed-income securities
or securities of parents or subsidiaries of such companies. (The Fund's
investment policies do not currently permit it to exercise warrants or
rights with respect to equity securities.)
15. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
Any investment restriction or limitation which involves a maximum
percentage of securities or assets shall not be considered to be violated
unless an excess over the percentage occurs immediately after an
acquisition of securities or a utilization of assets and such excess
results therefrom.
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 does 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.
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.
The Code requires the Fund 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.
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.
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 each Class, as shown below, is the average annual
total return quotations through October 31, 1998, 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%. The average annual total return for Class B Shares and 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, 1998. The average annual total return for Class B Shares and Class C
Shares excluding deferred sales charge assumes the shares were not
redeemed at October 31, 1998 and therefore does not reflect the deduction
of a CDSC.
Securities prices fluctuated during the periods covered, and past results
should not be considered as representative of future performance.
Average Annual Total Return(1)
Class A Class A Institutional
(at offer) (at NAV) Class
1 year ended
10/31/98 3.60% 8.79% 8.78%
3 years ended
10/31/98 5.57% 7.29% 7.28%
5 years ended
10/31/98 5.06% 6.08% N/A
10 years ended
10/31/98 8.33% 8.85% N/A
Life of
Fund(2) 8.43% 8.92% 8.16%
Class B Class B
(including (excluding
CDSC) CDSC)
1 year ended
10/31/98 3.97% 7.97%
3 years ended
10/31/98 5.63% 6.52%
5 years ended
10/31/98 N/A N/A
10 years ended
10/31/98 N/A N/A
Life of
Fund(2) 7.08% 7.43%
Class C Class C
(including (excluding
CDSC) CDSC)
1 year ended
10/31/98 6.98% 7.98%
3 years ended
10/31/98 6.49% 6.49%
5 years ended
10/31/98 N/A N/A
10 years ended
10/31/98 N/A N/A
Life of
Fund(2) 9.33% 9.33%
(1) 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.
(2) Class A Shares commenced operation on November 2, 1987;
Institutional Class Shares commenced operations on June 7, 1994; Class B
Shares commenced operations on June 7, 1994; Class C Shares commenced
operations on January 10, 1995.
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, 1998 were 4.64%, 4.11%, 4.12% and 4.87%, 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, 1998 for the Fund
was 21.30 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 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
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, 1998 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
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(1)
Class A Class A Institutional
(at offer) (at NAV) Class
3 months ended
10/31/98 (1.38%) 3.51% 3.51%
6 months ended
10/31/98 0.54% (2) 5.56% 5.55%
9 months ended
10/31/98 1.02% 6.02% 5.92%
1 year ended
10/31/98 3.60% 8.79% 8.78%
3 years ended
10/31/98 17.66% 23.49% 23.48%
5 years ended
10/31/98 28.00% 34.34% N/A
10 years ended
10/31/98 122.51% 133.60% N/A
Life of
Fund(3) 143.61% 155.79% 41.23%
Class B Class B
(including (excluding
CDSC) CDSC)
3 months ended
10/31/98 (0.69%) 3.31%
6 months ended
10/31/98 1.15% 5.15%
9 months ended
10/31/98 1.32% 5.32%
1 year ended
10/31/98 3.97% 7.97%
3 years ended
10/31/98 17.87% 20.87%
5 years ended
10/31/98 N/A N/A
10 years ended
10/31/98 N/A N/A
Life of
Fund(3) 35.13% 37.13%
Class C Class C
(including (excluding
CDSC) CDSC)
3 months ended
10/31/98 2.32% 3.32%
6 months ended
10/31/98 4.16% 5.16%
9 months ended
10/31/98 4.43% 5.43%
1 year ended
10/31/98 6.98% 7.98%
3 years ended
10/31/98 20.77% 20.77%
5 years ended
10/31/98 N/A N/A
10 years ended
10/31/98 N/A N/A
Life of
Fund(3) 40.46% 40.46%
(1) 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.
(2) For the six-month period ended October 31, 1998, cumulative total return
for Class A Shares at net asset value was 5.56%.
(3) Class A Shares commenced operation on November 2, 1987; Institutional
Class Shares commenced operations on June 7, 1994; Class B Shares
commenced operations on June 7, 1994; Class C Shares commenced operations
on January 10, 1995.
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 affiliates of the
Manager, including the number of such clients serviced by such affiliates.
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.
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.
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, 1996, 1997 and 1998, 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, 1998, 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. 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.
The portfolio turnover rate of the Fund was 202% for the fiscal year
ended October 31, 1997 and 280% for the fiscal year ended October 31, 1998.
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 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 are no minimum purchase
requirements for the Institutional Classes, but certain eligibility
requirements must be satisfied. The initial and subsequent investment
minimums 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 Manager's 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 Delaware Investments 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. In
doing so, an investor should keep in mind, however, that reduced front-end
sales charges apply to investments of $50,000 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 its shares of the Fund if in the opinion of management such
rejection is in the Fund's best interest. 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 the Delaware Investments family. 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.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts 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 will
apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts 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.
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. See the table in the Prospectus.
Class A Shares are also subject to annual 12b-1 Plan expenses for the life
of the investment.
Class B Shares are purchased at net asset value and are subject to a CDSC
of: (i) 4% if shares are redeemed within the first 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 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 assets of such shares. See Automatic
Conversion of Class B Shares below.
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.
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, in the case of Class A Shares or Institutional Class shares, 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 account 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 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.
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 also 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 Plans Under Rule 12b-1.
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 Determining Offering Price and Net Asset
Value.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the
Prospectus, and may include a series of purchases over a 13-month period
under a Letter of Intention signed by the purchaser. See 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.
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. 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 in
connection with sales of Class A Shares. Such dealers must meet certain
requirements in terms of organization and distribution capabilities and
their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and
circumstances upon which the additional commission will be paid.
Participating dealers may be deemed to have additional responsibilities
under the securities laws. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described 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.
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 (see Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased
at Net Asset Value under Redemption and Exchange) may be aggregated with
those of the 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.
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. 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. See Waiver of Contingent Deferred Sales Charge -- Class B Shares
and Class C Shares under Redemption and Exchange 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 same 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. 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.
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.
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
compensates 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.
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 the 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 Part B, 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
compensates 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.
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.
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 Part B. See Redemption and Exchange.
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 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
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, 1998, payments from Class A Shares,
Class B Shares, Class C Shares and Institutional Class Shares of the Fund
amounted to $323,997, $114,414, $15,160 and $45,374, respectively. These
payments were used for the following purposes:
Institutional
A Class B Class C Class Class
------- ------- ------- -----
Advertising $1,155 $214
Annual/Semi-Annual Reports 14,917
Broker Trails 252,917 27,838 $6,313 $20,458
Broker Sales Charges 38,766 5,990
Dealer Service Expenses 145 656
Interest on Broker Sales
Charges 41,325 1,410
Commissions to Wholesalers 13,392 5,543 1,158 11,925
Promotional-Broker Meetings 258 148 2,987
Promotional-Other 23,634 716
Prospectus Printing 16,857
Telephone
Wholesaler Expenses 980 470 141 8,632
Other
Other Payments to Dealers
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Fund 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. The Distributor may also pay a portion of the expense of
preapproved dealer advertisements promoting the sale of Delaware
Investments fund 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.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment
Privilege.
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, any affiliate, any of the funds in the Delaware
Investments family, 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. 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 funds in the Delaware Investments family. 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. Investors
may be charged a fee when effecting transactions in Class A Shares through
a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their
trust customers if they are not eligible to purchase shares of the
Institutional Class of the Fund; 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 Retirement Financial
Services, Inc. (formerly known as Delaware Investment & Retirement
Services, Inc.) proprietary record keeping system that (i) has in excess
of $500,000 of plan assets invested in Class A Shares of funds in the
Delaware Investments family 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 fund in
the Delaware Investments family and such employer has properly represented
to, and received written confirmation back from, Retirement Financial
Services, Inc. in writing that it has the requisite number of employees.
See Group Investment Plans for information regarding the applicability of
the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase
Institutional Class Shares or purchase interests in a collective trust as
a result of a change in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A
Shares of any of the funds in the Delaware Investments family 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
fund 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 the trade
qualifies for purchase at net asset value.
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 the Distributor 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. See Combined Purchases Privilege, below.
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.
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. See Class A Shares.
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.
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 in 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.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge
on investments of 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 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 the 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 (and of Institutional Classes holding
shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales
charge) 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 in the Delaware
Investments family, 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 where the redemption of the
shares triggered the payment of a Limited CDSC. Persons investing
redemption proceeds from direct investments in mutual funds in the
Delaware Investments family 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
either Class B Shares or Class C 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 connection with the features described
above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales
charges for investments in 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 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 Delaware Investments
investment accounts if they so notify the Fund in which they are investing
in connection with each purchase. See Retirement Plans under Investment
Plans for information about Retirement Plans.
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 only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments
family. See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value under Redemption and Exchange.
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 Manager 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).
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 a Class
(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 Institutional Classes are 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 dividend payment from net
investment income will be mailed to shareholders quarterly. A
confirmation of any distributions from realized securities profits 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 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
Classes 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 Family of 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 in the 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.
Subject to the following limitations, dividends and/or distributions from
other funds in Delaware Investments may be invested in 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. Dividends
from Class B Shares may only be directed to other Class B Shares and
dividends from Class C Shares may only be directed 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 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.
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 for information on exchanges by participants in an
Allied Plan.
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 Class A, B and C Shares account. 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.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Class A, B or C
Shares by phone using MoneyLine (SM) 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) 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
MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this 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 this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in Class A, B or
C Shares through regular liquidations of shares in their accounts in other
mutual funds in the Delaware Investments family. Class A, B and C
shareholders also may elect to invest in one or more of the other mutual
funds in Delaware Investments family through the Wealth Builder Option.
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.
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 in the Delaware
Investments family, 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 Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an 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. Also see Buying Class A Shares at Net Asset Value.
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 available through the Asset Planner service. Class A,
B and C Shares are 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 in the
Delaware Investments family 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, Class B and Class C Shares may be suitable for
tax-deferred retirement plans. Delaware Investments offers a full
spectrum of retirement plans, including the 401(k) Defined Contribution
Plan, Individual Retirement Account ("IRA") and the new Roth IRA and
Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs,
Roth IRAs, Education IRAs, Simplified Employee Pension Plans, Salary
Reduction Simplified Employee Pension Plans, and 403(b)(7) and 457
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 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.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders.
Certain retirement plans may qualify to purchase shares of the
Institutional Class shares. See Institutional Class, above. 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 described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations.
These plans can be maintained as Section 401(k), profit sharing or money
purchase pension plans. Contributions may be invested only in Class A Shares
and Class C Shares.
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;
however, participation may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for investors.
Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active
participant in an employer sponsored retirement plan. Even if a taxpayer
is an active participant in an employer sponsored retirement plan, the
full $2,000 is still available if the taxpayer's AGI is below $30,000
($50,000 for taxpayers filing joint returns) for years beginning after
December 31, 1997. A partial deduction is allowed for married couples
with income between $50,000 and $60,000, and for single individuals with
incomes between $30,000 and $40,000. These income phase-out limits reach
$80,000-$100,000 in 2007 for joint filers and $50,000-$60,000 in 2005 for
single filers. No deductions are available for contributions to IRAs by
taxpayers whose AGI after IRA deductions exceeds the maximum income limit
established for each year and who are active participants in an employer
sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each
working spouse and defer taxes on interest or other earnings from the
IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI
is below $150,000. The maximum deductible IRA contribution for a married
individual who is not an active participant, but whose spouse is, is
phased out for combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or
another IRA may rollover the distribution tax-free to a Conduit IRA. The
rollover of the eligible distribution must be completed by the 60th day
after receipt of the distribution; however, if the rollover is in the form
of a direct trustee-to-trustee transfer without going through the
distributee's hand, the 60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it is
made from a qualified retirement plan, a 403(b) plan or another IRA and
does not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or life
expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10 or
more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee;
and
(5) A distribution of after-tax contributions which is not includable in
income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As
a result of the Internal Revenue Service Restructuring and Reform Act of
1998 (the "1998 Act"), the $2,000 annual limit will not be reduced by any
contributions to a deductible or nondeductible IRA for the same year. The
maximum contribution that can be made to a Roth IRA is phased out for
single filers with AGI between $95,000 and $110,000, and for couples
filing jointly with AGI between $150,000 and $160,000. Qualified
distributions from a Roth IRA would be exempt from federal taxes.
Qualified distributions are distributions (1) made after the five-taxable
year period beginning with the first taxable year for which a contribution
was made to a Roth IRA and (2) that are (a) made on or after the date on
which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time
homebuyer expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated
earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA.
Earnings and contributions from a deductible IRA are subject to a tax upon
conversion; however, no 10% excise tax for early withdrawal would apply.
If the conversion is done prior to January 1, 1999, then the income from
the conversion can be included in income ratably over a four-year period
beginning with the year of conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA has
been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to
$500 per year per beneficiary. The $500 annual limit is in addition to
the $2,000 annual contribution limit applicable to IRAs and Roth IRAs.
Eligible contributions must be in cash and made prior to the date the
beneficiary reaches age 18. Similar to the Roth IRA, earnings would
accumulate tax-free. There is no requirement that the contributor be
related to the beneficiary, and there is no limit on the number of
beneficiaries for whom one contributor can establish Education IRAs. In
addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a
single beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and
$110,000, and for couples filing jointly with modified AGI of between
$150,000 and $160,000. Individuals with modified AGI above the phase-out
range are not allowed to make contributions to an Education IRA
established on behalf of any other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such
a distribution will be includible in gross income of the beneficiary and
subject to an additional 10% penalty tax if the distribution is not for
qualified higher educations expenses. Tax-free (and penalty-free)
transfers and rollovers of account balances from one Education IRA
benefiting one beneficiary to another Education IRA benefiting a different
beneficiary (as well as redesignations of the named beneficiary) is
permitted, provided that the new beneficiary is a member of the family of
the old beneficiary and that the transfer or rollover is made before the
time the old beneficiary reaches age 30 and the new beneficiary reaches
age 18.
A company or association may establish a Group IRA or Group Roth IRA for
employees or members who want to purchase shares of the Fund.
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. For
information concerning the applicability of a CDSC upon redemption of
Class B Shares and Class C Shares, see Contingent Deferred Sales Charge -
Class B Shares and Class C Shares.
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. In addition, effective January 1, 1998, the new law
allows for premature distribution without a 10% penalty if (i) the amounts
are used to pay qualified higher education expenses (including graduate
level courses) of the taxpayer, the taxpayer's spouse or any child or
grandchild of the taxpayer or the taxpayer's spouse, or (ii) used to pay
acquisition costs of a principle residence for the purchase of a
first-time home by the taxpayer, taxpayer's spouse or any child or
grandchild of the taxpayer or the taxpayer's spouse. A qualified
first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution
for first-time home purchases cannot exceed a lifetime cap of $10,000.
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. Class A, B and C Shares are available for investment
by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to 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. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans.
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 only Class A Shares and Class C
Shares or certain other funds in the Delaware Investments family.
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 table the Prospectus.
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 any of the Classes in conjunction with such an
arrangement. 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 table 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.
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 table 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. A SIMPLE IRA is available only to plan
sponsors with 100 or fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available only
to plan sponsors 100 or fewer employees and, in exchange for mandatory
plan sponsor contributions, discrimination testing is no longer required.
Class B Shares are not available for purchase by such plans.
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 or its agent. Orders for purchases of
Class B Shares, Class C Shares and the Institutional Classes are effected
at the net asset value per share next calculated after receipt of the
order by the Fund in which shares are being purchased or its agent. See
Distribution and Service under Investment Management Agreement and
Sub-Advisory Agreement. Selling dealers have the responsibility of
transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value per
share plus any applicable 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 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
this 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 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.
REDEMPTION AND EXCHANGE
You can redeem or 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 equity funds, tax-advantaged funds,
bond 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. 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 the Delaware
Investments directly for fund information.
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. 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. The Fund may suspend, terminate, or amend
the terms of the exchange privilege upon 60 days' written notice to
shareholders.
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
respective Fund, its agent, or certain authorized persons, subject to
applicable CDSC or Limited CDSC. 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.
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 by the Fund or certain other authorized persons (see
Distribution and Service under Investment Management Agreement and
Sub-Advisory Agreement); 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 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.
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 involved 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 such 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.
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, below. Class B Shares are subject to a CDSC of: (i) 4% if shares
are redeemed within the first 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 Purchasing Shares. Except for the applicable
CDSC or Limited CDSC and, with respect to the expedited payment by wire
described below for which there is currently a $7.50 bank wiring cost,
neither the Fund nor the Distributor charges a fee for redemptions or
repurchases, but such fees could be charged at any time in the future.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the 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 Part B 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 a Fund for a longer period of time than if
the investment in New Shares were made directly.
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. A
signature guarantee can be obtained from a commercial bank, a trust
company or a member of a Securities Transfer Association Medallion Program
("STAMP"). 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.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A 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, B or C Shares
into another mutual fund in 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
Insitutional 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 certificates.
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 which you have your
account 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.
Telephone instructions 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.
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. 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.
First Union National Bank's fee (currently $7.50 for Class A, B and C
Shares) will be deducted from 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.
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 in 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 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 in the Delaware Investments family. 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. This service is not available to Institutional Class
Shares.
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize the Fund to
accept such requests from you or your investment dealer, funds will be
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
MoneyLine (SM) On Demand transactions. See MoneyLine (SM) On Demand under
Investment Plans.
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 Equity Income Fund, (2) Growth and Income Fund, (3) Delaware
Balanced 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 time 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.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares 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. This is particularly useful
to shareholders living on fixed incomes, since it can provide them with a
stable supplemental amount. This $5,000 minimum does not apply for the
Fund's prototype retirement plans. 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.
Shareholders should not purchase additional shares while participating in
a Systematic Withdrawal Plan.
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 our 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. 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.
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.
Systematic Withdrawal Plan 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 MoneyLine (SM)
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. It may take up to four business
days for the transactions to be completed. You can initiate this 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 any this service;
however, your bank may charge a fee. This service is not available for
retirement plans.
The Systematic Withdrawal Plan is not available for the Institutional
Class. Shareholders should consult with their financial advisers to
determine whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or
shares into which such Class A Shares are exchanged) according to the
following schedule: (1) 1.00% if shares are redeemed during the first year
after the purchase; and (2) 0.50% if such shares are redeemed during the
second year after the purchase, if such purchases were made at net asset
value and triggered the payment by the Distributor of the dealer's
commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed on
an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the 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 the 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 such Class A Shares held for more than two years 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 two-year holding period. The Limited CDSC is assessed if
such two year 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 the first redeemed 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.
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 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) distributions to
participants from a retirement plan qualified under section 401(a) or
401(k) of the Internal Revenue Code of 1986, as amended (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 Internal Revenue 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 Purchasing 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 Internal Revenue 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 Plan, 401(k)
Defined Contribution Plan upon attainment of age 70 1/2, and IRA
distributions qualifying under Section 72(t) of the Internal Revenue 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.
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.
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 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 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations 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:
"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%. This category of gains applied only to gains and
distributions in 1997.
"1997 Act long-term capital gains" or "20 percent rate gain": securities
sold 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. As revised by the 1998 Act, this rate applies to
securities held for more than 12 months and sold in tax years beginning
after December 1, 1997. 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. The Omnibus Consolidated and
Emergency Supplemental Appropriations Act passed in October of 1998
included technical corrections to the 1998 Act. The effect of this
correction is that essentially all capital gain distributions paid to
shareholders during 1998 will be taxed at a maximum rate of 20%.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-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 five-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than five 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
five-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 when sold after the five-year holding
period.
See also Accounting and Tax Issues in this Part B.
INVESTMENT MANAGEMENT AGREEMENT AND SUB-ADVISORY 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, 1998, the Manager and its affiliates
within Delaware Investments, including Delaware International Advisers Ltd.,
were managing in the aggregate more than $42 billion in assets in the various
institutional or separately managed (approximately $24,854,600,000) and
investment company (approximately $17,780,970,000) 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 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 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
Fund's investment advisory contracts with the Fund's 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.
On October 31, 1998, the total net assets of Voyageur Funds, Inc. were
$86,883,024.
Investment management fees incurred by the Fund for the last 3 fiscal
years follow:
Period Incurred Paid Waived
Year Ended
October 31, 1998 $455,622 $398,138 $57,484
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
For the fiscal year ended October 31, 1998, the Manager did not pay any
fees to the Sub-Adviser.
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.
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.
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, 1999, Voyageur Funds, Inc.'s officers and directors owned less than 1%
of the outstanding shares of Class A, Class B, Class C and Institutional
Class of the Fund.
As of January 31, 1999 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> <S> <S> <S>
U.S. Government Securities City of Kentwood 290,225.410 7.39%
Fund A Class Attn: Tom Chase
4900 Breton Avenue SE
P.O. Box 8848
Kentwood, MI 49508
U.S. Government Securities Merrill Lynch, Pierce,
Fund B Class Fenner & Smith 29,311.990 5.87%
For the Sole Benefit of its
Customers
Attn: Fund Administration
4800 Deer Lake Drive,
East - 2nd Floor
Jacksonville, FL 32246
BNC Partnership 27,002.950 5.40%
Attn: Mike Schmitz
c/o BNC National Bank
Trust Dept.
322 East Main Street
Bismarck, ND 58501
Volunteer Medical Service 25,372.940 5.08%
Corps. of Lansdale
P.O. Box 208
175 Medical Campus Drive
Lansdale, PA 19446-0208
U.S. Government Securities Paine Webber 7,937.070 12.98%
Fund C Class For the Benefit of Paine
Webber CDN FBO
Daniel W. Drake
P.O. Box 3321
Weehawken, NJ 07087
Merrill Lynch, Pierce, 7,451.580 12.19%
Fenner & Smith
For the Sole Benefit of
its Customers
Attn: Fund Administration
4800 Deer Lake Drive,
East - 2nd Floor
Jacksonville, FL 32246
DMTC Custodian for the IRA of 4,857.310 7.94%
Theodrick B. Pryor
P.O. Box 2096
Post Falls, ID 83877-2096
DMTC Custodian for the IRA of 4,779.850 7.82%
Claudia J. Dixon-Pryor
P.O. Box 2096
Post Falls, ID 83877-2096
Donaldson, Lufkin, Jenrette 3,334.030 5.45%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
DMTC Custodian for the IRA of 3,088.730 5.05%
Beverly J. Henderson
P.O. Box 2085
Post Falls, ID 83877-2085
U.S. Government Securities Bankers Trust Co. as
Fund Institutional Class Trustee for Public 3,247,487.340 87.94%
Service Electric
& Gas Co.
Master Employee Benefit Plan
34 Exchange Place
Attn: Donna Dekowski
New Jersey, NJ 07303
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Management Company, Inc., Delaware Investment Advisers (a series of
Delaware Management Business Trust), 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 Retirement Financial 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.
<TABLE>
<S> <C>
*Jeffrey J. Nick (45) Chairman, President, Chief Executive Officer and
Director and/or Trustee of Voyageur Funds, Inc.,
and the other 33 investment companies in the
Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Business Trust,
Delvoy, Inc., DMH Corp. and Founders Holdings, Inc.
Chairman, Chief Executive Officer and Director of
Delaware Distributors, Inc., Delaware International
Holdings Ltd., Delaware International Advisers Ltd.
Chairman and Chief Executive Officer of Delaware
Management Company (a series of Delaware Management
Business Trust)
Chairman and Director of Delaware Capital Management,
Inc. and Retirement Financial Services, Inc.
Chairman of Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware
Distributors, L.P.
President, Chief Executive Officer and Director of
Lincoln National Investment Companies, Inc. and
Delaware Management Holdings, Inc.
Director of Delaware Service Company, Inc.
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/Trustee affiliated with the Portfolio's investment manager and
considered an "interested person" as defined in the 1940 Act.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
*Wayne A. Stork (61) Director and/or Trustee of Voyageur Funds, Inc.
and the other 33 investment companies In the
Delaware Investments family
Chairman and Director of Delaware Management
Holdings, Inc.
Prior to January 1, 1999, Mr. Stork was Director of
Delaware Capital Management, Inc.; Chairman,
President and Chief Executive Officer and
Director/Trustee of DMH Corp., Delaware Distributors,
Inc. and Founders Holdings, Inc.; Chairman,
President, Chief Executive Officer, Chief Investment
Officer and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business Trust;
Chairman, President, Chief Executive Officer and
Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business
Trust); Chairman, Chief Executive Officer and Chief
Investment Officer of Delaware Investment Advisers (a
series of Delaware Management Business Trust);
Chairman and Chief Executive Officer of Delaware
International Advisers Ltd; Chairman, Chief Executive
Officer and Director of Delaware International
Holdings Ltd.; Chief Executive Officer of Delaware
Management Holdings, Inc.; President and Chief
Executive Officer of Delvoy, Inc.; Chairman of
Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial
Services, Inc.
In addition, during the five years prior to January
1, 1999, Mr. Stork served in various executive
capacities at different times within the Delaware
organization.
Richard G. Unruh, Jr. Executive Vice President/Chief Investment Officer
(59) of Voyageur Funds, Inc. and the other 33 investment
companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Management Company
(a series of Delaware Management Business Trust) and
Delaware Capital Management, Inc.
President of Delaware Investment Advisers (a series
of Delaware Management Business Trust)
Executive Vice President and Director/Trustee of
Delaware Management Company, Inc. and Delaware
Management Business Trust
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.
- --------------------------
* Director/Trustee affiliated with the Portfolio's investment manager and
considered an "interested person" as defined in the 1940 Act.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Paul E. Suckow (51) Executive Vice President/Chief Investment Officer,
Fixed Income Voyageur Funds, Inc. and the other 33
investment companies in the Delaware Investments
family, Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers
(a series of Delaware Management Business Trust)
and Delaware Management Holdings, Inc.
Executive Vice President and Director of Founders
Holdings, Inc.
Executive Vice President of Delaware Capital
Management, Inc. and Delaware Management Business
Trust
Director of Founders CBO Corporation
Director of Delaware Offshore Funds Limited
Director of 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.
David K. Downes (59) Executive Vice President, Chief Operating Officer,
Chief Financial Officer of Voyageur Funds, Inc. and
the other 33 investment companies in the Delaware
Investments family, Delaware Management Holdings,
Inc., Founders CBO Corporation, Delaware Capital
Management, Inc., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware
Distributors, L.P.
Executive Vice President, Chief Financial Officer,
Chief Administrative Officer and Trustee of Delaware
Management Business Trust
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 Ltd.
Chairman, Chief Executive Officer and Director of
Delaware Management Trust Company and Retirement
Financial Services, Inc.
Director of Delaware International Advisers Ltd.
Vice President of Lincoln Funds Corporation
During the past five years, Mr. Downes has served in
various executive capacities at different times
within the Delaware organization.
Richard J. Flannery Executive Vice President of Voyageur Funds, Inc.
(41) and the other 33 investment companies in the
Delaware Investments family.
Executive Vice President and General Counsel of
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Management Trust
Company, Delaware Capital Management, Inc.,
Delaware Service Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust, Founders CBO Corporation and Retirement
Financial Services, Inc.
Executive Vice President/General Counsel and
Director of Delaware International Holdings Ltd.,
Founders Holdings, Inc. and Delvoy, Inc.
Senior Vice President of Pooled Trust, Inc.,
Foundation Funds and each of the other investment
companies in the Delaware Investments family
Director, HYPPCO Finance Company Ltd.
Walter P. Babich (71) Director and/or Trustee of Voyageur Funds, Inc.
and the other 33 investment companies in the Delaware
Investments family
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 (60) Director and/or Trustee of Voyageur Funds, Inc. and
the other 33 investment companies in the Delaware
Investments family
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 (58) Director and/or Trustee of Voyageur Funds, Inc. and
the other 33 investment companies in the Delaware
Investments family
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.
W. Thacher Longstreth Director and/or Trustee of Voyageur Funds, Inc.
(77) and the other 33 investment companies in the
Delaware Investments family
City Hall, Philadelphia, PA 19107
Philadelphia City Councilman.
Thomas F. Madison (62) Director and/or Trustee of Voyageur Funds,
Inc. and the other 33 investment companies in the
Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis,
Minnesota 55402 President and Chief Executive
Officer, MLM Partners, Inc.
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 the other 33 investment companies in the
Delaware Investments family
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.
George M. Chamberlain, Senior Vice President, Secretary and General
Jr. (52) Counsel of Voyageur Funds, Inc. and the other
33 other investment companies in the Delaware
Investments family.
Senior Vice President and Secretary of Delaware
Distributors, L.P., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware
Management Holdings, Inc.
Senior Vice President, Secretary and
Director/Trustee of DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings,
Inc., Retirement Financial Services, Inc.,
Delaware Capital Management, Inc., Delvoy, Inc.
and Delaware Management Business Trust
Executive Vice President, Secretary, 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 executive capacities at
different times within the Delaware organization.
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of
Voyageur Funds, Inc. and the other 33 investment
companies in the Delaware Investments family and
Founders Holdings, Inc.
Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Capital
Management, Inc., Delaware International Holdings
Ltd., Delvoy, Inc. and Delaware Management
Business Trust
Chief Financial Officer/Treasurer of Retirement
Financial 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
During the past five years, Mr. Hastings has
served in various executive capacities at
different times within the Delaware organization.
Michael P. Bishof (36) Senior Vice President/Treasurer of Voyageur Funds,
Inc. and the other 33 investment companies in the
Delaware Investments family and Founders
Holdings, Inc.
Senior Vice President/Investment Accounting of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware Service
Company, Inc.
Senior Vice President and Treasurer/Manager of
Investment Accounting of Delaware Distributors,
L.P. and Delaware Investment Advisers (a series of
Delaware Management Business Trust)
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.
</TABLE>
The following is a compensation table listing for each director entitled
to receive compensation, the aggregate compensation received from the Fund
and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a director or
trustee for the fiscal year ended October 31, 1998 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Directors/Trustees as of October 31, 1998. Only the
independent directors of the Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Part of Annual From all 34
Compensation Voyageur Benefits Delaware
from Voyageur Funds, Inc. Upon Investments
Name Funds, Inc. Expenses Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
W. Thacher Longstreth $898 None $38,500 $60,384
Ann R. Leven $933 None $38,500 $66,545
Walter P. Babich $928 None $38,500 $65,384
Anthony D. Knerr $928 None $38,500 $65,384
Charles E. Peck $898 None $38,500 $60,384
Thomas F. Madison $910 None $38,500 $62,467
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee 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 investment company in the Delaware
Investments family for which he or she serves as a director or trustee
for a period equal to the lesser of the number of years that such person
served as a director or trustee 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/trustees of each
investment company at the time of such person's retirement. If an
eligible director/trustee retired as of October 31, 1998 he or she
would be entitled to annual payments totaling the amount noted above, in
the aggregate, from all of the investment companies in the Delaware
Investments family for which he or she served as director or trustee,
based on the number of investment companies in the Delaware Investments
family as of that date.
(2) Each independent director/trustee currently receives a total annual
retainer fee of $38,500 for serving as a director or trustee for all 34
investment companies in Delaware Investments, plus $3,145 for each Board
Meeting attended. Ann R. Leven, Walter P. Babich, Anthony D. Knerr and
Thomas F. Madison serve on the Fund's audit committee; Ms. Leven is the
chairperson. Members of the audit committee currently receive
additional annual compensation of $5,000 from all investment companies,
in the aggregate, with the exception of the chairperson, who receives
$6,000.
GENERAL INFORMATION
Voyageur Funds, Inc. is an open-end, registered management investment
company. The Fund's portfolio of assets is diversified as defined by the
1940 Act. Voyageur Funds, Inc. was organized as a Minnesota corporation on
April 15, 1987.
The Manager is the investment manager of the Fund. The Manager also
provides investment management services to certain of the other funds in
the Delaware Investments family. An affiliate of the Manager 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.
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:
U.S. Government Securities Fund A Class
---------------------------------------
Total Amount of Amounts
Underwriting Reallowed Net Commission
Fiscal Year Ended Commission to Dealers to VFD/DDLP
- ----------------- -------------- ---------- --------------
10/31/98 $67,126 $55,344 $11,782
10/31/97 $34,104 $ 5,079 $29,025
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 and CDSC payments with respect to the Fund's Class B and Class C
Shares as follows:
Class A Shares Class B Shares Class C Shares
Period Ended CDSC payments CDSC payments CDSC payments
- ------------ -------------- -------------- --------------
Year Ended None $7,771 $155
10/31/98
Year Ended None 5,058 6
10/31/97
Year Ended None 1,460 4
10/31/96
Year Ended None 1,047 2
6/30/96
Year Ended
6/30/95 None 896 None
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the 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
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:
U.S. 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 U.S. Government Securities Fund.
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.
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.
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.
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.
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.
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.
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.
APPENDIX B -- GENERAL CHARACTERISTICS AND RISKS OF OPTIONS AND FUTURES
General. As described in the Prospectus under "Investment Objectives
and Policies C 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 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 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 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 positions, 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 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.
APPENDIX C -- INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE
INVESTMENTS FAMILY
Following is a summary of the investment objectives of the other funds
in the Delaware Investments family:
Delaware Balanced 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 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 Equity 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. Growth and
Income 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. Corporate Bond Fund seeks to provide investors with total
return by investing primarily in corporate bonds. Extended Duration Bond
Fund seeks to provide investors with total return by investing primarily in
corporate bonds
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.
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.
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 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 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 Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain
Pennsylvania state and local taxes, consistent with the preservation of
capital. 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.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Income Portfolio seeks a combination of current income and
preservation of capital with capital appreciation by investing primarily in
a mix of fixed income and domestic equity securities, including fixed
income and domestic equity Underlying Funds. Foundation Funds Balanced
Portfolio seeks capital appreciation with current income as a secondary
objective by investing primarily in domestic equity and fixed income
securities, including domestic equity and fixed income Underlying Funds.
Foundation Funds Growth Portfolio seeks long-term capital growth by
investing primarily in equity securities, including equity Underlying
Funds, and, to a lesser extent, in fixed income securities, including
fixed-income Underlying Funds.
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 Equity
Fund seeks to achieve long-term total return by investing in global
securities that provide the potential for capital appreciation and income.
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 the following funds available
exclusively as funding vehicles for certain insurance company separate
accounts. Decatur Total Return 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 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 seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital
appreciation by investing its assets in a diversified portfolio of
securities exhibiting the potential for significant growth. Delaware
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. Small Cap Value Series seeks capital appreciation
by investing primarily in small-cap common stocks whose market values
appear 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 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.
Social Awareness 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. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in
securities of companies primarily engaged in the real estate industry.
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 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 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. 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 funds in the Delaware
Investments family, 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).
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Voyageur Funds,
Inc. and, in its capacity as such, audits the annual financial statements
of the Fund. The Fund's Statement of Net Assets, 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, 1998 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 are incorporated by reference from the
Annual Report into this Part B. The Fund's previous auditors audited the
financial highlights of the Fund for the fiscal periods ending on or before
October 31, 1996.
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
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
DELAWARE-VOYAGEUR U.S.
GOVERNMENT SECURITIES FUND
A CLASS
B CLASS
C CLASS
INSTITUTIONAL CLASS
CLASSES OF VOYAGEUR FUNDS, INC.
PART B
STATEMENT OF
ADDITIONAL INFORMATION
MARCH 1, 1999
[LOGO OMITTED: DELAWARE INVESTMENTS]
