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MINNESOTA HIGH YIELD MUNICIPAL BOND FUND
[GRAPHIC OMITTED]
_________________________________________________________________
Voyageur Minnesota High Yield Municipal Bond Fund
Voyageur Funds (Not part of prospectus); dated May 1, 1997
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Table of Contents
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3 Fees and Expenses
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4 Financial Highlights
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6 The Fund
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6 Investment Objective and Policies
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13 Risks and Special Investment Considerations
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16 Investment Restrictions
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17 How to Purchase Shares
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22 How to Sell Shares
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24 Reinstatement Privilege
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25 Exchange Privilege
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25 Management
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28 Determination of Net Asset Value
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28 Distributions to Shareholders and Taxes
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30 Investment Performance
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31 General Information
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Voyageur Funds (Not part of prospectus); dated May 1, 1997
<PAGE>
Prospectus
Dated May 1, 1997
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Voyageur Minnesota High Yield Municipal Bond Fund (the "Fund") is a
series of Voyageur Mutual Funds, Inc., an open end management
investment company, commonly referred to as a mutual fund. The
investment objective of the Fund is to seek a high level of current
income exempt from federal income tax and from Minnesota personal
income tax primarily through investment in a portfolio of medium- and
lower-grade Municipal Obligations. The weighted average maturity of the
investment portfolio of the Fund is expected to be approximately 15 to
25 years. There is no assurance that the Fund will achieve its
investment objective.
The Fund may invest in medium- and lower-grade Municipal
Obligations rated between BBB and B- (inclusive) by Standard & Poor's
Ratings Group or Fitch Investors Service, LP, Baa and B3 (inclusive) by
Moody's Investors Service, Inc., comparably rated short-term Municipal
Obligations and non-rated Municipal Obligations determined by the
Fund's investment adviser to be of comparable quality. The Fund may
also invest in higher rated securities. Investment in medium- and
lower-grade Municipal Obligations involves special risks as compared
with investment in higher-grade municipal securities, including
potentially greater sensitivity to a general economic downturn or to a
significant increase in interest rates, greater market price volatility
and less liquid secondary market trading. See "Risks and Special
Investment Considerations." Investment in the Fund may not be
appropriate for all investors.
The Fund's investment adviser is Voyageur Fund Managers, Inc.
("Voyageur" or "Adviser"). The address of Voyageur is One Commerce
Square, 2005 Market Street, Philadelphia, Pennsylvania 19103, and the
address of the Fund is 1818 Market Street, Philadelphia, Pennsylvania
19103.
An investment in the Fund is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not insured or guaranteed by
the United States Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other federal agency. An
investment in the Fund involves investment risk, including the possible
loss of principal due to fluctuations in the Fund's net asset value.
This Prospectus sets forth certain information about the Fund that
a prospective investor ought to know before investing. Investors should
read and retain this Prospectus for future reference. The Fund has
filed a Statement of Additional Information (dated April 28, 1997) with
the Securities and Exchange Commission. The Statement of Additional
Information is available free of charge by telephone (800-523-4640)
and is incorporated by reference herein in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1 Voyageur Funds (Prospectus)
<PAGE>
The Fund offers investors a choice among classes of shares which
offer different sales charges and bear different expenses. These
alternatives permit an investor to choose the method of purchasing
shares that is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares and other
circumstances.
Class A Shares
An investor who purchases Class A shares pays a sales charge at the
time of purchase. As a result, Class A shares are not subject to any
charges when they are redeemed (except for sales at net asset value in
excess of $1 million or sales subject to special promotions identified
from time to time by the Fund's underwriter which in either case are
subject to a contingent deferred sales charge). The initial sales
charge may be reduced or waived for certain purchases. Class A shares
are subject to a Rule 12b-1 fee payable at an annual rate of .25% of
the Fund's average daily net assets attributable to Class A shares. See
"How to Purchase Shares--Class A Shares."
Class B Shares
Class B shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge of up to 5% if redeemed
within six years of purchase. Class B shares are also subject to a
higher Rule 12b-1 fee than Class A shares. The Rule 12b-1 fee for Class
B shares will be paid at an annual rate of 1% of the Fund's average
daily net assets attributable to Class B shares. Class B shares will
automatically convert to Class A shares at net asset value
approximately eight years after purchase. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work
from the time the investment is made, but until conversion will have a
higher expense ratio and pay lower dividends than Class A shares due to
the higher Rule 12b-1 fee. See "How to Purchase Shares--Class B
Shares."
Class C Shares
Class C shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge of 1% if redeemed within
one year of purchase. Class C shares are also subject to a higher Rule
12b-1 fee than Class A shares. The Rule 12b-1 fee for Class C shares of
the Fund will be paid at an annual rate of 1% of the Fund's average
daily net assets attributable to Class C shares. Class C shares provide
an investor the benefit of putting all of the investor's dollars to
work from the time the investment is made, but will have a higher
expense ratio and pay lower dividends than Class A shares due to the
higher Rule 12b-1 fee. See "How to Purchase Shares--Class C Shares."
Class C shares do not convert to any other class of shares.
The decision as to which class of shares provides a more suitable
investment for an investor depends on a number of factors, including
the amount and intended length of the investment. Investors making
investments that qualify for reduced sales charges might consider Class
A shares. Other investors might consider Class B or Class C shares
because all of the purchase price is invested immediately. The Fund's
transfer agent will treat orders for Class B shares for $250,000 or
more as orders for Class A shares or such orders will be declined.
Sales personnel may receive different compensation depending on which
class of shares they sell.
Shares of the Fund covered by this prospectus are not registered in all
states. Shares that are not registered in one or more states are not
being offered and sold in such states.
2 Voyageur Funds (Prospectus)
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Fees and Expenses
<TABLE>
<CAPTION>
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Minnesota High Yield Municipal Bond Fund Class A Class B Class C
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.75% N/A(2) N/A(2)
Deferred Sales Load
(as a percentage of original purchase price
or redemption proceeds, as applicable) 1.00(1) 5.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee (after voluntary fee waiver) .00 .00 .00
Rule 12b-1 Fee .24 .95 .99
Other Expenses
(after voluntary expense reimbursement) .00 .00 .00
----- ----- -----
Total Fund Operating Expenses
(after voluntary fee waivers and expense
reimbursements) .24% .95% .99%
===== ===== =====
Total Fund Operating Expenses
(without voluntary waiver and reimbursement)(3) 1.25% 2.00% 2.00%
===== ===== =====
Example
An investor in the Fund would pay the following expenses on a $1,000 investment
assuming a 5% annual return and:
Redemption at the end of each period
1 Year $40 $60 $ 20
3 Years 45 70 32
5 Years 51 73 55
10 Years 67 96 121
No redemption
1 Year 40 10 10
3 Years 45 30 32
5 Years 51 53 55
10 Years 67 96 121
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</TABLE>
(1) A contingent deferred sales charge of 1.00% is imposed on certain
redemptions of Class A shares that were purchased without an initial
sales charge as part of an investment of $1 million or more.
(2) Class B and Class C shares are sold without a front-end sales
charge, but their Rule 12b-1 fees may cause long term shareholders
to pay more than the economic equivalent of the maximum permitted
front-end sales charges.
(3) The Fund's management fee without waivers would be 0.65%.
The example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those
shown. The purpose of the above Fees and Expenses table is to assist
the investor in understanding the various costs and expenses that
investors in the Fund will bear directly or indirectly. The information
set forth above under the heading "Total Fund Operating Expenses (after
voluntary fee waivers and expense reimbursements)" reflects expenses
incurred during the period ended December 31, 1996 after voluntary
expense waivers and fee reimbursements ("Voluntary Waivers"). In
connection with a merger transaction whereby Voyageur became a
subsidiary of Delaware Management Holdings, Inc., Voyageur and its new
parent companies have agreed, until April 30, 1999, to pay
3 Voyageur Funds (Prospectus)
<PAGE>
certain operating expenses of the Fund which exceed 1.00% (excluding
Rule 12b-1 fees) of the Fund's average daily net assets on an annual
basis ("Additional Waivers"), as further described in
"Management-Expenses of the Fund." It is not anticipated that the
Additional Waivers will be required during the fiscal year ended
December 31, 1997. Absent such fee and expense waivers, Total Fund
Operating Expenses for such period would be equivalent to the
corresponding percentages disclosed above in "Total Fund Operating
Expenses (without voluntary waiver and reimbursement)." The example has
been calculated based on "Total Fund Operating Expenses (after
voluntary fee waivers and expense reimbursements)". To the extent that
there are any voluntary fee waivers or expense reimbursements for the
Fund's current fiscal year, under no circumstances will the Fund's
total operating expenses be higher than what appears in the line
labeled "Total Fund Operating Expenses (without voluntary waiver and
reimbursements)".
Financial Highlights
The following table shows certain per share data and selected
information for a share of capital stock outstanding during the
indicated periods for the Fund. This performance has been audited by
KPMG Peat Marwick LLP, independent auditors, and should be read in
conjunction with the financial statements of the Fund contained in its
annual report. An annual report of the Fund can be obtained without
charge by contacting the Fund at 800-523-4640. In addition to financial
statements, the annual report contains further information about
performance of the Fund.
<TABLE>
<CAPTION>
Period Ended December 31, 1996
--------------------------------------
Class A Class B Class C
------- ------- ---------
<S> <C> <C> <C>
Net Asset value:
Beginning of period.......................... $10.00 $ 9.78 $ 9.99
Operations:
Net Investment Income........................ .35 .29 .30
Net Realized and Unrealized Gain (Loss)
on Securities............................ .18 .41 .19
------ ----- -----
Total................................. .53 .70 .49
------ ----- -----
Distributions to shareholders:
From Net Investment Income................... (.35) (.29) (.30)
Net Asset Value End of Period.................. $10.18 $10.19 $10.18
====== ====== ======
Total Investment Return........................ 5.40% 7.29% 5.02%
Net Assets End of Period (000s)................ $6,068 $2,738 $900
Ratios:
Ratio of Expenses to Average Net Assets(6)... .24% .95%(5) .99%(5)
Ratio of Net Investment Income to
Average Net Assets......................... 5.78%(5) 5.14%(5) 4.90%(5)
Portfolio Turnover Rate...................... 14.97% 14.97% 14.97%
(assuming no voluntary waivers
and reimbursements)......................... 1.25%(5) 2.00%(5) 2.00%(5)
</TABLE>
Notes to Financial Highlights
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4 Voyageur Funds (Prospectus)
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(1) Period from June 4, 1996 (commencement of operations) to
December 31, 1996.
(2) Period from June 12, 1996 (commencement of operations) to
December 31, 1996.
(3) Period from June 7, 1996 (commencement of operations) to
December 31, 1996.
(4) Total investment return is based on the change in net asset value
on a share during the period and assumes reinvestment of
distributions at net asset value and does not reflect the impact
of a sales charge.
(5) Annualized.
(6) The expense ratio reflects the effect of gross expenses
attributable to earnings credits on uninvested cash received by
the Fund.
5 Voyageur Funds (Prospectus)
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The Fund
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The Fund is a separate series of Voyageur Mutual Funds, Inc., a parent
corporate entity which was incorporated in the State of Minnesota on
April 14, 1993. The Fund is non-diversified, as such term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"). As a
non-diversified investment company, the Fund will be able to invest,
subject to certain federal tax requirements, a relatively higher
percentage of its assets in the securities of a limited number of
issuers which may result in the Fund's securities being more
susceptible to any single economic, political or regulatory occurrence
than the securities of a diversified Fund. The investment objective and
policies of the Fund are described below.
Investment Objective and Policies
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The investment objective of the Fund is to seek a high level of current
income exempt from federal income tax and from Minnesota personal
income tax primarily through investment in a portfolio of medium and
lower grade Municipal Obligations. The Fund does not purchase insurance
on its portfolio securities. The Fund will attempt to invest 100% (and
as a matter of fundamental policy during normal circumstances will
invest at least 80%) of the value of its net assets in Municipal
Obligations the interest on which is exempt from regular federal income
tax and from Minnesota personal income tax. The Fund may invest without
limitation in securities that generate interest that is an item of tax
preference for purposes of federal and state alternative minimum tax
("AMT"). In normal circumstances the weighted average maturity of the
investment portfolio of the Fund is expected to be approximately 15 to
25 years. However, if the Adviser determines that market conditions
warrant a shorter average maturity, the Fund's investments will be
adjusted accordingly. During times of adverse market conditions when a
defensive investment posture is warranted, the Fund may temporarily
select investments without regard to the foregoing policies.
There are risks in any investment program, and there is no
assurance that the Fund's investment objective will be achieved. The
value of the Fund's shares will fluctuate with changes in the market
value of its investments. The Fund's investment objective and certain
other investment policies explicitly designated herein as such are
fundamental, which means that they cannot be changed without the vote
of the Fund's shareholders as provided in the 1940 Act. The Fund will
invest at least 65% of its total assets, except under abnormal market
or economic situations, in medium- and lower-grade Municipal
Obligations rated, at the time of investment, between BBB and
B-(inclusive) by Standard & Poor's Ratings Group ("S&P"), Baa and B3
(inclusive) by Moody's Investors Service, Inc. ("Moody's"), and BBB and
B- (inclusive) by Fitch Investors Service, LP ("Fitch"), and Municipal
Obligations determined by the Fund's investment adviser to be of
comparable quality.
Medium-grade Municipal Obligations are rated BBB by S&P or Fitch,
Baa by Moody's or determined by the Adviser to be of comparable
quality. Municipal Obligations rated BBB by S&P or Fitch generally are
regarded by S&P or Fitch as having an adequate capacity to pay interest
and repay principal; adverse economic conditions or changing
circumstances are, however, more likely in S&P's or Fitch's view to
lead to a weakened capacity to pay interest and repay principal as
compared with higher rated Tax Exempt Obligations. Municipal
Obligations rated Baa by Moody's generally are considered by Moody's as
medium-grade obligations, i.e., they are neither highly protected nor
poorly secured. In Moody's view, 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. In
6 Voyageur Funds (Prospectus)
<PAGE>
Moody's view, such securities lack outstanding investment
characteristics and have speculative characteristics as well.
The Fund may invest in lower-grade Municipal Obligations rated, at
the time of investment, no lower than B- by S&P or Fitch or B3 by
Moody's, and in municipal securities determined by the Fund's
investment adviser to be of comparable quality. Municipal Obligations
rated B by S&P or Fitch generally are regarded by S&P or Fitch, on
balance, as predominantly speculative with respect to capacity to pay
interest or repay principal in accordance with the terms of the
obligations. While such securities will likely have some quality and
protective characteristics, in S&P's or Fitch's view these are
outweighed by large uncertainties or major risk exposure to adverse
conditions. Securities rated B by Moody's are viewed by Moody's as
generally lacking characteristics of the desirable investment. In
Moody's view, assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
The Fund will not make initial investments in Municipal
Obligations rated, at the time of investment, below B- by S&P or Fitch
or below B3 by Moody's, or in Municipal Obligations determined by the
Fund's investment adviser to be of comparable quality. The Fund may
retain Municipal Obligations which are downgraded after investment.
There is no minimum rating with respect to securities that the Fund may
hold if downgraded after investment. See Appendix A to the Statement of
Additional Information for a description of Municipal Obligations
ratings.
Investment in medium- and lower-grade securities involves special
risks as compared with investment in higher-grade securities, including
potentially greater sensitivity to a general economic downturn or to a
significant increase in interest rates, greater market price volatility
and less liquid secondary market trading. See "Risks and Special
Investment Considerations." There can be no assurance that the Fund
will achieve its investment objective, and the Fund may not be an
appropriate investment for all investors. Furthermore, interest on
certain "private activity" obligations in which the Fund may invest is
treated as a preference item for the purpose of calculating the federal
and state alternative minimum tax and, accordingly, a portion of the
income produced by the Fund may be taxable under the federal and state
alternative minimum tax. The Fund may not be a suitable investment for
investors who are already subject to the alternative minimum tax or who
would become subject to the alternative minimum tax as a result of an
investment in the Fund. See "Taxation."
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Moody's Rating Aaa Aa A Baa Ba B Unrated
(S&P Rating) (AAA) (AA) (A) (BBB) (BB) (B) Bonds Total
Voyageur Minnesota High 9% 7 16% 17% 3% 7% 41% 100%
Yield Municipal Bond Fund
</TABLE>
At times the Fund's investment adviser may judge that conditions
in the markets for medium and lower grade Municipal Obligations make
pursuing the Fund's basic investment strategy of investing primarily in
such Municipal Obligations inconsistent with the best interests of
shareholders. At such times, the Fund may invest all or a portion of
its assets in higher grade Municipal Obligations and in Municipal
Obligations determined by the Fund's investment adviser to be of
comparable quality. Although such higher grade Municipal Obligations
generally entail less credit risk, such higher grade Municipal
Obligations may have a lower yield than medium and lower grade
Municipal Obligations, and investment in such higher grade Municipal
Obligations may result in a lower yield to Fund shareholders. The
Fund's investment adviser may also judge that conditions in the markets
for long- and intermediate-term Municipal Obligations in general make
pursuing the Fund's basic investment strategy inconsistent with the
best interests of the Fund's shareholders. At such times, the Fund may
pursue strategies primarily designed to reduce fluctuations in the
value of the
7 Voyageur Funds (Prospectus)
<PAGE>
Fund's assets, including investing the Fund's assets in high-quality,
short-term Municipal Obligations and in high-quality, short-term
taxable securities. See "Taxation."
The Fund may invest without limitation in short term Municipal
Obligations or in taxable obligations on a temporary, defensive basis
due to market conditions or, with respect to taxable obligations, for
liquidity purposes. Such taxable obligations, whether purchased for
liquidity purposes or on a temporary, defensive basis, may include:
obligations of the U.S. Government, its agencies or instrumentalities;
other debt securities rated within the three highest grades by either
Moody's, Fitch or S&P; commercial paper rated in the highest grade by
any of such rating services (Prime-1, F-1+ or A-1, respectively);
certificates of deposit and bankers' acceptances of domestic banks
which have capital, surplus and undivided profits of over $100 million;
high-grade taxable municipal bonds; and repurchase agreements with
respect to any of the foregoing investments. The Fund also may hold its
assets in cash and in securities of tax-exempt money market mutual
funds.
Municipal Obligations
As used in this Prospectus, the term "Municipal Obligations" refers to
debt obligations issued by or on behalf of a state or territory or its
agencies, instrumentalities, municipalities and political subdivisions.
The term "Municipal Obligations" also includes Derivative Municipal
Obligations as defined below.
Municipal Obligations are primarily debt obligations issued to
obtain funds for various public purposes such as constructing public
facilities and making loans to public institutions. The two principal
classifications of Municipal Obligations are general obligation bonds
and revenue bonds. General obligation bonds are generally secured by
the full faith and credit of an issuer possessing general taxing power
and are payable from the issuer's general unrestricted revenues and not
from any particular fund or revenue source. Revenue bonds are payable
only from the revenues derived from a particular source or facility,
such as a tax on particular property or revenues derived from, for
example, a municipal water or sewer utility or an airport. Municipal
Obligations that benefit private parties in a manner different than
members of the public generally (so-called private activity bonds or
industrial development bonds) are in most cases revenue bonds, payable
solely from specific revenues of the project to be financed. The credit
quality of private activity bonds is usually directly related to the
creditworthiness of the user of the facilities (or the creditworthiness
of a third-party guarantor or other credit enhancement participant, if
any).
Within these principal classifications of Municipal Obligations,
there is a variety of types of municipal securities. Certain Municipal
Obligations may carry variable or floating rates of interest whereby
the rate of interest is not fixed but varies with changes in specified
market rates or indexes, such as a bank prime rate or a tax-exempt
money market index. Accordingly, the yield on such obligations can be
expected to fluctuate with changes in prevailing interest rates. Other
Municipal Obligations are zero-coupon securities, which are debt
obligations which do not entitle the holder to any periodic interest
payments prior to maturity and are issued and traded at a discount from
their face amounts. The market prices of zero-coupon securities are
generally more volatile than the market prices of securities that pay
interest periodically.
Municipal Obligations also include state or municipal leases and
participation interests therein. The Fund may invest in these types of
obligations without limit. Municipal leases are obligations issued by
state and local governments or authorities to finance the acquisition
of equipment and facilities such as fire, sanitation or police vehicles
or telecommunications equipment, buildings or other capital assets.
Municipal lease obligations, except in certain circumstances, are
considered illiquid by the staff of the Securities and Exchange
Commission. Municipal lease obligations held by the Fund
8 Voyageur Funds (Prospectus)
<PAGE>
will be treated as illiquid unless they are determined to be liquid
pursuant to guidelines established by the Fund's Board of Directors.
Under these guidelines, the Fund's investment adviser will consider
factors including, but not limited to (1) whether the lease can be
canceled, (2) what assurance there is that the assets represented by
the lease can be sold, (3) the municipality's general credit strength
(e.g., its debt, administrative, economic and financial
characteristics), (4) the likelihood that the municipality will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of non-appropriation"),
and (5) the legal recourse in the event of failure to appropriate.
Additionally, the lack of an established trading market for municipal
lease obligations may make the determination of fair market value more
difficult. See "Investment Policies and Restrictions--Municipal
Obligations" in the Statement of Additional Information.
The Fund may also acquire Derivative Municipal Obligations, which
are custodial receipts or certificates underwritten by securities
dealers or banks that evidence ownership of future interest payments,
principal payments or both on certain Municipal Obligations. The
underwriter of these certificates or receipts typically purchases and
deposits the securities in an irrevocable trust or custodial account
with a custodian bank, which then issues receipts or certificates that
evidence ownership of the periodic unmatured coupon payments and the
final principal payment on the obligations. Although under the terms of
a custodial receipt, the Fund typically would be authorized to assert
its rights directly against the issuer of the underlying obligation,
the Fund could be required to assert through the custodian bank those
rights as may exist against the underlying issuer. Thus, in the event
the underlying issuer fails to pay principal and/or interest when due,
the Fund may be subject to delays, expenses and risks that are greater
than those that would have been involved if the Fund had purchased a
direct obligation of the issuer.
In addition, in the event that the trust or custodial account in
which the underlying security had been deposited is determined to be an
association taxable as a corporation, instead of a non-taxable entity,
it would be subject to state income tax (but not federal income tax) on
the income it earned on the underlying security, and the yield on the
security paid to the Fund and its shareholders would be reduced by the
amount of taxes paid. Furthermore, amounts paid by the trust or
custodial account to the Fund would lose their tax-exempt character and
become taxable, for federal and state purposes, in the hands of the
Fund and its shareholders. However, the Fund will only invest in
custodial receipts which are accompanied by a tax opinion stating that
interest payable on the receipts is tax-exempt. If the Fund invests in
custodial receipts, it is possible that a portion of the discount at
which the Fund purchases the receipts might have to be accrued as
taxable income during the period that the Fund holds the receipts.
The principal and interest payments on the Derivative Municipal
Obligations underlying custodial receipts may be allocated in a number
of ways. For example, payments may be allocated such that certain
custodial receipts may have variable or floating interest rates and
others may be stripped securities which pay only the principal or
interest due on the underlying Municipal Obligations. The Fund may also
invest in custodial receipts which are "inverse floating obligations"
(also sometimes referred to as "residual interest bonds"). These
securities pay interest rates that vary inversely to changes in the
interest rates of specified short term Municipal Obligations or an
index of short-term Municipal Obligations. Thus, as market interest
rates increase, the interest rates on inverse floating obligations
decrease. Conversely, as market rates decline, the interest rates on
inverse floating obligations increase. Such securities have the effect
of providing a degree of investment leverage, since the interest rates
on such securities will generally change at a rate which is a multiple
of the change in the interest rates of the specified Municipal
Obligations or index. As a result, the market values of inverse
floating obligations will generally be more volatile than the market
values of other
9 Voyageur Funds (Prospectus)
<PAGE>
Municipal Obligations and investments in these types of obligations
will increase the volatility of the net asset value of shares of the
Fund.
Illiquid Securities
The Fund may invest up to 15% of its net assets in illiquid securities.
A security is considered illiquid if it cannot be sold in the ordinary
course of business within seven days at approximately the price at
which it is valued. Illiquid securities may offer a higher yield than
securities which are more readily marketable, but they may not always
be marketable on advantageous terms.
The sale of illiquid securities often requires more time and
results in higher brokerage charges or dealer discounts than does the
sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. The Fund may be
restricted in its ability to sell such securities at a time when the
Fund's investment adviser deems it advisable to do so. In addition, in
order to meet redemption requests, the Fund may have to sell other
assets, rather than such illiquid securities, at a time which is not
advantageous.
Certain securities in which the Fund may invest, including
municipal lease obligations, certain restricted securities and
commercial paper issued pursuant to the private placement exemption of
Section 4(2) of the Securities Act of 1933, historically have been
considered illiquid by the staff of the Securities and Exchange
Commission. In accordance with more recent staff positions, however,
the Fund will treat such securities as liquid and not subject to the
above 15% limitation when they have been determined to be liquid by the
Fund's investment adviser subject to the oversight of and pursuant to
procedures adopted by the Fund's Board of Directors. See "Investment
Policies and Restrictions--Illiquid Investments" in the Statement of
Additional Information.
Miscellaneous Investment Practices
Forward Commitments
New issues of Municipal Obligations and other securities are often
purchased on a "when issued" or delayed delivery basis, with delivery
and payment for the securities normally taking place 15 to 45 days
after the date of the transaction. The payment obligation and the
interest rate that will be received on the securities are each fixed at
the time the buyer enters into the commitment. The Fund may enter into
such "forward commitments" if it holds, and maintains until the
settlement date in a segregated account, cash or liquid securities in
an amount sufficient to meet the purchase price. There is no percentage
limitation on the Fund's total assets which may be invested in forward
commitments. Municipal Obligations purchased on a when-issued basis and
the securities held in the Fund's portfolio are subject to changes in
value (both generally changing in the same way, i.e., appreciating when
interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and
changes, real or anticipated, in the level of interest rates. Municipal
Obligations purchased on a when-issued basis may expose the Fund to
risk because they may experience such fluctuations prior to their
actual delivery. Purchasing Municipal Obligations on a when-issued
basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Any significant commitment by the
Fund to the purchase of securities on a when-issued basis may increase
the volatility of the Fund's net asset value. Although the Fund will
generally enter into forward commitments with the intention of
acquiring securities for its portfolio, it may dispose of a commitment
prior to settlement if the Fund's investment adviser deems it
appropriate to do so. The Fund may realize short-term profits or losses
upon the sale of forward commitments.
10 Voyageur Funds (Prospectus)
<PAGE>
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to not more
than 10% of its total assets (taken at current value), except when
investing for defensive purposes during times of adverse market
conditions. The Fund may enter into repurchase agreements with respect
to any securities which it may acquire consistent with its investment
policies and restrictions.
A repurchase agreement involves the purchase by the Fund of
securities with the condition that, after a stated period of time, the
original seller (a member bank of the Federal Reserve System or a
recognized securities dealer) will buy back the same securities
("collateral") at a predetermined price or yield. Repurchase agreements
involve certain risks not associated with direct investments in
securities. In the event the original seller defaults on its obligation
to repurchase, as a result of its bankruptcy or otherwise, the Fund
will seek to sell the collateral, which action could involve costs or
delays. In such case, the Fund's ability to dispose of the collateral
to recover such investment may be restricted or delayed. While
collateral will at all times be maintained in an amount equal to the
repurchase price under the agreement (including accrued interest due
thereunder), to the extent proceeds from the sale of collateral were
less than the repurchase price, the Fund could suffer a loss. See
"Investment Policies and Restrictions--Taxable Obligations" in the
Statement of Additional Information.
Reverse Repurchase Agreements
The Fund may engage in "reverse repurchase agreements" with banks and
securities dealers with respect to not more than 10% of its total
assets. Reverse repurchase agreements are ordinary repurchase
agreements in which the Fund is the seller of, rather than the investor
in, securities and agrees to repurchase them at an agreed upon time and
price. Use of a reverse repurchase agreement may be preferable to a
regular sale and later repurchase of the securities because it avoids
certain market risks and transaction costs. Because certain of the
incidents of ownership of the security are retained by the Fund,
reverse repurchase agreements are considered a form of borrowing by the
Fund from the buyer, collateralized by the security. At the time the
Fund enters into a reverse repurchase agreement, cash or liquid
securities having a value sufficient to make payments for the
securities to be repurchased will be segregated, and will be marked to
market daily and maintained throughout the period of the obligation.
Reverse repurchase agreements may be used as a means of borrowing for
investment purposes subject to the 10% limitation set forth above. This
speculative technique is referred to as leveraging. Leveraging may
exaggerate the effect on net asset value of any increase or decrease in
the market value of the Fund's portfolio. Money borrowed for leveraging
will be subject to interest costs which may or may not be recovered by
income from or appreciation of the securities purchased. Because the
Fund does not currently intend to utilize reverse repurchase agreements
in excess of 10% of total assets, the Fund believes the risks of
leveraging due to use of reverse repurchase agreements to principal are
reduced. The Fund's investment adviser believes that the limited use of
leverage may facilitate the Fund's ability to provide high current
income.
Options and Futures
The Fund may utilize put and call transactions and may utilize futures
transactions to hedge against market risk and facilitate portfolio
management. See "Investment Policies and Restrictions--Options and
Futures Transactions" in the Statement of Additional Information.
Options and futures may be used to attempt to protect against possible
declines in the market value of the Fund's portfolio resulting from
downward trends in the debt securities markets (generally due to a rise
in interest rates), to protect the Fund's unrealized gains in the value
of its portfolio securities, to facilitate the sale of such securities
for investment purposes, to manage the effective maturity or duration
of the
11 Voyageur Funds (Prospectus)
<PAGE>
Fund's portfolio or to establish a position in the securities markets
as a temporary substitute for purchasing particular securities. The use
of options and futures is a function of market conditions. Other
transactions may be used by the Fund in the future for hedging purposes
as they are developed to the extent deemed appropriate by the Board.
Options on Securities
The Fund may write (i.e., sell) covered put and call options and
purchase put and call options on the securities in which it may invest
and on indices of securities in which it may invest, to the extent such
put and call options are available.
A put option gives the buyer of such option, upon payment of a
premium, the right to deliver a specified amount of a security to the
writer of the option on or before a fixed date at a predetermined
price. A call option gives the purchaser of the option, upon payment of
a premium, the right to call upon the writer to deliver a specified
amount of a security on or before a fixed date, at a predetermined
price.
In purchasing a call option, the Fund would be in a position to
realize a gain if, during the option period, the price of the security
increased by an amount in excess of the premium paid. It would realize
a loss if the price of the security declined or remained the same or
did not increase during the period by more than the amount of the
premium. In purchasing a put option, the Fund would be in a position to
realize a gain if, during the option period, the price of the security
declined by an amount in excess of the premium paid. It would realize a
loss if the price of the security increased or remained the same or did
not decrease during that period by more than the amount of the premium.
If a put or call option purchased by the Fund were permitted to expire
without being sold or exercised, its premium would be lost by the Fund.
If a put option written by the Fund were exercised, the Fund would
be obligated to purchase the underlying security at the exercise price.
If a call option written by the Fund were exercised, the Fund would be
obligated to sell the underlying security at the exercise price. The
risk involved in writing a put option is that there could be a decrease
in the market value of the underlying security caused by rising
interest rates or other factors. If this occurred, the option could be
exercised and the underlying security would then be sold to the Fund at
a higher price than its current market value. The risk involved in
writing a call option is that there could be an increase in the market
value of the underlying security caused by declining interest rates or
other factors. If this occurred, the option could be exercised and the
underlying security would then be sold by the Fund at a lower price
than its current market value. These risks could be reduced by entering
into a closing transaction as described in Appendix B to the Statement
of Additional Information. The Fund retains the premium received from
writing a put or call option whether or not the option is exercised.
Over-the-counter options are purchased or written by the Fund in
privately negotiated transactions. Such options are illiquid, and it
may not be possible for the Fund to dispose of an option it has
purchased or terminate its obligations under an option it has written
at a time when the Fund's investment adviser believes it would be
advantageous to do so. Over-the-counter options are subject to the
Fund's 15% illiquid investment limitation. See Appendix B to the
Statement of Additional Information for a further discussion of the
general characteristics and risks of options.
Participation in the options market involves investment risks and
transaction costs to which the Fund would not be subject absent the use
of this strategy. If the investment adviser's predictions of movements
in the direction of the securities and interest rate markets are
inaccurate, the adverse consequences to the Fund may leave the Fund in
a worse position than if such strategy was not used. Risks inherent in
the use of options include (1) dependence on the investment adviser's
ability to predict correctly movements in the direction of interest
rates and securities prices; (2) imperfect correlation between the
price of options and movements in the prices of the securities being
hedged; (3) the fact that the skills needed to use these strategies are
different from those needed to select portfolio securities; (4) the
possible absence of a
12 Voyageur Funds (Prospectus)
<PAGE>
liquid secondary market for any particular instrument at any time; and
(5) the possible need to defer closing out certain hedged positions to
avoid adverse tax consequences. See "Investment Policies and
Restrictions-- Risks of Transactions in Futures Contracts and Options"
in the Statement of Additional Information for further discussion and
see Appendix B for a discussion of closing transactions and other
risks.
Futures Contracts and Options on Futures Contracts
The Fund may enter into contracts for the purchase or sale for future
delivery of fixed income securities or contracts based on financial
indices including any index of securities in which the Fund may invest
("futures contracts") and may purchase and write put and call options
to buy or sell futures contracts ("options on futures contracts"). A
"sale" of a futures contract means the acquisition of a contractual
obligation to deliver the securities called for by the contract at a
specified price on a specified date. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount of
cash equal to the difference between a specified dollar multiple of the
value of the index on the expiration date of the contract ("current
contract value") and the price at which the contract was originally
struck. Options on futures contracts to be written or purchased by the
Fund will be traded on exchanges or over the counter. The successful
use of such instruments draws upon the investment adviser's experience
with respect to such instruments and usually depends upon the
investment adviser's ability to forecast interest rate movements
correctly. Should interest rates move in an unexpected manner, the Fund
may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize losses and would thus be in
a worse position than if such strategies had not been used. In
addition, the correlation between movements in the price of futures
contracts or options on futures contracts and movements in the prices
of the securities hedged or used for cover will not be perfect.
The Fund's use of financial futures and options thereon will in
all cases be consistent with applicable regulatory requirements. To the
extent required to comply with applicable Securities and Exchange
Commission releases and staff positions, when purchasing a futures
contract or writing a put option, the Fund will maintain in a
segregated account cash or liquid securities equal to the value of such
contracts, less any margin on deposit. In addition, the rules and
regulations of the Commodity Futures Trading Commission currently
require that, in order to avoid "commodity pool operator" status, the
Fund must use futures and options positions (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. There are no other numerical limits on the
Fund's use of futures contracts and options on futures contracts. For a
discussion of the tax treatment of futures contracts and options on
futures contracts, see "Taxes" in the Statement of Additional
Information. For a further discussion of the general characteristics
and risks of futures, see Appendix B to the Statement of Additional
Information.
Concentration Policy
As a fundamental policy, the Fund may not invest 25% or more of its
total assets in the securities of any industry, although, for purposes
of this limitation, tax-exempt securities and U.S. Government
obligations are not considered to be part of any industry. The Fund may
invest 25% or more of its total assets in industrial development
revenue bonds. In addition, it is possible that the Fund from time to
time will invest 25% or more of its total assets in a particular
segment of the municipal bond market, such as housing, health care,
utility, transportation, education or industrial obligations. In such
circumstances, economic, business, political or other changes affecting
one bond (such as proposed legislation affecting the financing of a
project; shortages or price increases of needed materials; or a
declining market or need for the project) might also affect other bonds
in
13 Voyageur Funds (Prospectus)
<PAGE>
the same segment, thereby potentially increasing market or credit risk.
For a discussion of these segments of the municipal bond market, see
"Investment Policies and Restrictions--Concentration Policy" in the
Statement of Additional Information.
The Fund's Board may change any of the foregoing policies that are
not specifically designated fundamental.
Risks and Special Investment Considerations
-----------------------------------------------------------------------
General
The yields on Municipal Obligations are dependent on a variety of
factors, including the financial condition of the issuer or other
obligor thereon or the revenue source from which debt service is
payable, general economic and monetary conditions, conditions in the
relevant market, the size of a particular issue, maturity of the
obligation and the rating of the issue. Generally, the value of
Municipal Obligations will tend to fall as interest rates rise and will
tend to increase as interest rates decrease. In addition, Municipal
Obligations of longer maturity generally produce higher current yields
than Municipal Obligations with shorter maturities but are subject to
greater price fluctuation due to changes in interest rates, tax laws
and other general market factors. Lower rated Municipal Obligations
generally produce a higher yield than higher rated Municipal
Obligations due to the perception of a greater degree of risk as to the
payment of principal and interest. Certain Municipal Obligations held
by the Fund may permit the issuer at its option to "call," or redeem,
its securities. If an issuer were to redeem securities held by the Fund
during a time of declining interest rates, the Fund might not be able
to reinvest the proceeds in securities providing the same investment
return as the securities redeemed.
Special Risk Considerations Regarding
Medium- and Lower-Grade Municipal Obligations
The Fund invests in medium- and lower-grade Municipal Obligations.
Municipal Obligations which are in the medium and lower grade
categories generally offer a higher current yield than is offered by
higher-grade Municipal Obligations but they also generally involve
greater price volatility and greater credit and market risk. Credit
risk relates to the issuer's ability to make timely payment of interest
and principal when due. Market risk relates to the changes in market
value that occur as a result of variation in the level of prevailing
interest rates and yield relationships in the municipal securities
market. Debt securities rated BB or below by S&P or Fitch and B or
below by Moody's are commonly referred to as "junk bonds." Although the
Fund primarily will invest in medium- and lower-grade Municipal
Obligations, the Fund may invest in higher-grade Municipal Obligations
for temporary defensive purposes. Such investments may result in lower
current income than if the Fund were fully invested in medium and
lower-grade securities.
The value of the Fund's portfolio securities can be expected to
fluctuate over time. When interest rates decline, the value of a
portfolio invested in fixed-income securities generally can be expected
to rise. Conversely, when interest rates rise, the value of a portfolio
invested in fixed-income securities generally can be expected to
decline. However, the secondary market prices of medium- and
lower-grade Municipal Obligations are less sensitive to changes in
interest rates and are more sensitive to adverse economic changes or
individual issuer developments than are the secondary market prices of
higher-grade debt securities. Such events also could lead to a higher
incidence of defaults by issuers of medium- and lower-grade Municipal
Obligations as compared with historical default rates. In addition,
changes in interest rates and periods of economic uncertainty can be
expected to result in increased volatility in the market price of the
Municipal Obligation in the Fund's portfolio and thus in the net asset
value
14 Voyageur Funds (Prospectus)
<PAGE>
of the Fund. Also, adverse publicity and investor perceptions, whether
or not based on rational analysis, may affect the value and liquidity
of medium- and lower-grade Municipal Obligations. The secondary market
value of Municipal Obligations structured as zero-coupon securities
and payment-in-kind securities may be more volatile in response to
changes in interest rates than debt securities which pay interest
periodically in cash. Investment in such securities also involves
certain tax considerations.
Increases in interest rates and changes in the economy may
adversely affect the ability of issuers of medium- and lower-grade
Municipal Obligations to pay interest and to repay principal, to meet
projected financial goals and to obtain additional financing. In the
event that an issuer of securities held by the Fund experiences
difficulties in the timely payment of principal or interest and such
issuer seeks to restructure the terms of its borrowings, the Fund may
incur additional expenses and may determine to invest additional assets
with respect to such issuer or the project or projects to which the
Fund's portfolio securities relate. Further, the Fund may incur
additional expenses to the extent that it is required to seek recovery
upon a default in the payment of interest or the repayment of principal
on its portfolio holdings, and the Fund may be unable to obtain full
recovery thereof.
To the extent that there is no established retail market for some
of the medium- or lower-grade Municipal Obligations in which the Fund
may invest, trading in such securities may be relatively inactive. The
Fund's investment adviser has contracted with Muller Data Corporation
as pricing agent and the investment adviser is responsible for
determining the net asset value of the Fund, subject to the supervision
of the Board of Directors. During periods of reduced market liquidity
and in the absence of readily available market quotations for medium-
and lower-grade Municipal Obligations held in the Fund's portfolio, the
ability of the pricing agent to value the Fund's securities becomes
more difficult and the pricing agent's use of judgment may play a
greater role in the valuation of the Fund's securities due to the
reduced availability of reliable objective data. The effects of adverse
publicity and investor perceptions may be more pronounced for
securities for which no established retail market exists as compared
with the effects on securities for which such a market does exist.
Further, the Fund may have more difficulty selling such securities in a
timely manner and at their stated value than would be the case for
securities for which an established retail market does exist.
The Fund may invest in zero-coupon and payment-in-kind Municipal
Obligations. Zero-coupon securities are debt obligations that do not
entitle the holder to any periodic payment of interest prior to
maturity or a specified date when the securities begin paying current
interest. They are issued and traded at discount from their face
amounts or par value, which discount varies depending on the time
remaining until cash payments begin, prevailing interest rates,
liquidity of the security and the perceived credit quality of the
issuer. The Internal Revenue Code of 1986, as amended, requires that
regulated investment companies distribute at least 90% of their net
investment income each year, including tax-exempt and non-cash income.
Accordingly, although the Fund will receive no coupon payments on
zero-coupon securities prior to their maturity, the Fund is required,
in order to maintain its desired tax treatment, to include in its
distributions to shareholders in each year any income attributable to
zero-coupon securities that is in excess of 10% of the Fund's net
investment income in that year. The Fund may be required to borrow or
to liquidate portfolio securities at a time that it otherwise would not
have done so in order to make such distributions. Payment-in-kind
securities are securities that pay interest through the issuance of
additional securities. Such securities generally are more volatile in
response to changes in interest rates and are more speculative
investments than are securities that pay interest periodically in cash.
The Fund's investment adviser seeks to minimize the risks involved
in investing in medium- and lower-grade Municipal Obligations through
multiple portfolio
15 Voyageur Funds (Prospectus)
<PAGE>
holdings, careful investment analysis, and attention to current
developments and trends in the economy and financial and credit
markets. The Fund will rely on the investment adviser's judgment,
analysis and experience in evaluating the creditworthiness of an issue.
In its analysis, the investment adviser will take into consideration,
among other things, the issuer's financial resources, its sensitivity
to economic conditions and trends, its operating history, the quality
of the issuer's management and regulator matters. The Fund's investment
adviser may consider the credit ratings of Moody's, Fitch, and S&P in
evaluating Municipal Obligations, although it does not rely primarily
on these ratings. Such ratings evaluate only the safety of principal
and interest payments, not market value risk. Additionally, because the
creditworthiness of an issuer may change more rapidly than is able to
be timely reflected in changes in credit ratings, the Fund's investment
adviser continuously monitors the issuers of Municipal Obligations held
in the Fund's portfolio.
Municipal Obligations generally are not listed for trading on any
national securities exchange, and many issuers of medium- and
lower-grade Municipal Obligations choose not to have a rating assigned
to their obligations by any national recognized statistical rating
organization. The amount of information available about the financial
condition of an issuer of unlisted or unrated securities generally is
not as extensive as that which is available with respect to issuers of
listed or rated securities. Because of the nature of medium- and lower-
rated Municipal Obligations, achievement by the Fund of its investment
objective may be more dependent on the credit analysis of the Fund's
investment adviser than is the case for an investment company which
invests primarily in exchange listed higher-grade securities.
State Considerations
The value of Municipal Obligations owned by the Fund may be adversely
affected by local political and economic conditions and developments
within Minnesota. Adverse conditions in an industry significant to the
local economy could have a correspondingly adverse effect on the
financial condition of local issuers. Other factors that could affect
Municipal Obligations include a change in the local, state or national
economy, demographic factors, ecological or environmental concerns,
statutory limitations on the issuer's ability to increase taxes and
other developments generally affecting the revenues of issuers (for
example, legislation or court decisions reducing state aid to local
governments or mandatory additional services). A description of certain
factors affecting and statistics describing issuers of Municipal
Obligations in Minnesota is set forth in the Statement of Additional
Information. Generally, the structure of the State's economy parallels
the structure of the United States economy as a whole. There are,
however, employment concentrations in durable goods and non-durable
goods manufacturing, particularly industrial machinery, instruments and
miscellaneous, food, paper and related industries, and printing and
publishing. The Minnesota Department of Finance February 1996 Forecast
has projected that, under current laws, the State will complete its
current biennium June 30, 1997 with a $15 million surplus, plus a $350
million cash flow account balance, plus a $220 million budget reserve.
Currently Minnesota's general obligation bonds are rated Aaa by
Moody's, AA+ by S&P and AAA by Fitch. See "Special Factors Affecting
the Fund" in the Statement of Additional Information.
Investment Restrictions
-----------------------------------------------------------------------
The Fund has adopted certain investment restrictions in addition to
those set forth above, which are set forth in their entirety in the
Statement of Additional Information. Certain of these restrictions are
fundamental and cannot be changed without shareholder approval,
including the restriction providing that the Fund may not borrow
16 Voyageur Funds (Prospectus)
<PAGE>
money, except from banks for temporary or emergency purposes in an
amount not exceeding 20% of the value of its total assets (the Fund may
also borrow money in the form of reverse repurchase agreements up to
10% of total assets). See "Investment Policies and
Restrictions--Investment Restrictions" in the Statement of Additional
Information.
The Fund also has a number of non-fundamental investment
restrictions which may be changed by the Fund's Board without
shareholder approval. These include restrictions providing that the
Fund may not (i) invest more than 5% of its total assets in securities
of any single investment company, (ii) invest more than 10% of its
total assets in securities of two or more investment companies, (iii)
invest more than 15% of its net assets in illiquid securities or (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of net assets. If the Fund invests in securities of other
investment companies, the return on any such investments will be
reduced by the operating expenses, including investment advisory and
administrative fees, of such investment companies.
Except for the Fund's policy with respect to borrowing, 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.
How to Purchase Shares
-----------------------------------------------------------------------
Alternative Purchase Arrangements
The Fund offers investors the choice among three classes of shares
which offer different sales charges and bear different expenses. These
alternatives permit an investor to choose the method of purchasing
shares that is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares and other
circumstances. Page 2 of the Prospectus contains a summary of these
alternative purchase arrangements.
A broker-dealer may receive different levels of compensation depending
on which class of shares is sold. In addition, Delaware Distributors,
L.P., the Fund's principal underwriter (the "Underwriter"), from time
to time pays certain additional cash incentives of up to $100 and/or
non cash incentives such as vacations or merchandise to its investment
executives and other broker-dealers and financial institutions in
consideration of their sales of Fund shares. In some instances, the
Underwriter pays amounts not to exceed 1.25% of the Fund's net assets
(such as payments related to retention of shares by a particular
broker-dealer or financial institution for a specified period of time),
which may be made available only to broker-dealers and financial
institutions who meet certain objective standards developed by the
Underwriter.
General Purchase Information
The minimum initial investment in the Fund is $1,000, and the minimum
additional investment is $100. The Fund's shares may be purchased at
the public offering price from the Underwriter, from other
broker-dealers who are members of the National Association of
Securities Dealers, Inc. and who have selling agreements with the
Underwriter, and from certain financial institutions that have selling
agreements with the Underwriter.
When orders are placed for shares of the Fund, the public offering
price used for the purchase will be the net asset value per share next
determined after receipt of the order, plus the applicable sales
charge, if any. If an order is placed with the Underwriter or other
broker-dealer, the broker-dealer is responsible for promptly
transmitting the
17 Voyageur Funds (Prospectus)
<PAGE>
order to the Fund. The Fund reserves the right, in its absolute
discretion, to reject any order for the purchase of shares.
Shares of the Fund may be purchased by opening an account either
by mail, by phone, or by wire.
An investor who may be interested in having shares redeemed
shortly after purchase should consider making unconditional payment by
certified check or other means approved in advance by the Underwriter.
Payment of redemption proceeds will be delayed as long as necessary to
verify by expeditious means that the purchase payment has been or will
be collected. Such period of time typically will not exceed 15 days.
Automatic Investment Plan
Investors may make systematic investments in fixed amounts
automatically on a monthly basis through the Fund's Automatic
Investment Plan. Additional information is available from the
Underwriter by calling 800-523-1918.
Purchases by Mail
To open an account by mail, an Investment Application must be
completed, signed and sent with a check payable to the specific Fund
and class selected, to:
Through May 11, 1997:
---------------------
NW 9369
P.O. Box 1450
Minneapolis, MN 55485-9369
Beginning May 12, 1997:
-----------------------
Delaware Group
1818 Market Street
Philadelphia, PA 19103
Purchases by Telephone
To open an account by telephone, call 1-800-523-4640 to obtain an
account number and instructions. Information concerning the account
will be taken over the phone. The investor must then request a
commercial bank with which he or she has an account and which is a
member of the Federal Reserve System to transmit Federal Funds by wire
to the appropriate Fund as follows:
Through May 11, 1997:
---------------------
Norwest Bank Minnesota, N.A., ABA #091000019
For Credit of: Voyageur Minnesota High Yield Municipal Bond Fund
Checking Account No.: 872-458
Account Number: (assigned by telephone)
Beginning May 12, 1997:
-----------------------
CoreStates Bank, N.A.
ABA #031000011
For Credit of: Voyageur Minnesota High Yield Municipal Bond Fund
Account Number: 1412893401
18 Voyageur Funds (Prospectus)
<PAGE>
Information on how to transmit Federal Funds by wire is available
at any national bank or any state bank that is a member of the Federal
Reserve System. The bank may charge the shareholder for the wire
transfer. If the phone order and Federal Funds are received before the
close of trading on the Exchange, the order will be deemed to become
effective at that time. Otherwise, the order will be deemed to become
effective as of the close of trading on the Exchange on the next day
the Exchange is open for trading. The investor will be required to
complete the Investment Application and mail it to the Fund after
making the initial telephone purchase.
Class A Shares--Front End Sales Charge Alternative
The public offering price of Class A shares of the Fund is the net
asset value of the Fund's shares plus the applicable front end sales
charge ("FESC"), which will vary with the size of the purchase. The
Fund receives the net asset value. The FESC varies depending on the
size of the purchase and is allocated between the Underwriter and other
broker-dealers.
The current sales charges are:
<TABLE>
<CAPTION>
_______________________________________________________________________________________________
Sales Charge
as % of Sales Charge Dealer Discount
Net Asset as % of as % of
Amount of Purchase Value Offering Price Offering Price(1)
_______________________________________________________________________________________________
<S> <C> <C> <C>
Less than $50,000 3.90% 3.75% 3.25%
$50,000 but less than $100,000 3.63 3.50 3.00
$100,000 but less than $250,000 2.83 2.75 2.50
$250,000 but less than $500,000 2.04 2.00 1.75
$500,000 but less than $1,000,000 1.78 1.75 1.75
$1,000,000 or more NAV(3) NAV(3) 1.00(2)
_______________________________________________________________________________________________
</TABLE>
(1) Brokers and dealers who receive 90% or more of the sales charge may
be considered to be underwriters under the Securities Act of 1933,
as amended.
(2) The Underwriter intends to pay its investment executives and other
broker-dealers and banks that sell Fund shares, out of its own
assets, a fee of 1% of the offering price of sales of $1,000,000 or
more, other than on sales not subject to a contingent deferred sales
charge.
(3) Purchases of $1,000,000 or more may be subject to a contingent
deferred sales charge at the time of redemption. See "Contingent
Deferred Sales Charge."
In connection with the distribution of the Fund's Class A shares,
the Underwriter is deemed to receive all applicable sales charges. The
Underwriter, in turn, pays its investment executives and other
broker-dealers selling such shares a "dealer discount," as set forth
above. In the event that shares are purchased by a financial
institution acting as agent for its customers, the Underwriter or the
broker-dealer with whom such order was placed may pay all or part of
its dealer discount to such financial institution in accordance with
agreements between such parties.
Special Purchase Plans--Reduced Sales Charges
Certain investors (or groups of investors) may qualify for reductions
in the sales charges shown above. Investors should contact their
broker-dealer or the Fund for details about the Fund's Combined
Purchase Privilege, Cumulative Quantity Discount and Letter of
Intention plans. Descriptions are also included with the general
authorization form and in the Statement of Additional Information.
These special purchase plans may be amended or eliminated at any time
by the Underwriter without notice to existing Fund shareholders.
19 Voyageur Funds (Prospectus)
<PAGE>
Rule 12b-1 Fees
Class A shares are subject to a Rule 12b-1 fee payable at an annual
rate of .25% of the average daily net assets of the Fund attributable
to Class A shares. All or a portion of such fees are paid quarterly to
financial institutions and service providers with respect to the
average daily net assets attributable to shares sold or serviced by
such institutions and service providers. For additional information
about this fee, see "Management--Plan of Distribution" below.
Contingent Deferred Sales Charge
Although there is no initial sales charge on purchases of Class A
shares of $1,000,000 or more, the Underwriter pays investment dealers,
out of its own assets, a fee of 1% of the offering price of such
shares. If these shares are redeemed within two years, the redemption
proceeds will be reduced by a contingent deferred sales charge ("CDSC")
of 1%. For additional information, see "How to Sell Shares--Contingent
Deferred Sales Charge."
Waiver of Sales Charges
Purchases of Class A shares may be made at net asset value by current
and former officers, directors and employees (and members of their
families) of the Fund's investment adviser or Delaware Management
Company, Inc., any of their affiliates, any of the Voyageur or other
Delaware Group funds, certain of their agents and registered
representatives and employees of authorized investment dealers and by
employee benefit plans for such entities. Individual purchases,
including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A shares may also be made by clients of
registered representatives of an authorized investment dealer at net
asset value within 12 months after the registered representative
changes employment, if the purchase is funded by proceeds from an
investment where a front-end sales charge, continent deferred sales
charge or other sales charge has been assessed. Purchases of Class A
shares may also be made at net asset value by bank employees who
provide services in connection with agreements between the bank and
unaffiliated brokers or dealers concerning sales of shares of the
Voyageur or other Delaware Group funds. Officers, directors and key
employees of institutional clients of the investment adviser or any of
its affiliates may purchase Class A shares at net asset value.
Moreover, purchases may be effected at net asset value for the benefit
of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or
investment adviser has entered into an agreement with the Underwriter
providing specifically for the purchase of Class A shares in connection
with special investment products, such as wrap accounts or similar fee
based programs.
The Fund must be notified in advance that an investment
qualifies for purchase at net asset value.
Class B Shares--Contingent Deferred Sales Charge Alternative
The public offering price of Class B shares of the Fund is the net
asset value of the Fund's shares. Class B shares are sold without an
initial sales charge so that the Fund receives the full amount of the
investor's purchase. However, a CDSC of up to 5% will be imposed if
shares are redeemed within six years of purchase. For additional
information, see "How to Sell Shares--Contingent Deferred Sales
Charge." In addition, Class B shares are subject to higher Rule 12b-1
fees as described below. The CDSC will depend on the number of years
since the purchase was made according to the following table:
20 Voyageur Funds (Prospectus)
<PAGE>
CDSC as a
CDSC Period % of Amount Redeemed*
________________________________________________________
1st year after purchase 5%
2nd year after purchase 4
3rd year after purchase 4
4th year after purchase 3
5th year after purchase 2
6th year after purchase 1
Thereafter 0
________________________________________________________
* The CDSC will be calculated on an amount equal to the lesser of the
net asset value of the shares at the time of purchase or the net
asset value at the time of redemption.
Proceeds from the CDSC are paid to the Underwriter and are used to
defray expenses of the Underwriter related to providing
distribution-related services to the Fund in connection with the sale
of Class B shares, such as the payment of compensation to selected
broker dealers and for selling Class B shares. The combination of the
CDSC and the Rule 12b-1 fee enables the Fund to sell the Class B shares
without deduction of a sales charge at the time of purchase. Although
Class B shares are sold without an initial sales charge, the
Underwriter pays to brokers who sell Class B shares a sales commission
equal to 4% of the amount invested and an ongoing annual servicing fee
of .15% (paid quarterly) calculated on the net assets attributable to
sales made by such broker-dealers.
Rule 12b-1 Fees
Class B shares are subject to a Rule 12b-1 fee payable at an annual
rate of 1% of the average daily net assets of the Fund attributable to
Class B shares. The higher 12b-1 fee will cause Class B shares to have
a higher expense ratio and to pay lower dividends than Class A shares.
For additional information about this fee, see "Fees and Expenses" and
"Management--Plan of Distribution."
Conversion Feature
On the first business day of the month eight years after the purchase
date, Class B shares will automatically convert to Class A shares and
will no longer be subject to a higher Rule 12b-1 fee. Such conversion
will be on the basis of the relative net asset values of the two
classes. Class A shares issued upon such conversion will not be subject
to any FESC or CDSC. Class B shares acquired by exchange from Class B
shares of another Voyageur Fund will (or effective May 12, 1997 from
another fund in the Delaware Group) will convert into Class A shares
based on the time of the initial purchase. Similarly, Class B shares
acquired by exercise of the Reinstatement Privilege will convert into
Class A shares based on the time of the original purchase of Class B
shares. See "Reinstatement Privilege" below. Class B shares acquired
through reinvestment of distributions will convert into Class A shares
based on the date of issuance of such shares.
Class C Shares--Level Load Alternative
The public offering price of Class C shares of the Fund is the net
asset value of the Fund's shares. Class C shares are sold without an
initial sales charge so that the Fund receives the full amount of the
investor's purchase. However, a CDSC of 1% will be imposed if shares
are redeemed within one year of purchase. For additional information
see "How to Sell Shares--Contingent Deferred Sales Charge." In
addition, Class C shares are subject to higher annual Rule 12b-1 fees
as described below.
21 Voyageur Funds (Prospectus)
<PAGE>
Rule 12b-1 Fees
Class C shares are subject to a Rule 12b-1 fee payable at an annual
rate of 1% of the average daily net assets of the Fund attributable to
Class C shares. The higher Rule 12b-1 fee will cause Class C shares to
have a higher expense ratio and to pay lower dividends than Class A
shares. For additional information about this fee, see "Fees and
Expenses" and "Management--Plan of Distribution."
Proceeds from the CDSC are paid to the Underwriter and are used to
defray expenses of the Underwriter related to providing
distribution-related services to the Fund in connection with the sale
of Class C shares, such as the payment of compensation to selected
broker-dealers and for selling Class C shares. The combination of the
CDSC and the Rule 12b-1 fee enables the Fund to sell the Class C shares
without deduction of a sales charge at the time of purchase. Although
Class C shares are sold without an initial sales charge, the
Underwriter pays to brokers who sell Class C shares a sales commission
equal to 1% of the amount invested and an ongoing annual servicing fee
of .90% (paid quarterly commencing in the thirteenth month after the
sale of such shares) calculated on the net assets attributable to sales
made by such broker-dealers.
22 Voyageur Funds (Prospectus)
<PAGE>
How to Sell Shares
-----------------------------------------------------------------------
The Fund will redeem its shares in cash at the net asset value next
determined after receipt of a shareholder's written request for
redemption in good order (see below). If shares for which payment has
been collected are redeemed, payment must be made within seven days.
The Fund may suspend this right of redemption and may postpone payment
only when the Exchange is closed for other than customary weekends or
holidays, or if permitted by the rules of the Securities and Exchange
Commission during periods when trading on the Exchange is restricted or
during any emergency which makes it impracticable for the Fund to
dispose of its securities or to determine fairly the value of its net
assets or during any other period permitted by order of the Commission
for the protection of investors.
The Fund reserves the right and currently plans to redeem Fund
shares and mail the proceeds to the shareholder if at any time the
value of Fund shares in the account falls below a specified value,
currently set at $250. Shareholders will be notified and will have 60
days to bring the account up to the required value before any
redemption action will be taken by the Fund.
Contingent Deferred Sales Charge
The CDSC will be calculated on an amount equal to the lesser of the net
asset value of the shares at the time of purchase or their net asset
value at the time of redemption. No charge will be imposed on increases
in net asset value above the initial purchase price. In addition, no
charge will be assessed on shares derived from reinvestment of
dividends or capital gains distributions.
In determining whether a CDSC is payable with respect to any
redemption, the calculation will be determined in the manner that
results in the lowest rate being charged. Therefore, it will be assumed
that shares that are not subject to the CDSC are redeemed first, shares
subject to the lowest level of CDSC are redeemed next, and so forth.
The CDSC does not apply to: (1) redemptions of Class B shares in
connection with the automatic conversion to Class A shares; (2)
redemptions of shares when the Fund exercises its right to liquidate
accounts which are less than the minimum account size; and (3)
redemptions in the event of the death or disability of the shareholder
within the meaning of Section 72(m)(7) of the Internal Revenue Code.
If a shareholder exchanges Class A, Class B or Class C shares
subject to a CDSC for Class A, Class B or Class C shares, respectively,
of a different Voyageur Fund, the transaction will not be subject to a
CDSC. However, when shares acquired through the exchange are redeemed,
the shareholder will be treated as if no exchange took place for the
purpose of determining the CDSC. Beginning May 12, 1997, Class A, Class
B and Class C shares of funds in the Delaware Group and the
corresponding classes of the Fund may be exchanged for each other. The
same rules concerning treatment of CDSCs will apply to permissible
exchanges. Fund shares are exchangeable for shares of the Voyageur
money market funds. No CDSC will be imposed at the time of any such
exchange; however, the shares acquired in any such exchange will remain
subject to the CDSC and the period during which such shares represent
shares of the money market fund will not be included in determining how
long the shares have been held. Effective July 1, 1997, Class B and
Class C shares of the Fund may not be exchanged into shares of the
Voyageur money market funds. Any CDSC due upon a redemption of Fund
shares
23 Voyageur Funds (Prospectus)
<PAGE>
will be reduced by the amount of any Rule 12b-1 payments made by such
money market fund with respect to such shares.
Expedited Redemptions
The Fund offers several expedited redemption procedures, described
below, which allow a shareholder to redeem Fund shares at net asset
value determined on the same day that the shareholder places the
request for redemption of those shares. Pursuant to these expedited
redemption procedures, the Fund will redeem its shares at their net
asset value next determined following the Fund's receipt of the
redemption request. The Fund reserves the right at any time to suspend
or terminate the expedited redemption procedures or to impose a fee for
this service. There is currently no additional charge to the
shareholder for use of the Fund's expedited redemption procedures.
Expedited Telephone Redemption
Shareholders redeeming at least $1,000 (for which certificates have not
been issued) may redeem by telephoning the Fund directly at
800-523-1918. The applicable section of the Investment Application must
have been completed by the shareholder and filed with the Fund before
the telephone request is received. The proceeds of the redemption will
be paid by check mailed to the shareholder's address of record or, if
requested at the time of redemption, by wire to the bank designated on
the Investment Application. Shareholders should notify the Fund in
writing if they do not wish to have such services available to their
accounts.
Neither the Fund nor its shareholder services and transfer agent
is responsible for any shareholder loss incurred in acting upon written
or telephone instructions for redemption of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, the Fund will follow reasonable procedures to confirm
that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not,
the Fund or the shareholder services and transfer agent may be liable
for any losses due to unauthorized or fraudulent transactions.
Instructions received by telephone are generally tape recorded, and a
written confirmation will be provided for all purchase and redemption
transactions initiated by telephone. These procedures also apply to
written and telephone exchange requests. By exchanging shares by
telephone, you are acknowledging prior receipt of a prospectus for the
fund into which your shares are being exchanged.
Expedited Redemptions Through Certain Broker Dealers
Certain broker-dealers who have sales agreements with the Underwriter
may allow their customers to effect a redemption of shares of the Fund
purchased through such broker-dealer by notifying the broker-dealer of
the amount of shares to be redeemed. The broker-dealer is then
responsible for promptly placing the redemption request with the Fund
on the customer's behalf. Payment will be made to the shareholder by
check or wire sent to the broker-dealer. Broker-dealers offering this
service may impose a fee or additional requirements for such
redemptions.
Good Order
"Good order" means that stock certificates, if issued, must accompany
the written request for redemption and must be duly endorsed for
transfer, or must be accompanied by a duly executed stock power. If no
stock certificates have been issued, a written request to redeem must
be made. Stock certificates will not be issued for Class B or Class C
shares. In any case, the shareholder must execute the redemption
request exactly as the shares are registered. If the redemption
proceeds are to be paid to the registered holder(s), a signature
guarantee is not normally required. A signature
24 Voyageur Funds (Prospectus)
<PAGE>
guarantee is required in certain other circumstances, for example,
to redeem more than $50,000 or to have a check mailed other than to the
shareholder's address of record. See "Other Information" in the
Statement of Additional Information. The Fund's transfer agent may
waive certain of these redemption requirements at its own risk, but
also reserves the right to require signature guarantees on all
redemptions, in contexts perceived by the transfer agent to subject the
Fund to an unusual degree of risk.
Monthly Cash Withdrawal Plan
An investor who owns or buys shares of the Fund valued at $5,000 or
more at the current offering price may open a Withdrawal Plan and have
monthly withdrawals of $25 or more paid to the investor or another
person. Deferred sales charges may apply to monthly redemptions of
Class B or Class C shares. See "Monthly Cash Withdrawal Plan" in the
Statement of Additional Information.
Reinstatement Privilege
-----------------------------------------------------------------------
An investor in the Fund whose shares have been redeemed and who has not
previously exercised the Reinstatement Privilege as to the Fund may
reinvest the proceeds of such redemption in Class A shares of any
Voyageur Fund or Delaware Group Fund eligible for sale in the
shareholder's state of residence. Reinvestment will be at the net asset
value of Fund shares next determined after the Underwriter receives a
check along with a letter requesting reinstatement. The Underwriter
must receive the letter requesting reinstatement within 365 days
following the redemption. Investors who desire to exercise the
Privilege should contact their broker-dealer or the Fund.
Exercise of the Reinstatement Privilege does not alter the income
tax treatment of any capital gains realized on a sale of shares of the
Fund, but to the extent that any shares are sold at a loss and the
proceeds are reinvested within 30 days in shares of the Fund, some or
all of the loss may not be allowed as a deduction, depending upon the
number of shares reacquired.
Exchange Privilege
-----------------------------------------------------------------------
Except as described below, shareholders may exchange some or all of
their Fund shares for shares of another Voyageur Fund, provided that
the shares to be acquired in the exchange are eligible for sale in the
shareholder's state of residence. Class A shareholders may exchange
their shares for Class A shares of other Voyageur Funds. Class B
shareholders may exchange their shares for the Class B shares of other
Voyageur Funds and Class C shareholders may exchange their shares for
the Class C shares of other Voyageur Funds. Shares of each class may
also be exchanged for shares of the Voyageur money market funds.
Effective July 1, 1997, however, only Class A shares may be exchanged
into such money market funds.
Beginning May 12, 1997, Class A, Class B and Class C shares of the
Fund may be exchanged into the corresponding classes of shares of the
retail funds in the Delaware Group that have such classes. In addition,
each of the three money market funds in the Delaware Group has Class A
shares and a consultant class. The consultant class of each of these
funds is subject to a Rule 12b-1 Plan; however, only the consultant
class of Delaware Cash Reserve currently assess a fee under its 12b-1
Plan. The Class A shares of the Fund may be exchanged into either Class
A shares or the consultant class of these three funds.
25 Voyageur Funds (Prospectus)
<PAGE>
The minimum amount which may be exchanged is $1,000. The exchange
will be made on the basis of the relative net asset values next
determined after receipt of the exchange request. For a discussion of
issues relating to the contingent deferred sales charge upon such
exchanges, see "How to Sell Shares--Contingent Deferred Sales Charge."
There is no specific limitation on exchange frequency; however, the
Fund is intended for long term investment and not as a trading vehicle.
The Fund reserves the right to prohibit excessive exchanges (more than
four per quarter). The Fund also reserves the right, upon 60 days'
prior notice, to restrict the frequency of, or otherwise modify,
condition, terminate or impose charges upon, exchanges. An exchange is
considered to be a sale of shares on which the investor may realize a
capital gain or loss for income tax purposes. Exchange requests may be
placed directly with the Fund in which the investor owns shares,
through the Fund's transfer agent or through other broker-dealers. An
investor considering an exchange should obtain a prospectus of the fund
to be acquired and should read such prospectus carefully. Contact the
Fund, the Fund's transfer agent or any of such other broker-dealers for
further information about the exchange privilege.
Management
-----------------------------------------------------------------------
The Board of Directors of the Fund is responsible for managing the
business and affairs of the Fund. The names, addresses, principal
occupations and other affiliations of Directors and executive officers
of the Fund are set forth in the Statement of Additional Information.
Investment Adviser; Portfolio Management
Prior to May 1, 1997, 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 is an indirect,
wholly-owned subsidiary of Dougherty Financial Group, Inc. ("DFG").
After the close of business on April 30, 1997, Voyageur became an
indirect, wholly-owned subsidiary of Lincoln National Corporation
("LNC") as a result of LNC's acquisition of DFG. LNC, headquartered in
Fort Wayne, Indiana, owns and operates insurance and investment
management business, including Delaware Management Holdings, Inc.
("DMH"). Affiliates of DMH serve as adviser, distributor and transfer
agent for the Delaware Group of Mutual Funds which currently includes
16 open-end funds and 2 closed-end funds (comprising 48 separate
investment portfolios). DMH, through its subsidiaries, is responsible
for the management of approximately $32 billion.
Because LNC's acquisition of DFG resulted in a change of control
of Voyageur, the Fund's previous investment advisory agreement with
Voyageur was "assigned," as that term is defined by the Investment
Company Act of 1940, and the previous agreement therefore terminated
upon the completion of the acquisition. The Board of Directors of the
Fund unanimously approved a new investment advisory agreement at a
meeting held in person on February 14, 1997, and called for a
shareholders meeting to approve the new agreement. At a meeting held on
April 11, 1997, the shareholders of the Fund approved the investment
advisory agreement with Voyageur to become effective after the close of
business on April 30, 1997, the date the acquisition was completed.
The Fund pays Voyageur a monthly investment advisory and
management fee equivalent on an annual basis to .65% of its average
daily net assets.
26 Voyageur Funds (Prospectus)
<PAGE>
Elizabeth H. Howell has day-to-day portfolio management
responsibility for the Fund. Since 1991, Ms. Howell has had day-to-day
portfolio management responsibility for the Voyageur Minnesota Tax Free
Fund, Voyageur Minnesota Limited Term Tax Free Fund, and Voyageur
Minnesota Insured Fund, as well as, since inception, the Voyageur Idaho
Tax Free Fund, Voyageur Kansas Tax Free Fund, Voyageur Missouri Insured
Tax Free Fund, Voyageur Oregon Insured Tax Free Fund, and Voyageur
Washington Insured Tax Free Fund. In addition, on May 1, 1997, Ms.
Howell resumed day-to-day portfolio management responsibility for the
Iowa and Wisconsin Funds, which she managed from their inception until
July, 1995. Ms. Howell is a Vice President and Senior Tax-Exempt
Portfolio Manager for Voyageur, where she has been employed since 1991
and is a Vice President of each of the Voyageur Funds. Ms. Howell has
over ten years experience as a securities analyst and portfolio
manager.
Plan of Distribution
The Fund has adopted a Plan of Distribution under the 1940 Act (the
"Plan") and has entered into a Distribution Agreement with Delaware
Distributors, L.P. (the "Underwriter"). Pursuant to the Fund's Plan,
the Fund pays the Underwriter a Rule 12b-1 fee, at an annual rate of
.25% of the Fund's average daily net assets attributable to Class A
shares and 1% of the Fund's average daily net assets attributable to
each of Class B and Class C shares for servicing of shareholder
accounts and distribution related services. Payments made under the
Plan are not tied exclusively to expenses actually incurred by the
Underwriter and may exceed or be less than expenses actually incurred
by the Underwriter.
All of the Rule 12b-1 fee attributable to Class A shares, and a
portion of the fee equal to .25% of the average daily net assets of the
Fund attributable to each of Class B shares and Class C shares
constitutes a shareholder servicing fee designed to compensate the
Underwriter for the provision of certain services to the shareholders.
The services provided may include personal services provided to
shareholders, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and services related
to the maintenance of shareholder accounts. The Underwriter may use
such Rule 12b-1 fee or portion thereof to make payments to qualifying
broker-dealers and financial institutions that provide such services.
That portion of the Rule 12b-1 fee equal to .75% of the average
daily net assets of the Fund attributable to Class B shares and Class C
shares, respectively, constitutes a distribution fee designed to
compensate the Underwriter for advertising, marketing and distributing
the Class B shares and Class C shares of the Fund. In connection
therewith, the Underwriter may provide initial and ongoing sales
compensation to its investment executives and other broker-dealers for
sales of Class B shares and Class C shares and may pay for other
advertising and promotional expenses in connection with the
distribution of Class B shares and Class C shares. The distribution fee
attributable to Class B shares and Class C shares is designed to permit
an investor to purchase such shares through investment executives of
the Underwriter and other broker-dealers without the assessment of an
initial sales charge and at the same time to permit the Underwriter to
compensate its investment executives and other broker-dealers in
connection with the sale of such shares.
Custodian; Dividend Disbursing,
Transfer, Administrative and Account Services Agent
Norwest Bank Minnesota, N.A. serves as the custodian of the Fund's
portfolio securities and cash.
Delaware Service Company, Inc. ("DSC") acts as the Fund's dividend
disbursing, transfer, administrative and fund accounting agent to
perform
27 Voyageur Funds (Prospectus)
<PAGE>
dividend-paying functions, to calculate the Fund's daily share price,
to maintain shareholder records and to perform certain regulatory and
compliance related services for the Fund.
Certain institutions may act as sub-transfer agents for the Fund
pursuant to contracts with DSC, whereby the institutions will provide
shareholder services to their customers. DSC will pay the
sub-administrators' fees out of its own assets. The fee paid by DSC to
any sub-administrator will be a matter of negotiation between the
institution and DSC based on the extent and quality of the services
provided.
Expenses of the Fund
In connection with a merger transaction whereby Voyageur became a
subsidiary of Delaware Management Holdings, Inc., Voyageur and its new
parent companies have agreed, until April 30, 1999, to pay the
operating expenses of the Fund which exceed 1% (excluding interest
expense, taxes, brokerage fees, commissions and Rule 12b-1 fees) of the
Fund's average daily net assets on an annual basis up to certain limits
as set forth in detail in the Statement of Additional Information. In
addition, Voyageur and the Underwriter reserve the right to voluntarily
waive their fees in whole or part and to voluntarily absorb certain
other of the Fund's expenses.
The Fund's expenses include, among others, fees of directors,
expenses of directors' and shareholders' meetings, insurance premiums,
expenses of redemption of shares, expenses of the issue and sale of
shares (to the extent not otherwise borne by the Underwriter), expenses
of printing and mailing stock certificates and shareholder statements,
association membership dues, charges of the Fund's custodian,
bookkeeping, auditing and legal expenses, the fees and expenses of
registering the Fund and its shares with the Securities and Exchange
Commission and registering or qualifying its shares under state
securities laws and expenses of preparing and mailing prospectuses and
reports to existing shareholders.
Portfolio Transactions
The Fund will not effect any brokerage transactions in its portfolio
securities with any broker-dealer affiliated directly or indirectly
with the Fund's investment adviser unless such transactions, including
the frequency thereof, the receipt of commissions payable in connection
therewith and the selection of the affiliated broker-dealer effecting
such transactions, are not unfair or unreasonable to the shareholders
of the Fund. It is not anticipated that the Fund will effect any
brokerage transactions with any affiliated broker-dealer, including the
Underwriter, unless such use would be to the Fund's advantage. The
Fund's investment adviser may consider sales of shares of the funds in
the Delaware Group as a factor in the selection of broker-dealers to
execute the Fund's securities transactions.
Determination of Net Asset Value
-----------------------------------------------------------------------
The net asset value of Fund shares is determined once daily, Monday
through Friday, as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m. Eastern time) on each business day
the Exchange is open for trading.
The net asset value per share of each class is determined by
dividing the value of the securities, cash and other assets of the Fund
attributable to such class less all liabilities attributable to such
class by the total number of shares of such class outstanding. For
purposes of determining the net assets of the Fund, tax-exempt
securities are stated on the basis of valuations provided by a pricing
service, approved by the Board of Directors, which uses information
with respect to transactions in bonds, quotations from bond
28 Voyageur Funds (Prospectus)
<PAGE>
dealers, market transactions in comparable securities and various
relationships between securities in determining value. Market
quotations are used when available. Non-tax-exempt securities for which
market quotations are readily available are stated at market value
which is currently determined using the last reported sale price, or,
if no sales are reported, as in the case of most securities traded
over-the-counter, the last reported bid price, except that U.S.
Government securities are stated at the mean between the last reported
bid and asked prices. Short-term notes having remaining maturities of
60 days or less are stated at amortized cost which approximates market.
All other securities and other assets are valued in good faith at fair
value by the Fund's investment adviser in accordance with procedures
adopted by the Board of Directors.
Distributions to Shareholders and Taxes
-----------------------------------------------------------------------
Distributions
The present policy of the Fund is to declare a distribution from net
investment income on each day that the Fund is open for business. Net
investment income consists of interest accrued on portfolio investments
of the Fund, less accrued expenses. Distributions of net investment
income are paid monthly. Short-term capital gains distributions are
taxable to shareholders as ordinary income. Net realized long term
capital gains, if any, are distributed annually, after utilization of
any available capital loss carryovers. Distributions paid by the Fund,
if any, with respect to Class A, Class B and Class C shares will be
calculated in the same manner, at the same time, on the same day and
will be in the same amount, except that the higher Rule 12b-1 fees
applicable to Class B and Class C shares will be borne exclusively by
such shares. The per share distributions on Class B and Class C shares
will be lower than the per share distributions on Class A shares as a
result of the higher Rule 12b-1 fees applicable to Class B and Class C
shares.
Shareholders receive distributions from investment income and
capital gains in additional shares of the class of the Fund owned by
such shareholders at net asset value, without any sales charge, unless
they elect otherwise. The Fund sends to its shareholders no less than
quarterly statements with details of any reinvested dividends.
Taxes
Federal Income Taxation
The Fund is treated as a separate entity for federal income tax
purposes. The Fund intends to qualify during its current taxable year
as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"). The Fund also intends to take all other
action required to ensure that no federal income taxes will be payable
by the Fund and that the Fund can pay exempt- interest dividends.
Distributions of net interest income from tax-exempt obligations
that are designated by the Fund as exempt-interest dividends are
excludable from the gross income of the Fund's shareholders.
Distributions paid from other interest income and from any net realized
short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or in additional shares. Distributions
paid from long-term capital gains (and designated as such) are taxable
as long-term capital gains for federal income tax purposes, whether
received in cash or shares, regardless of how long a shareholder has
held shares in the Fund.
Exempt-interest dividends attributable to interest income on
certain tax-exempt obligations issued after August 7, 1986 to finance
private activities are treated as an item of tax preference for
purposes of computing the alternative minimum tax for individuals,
estates and trusts.
29 Voyageur Funds (Prospectus)
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Minnesota State Taxation
Minnesota taxable net income is based generally on federal taxable
income. The portion of exempt-interest dividends that is derived from
interest income on Minnesota Municipal Obligations is excluded from the
Minnesota taxable net income of individuals, estates and trusts,
provided that the portion of the exempt-interest dividends from such
Minnesota sources paid to all shareholders represents 95 percent or
more of the exempt-interest dividends paid by the Fund. Exempt-interest
dividends are not excluded from the Minnesota taxable income of
corporations and financial institutions. Dividends qualifying for
federal income tax purposes as capital gain dividends are to be treated
by shareholders as long-term capital gains. Minnesota has repealed the
favorable treatment of long-term capital gains, while retaining
restrictions on the deductibility of capital losses. Exempt-interest
dividends subject to the federal alternative minimum tax will also be
subject to the Minnesota alternative minimum tax imposed on
individuals, estates and trusts.
The 1995 Minnesota Legislature enacted a statement of intent that
interest on obligations of Minnesota governmental units and Indian
tribes be included in net income of individuals, estates and trusts for
Minnesota income tax purposes if a court determines that Minnesota's
exemption of such interest unlawfully discriminates against interstate
commerce because interest on obligations of governmental issuers
located in other states is so included. This provision applies to
taxable years that begin during or after the calendar year in which any
such court decision becomes final, irrespective of the date on which
the obligations were issued. The Fund is not aware of any decision in
which a court has held that a state's exemption of interest on its own
bonds or those of its political subdivisions or Indian tribes, but not
of interest on the bonds of other states or their political
subdivisions or Indian tribes, unlawfully discriminates against
interstate commerce or otherwise contravenes the United States
Constitution. Nevertheless, the Fund cannot predict the likelihood that
interest on the Minnesota Municipal Obligations held by the Fund would
become taxable under this Minnesota statutory provision.
The foregoing discussion relates to federal and state taxation as
of the date of the Prospectus. See "Taxes" in the Statement of
Additional Information. This discussion is not intended as a substitute
for careful tax planning. You are urged to consult your tax adviser
with specific reference to your own tax situation.
Investment Performance
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Advertisements and other sales literature for the Fund may refer to
"yield," "taxable equivalent yield," "average annual total return" and
"cumulative total return" and may compare such performance quotations
with published indices and comparable quotations of other funds.
Performance quotations are computed separately for Class A, Class B and
Class C shares of the Fund. All such figures are based on historical
earnings and performance and are not intended to be indicative of
future performance. Additionally, performance information may not
provide a basis for comparison with other investments or other mutual
funds using a different method of calculating performance. The
investment return on and principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The advertised yield of the Fund will be based on a 30-day period
stated in the advertisement. Yield is calculated by dividing the net
investment income per share
30 Voyageur Funds (Prospectus)
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deemed earned during the period by the maximum offering price per share
on the last day of the period. The result is then annualized using a
formula that provides for semiannual compounding of income.
Taxable equivalent yield is calculated by applying the stated
income tax rate only to that portion of the yield that is exempt from
taxation. The tax-exempt portion of the yield is divided by the number
1 minus the stated income tax rate (e.g., 1-28% = 72%). The result is
then added to that portion of the yield, if any, that is not
tax-exempt.
Average annual total return is the average annual compounded rate
of return on a hypothetical $1,000 investment made at the beginning of
the advertised period. In calculating average annual total return, the
maximum sales charge is deducted from the hypothetical investment and
all dividends and distributions are assumed to be reinvested.
Cumulative total return is calculated by subtracting a
hypothetical $1,000 payment to the Fund from the ending redeemable
value of such payment (at the end of the relevant advertised period),
dividing such difference by $1,000 and multiplying the quotient by 100.
In calculating ending redeemable value, all income and capital gain
distributions are assumed to be reinvested in additional Fund shares
and the maximum sales load is deducted.
The Fund may also present total return information that does not
reflect the deduction of the maximum sales charges. In this case, such
total return information would be more favorable than total return
information that includes the deductions of the maximum sales charges.
In addition to advertising total return and yield, comparative
performance information may be used from time to time in advertising
the Fund's shares, including data from Lipper Analytical Services, Inc.
and Morningstar.
For Fund performance information and daily net asset value
quotations, investors may call 800-523-4640. For additional information
regarding the calculation of the Fund's yield, taxable equivalent
yield, average annual total return and cumulative total return, see
"Calculation of Performance Data" in the Statement of Additional
Information.
General Information
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The Fund sends to its shareholders six-month unaudited and annual
audited financial statements.
The shares of the Fund constitute a separate series of Voyageur
Mutual Funds, Inc. (the "Company"), a Minnesota corporation which
issues shares of common stock with a $.01 par value per share. All
shares of the Company are non-assessable and fully transferable when
issued and paid for in accordance with the terms thereof and possess no
cumulative voting, preemptive or conversion rights. The Board of
Directors is empowered to issue other series of common stock without
shareholder approval.
The Fund currently offers its shares in multiple classes, each
with different sales arrangements and bearing different expenses. Class
A, Class B and Class C shares each represent interests in the assets of
the Fund and have identical voting, dividend, liquidation and other
rights on the same terms and conditions except that expenses related to
the distribution of each class are borne solely by such class and each
class of shares has exclusive voting rights with respect to provisions
of the Fund's Rule 12b-1 distribution plan which pertain to a
particular class and other matters for which separate class voting is
appropriate under applicable law.
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Fund shares are freely transferable, subject to applicable
securities laws, are entitled to dividends as declared by the Board,
and, in liquidation, are entitled to receive the net assets, if any, of
the Fund. The Fund does not generally hold annual meetings of
shareholders and will do so only when required by law.
Each share of a series has one vote irrespective of the relative
net asset value of the shares. On some issues, such as the election of
Board members, all shares vote together as one series of the Company.
On an issue affecting only a particular series or class, the shares of
the affected series or class vote as a separate series or class. An
example of such an issue would be a fundamental investment restriction
pertaining to only one series.
The assets received by the Company for the issue or sale of share
of each series or class thereof, and all income, earnings, profits and
proceeds thereof, subject only to the rights of creditors, are
allocated to such series, and in the case of a class, allocated to such
class, and constitute the underlying assets of such series or class.
The underlying assets of each series, or class thereof, are required to
be segregated on the books of account, and are to be charged with the
expenses in respect to such series or class thereof, and with a share
of the general expenses of the Company. Any general expenses of the
Company not readily identifiable as belonging to a particular series or
class are allocated among the series or classes thereof, based upon the
relative net assets of the series or class at the time such expenses
were accrued. The Company's Articles of Incorporation limit the
liability of the Board members to the fullest extent permitted by law.
For a further discussion of the above matters, see "Additional
Information" in the Statement of Additional Information.
No dealer, sales representative or other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus (and/or in the Statement of Additional
Information referred to on the cover page of this Prospectus), and, if
given or made, such information or representations must not be relied
upon as having been authorized by the Fund or Delaware Distributors,
L.P. This Prospectus does not constitute an offer or solicitation by
anyone in the state in which such offer or solicitation is not
authorized, or in which the person making such offer or solicitation is
not qualified to do so or to any person to whom it is unlawful to make
such offer or solicitation.
32 Voyageur Funds (Prospectus)
